Software companies sued for patent infringement can seek quick layoffs | Blogs | Innovative technological perspectives


Patent infringement litigation can be expensive, take years, and be a huge distraction to a company’s efforts in the marketplace. While it can be emotionally satisfying to fight an infringement charge from trial to final judgment, an early exit from litigation can save a defendant significant resources. The recent case DataWidget, LLC v The Rocket Science Group, LLC provides an example of strategies that software publishers can use to obtain early dismissals of patent infringement cases without sufficient factual basis.


Federal Rules of Civil Procedure and Substantive Patent Law provide defendants in patent cases with various protections from frivolous lawsuits, although these protections may have limited application. For example, Federal Rule 11 allows for the dismissal of a lawsuit and penalties where complainants have failed to conduct adequate pre-complaint investigations; but as seen in Hoffmann-LaRoche, Inc. v. Invamed, Inc.Plaintiffs could avoid penalties by asking accused defendants to explain the operation of products that could not be determined from publicly available information. In 2014, the Supreme Court ruled in Alice Corp. Pty. ltd. against CLS Bank Int’l that patent claims directed to a computer-implemented system to mitigate “settlement risk” were not patent-eligible under 35 USC §101, but rather covered an abstract idea ineligible for patent, and that the generic computer implementation failed to transform this abstract idea into an eligible invention patent. After Alicemotions to dismiss based on allegedly unpatentable subject matter have been frequently used in software-related cases, and the filing of such motions has increased from 31 motions in 2013 to over 350 motions in 2016.

Figure 1: Motions to Dismiss for Failure to Disclose a Claim Based on Non-Patentable Subject Matter (35 USC § 101) (Docket Navigator Analytics)

As noted in our previous analysis, a year later, in 2015, the Form 18 patent complaint was revoked and plaintiffs were required to plead sufficient factual content to allow a court to reasonably conclude that the defendant is responsible for the alleged misconduct. . Two years later, in 2017, the Supreme Court decision in TC Heartland LLC v Kraft Foods Group Brands LLC clarified that for the purposes of patent jurisdiction, a corporation “resides” only in its state of incorporation, and not any forum where it is subject to personal jurisdiction, thus limiting the places in which corporations could be continued. the DataWidget However, the case identifies an additional strategy that defendants can use to avoid prosecution even if sued in an appropriate venue and the plaintiff has complied with the obligations of Rule 11 by demanding an explanation from the targeted defendant regarding the operation of the accused system.

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In DataWidget, the plaintiff claimed to be the owner of a patent relating to a system for “selling personalized, customer-specific subsets of data on a third-party website using a data vendor widget “. The plaintiff contacted the defendant before filing the lawsuit to find out how he had integrated the data sellers’ data into his web page, but the defendant never responded. Undeterred and potentially protected from the penalties of Rule 11 by having made inquiries of Defendant regarding the operation of the accused system, Plaintiff sued for patent infringement, admitting in the complaint that his allegations of infringement were based on a series of assumptions that a non-party software developer has created software used by defendant that performs the functions claimed by plaintiff’s patent. When asked about defendant’s motion to dismiss, plaintiff asserted that he had adequately pleaded (1) ownership of the patent, (2) name of the infringer, (3) a citation of the infringing patent, (4) l infringing activity and (5) citations to federal patent law, which under repealed Form 18 would have been sufficient to plead patent infringement.

The Court concluded that Form 18 required “little more than a concluding statement alleging that the defendant had infringed the plaintiff’s patent” and that, under today’s pleading standards, the plaintiff “must show How? ‘Or’ What the defendant plausibly infringes by alleging certain facts linking the allegedly infringing product to the elements of the claim. The complaint merely speculated about the operation of the accused system, and the Court found that plaintiff could not properly allege infringement without factual allegations showing how defendant’s system actually practiced the limitations of the patent claims. Although the Court recognized that the Plaintiff could do little more than speculate when he had no idea of ​​the Defendant’s dealings without discovery, the Court refused to let the case proceed because “allowing this matter to continue on the basis of assumptions would impermissibly lower the standard of pleading. so any patentee can pursue claims and force a defendant to incur the time and expense of litigation, simply because another product looks like his. Thus, the Court dismissed the complaint and concluded that the plaintiff did not have “a right to discovery to determine whether he had a claim in the first place”.


the DataWidget The case is of particular importance to software companies whose products cannot be reverse engineered by potential patent applicants. Sometimes cooperating with a patent holder to explain that infringement could not take place has resolved lawsuits, but cooperation does not guarantee that litigation will be avoided. After DataWidgetsoftware vendors have an additional incentive not to cooperate with potential claimants, because a claimant’s admission that they have no factual basis to claim an infringement can lead to early rejections of cases.


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