Grecia v. Apple Inc., No. 3:2014cv00775 - Document 130 (N.D. Cal. 2014)
Court Description: ORDER Granting Defendants VUDU, Inc. and Digital Entertainment Content Ecosystem (DECE) LLC's Motions to Dismiss in Related Case No. C-14-1220 EMC. Signed by Judge Edward M. Chen on 8/29/2014. (emcsec, COURT STAFF) (Filed on 8/29/2014)
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Grecia v. Apple Inc. Doc. 130 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 WILLIAM GRECIA, 9 11 For the Northern District of California United States District Court 10 Plaintiff, v. Lead Case No. C-14-0775 EMC VUDU, INC. and Digital Entertainment Content Ecosystem (DECE) LLC, ORDER GRANTING DEFENDANTS VUDU, INC., AND DIGITAL ENTERTAINMENT CONTENT ECOSYSTEM (DECE) LLC’s MOTIONS TO DISMISS Defendants. ___________________________________/ (Docket Nos. 18, 43) 12 13 No. C-14-1220 EMC 14 15 16 Pending before the Court are Defendant VUDU, Inc. (“VUDU”), and Defendant Digital 17 Entertainment Content Ecosystem (DECE), LLC (“DECE”) motions to dismiss Plaintiff William 18 Grecia’s (“Plaintiff”) complaint. See Docket Nos. 18, 43. On August 22, 2014, this Court granted 19 Plaintiff’s administrative motion to relate Grecia v. VUDU, Inc, et al., C14-1220-JD with lead case 20 Grecia v. Apple, et al., C14-0775-EMC. See Docket 59. This Court granted the motion to relate 21 after the prior judge had heard Defendant DECE’s motion to dismiss and took the matter under 22 submission. See Docket 52. The prior judge had not yet heard Defendant VUDU’s motion to 23 dismiss. Having considered the parties’ briefs, accompanying submissions, and transcript of the 24 hearing on Defendant DECE’s motion to dismiss before the prior judge, the Court finds this matter 25 is appropriate for resolution without argument and hereby VACATES the hearing pursuant to Civil 26 Local Rule 7-1(b). 27 28 The Court hereby GRANTS Defendants’ motions to dismiss Plaintiff’s complaint with leave to amend. Dockets.Justia.com 1 I. FACTUAL & PROCEDURAL BACKGROUND 2 In the complaint, Plaintiff alleges as follows. See Docket No. 1. 3 Plaintiff owns United States Patent 8,533,860 (“‘806 Patent”) and at least one continuing 4 application claiming back to the original priority date of March 21, 2010. Complaint ¶ 8. Plaintiff 5 invented the methods and products claimed in the ‘860 Patent. Id. Defendant VUDU is a 6 corporation organized under the laws of Delaware, with a principal place of business located in 7 Santa Clara, California. Id. ¶ 2. Defendant DECE is a company organized under the laws of 8 Delaware, with its principal place of business located in Pleasanton, California. Id. ¶ 3. 9 The ‘860 Patent is in the field of invention referred to as digital rights management. (“DRM”). Id. ¶ 9. DRM concerns technology that supports copyright owners who want to sell their 11 For the Northern District of California United States District Court 10 content in a digital form – such as books, movies, and music – and transfer ownership to the buyer, 12 while also protecting the value by preventing the illicit copying of the content. Id. Prior DRM 13 technologies locked the purchased content to specific devices and, in some cases, limited playback 14 rights to a single device that a client had to continually re-authorize. Id. ¶ 10. Plaintiff’s ‘860 Patent 15 allows the digital content to be accessed on a number of devices, while still protecting copyright 16 owners against unlicensed use. Id. ¶ 11. 17 Plaintiff alleges that VUDU and DECE, pursuant to a contractual or agency relationship, 18 have and are directly infringing on the ‘860 Patent. Id. ¶ 14. According to Plaintiff, VUDU and 19 DECE make, use, sell, and offer for sale methods, equipment, and services that practice claims 1, 2, 20 3, 4, 5, 9, and 10 of the ‘860 Patent. Id. For example, Plaintiff alleges that VUDU and DECE’s 21 cloud computing service directly infringes on claim 1 in the following ways. Id. ¶ 15. VUDU and 22 DECE “practice a method of authorizing access to digital content–such as movies–using a cloud 23 computing system” (id. ¶ 16) and “facilitate access rights to movies between a plurality of devices” 24 (id. ¶ 17). “VUDU receives a content access request from the user’s device when the user requests 25 access to her digital content by requesting that VUDU write her email address and password to 26 metadata of the digital content.” Id. ¶ 18. Then, “[a]fter the VUDU user’s verification token has 27 been authenticated, VUDU establishes a connection between the user’s device and DECE’s 28 UltraViolet web services by presenting the UltraViolet login screen using UltraViolet’s coordinator 2 1 Application Programmable Interface.” Id. ¶ 19. Last, VUDU and DECE “request an identification 2 reference . . . from the communications console” (id. ¶ 20), “receive[ ] an identification reference” 3 (id. ¶ 21), and “write, among other things, the user’s VUDU verification token or the DECE 4 identification reference into the metadata associated with the digital content, authorizing the user to 5 her digital content.” (id. ¶ 22). Plaintiff alleges that VUDU and DECE had prior knowledge of the 6 ‘860 Patent, because DECE, or individual acting on DECE’s behalf, disclosed the ‘860 Patent to the 7 United States Patent and Trademark Office as relevant prior art in case 13/436,567. Id. ¶ 23. 8 9 This Court related the following cases pursuant to Civil Local Rule 3-12: (1) Grecia v. Apple and ABC, Inc., dba Walt Disney Studies Motion Pictures, C-14-0775-EMC, (2) Grecia v. Sony Network Entertainment International, LLC, C-14-0969, (3) Grecia v. Google Inc., C-14-1194, 11 For the Northern District of California United States District Court 10 and (4) Grecia v. VUDU, et al., C-14-1220. See Dockets No. 70, 71, and 127. 12 Currently before the Court are two motions to dismiss that were pending when this Court 13 related the case Grecia v. VUDU, et al. on August 22, 2014. See Docket No. 18, 43. The prior 14 judge held a hearing on Defendant DECE’s motion to dismiss (see Docket No. 18) on August 11, 15 2014 and took the matter under submission. See Docket No. 52. The prior judge had not yet heard 16 arguments on Defendant VUDU’s motion to dismiss at the time the cases were related. However, 17 Plaintiff failed to respond to Defendant VUDU’s motion to dismiss by August 15, 2014. In 18 Plaintiff’s opposition to Defendant VUDU’s request to continue a case management conference, 19 Plaintiff requested the prior judge hear both Defendant DECE and VUDU’s motions to dismiss on 20 August 11, 2014, stating that “. . . DECE and VUDU’s motions to dismiss are nearly identical” and 21 Plaintiff “would stand on his opposition to the DECE motion and could address any new matter that 22 VUDU raises in its motion at oral argument scheduled for August 11, 2014.” Pl. Opposition to 23 VUDU’s Request to Continue the Case Management Conference at 2, Docket No. 45. The prior 24 judge denied the motion to reschedule, but declined to hear arguments on Defendant VUDU’s 25 motion to dismiss on August 11, 2014. See Transcript of Proceeding at 2:24-3:1, Docket No. 58. 26 No order was entered on either motion to dismiss. Accordingly, both Defendant DECE and 27 Defendant VUDU’s motions to dismiss are still currently pending before this Court. 28 3 1 2 3 III. A. DISCUSSION Legal Standard Federal Rule of Civil Procedure (“Rule”) 12(b)(6) allows for dismissal based on a failure to 4 state a claim for relief. Rule 8(a)(2) governs pleading requirements, stating that a pleading must 5 contain only “a short and plain statement of the claim showing that the pleader is entitled to relief,” 6 in order to “give the defendant fair notice of what the . . . claim is and the grounds upon which it 7 rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A motion to dismiss based on the rule 8 challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington, 51 F.3d 9 1480, 1484 (9th Cir.1995). In considering a 12(b)(6) motion, a court must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although 11 For the Northern District of California United States District Court 10 “conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) 12 dismissal.” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). 13 While “a complaint need not contain detailed factual allegations . . . it must plead ‘enough 14 facts to state a claim to relief that is plausible on its face.’” Id. “A claim has facial plausibility when 15 the plaintiff pleads factual content that allows the court to draw the reasonable inference that the 16 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); see 17 also Twombly, 550 U.S. at 556. “[N]aked assertions devoid of further factual enhancement” are 18 insufficient to state a plausible claim for relief. Blantz v. Cal. Dep’t of Corr. & Rehab, 727 F.3d 19 917, 926-27 (9th Cir. 2013). “The plausibility standard is not akin to a ‘probability requirement,’ 20 but it asks for more than sheer possibility that a defendant acted unlawfully.” Iqbal, 556 U.S. at 678. 21 The Federal Circuit has held that whether a complaint has “adequately plead direct 22 infringement is to be measured by the specificity required by Form 18.” In re Bill of Lading 23 Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1334 (Fed. Cir. 2012) (citing 24 Appendix of Forms to the Federal Rules of Civil Procedure, Form 18); see also McZeal v. Sprint 25 Nextel Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007). However, “Form 18 should be strictly 26 construed as measuring only the sufficiency of allegations of direct infringement, and not indirect 27 infringement[,]” which should be measured according to Twombly and Iqbal. In re Bill of Lading, 28 681 F.3d at 1336. 4 1 2 B. Count One: Direct Patent Infringement Against Both VUDU and DECE Plaintiff alleges in Count One that “VUDU and DECE, pursuant to a contractual or agency 3 relationship, have and are directly infringing claims of the ‘860 patent. Vudu and DECE make, use, 4 sell, and offer for sale methods, equipment, and services that practice claims 1, 2, 3, 4, 5, 9, and 10 5 of the ‘860 patent.” Complaint ¶ 14. 6 Recently, the United State Supreme Court held that “. . . a method patent is not directly 7 infringed – and the patentee’s interest is thus not violated – unless a single actor can be held 8 responsible for the performance of all steps of the patent.” Limelight Networks, Inc. v. Akamai 9 Technologies, Inc., 134 S. Ct. 2111, 2119 (2014). The Supreme Court interpreted the Federal Circuit’s Muniauction, Inc. v. Thomson Corp decision to hold “that a method’s steps have not all 11 For the Northern District of California United States District Court 10 been performed as claimed by the patent unless they are all attributable to the same defendant, either 12 because the defendant actually performed those steps or because he directed or controlled others 13 who performed them.” Id. (citing Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 14 2008)). In Muniauction, the Federal Circuit found “where the actions of multiple parties combine to 15 perform every step of a claimed method, the claim is directly infringed only if one party exercises 16 ‘control or direction’ over the entire process such that every step is attributable to the controlling 17 party, i.e., the ‘mastermind.’” 532 F.3d at 1329 (citing BMC Res., Inc. v. Paymentech, L.P., 498 18 F.3d 1373, 1377 (Fed. Cir. 2007)). “The control or direction standard is satisfied in situations where 19 the law would traditionally hold the accused direct infringer vicariously liable for the acts committed 20 by another party that are required to complete performance of a claimed method.” Muniauction, 532 21 F.3d at 1330. 22 The complaint does not explicitly state whether Plaintiff alleges that Defendants infringed 23 independently or jointly on the ‘860 Patent. The Court assumes, however, that because Plaintiff 24 alleges that Defendants acted “pursuant to a contractual or agency relationship” (Complaint ¶ 14) 25 and identifies both Defendants as performing different steps of the claimed method (see e.g. id. ¶ 19 26 (“After the VUDU user’s verification token has been authenticated, VUDU establishes a connection 27 between the user’s device and DECE’s Ultraviolet web services . . .”)), Plaintiff relies on a theory of 28 joint infringement. Based on the allegations contained in the complaint, Plaintiff’s claim for joint 5 1 infringement fails to allege sufficient facts that the infringement is attributable to a single defendant 2 as required by Limelight Networks. Plaintiff does not allege whether it is VUDU or DECE that 3 directs or controls the entire process, i.e., acts as the mastermind. 4 Courts have routinely dismissed complaints that fail to identify a single mastermind, or that 5 lack allegations that a single defendant directed or controlled the entire process. See e.g. Nu Flow 6 Technologies (2000) Inc. v. A.O. Reed & Co., 13-CV-1818 BEN JMA, 2014 WL 1400127 *3 (S.D. 7 Cal. Apr. 8, 2014) (pursuant to Twombly and Iqbal, court found plaintiff failed “to adequately allege 8 that one defendant exerted control and direction over the other defendants”); EON Corp. IP 9 Holdings LLC v. FLO TV Inc., 802 F. Supp. 2d 527, 534 (D. Del. 2011) (court dismissed the joint infringement claim because plaintiff failed “to identify any defendant as exercising ‘control or 11 For the Northern District of California United States District Court 10 direction’ over the allegedly infringing acts of other parties”); Desenberg v. Google, Inc., 392 F. 12 App’x 868, 870-71 (Fed. Cir. 2010) (affirming dismissal where district court found defendant had 13 not performed all steps of a claim itself and plaintiff failed to allege that defendant had exercised 14 direction or control over the multiple actors). While Plaintiff did indicate at the hearing before the 15 prior court that he could plead in good faith that “on information and belief VUDU would appear to 16 be the mastermind,” Plaintiff makes no such allegation in the complaint. See Transcript of 17 Proceedings at 6:3-5 (Plaintiff stated “[a]s we explained in our opposition, we can plead in good 18 faith that . . . on information and belief VUDU would appear to be the mastermind”), Docket No. 58. 19 The Court is confined to the pleadings in ruling on a motion to dismiss. 20 Accordingly, the Court grants the motions to dismiss the claim for direct infringement 21 against both Defendant DECE and Defendant VUDU with leave to amend. 22 C. Count Two: Indirect Patent Infringement by DECE 23 Plaintiff asserts a claim against DECE only for indirect patent infringement alleging that 24 “DECE has knowledge of the ‘860 patent and nonetheless actively induces at least the following 25 entities to directly infringe the ‘860 patent: VUDU, Target Corporations, Sony Pictures 26 Entertainment Inc., [et al.] . . .” Complaint ¶ 24. 27 28 In Limelight Networks, the Supreme Court confirmed that “where there has been no direct infringement, there can be no inducement of infringement under § 271(b).” Limelight Networks, 134 6 1 S.Ct. at 2117. Plaintiff concedes that the second claim for inducement rises and falls with the first 2 claim for direct infringement, stating in opposition that “inducement liability may arise only if there 3 is a direct infringement.” Opposition at 9, Docket No. 34. Plaintiff’s claim for inducement cannot 4 be sustained without an adequate showing of direct infringement. 5 6 Accordingly, the Court grants Defendant DECE’s motion to dismiss the claim for inducement with leave to amend. 7 8 9 11 For the Northern District of California United States District Court 10 12 13 IV. CONCLUSION The Court hereby GRANTS the motions to dismiss Plaintiff’s claims for direct infringement against Defendants DECE and VUDU (Count One) and inducement against Defendant DECE (Count Two). The Court grants the motion with leave to amend. A Status Conference is scheduled for December 11, 2014 at 10:30 a.m. A Joint Status Conference Statement shall be filed by December 4, 2014. This disposes of Docket Nos. 18 and 43. 14 15 IT IS SO ORDERED. 16 17 Dated: August 29, 2014 18 _________________________ EDWARD M. CHEN United States District Judge 19 20 21 22 23 24 25 26 27 28 7
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