Motion to Dismiss Denied – Supreme Court’s Bell Atlantic Corp. v. Twombly Decision Did Not Alter Pleading Standards, Especially in Patent Context

CBT Flint Partners, LLC v. Goodmail Systems, Inc., Return Path, Inc., and Cisco Ironport Systems, LLC, No. 1:07-cv-01822 (N.D. Ga., Dec. 17, 2007) (Thrash, Jr., J.)

Judge Thrash denied defendant Goodmail Systems, Inc.’s (“Goodmail’s”) Motion to Dismiss the case for failure to state a claim. Goodmail contended that the U.S. Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007), which held that a claim in an antitrust action under Section 1 of the Sherman Act must set forth “plausible grounds” to infer an illegal agreement, altered the pleading standards in all federal cases to require more factual detail. Goodmail further contended that the plaintiff’s allegations of direct and indirect patent infringement, as set forth in the Complaint, failed to meet this heightened factual standard.

The Court disagreed with Goodmail’s reading of Twombly. In the Court’s view, the Supreme Court in Twombly applied the traditional “notice pleading” standard under Rule 8 of the Federal Rules in the antitrust context. Specifically, the Court understood Twombly’s “plausibility requirement” to force Sherman Act Section 1 plaintiffs to set forth more than an allegation of parallel (lawful) behavior and a bare assertion of an illegal agreement before being permitted to go forward with discovery. Judge Trash saw nothing new in such a requirement:

The [Supreme] Court’s “new standard” was merely a specific way to articulate a solution to what it perceived to be a specific pleading problem, in a specific area of law that inflicted a high cost upon antitrust defendants. It was not a broad based new license for federal courts to ramp up pleading requirements.

Consequently, the Court found no basis in Twombly to require heightened fact pleading, particularly in the patent context. The Court felt that its conclusion was bolstered by Form 16 of the Federal Rules, which provides a "barebones" model for stating a claim in a patent infringement case. Further, the Court believed that imposing a heightened factual pleading requirement in patent cases is unnecessary because the Northern District of Georgia’s Local Patent Rules already require plaintiffs to disclose a great deal of extremely detailed information early in the case.

Thus, the Court concluded that Twombly did not alter the pleading standards for federal cases, especially patent infringement cases. Because the Court found the plaintiff’s allegations of patent infringement to be sufficient under Rule 8, Goodmail’s Motion to Dismiss was denied.

Order Concerning Attorneys' Fees and Costs

Atlanta Attachment Company v. Leggett & Platt, Inc., No. 1:05-cv-0107 (N.D. Ga. Oct. 18, 2007) (Evans, J.)

Judge Evans awarded Atlanta Attachment Company (“AAC”) attorneys’ fees and costs in the amount of $1,241,056.55. AAC was represented by Troutman Sanders.

AAC prevailed on its claim for infringement of U.S. Patent No. 6,834,603, but did not prevail on its claim for infringement of U.S. Patent No. 6,574,815 or on its claim for breach of contract. The Court found that AAC’s claim for infringement of the ‘603 patent “was by far the predominant claim in [the] case,” and that AAC was the prevailing party because it succeeded on this claim. Because the claims involved common facts, it was difficult for AAC to separate the attorneys’ fees associated with the ‘603 patent from the attorneys’ fees associated with the ‘815 patent and the breach of contract claim. Consequently, AAC divided the case into five phases and requested a percentage of the total fees it incurred in each phase. The Court approved this approach and awarded AAC 50% (pre-suit phase), 67% (discovery phase), 64% (summary judgment phase), 100% (pre-trial phase), and 100% (post-trial phase) of Troutman Sanders’ fees for the respective phases.

AAC also sought an award under 28 U.S.C. § 1920 for costs related to all claims and an award under 35 U.S.C. § 285 for additional costs, excluding fees charged by expert witnesses. The Court granted AAC’s requests, holding that (1) apportionment of costs between successful and unsuccessful claims is not required by 28 U.S.C. § 1920 and (2) to the extent any of AAC's requested costs were not recoverable under 28 U.S. C. § 1920, such costs were recoverable under 35 U. S. C. § 285.

Motion for Partial Summary Judgment of Invalidity Granted Due to Indefiniteness

Romala Stone, Inc. v. Home Depot U.S.A., Inc., No. 1:04-cv-2307 (N.D. Ga. Sept. 28, 2007) (Story, J.).

Judge Story granted the defendant’s Motion for Partial Summary Judgment of Invalidity based on a finding that the phrase “price affordable to an average consumer,” which appeared in the preamble of two asserted claims, was indefinite because “no objective standard is provided by which a person reading the patent could determine if he were infringing the patent.”

The patent-in-suit relates to a method for packaging and shipping natural stone for use as a bathroom or kitchen countertop. According to the patent, the stone is particularly suited for sale at high volume stores and at prices that are reasonable to the average consumer. A Special Master had submitted proposed claim constructions for certain claim terms and phrases. On review of the Special Master’s recommendations, the Court adopted all the proposed constructions except for those that included the term “average consumer.” Specifically, the Court found that the Special Master had improperly defined the term “average consumer” using other limitations from the claim, and thus rendered the term superfluous. The Court went on to adopt a slightly modified version of the plaintiff’s proposed construction, holding that in view of the specification “average consumer” means “an individual that purchases supplies for a home improvement task from a retail outlet and performs the home improvement task himself or herself, regardless of whether the individual has any training in that task.”

Turning to the construction of the preamble phrase “price affordable to an average consumer,” the Court found that even with the term “average consumer” properly construed, the meaning of this phrase was not clear.

The meaning of this phrases [sic] is not clearly discernable from its words. An individual that purchases supplies for a home improvement task from a retail outlet and performs the home improvement task himself or herself, regardless of whether the individual has any training in that task can be an individual from any economic class. The Court finds nothing in the intrinsic or extrinsic evidence that provides an objective standard from which one could determine whether the product is affordable to such a consumer. A person reading the patent is not able to discern the scope of the limitation.

(Order at 11.) Based on this determination, the Court held that the phrase was indefinite as a matter of law and that the asserted claims that included this phrase were thereby invalid.

Motions to Dismiss for Lack of Personal Jurisdiction or, in the Alternative, to Transfer Venue Denied

Catch Curve, Inc. v. Integrated Global Concepts, Inc. and Meixler Technologies, Inc., No. 1:06-cv-2199 (N.D. Ga. Sept. 20, 2007) (Cooper, J.); and

Catch Curve, Inc. v. Graphnet, Inc., No. 1:06-cv-2386 (N.D. Ga. Sept. 28, 2007) (Cooper, J.).

In each of two cases involving the same Georgia plaintiff, Judge Cooper found that the Court had specific jurisdiction over an out-of-state defendant that maintained an interactive website accessible to Georgia residents and sold internet fax services to Georgia residents. Judge Cooper also denied the defendants’ Motions to Transfer because, in each case, the Plaintiff’s choice to bring suit in its home state was “not clearly outweighed by other considerations.” (Emphasis in original).

Integrated Global Concepts is a patent infringement case brought by an Atlanta-based company against two out-of-state defendants – one with its only place of business in Chicago, Illinois and the other with its only place of business in Hatboro, Pennsylvania. The patents-in-suit relate to enhanced facsimile technology. The defendants provide internet fax services that enable their customers to receive fax messages via email. The defendants asserted that they lack sufficient contacts with the State of Georgia to exercise personal jurisdiction over either of them. Alternatively, the defendants argued that the case should be transferred to the Northern District of Illinois for the convenience of the parties and witnesses.

Based upon the evidence presented, Judge Cooper determined that the Court has specific jurisdiction over the defendants. The Court accepted as true the plaintiff’s allegations that both defendants sell significant quantities of services to subscribers in Georgia and derive significant revenues from subscribers in Georgia. The defendants attempted to rebut such allegations by arguing that most of their customers pay by credit card and that they could not determine whether any of such customers reside in Georgia, but Judge Cooper considered such arguments to be unsupported and not credible. The Court found that jurisdiction was further supported because the defendants (1) maintain interactive and commercial websites that are accessible from Georgia and (2) communicate regularly via email with customers in Georgia. The Court also found that exercising personal jurisdiction over the defendants in Georgia would not be unreasonable or unfair given the state’s interest in protecting the intellectual property rights of a Georgia resident and the defendants’ purposeful entry into commercial relationships with Georgia residents. For these reasons, the Court denied the defendants’ Motion to Dismiss for Lack of Personal Jurisdiction.

The Court also denied the defendants’ Motion to Transfer Venue. Assuming the case could have been brought in the Northern District of Illinois, the Court found that the plaintiff’s choice to sue in its home forum was “not clearly outweighed by other considerations.” (Emphasis in original). The convenience of the parties and witnesses did not weigh in favor of a transfer because transferring the action would simply shift the inconvenience from the Illinois defendant and its witnesses (and perhaps the Pennsylvania defendant and its witnesses) to the Georgia plaintiff and its witnesses. Although more of the relevant documents and sources of proof were located in Illinois and the relative means of the parties slightly favored a transfer, these factors were insufficient to overcome the substantial deference afforded to the Plaintiff’s choice to bring suit in its home state.

Graphnet is another patent infringement case brought by the Atlanta-based company. The defendant in this case is a company having its principal place of business in New York, New York. The defendant provides broadcast fax services using templates delivered via email, and electronic message services that convert voice mails and faxes into messages delivered via email. The defendant moved to dismiss for lack of personal jurisdiction or, in the alternative, to transfer the case to the Southern District of New York.

Applying essentially the same analysis as in Integrated Global Concepts, Judge Cooper determined that the Court has specific jurisdiction over the New York defendant in Graphnet and that the case should not be transferred. The evidence indicated that the defendant had generated only $4,500 in gross revenue from a total of seven customers in Georgia from January to November 2006, while at the same time generating over $6 million in gross revenue from customers throughout the U.S. Although the amount of sales to Georgia residents may have been relatively small, the Court held that such sales evidenced the defendant's conscious choice to enter into contracts with customers in Georgia and pursue profits from Georgia. Thus, these contacts supported the exercise of personal jurisdiction. As in Integrated Global Concepts, the Court found that jurisdiction was further supported because the defendant (1) maintains an interactive and commercial website that is accessible from Georgia and (2) communicates regularly via email with customers in Georgia. The Court ultimately rejected many of the same arguments in Graphnet that were presented by the defendants in Integrated Global Concepts, and denied the New York defendant’s Motion to Dismiss or, in the Alternative, to Transfer Venue.