2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 1 of 26 Pg ID 95 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

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1 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 1 of 26 Pg ID 95 JOSEPH ROBERT MARCHESE, d/b/a JDS Digital Security Systems LLC, UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION v. Plaintiff, Case No. 12-cv NGE-MJH Hon. Nancy G. Edmunds MILESTONE SYSTEMS, INC., an Oregon corporation, Jury Trial Demanded Oral Argument Requested Defendant. DEFENDANT S MOTION TO DISMISS PLAINTIFF S CLAIMS FOR INDIRECT INFRINGEMENT AND WILLFUL INFRINGEMENT Defendant Milestone Systems, Inc. ( Milestone ), by and through its counsel, hereby respectfully moves, pursuant to Fed. R. Civ. P. 12(b)(6), to partially dismiss Plaintiff Joseph Robert Marchese s ( Marchese ) Complaint for Patent Infringement (Doc. No. 1) for indirect infringement, inducement of infringement, contributory infringement and willful infringement of U.S. Patent No. 6,891,566 ( the 566 patent ) and United States Patent No. 8,185,964 ( the 964 patent ). In support of the foregoing Motion, Defendant states as follows: 1. Defendant bases this Motion upon the accompanying brief in support, oral argument of counsel, and such other and further material as the Court may consider. 2. As required by E.D. Mich. Local Rule 7.1(a), counsel for Defendant sought concurrence from counsel for Plaintiff on August 6, 2012, via telephone conference. During that call, counsel for Defendant explained the nature of this Motion and its legal basis and requested, but did not obtain, concurrence in the relief sought (i.e., dismissal of the Complaint). {36048/1/DT DOC;1}

2 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 2 of 26 Pg ID 96 Dated: August 6, 2012 Respectfully submitted, KERR, RUSSELL AND WEBER, PLC /s/ Fred K. Herrmann Stephen D. McGraw (P26568) Fred K. Herrmann (P49519) Kerr, Russell and Weber, PLC 500 Woodward Avenue, Suite 2500 Detroit, MI Telephone: (313) Facsimile: (313) smcgraw@kerr-russell.com fherrmann@kerr-russell.com Rory J. Radding Jennifer L. Dereka EDWARDS WILDMAN PALMER LLP 750 Lexington Avenue New York, NY Telephone: (212) Facsimile: (212) rradding@edwardswildman.com jdereka@edwardswildman.com Peter N. Moore EDWARDS WILDMAN PALMER LLP 225 West Wacker Drive, Suite 3000 Chicago, IL Telephone: (312) Facsimile: (312) pmoore@edwardswildman.com Brian R. Landry EDWARDS WILDMAN PALMER LLP 111 Huntington Avenue Boston, MA Telephone: (617) Facsimile: (617) blandry@edwardswildman.com Attorneys for Defendant Milestone Systems, Inc. {36048/1/DT DOC;1} 2

3 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 3 of 26 Pg ID 97 JOSEPH ROBERT MARCHESE, d/b/a JDS Digital Security Systems LLC, UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION v. Plaintiff, MILESTONE SYSTEMS, INC., an Oregon corporation, Case No. 12-cv NGE-MJH Hon. Nancy G. Edmunds Jury Trial Demanded Oral Argument Requested Defendant. DEFENDANT S BRIEF IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFF S CLAIMS FOR INDIRECT INFRINGEMENT AND WILLFUL INFRINGEMENT {36048/1/DT DOC;1}

4 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 4 of 26 Pg ID 98 STATEMENT OF THE ISSUES PRESENTED 1. Whether under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), Plaintiff has failed to allege sufficient facts to meet the minimum requirements for pleading a claim based on indirect infringement 35 U.S.C. 271(b) inducement of infringement and 35 U.S.C. 271(c) contributory infringement? 2. Whether under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), Plaintiff has failed to allege sufficient facts to meet the minimum requirements for pleading a claim based on willful infringement? {36048/1/DT DOC;1} ii

5 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 5 of 26 Pg ID 99 CONTROLLING OR MOST APPROPRIATE AUTHORITIES Insufficiency of the Complaint under Bell Atlantic Corp. v. Twombly A. Inducement of Infringement under 35 U.S.C. 271(b) Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) Ashcroft v. Iqbal, 129 S. Ct (2009) In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323 (Fed. Cir. 2012) Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317 (Fed. Cir. 2009) Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct (2011) DSU Med. Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1305 (Fed. Cir. 2006) IPVenture Inc. v. Lenovo Group Limited, , 2012 U.S. Dist. LEXIS (D. Del. June 29, 2012) Gradient Enters., Inc. v. Skype Techs., 10-CV-6712L, 2012 U.S. Dist. LEXIS (W.D.N.Y. Mar. 13, 2012) ArrivalStar, S.A. v. Intermec Techs. Corp., No , slip op. (S.D. Fla. Sept. 26, 2011) Asentinel LLC v. Info. Group, Inc., , 2011 U.S. Dist LEXIS (W.D. Tenn. Aug. 3, 2011) 35 U.S.C. 271(b) B. Contributory Infringement under 35 U.S.C. 271(c) Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) Ashcroft v. Iqbal, 129 S. Ct (2009) In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323 (Fed. Cir. 2012) Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009) ArrivalStar, S.A. v. Intermec Techs. Corp., No , slip op. (S.D. Fla. Sept. 26, 2011) Classen Immunotherapies, Inc. v. Biogen IDEC, WDQ , 2012 U.S. Dist. LEXIS (D. Md. May 29, 2012) Asentinel LLC v. Info. Group, Inc., , 2011 U.S. Dist LEXIS (W.D. Tenn. Aug. 3, 2011) 35 U.S.C. 271(c) C. Willful Infringement Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) Ashcroft v. Iqbal, 129 S. Ct (2009) In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323 (Fed. Cir. 2012) State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226 (Fed. Cir. 1985) {36048/1/DT DOC;1} iii

6 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 6 of 26 Pg ID 100 Solannex, Inc. v. Miasole, , 2011 U.S. Dist. LEXIS (N.D. Cal. Sept. 9, 2011). Classen Immunotherapies, Inc. v. Biogen IDEC, WDQ , 2012 U.S. Dist. LEXIS (D. Md. May 29, 2012) IpVenture, Inc. v. Cellco P'ship., No. C JSW, 2011 U.S. Dist. LEXIS 5955 (N.D. Cal. Jan. 21, 2011) HSM Portfolio LLC v. Fujitsu Limited, , 2012 U.S. Dist. LEXIS (D. Del. July 3, 2012) Rovi Corp. v. Hulu, LLC, , 2012 U.S. Dist. LEXIS (D. Del. Jan. 27, 2012) In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) Softview LLC v. Apple Inc., et al., , 2012 U.S. Dist. LEXIS (D. Del. July 26, 2012) LML Holdings, Inc. v. Pacific Coast Distrib., Inc., 11-CV-06173, 2012 U.S. Dist. LEXIS (N.D. Cal. May 30, 2012) {36048/1/DT DOC;1} iv

7 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 7 of 26 Pg ID 101 TABLE OF CONTENTS STATEMENT OF THE ISSUE PRESENTED... II BACKGROUND... 1 ARGUMENT... 4 I. MARCHESE FAILS TO STATE A CLAIM FOR INDIRECT INFRINGEMENT... 5 A. Marchese s Allegations Fail to State a Claim for Inducement of Infringement... 6 B. Marchese s Allegations Fail to State a Claim for Contributory Infringement... 8 II.. MARCHESE FAILS TO STATE A CLAIM FOR WILLFUL INFRINGEMENT CONCLUSION {36048/1/DT DOC;1} v

8 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 8 of 26 Pg ID 102 TABLE OF AUTHORITIES CASES ArrivalStar, S.A. v. Intermec Techs. Corp., No , slip op. (S.D. Fla. Sept. 26, 2011)... ii, 7, 8, 9 Asentinel LLC v. Info. Group, Inc., , 2011 U.S. Dist LEXIS (W.D. Tenn. Aug. 3, 2011)... ii, 8, 10 Ashcroft v. Iqbal, 129 S. Ct (2009)... ii, 1, 4, 5 Ass n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545 (6 th Cir. 2007)...5 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)... passim Bosch Healthcare Systems, Inc. v. Express MD Solutions, LLC, , 2012 U.S. Dist. LEXIS (N.D. Cal. July 10, 2012)...11, 14 Classen Immunotherapies, Inc. v. Biogen IDEC, WDQ , 2012 U.S. Dist. LEXIS (D. Md. May 29, 2012)... passim DSU Med. Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1305 (Fed. Cir. 2006)... ii, 6, 7 Fallat v. Cryomed, LLC, , 2009 U.S. Dist. LEXIS (E.D. Mich. Apr. 24, 2009)...5 Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct (2011)... ii, 6 GMA Cover Corp. v. Saab Barracuda LLC, 4:10-CV-12060, 2012 U.S. Dist. LEXIS (E.D. Mich. Feb. 8, 2012)...4 Gradient Enters., Inc. v. Skype Techs., 10-CV-6712L, 2012 U.S. Dist. LEXIS (W.D.N.Y. Mar. 13, 2012)... ii, 6, 8 Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 511 (Fed. Cir. 1990)...10 HSM Portfolio LLC v. Fujitsu Limited, , 2012 U.S. Dist. LEXIS (D. Del. July 3, 2012)... iii, 11 {36048/1/DT DOC;1} vi

9 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 9 of 26 Pg ID 103 In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323 (Fed. Cir. 2012)... passim In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007)... iii, 11, 12 IpVenture, Inc. v. Cellco P'ship., No. C JSW, 2011 U.S. Dist. LEXIS 5955 (N.D. Cal. Jan. 21, 2011)... iii, 11 IPVenture Inc. v. Lenovo Group Limited, , 2012 U.S. Dist. LEXIS (D. Del. June 29, 2012)... ii, 6 Koyle v. Fannie Mae, No , 2012 U.S. Dist. LEXIS (E.D. Mich. Aug. 2, 2012)...5 LML Holdings, Inc. v. Pacific Coast Distrib., Inc., 11-CV-06173, 2012 U.S. Dist. LEXIS (N.D. Cal. May 30, 2012)... iii, 12 Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009)... ii, 8 Pragmatus Telecom, LLC v. Ford Motor Co., 1:12-cv-92, slip op. at 2-3, 2012 U.S. Dist. LEXIS (D. Del. July 5, 2012)...10 Prestige Pet Products, Inc. v. Pingyang Huaxing Leather & Plastic Co. Ltd., 767 F.Supp.2d 806 (E.D. Mich. 2011)...4 Rippy v. Hattaway, 270 F.3d 416 (6 th Cir. 2001)...4 Rovi Corp. v. Hulu, LLC, , 2012 U.S. Dist. LEXIS (D. Del. Jan. 27, 2012)... iii, 11 Sharafabadi v. Univ. of Idaho, No. C , 2009 WL , 2009 U.S. Dist. LEXIS (W.D. Wash. Nov. 27, 2009)...9 Softview LLC v. Apple Inc., et al., , 2012 U.S. Dist. LEXIS (D. Del. July 26, 2012)... iii, 12, 13 Solannex, Inc. v. Miasole, , 2011 U.S. Dist. LEXIS (N.D. Cal. Sept. 9, 2011)... passim State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226 (Fed. Cir. 1985)... ii, 10, 12, 13 Tech. Licensing Corp. v. Technicolor USA, Inc., 03 cv-1329, 2010 WL (E.D. Cal. Oct. 18, 2010)...3, 5 {36048/1/DT DOC;1} vii

10 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 10 of 26 Pg ID 104 Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317 (Fed. Cir. 2009)... ii, 6, 8 STATUTES 35 U.S.C , 2 35 U.S.C. 271(b)... passim 35 U.S.C. 271(c)... passim OTHER AUTHORITIES Fed. R Civ. P. 8(a)(2)...4 Fed. R. Civ. P. 12(b)(6)...1, 4, 5, 11 Local Rule 7.1(a)...1 Rule U.S. Patent No. 6,891, , 2, 12, 13 U.S. Patent No. 8,185, passim {36048/1/DT DOC;1} viii

11 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 11 of 26 Pg ID 105 Pursuant to Fed. R. Civ. P. 12(b)(6), Defendant Milestone Systems, Inc. ( Milestone ) respectfully moves this Court to partially dismiss Plaintiff Joseph Robert Marchese s ( Marchese ) Complaint for Patent Infringement (Doc. No. 1) on the grounds that it fails to state a claim upon which relief can be granted. Specifically, Milestone moves (1) to dismiss Marchese s claims against Milestone for indirect infringement, inducement of infringement and contributory infringement of U.S. Patent No. 6,891,566 ( the 566 patent ) and United States Patent No. 8,185,964 ( the 964 patent ), and (2) to dismiss Marchese s willfulness claims with respect to both the 566 and 964 Patents. Marchese s Complaint has alleged no facts to support its claims of indirect infringement, via either contributory or induced infringement, or willful infringement of the patents-in-suit, much less all of the necessary elements of these claims. Instead, Marchese makes legal conclusions couched as factual allegations, which is insufficient to satisfy the pleading requirements of Twombly and Iqbal. BACKGROUND On May 24, 2012, Marchese filed a complaint alleging that Milestone directly and indirectly infringes the 566 patent and the 964 patent. (collectively, the Marchese Patents ). Doc No. 1. In Count I, Marchese alleged the following with respect to indirect infringement: 14. Defendant has made, used, offered for sale and sold in the United States, and continues to make, use, offer for sale and sell in the United States video surveillance software and systems. Defendant s activities infringe, induce others (users of Milestone s software) to infringe, and/or contributorily infringe the 566 patent. These activities include providing the Milestone XProtect IP Video Management Software to customers and instructing the customers on use of the software. As a non-limiting example, upon information and belief, Greektown Casino and Hotel in Detroit, Michigan, is one of those customers. By making, using, offering for sale and selling technology including, but not limited to, its XProtect IP Video Management Software in the United States, Defendant is infringing claims of the 566 patent under 35 U.S.C Doc. No. 1 at 14. Similarly, in Count II, Marchese alleged the following: {36048/1/DT DOC;1} 1

12 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 12 of 26 Pg ID Defendant has made, used, offered for sale and sold in the United States, and continues to make, use, offer for sale and sell in the United States video surveillance software and systems. Defendant s activities infringe, induce others to infringe, and/or contributorily infringe the 964 patent. These activities include providing the Milestone XProtect IP Video Management Software to customers and instructing the customers on use of the software. As a non-limiting example, upon information and belief, Greektown Casino and Hotel in Detroit, Michigan, is one of those customers. By making, using, offering for sale and selling technology including, but not limited to, its XProtect IP Video Management Software in the United States, Defendant is infringing claims of the 964 patent under 35 U.S.C Doc. No. 1 at 22. With respect to willful infringement, Marchese alleges in Count I the following: 20. Defendant s infringement of the 566 patent has been and continues to be willful, wanton, and deliberate with full knowledge and awareness of Plaintiff s patent rights. Such knowledge and awareness of Plaintiff s technology and resulting patent rights occurred as of February 2004, or alternatively, Defendant has been willfully blind to Plaintiff s patent rights. In addition, Defendant has knowledge of the 566 patent constructively through Plaintiffs marking of its products, and expressly based on the filing and service of the present lawsuit. Doc. No. 1 at Defendant s infringement of the 964 patent, to the extent that it has continued after the filing and/or service of the present complaint, is and continues to be willful, wanton, and deliberate with full knowledge and awareness of Plaintiffs patent rights. Doc. No. 1 at 28 (emphasis added). These paragraphs constitute Marchese s sole basis for its purported claims for inducement of infringement, contributory infringement and willful infringement of the Marchese Patents. Thus, Marchese s indirect infringement claims are based on the threadbare allegation that Milestone is making, using, offering for sale and selling technology including, but not limited to, its XProtect IP Video Management Software in the United States and that Milestone infringe[s], induce[s] others (users of Milestone s software) to infringe, and/or contributorily infringe[s] the 566 and 964 patents by providing the Milestone XProtect LP Video {36048/1/DT DOC;1} 2

13 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 13 of 26 Pg ID 107 Management Software to customers and instructing the customers on use of the software. Id. at 14, 22. In addition, Marchese s claims of willful infringement are based solely on facts related to an alleged February 2004 meeting that included a discussion of technology disclosed in a pending patent application that later matured into the 566 and 964 patents. Id. at 13, 20. This alleged meeting, however, occurred prior to the issuance of the patents-in-suit, and therefore, cannot form the basis for allegations that Milestone had the requisite pre-suit knowledge of these patents. Id. at 8, 9; Solannex, Inc. v. Miasole, , 2011 U.S. Dist. LEXIS , at *8-9 (N.D. Cal. Sept. 9, 2011). Also, although still insufficient for willfulness, the allegation does not even state that the fact of a pending patent application was ever disclosed to Milestone, but only that the discussion involved technology disclosed in a pending patent application. (emphasis added) Doc. No. 1 at 13. Moreover, Marchese s claims of willful infringement based on allegations that unspecified conduct is willful, wanton and deliberate, as well as constructive knowledge and willful blindness are nothing more than barebone recitations of the elements of a willful infringement claim. As explained below, Marchese s allegations fail to contain additional elements not found in direct infringement claims. In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323, (Fed. Cir. 2012) (quoting Tech. Licensing Corp. v. Technicolor USA, Inc., 03 cv-1329, 2010 WL , at *2 (E.D. Cal. Oct. 18, 2010)). With respect to its indirect infringement claims, nowhere is there any allegation regarding: (1) any act of alleged infringement by any third party; (2) specific intent to induce infringement; or (3) that the accused product has no substantial noninfringing uses. As for Marchese s willfulness claims, they likewise fail because they do not adequately allege (1) facts to support the requirement that {36048/1/DT DOC;1} 3

14 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 14 of 26 Pg ID 108 Milestone have pre-suit knowledge of the patents-in-suit; or (2) that Milestone acted in reckless disregard of a possibility that it was infringing the 566 or 964 patents. Marchese s complaint thus fails to meet the requirements for pleading claims of 35 U.S.C. 271(b) inducement of infringement, 35 U.S.C. 271(c) contributory infringement, and willful infringement, and must therefore be dismissed. ARGUMENT The purpose of Rule 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief if all the facts and allegations in the complaint are taken as true. Rippy v. Hattaway, 270 F.3d 416, 419 (6 th Cir. 2001). Federal Rule of Civil Procedure 8(a)(2) requires that a pleading contain a short and plain statement of the claim showing that the pleader is entitled to relief in order to give the defendant fair notice of what the claim is and the grounds upon which it rests. GMA Cover Corp. v. Saab Barracuda LLC, 4:10-CV-12060, 2012 U.S. Dist. LEXIS 25543, at *11 (E.D. Mich. Feb. 8, 2012) (citing Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007), quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). Although Rule 8 does not require a claimant to set out in detail the facts upon which he bases his claim, "it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id.; Prestige Pet Products, Inc. v. Pingyang Huaxing Leather & Plastic Co. Ltd., 767 F.Supp.2d 806, 812 (E.D. Mich. 2011) ( Plaintiff has failed to plead the minimum factual basis required of a plausible claim that Defendants used the specified gaseous smoke, along with all other requisite steps of the 212 Patent. ). Moreover, while a Court generally accepts the factual allegations in the complaint as true, this tenet is inapplicable to a legal conclusion couched as a factual allegation. GMA, 2012 U.S. Dist. LEXIS 25543, at *12-14 (internal quotations and citations {36048/1/DT DOC;1} 4

15 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 15 of 26 Pg ID 109 omitted). Surviving a Rule 12(b)(6) motion to dismiss requires that the plaintiff plead enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570; see id. at 557 (holding naked assertion... without some further factual enhancement... stops short of the line between possibility and plausibility of entitlement to relief. ). A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Iqbal, 129 S. Ct. at Thus, the pleading standard requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.... Twombly, 550 U.S. at 555 (accord Koyle v. Fannie Mae, No , 2012 U.S. Dist. LEXIS , at *4 (E.D. Mich. Aug. 2, 2012). Dismissal for failure to state a claim is proper if the factual allegations are not enough to raise a right to relief above the speculative level. Ass n of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6 th Cir. 2007). I. MARCHESE FAILS TO STATE A CLAIM FOR INDIRECT INFRINGEMENT Marchese s complaint is devoid of the factual allegations required for an indirect infringement claim. Indirect infringement can be based either on a theory of inducement of infringement, [35 U.S.C.] 271(b), or contributory infringement, [35 U.S.C.] 271(c). Fallat v. Cryomed, LLC, , 2009 U.S. Dist. LEXIS 34798, at *6-8 (E.D. Mich. Apr. 24, 2009). It is axiomatic that claims for indirect infringement must contain additional elements not found in direct infringement claims. In re Bill of Lading, 681 F.3d at 1336 (quoting Tech. Licensing Corp WL , at *2). But here, Marchese s complaint does not even contain a [t]hreadbare recital of the elements of a cause of action, supported by mere conclusory statements, and thus plainly do[es] not suffice. Iqbal, 129 S. Ct. at Marchese s {36048/1/DT DOC;1} 5

16 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 16 of 26 Pg ID 110 threadbare and conclusory allegation that Milestone induces or contributorily infringes because Milestone has made, used, offered for sale and sold in the United States, and continues to make, use, offer for sale and sell in the United States video surveillance software and systems and that Defendant has provided the Milestone XProtect IP Video Management Software to customers and instructing the customers on use of the software is not enough to state a plausible claim for indirect infringement, and should therefore be dismissed. A. Marchese s Allegations Fail to State a Claim for Inducement of Infringement Claims for inducement of infringement under 35 U.S.C. 271(b) require sufficient supporting factual allegations, which Marchese has entirely failed to plead. To state a sufficient claim for inducement of infringement, a patentee must allege that the alleged inducer knew of the patent, knowingly induced the infringing acts, and possessed a specific intent to encourage another's infringement of the patent. Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317, 1328 (Fed. Cir. 2009) (evidence consisting of product instructions and the design of the device were insufficient to support an inference of a specific intent to encourage customers to infringe the patent); Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2068 (2011) ( induced infringement under 271(b) requires knowledge that the induced acts constitute patent infringement ); DSU Med. Corp. v. JMS Co., Ltd., 471 F.3d 1293, 1305 (Fed. Cir. 2006) (en banc) ( To establish liability under section 271(b), a patent holder must prove that once the defendants knew of the patent, they actively and knowingly aid[ed] and abet[ed] another s direct infringement. ) (citation omitted); IpVenture Inc. v. Lenovo Group Limited, , 2012 U.S. Dist. LEXIS 90783, at *7 (D. Del. June 29, 2012) ( [t]o the extent the allegations can be read to allege that the defendant knew that (undescribed) induced acts constitute patent infringement, it is wholly unsupported by any factual allegation ); Gradient Enters., Inc. v. Skype Techs., 10-CV- {36048/1/DT DOC;1} 6

17 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 17 of 26 Pg ID L, 2012 U.S. Dist. LEXIS 33563, at *10-11 (W.D.N.Y. Mar. 13, 2012) (complaint that alleges that defendants make or sell methods or systems that induce or contribute to the infringement of the '207 patent found inadequate as simply threadbare recitals of the elements of a cause of action ); ArrivalStar, S.A. v. Intermec Techs. Corp., No , slip op. at 4 (S.D. Fla. Sept. 26, 2011) (dismissing Plaintiff s indirect infringement claim because to state a claim for inducement of infringement, Plaintiffs must allege that [Defendant s] inducement was intentional. ). Marchese s complaint lacks each of these required elements of an inducement claim. Marchese s unsupported allegation that Milestone infringes by inducement because Defendant has made, used, offered for sale and sold in the United States, and continues to make, use, offer for sale and sell in the United States video surveillance software and systems and that Defendant has provided the Milestone XProtect IP Video Management Software to customers and instructing the customers on use of the software is insufficient to plead a claim of inducement of infringement. The making, using and selling language in Form the sample complaint for direct patent infringement in the Federal Rules of Civil Procedure Appendix -- cannot save Marchese s Complaint because Form 18 measure[es] only the sufficiency of allegations of direct infringement, and not indirect infringement. In re Bill of Lading, 681 F.3d at Properly pleading inducement of infringement requires more than the allegation that Milestone is making, selling, and using products. See Id. at 1339 ( To survive [a] motion to dismiss, therefore, [the] complaint[] must contain facts plausibly showing that [defendant] specifically intended their customers to infringe the [] patent and knew that the customer s acts constituted infringement. ); DSU Med. Corp., 471 F.3d at Significantly, Marchese has failed to plead or assert any facts whatsoever that Milestone knowingly induced infringement {36048/1/DT DOC;1} 7

18 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 18 of 26 Pg ID 112 and/or possessed specific intent to encourage another's infringement. Gradient Enters., Inc., 2012 U.S. Dist. LEXIS 33563, at *10-11; Asentinel LLC v. Info. Group, Inc., , 2011 U.S. Dist LEXIS 93803, at *21 (W.D. Tenn. Aug. 3, 2011) (specific intent to encourage infringement not found based on allegations that plaintiff sold its product and provided support for its customers); ArrivalStar, No , slip op. at 4. In addition, the Complaint s allegation that Milestone instructs customers on how to use their software is insufficient to support an inference that Milestone possessed the specific intent to encourage customers to infringe the 566 or 964 patents. Id., Vita-Mix Corp., 581 F.3d at Thus, even assuming all of the allegations in the complaint are true, Marchese has not stated a claim for inducement. As Marchese has not plead the required factual allegations to support a claim for inducement of infringement (i.e., direct infringement by another, specific intent, and/or knowledge of infringement), the Court should dismiss Marchese s woefully deficient inducement claims. B. Marchese s Allegations Fail to State a Claim for Contributory Infringement Marchese s complaint similarly lacks the factual allegations required to state a claim for contributory infringement. Contributory infringement occurs if a party sells or offers to sell, a material or apparatus for use in practicing a patented process, and that material or apparatus is material to practicing the invention, has no substantial non-infringing uses, and is known by the party to be especially made or especially adapted for use in an infringement of such patent. 35 U.S.C. 271(c);. To state a claim for contributory infringement, therefore, a plaintiff must, among other things, plead facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses. In re Bill of Lading, 681 F.3d at 1337 (emphasis added) (citation omitted); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009) ( [T]o succeed on a claim of contributory infringement, in addition to proving an act of direct infringement, plaintiff must show that {36048/1/DT DOC;1} 8

19 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 19 of 26 Pg ID 113 defendant knew that the combination for which its components were especially made was both patented and infringing and that defendant's components have no substantial non-infringing uses. ) (internal quotations omitted); see also Classen Immunotherapies, Inc. v. Biogen IDEC, WDQ , 2012 U.S. Dist. LEXIS 75039, at *28-29, 31 (D. Md. May 29, 2012) ("[t]hat a component is 'capable of being used in an infringing manner,' and comes with instructions for applying the infringing method, does not make it especially made or adapted for use in an infringing method; the plaintiff must allege that the item is not a staple and lacks substantial noninfringing use."); ArrivalStar, No , slip op. at 4 (dismissing Plaintiff s indirect infringement claim because to state a claim for contributory infringement, a plaintiff should at a minimum allege that the defendant s products are especially designed to be used by others to infringe, and that those products lack substantial noninfringing uses. ). Marchese s pleading does not even attempt to address any of these required elements for contributory infringement. Marchese s complaint does not contain allegations that Milestone s products are not a staple article under 35 U.S.C. 271(c), nor any factual averments regarding the uses of Milestone s accused products. Also missing from Marchese s complaint is any allegation regarding alleged direct infringement by a third party to which Milestone purportedly contributed. See Sharafabadi v. Univ. of Idaho, No. C , 2009 U.S. Dist. LEXIS , at *14 (W.D. Wash. Nov. 27, 2009) (dismissing indirect infringement claims where complaint does not allege, for instance, any facts concerning either how [defendant] induced or contributed to another party's direct infringement of the [] Patent or [defendant s] knowledge ). As with inducement of infringement, Marchese s bare allegation that Milestone has made, used, offered for sale and sold in the United States, and continues to make, use, offer for sale and sell in the United States video surveillance software and systems and that Milestone has {36048/1/DT DOC;1} 9

20 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 20 of 26 Pg ID 114 provided the Milestone XProtect IP Video Management Software to customers and instructing the customers on use of the software is not enough for contributory infringement, and Form 18 does not save Marchese s complaint. In re Bill of Lading, 681 F.3d at see, e.g., Pragmatus Telecom, LLC v. Ford Motor Co., 1:12-cv-92, 2012 U.S. Dist. LEXIS 93112, at *4-5 (D. Del. July 5, 2012) (citing In re Bill of Lading; holding bare bones complaint failed to state a claim for both forms of indirect infringement); Asentinel LLC, 2011 U.S. Dist LEXIS 93803, at *22 complaint does not mention - much less allege facts to support a reasonable inference - that Cass's product is "especially designed" to be used by others to infringe, that Cass had knowledge of such use, or that the product lacks substantial noninfringing uses. ). As Marchese s complaint does not state a claim for contributory infringement, the Court should grant Milestone s motion to dismiss. II.. MARCHESE FAILS TO STATE A CLAIM FOR WILLFUL INFRINGEMENT To willfully infringe a patent, the patent must exist and one must have knowledge of it." State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985) (emphasis omitted) ( Filing an application is no guarantee any patent will issue and a very substantial percentage of applications never result in patents ); Solannex, Inc., 2011 U.S. Dist. LEXIS , at *9-10 (willful infringement claims were insufficient because all of the facts alleged precede, but do not follow, the date the '810 Patent was issued ). Thus, a party "cannot be found to have 'willfully' infringed a patent of which the party had no knowledge." Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 511 (Fed. Cir. 1990). Moreover, even when the accused knows about the patents, willful infringement is not established by the simple fact of infringement. Classen Immunotherapies, Inc., 2012 U.S. Dist. LEXIS 75039, at * {36048/1/DT DOC;1} 10

21 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 21 of 26 Pg ID 115 (complaint dismissed because mere knowledge of the patents in suit, without an allegation that GSK acted in reckless disregard of a possibility that it was infringing them, does not support a claim for willful infringement ). Rather, a patentee must allege facts showing that the infringer recklessly disregarded the possibility that certain conduct was infringing. Id. at * 34 (citing In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc) (willfulness requires that "the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent."). Consequently, the "bare recitation of the required legal elements for willful infringement" is insufficient to state a claim under Rule 12(b)(6). 1 IpVenture, Inc. v. Cellco P'ship., No. C JSW, 2011 U.S. Dist. LEXIS 5955, at *7-8 (N.D. Cal. Jan. 21, 2011); see also HSM Portfolio LLC v. Fujitsu Limited, , 2012 U.S. Dist. LEXIS 92167, at *6, 9 (D. Del. July 3, 2012) (dismissing complaint stating that infringement was willful and intentional for falling to set forth any factual support for such proposition); Rovi Corp. v. Hulu, LLC, , 2012 U.S. Dist. LEXIS 10183, at *6-7 (D. Del. Jan. 27, 2012) (no facts plead to advise what actions warrant a conclusion that infringement was willfully or intentionally done or to support claims for inducement). In addition, with respect to knowledge of the patent, the Federal Circuit has stated: In ordinary circumstances, willfulness will depend on an infringer's prelitigation conduct [W]hen a complaint is filed, a patentee must have a good faith basis for alleging willful infringement. So a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer's pre-filing conduct. By contrast, when an accused infringer's post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement. 1 As with Marchese s claims for indirect infringement, pleading willful infringement requires additional elements not found in direct infringement claims. Bosch Healthcare Systems, Inc. v. Express MD Solutions, LLC, , 2012 U.S. Dist. LEXIS 98641, at *10 (N.D. Cal. July 10, 2012) (citing In re Bill of Lading,, 681 F.3d at ). {36048/1/DT DOC;1} 11

22 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 22 of 26 Pg ID 116 In re Seagate Technology, LLC, 497 F.3d at District Courts have interpreted Seagate as implying that willful infringement allegations based only on post-filing conduct are inadequate. Softview LLC v. Apple Inc., et al., , 2012 U.S. Dist. LEXIS , at *26 (D. Del. July 26, 2012) (finding that SoftView s failure to plausibly allege pre-suit knowledge of the patents-in-suit by Kyocera resulted in dismissal of willful infringement allegations); LML Holdings, Inc. v. Pacific Coast Distrib., Inc., 11-CV-06173, 2012 U.S. Dist. LEXIS 75843, at *15-19 (N.D. Cal. May 30, 2012). Thus, to state a claim for willful infringement here, Marchese must allege facts from which it may be concluded that the Defendants knew of the patents at issue prior to initiation of the lawsuit and there was an objectively high likelihood that their actions constituted infringement of a valid patent. Id.; State Industries, Inc., 751 F.2d at Marchese s complaint fails on both counts. As an initial matter, the only specific facts in the Complaint related to Marchese s willfulness claims concern an alleged February 2004 meeting between an alleged Milestone employee and Mr. Marchese to discuss the Softsite software suite product, which allegedly included a discussion of technology disclosed in a pending patent application that later matured into the 566 and 964 patents. Doc. 1 at 13. Significantly, the alleged meeting occurred one (1) year before the issuance of the 566 patent and over (8) years before issuance of the 964 patent. Doc. 1 at 8 and 9. Allegations of Milestone s pre-suit knowledge that preceded issuance of the patents; however, is insufficient for a claim of willful infringement, because [f]iling an application is no guarantee any patent will issue, as a very substantial percentage of applications never result in patents. Solannex, Inc., 2011 U.S. Dist. LEXIS , at *8 (citing State Industries, Inc., 751 F.2d at 1236). Thus, this alleged meeting occurring prior to {36048/1/DT DOC;1} 12

23 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 23 of 26 Pg ID 117 issuance of the patents-in-suit cannot form the basis for Marchese s allegations that Milestone had pre-suit knowledge of the 566 and 964 patents, even if the existence of a pending patent application was disclosed at that alleged meeting. Id. Additionally, with respect to the 964 patent, the Complaint further states that Milestone s infringement, to the extent that it has continued after the filing and/or service of the present complaint, is and continues to be willful, wanton, and deliberate with full knowledge and awareness of Plaintiffs patent rights. (Doc. 1 at 28). The Complaint is completely devoid of any allegations that Milestone had pre-suit knowledge of the 964 patent, and therefore, Marchese s claim for willful infringement of this patent should be dismissed outright. Softview LLC, 2012 U.S. Dist. LEXIS , at *26. In any event, mere knowledge of the 964 patent, without an allegation of specific facts showing that Milestone acted in reckless disregard of a possibility that its conduct was infringing the patent, is likewise insufficient to support a claim for willful infringement. Classen, 2012 U.S. Dist. LEXIS 75039, at * As for the 566 patent, the complaint generally states that Defendant has been willfully blind to Plaintiffs patent rights and that Milestone has knowledge of the 566 patent constructively through Plaintiffs marking of its products, and expressly based on the filing and service of the present lawsuit. Doc. 1 at 13. Like the 964 patent, Marchese s claim for willful infringement based on post-filing knowledge of the 566 patent does not satisfy the presuit conduct necessary to sustain a claim for willful infringement. Softview LLC, 2012 U.S. Dist. LEXIS , at *26. Nor does Marchese s unsupported statement as to Milestone s constructive knowledge and willful blindness state a claim for willful infringement. These statements are nothing more than a barebone recitation of the elements of a willful infringement claim, with no specific facts that Milestone was aware of the asserted patent, but nonetheless {36048/1/DT DOC;1} 13

24 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 24 of 26 Pg ID 118 acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. Classen, 2012 U.S. Dist. LEXIS 75039, at * 33-35; Bosch Healthcare Systems, Inc., 2012 U.S. Dist. LEXIS 98641, at *8 ( Plaintiff has failed to make out even the barest factual assertion that Defendant knew of the patents-in-suit, but instead has made a mere allegation, without more, that Defendant had actual knowledge of those patents ). Accordingly, Marchese s claims for willful infringement should be dismissed. CONCLUSION For the foregoing reasons, Milestone respectfully requests that this Court grant its motion to dismiss any indirect infringement and willful infringement claims in the Complaint. Dated: August 6, 2012 Respectfully submitted, MILESTONE SYSTEMS, INC. /s/fred K. Herrmann Stephen D. McGraw (P26568) Fred K. Herrmann (P49519) Kerr, Russell and Weber, PLC 500 Woodward Avenue, Suite 2500 Detroit, MI Telephone: (313) Facsimile: (313) smcgraw@kerr-russell.com fherrmann@kerr-russell.com Rory J. Radding Jennifer L. Dereka EDWARDS WILDMAN PALMER LLP 750 Lexington Avenue New York, NY Telephone: (212) Facsimile: (212) rradding@edwardswildman.com jdereka@edwardswildman.com {36048/1/DT DOC;1} 14

25 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 25 of 26 Pg ID 119 Peter N. Moore EDWARDS WILDMAN PALMER LLP 225 West Wacker Drive, Suite 3000 Chicago, IL Telephone: (312) Facsimile: (312) pmoore@edwardswildman.com Brian R. Landry EDWARDS WILDMAN PALMER LLP 111 Huntington Avenue Boston, MA Telephone: (617) Facsimile: (617) blandry@edwardswildman.com Attorneys for Defendant Milestone Systems, Inc. {36048/1/DT DOC;1} 15

26 2:12-cv NGE-MJH Doc # 9 Filed 08/06/12 Pg 26 of 26 Pg ID 120 CERTIFICATE OF SERVICE I hereby certify that on this 6 th day of August, 2012, the foregoing DEFENDANT S MOTION TO DISMISS PLAINTIFF S CLAIMS FOR INDIRECT INFRINGEMENT AND WILLFUL INFRINGEMENT, AND BRIEF IN SUPPORT was electronically filed with the Clerk of the Court using CM/ECF and was also served upon Plaintiff Marchese s Counsel via CM/ECF. /s/ Fred K Herrmann Stephen D. McGraw (P26568) Fred K. Herrmann (P49519) Kerr, Russell and Weber, PLC 500 Woodward Avenue, Suite 2500 Detroit, MI Telephone: (313) Facsimile: (313) smcgraw@kerr-russell.com fherrmann@kerr-russell.com Attorneys for Defendant Milestone Systems, Inc. {36048/1/DT DOC;1} 16