FIGHTING PATENT TROLLS EARLY: LEARNING FROM THE UNITED KINGDOM IN OUR SCRAMBLE TO DETERMINE THE CORRECT PLEADING STANDARDS FOR DIRECT PATENT INFRINGEMENT.

• Author: Copeland, Adam

INTRODUCTION

Congress, since the time of the country's founding, has sought to "promote the [p]rogress of [s]cience and useful [a]rts" through the patent system. (1) Yet the progress of science and useful arts has been hampered recently, ironically through the patent system that was designed for their promotion. This is because patent holders who produce no goods (also known as non-practicing entities--or, pejoratively, "patent trolls") have taken to leveraging vague patents against true innovators through expensive litigation in hopes of spurring these innovators to settle the case. This leaves one to wonder: how did these frivolous claims become so lucrative?

To answer this, one must delve into the historical development of pleading standards in the United States. Plaintiffs formerly enjoyed a lax pleading standard that only required minimally coherent facts. However, by the beginning of the twenty-first century, these "notice pleading" standards evolved to become far less pro-plaintiff. (2) Litigants pleading direct patent infringement initially enjoyed insulation from these newly heightened standards through Federal Rule of Civil Procedure 84, which permitted them to initiate a claim with a brief, boilerplate, non-fact-intensive form. (3) However, this Rule was abrogated in 2015, leaving district courts to wonder how one was to plead direct patent infringement in light of the new heightened pleading standard. A more pro-plaintiff standard would make it easier for patent trolls to file frivolous lawsuits; a less pro-plaintiff standard would make it harder for patent owners to fully enforce their rights.

This note considers whether the United States might benefit from a strict pleading standard for direct infringement by comparing its pleading standard to that of the United Kingdom. While the data available on patent trolls in the United Kingdom is unfortunately sparse, the discrepancy in the prevalence of patent trolls between the two countries might indicate that a stricter pleading standard like that in the United Kingdom might help the United States in its fight against patent trolls.

The tools the United Kingdom uses to help safeguard its patent system and inventors from patent trolls--e.g., high administrative costs to obtain a patent and the "loser pays" rule--indicate that patent trolls are cost-conscious; when litigation presents financially high risks, they will abandon the plan to bring suit. (4) Therefore, it is reasonable to deduce that the United Kingdom's higher pleading standard for patent infringement performs the same function, and thus the United States could benefit from a similar standard.

1. DEVELOPMENT OF PLEADING STANDARDS GENERALLY

   1. The Originally Lax Requirements of Rule 8(a)

      Though plaintiffs' attorneys today are wont to stress over whether they have successfully pleaded a claim, this stress has not always been felt so keenly. Congress adopted Federal Rule of Civil Procedure 8 in 1937. (5) It provides, in pertinent part, that a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." (6) Charles E. Clark, principal draftsman of this Rule, (7) expounded upon its meaning seven years after its adoption while sitting as a judge for the Second Circuit Court of Appeals in Dioguardi v. Durning. (8) In that case, Dioguardi, an Italian immigrant representing himself pro se, (9) filed an "obviously home drawn" complaint against the Collector of Customs. (10) Though the complaint was barely coherent--the court had to guess at what his claim "appear[ed] to be" (11) --the court held that Dioguardi had successfully pleaded a claim. (12) According to one judge, Judge Clark wanted his opinion to send a message that, under Rule 8(a), "the complaint was merely to get the ball rolling." (13) Whether the plaintiffs case had specific facts to constitute a proper cause of action was to be determined through discovery and summary judgment. (14)

      The Dioguardi decision is thought to have been the origin of the "notice pleading era." (15) Notice pleading is a system in which a plaintiffs "short and plain statement of the claim" need only "give the defendant fair notice of what the plaintiffs claim is and the grounds upon which it rests," (16) and in which "a complaint [w]ould not be dismissed for failure to state a claim unless it appear[ed] beyond doubt that the plaintiff [could] prove no set of facts in support of his claim which would entitle him to relief." (17) Such was the Supreme Court's holding in Conley v. Gibson. (18) Significantly, by 2007, this holding had been cited in a dozen subsequent Supreme Court opinions and four additional non-majority Supreme Court opinions; in none of them was the language "questioned, criticized, or explained away." (19)

      Yet the liberal, pro-plaintiff notice pleading standards articulated in Dioguardi and Conley were significantly narrowed by the Supreme Court's decisions in Bell Atlantic Corp. v. Twombly (20) and Ashcroft v. Iqbal. (21) Doing away with the "no set of facts" standard of Conley, these cases held that, while "detailed factual allegations" are not necessary, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." (22) The factual content must "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." (23) Though it is disputed whether there has been a substantial increase in dismissals for failure to state a claim, (24) it is certain that Twombly and Iqbal have heightened the pleading requirements for plaintiffs. These cases necessarily make it more difficult for plaintiffs to state a claim. (25)

   2. Pleading Requirements for Patent Infringement

      Though the generic pleading standards changed markedly under Twombly and Iqbal, certain causes of action--including direct patent infringement (26) --enjoyed unchanged pleading requirements under Federal Rule of Civil Procedure 84. (27) Rule 84 provided that, if a plaintiff used Form 18 (provided in the Rules' Appendix of Forms) to plead one of the given causes of action, then she had successfully pleaded her claim. (28) Under Form 18, a plaintiff "only needed to identify the infringing party, the infringed patent, the infringing device, and provide statements of jurisdiction and patent notice." (29)

      District courts struggled to reconcile the plausibility standard of Twombly and Iqbal with the looser standards of Form 18. (30) Yet the Federal Circuit (31) in R+L Carriers, Inc. v. DriverTech LLC (32) held that, for direct infringement claims, Form 18 controls, even to the extent that it conflicts with Twombly and Iqbal. (33) However, since Form 18 only addresses direct infringement, the Federal Circuit instructed that lower courts "look to Supreme Court precedent for guidance regarding the pleading standards for claims of indirect infringement." (34) Consequently, district courts applied different standards for pleading indirect infringement versus direct infringement, (35) with some courts even classifying Form 18 as a circumvention of the plausibility standard of Twombly and Iqbal. (36)

      A significant change came in 2015 when Congress abrogated Rule 84 from the Federal Rules of Civil Procedure. (37) A direct patent infringement pleading is no longer statutorily valid under the minimum Form 18 requirements, ( 38) and thus must, like indirect infringement pleadings, satisfy the higher Twombly and Iqbal plausibility standard. (39) To the delight of confused scholars and litigants, the Federal Circuit has been relatively clear as to how one sufficiently pleads a claim for indirect infringement. (40) However, how to satisfy the plausibility standard with respect to direct infringement remains unclear. (41)

   3. Different Pleading Standards in the District Courts

      District courts' approaches to the conundrum of how to plead direct patent infringement exist on a spectrum from Dioguardi-esque plaintiff friendliness to rigid adherence to the heightened standard of Twombly and Iqbal. The strictest courts require the complainant to "allege facts sufficient to show infringement of each element of each asserted claim." (42) Less strict courts require only that "all elements of at least one patent claim in the complaint" are infringed. (43) Still others merely require a plaintiff to "plead that the allegedly infringing product and the patented product share a unique feature." (44) The most lenient courts hold that the now-repealed Form 18 is still a viable means of pleading direct infringement. (45) Floating somewhere along this spectrum are courts who simply apply Twombly and Iqbal to direct infringement pleadings on a case-by-case basis. (46)

2. WHY IS THIS SPLIT IMPORTANT?

   As it is uncertain how one might satisfy the Twombly and Iqbal pleading standard for direct patent infringement, district judges are left to make a choice with inevitable policy consequences: choose a strict pleading standard that errs on the side of protecting innocent defendants at the potential expense of victimized plaintiffs, or choose a laxer pleading standard that errs on the side of protecting victimized plaintiffs at the potential expense of innocent defendants. (47) While this dilemma presumably exists in every civil suit, its effect on patent law is notable for one significant reason: non-practicing entities.

   Non-practicing entities ("NPEs") acquire patents without actually producing or selling the goods or processes the patents protect. (48) Instead, they acquire the patents for the sole purpose of either bringing infringement suits or negotiating a licensing agreement. (49) While some argue that NPEs provide a societal benefit because of their ability to facilitate markets for new technologies, (50) many others are far more cynical. (51)

   Critics, including many technology firms, compare these NPEs to the mythical trolls who hide under bridges built by...