Ioengine, LLC v. Paypal Holdings, Inc.

IOENGINE, LLC, Plaintiff, v. PAYPAL HOLDINGS, INC., Defendant.

INGENICO INC., Plaintiff, v. IOENGINE, LLC, Defendant.

IOENGINE, LLC, Counterclaim Plaintiff, v. INGENICO INC., INGENICO CORP.,and INGENICO GROUP, S.A., Counterclaim Defendants.

Civil Action No. 18-452-WCB

Civil Action No. 18-826-WCB

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

January 25, 2019

MEMORANDUM OPINION AND ORDER

Before the Court are two motions to dismiss. The first, in case number 18-452, is the motion by defendant PayPal Holdings, Inc. ("PayPal"), to dismiss IOENGINE's claims of joint infringement, indirect infringement, and willful infringement on the ground that the complaint fails to allege facts sufficient to plead plausible claims on each of those theories of liability. No. 1:18-cv-452, Dkt. No. 9. The second, in case number 18-826, is the motion by the Ingenico counterclaim defendants (Ingenico Inc., Ingenico Corp., and Ingenico Group S.A.) to dismiss the counterclaims by IOENGINE, LLC, against Ingenico Group S.A. for lack of jurisdiction and to dismiss the counterclaims against all of the counterclaim defendants on the ground that the counterclaims lump the defendants together and fail to give fair notice to any of them. No. 1:18-cv-826, Dkt. No. 26.

In the PayPal case, the Court grants PayPal's motion to dismiss in part and denies it in part. With respect to IOENGINE's theory of joint infringement, the Court holds that the complaint sufficiently alleges facts that plausibly state a claim for relief on that theory. With respect to IOENGINE's theories of indirect infringement and willful infringement, the Court rules that the complaint pleads the requisite knowledge of the patents-in-suit from the date of the complaint. The Court rules that the complaint is otherwise sufficient to support IOENGINE's theories of induced infringement and willful infringement, but that the complaint does not sufficiently allege contributory infringement.

In the Ingenico case, the Court denies the motion to dismiss without prejudice, pending jurisdictional discovery. After jurisdictional discovery, the Ingenico counterclaim defendants will be permitted to renew their motion to dismiss Ingenico Group S.A. as a counterclaim-defendant in this action if they wish to do so, and the parties will be given an opportunity to file supplementalbriefs on the jurisdictional issues. A hearing on the jurisdictional issue will be held if the Court determines that it is necessary. As to the motion of the Ingenico counterclaim defendants to dismiss the counterclaims on the ground that it is unclear from the counterclaims what role each defendant is accused of playing in the alleged acts of infringement, the Court denies the motion.

I. PAYPAL'S MOTION TO DISMISS

A. Joint Infringement

PayPal moves to dismiss IOENGINE's claims of joint infringement, contending that IOENGINE's complaint includes no allegations of facts plausibly demonstrating that the acts of a third party are attributable to PayPal such that a single entity is responsible for the alleged infringement.

Proof of joint infringement requires the plaintiff to show that one entity "directs or controls" the other's performance, or that the actors "form a joint enterprise." Eli Lilly & Co. v. Teva Parenteral Medicines, Inc., 845 F.3d 1357, 1364 (Fed. Cir. 2017) (quoting Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 1022 (Fed. Cir. 2015) (en banc)). Proof that a defendant engaged in joint infringement by directing and controlling another party's infringing conduct can be shown where the defendant "(1) 'conditions participation in an activity or receipt of a benefit' upon others' performance of one or more steps of a patented method, and (2) 'establishes the manner or timing of that performance.'" Eli Lilly, 845 F.3d at 1365 (quoting Akamai, 797 F.3d at 1023). Proof that a defendant was part of a joint enterprise with another party or group of parties requires a showing of "(1) an agreement, express or implied, among the members of the group; (2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in that purpose, among the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control." Akamai, 797 F.3d at 1023.

In order to survive a motion to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b)(6), Fed. R. Civ. P., a complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when the plaintiff pleads factual content that, if taken as true, "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. That standard is not met when a plaintiff provides a "bare averment that he wants relief and is entitled to it." Twombly, 550 U.S. at 555 n.3. On the other hand, "the plausibility requirement is not akin to a 'probability requirement at the pleading stage; it simply calls for enough fact[s] to raise a reasonable expectation that discovery will reveal' that the defendant is liable for the misconduct alleged." Lifetime Indus., Inc. v. Trim-Lok, Inc., 869 F.3d 1372, 1380 (Fed. Cir. 2017) (quoting In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1341 (Fed. Cir. 2012)).

PayPal contends that the complaint against it fails to allege sufficient facts under either theory of joint infringement, and that the complaint merely asserts in conclusory fashion that "PayPal has infringed and continues to infringe[] directly (alone or jointly)." Dkt. No. 9, at 9 (citing complaint ¶¶ 26, 109, 189). IOENGINE responds that the complaint contains allegations that PayPal provides software development kits for PayPal infringing products and instructs and encourages customers, Point of Sale Partners ("POS Partners"), and third parties to create applications that enable credit or debit card payments using PayPal card readers. Dkt. No. 16, at 3 (quoting complaint ¶¶ 22, 100, 180, 275). IOENGINE points out that the complaint also contains citations to PayPal's website and to its YouTube video channel, which instruct and encourage end users to use PayPal products in an infringing manner. In particular, IOENGINE notes that thecomplaint alleges that PayPal jointly infringes by "orchestrating the infringing use of the PayPal Infringing Products" by PayPal's POS Partners and their mobile payment applications. Id. at 17 (citing complaint ¶ 32). PayPal's relationship with its POS Partners, according to IOENGINE, allows a reasonable inference both that PayPal exercises direction or control over its POS Partners and that PayPal and its POS Partners are engaged in a joint enterprise with respect to the acts of alleged infringement.

IOENGINE contends that PayPal documentation referred to in the complaint "direct[s] third party developers on how to create applications that work with the PayPal Infringing Products and . . . control[s] how those partner applications interact with PayPal's systems." Id. at 18. According to IOENGINE, the ability of PayPal's POS Partners to interact with the accused PayPal products depends on their use of PayPal's software development kits, which control the performance of the steps of the method claims when the PayPal software is run by the POS Partners. The PayPal software thus establishes the manner and timing of the performance of the claimed method steps by controlling the manner in which the POS Partner interacts with the accused PayPal products to carry out the infringing functionality.

Whether the facts alleged in the complaint will ultimately be determined to be sufficient to constitute "direction or control" by PayPal of the activities of the POS Partners, customers, and third parties is not at issue at this juncture. The pleaded facts are at least sufficient to plausibly assert the required direction or control in light of case law from the Federal Circuit.

The Federal Circuit's decisions in Akamai and Travel Sentry, Inc. v. Tropp, 877 F.3d 1370 (Fed. Cir. 2017), in particular, are instructive here. In Akamai, Limelight was accused of infringing a patent on methods of hosting content and delivering it over the Internet. The evidence showed that Limelight performed several steps of the claimed methods, and that Limelight's customersperformed at least one of the steps, in which the customers "tagged" and "served" the content to be hosted and delivered by Limelight's content delivery network. The en banc Federal Circuit held that substantial evidence supported the jury's determination that Limelight directed or controlled its customers' performance of the remaining method steps. The court observed that "if Limelight's customers wish to use Limelight's product, they must tag and serve content." Akamai, 797 F.3d at 1024. That statement was based on evidence that "Limelight requires all of its customers to sign a standard contract" that "delineates the steps customers must perform if they use the Limelight service." Id. The Federal Circuit did not recite any evidence that Limelight categorically enforced the contract, but found that Limelight conditioned receipt of the benefit of use of the product based on the contractual promise of the user.

The Travel Sentry case involved a claim of joint infringement of a patent directed to an improvement in airline luggage inspection systems. The evidence showed that the accused infringer, Travel Sentry, performed certain steps of the patented method, and that agents of the Transportation Security Administration ("TSA") performed the final two steps. The Federal Circuit held that the evidence was sufficient for a reasonable jury to conclude that the TSA agents' performance of the final two claim steps was attributable to...