Patent Ruling Highlights Pressure on Plaintiffs

Patent Ruling Highlights Pressure on Plaintiffs fotolia

Amid a backlash against so-called patent trolls, plaintiffs in patent cases are facing a multipronged movement to tighten the pleading requirements that govern their infringement claims. Some of these efforts are centered in Congress, which is considering multiple patent reform bills. But others are coming from the judicial branch—a point clearly illustrated last week in a ruling by a federal judge in Virginia.

In a forceful 18-page opinion, U.S. District Judge Robert Payne in Richmond dismissed most of a patent infringement suit that Macronix International Co. filed against Spansion Inc., saying that Macronix’s claims were vague, unspecific and “bare-bones.”

While the March 10 opinion centers on the specifics of the case, most of it is devoted to providing a detailed explanation of why patent complaints should be subject to the heightened pleading standards outlined in the U.S. Supreme Court’s decisions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal. Those rulings, issued in 2007 and 2009, require plaintiffs in all civil actions to back their claims with specific and plausible fact-based allegations in order to survive motions to dismiss.

Those standards haven’t been universally applied to patent cases, however. The U.S. Court of Appeals for the Federal Circuit has held that under patent law, plaintiffs need only submit what’s known as a Form 18, which requires a very limited statement alleging infringement, when filing a complaint.

Payne obviously disagrees with the Federal Circuit. “There is no logical reason to exempt patent complaints from the plausibility requirements that apply to all other federal complaints,” he wrote. The judge noted that the Supreme Court made clear that the heightened pleading requirement was needed “to assure that the parties would not embark on expensive litigation unless the plaintiff had made in the complaint a plausible case.”

“Patent cases generally are among the most expensive kinds of cases in federal court,” Payne wrote, “It is not logical to exempt them from the reach of Twombly and Iqbal, whose prime purpose was to assure that such expense was not incurred unless the plaintiff had posited a plausible claim in the complaint.”

Taiwan-based Macronix sued Spansion, a flash memory company, in October, alleging infringement of seven of its patents related to memory devices and data transmission. Payne instructed Macronix to amend its complaint to meet the higher pleading standards, but Macronix failed to do so adequately, according to the judge.

Payne gave Macronix permission to file a second amended complaint in last week’s ruling, but he warned the company that it would “be wise to hew closely” to his instructions and “to eschew the blunderbuss approach” it had taken previously. The judge also agreed to transfer the litigation to a federal court in California over Macronix’s objection.

Michael Murray, one of a team of lawyers from Winston & Strawn representing Macronix, said the company intends to file an amended complaint and will include the detail Payne requested. He said he was not authorized to comment further about the case.

The judge’s opinion comes at a time when other branches of government are advocating for a higher pleadings standard for patent cases. The Judicial Conference of the U.S., which oversees the Federal Rules of Civil Procedure, has called for the elimination of the rule that allows plaintiffs to base complaints on Form 18.

Some believe that rule has allowed for the proliferation of patent trolls, which often seek a quick settlement and assert vague claims. But others in the patent community fear that heightened pleading standards will lead judges to dismiss lawsuits that deserve to be heard.

Congress, too, has turned its attention to pleading requirements for patent plaintiffs—and the possibility that tightening them could deter patent trolls. The Innovation Act, the version of patent reform legislation that has already passed in the U.S. House of Representatives, would require a patent holder to clearly identify the patent claims being asserted and explain exactly how the patents are infringed. The Senate is still considering several patent reform proposals, and some of those also include a heightened pleading standard.

“Judge Payne’s opinion directly contradicts decisions of the Federal Circuit, but is in line with proposals in Congress and in the judicial branch,” said Chris Mammen, a partner at Hogan Lovells and a law professor at the University of California at Hastings who has no interest in the Macronix-Spansion dispute. “There’s a good chance other litigants and district court judges will cite the decision as a persuasive authority,” Mammen said.

Spansion is represented by Andrew Thomases, Megan Raymond and Nicole Jantzi of Ropes & Gray, and by Dabney Carr of Troutman Sanders. They were not immediately available to comment.

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