Case 2:22-cv-00486-JRG Document 71 Filed 09/05/23 Page 1 of 10 PageID #: 877
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF TEXAS
`MARSHALL DIVISION
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`CIVIL ACTION NO. 2:22-CV-00486-JRG
`(LEAD CASE)
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`NORTHSTAR SYSTEMS LLC,
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`v.
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`VOLKSWAGEN AG,
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`Defendant,
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`BAYERISCHE MOTOREN WERKE AG,
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`Plaintiff,
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`Defendant.
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`§
`CIVIL ACTION NO. 2:22-CV-00496-JRG
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`(MEMBER CASE)
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`MEMORANDUM OPINION AND ORDER
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`I.
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`INTRODUCTION
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`Before the Court is Defendant Bayerische Motoren Werke AG’s (“BMW”) Motion to
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`Dismiss Pursuant to Rules 12(b)(6) and 12(b)(7) (the “Motion”). (Dkt. No. 26.) Plaintiff NorthStar
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`Systems LLC (“NothStar”) opposes the Motion. (See Dkt. No. 43.) For the following reasons, the
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`Court finds that the Motion should be GRANTED under 12(b)(6), and DENIED under 12(b)(7),
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`and further ORDERS and that NorthStar be given leave to amend its complaint.
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`II. BACKGROUND
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`NorthStar filed suit against BMW on December 27, 2022. (2:22-cv-496, Dkt. No. 1
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`(hereinafter, “Complaint”).) The Complaint alleges that BMW directly and indirectly infringes
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`five patents—U.S. Patent Nos. 6,898,432 (the “’432 Patent”), 8,014,943 (the “’943 Patent”),
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`8,032,297 (the “’297 Patent”), 8,478,527 (the “’527 Patent”), and 8,805,416 (the “’416 Patent”)
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`(collectively, the “Patents-in-Suit”). (Id. at ¶¶ 7–11.) The ’432 Patent, and ’416 Patent have
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`expired. The Complaint only asserts infringement of method claims. (Dkt. No. 26 at 1.)
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`Plaintiff NorthStar is a Texas limited liability company located in Marshall, Texas.
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`(Complaint at ¶ 1.) BMW is a German corporation based in Germany. (Id. at ¶ 2.) BMW of North
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`America, LLC (“BMW NA”) is a Delaware limited liability company located in Woodcliff Lake,
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`New Jersey. (Dkt. No. 26-1 at ¶ 4.) BMW NA is a wholly but indirectly owned subsidiary of
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`BMW. (Id.)
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`III. LEGAL STANDARD
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`A. Motion to Dismiss
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`Under the Federal Rules of Civil Procedure, a complaint must include “a short and plain
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`statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A
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`Court can dismiss a complaint that fails to meet this standard. Fed. R. Civ. P. 12(b)(6). To survive
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`dismissal at the pleading stage, a complaint must state enough facts such that the claim to relief is
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`plausible on its face. Thompson v. City of Waco, 764 F.3d 500, 502 (5th Cir. 2014) (quoting Bell
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`Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when the plaintiff
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`pleads enough facts to allow the Court to draw a reasonable inference that the defendant is liable
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`for the misconduct alleged. Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court
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`accepts well-pleaded facts as true and views all facts in the light most favorable to the plaintiff but
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`is not required to accept the plaintiff’s legal conclusions as true. Id. “[A] complaint attacked by a
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`Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.” Twombly, 550 U.S. at
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`555.
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`In the Fifth Circuit, motions to dismiss under Rule 12(b)(6) are viewed with disfavor and
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`are rarely granted. Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009); Lowrey v.
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`Texas A&M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997). “The court may consider ‘the complaint,
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`any documents attached to the complaint, and any documents attached to the motion to dismiss
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`that are central to the claim and referenced by the complaint.’” Script Sec. Sols. L.L.C. v.
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`Amazon.com, Inc., 170 F. Supp. 3d 928, 935 (E.D. Tex. 2016) (quoting Lone Star Fund V (U.S.)
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`L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010)).
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`B. Failure to Join an Necessary and Indispensable Party
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`“[A] Rule 12(b)(7) analysis entails two inquiries under Rule 19.” H.S. Res., Inc. v. Wingate,
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`327 F.3d 432, 439 (5th Cir. 2003). First, the Court must determine under Rule 19(a) whether a
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`person should be joined to the lawsuit. Id. “If joinder is warranted, then the person will be brought
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`into the lawsuit.” Id. “But if such joinder would destroy the [C]ourt’s jurisdiction, then the Court
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`turns to Rule 19(b) and determines “whether to press forward without the person or to dismiss the
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`litigation.” Id.
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`A party is necessary under Rule 19(a)(1) if:
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`(A) in that person’s absence, the court cannot accord complete relief among existing
`parties; or
`(B) that person claims an interest relating to the subject of the action and is so
`situated that disposing of the action in the person’s absence may:
`(i) as a practical matter impair or impede the person’s ability to protect the
`interest; or
`(ii) leave an existing party subject to a substantial risk of incurring double,
`multiple, or otherwise inconsistent obligations because of the interest.
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`Fed. R. Civ. P. 19(a)(1).
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`IV. ANALYSIS
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`A. Motion to Dismiss
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`i. Direct Infringement
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`BMW argues that the Complaint is threadbare, reciting nothing more than the asserted
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`claim language. (Dkt. No. 26 at 7–14.) Further, BMW argues that cases alleging infringement of
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`a software patent must meet a higher pleading standard and that NorthStar has not meet this
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`standard. (Id. at 14–16 (citing Effectively Illuminated Pathways LLC v. Aston Martin Lagonda of
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`North America, Inc., 2011 WL 13223466, at *3 (E.D. Tex. Sep. 29, 2011) (“[c]ases involving more
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`nebulous, less tangible inventions such as computer software methods require a greater degree of
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`specificity to put the defendant on notice.”)).) BMW also argues that NorthStar has not alleged
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`how BMW uses the method claims. (Id. at 16–18.)
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`In response, NorthStar argues that its allegations are sufficient to put BMW on notice of
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`the Patents-in-Suit and how BMW’s products infringe, and that there is no heightened pleading
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`standard. (Dkt. No. 43 at 6–8.) NorthStar further argues that BMW uses the technology by testing
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`and troubleshooting performed in the United States and loading the software onto its vehicles. (Id.
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`at 9–10, n. 4.)
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`In reply, BMW points out that NorthStar effectively acknowledges that it did nothing more
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`than parrot the claim language with respect to the ’416 and ’432 Patents. (Dkt. No. 49 at 2.) Further,
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`BMW argues, NorthStar’s allegations for the ’943, ’527, and ’297 Patents are deficient because
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`the screenshots accompanying the allegations have no explanation. (Dkt. No. 49 at 3–5.)
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`Additionally, BMW argues, the allegations for the ’943, ’527, and ’297 Patents are deficient
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`because NorthStar fails to identify any accused products with sufficient specificity. (Id. at 5.)
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`BMW also argues that none of the facts now argued by NorthStar are in its Complaint. (Id. at 7–
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`8.)
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`NorthStar argues in sur-reply that all of its allegations are sufficient to put BMW on notice.
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`(Dkt. No. 52 at 1–3.) NorthStar also argues that it has identified the Accused Products with
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`sufficient specificity. (Dkt. No. 52 at 3–4.)
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`The Court finds that the Complaint is deficient to some degree. As a preliminary matter,
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`NorthStar does not allege how BMW uses the inventions claimed in the Patents-in-Suit. However,
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`NorthStar asserts that BMW uses the Patents-in-Suit by testing and troubleshooting the accused
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`features in the United States. (Dkt. No. 43 at 9–10, n. 4.) These factual allegations do not appear
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`to be in the Complaint but would cure this deficiency if they were. Accordingly, providing leave
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`to amend the Complaint is appropriate.
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`Moreover, NorthStar’s factual allegations of infringement are thin. NorthStar does little
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`more than parrot the claim language. NorthStar breaks out the elements of the claims, copies them
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`to the Complaint, and prepends language to the effect of “The BMW Navigation System performs
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`the step of ….” There should be more than the claim language presented this way.
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`Nonetheless, the Court finds that NorthStar has largely identified the accused products with
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`sufficient specificity. Alleging that the “BMW Navigation System” is infringing is sufficient to
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`put BMW on notice of the class of products that may be infringing. BMW does not allege that
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`there are a large number of various unnamed products that may be infringing.
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`Given that the Court is granting leave to NorthStar to amend, the Court need not presently
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`address whether there is a heightened pleading standard for software claims.
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`ii.
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`Indirect Infringement
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`BMW argues that to sufficiently allege induced infringement, NorthStar must plausibly
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`allege (1) that BMW has caused or encouraged activity that in fact directly infringes; (2) that BMW
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`knew of the patent and that the acts in question would infringe; and (3) that BMW specifically
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`intended to encourage the third party’s infringement. (Dkt. No. 26 at 18–19 (citing Akamai Techs.,
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`Inc. v. Limelight Networks, Inc., 692 F.3d 1301 (Fed. Cir. 2012)).) BMW then argues that (1)
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`NorthStar does not allege how BMW has caused or encouraged activity that infringes, (2)
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`NorthStar has failed to allege facts sufficient to show that BMW AG had pre-suit knowledge of
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`the Patents-in-Suit, and (3) NorthStar has not alleged facts sufficient to plead that BMW had the
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`requisite specific intent. (Dkt. No. 26 at 19–20.)
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`In response, NorthStar argues that BMW had the requisite intent because NorthStar pled
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`that BMW has had knowledge of the Patents-in-Suit and has at least been willfully blind to them.
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`(Dkt. No. 43 at 11.) Further, NorthStar argues, BMW has published manuals directing customers
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`and end-users to directly infringe the Patents-in-Suit. (Id.) NorthStar urges that upon taking these
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`facts together, it is reasonable and plausible to infer that BMW specifically intended to induce its
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`customers to infringe the Patents-in-Suit. (Id. at 12.) Moreover, NorthStar argues that it has
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`sufficiently pled pre-suit knowledge for the expired and unexpired Patents-in-Suit. (Id. at 12–15.)
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`BMW and NorthStar re-urge essentially the same arguments in reply and sur-reply,
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`respectively, and to little additional effect. (See Dkt No. 49 at 8; Dkt. No. 52 at 6–7.)
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`The Court finds that NorthStar has inadequately pled indirect infringement. First, NorthStar
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`has not sufficiently pled that BMW has caused or encouraged infringing activity. NorthStar argues
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`that BMW encouraged end-users to infringe by publishing manuals that instruct the end-users on
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`how to infringe, but these arguments are just that, arguments. (Dkt. No. 43 at 11.) There should be
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`more corresponding factual allegations in the Complaint to provide BMW with adequate notice.
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`However, the Court finds that NorthStar has adequately pled that BMW knew of the
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`Patents-in-Suit. NorthStar alleged that BMW was willfully blind to the Patents-in-Suit (id.), and
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`“willful blindness can satisfy the knowledge requirement for active inducement under § 271(b)
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`(and for contributory infringement under § 271(c)), even in the absence of actual knowledge.”
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`Warsaw Orthopedic, Inc. v. NuVasive, Inc., 824 F.3d 1344, 1347 (Fed. Cir. 2016). Further, BMW
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`knew of the unexpired Patents-in-Suit at least as early as the filing of the Complaint, which is
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`sufficient to survive a motion to dismiss. See Erfindergemeinschaft Uropep GbR v. Eli Lilly & Co.,
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`No. 2:15-CV-1202-WCB, 2016 WL 1643315, at *4 (E.D. Tex. Apr. 26, 2016). Further, NorthStar
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`has sufficiently pled pre-suit knowledge for the expired Patents-in-Suit. NorthStar alleges in the
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`Complaint that BMW had pre-suit knowledge of the Patents-in-Suit via industry publication.
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`(Complaint at ¶ 16, n. 1.) The Court finds that it is plausible that BMW had knowledge of the
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`Patents-in-Suit via industry publication. It is highly likely that a large corporation, like BMW,
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`would keep abreast of its competitor’s legal affairs, including whether or not they were sued for
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`patent infringement. The inadequacies of NorthStar’s pleading noted above can be readily cured
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`by amendment, which the Court authorizes.
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`B. Necessary and Indispensable Party
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`BMW argues that BMW NA is a necessary party and indispensable party, such that it must
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`be joined, but that BMW NA is not subject to venue in the Eastern District of Texas so BMW NA
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`cannot be joined, and thus the case must be dismissed. (Dkt. No. 26 at 20–22.) NorthStar contends
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`that BMW NA is not a necessary or indispensable party, but does not dispute that BMW NA is not
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`subject to venue in this District. (Dkt. No. 43 at 15–17, n. 9.) Accordingly, the gravamen of the
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`dispute is whether or not BMW NA is a necessary and indispensable party in this case.
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`BMW argues that BMW NA is a necessary and indispensable party because BMW NA has
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`“explicitly claimed an interest relating to this action and its interests would be impaired if this
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`action were to be decided without its presence.” (Dkt. No. 26 at 20–21.) BMW contends that a
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`judgement against BMW would amount to a judgment against BMW NA, and would affect BMW
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`NA’s rights to the extent it performs allegedly infringing activities. (Id. at 21.) Moreover, BMW
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`argues, BMW NA is the principal actor and thus must be joined. (Id. (citing Dernick v. Bralorne
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`Res., Ltd., 639 F.2d 196, 199 (5th Cir. 1981)).)
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`In response, NorthStar argues that tortfeasors need not be sued jointly. (Dkt. No. 43 at 15–
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`16 (citing Akoloutheo, LLC v. Sys. Soft Techs., Inc., No. 4:20-cv-985, 2021 WL 1947343 (E.D.
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`Tex. May 14, 2021) (“It is well-settled that joint tortfeasors are not considered ‘required’ or
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`indispensable parties under Rule 19.”)).) Further, NorthStar contends that its allegations are solely
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`against BMW, not BMW NA. (Id. at 16.)
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`BMW argues in reply that “a judgment would preclude [BMW NA] from enforcing [its]
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`rights or injuriously affect [it]” because a judgment would implicate BMW NA’s rights to sell and
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`import BMW products. (See Dkt. No. 49 at 9 (quoting Innovative Display Techs. LLC v. Microsoft
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`Corp., 2014 WL 2757541 at *2 (E.D. Tex. June 17, 2014). Also, BMW again re-urges that BMW
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`NA undertakes the alleged infringing activity, not BMW. (Id. at 10.)
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`NorthStar argues in sur-reply that the Court has previously recognized the right of a
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`plaintiff to bring separate infringement actions against related foreign and domestic entities. (Dkt.
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`No. 52 at 7–8 (citing Arigna Tech. Ltd. v. Bayerische Motoren Werke AG, et al., Case No 2:21-cv-
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`00172, Dkt. 200 (E.D. Tex. Dec. 14, 2022)).)
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`The Court finds that BMW NA is neither a necessary nor indispensable party. Federal Rule
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`of Civil Procedure 19(a)(1) how and when when a party is required. BMW does not claim that in
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`BMW NA’s absence the Court “cannot accord complete relief among the existing parties.” See
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`Rule 19(a)(1)(A). However, while not stated clearly, BMW does appear to be arguing that BMW
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`NA is a required party under Rule 19(a)(1)(B)(i). To succeed on this, BMW must show that
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`“[BMW NA] claims an interest relating to the subject of the action and is so situated that disposing
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`of the action in [BMW NA’s] absence may: as a practical matter impar or impede [BMW NA’s]
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`ability to protect [its] interest.” Id.
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`BMW asserts that BMW NA claims an interest in the above-captioned litigation, and
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`NorthStar does not argue otherwise. (See Dkt. No. 26 at 20–21.)
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`The Court is not convinced that disposing of the action in BMW NA’s absence would
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`impair or impede BMW NA’s ability to protect its interest. This is for the simple reason that BMW
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`NA is a wholly-owned subsidiary of BMW, so the interests of these two entities align. In other
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`words, BMW will adequately protect the interests of BMW NA. See Dine Citizens Against Ruining
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`Our Env’t v. Bureau of Indian Affs., 932 F.3d 843, 852 (9th Cir. 2019) (“As a practical matter, an
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`absent party’s ability to protect its interest will not be impaired by its absence from the suit where
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`its interest will be adequately represented by existing parties to the suit.” (quoting Alto v. Black,
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`738 F.3d 1111, 1127 (9th Cir. 2013))); Lee v. Anthony Lawrence Collection, L.L.C., 47 F.4th 262,
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`268 (5th Cir. 2022) (citing Dine Citizens, 932 F.3d 843 with approval in other respects). Further,
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`BMW’s speculation as to the predicted effects of going forward without BMW NA is just that—
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`speculation. Such is inadequate to invoke Rule 19(a)(1)(B)(i).
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`BMW relies on Dernick to compel an opposite result, but Dernick is distinguishable. 639
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`F.2d 196. There, the Fifth Circuit found that when “the subsidiary was the primary participant in
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`the events giving rise to the lawsuit,” “[f]ailure to join the subsidiary in such circumstances would
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`be improper.” Id. at 199. While, BMW argues that BMW NA has acknowledged in a parallel
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`proceeding that it is the primary actor with respect to the allegedly infringing activities (Dkt. No.
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`26 at 21), the Court finds that NorthStar has not accused BMW NA of any infringing activities.
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`The Plaintiff has accused only BMW. (See Complaint.) Accordingly, BMW NA is not a necessary
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`party under Dernick.
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`BMW further relies on Freeman v. Nw. Acceptance Corp. to compel an opposite result, but
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`Freeman is distinguishable for many of the same reasons that Dernick is distinguishable. 754 F.2d
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`553 (5th Cir. 1985). There, the plaintiffs sued a parent company for conversion, but not its wholly-
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`owned subsidiary, and “the conduct complained of was that of [the] wholly-owned subsidiary.”
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`Id. at 555. In holding that it would be improper to fail to join the subsidiary, the Fifth Circuit
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`reasoned that the subsidiary must be joined because it “was more than an active participant in the
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`conversion alleged by the [plaintiffs]; it was the primary participant.” Id. at 559. However, as
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`discussed above, NorthStar has not accused BMW NA of any infringing activities. Accordingly,
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`while BMW NA may wish to “take the fall” and be considered the primary participant (so it may
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`pave the way for BMW to defeat venue), its wishes do not change the text of the Complaint, which
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`clearly accuses only BMW, and not BMW NA. BMW NA is not the primary participant here such
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`that failure to join them in this action would be improper.
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`V. CONCLUSION
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`For the foregoing reasons, the Court finds that the Motion (Dkt. No. 26) should be and
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`hereby is GRANTED-IN-PART and DENIED-IN-PART. Specifically, the Court GRANTS the
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`Motion under 12(b)(6) as noted above and DENIES the Motion under 12(b)(7) for all purposes.
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`Further, and in light of these rulings, the Court ORDERS that NorthStar is given leave to
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`amend its Complaint to address its pleading shortcomings as discussed above. Any such amended
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`complaint, filed for such purpose, must be filed within 14 days from this date.
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`____________________________________
`RODNEY GILSTRAP
`UNITED STATES DISTRICT JUDGE
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`So ORDERED and SIGNED this 5th day of September, 2023.
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