Schwabe, Williamson & Wyatt PC | Latest Federal Court Cases – July 2021 #2

Schwabe, Williamson & Wyatt PC | Latest Federal Court Cases – July 2021 #2

Bot M8 accused Sony’s PlayStation 4 (“PS4”) video game consoles and aspects of Sony’s PlayStation network of infringing the ’540, ’990, ’988, and ’670 patents. Bot M8 also accused certain PS4 videogames of infringing the ’363 patent. During a case management conference, the court sua sponte directed Bot M8 to file an amended complaint specifying “every element of every claim that you say is infringed and/or explain why it can’t be done.” Bot M8 agreed to do so and timely filed a 223-page first amended complaint (“FAC”).

In this week’s Case of the Week, the Federal Circuit addressed the stringency of pleading requirements alleging patent infringement. At issue in the case was Bot M8 LLC’s lawsuit against Sony Corporation of America, alleging infringement of six patents relating to gaming machines. The district court granted dismissal as to the ’540, ’990, ’988, and ’670 patents, and summary judgment as to the ’363 patent. The Federal Circuit affirmed in part, reversed in part, and remanded to the district court for further proceedings. The Court’s opinion reemphasized two critical procedural points: (1) patentees need not prove their case at the pleading stage; and (2) while a patentee’s pleading obligations are not insurmountable, a patentee may subject its claims to early dismissal by pleading facts that are inconsistent with the requirements of its claims.

Sony moved to dismiss the FAC. The district court granted Sony’s motion to dismiss as to the ’540, ’990, ’988 and ’670 patents. For the ’540 patent – which describes an authentication mechanism for video games – the district court found that the FAC failed to allege when or where the game program and authentication program are stored together on the same memory board. Likewise, for the ’990 patent – which describes a mutual authentication mechanism for video games – the district court found that the FAC failed to allege when or where the game program and mutual authentication program are stored together. And for the ’988 and ’670 patents – which describe computer program fault inspection – the district court found that the FAC provided no basis to infer the proper timing of the inspection – i.e., whether a fault inspection program is completed before the game starts. The district court explained that Bot M8’s allegation too closely tracks the claim language to be entitled to the presumption of truth, and that no underlying allegations of fact were offered.

In response to the district court’s order, Bot M8 requested permission to “jailbreak” the PS4 and use its discoveries to supplement its prior pleadings. Bot M8 had not previously communicated to the district court its need for such authority, and in fact, had communicated the opposite at the initial case management conference. Nevertheless, the district court granted permission. Bot M8 did jailbreak the PS4 and then sought leave to amend its FAC with new evidence it obtained from this endeavor. The district court, relying on FRCP 16, found that Bot M8’s request required “good cause,” and that none existed because Bot M8 had not previously communicated to the district court any hurdles prohibiting it from jailbreaking the PS4.

The district court also entered summary judgment as to the ’363 patent – which describes a gaming machine that changes future game conditions based on players’ prior game results – finding claim 1 of the ’363 patent recited abstract ideas and offered no inventive concept.

On appeal, the Federal Circuit found that the district court’s instruction to counsel for Bot M8 that it must “explain in complaint every element of every claim that you say is infringed and/or explain why it can’t be done,” was incorrect. The Federal Circuit clarified that a plaintiff need not prove its case at the pleading stage and that a plaintiff is not required to plead infringement on an element-by-element basis. Instead, the relevant inquiry is whether the factual allegations in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. Additionally, the Federal Circuit explained that a plaintiff cannot assert a plausible claim for infringement under the Iqbal/Twombly standard by reciting the claim elements and merely concluding that the accused product has those elements. There must be some factual allegations that, when taken as true, articulate why it is plausible that the accused product infringes the patent claim.

Applying this standard, the Federal Circuit (1) agreed with the district court that Bot M8’s allegations as to the ’540 and ’990 patents were conclusory and at times contradictory, and affirmed the dismissal of same; and (2) found that the district court erred in dismissing the allegations as to the ’988 and ’670 patents and reversed same.

As for the ’540 patent, the Federal Circuit reasoned that the FAC contained too much rather than too little, to the point that Bot M8 had essentially pleaded itself out of court. According to the Federal Circuit, Bot M8 took a “kitchen sink” approach that revealed inconsistent pleadings that rendered the claim not even possible, much less plausible. The ’990 patent suffered the opposite problem. The Federal Circuit reasoned that Bot M8 merely recited the claim elements and corresponding conclusions, without providing supporting factual allegations.

As for the ’988 and ’670 patents, the Federal Circuit reasoned that the district court demanded too much at the pleading stage. The ’988 and ’670 patents require a control device that executes a “fault inspection program” and “completes the execution of the fault inspection program before the game is started.” According to the Federal Circuit, the FAC plausibly alleges infringement of the ’988 and ’670 patents as Bot M8 expressly alleges – at least four different times in the FAC – that the fault inspection program completes before the game is started, and supported these allegations with specific error messages that are displayed by the PS4 when faults are detected. In addition to the above, the Federal Circuit also addressed Bot M8’s arguments that the district court erred in (1) sua sponte forcing Bot M8 to replead its original complaint; (2) denying leave to amend the FAC; and (3) granting summary judgment as to the ’363 patent. The Federal Circuit rejected each argument. As to the first, the Federal Circuit noted that Ninth Circuit law is clear that the district court had the authority to request an amended complaint. As to the second, the Federal Circuit reasoned that – while it concluded that the FAC was sufficient as to the ’988 and ’670 patents – leave to amend was properly denied as to all four patents because FRCP 16 applied and required “good cause.” The Court found Bot M8’s misrepresentations to the district court regarding its ability to “jailbreak” the PS4 sufficient to support the district court’s decision. Finally, as to Bot M8’s third argument, the Federal Circuit found no error in the district court’s summary judgment analysis and felt no need to discuss the analysis in detail.

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