In re Bill of Lading Transmission & Processing System Patent Litigation

It turns out the forms at the back of the Federal Rules of Civil Procedure are what lift and separate pleading sufficiency standards for patent infringement claims. In In re Bill of Lading Transmission & Processing System Patent Litigation, a divided panel held that Federal Rule of Civil Procedure 84 girdles the inquiry because it states that a complaint that follows a form in the Rules’ Appendix of Forms is per se sufficient. Direct infringement claims have Form 18 to follow. Thus, according to the panel’s majority, those claims can squeeze past the pleading standards the Supreme Court established in Iqbal and Twombly. But no similar controlling form exists for indirect infringement.  Accordingly, those claims are corseted by Iqbal and Twombly’s stricter pleading standards. Dissenting, Judge Newman argued that, because it disregards the foundational nature of the Supreme Court’s decisions on pleading sufficiency, the majority’s Form opinion should be Spanxed.

R+L, the Bill of Lading plaintiff, has a patent on a method for streamlining the documentation involved in running an efficient “less-than-a-load trucking” business. The method involves scanning data at the truck and sending it to a remote central processing and loading center. The remote scanning allows preparation of a manifest covering the route less-than-full-load shipments will take to their final destination before arrival at the distribution center. The method allows more efficient packing and routing of the packages in those shipments.

R+L sued several competitors and some of their competitor’s customers. R+L alleged both direct and indirect infringement. Six defendants moved to dismiss and the district court ruled that R+L failed to plead facts with the sufficient particularity needed to state a claim for either direct or indirect infringement. R+L appealed.

Reversing the district court, the majority held that R+L had adequately pled a direct infringement claim because their complaint followed Form 18, the sample complaint for direct infringement in the Federal Rules’ forms appendix. The majority noted that Twombly and Iqbal—the leading Supreme Court cases on pleading—did not apply because those opinions do not address the sufficiency of a complaint covered by one of the Federal Rule’s sample forms. The majority found that distinction critical because Federal Rule of Civil Procedure Rule 84 states that any claim that follows an appendix form is per se sufficient.

But, because no appendix form exists to cover indirect infringement claims, the majority said those claims must meet Twombly and Iqbal’s stricter plausibility pleading standards. For contributory infringement then, for example, the plaintiff must plead a plausible claim that the components sold or offered for sale have no substantial non-infringing uses. For inducement, the plaintiff must plausibly show both that the defendants specifically intended their customers to infringe the patent-in-suit and also knew that their customers’ actions constituted infringement.

Using these standards, the majority agreed with the district court that the facts of the complaint showed that the accused products have substantial non-infringing uses and thus did not state a plausible claim of contributory infringement. But the majority reversed on the inducement claims, finding that complaint sufficiently pled the necessary facts.

In a vigorous dissent, Judge Newman criticized the majority for ignoring the Supreme Court’s direct instructions that “Twombly expound[s] the pleading standards for all civil actions.” While agreeing that R+L had sufficiently pled direct infringement and inducement, Judge Newman said that the majority’s separate, form-controlled pleading standard for direct infringement fails to address the claim’s complexity and “discard[s] the general national standard for pleading.”

Bill of Lading’s two-piece pleading standards are sure to get some litigant’s knickers in a twist. Accused infringers will have a harder time getting direct infringement claims dismissed based on a complaint’s unmentionables. But indirect infringement claims that try to leave a little something to the imagination will be less effective at establishing the requisite plausibility Iqbal and Twombly’s pleadings standards demand.  Our take? When it comes to pleading indirect infringement claims—boxers really just might be better than briefs.

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