Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 1 of 10 PageID #: 1415
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELA WARE
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`ELM 3DS INNOVATIONS, LLC, a
`Delaware limited liability company,
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`Plaintiff,
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`v.
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`)
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`SAMSUNG ELECTRONICS CO., LTD.,
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`a Korean business entity,
`SAMSUNG SEMICONDUCTOR, INC., a )
`California corporation,
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`SAMSUNG ELECTRONICS AMERICA,
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`INC., a New York corporation, and
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`SAMSUNG AUSTIN SEMICONDUCTOR,).
`LLC, a Delaware limited liability company, )
`)
`)
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`Civil Action No. 14-1430-LPS-CJB
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`Defendants.
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`REPORT AND RECOMMENDATION
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`. At Wilmington this 29th day of September 2015, having reviewed Defendants Samsung
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`Electronics Co., Ltd., Samsung Semiconductor, Inc., Samsung Electronics America, Inc. and
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`Samsung Austin Semiconductor, LLC's (collectively, "Defendants" or "Samsung") "Motion to
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`Dismiss Plaintiff's Induced Infringement Claims Pursuant to Fed. R. Civ. P. 12(b)(6), or, in the
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`Alternative, 12(c)" ("Motion"), (D.I. 25), and the papers filed in connection therewith, the Court
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`recommends that the Motion be DENIED based on the following reasoning.
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`I.
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`BACKGROUND
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`1.
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`Plaintiff Elm 3DS Innovations, LLC ("Plaintiff' or "Elm") brought suit in
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`November 2014. (DJ. 1) A subsequent First Amended Complaint ("FAC"), (DJ. 18), alleges
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`that Defendants' semiconductor chip products infringe 12 United States patents, one of
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`which-U.S. Patent No. 7,193,239 ("the '239 patent")-is particularly relevant here. Chief
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`Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 2 of 10 PageID #: 1416
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`Judge Leonard P. Stark has referred the instant case to the Court for limited purposes, including
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`for resolution of the instant Motion. (D.I. 6)
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`2.
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`With the Motion, Defendants seek to dismiss Plaintiffs claims for induced
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`infringement, to the extent Plaintiff seeks damages for pre-suit infringement. (D.I. 26 at 2) 1
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`Plaintiff has confirmed that it alleges pre-suit induced infringement as to only one of the patents-
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`in-suit, the '23 9 patent, (D .I. 28 at 1 & n.1 ), and so that claim is the only claim put at issue by the
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`Motion.
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`II.
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`DISCUSSION
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`3.
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`The sufficiency of pleadings for non-fraud cases is governed by Federal Rule of
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`Civil Procedure 8, which requires "a short and plain statement of the claim showing that the
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`pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). When presented with a Rule 12(b)(6)
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`motion to dismiss for failure to state a claim for induced infringement, a court conducts a
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`two-part analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the
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`court separates the factual and legal elements of a claim, accepting "all of the complaint's
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`well-pleaded facts as true, but [disregarding] any legal conclusions." Id at 210-11. Second, the
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`court determines "whether the facts alleged in the complaint are sufficient to show that the
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`plaintiff has a 'plausible claim for relief.'" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662,
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`679 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows
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`the court to draw the reasonable inference that the defendant is liable for the misconduct
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`Plaintiff does not contend that by filing an Answer to the original Complaint,
`Defendants waived the ability to move for dismissal pursuant to Rule 12(b)(6). (See D.I. 26 at 5
`(citing In re Morrison, 421 B.R. 381, 386 (S.D. Tex. 2009)); D.I. 28 at 5-7) Thus, the Court will
`consider the Motion as one filed pursuant to Rule 12(b)(6).
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`2
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`Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 3 of 10 PageID #: 1417
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`alleged." Iqbal, 556 U.S. at 678 (citing Bell At!. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
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`In assessing the plausibility of a claim, the court must "'accept all factual allegations as true,
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`construe the complaint in the light most favorable to the plaintiff, and determine whether, under
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`any reasonable reading of the complaint, the plaintiff may be entitled to relief."' Fowler, 578
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`F.3d at 210 (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).
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`4.
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`As to the substance of an induced infringement claim, 35 U.S.C. § 271(b) states
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`that "[w]hoever actively induces infringement of a patent shall be liable as an infringer." In order
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`to prove induced infringement, the patentee "must show direct infringement, and that the alleged
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`infringer knowingly induced infringement and possessed specific intent to encourage another's
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`infringement." Toshiba Corp. v. Imation Corp., 681 F.3d 1358, 1363 (Fed. Cir. 2012) (internal
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`quotation marks and citations omitted); see also Symantec Corp. v. Comput. Assocs. Int'!, Inc.,
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`522 F.3d 1279, 1292-93 (Fed. Cir. 2008) ("Thus, 'inducement requires evidence of culpable
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`conduct, directed to encouraging another's infringement, not merely that the inducer had
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`knowledge of the direct infringer's activities.'") (emphasis added) (citation omitted). A
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`complaint stating a claim for induced infringement must allege facts that, taken as true, plausibly
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`demonstrate the requisite knowledge and intent-that is, that Defendants knew of the patent,
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`knew that a third party's (here their customers') acts constituted infringement of the patent, and
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`specifically intended that their customers infringe. See In re Bill of Lading Transmission and
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`Processing Sys. Patent Litig., 681F.3d1323, 1339 (Fed. Cir. 2012); Xpoint Techs., Inc. v.
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`Microsoft Corp., 730 F. Supp. 2d 349, 356 (D. Del. 2010).
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`5.
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`Defendants first assert that Plaintiff has not alleged sufficient facts demonstrating
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`that Defendants had pre-suit knowledge of the '239 patent. (D.I. 26 at 7-11; D.I. 31 at 2-5) To
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`3
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`Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 4 of 10 PageID #: 1418
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`that end, although the FAC generally alleges Defendants' pre-suit knowledge of the patent, (D.I.
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`18 at~ 54), it does not cite to any direct evidence indicating that Defendants ever reviewed or
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`cited to the '239 patent prior to suit. (See D.I. 18 at~~ 54-81; D.I. 28 at 8 (noting that Plaintiff
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`intends to demonstrate such knowledge "indirectly from surrounding circumstances"))
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`6.
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`The FAC does, however, list certain facts relating to Defendants' knowledge of
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`and citation to other of Plaintiffs patents that are related to the '239 patent. These include the
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`following allegations: (a) in 2000 or 2001, Elm's President Glenn Leedy, the inventor of the
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`patents-in-suit, made a presentation to Defendants on Elm's 3DS technology and sent Defendants
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`a copy of U.S. Patent No. 5,915,167 ("the '167 patent"), the parent patent to the '239 patent; (b)
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`the presentation included several slides depicting figures from the '167 patent; and (c) thereafter,
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`Defendants cited to four Elm 3DS patents (the '167 patent, and three children of the '167 patent
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`that share the same specification as the '239 patent) in prosecuting a number of Defendants' own
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`patents.2 (D.I. 18 at~~ 55-57)
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`7.
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`The FAC also contains allegations that the '239 patent was well known in the
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`semiconductor industry and was frequently cited by other of Defendants' competitors in that
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`industry. These include the following allegations: (a) the '239 patent has been cited by at least
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`40 issued U.S. patents since 2008, including by a number of other companies in the
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`semiconductor field such as Micron Technology, Inc. (hereinafter "Micron," a Defendant in a
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`2
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`The Court agrees with Defendants that Plaintiffs additional allegation that
`"[u]pon information and belief, since 2000, Samsung followed Mr. Leedy's Elm 3DS portfolio as
`it obtained the patents-in-suit" is a bare conclusion, devoid of any factual support. (D.I. 31 at 2-
`3) The Court does not consider it here, and will focus on the remaining factual allegations
`Plaintiffs put forward in order to demonstrate that Defendants had pre-suit knowledge of the '239
`patent.
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`4
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`Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 5 of 10 PageID #: 1419
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`related case filed by Plaintiff in this Court), Xilinx, Inc. ("Xilinx") and IBM Corporation
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`("IBM"); (b) Defendants, along with Micron, Xilinx, IBM and SK Hynix, Inc. (another
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`Defendant in a related case filed by Plaintiff in this Court), are participants in the HMC
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`Consortium, a forum for semiconductor manufacturers that "have come together for the explicit
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`purpose of developing and adopting an industry-wide interface for DRAM memory architectures
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`that revolves around vertical stacks of DRAM die"; (c) Micron has cited to the Elm 3DS patent
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`portfolio in over 40 of its patents since 2000; (d) Micron cited to the '239 patent on Information
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`Disclosure Statements ("IDS") submitted during prosecution of patent applications that
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`eventually issued as U.S. patents, including on a 2013 IDS devoted entirely to disclosing patents
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`and patent applications belonging to Mr. Leedy; and ( e) the Elm 3DS portfolio, and in particular
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`the '239 patent, "were frequently referenced" in the "tight knit" semiconductor industry, and were
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`"widely and publicly known" in that industry. (Id. at iii! 58-62)
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`8.
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`The allegations regarding Defendants' interaction with patents related to the '239
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`patent, taken as true, suggest that as of the early 2000s, Defendants had some fairly detailed,
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`specific discussions about the '239 patent's parent-and went on to cite to other patents from the
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`same patent family thereafter. Of course, even in light of this, it is certainly possible that while
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`Defendants were very aware of the '23 9 patent's parent, and were aware of certain of its siblings,
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`they still lacked knowledge of the '239 patent itself, since they had no affirmative duty to keep
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`abreast of the '167 patent. But these facts at least help to make it seem more plausible that
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`Defendants did in fact have actual knowledge of the '239 patent. So too do Plaintiff's allegations
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`that the '239 patent is well known and frequently referenced in the semiconductor industry, and
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`that it has been frequently cited by Defendants' competitors (both in issued patents and patent
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`5
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`Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 6 of 10 PageID #: 1420
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`applications) over the last many years. These pleaded facts are relevant not because the Court is
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`imputing the knowledge of Defendants' competitors to Defendants, (see D.I. 26 at 9), but
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`because if true (as the Court must assume them to be), they render it more likely that Defendants
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`(who are also participants in the allegedly "tight knit" semiconductor industry) may have been
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`similarly aware of the '239 patent's existence and its contents. See Investpic, LLC v. Factset
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`Research Sys., Inc., Civ. No. 10-1028-SLR, 2011 WL 4591078, at *2 (D. Del. Sept. 30, 2011)
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`(finding that plaintiff had sufficiently alleged that defendant had knowledge of the patent-in-suit,
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`in part because plaintiff had alleged that the patent was "well-known in the industry-having
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`been cited by at least 79 issued U.S. patents since 2001 [,]"and "if a patent is 'publicly' known,
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`one can infer ... that an individual defendant had knowledge of it").3
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`9.
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`In and of themselves, the allegations regarding (1) Defendants' knowledge of
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`patents related to the '239 patent or (2) the '239 patent's ubiquity in Defendants' industry, may
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`not have been sufficient here. 4 And even taken together, they may not make pre-suit knowledge
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`3
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`Cf MONEC Holding AG v. Motorola Mobility, Inc., 897 F. Supp. 2d 225, 233-34
`(D. Del. 2012) (distinguishing Investpic on this point on the grounds that while there, the patent(cid:173)
`in-suit had been cited by at least 79 issued patents in the past 10 years, in the instant case, there
`were "no similar allegations supporting an inference that the [patent-in-suit] is widely known and
`frequently referenced in the industry" and that, in the instant case, "the alleged public disclosure
`stems from two lawsuits against Defendants' competitors, which concluded well before the
`issuance of the [patent-in-suit]"); Trading Techs. Int'!, Inc. v. BCG Partners, Inc., No. 10 C 715,
`2011 WL 3946581, at *4 & n.5 (N.D. Ill. Sept. 2, 2011) (cited in MONEC, 897 F. Supp. 2d at
`232) (concluding "that the litigants are competitors in the same industry is a fact that .makes [a
`defendant's knowledge of the competitor's] patent at issue more plausible," even if such
`allegations would not be sufficient, in and of themselves, to pass Rule 12(b)(6) muster)
`(emphasis in original).
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`4
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`Cf MONEC, 897 F. Supp. 2d at 233 (finding that the fact that the alleged
`infringer had knowledge of a related patent to the patent-in-suit was not, without more, sufficient
`to demonstrate a plausible claim to pre-suit knowledge of the patent-in-suit); Softview LLC v.
`Apple Inc., Civ. No. 10-389-LPS, 2012 WL 3061027, at *6 (D. Del. July 26, 2012) (finding that
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`6
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`Case 1:14-cv-01430-LPS-CJB Document 40 Filed 09/29/15 Page 7 of 10 PageID #: 1421
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`probable. But considered as a whole, they render it at least plausible that Defendants were aware
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`of the '239 patent and its claims prior to suit. See id. (concluding that another fact demonstrating
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`knowledge-specifically, that products relating to the invention were readily available in the U.S.
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`marketplace-when combined with fact that the patent-in-suit was well known in the industry,
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`was together enough to make a plausible claim of knowledge of the patent); see also Softview
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`LLC v. Apple Inc., Civ. No. 10-389-LPS, 2012 WL 3061027, at *5-6 (D. Del. July 26, 2012)
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`(denying a motion to dismiss after concluding that plaintiff had alleged a "plausible basis" for
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`pre-suit knowledge based on the combined allegations that: (1) defendant's subsidiary "had cited
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`the published application of the parent application of the [patent-at-issue] during the prosecution
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`of one of [the subsidiary's] own patents"; (2) defendant had a "connection with [the] inventor";
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`and (3) defendant learned about the patent "from Apple in the course of its relationship with
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`Apple as the exclusive seller of the iPhone ... based on Apple's previous discussions with
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`[plaintiff] involving [the patent-at-issue]").
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`10.
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`Next, Defendants assert that Plaintiff has failed to adequately plead that they had
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`knowledge of their customers' infringement. (D .I. 26 at 11-13; D .I. 31 at 5-8) Yet in the F AC,
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`Plaintiff alleges that Defendants' semiconductor chip products infringe at least claim 1 of the
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`'23 9 patent, which is an apparatus claim. (D .I. 18 at ~ 65) And Plaintiff sets out how or why
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`these products infringe at least that claim: the claim, which is set out in full in the F AC, is
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`asserted to cover "thinned, stacked semiconductor die that are bonded together in a single
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`media reports confirming that a company with similar business interests to defendant was sued
`for infringement of the patent-in-suit was not sufficient, "by itself[,]" to suggest that the
`defendant would have been aware of those reports).
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`7
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`package" and Defendants' semiconductor chips are alleged to contain the claimed structure (i.e.,
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`to comprise "thinned, stacked semiconductor die that were bonded together in a single package").
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`(Id. at~~ 66, 68; see also id at~~ 69-71; D.I. 28 at 14) This articulation of how and why
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`Defendants' chips infringe is not lengthy, but Defendants do not articulate why it is insufficiently
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`specific to set out a plausible claim of infringement.
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`11.
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`From there, if it is plausible that Defendants knew of the '23 9 patent, then it is
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`plausible that, as Plaintiff alleges, Defendants had reviewed the content of the patent's
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`specification and claims. (Id. at~ 64) Next, Plaintiff pleaded that Defendants are "global
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`manufacturers of semiconductor devices" with "deep expertise" in manufacturing such products,
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`such that they "possessed the technical expertise required" to understand the content and scope of
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`that patent-including that the patent covered semiconductor chips of the kind that Defendants
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`made. (Id at ~~ 66-68) Plaintiff then plausibly alleges that Defendants knew that its
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`semiconductor chips at issue were in fact incorporated into its customers' finished electronics
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`products sold in the United States. (Id. at~~ 73-75)5 And because the allegation here is that
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`Defendants' customers directly infringed the '239 patent "when they imported or sold finished
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`5
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`The allegations are also that Defendants' semiconductor chip products cannot be
`sold or used in a manner that does not infringe, in that they (1) are integral components of their
`customers' computer and mobile products that incorporate them; (2) are built into those
`customers' products; and (3) cannot be removed or disabled by a purchaser of those end
`products. (D.I. 18 at~ 76); see Fairchild Semiconductor Corp. v. Power Integrations, Inc., 935
`F. Supp. 2d 772, 778 (D. Del. 2013) (approving the sufficiency of allegations of infringement of
`apparatus claims, wherein the allegations were that "[Defendant] is aware that the infringing soft
`start circuit is a default feature of the controller products incorporating this circuit, that the
`softstart circuit is always present and cannot be disabled by a purchaser of the controller and,
`therefore, that [Defendant's] customers will infringe [the patent-in-suit] by using the default
`softstart feature or by incorporating the infringing controller in other products, and that
`subsequent sales of such products would also be a direct infringement.") (emphasis and citation
`omitted).
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`8
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`electronics products containing infringing Samsung semiconductor chips in the United States[,]"
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`the F AC plausibly asserts that Defendants were aware of their customers' infringement via that
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`importation and sale. (Id. at ifiI 63, 72); cf Largan Precision Co., Ltd v. Genius Elec. Optical
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`Co., Ltd., Case No. 13-cv-02502-WHO, 2013 WL 5934698, at *4 & n.3 (N.D. Cal. Nov. 4,
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`2013).
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`12.
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`Lastly, Defendants assert that Plaintiff has not adequately alleged that they
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`specifically intended to induce infringement. (D.I. 26 at 13-15; D.I. 31at8-9) However, the
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`F AC alleges that Defendants encouraged their customers (including through the dissemination of
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`advertising brochures and other materials) to incorporate Defendants' allegedly infringing
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`semiconductor chips (i.e., those "comprising thinned, stacked semiconductor die that were
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`bonded together in a single package") into the customers' finished products (that in tum, were to
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`be sold in the United States). (D.I. 18 at ifiI 77-81, 93) These allegations plausibly describe
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`encouragement of sale of the allegedly infringing apparatus-all after having sufficiently
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`described what it is about Defendants' semiconductor chips that is said to render them infringing
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`apparatuses in the first place, and why Defendants had knowledge that those chips infringed.
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`This is sufficient to plead specific intent.
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`III. CONCLUSION
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`13.
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`For the reasons set forth above, the Court recommends that the Motion be
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`DENIED. 6
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`14.
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`This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B),
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`Fed. R. Civ. P. 72(b)(l), and D. Del. LR 72.1. The parties may serve and file specific written
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`6
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`Defendants' request for oral argument on the Motion, (D.I. 32), is DENIED.
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`9
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`objections within fourteen (14) days after being served with a copy of this Report and
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`Recommendation. Fed. R. Civ. P. 72(b ). The failure of a party to object to legal conclusions
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`may result in the loss of the right to de novo review in the district court. See Sincavage v.
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`Barnhart, 171 F. App'x 924, 925 n.1 (3d Cir. 2006); Henderson v. Carlson, 812 F.2d 874, 878-
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`79 (3d Cir. 1987).
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`15.
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`The parties are directed to the Court's Standing Order for Objections Filed Under
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`Fed. R. Civ. P. 72, dated October 9, 2013, a copy of which is available on the District Court's
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`website, located at http://www.ded.uscourts.gov.
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`Dated: September 29, 2015
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`Christopher J. Burke
`UNITED STATES MAGISTRATE JUDGE
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`10