Nalco Company v. Chem-Med, LLC et al. (24 other parties)

Docket No. 2017-1036
MOORE, SCHALL, O’MALLEY
February 27, 2018

Brief summary: DC dismissal of Nalco’s complaint for failing to properly allege infringement reversed and remanded since “[t]he ‘purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits’” (e.g. Nalco’s “allegations adequately plead attribution of the testing activities to Defendants”.)

Summary: Exclusive licensee Nalco appealed DC dismissal of its fourth amended complaint (4AC) alleging indicrect, direct, doctrine of equivalents (DOE), and willful infringement claims for US 6,808,692 which describes “a method for the removal of elemental mercury from the flue gas created by combustion in coal-fired power plants.” A reexamination certificate was issued for the ‘692 patent on April 7, 2014. The DC rejected Nalco’s claims (after considering four amended complaints) “due to a failure to plead direct infringement”, found it “failed to plead induced infringement claim because it failed to please facts indicating an intent to induce infringement”, and “denied Nalco’s motion for reconsideration, finding that Nalco failed to establish ‘manifest error of law or fact.’” The FC panel reviewed the DC’s dismissal for failure to state a claim under Rule 12(b)(6) de novo and its decision to dismiss with prejudice under Rule 12(b)(6) for abuse of discretion, assuming “all well-pleaded allegations are true and draw[ing] all reasonable inferences in the light most favorable to the plaintiff.” The FC panel explained that “[t]o survive a motion to dismiss under Rule 12(b)(6), a complaint must ‘contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face’” (Ashcroft, US 2009 (“the plaintiff must plead ‘factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged’…the plaintiff must do more than plead facts ‘merely consistent with’ a defendant’s liability”)). Nalco asserted “two main theories of direct infringement-each explaining how use of the Chem-Mod Solution could” be used in an infringing manner (e.g., “to effect oxidation of elemental mercury” in flue gas). The FC panel agreed its theories were “plausibl[e]”, noting that “Nalco is entitled to all inferences in its favor”. The FC panel also found that the “Defendants’ arguments boil down to objections to Nalco’s proposed claim construction for ‘flue gas,’ a dispute not suitable for resolution on a motion to dismiss”, that the “Defendants have not explained why we should-or could” make “a factual finding that a thermolabile material could not survive passing from the combustion zone to the flue” “at this stage” of the case, and that none “of the evidence cited by the parties indicate that Nalco has pled itself out of court” (“The ‘purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.” Gibson, 7th Cir. 1990). On Nalco’s allegation of divided infringement, the DC concluded that “Nalco failed to alleged that any Defendant is directly responsible for performing all method steps” of the claims (§ 271(a); Akamai, FC 2015 (“the acts of one” must be “attributable to the other…directs or controls other’s performance’, or ‘where the actors form a joint enterprise’”). The FC panel disagreed (except with respect to “commercial applications”), finding Nalco’s “allegations adequately plead attribution of the testing activities to Defendants” (e.g., “what matters is that, according to Nalco’s allegations, the testing can be attributed to the Defendants” as the testing facility “was directed to do so by the Defendants”). The FC panel similarly found Nalco’s claim for infringement under DOE (Warner-Jenkinson, US 1997) was also adequately stated. Regarding indirect infringement, the DC found Nalco had failed to plead a direct infringement claim (required to show inducement or contributory infringement (Linear Tech., FC 2004); § 271(b) requires intent (Global-Tech., US 2011). The FC panel disagreed, finding Nalco pleaded “facts plausibly showing that the accused infringer ‘specifically intended [another party] to infringe [the patent] and knew that the other party’s acts constituted infringement” (Lifetime Indust. (FC 2017)) and did not waive its challenge to the DC’s determination (e.g., “[t]he [DC’s] treatment of the inducement claim was cursory”). The FC panel similarly found Nalco had properly pleaded contributory infringement (§ 271(c); requires knowledge of the patent in suit and knowledge of patent infringement (Commil, US 2015)), again noting it “must presume [Nalco’s] allegations are true at the pleading stage.” The FC panel also reversed the DC’s dismissal of Nalco’s willful infringement claims since Nalco “adequately stated a direct infringement claim for at least some of the methods.”