Note Quite Game Over as Bot M8 Receive a 1-Up from the CAFC
| July 23, 2021
Bot M8 LLC., v. Sony Corporation of American, Sony Corporation, Cony Interactive Entertainment LLC.
Decided on July 13, 2021
Before Dyk, Linn and O’malley, Circuit Judges.
Opinion by Circuit Judge O’malley.
SUMMARY
Briefly, the CAFC addresses the stringency of pleading requirements in cases alleging patent infringement, and that patentees need not prove their case at the pleading stage. Further that “a patentee may subject its claims to early dismissal by pleading facts that are inconsistent with the requirements of its claims” Col. 2, L., 1 to 13.
DETAIL
Bot M8 LLC (herein Bot M8) filed suit against Sony et al (herein Sony) alleging infringement of six patents, five of which remain at issue. U.S. Patent Nos., 8,078,540, 8,095,990, 7,664,988, 8,112,670 and 7,338,363. The asserted patents relate to gaming machines. Bot M8 accused Sony’s PlayStation 4 (PS4) consoles and aspects of Sony’s network of infringing the ‘540, ‘990, ‘998 and ‘670 Patents, while certain PS4 videogames of infringing the ‘363 patent.
- Procedural History
Bot M8 initially sued Sony in the United States District Court for the Southern District of NY, Sony filed an answer, asserting non-infringement and arguing that “the Complaint fails to identify legitimate theories for how the claim limitations of the patent-in-suit are all allegedly satisfied,” along with a motion to transfer the case to California. Col 6, L., 1 to 6. Sony did not move to dismiss the complaint for failure to state a claim.
After the case was transferred, the district court held a case management conference, and the court directed Bot M8 to file an amended complaint specifying “every element of every claim that you say is infringed and/or explain why it can’t be done.” The court instructed Bot M8 that, “if this is a product you can buy on the market and reverse engineer, you have got to do that.” Id. Counsel for Bot M8 responded that they “would be happy to…” and that reverse engineering would not be a problem because it had already “torn down the Sony PlayStation.”
— First Amended Complaint (FAC)
Bot M8 timely filed a FAC, and Sony moved to dismiss. The district court held oral argument on Sony’s motion and at the hearing questioned why Bot M8 had not cited to Sony’s source code in the FAC, a failing Sony did not identify in its motion to dismiss. The Court specifically asked “Why can’t you buy one of these products and take whatever code is on there off and analyze it?” Bot M8 indicated that the PS4 source code is not publicly available.
Consequently, the district court granted Sony’s motion to dismiss as to the ’540, ’990, ’988 and ’670 patents.
Briefly, the district court held the following:
- For the ’990 patent—which describes a mutual authentication mechanism for video games—the court found that “the complaint fails to allege when or where the game program and mutual authentication program are stored together.”
- For the ‘540 patent—which describes an authentication mechanism for video games—the district court found that “the complaint fails to allege when or where the game program and authentication program are stored together on the same memory board.” Because the allegations “do not address where the game program is stored,” the court found them insufficient.
- For the ’988 and ’670 patents—which describe computer program fault inspection—the court found that “the complaint provides no basis to infer the proper timing of the inspection”—i.e., whether a “fault inspection program” is “completed before the game starts.” That Bot M8’s “allegation too closely tracks the claim language to be entitled to the presumption of truth,” and “[n]o underlying allegations of fact are offered.”
The district court explained that Bot M8 “already enjoyed its one free amendment under the rules” and was instructed to “plead well, element-by-element.” The court stated that Bot M8 “does not deserve yet another chance to re-plead,” but nevertheless gave Bot M8 another chance to do so. But added that, if Bot M8 “move[d] for leave to file yet another amended complaint, it should be sure to plead its best case.”
Next, during a discovery hearing, Bot M8 raised, for the first time, concerns about the legality of reverse engineering the PS4’s software, otherwise known as “jailbreaking,” under the Digital Millennium Copyright Act (“DMCA”) and other anti-hacking statutes. The District Court asked Sony to give Bot M8 permission, and Sony agreed.
— Motion for Leave to Amend (Second Amended Complaint – SAC)
Bot M8 filed a motion for leave to amend its complaint and attached a redlined version of its proposed Second Amended Complaint (“SAC”). Bot M8 explained that the SAC was based on new evidence obtained only after Sony gave them permission to “jailbreak” the PS4.
Though Bot M8 moved for leave to file the SAC within the time frame authorized by the district court, the court still denied Bot M8’s motion for lack of diligence. Specifically, the court found that Bot M8 should have done the so-called “jailbreak” early in the proceedings and included the evidence in the FAC. The court explained that Bot M8’s motion was governed by FRCP 16, which authorized modifications “only for good cause.”
The district court found that Bot M8 “could have, and should have” included this evidence early because the issue of reverse engineering was brought up at the case management conference during which they failed to raise on concerns about the legality thereof. In fact, Bot M8’s counsel indicated they had already done it.
Consequently, the proposed amendment was deemed untimely.
—Motion to Reconsider
Bot M8 sought leave to move for reconsideration of the court’s order denying leave to amend, arguing that it could not have reverse engineered the PS4 before obtaining permission to disable the PS4’s access control technology in light of the DMCA.
The district court denied the motion, finding that Bot M8’s “theory of the [DMCA] crossing paths with patent rights remain[ed] unsupported by caselaw,” and Bot M8 “offer[ed] no binding decision directing a different pleading or amendment standard.”
—Summary Judgement under 35 U.S.C. §101
Sony moved for summary judgment of non-infringement and patent ineligibility under 35 U.S.C. § 101 against the ‘363 patent. In applying the two-part test set forth in Alice (Alice Corp. v. CLS Bank International, 573 U.S. 208, 217– 18 (2014)) the district court found claim 1 of the ’363 patent ineligible.
At Alice step one, the court found that claim 1 recites “the abstract idea of increasing or decreasing the risk-to-reward ratio, or more broadly the difficulty, of a multiplayer game based upon previous aggregate results.” At Alice step two, the court concluded that “claim 1 offers no inventive concept.” That, “[t]hough given special names, each part remains a generic computer part invoked to effect the conventional computer task of gathering, manipulating, transmitting, and using data.”
Bot M8 has submitted two expert declarations to establish inventive step, but the court concluded that Bot M8’s expert testimony was insufficient “to forestall summary judgment,” because, for example, the experts failed to articulate any “specific inventive concept in claim 1… other than [a generic reference to] ‘the totality’” based expert report.
- CAFC
- Amending the Original Complaint: Bot M8 argued that the district court erred by “forcing” them to replace their original complaint. The CAFC disagreed, holding that the court merely gave Bot M8 a chance to amend, and Bot M8 chose to file an amended complaint rather than defend the original.
- Dismissal of the FAC: As per FRCP 8(a)(2) “generally requires only a plausible ‘short and plain’ statement of the plaintiff’s claim,” showing that the plaintiff is entitled to relief. Skinner, 562 U.S. at 530. To 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 v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555).
Initially, the CAFC disagreed with the districts approach of instructing Bot M8 that it must “explain in [the] complaint every element of every claim that you say is infringed and/or explain why it can’t be done.” The CAFC reiterated that a plaintiff “need not ‘prove its case at the pleading stage.’” That, a plaintiff is not required to plead infringement on an element-by-element basis.
Instead, it is enough “that a complaint place the alleged infringer ‘on notice of what activity . . . is being accused of infringement.’” Lifetime Indus., Inc. v. Trim-Lok, Inc., 869 F.3d 1372, 1379 (Fed. Cir. 2017) (quoting K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1284 (Fed. Cir. 2013)). See Twombly, 550 U.S. at 556 (“[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.”)
Thus, “The relevant inquiry under Iqbal/Twombly is whether the factual allegations in the complaint are sufficient to show that the plaintiff has a plausible claim for relief. Iqbal, 556 U.S. at 679. “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. at 678. In other words, a plausible claim must do more than merely allege entitlement to relief; it must support the grounds for that entitlement with sufficient factual content. Id.” Col. 14, L., 4 to 13.
As such, the Plaintiff “cannot assert a plausible claim for infringement under the Iqbal/Twombly standard by reciting the claim elements and merely concluding that the accused product has those elements. There must be some factual allegations that, when taken as true, articulate why it is plausible that the accused product infringes the patent claim.” Col. 14, L 22 to 28. That is, a Plaintiff is to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests,” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. at 555).
Having clarified the standard, the CAFC concluded that they agreed with the district court that the allegations as to the ‘540 and ‘990 patents were conclusory, and at times contradictory but disagreed with the dismissal of the ‘988 and ‘670 patents. Here, the CAFC emphasized that the “court simply required too much.”
Briefly, the CAFC held the following:
- For the ’990 patent—which describes a mutual authentication mechanism for video games—the CAFC agreed with the district counts analyzing that found “the complaint fails to allege when or where the game program and mutual authentication program are stored together.”
- For the ‘540 patent—which describes an authentication mechanism for video games—the CAFC agreed with Sony that the FAC actually alleges away from infringement by asserting that the purported “authentication program” is stored on the PS4 motherboard—an allegation that is inconsistent with Bot M8’s infringement theory. That CAFC noted that Bot M8 had taken a “kitchen sink” approach in their complaint, revealing inconsistencies that ended up being fatal.
- For the ’988 and ’670 patents—which describe computer program fault inspection—and completed the inspection before the game starts. Here, the CAFC differed with the district court. Bot M8 argued on appeal that the district court erred in its dismissal because the FAC “includes specific evidence demonstrating that the PS4 includes a fault inspection program that concludes prior to the game starting.” That is, the PS4 displays error codes upon boot up and prior to a game starting, and the CAFC agreed this supports a plausible inference that the PS4’s fault inspection program concluded prior to the start of a game. Sony argued, and the district court agreed, that these passages failed to allege that execution of a fault inspection program completes before a game start, only that they commence during start-up. That CAFC held that Sony, like the district court, “demands too much as this stage of proceedings.”
- Denial of Leave to Amend the FAC: The CAFC ultimately determined that the denial was proper, because Bot M8 did not raise any concerns about its ability to reverse engineer the PS4 until after the district court issued its decision on Sony’s motion to dismiss, thus Bot M8 was not diligent.
Of note, the CAFC stated that while the district court perhaps should not have required reverse engineering of Sony’s products as a prerequisite to pleading claims of infringement, Bot M8 ultimately waived its objection to that obligation when it told the court it was happy to undertake that exercise.
- The ‘363 Patent: After consideration, the CAFC found no error in the districts 101 analysis.
CONCLUSION: Affirmed in part, reversed in part and remanded to the district court for further proceedings regarding infringement of the ’988 and ’670 patents.
- Take-Aways:
- Patentees need not prove their case as the pleading stage. But there must be some factual allegations that, when taken as true, articulate why it is plausible that the accused product infringes the patent claim.
- A patentee may subject its claims to early dismissal by pleading fats that are inconsistent with the requirements of its claims. As here, be mindful of “kitchen sink” approached, that arguments do not end up inconsistent.
- Be mindful of comments made during pre-trail procedures and always strive to be timely. Here, Bot M8’s counsel stated during the case management conference that their client was happy to reverse engineer the PS4 and had already done it, which turned out to be untrue and thus their wait of around 9 weeks to seek authorization to reverse engineer the product provide fatal for a lack of diligence. This ultimately lead to Bot M8 waiving its objection to this obligation.
