NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 2 1

- 2 3 5 3

_ _ _ _ _ _ _ _ ____

VERIFY SMART CORP,

Appellant

v.

BANK OF AMERICA NA;

BANK OF AMERICA CORP;

WELLS FARGO BANK NA;

WELLS FARGO & C O;

DAVID LEITCH; GARY LYNCH;

JAMES STROTHER; JIM HOWARD;

SEAN REILLY

_ _____________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF N E W J E R S E Y

(D.C. No. 2:17

- CV

- 04248 )

District Judg e: Honorable J o h n M

. V a z q u e z

______________

Submi tted Under Third Circuit L

. A

. R

. 34.1(a)

o n J u n e 2 2 , 20 2 2

______________

Before: MCKEE, RESTREPO, BIBAS

, Circuit Judges

.

(Filed: August 31, 2 0 2 2 )2 ______________

OPINION *

______________

RESTREPO

, Circui t Judge

.

T h i s a p p e a l a r i s e s f

r o m t h e f a l l o u t o f a p a t e n t

- i nfr ingement s e t t l e m e n t

. A p p e l l a n t

V e r i f y S m a r t C o r p s u e d A p p e l l e e s W e l l s F a r g o a n d B a n k o f A m e r i c a ( t h e “ B a n k s ” )

,

a l l e g i n g t h a t t h e B a n k s a c t e d t h o u g h a b a n k i n g i n d u s t r y g r o u p ’ s s u b s i d i a r y t o challenge a

p a t e n t t h e y w e r e c o n t r a c t u a l l y p r o h i b i t e d f r o m cha llen ging t h e m s e l v e s

. T h e D i s t r i c t

C o u r t d i s m i s s e d V e r i f

y ’ s c l a i m s o n t h e b a s i s t h a t i t f a i l e d t o p l a u s i b l y a l l e g e a n a g e n c y

r e l a t i o n s h i p b e t w e e n t h e i n d u s t r y g r o u p ’ s s u b s i d i a r y a n d t h e B a n k s

. W e w i l l a f f i r m

.

I

. 1

P r i o r t o t h e i n s t a n t l i t i g a t i o n

, V e r i f y b r o u g h t c l a i m s a g a i n s t t h e B a n k s f o r

a l l e g e d l y infringing i t s p a t e n t f o r m u l t i f a c t o r

- i d e n t i f

i c a t i o n s o f

t w a r e

. I n r e s p o n s e

, B a n k

o f A m e r i c a challenged t h e p a t e n t

. T h e y a l l s e t t l e d

, w i t h t h e B a n k s p r o m i s i n g n o t t o

challe nge V e r i f

y ’ s p a t e n t

. B u t s h o r t l y t h e r e a f t e r

, a s u b s i d i a r y o f a b a n k i n g i n d u s t r y

g r o u p

— o f w h i c h b o t h B a n k s w e r e m e m b e r s

— challenged t h e s a m e p a t e n t a n d succeeded

i n i n v a l i d a t i n g i t

. U n d e r s t a n d a b l y s u s p i c i o u s

, V e r i f y s u e d t h e B a n k s

, c l a i m i n g t h a t t h e y

h a d b r e a c h e d a n d fraudulently i n d u c e d t h e s e t t l e m e n t a g r e e m e n t s

.

* This disposition is not an opini on of the full Court and, p ursuan t to I.O.P. 5.7, do es not

c on stitute bind ing precedent.

1 As we write for the benefit of the parties, we set out only the facts necessary for the

discussion that follows.3

T h e c r u x o f V e r i f

y ’ s t h e o r y i s t h a t Askeladden L

. L

. C

. , t h e w h o l l y

- o w n e d

s u b s i d i a r y o f b a n k i n g industry g r o u p The Cleari ng House Payments Company L.L.C.

( “ T C H ” )

, a c t e d a s t h e B a n k s ’ a g e n t t o challenge t h e p a t e n t

— w h i c h t h e y w e r e

c o n t r a c t u a l l y f

o r b i d d e n t o d o t h e m s e l v e s

. I n s u p p o r t

, V e r i f y a l l e g e d t h a t : ( i ) t h e B a n k s

a n d t h e i r p e e r i n s t i t u t i o n s o w n a n d c o n t r o l T C H ; ( i i ) T C H o w n s a n d c o n t r o l s Askeladden ;

( i i i ) T C H c r e a t e d Askeladden t o challenge p a t e n t s t h a t adversely e f f e c t T C H ’ s o w n e r s

,

i n c l u d i n g t h e B a n k s ; ( i v ) TCH controls Askeladden ’ s p a t e n t challenges on behalf of t h e

B a n k s ; and ( v) Askeladden has an established practice of suing patent owners after

TCH’s member banks settle their patent challenge s, and i t did just that here.

A f t e r V e r i f y h a d several c h a n c e s t o a m e n d i t s c l a i m s

, t h e District C o u r t d i s m i s s e d

i t s T h i r d A m e n d e d C o m p l a i n t w i t h p r e j u d i c e

. I t h e l d t h a t V e r i f

y f a i l e d t o s t a t e a c l a i m

a g a i n s t t h e B a n k s f

o r b r e a c h o f c o n t r a c t a n d f r a u d o n t h e b a s i s t h a t i t f

a i l e d t o p l a u s i b l y

a l l e g e t h e y h a d a n a g e n c y r e l a t i o n s h i p w i t h Askeladden

. 2 Verify’s a l l e g a t i o n s relied

heavily on Askeladden’s LLC Agreement for purposes of establishing agency. B u t t h e

D istrict C ourt found Verify’s reliance misplaced, co ncluding that the LLC Agreement

contr adicted the existence of any agency relationship. I t also found V e r i f y ’ s a l l e g a t i o n s

i n s u f f i c i e n t t o e s t a b l i s h t h a t any of the indivi duals V e r i f y i d e n t i f i e d a s associated with the

B a n k s had “any authority to di rec t Askeladden to challenge paten ts” or h a d ever

2 Verify ’s no tice of appeal generally references the District Court ’ s entry of dismissal of

the entire Thir d Amended Complaint

— which included claims and defend ants other than

its breach and fraud claims against the Banks that we address here. But Verify makes no

effor t in its briefing to challenge the dismissal of those other claims , s o they are

abandoned

. See Sikora v. UPMC , 876 F.3d 110, 112 n.1 (3d Cir. 2017)

.4

communicated with the B a n k s in connection with filing the p a t e n t challenge

. JA25

.

V e r i f y t i m e l y a p p e a l e d

. 3

I I

.

W e r e v i e w d e n o v o a district court’s order granting a motion to dismiss for failure

to state a c laim

. Wheeler v. Hampton Twp.

, 399 F.3d 2 38, 242 (3d Cir. 2005). At the

motion to dismiss stage, “we accept all well

- pleaded allegations in the Complaint as true

and draw all reasonable inferences in favor of the non

- moving part[y].” M.A. ex rel. E.S

.

v . State

- Operated Sch. Dist. of City of New a rk , 344 F.3d 335, 340 (3d Cir. 2003) (citing

Bd. of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc. , 296 F.3d 164,

168 (3d Cir. 2002)). To survive a motion to dismiss, factual allegations “must be enough

to raise a right to relie f above th e speculative level,” which “requires more than labels

and conclusions.” Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). We may affirm

on any grounds supported b y the record. Hass en v. Gov ’ t of V.I. , 8 6 1 F.3d 108 , 114 (3d

Cir. 2 017)

.

I I I

.

V e r i f y c o n t e n d s t h a t t h e D i s t r i c t C o u r t e r r e d i n h o l d i n g t h a t i t f a i l e d t o p l e a d

Askeladden was acting as the B anks’ agent when it challenged V e r i f y ’ s p a t e n t

. W e

d i s a g r e e

.

V e r i f y failed to plausibly allege that Askeladden acted as an agent for t h e B a n k s

when i t f iled the challen ge t o Verify’s now

- invalidated p atent. W h i l e w e a g r e e w i t h t h e

3 T he Distr i ct Court had jurisdiction pursuant to 28 U.S.C. § 133 2(a)

. W e have

juris diction p u r s u a n t t o 28 U.S.C. § 1291

.5

D i s t r i c t C o u r t t h a t t h e t i m i n g o f Askeladden ’ s p a t e n t challenge w a s “ s u s p i c i o u s

, ” s e e J A

2 9 0

, w e a l s o a g r e e t h a t t h e LLC Agreement actually shows tha t t h e B anks do not control

w h i c h patents Askeladden challenges

. A n d V e r i f y d o e s n o t a l l e g e a n y f

a c t s e s t a b l i s h i n g

t h a t a n y B a n k o f

f i c e r h a d a u t h o r i t y o v e r o r r e s p o n s i b i l i t i e s r e l a t e d t o Askeladden

.

I V

.

For the for e going reasons, t he judgment of the Dist r ict Court is affirmed

.