The Demise Of Rule 84 And The Unleashing Of Twombly
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The Demise Of Rule 84 And The Unleashing Of Twombly
Law360, New York (July 8, 2016, 11:55 AM ET) -- In light of the abrogation of Rule 84 and Form 18 as of Dec. 1, 2015, several district courts have been presented with a novel issue as to the proper application of the plausibility requirement of Federal Rule of Civil Procedure 8(a), as explained by the U.S. Supreme Court decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and further by Ashcroft v. Iqbal, 556 U.S. 662 (2009).[1]
As such, while the proper application of the Supreme Court decisions in Twombly and Iqbal are being hashed out in the various district and appellate courts around the country, patent prosecution counsel are encouraged to take certain steps in drafting their complaints, in order to avoid potential dismissal of their complaints on a motions to dismiss under Federal Rule of Civil Procedure 12(b)(6), alleging improper pleading of plausibility under Rule 8 and according to Twombly and Iqbal.
Similarly, defense counsel are encourage to familiarize themselves with these developments in the law, in order to mount an effective defense against implausible claims and leverage a better settlement for their clients, in cases where the complaint does not adequately comply with the requirements of plausibility as explained in Twombly and Iqbal. Defense counsel’s diligence in this matter will further assist the courts in ferreting out implausible and insufficiently pled claims. However, in order to obtain a sufficient understanding of this new development in the law, counsel must first have a proper understanding of the historical development of Rule 84 and Form 18, and the relationship between these historical developments and the Supreme Court decisions in Twombly and Iqbal.
Historical Development of Rule 84 and Form 18
Rule 84 has been in effect since 1937. It was amended in 1946 and remained intact in that form from then until a stylistic amendment was made in 2007. Although Rule 84 and Form 18 were amended on April 30, 2007, and took effect on Dec. 1, 2007, the Advisory Committee notes regarding the 2007 amendments make no reference to Twombly. This is for good reason: Twombly was not decided until May 27, 2007, approximately a month after the 2007 amendments were approved by the Supreme Court and the Congress. Consequently, the 2007 amendments to the Federal Rules of Civil Procedure did not take notice of the ruling in Twombly because the Twombly decision was published after the 2007 amendments. Therefore, Form 18, which included only a bare-bone, conclusory and talismanic recitation of the elements of patent infringement, remained in effect between 2007 and 2015, despite the decisions of the Supreme Court in Twombly and Iqbal, which were both published subsequent to the 2007 amendments to the Federal Rules of Civil Procedure.
Subsequently, on Sept. 16, 2014, the Judicial Conference of the United States unanimously approved a number of amendments to the Federal Rules of Civil Procedure, including the proposed amendment to abolish Rule 84 and the Appendix of Forms, including From 18. The Supreme Court and Congress approved the amendments proposed by Judicial Conference, and the new amendments took effect as of Dec. 1, 2015, effectively abrogating Rule 84 and Form 18.
Relationship Between Twombly and Iqbal and the Development of Rule 84 and Form 18
As noted previously, the 2007 amendments to the Federal Rules of Civil Procedure, including the amendments to Rule 84 and From 18, did not take notice of or incorporate the Supreme Court’s decisions in Twombly and Iqbal because those decisions were made subsequent to the ratification of the 2007 amendments. This historical development of Rule 84 and Form 18, therefore, caused significant confusion among lower courts, regarding the applicable plausibility standard required by Rule 8, as explained in Twombly and Iqbal, as opposed to the allegations of Form 18, which did not comply with the Twombly and Iqbal standard, which were decided subsequent to the 2007 amendments.
Therefore, the lower courts were faced with two, seemingly conflicting provisions of the law: the requirements of plausibility as explained in Twombly and Iqbal, on the one hand, and the bare-bones and talismanic language of the pleading asserted in Form 18, on the other hand. Needless to say, it is axiomatic in the rules of statutory construction that in case of conflict between different provisions of the law, when the different provisions “can be harmonized by a fair and liberal construction it must be done.”[2] Therefore, between 2007 and 2016, numerous lower courts attempted to harmonize the conflict between Twombly and Form 18. This harmonizing was generally dictum as a technical matter, because most courts that took the issue were dealing with complaints that were not as bare-bones and talismanic as the language suggested by Form 18 and therefore these lower courts generally were able to pass on the procedure question of whether Form 18 is sufficient, by pointing out that the complaint at hand in those cases, contained more detailed allegations than the language of Form 18 suggested.
However, since Rule 84 and Form 18 were the main line of defense for prosecution counsel in response to motions to dismiss under Rule 12(b)(6), some lower courts took it upon themselves, regardless of whether it was dictum or not, to provide some clarification regarding this apparent inconsistency between Twombly and Form 18. While some lower courts looked to Twombly, others looked to Form 18, in order to harmonize the law. However, the decisions that looked to the form have been harshly criticized, and since the abrogation of Form 18 are no longer applicable. As such, as of Dec. 1, 2015, Twombly speaks for itself, and is no longer held back by the harmonizing effect which was imposed on the courts, as a result of Rule 84 and Form 18.
Now, it is more important than ever that patent litigation counsel pay close attention to the specific requirements of Twombly. Since Rule 8(a) is a purely procedural rule, the application of which is governed by the law of the regional circuit,[3] counsel must look closely at the law of the circuit or the district in which they are litigating. This article generally focuses on the modern trend, as unraveling in the more modern and technology savvy districts, such as California, Delaware and other similar districts. However, before discussing the specific requirements of Twombly and Iqbal, a brief discussion of the cases that looked to Form 18 will provide a much-needed insight into how different circuits are likely to interpret the Twombly and Iqbal requirements of plausibility pleading, in the post-abrogation era.
A Brief Survey of Lower Court Decisions
The Federal Circuit weighed in on the question of harmonizing Twombly with Form 18 in In re Bill of Lading Transmission & Processing System Patent Litigation.[4] In that case, in reaching its conclusion that a direct patent infringement complaint only needs to comport with the level of factual detail specified in Form 18, the Federal Circuit reasoned that, to the extent that Twombly and Iqbal pleading standards conflict with the Forms, “the Forms control,” and that the Federal Circuit lacked the power to alter those forms or Rule 84, which states that the forms “suffice under these rules.”[5] The Federal Circuit’s decision in Bill of Lading, was in turn based upon the decision in McZeal v. Sprint Nextel Corporation.[6]
Following the decisions in Bill of Lading and McZeal, in K-Tech Telecomm. Inc. v. Time Warner Cable Inc. the Federal Circuit again reiterated the problematic language that “the Form controls.”[7] However, as the concurring opinion of Judge Evan Wallach in K-Tech astutely observed, the majority’s opinion in K-Tech was couched in problematic terms by unnecessarily pronouncing that “the Forms control” over plausibility.[8] Attempting to harmonize the conflicting standards of pleading plausibility under Rule 8, as expressed in Twombly, on the one hand, and the less stringent form pleading standard of Rule 84 and Form 18, on the other, Judge Wallach’s concurring opinion in K-Tech maintains that the K-Tech majority did not have to reach the analysis as to whether the form controls over plausibility or vice versa. As such, the majority’s language that “the Forms control,” Judge Wallach noted, is dictum. Id. at 1287-88. Judge Wallach further points to the same inconsistencies between Twombly and Form 18, noting that the majority’s Twombly and Iqbal analysis in K-Tech “does not square with the majority’s dictum that ‘the Forms control.’” Id.
Additionally, as the Eastern District of Virginia noted in Macronix, “[t]he threshold problem with McZeal and Bill of Lading is that they accord no force either to the text or teaching of Twombly and Iqbal which require more to plead a legally sufficient claim than is set out in Form 18.”[9] Now, in the post-abrogation era, as previously predicted by Jason Murata and Ryan Cook in their Law360 Expert Analysis article “Twombly, Iqbal And The Demise Of Form 18" (published Nov. 18, 2014), “the Federal Circuit’s basis for refusing to strike patent infringement complaints that comply with the minimum requirements of Form 18” has ceased to exist.[10] As such, there is no more need for harmonizing Twombly with Form 18, and Twombly speaks for itself and in full force.
The Specific Requirements the Application of Twombly Pleading Standard Imposes in the Context of a Patent Case
Specific Requirements of Twombly
In deciding on the sufficiency of a complaint, in light of a Rule 12(b)(6) motion to dismiss, the court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' ... it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation."[11] In other words, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do."[12] "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'"[13]
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"[14] A claim is facially plausible when the facts pled "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."[15] That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully."[16] "[F]acts that are 'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief.[17] Further, the court need not accept as true "legal conclusions" contained in the complaint.[18] This review requires "context-specific" analysis involving the court's "judicial experience and common sense."[19] "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not 'show[n]' — 'that the pleader is entitled to relief.'"[20]
In Atlas IP LLC v. Pac. Gas & Elec. Co.,[21] the Northern District of California applied the Twombly standard of plausibility. Since Atlas involved only one asserted claim, it provided the court with a good opportunity to explain the post-December 2015 standard of pleading for patent infringement cases in a relatively simple context. The asserted claim in Atlas was an “apparatus” (or “device” or “system”) claim.[22]
In Atlas, the court concluded that “the complaint fails to state a plausible claim for direct infringement[]” because “the complaint recites only some of the elements of the sole asserted claim, and provides only a threadbare description of the alleged abilities of the accused device.[23] In reaching this conclusion, the court made use of Elan Microelectronics Corp. v. Apple Inc.[24] to demonstrate the point that “simply reciting some of the elements of a representative claim and then describing generally how an accused product operates, without specifically tying the operation to any asserted claim or addressing all of the claim requirements, is insufficient.”[25] In Elan, the court held that "a bare assertion, made 'on information and belief'" that defendant "has been and is currently, directly and/or indirectly infringing" the specified patents "through its design, marketing, manufacture and/or sale of touch sensitive input devices or touchpads, including but not limited to the Smart-Pad" was an insufficient recital of elements supported only by conclusory statements.[26]
Furthermore, the Twombly decision and its progeny provide ample language suggesting that a stricter standard of pleading was imposed by Twombly. In Twombly itself, the court retired the lower standard of sufficiency under Rule 8, that it had previously set in Conley v. Gibson[27]. As one eminent scholar of federal civil procedure has said of Twombly: “Notice pleading is dead. Say hello to plausibility pleading.”[28] That is because the “liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2) has been decidedly tightened (if not discarded) in favor of a stricter standard requiring the pleading of facts painting a ‘plausible’ picture of liability.”[29] Twombly then made quite clear that:
While, for most types of cases, the Federal Rules eliminated the cumbersome requirement that a claimant "set out in detail the facts upon which he bases his claim," Rule 8(a)(2) still requires a "showing," rather than a blanket assertion of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a complainant could satisfy the requirement of providing not only "fair notice" of the nature of the claim, but also "grounds" upon which the claim rests.
Bell Atlantic v. Twombly.[30] Explaining the relationship between Rule 12(b)(6) and Rule 8(a)(2), the court said that:
The need at the pleadings stage for allegations plausibly suggesting (not merely consistent with) agreement [an element of an antitrust claim] reflects the threshold requirement of Rule 8(a)(2) that the "plain statement" possess enough heft to "show that the pleader is entitled to relief."
Id. at 557. Only then, will a complaint be sufficient to withstand attack under Rule 12(b)(6).
The Twombly standard was further underscored two years later when the Supreme Court decided Iqbal, wherein the Supreme Court explained that Rule 8:
[D]oes not require "detailed factual allegations," but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation... . A pleading that offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Nor does a complaint suffice if it tenders "naked assertion[s]" devoid of "further actual enhancement."
556 U.S. at 678. To explain what plausibility means, the court said, as to claims asserted under Rule 8, that “[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.”[31] In other words, plausibility requires a complaint to place the legal conclusions it makes in context of facts that render the asserted claim plausible. Now, as professor A. Benjamin Spencer has aptly put it: “Only those complaints that plead facts suggestive of liability satisfy the Rule 8(a) obligation to state a claim that shows entitlement to relief.”[32] The legal sufficiency of a complaint presented under Rule 8(a) is tested by a motion made under Rule 12(b)(6). “The question of whether a Rule 12(b)(6) mot[33]ion was properly granted is purely a procedural question not pertaining to patent law to which [courts apply] the rule of the regional ... circuit.”
Accordingly, in cases post-Dec. 1, 2015, prosecution counsel are encouraged to review the court’s decision in Atlas, and to allege sufficient facts, specifically tying the operation to any asserted claim or addressing all of the claim requirements. This may require patentees in certain cases to undertake more burdensome presuit investigations to learn sufficient facts to allege sufficient plausibility, as required by Twombly. This requires counsel to know exactly which limitations of the asserted claims of the patent(s)-in-suit are being infringed and how the accused products infringes on these limitations of the asserted claims of the patent(s)-in-suit. However, as discussed below, this was an intended consequence of the Supreme Court’s decision in Twombly, and the underlying public policy involved in that case.
Public Policy Supporting the Specific Requirements of Twombly
The court’s analysis in Twombly not only explains the applicable standard for pleading plausibility under Rule 8 but also discusses the underlying public policy necessitating a more rigorous plausibility standard under Rule 8. In Twombly, the Supreme Court made clear that the more rigorous application of Rule 8(a) was needed to assure that the parties would not embark on expensive litigation unless the plaintiff had made in the complaint a plausible case. Twombly, 550 U.S. at 557–59; A. Benjamin Spencer, supra, at 450–52. Twombly was an antitrust case, a kind of litigation well known for extensive discovery and high litigation costs. Patent cases fit the same bill, perhaps even more so. Indeed, patent cases generally are among the most expensive kinds of cases in federal court. It is not logical to exempt them from the reach of Twombly and Iqbal, whose prime purpose was to assure that such expense was not incurred unless the plaintiff had posited a plausible claim in the complaint.
Satisfying the requirements of Twombly and Iqbal, of course, will require counsel to focus complaints only on viable claims. Thus, before filing a complaint, counsel must ascertain exactly what claims are alleged to be infringed and how they are infringed. That can be done with brevity and clarity, if counsel know their theories of infringement at the outset and what can, and cannot, be said about allegedly infringing conduct. That, in turn, may well, and indeed, likely will, require expert assistance. It will mean taking great care when crafting a succinct, but sufficient, patent complaint. But, that is not asking too much.
Indeed, the words of Macronix court are echoed now, louder than ever, in the light of the abrogation of Rule 84 and Form 18: “it is high time that counsel in patent cases do all of that work before filing a complaint. That, of course, will serve to winnow out weak (or even baseless) claims and will protect defendants from the need to prepare defenses for the many claims that inevitably fall by the way side in patent cases. That also will serve to reduce the expense and burden of this kind of litigation to both parties which, like the antitrust litigation in Twombly, is onerous.”[34] The pre-December 2015 pleading standard practice, was to file a Form 18 complaint and then, using claim charts, prior art charts, discovery, and motions, to pare claims that ought not to have been brought or that cannot withstand careful scrutiny. That process has proven to be an increasingly expensive proposition for the parties and one that takes a tremendous toll on already strained judicial resources. “There is no logical reason to exempt patent complaints from the plausibility requirements that apply to all other federal complaints. If counsel will but accept the task, the expense of patent litigation and the burden on the courts will be reduced. If they will not, their cases will be dismissed and they may face sanctions. But neither is necessary.”[35]
Based on the foregoing discussion, patent prosecution counsel are encouraged to carefully review the application of Twombly and Iqbal to patent infringement cases in their jurisdiction and to make sure that their complaint has alleged sufficient facts to sufficiently plead plausibility, as required by Rule 8 and Twombly and the applicable law in each jurisdiction. Similarly, patent litigation defense counsel are encouraged to review the applicable Twombly analysis in their jurisdiction, in order to properly appraise their defense options, when facing complaints that have not pled sufficient plausibility.
—By Alexander Chen and Omid Shabani, InHouse Co. Law Firm
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