Case 8:17-cv-00981-JVS-JCG Document 55 Filed 02/05/18 Page 1 of 5 Page ID #:948
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 17-00981 JVS(JCGx)
`Date February 5, 2018
`Document Security Systems, Inc. v. Seoul Semiconductor Co., et al.
`Title
`
`Present: The
`Honorable
`
`James V. Selna
`
`Karla J. Tunis
`Deputy Clerk
`Attorneys Present for Plaintiffs:
`Not Present
`
`Not Present
`Court Reporter
`Attorneys Present for Defendants:
`Not Present
`
`Proceedings:
`
`(IN CHAMBERS)
`
`ORDER GRANTING DEFENDANT’S
`MOTION TO DISMISS
`
`The Court, having been informed by the parties in this action that they submit
`on the Court’s tentative ruling previously issued, hereby GRANTS the Defendants’
`Motion to Dismiss and rules in accordance with the tentative ruling as follows:
`
`Defendants Seoul Semiconductor Co., Ltd. (“SSC”) and Seoul Semiconductor, Inc.
`(“SSI”) (collectively, “Defendants”) filed a motion to dismiss Plaintiff Document
`Security Systems, Inc.’s (“DSS”) claims for willful infringement for failure to state a
`claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure
`12(b)(6). (Mot., Docket No. 45.) DSS filed an opposition. (Opp’n, Docket No. 48.)
`Defendants filed a Reply. (Reply, Docket No. 50.)
`
`For the following reasons, Defendants’ motion to dismiss is granted.
`
`I. BACKGROUND
`
`DSS holds all rights in and title to U.S. Patent Nos. 6,949,771 (“the ‘771 Patent”),
`7,524,087 (“the ‘087 Patent”), and 7,256,486 (“the ‘486 Patent”). (Second Amended
`Complaint “SAC”, Docket No. 40 ¶¶ 8-11.) On June 7, 2017, DSS filed the present
`action against Defendants. (Compl. Docket No. 1.) On November 16, 2017, DSS filed
`the SAC, which alleges infringement of the ‘771, ‘087, and ‘486 Patents. (See generally
`SAC, Docket No. 40.) In particular, the SAC alleges willful infringement of each
`asserted patent. (Id. ¶¶ 22, 33, 46.) Defendants now move to dismiss DSS’s claims for
`willful infringement of all three asserted patents. (Mot., Docket No. 45.)
`
`CV-90 (06/04)
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`CIVIL MINUTES - GENERAL
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`Case 8:17-cv-00981-JVS-JCG Document 55 Filed 02/05/18 Page 2 of 5 Page ID #:949
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 17-00981 JVS(JCGx)
`Date February 5, 2018
`Document Security Systems, Inc. v. Seoul Semiconductor Co., et al.
`Title
`
`II. LEGAL STANDARD
`
`Under Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss
`for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). A
`plaintiff must state “enough facts to state a claim to relief that is plausible on its face.”
`Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has “facial plausibility”
`if the plaintiff pleaded facts that “allow[] the court to draw the reasonable inference that
`the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 663
`(2009).
`
`In resolving a 12(b)(6) motion under Twombly, a court must follow a two-step
`approach. Id. at 679. First, a court must accept all well-pleaded factual allegations as
`true, but “[t]hread-bare recitals of the elements of a cause of action, supported by mere
`conclusory statements, do not suffice.” Id. at 677. Furthermore, a court must not “accept
`as true a legal conclusion couched as a factual allegation.” Id. at 677-78 (quoting
`Twombly, 550 U.S. at 555). Second, assuming the veracity of well-pleaded factual
`allegations, a court must “determine whether they plausibly give rise to an entitlement to
`relief.” Id. at 664. This determination is context-specific, requiring a court to draw on its
`experience and common sense, but there is no plausibility “where the well-pleaded facts
`do not permit the court to infer more than the mere possibility of misconduct.” Id.
`
`III. DISCUSSION
`
`Under 35 U.S.C. § 284, a court may “increase the damages up to three times the
`amount found or assessed” in a patent claim. In the Supreme Court’s recent decision
`Halo Electronics Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), the Court rejected
`the Federal Circuit’s two-part test from In re Seagate, 497 F.3d 1360 (Fed. Cir. 2007), for
`determining when a district court may award enhanced damages. The Court reaffirmed
`that awarding damages under § 284 is in the discretion of the district court. Halo, 136 S.
`Ct. at 1933-34. The Court found that the Seagate test was “unduly rigid” and
`“impermissibly encumber[ed]” the discretion of district courts. Id. at 1932. The Court
`did away with the requirement that “objective recklessness” be shown in every case,
`instead “limiting the award of enhanced damages to egregious cases of misconduct
`beyond typical infringement.” Id. at 1932, 1935. Further, the Court noted that § 284
`“allows district courts to punish the full range of culpable behavior[,]” but “such
`punishment should generally be reserved for egregious cases typified by willful
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`Case 8:17-cv-00981-JVS-JCG Document 55 Filed 02/05/18 Page 3 of 5 Page ID #:950
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`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 17-00981 JVS(JCGx)
`Date February 5, 2018
`Document Security Systems, Inc. v. Seoul Semiconductor Co., et al.
`Title
`
`misconduct.” Halo, 136 S. Ct. at 1933-34.
`
`“Halo did not address pleading standards at the motion to dismiss stage, instead
`addressing what plaintiffs needed to have shown in a motion for summary judgment and
`in a motion for judgment as a matter of law.” Nanosys, Inc. v. QD Vision, Inc., No.
`16-cv-01957-YGR, 2016 WL 4943006, at *8 (N.D. Cal. Sept., 16, 2016). However,
`“[s]ince Halo abrogated the ‘objective recklessness’ standard, the law concerning
`willfulness has been in a state of flux, and Halo’s ‘effect on the pleading standard for
`willful infringement remains unclear.’” Cont’l Circuits LLC v. Intel Corp., No.
`CV16-2026 PHX DGC, 2017 WL 2651709, at *7 (D. Ariz. June 29, 2017) (quoting
`Bobcar Media, LLC v. Aardvark Event Logistics, Inc., No. 16-885, 2017 WL 74729, at
`*5-6 (S.D.N.Y. Jan. 4, 2017)). Courts are in agreement that “[k]nowledge of the patent
`alleged to be willfully infringed continues to be a prerequisite to enhanced damages.”
`WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed. Cir. 2016). Additionally, “[c]ourts
`. . . have universally—either in word or deed—required plaintiffs to plead facts showing
`willfulness.” Cont’l Circuits, 2017 WL 2651709, at *7 (collecting cases). “More
`uncertain is the quantum of culpability that a plaintiff must plead.” Id. at *8. “Several
`courts have required facts showing ‘egregious’ conduct.” Id. (collecting cases). “Some
`require ‘allegations showing willfulness beyond a claim of mere knowledge.’” Id.
`(quoting Nanosys, 2016 WL 4943006, at *8). “Other courts have suggested that
`knowledge can suffice, at least under some circumstances.” Id. (collecting cases).
`
`The Court joins the majority of district courts in the Ninth Circuit in finding that
`allegations of knowledge alone are not sufficient to state a claim for willful infringement.
`See XpertUniverse, Inc. v. Cisco Sys., Inc., No. 17-cv-03848-RS, 2017 WL 4551519, at
`*6 (N.D. Cal. Oct. 11, 2017) (“Although [plaintiff] has alleged knowledge and continued
`infringement, it needs to do more to show that [defendant] has engaged in ‘egregious
`cases of misconduct beyond typical infringement’ that could possibly warrant enhanced
`damages.” (quoting Halo, 136 S. Ct. at 1935)); Cont’l Circuits, 2017 WL 2651709, at *8
`(“The Court continues to conclude that willfulness must be pled, and that allegations of
`knowledge alone are insufficient.”); Finjan, Inc. v. Cisco Sys. Inc., No.
`17-cv-00072-BLF, 2017 WL 2462423, at *5 (N.D. Cal. June 7, 2017) (“[E]ven if
`[plaintiff] had adequately alleged that [defendant] had pre-suit knowledge of the Asserted
`Patents, dismissal would also be warranted because the FAC does not contain sufficient
`factual allegations to make it plausible that [defendant] engaged in ‘egregious’ conduct
`that would warrant enhanced damages under Halo.”); Nanosys, 2016 WL 4943006, at *8
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`Case 8:17-cv-00981-JVS-JCG Document 55 Filed 02/05/18 Page 4 of 5 Page ID #:951
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 17-00981 JVS(JCGx)
`Date February 5, 2018
`Document Security Systems, Inc. v. Seoul Semiconductor Co., et al.
`Title
`
`(granting leave to amend because plaintiffs “asserted they [could] allege additional facts
`upon which they [could] bolster allegations showing willfulness beyond a claim of mere
`knowledge”); CG Tech. Development, LLC v. Big Fish Games, Inc., No. 2:16-cv-00857-
`RCJ-VCF, 2016 WL 4521682, at *14 (D. Nev. Aug. 29, 2016) (“[A]lleging that
`Defendant only knew about the patent” and continued use of the infringing products “is
`insufficient to constitute willful infringement.”); see also Halo, 136 S. Ct. at 1936
`(Breyer, J., concurring) (“[T]he Court’s references to ‘willful misconduct’ do not mean
`that a court may award enhanced damages simply because the evidence shows that the
`infringer knew about the patent and nothing more. . . . It is ‘circumstanc[e]’ that
`transforms simple knowledge into such egregious behavior, and that makes all the
`difference.” (quoting majority opinion)). But see Straight Path IP Grp., Inc. v. Apple,
`Inc., No. C 16-03582 WHA, 2017 WL 3967864, at *4 (N.D. Cal. Sept. 9, 2017) (finding
`allegations that defendant was aware of the asserted patents and their infringement and
`nonetheless continued to sell the accused products and induce infringement by its
`customers were sufficient to survive a motion for judgment on the pleadings).
`
`In the SAC, DSS alleges a nearly identical claim of willful infringement for each of
`the patents-in-suit. (SAC, Docket No. 40 ¶¶ 22, 33, 46.) For example, the allegations for
`the ‘771 Patent state:
`
`Defendants have been aware of the ’771 Patent and of its
`infringement as of a date no later than the date they were
`served with the complaint in the case 2:17-cv-308, filed
`April 13, 2017. Since that date, Defendants have failed to
`investigate and remedy their infringement of the ‘771
`Patent and thus willfully and egregiously continue to
`infringe the ‘771 Patent. On information and belief,
`Defendants continued to offer infringing products without
`having modified or altered those products in a manner that
`would not infringe the ‘771 patent. Defendants, at the very
`least, have been egregiously and willfully blind to
`infringement of the ‘771 Patent. Further evidence of
`Defendants’ egregious and willful infringement are the acts
`of active inducement described in this Complaint.
`Defendants actively induce and encourage customers to
`make, use, sell, offer to sell and/or import the ‘771 Accused
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`Case 8:17-cv-00981-JVS-JCG Document 55 Filed 02/05/18 Page 5 of 5 Page ID #:952
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Case No. SACV 17-00981 JVS(JCGx)
`Date February 5, 2018
`Document Security Systems, Inc. v. Seoul Semiconductor Co., et al.
`Title
`
`Instrumentalities with knowledge that these acts constitute
`infringement of the ‘771 Patent, with the purpose of, inter
`alia, developing and serving the United States market for
`Defendants’ LED products and consumer devices that
`include Defendants’ products.
`
`(Id. ¶ 22.)
`
`The Court finds that DSS’s allegations are not sufficient to state a claim for
`willful infringement of the patents-in-suit. Although, DSS has alleged knowledge and
`continued infringement, it has failed to allege facts suggesting that Defendants’
`conduct amounts to an “egregious case[] of misconduct beyond typical infringement.”
`Halo, 136 S. Ct. at 1935. “Disagreement about the existence of continued
`infringement does not necessarily indicate willful or deliberate misconduct.”
`XpertUniverse, 2017 WL 4551519, at *6. Thus, without more, the facts as alleged do
`not support a plausible inference that Defendants’ conduct warrants enhanced
`damages under Halo and § 284.
`
`Accordingly, the Court grants Defendants’ motion to dismiss the claims of
`willful infringement.
`
`IV. CONCLUSION
`
`For the foregoing reasons, the Court grants Defendants’ motion to dismiss with
`leave to amend.
`
`IT IS SO ORDERED.
`
`.
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`Initials of Preparer
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`kjt
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