Dali Wireless, Inc. v. Corning Optical Commc'ns LLC

DALI WIRELESS, INC., Plaintiff, v. CORNING OPTICAL COMMUNICATIONS LLC, Defendant.

No. 20-cv-06469-EMC

United States District Court, N.D. California

May 5, 2022

ORDER GRANTING DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS DOCKET NO. 124

EDWARD M. CHEN, United States District Judge.

I. INTRODUCTION

Plaintiff Dali Wireless, Inc. (“Dali”) filed this lawsuit against Defendant Corning Optical Communications LLC (“Corning”) for patent infringement. There are three patents at issue: the ‘261 patent, the ‘358 patent, and the ‘454 patent. The Court GRANTS Corning's motion for judgment on the pleadings for reasons stated below.

II. FACTUAL & PROCEDURAL BACKGROUND

Dali initiated this lawsuit against Corning on December 30, 2019. In its original complaint, it asserted infringement of two different patents - i.e., the ‘074 and ‘766 patents. See Docket No. 1 (Complaint). In its first amended complaint (“FAC”) filed on April 30, 2020, Dali asserted infringement of three new patents currently at issue - i.e., the ‘261, ‘358, and ‘454 patents.^[1] See Docket No. 7 (FAC). Dali alleged that Corning has willfully infringed all three patents at issue because Corning had “extensively examined Dali's patent portfolio and proprietary technology” between 2010 and 2014, during which Corning became well aware of the nature and scope of Dali's extensive patent portfolio.

Corning moved to dismiss the FAC, arguing that Dali's allegations were insufficient to support a claim of willful infringement because none of the three patents were issued until after 2014 - thus, Corning had no knowledge of the patents at issue. See Docket No. 84 at 2. On August 19, 2021, the Court granted Corning's motion for judgment on the pleadings of no willfulness for failure to allege knowledge of the patents, with leave to amend. See Docket No. 96.

In its Second Amended Complaint (“SAC”), Dali now alleges that Corning had actual notice of the patents-in-suit prior to the filing of the FAC - i.e., when the patents-at-suit were first alleged on April 30, 2020. According to Dali, Corning's in-house counsel learned of the ‘358 Patent on October 14, 2016, the ‘261 Patent on April 8, 2020, and the ‘454 Patent on April 15, 2020. See Docket No. 109 (SAC) at 8. Dali also alleges that Corning learned of the application of the ‘454 Patent as early as August 8, 2016. Id. at 10. Dali does not allege with any particularity how Corning learned of these patents. It does not allege, for instance, that Dali specifically warned Corning or presented infringement claims or contentions. According to Dali, Corning monitored its patent portfolio between 2010 and 2014 as follows:

• In late 2010, Corning executives were introduced to Dali. Id. at 8.

• In March 2011, Corning entered into an NDA to discuss purchasing radio distribution system components from Dali. Id.

• In October 2011, Corning executives visited Dali's research and development headquarters in Canada and discussed a framework for cooperating on a project. Corning also expressed interest in making a strategic investment in Dali. Id.

• In May 2012, Corning and Dali signed a letter of intent for Dali to develop, and Corning to purchase, portions of a radio distribution system. Id.

• Between May and July of 2012, Corning performed extensive due diligence on Dali's portfolio, and the two entered into a License and Purchase Agreement. Id. at 9.

• In September 2012, the two entered into a License and Purchase Agreement. Id.

• In April 2013, Dali and Corning discussed broader cooperation between the two companies.

• In October-November 2013, Corning informed Dali that it was reevaluating its business case relating to radio distribution system, but suggested that other projects and opportunities for collaboration with Dali would arise. Id.

• In March 2014, Corning reached out to Dali to discuss completing the radio project as well as beginning a new project. Id.

• On June 3, 2014, Corning's corporate development team met with Dali to discuss Corning acquiring Dali, during which Dali presented an overview of its strategy, product roadmap, and IP positioning. Id. Corning offered Dali up to $100 million for its business and IP holdings; however, it lost interest in acquiring Dali sometime between 2015 and 2016. Id. at 9-10.

• In 2017, Corning acquired SpiderCloud, obtaining the products accused of infringement in this lawsuit. Id.

• On information and belief, Corning continued to monitor Dali's patent portfolio, and the parties again discussed licensing Dali's portfolio in 2019. Id. at 10-11.

These allegations, however, are not specific to the ‘358, ‘261, or ‘454 Patents. From these facts, Dali alleges that Corning examined and continued to monitor Dali's patent portfolio, yet did nothing to ensure its products acquired as part of the 2017 SpiderCloud acquisition did not infringe Dali's patents until April 2020. Id. at 7, 10, 11. Dali further alleges that Corning continues to sell the accused SpiderCloud products. Id.

III. LEGAL STANDARD

Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” “[T]he same standard of review applicable to a Rule 12(b) motion applies to its Rules 12(c) analog” because the motions are “functionally identical.” Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). Thus, when considering a Rule 12(c) motion, a district court “must accept the facts as pled by the nonmovant.” Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1053 (9th Cir. 2011).

The district court then must apply the Iqbal standard to determine “whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief.” Id. at 1054 & n.4 (citing Iqbal, 556 U.S. at 662).

A. Willful Infringement - Elements

This Court recently addressed the elements of a claim for willful infringement:

Section 284 of the Patent Act directs courts to award a prevailing claimant "damages adequate to compensate for the infringement" and "may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. The Supreme Court has held that while district courts should "take into account the particular circumstances of each case in deciding whether to award [enhanced] damages," "such punishment should generally be reserved for egregious cases typified by willful misconduct." See Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S.Ct. 1923, 1934 (2016). Enhanced damages, that is, "are not to be meted out in a typical infringement case, but are instead designed as a 'punitive' or 'vindictive' sanction for egregious infringement behavior," i.e., behavior that is "willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or . . . characteristic of a pirate." Id. at 1932. "Since Halo, courts in this District have required willful infringement claims to show both knowledge of the . . . [p]atents and egregious' conduct in order to survive a motion to dismiss." Google, 2020 U.S. Dist. LEXIS 52753 (emphasis in original) (internal quotation omitted).

Fortinet, Inc. v. Forescout Techs., Inc., No. 20-cv-03343-EMC, 2021 U.S. Dist. LEXIS 111314, at *58-59 (N.D. Cal. June 14, 2021).

The Federal Circuit has clarified that enhanced damages require a high standard of “wanton, malicious, and bad-faith behavior, ” but a finding of willfulness requires “deliberate or intentional infringement.” SRI Int'l, Inc. v. Cisco Sys., Inc., 14 F.4th 1323, 1330 (Fed. Cir. 2021). This requires the patentee to show that “the accused infringer had a specific intent to infringe at the time of the challenged conduct.” BASF Plant Sci., LP, v. Commonwealth Sci. & Indus. Rsch. Organisation, 28 F.4th 1247 (Fed. Cir. 2022). Further, “knowledge of the asserted patent and evidence of infringement” . . . “is necessary, but not sufficient, for a finding of willfulness.” Id. (citation omitted).

Courts have since then noted that this finding of “subjective willfulness” can be satisfied by “proof that the accused infringer acted in the face of a risk of infringement that was ‘either known or so obvious that it should have been known to the accused infringer, '” as articulated by the Federal Circuit in In re Seagate, and discussed by the Supreme Court in Halo. See Halo Elecs., Inc. v. Pulse Elecs., Inc., 579 U.S. 93, 101 (2016); Arctic Cat Inc. v. Bombardier Recreational Prod. Inc., 876 F.3d 1350, 1371 (Fed. Cir. 2017) (“Halo did not disturb the substantive standard for the second prong of Seagate, subjective willfulness.”); iFIT Inc. v. Peloton Interactive, Inc., No. CV 21-507-RGA, 2022 WL 609605, at *1 (D. Del. Jan. 28, 2022) (emphasis added) (citations omitted); accord Fuma Int'l LLC v. R.J. Reynolds Vapor Co., No. 1:19-CV-260, 2021 WL 4820738, at *2 (M.D. N.C. Oct. 15, 2021)).

IV. DISCUSSION

As a preliminary matter, Dali points to an older Federal Circuit case, in which the court laid out factors for determining whether a defendant acted in such bad faith as to warrant an increase in damages. Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992). However, while the Read factors are “useful guideposts in determining the egregiousness of the defendant's conduct[, ]” they are not dispositive and a “district court is not required to discuss the Read factors.” Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 875 F.3d 1369, 1382-83 (Fed. Cir. 2017); Finjan, Inc. v. Blue Coat Sys., Inc., No. 13-CV-03999-BLF, 2016 WL 3880774, at *16 (N.D. Cal. July 18, 2016), affd in part, rev'd in part on other grounds, 879 F.3d 1299 (Fed. Cir. 2018). In the case at bar, the inquiry into willfulness is more direct and thus the multiple Read factors are less helpful.

A....