Opinion
NO. 3-03-CV-0598-L
November 17, 2003
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Defendant NTN Wireless Communications, Inc. ("NTN") f/k/a Zoom Communications, Inc. ("Zoom") has filed a motion to dismiss the patent infringement claims alleged in Plaintiffs First Amended Complaint. For the reasons stated herein, the motion should be denied.
I.
Plaintiff Long Range Systems, Inc. ("LRS") is the assignee of two patents for electronic pagers which are used, among other things, to alert restaurant patrons that their tables are ready. (Plf. First Am. Compl. at 2, ¶ 4). One patent, U.S. Design Patent No. 371, 054 ("the '054 Design Patent"), covers the design and look of stackable coaster pagers. (Id. at 2, ¶ 5 Exh. B). The other patent, U.S. Patent No. 5, 814, 968 ("the '968 Patent"), covers a battery charger and an electronic device assembly consisting of a charger base unit and a plurality of stackable rechargeable electronic pagers. (Id. Exh. A), In early 1999, Zoom became the exclusive sales agent for LRS pagers east of the Mississippi River. (Id. at 3, ¶ 8). Sometime thereafter, Zoom introduced its own coaster paging device into the market which, according to plaintiff, "was designed, manufactured and sold, at least in part by using the proprietary and confidential information obtained from LRS." (Id. at 4, ¶ 9). Plaintiff further alleges that:
Zoom was subsequently acquired by NTN. (Plf. First Am. Compl. at 5, ¶ 14).
During the same time frame, Zoom began taking in trade used LRS individual coaster pagers from owners of LRS systems. Zoom then would open the sealed cases of the LRS pages (although the cases had no defects), remove the electronic hardware inside, and reinstall the LRS electronic hardware into a plastic case that was, on information and belief, designed by and made for Zoom to duplicate the patented design of the LRS case. On information and belief, the only design changes made by Zoom to the patented article of LRS were to leave the required patent notices off the Zoom case, to leave off the required FCC notice, to make the four charging pins extend from the case body to a slightly different height and to re-label the article as a Zoom product without any mention of LRS. Otherwise, the '054 patented article of LRS and the infringing article of Zoom are identical.(Id. at 4-5, ¶ 11). By this suit, plaintiff alleges that the electronic paging devices sold by defendant infringe the '054 Design Patent and the '968 Patent. (See id. at 5-6, ¶¶ 15-18 6-7, ¶¶ 19-22).
Plaintiff also sues for trade dress infringement under section 43(a) of the Lanham Act and unfair competition.
Defendant now seeks dismissal of plaintiffs patent infringement claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. As grounds for its motion, defendant contends that: (1) the pleadings conclusively establish the affirmative defense of patent exhaustion; and (2) plaintiff has failed to allege sufficient facts to establish contributory infringement. The motion has been briefed by the parties and is ripe for determination.
II.
A motion to dismiss under Rule 12(b)(6) "is viewed with disfavor and is rarely granted." Lowrey v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997), quoting Kaiser Aluminum Chemical Sales, Inc. v. Avondale Shipyards, 677 F.2d 1045, 1050(5th Cir. 1982), cert. denied, 103 S.Ct. 729 (1983). A district court may dismiss a complaint "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). The complaint must be liberally construed in favor of the plaintiff and the allegations contained therein must be taken as true. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996).
The exacting standards governing Rule 12(b)(6) motions must be considered in light of the liberal pleading requirements of Rule 8(a). In what has been characterized as a "seminal pleading case," the Supreme Court has reminded lower courts that, in order to survive a motion to dismiss, a complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 922, 998, 152 L.Ed.2d 1 (2002), quoting FED. R. Civ. P. 8(a) (2). This simplified pleading standard applies to all civil actions. Id., 122 S.Ct. at 998. Except in a limited set of cases, a plaintiff is not required to plead facts supporting each and every element of his claim or legal theory. Id. Rather, a complaint is sufficient if it "give[s] the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Id., quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957). See also Higgs v. Carver, 286 F.3d 437, 439 (7th Cir. 2002) (interpreting Swierkiewicz to mean that "[a] complaint that complies with the federal rules of civil procedure cannot be dismissed on the ground that it is conclusory or fails to allege facts"). Liberal discovery rules and summary judgment motions, not motions to dismiss, should be used to define disputed facts and issues and to dispose of unmeritorious claims. See Swierkiewicz, 122 S.Ct. at 998.
These exceptions are found in Rule 9(b), which provides:
In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge, and other condition of mind of a person may be averred generally.
FED. R. Civ. P. 9(b).
Judged against these standards, the court is unable to say that plaintiff can prove no set of facts which would entitle it to relief. Although defendant contends that the repair and resale of used LRS pagers are not infringing activities as a matter of law, the facts alleged by plaintiff suggest that defendant reconstructed, rather than repaired, the patented device. (See Plf. First Am. Compl. at 4-5, ¶ II). Such allegations, if proved, are sufficient to state a claim for patent infringement. See Bottom Line Management, Inc. v. Pan Man, Inc., 228 F.3d 1352, 1354-55 (Fed. Cir. 2000). Similarly, plaintiff has plainly stated a claim for contributory infringement of the '968 Patent. (Id. at 7, ¶ 21). Without suggesting a view on the merits of these claims and defenses or whether dismissal would be proper in another procedural context, such as a motion for summary judgment, the court concludes that defendant cannot prevail on a Rule 12(b)(6) motion at this stage of the litigation. Accordingly, the motion should be denied.
The court notes that defendant has not pled the affirmative defense of patent exhaustion as required by Rule 8(c). In fact, defendant has never answered plaintiff's complaint. Instead, it has filed two motions to dismiss under Rule 12(b)(6).
RECOMMENDATION
Defendant's motion to dismiss for failure to state a claim upon which relief can be granted should be denied. INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO OBJECT
On this date the United States magistrate judge made written findings and a recommended disposition of defendant's motion to dismiss in the above styled and numbered cause. The United States district clerk shall serve a copy of these findings and recommendations on all parties by certified mail, return receipt requested. Pursuant to 28 U.S.C. § 636(b)(1), any party who desires to object to these findings and recommendations must file and serve written objections within ten (10) days after being served with a copy. A party filing objections must specifically identify those findings and recommendations to which objections are being made. The district court need not consider frivolous, conclusory or general objections. The failure to file such written objections to these proposed findings and recommendations shall bar that party from obtaining a de novo determination by the district court. Nettles v. Wainwright, 677 F.2d 404, 410 (5th Cir. 1982). See also Thomas v. Am, 474 U.S. 140, 150 (1985). Additionally, the failure to file written objections to proposed findings and recommendations within ten (10) days after being served with a copy shall bar the aggrieved party from appealing the factual findings and legal conclusions of the magistrate judge that are accepted or adopted by the district court, except upon grounds of plain error or manifest injustice. Douglass v. United Services Automobile Ass'n, 79 F.3d 1415, 1417 (5th Cir. 1996).