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Judge Andrews grants motion to amend complaint in part, denies motion to dismiss breach of contract counterclaim

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In a recent Order, Judge Richard G. Andrews, pursuant to FRCP 15(a), granted plaintiff’s motion amend its complaint as to claims of induced infringement, but denied the motion to amend as to claims of contributory infringement. TQ Delta, LLC v. 2Wire, Inc., C.A. No. 13-1835-RGA (D. Del. Mar. 26, 2015).  First, Judge Andrews found that plaintiff had adequately pled induced infringement, and its claims were therefore not futile. In particular, Judge Andrews explained that plaintiff “properly alleged inducement because it makes specific allegations of directly infringing parties, products and acts.” Id. at 3. Plaintiff alleged that defendant’s products operate in accordance with “specific DSL standards,” and defendant argued that “a standard with a mix of mandatory and optional requirements cannot be used alone to establish infringement.” Id. Judge Andrews found that “whether or not infringement has been established, as opposed to plausibly alleged, is a question for another day.” Id. That is, “[t]he standard’s mix of mandatory and optional requirements does not undercut the plausibility of the direct infringement allegation.” Id. at 3-4. Judge Andrews also found that plaintiff made a plausible showing that defendant knowingly induced infringement and had the specific intent to encourage infringement.  Id. at 4-5. Specifically, Judge Andrews noted that “I do not think I need to decide exactly when the allegations rise to the level of knowledge since knowledge is plausibly pled as of the date an earlier complaint[,] names a patent[,] and alleges the Defendant infringed it with a product that complied with a named standard.” Id. at 4.  Judge Andrews further noted that “[i]t is more than plausible that after receiving the complaint Defendant would have conducted reasonable investigation to determine the scope of the asserted patents, and that it thereafter intended for its customers to directly infringe the asserted patents.”  Id. at 5. Judge Andrews found that plaintiff did not sufficiently plead contributory infringement, where “plaintiff merely states that the products are made for the specific purpose of operating in accordance with the standards, and therefore concludes that they have no substantial noninfringing use.” Id. Judge Andrews explained that “[t]hese conclusory statements are not adequately pled, because, as Defendant argues, the allegations are not plausible given the ‘mandatory/optional features of the standards and the substantial room for implementation-specific customization.’” Id.

Finally, Judge Andrews denied plaintiff’s motion to dismiss defendant’s breach of contract counterclaim. Id. at 6. Plaintiff argued, among other things, that defendant’s “breach of contract counterclaim fails to plead facts to demonstrate that Defendant was entitled to the benefits of Plaintiff’s agreement with ITU, a standards-setting organization.” Id. Judge Andrews found, however, that defendant “has sufficiently alleged that it was a third-party beneficiary of a contract and that Plaintiff failed to negotiate a license in good faith.” Id.

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