Court Opinion

ID: 4076447
Source: CourtListenerOpinion
Date Created: 2016-09-30 16:02:05.110777+00
Date Added: 2024-06-11T14:33:04.598502
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

                    EDWIN LYDA,
                   Plaintiff-Appellant

                           v.

  CBS CORPORATION, CBS INTERACTIVE, INC.,
             Defendants-Appellees
            ______________________

                      2015-1923
                ______________________

   Appeal from the United States District Court for the
Southern District of New York in No. 1:14-cv-06572-VEC,
Judge Valerie E. Caproni.
                 ______________________

              Decided: September 30, 2016
                ______________________

    DAVID FINK, Fink & Johnson, Houston, TX, argued for
plaintiff-appellant.

    JASON C. WHITE, Morgan, Lewis & Bockius LLP,
Chicago, IL, argued for defendants-appellees. Also repre-
sented by SCOTT D. SHERWIN; THOMAS M. PETERSON, San
Francisco, CA; STEPHANIE GAMIZ, New York, NY.
                 ______________________

     Before REYNA, HUGHES, and STOLL, Circuit Judges.
2                                  LYDA   v. CBS CORPORATION

STOLL, Circuit Judge.
     Appellant Edwin Lyda appeals a decision of the Unit-
ed States District Court for the Southern District of New
York dismissing his complaint of patent infringement
under Federal Rule of Civil Procedure 12(b)(6). Lyda v.
CBS Corp., No. 14-CV-6572-VEC, 2015 WL 4393120
(S.D.N.Y. July 16, 2015). We hold that Form 18 does not
apply to a claim of joint patent infringement. Because
Mr. Lyda’s Amended Complaint fails to state a claim for
relief under the Twombly/Iqbal pleading standard, we
affirm the dismissal under Rule 12(b)(6).
                        BACKGROUND
     Mr. Lyda is the named inventor on United States Pa-
tent Nos. 7,434,243 and 7,730,506. According to the
patents, audience members of game shows or reality
programs often use input devices to electronically vote in
response to cues during the shows. In particular, the ’243
and ’506 patents cover methods and systems for “obtain-
ing real time responses to remote programming” by
“allow[ing] persons viewing or listening to a broadcast to
respond to the broadcast in real time without requiring a
personal computer.” ’243 patent col. 1 ll. 14–15, 56–58;
’506 patent col. 1 ll. 16–17, 57–59. The specifications
describe that “the present invention provides a response
device for each person who is listening to/viewing a pro-
gram.” ’243 patent col. 1 ll. 62–64; ’506 patent col. 1
ll. 63–65. This response device is “configured to allow the
audience member to send response data.” ’506 patent
col. 7 ll. 47–48. The specifications describe embodiments
of the response device ranging from a key pad that is
“limited to the choices available to the user presented by
the key pad,” to a full alpha-numeric key pad for “unlim-
ited entry possibilities.” Id. col. 5 ll. 62–67; ’243 patent
col. 5 ll. 53–58. The audience members input their vote
along with an “identifier code” that identifies the person
voting. The responses are sent over a “standard commu-
LYDA   v. CBS CORPORATION                                 3

nication system,” such as a telephone line or a two-way
paging network. ’243 patent col. 1 l. 66; ’506 patent col. 1
l. 67. The responses are collected at a central location,
correlated with the identifier code, and tallied. “If the
programming is being presented live as the responses are
sent in, the program presenter can incorporate the re-
sponses into the programming and modify the program-
ming to meet the audience’s needs.” ’506 patent col. 5 ll.
37–41; see also ’243 patent col. 5 ll. 28–32.
    The Amended Complaint asserts four independent
claims: method claim 8 and system claim 9 of the
’243 patent, and method claim 1 and system claim 7 of the
’506 patent.     Independent method claim 1 of the
’506 patent is representative of the asserted claims and
recites:
   1. A method for receiving and processing re-
   sponses to a program comprising:
       providing a program identifier code for the
   program;
     providing means for identifying an audience
   member[;]
       providing a user input device not requiring a
   personal computer, the device configured to allow
   the audience member to send response data di-
   rectly from the user input device over a standard
   communication system in response to the program
   received apart from the device, the device operat-
   ing without receiving program data;
      having the audience member input the pro-
   gram identifier code into the user input device;
       having the audience member input responses
   to the program received apart from the device into
   the user input device;
4                                          LYDA   v. CBS CORPORATION

        transmitting response data comprising the
    program identifier code, the means for identifying
    an audience member, and the responses over the
    standard communication system;
        collecting the response data at a central loca-
    tion;
        correlating the program identifier code to the
    responses;
         processing the response data.
’506 patent col. 7 ll. 42 – col. 8 l. 3.
    Claim 9 of the ’243 patent and claim 7 of the ’506 pa-
tent, while identified as “system” claims in their pream-
bles, recite the same method steps as claim 1. In effect
then, the system claims should be treated as method
claims. For example, claim 7 of the ’506 patent recites:
    7. A system for receiving and processing re-
    sponses to a program comprising:
        providing a program identifier code for the
    program being presented;
        providing a user input device not requiring a
    personal computer, the device configured to allow
    an audience member to send response data direct-
    ly from the user input device over a standard
    communication system in response to the program
    received apart from the device, the device operat-
    ing without receiving program data;
       having the audience member input the pro-
    gram identifier code into the user input device;
        having the audience member input responses
    to the program received apart from the device into
    the user input device;
LYDA    v. CBS CORPORATION                                5

        transmitting the program identifier code and
    the responses associated with a user identifier
    over the standard communication system;
       collecting, correlating, and processing the pro-
    gram identifier and the responses;
          routing the responses to a program presenter.
Id. col. 8 ll. 23–43.
     Mr. Lyda sued Defendants CBS Corporation and its
wholly owned subsidiary CBS Interactive, Inc. (collective-
ly, “CBS”) for infringement of the ’243 and ’506 patents
for producing and operating the television show “Big
Brother.” After CBS notified Mr. Lyda of alleged deficien-
cies in the original complaint, Mr. Lyda filed the Amend-
ed Complaint at issue here. The Amended Complaint
alleged that Defendants’ operation of the television show
Big Brother infringed Mr. Lyda’s patents by allowing
television audience members to influence aspects of the
show by voting via text message on their cellular phones.
The text messages allegedly used codes identifying the
sender and the sender’s vote selection.
    The Amended Complaint asserts eight nearly identi-
cal counts of infringement based on the four asserted
independent claims against each of the two defendants. 1
For each of the four claims, method and system claims
alike, the Amended Complaint alleges “the participation
of people under the control or direction of an independent
contractor engaged by the Defendant CBS Interactive to
send votes using text messages.” Am. Compl. ¶¶ 17, 24,
31, 38.

    1  The two remaining counts, Count Five and Count
Ten, allege willful infringement based on the infringe-
ment claims.
6                                 LYDA   v. CBS CORPORATION

    The Amended Complaint further alleges that CBS In-
teractive tested the system’s capability to receive text
message responses prior to using the system during live
broadcasts. The Amended Complaint indicates that such
testing was carried out by an independent contractor,
“[a]pparently under the control of Defendant CBS Interac-
tive.” Id. ¶ 8. These independent contractors, themselves
under the direction and control of CBS Interactive, alleg-
edly directed and controlled unnamed third parties to test
the voting operations using “well known cell phones” that
they either owned or borrowed from some unidentified
source. Id. ¶ 17. Mr. Lyda alleged that Defendant CBS
Corporation infringed the asserted patents “by having
Defendant CBS Interactive operate the show Big Brother
and use an independent contractor in conjunction with
testing the system under the control of Defendant CBS
Interactive.” Id. ¶¶ 18, 25, 32, 39. For example, in Count
One, Mr. Lyda alleged the following:
    16. BIG BROTHER tests . . . its electrical systems
    such as audience voting using cell phones to send
    . . . text messages along with the computer pro-
    cessing systems under the control of Defendant
    CBS Interactive for compiling votes as well [as]
    other electrical system functions anticipated for
    conducting a major show on television before a
    live audience.
    17. The testing of text voting operations by De-
    fendant CBS Interactive using cell phones sending
    text messages requires the participation of people
    under the control or direction of an independent
    contractor engaged by the Defendant CBS Inter-
    active to send votes using text messages using
    well known cell phones either their own respective
    cell phones, or borrowed cell phones to test the
    electronic text voting system used by Defendant
    CBS Interactive for its show BIG BROTHER.
LYDA   v. CBS CORPORATION                                   7

Id. ¶¶ 16, 17.
    Defendants moved to dismiss the Amended Complaint
for failure to state a claim under Federal Rule of Civil
Procedure 12(b)(6). During an initial pre-trial conference,
the district court judge informed Mr. Lyda that, pursuant
to the judge’s Individual Rules of Practice in Civil Cases,
he could either amend the complaint a second time, or
oppose the motion and forfeit his ability to further amend
the complaint. Mr. Lyda elected to oppose the motion to
dismiss.
     In evaluating Defendants’ motion to dismiss, the dis-
trict court addressed the parties’ dispute regarding the
type of infringement involved and the applicable pleading
standard. The court determined that while the Amended
Complaint “certainly leaves room for doubt regarding
Plaintiff’s theory of liability,” the allegations regarding an
“independent contractor” acting under the direction or
control of CBS Interactive implicated a theory of joint
infringement. Lyda, 2015 WL 4393120, at *3. While this
court has not directly spoken on the issue of whether
Form 18 applies to a claim of joint infringement, the
district court noted that the general consensus among
district courts was “that Form 18 does not apply to joint
infringement claims.” Id. The court determined, none-
theless, that Plaintiffs did not allege joint infringement
and that “Plaintiff’s allegations are simply too vague,
even under the Form 18 standard, to articulate a claim for
relief.” Id.
    The court determined that Mr. Lyda “fail[ed] to estab-
lish which of Defendants’ alleged practices constitutes
infringement, and he fail[ed] to demonstrate any connec-
tion between the alleged infringing activities and his
patent claims.” Id. According to the court, the Amended
Complaint’s bare allegations that CBS Interactive “op-
erat[ed] the show” by “us[ing] an independent contractor
in conjunction with testing the system,” made it “simply
8                                   LYDA   v. CBS CORPORATION

impossible to discern what actions, activities, services, or
products are infringing Plaintiff’s patents.” Id. at *4. The
district court thus concluded that the Amended Com-
plaint’s allegations were “simply too vague to conform
even with the generous pleading standard set forth under
Form 18.” Id. Accordingly, the district court granted
Defendants’ motion to dismiss and denied Mr. Lyda an
opportunity for further amendments because “leave to
replead would be futile.” Id. at *5.
    Mr. Lyda appealed to this court, and we have jurisdic-
tion under 28 U.S.C. §§ 1295(a)(1).
                        DISCUSSION
     We apply the law of the regional circuit, here the Sec-
ond Circuit, in reviewing motions to dismiss. See OIP
Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362
(Fed. Cir.), cert. denied, 136 S. Ct. 701 (2015). According
to the Second Circuit, “[t]o survive a motion to dismiss
Fed. R. Civ. P. 12(b)(6), a complaint must allege sufficient
facts, taken as true, to state a plausible claim for relief.”
Johnson v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir.
2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555–56 (2007)); see also Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). Facial plausibility exists when the court can
“draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.
“Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.”
Id. (citing Twombly, 550 U.S. at 555).
                             I.
   For claims of direct patent infringement, this court
has determined that the pleading requirements of Form
LYDA    v. CBS CORPORATION                                  9

18 suffice to survive a motion to dismiss. 2 See In re Bill of
Lading Transmission & Processing Sys. Patent Litig., 681
F.3d 1323, 1334 (Fed. Cir. 2012). Form 18, in the Appen-
dix to the Federal Rules of Civil Procedure, is titled
“Complaint for Patent Infringement” and provides a
sample allegation of direct infringement. We have stated
that when used properly, Form 18 “effectively immunizes
a claimant from attack regarding the sufficiency of the
pleading.” K-Tech Telecomms., Inc. v. Time Warner Cable,
Inc., 714 F.3d 1277, 1283 (Fed. Cir. 2013) (internal cita-
tion omitted).
    Form 18 has the following minimal requirements:
    (1) an allegation of jurisdiction; (2) a statement
    that the plaintiff owns the patent; (3) a statement
    that defendant has been infringing the patent “by
    making, selling, and using [the device] embodying

    2   The Appendix of Forms, including Form 18, and
Federal Rule of Civil Procedure 84, which provides that
the forms “suffice under these rules,” were both eliminat-
ed from the Federal Rules of Civil Procedure following
changes that took effect on December 1, 2015. When
adopting these changes, the Supreme Court stated that
the rule change “shall govern in all proceedings in civil
cases thereafter commenced [after December 1, 2015] and,
insofar as just and practicable, all proceedings then
pending.” Supreme Court of the United States, Order
Regarding Amendments to the Federal Rules of Civil
Procedure         (U.S.         Apr.       29,       2015),
https://www.supremecourt.gov/orders/courtorders/frcv15(u
pdate)_1823.pdf. Defendants argue that because Form 18
has been abrogated, it does not apply to this case. But the
Amended Complaint was filed in 2014, and the case was
terminated when the complaint was dismissed in July
2015. Accordingly, we determine that the repeal of Form
18 does not apply to this case.
10                                 LYDA   v. CBS CORPORATION

     the patent”; (4) a statement that the plaintiff has
     given the defendant notice of its infringement;
     and (5) a demand for an injunction and damages.
In re Bill of Lading, 681 F.3d at 1334.
    As we explained in In re Bill of Lading, Federal Rule
of Civil Procedure 84 provides that “the forms in the
Appendix suffice under these rules and illustrate the
simplicity and brevity that these rules contemplate.” Id.
(quoting Fed. R. Civ. P. 84). Rule 84 and its accompany-
ing Advisory Committee Notes indicate that the forms
satisfy the rules as to the sufficiency of pleading direct
infringement. Id. Therefore, whether a complaint ade-
quately pleads direct infringement is “to be measured by
the specificity required by Form 18.” Id. Moreover, “to
the extent any conflict exists between Twombly (and its
progeny) and the Forms regarding pleadings require-
ments, the Forms control.” K-Tech, 714 F.3d at 1283.
    We have also held that allegations of induced or con-
tributory infringement, which have additional elements
not found in direct infringement claims, are not governed
by Form 18. In re Bill of Lading, 681 F.3d at 1336; Supe-
rior Indus., LLC v. Thor Glob. Enters. Ltd., 700 F.3d
1287, 1295 (Fed. Cir. 2012) (“Form 18 does not determine
the sufficiency of pleading for claims of indirect infringe-
ment.”). “Rather, the pleading requirements set forth in
[Twombly and Iqbal] apply” to claims of induced and
contributory infringement. Superior, 700 F.3d at 1295.
We have not, however, expressly considered whether
claims of joint infringement should be measured by the
sparse requirements of Form 18.
    “Direct infringement under § 271(a) occurs where all
steps of a claimed method are performed by or attributa-
ble to a single entity.” Akamai Techs., Inc. v. Limelight
Networks, Inc., 797 F.3d 1020, 1022 (Fed. Cir. 2015) (en
banc). While a typical claim of direct infringement re-
quires proof that a defendant performs each step of the
LYDA   v. CBS CORPORATION                                 11

claimed method, joint infringement requires more. To
prove joint infringement, where multiple actors are in-
volved in practicing the claim steps, the patent owner
must show that the acts of one party are attributable to
the other such that a single entity is responsible for the
infringement. This court has held that an entity will be
responsible for others’ performance of method steps in two
circumstances: “(1) where that entity directs or controls
others’ performance, and (2) where the actors form a joint
enterprise.” Id. Therefore, like claims of induced or
contributory infringement, allegations of joint infringe-
ment require elements beyond those for the more typical
act of direct infringement to which Form 18 is directed.
     We agree with the district courts that have addressed
this issue and concluded that the pleading requirements
for joint infringement are not satisfied by Form 18. See,
e.g., Nu Flow Techs. (2000) Inc. v. A.O. Reed & Co., No.
13-CV-1818 BEN JMA, 2014 WL 1400127, at *2 (S.D. Cal.
Apr. 8, 2014). Because joint infringement requires addi-
tional elements not addressed by Form 18, we hold that
allegations of joint infringement must be measured by the
Iqbal and Twombly standard without reference to Form
18. Id. (“Form 18 also does not address joint infringe-
ment. To be consistent with the requirement that allega-
tions of indirect infringement meet the pleading standard
of Twombly and Iqbal, courts have required allegations of
joint infringement to meet the same pleading standard.”).
A claim of joint infringement thus requires pleading facts
sufficient to allow a reasonable inference that all steps of
the claimed method are performed and either (1) one
party exercises the requisite “direction or control” over the
others’ performance or (2) the actors form a joint enter-
prise such that performance of every step is attributable
to the controlling party. See Akamai, 797 F.3d at 1022.
12                                 LYDA   v. CBS CORPORATION

                            II.
                            A.
    Mr. Lyda’s complaint does not explicitly indicate
whether CBS infringes the asserted patents under a
single or joint theory of direct infringement. The Amend-
ed Complaint, however, alleges that “Defendant CBS, as
owner of the Defendant CBS Interactive, controls the
operations of the Defendant CBS Interactive,”
Am. Compl. ¶ 13, and therefore that the purported steps
taken by CBS Interactive are attributed to CBS. The
Amended Complaint further alleges infringement by “the
participation of people under the control or direction of an
independent contractor” hired by CBS Interactive and
“the computer processing systems under the control of
Defendant CBS Interactive.” See, e.g., id. ¶¶ 16–18. It
also alleges that the independent contractors direct or
control unnamed people to use their own or borrowed cell
phones to vote. Id. ¶ 17. These allegations implicate joint
infringement, which Mr. Lyda’s counsel acknowledged
during oral argument when he agreed that the Amended
Complaint asserts a joint infringement theory of direct
infringement. See Oral Argument at 4:15–4:22, available
at http://oralarguments.cafc.uscourts.gov/default.aspx?fl=
2015-1923.mp3.
     Our cases have applied joint infringement to method
claims and not system claims. See Centillion Data Sys.
LLC v. Qwest Commc’ns Int’l Inc., 631 F.3d 1279, 1284
(Fed. Cir. 2011) (analyzing system claims under a differ-
ent framework: “to ‘use’ a system for purposes of in-
fringement, a party must put the invention into service,
i.e., control the system as a whole and obtain benefit from
it”). As we discussed above, the purported system claims
asserted in this case are, in fact, method claims because
the body of the claims require the performance of particu-
lar method steps. Moreover, the Amended Complaint
pleads the system claims like the method claims, alleging
LYDA   v. CBS CORPORATION                                13

direction or control over the independent contractors, who
in turn direct or control the unnamed third parties. 3
Therefore, we conclude that each count of the Amended
Complaint implicates joint infringement. 4
                            B.
    We note that Mr. Lyda does not attempt to argue that
the Amended Complaint satisfies the Twombly/Iqbal
pleading standard outside of relying on Form 18. Because
we hold that Form 18 does not apply to claims of joint
infringement, and because Mr. Lyda has not plausibly
pled a claim of joint infringement in satisfaction of the
Iqbal/Twombly pleading standard, we affirm the district
court’s dismissal under Rule 12(b)(6).
    The Amended Complaint relies on a direction or con-
trol theory of joint infringement and does not plead that

   3    We recognize that claims reciting both a system
and the method steps of using the system are indefinite
under 35 U.S.C. § 112, second paragraph. IPXL Holdings,
L.L.C. v. Amazon.com, Inc., 430 F.3d 1377, 1384 (Fed. Cir.
2005) (“Because [the claim] recites both a system and the
method for using that system, it does not apprise a person
of ordinary skill in the art of its scope, and it is invalid
under section 112, paragraph 2.”). As noted above, the
“system” claims here recite method steps, and the
Amended Complaint pleads the system claims like meth-
od claims. Therefore, we, like the district court, treat
them as method claims for this 12(b)(6) analysis.
    4   We do not address the situation where claim con-
struction may be necessary to resolve the question of
whether the claim terms require joint infringement.
Here, each count of the Amended Complaint unequivocal-
ly alleges the participation of multiple parties, and
Mr. Lyda’s counsel acknowledged as much during oral
argument.
14                                LYDA   v. CBS CORPORATION

Defendants are in a joint enterprise with the independent
contractors. To survive a motion brought under Rule
12(b)(6), the Amended Complaint must plausibly allege
that Defendants exercise the requisite “direction or con-
trol” over the performance of the claim steps, such that
performance of every step is attributable to Defendants.
See Akamai, 797 F.3d at 1022. The Amended Complaint
alleges that CBS Interactive controls certain independent
contractors who in turn direct and control the “participa-
tion” of unnamed third persons to send votes on either
their own or borrowed cell phones. Mr. Lyda does not set
forth any factual allegations in support of his assertion
that CBS Interactive directed or controlled the independ-
ent contractors. Nor does the Amended Complaint con-
tain factual allegations relating to how the independent
contractors directed or controlled the unnamed third
parties. Most importantly, the Amended Complaint does
not allege any relationship between the Defendants and
the unnamed third parties, who own or borrow cell
phones, in a way that the actions of these unnamed third
parties should be attributed to Defendants. Rather, the
Amended Complaint alleges conclusively and without
factual support that CBS directed or controlled the inde-
pendent contractors who then directed or controlled the
unnamed third parties. There are thus no allegations in
the Amended Complaint that can form the basis of a
reasonable inference that each claim step was performed
by or should be attributed to Defendants. The Amended
Complaint fails to plausibly plead sufficient facts to
ground a joint infringement claim under this court’s
Akamai decision and does not satisfy the Iqbal/Twombly
pleading standard. See Akamai, 797 F.3d at 1022. Ac-
cordingly, we agree with the district court that dismissal
of the Amended Complaint was proper.
                           III.
   The district court did not abuse its discretion in deny-
ing Mr. Lyda further leave to amend the complaint.
LYDA   v. CBS CORPORATION                                  15

Mr. Lyda amended the complaint once, and declined the
opportunity to amend the complaint a second time, decid-
ing instead to oppose Defendants’ motion to dismiss. The
district court’s rules of practice freely allow a plaintiff to
amend its complaint in the face of a motion to dismiss,
but curtails leave to amend where the plaintiff declines to
do so until after the court finds the pleadings insufficient.
E.g., Honorable Valerie E. Caproni, Individual Rules of
Practice in Civil Cases § 3.E.i (2015). We see no reason to
disturb the district court’s application of its own internal
rules, which fall within its broad power to control its
docket. See Keranos, LLC v. Silicon Storage Tech., Inc.,
797 F.3d 1025, 1035 (Fed. Cir. 2015). As such, we cannot
say that the court abused its discretion in denying
Mr. Lyda leave to amend his complaint.
                          CONCLUSION
    Because we hold that Form 18 does not apply to
claims of joint infringement, and because the Amended
Complaint does not satisfy the Iqbal/Twombly pleading
standard, we affirm the district court’s dismissal of the
Amended Complaint under Federal Rule of Civil Proce-
dure 12(b)(6). Moreover, the district court did not abuse
its discretion in denying Mr. Lyda leave to amend his
complaint a second time.
                        AFFIRMED
                            COSTS
    Costs to Appellees.