CEMCO LLC v. KPSI Innovations Inc et al, No. 2:2023cv00918 - Document 76 (W.D. Wash. 2024)
Court Description: ORDER denying Defendant's 70 Motion to Dismiss for Failure to State a Claim. Signed by Judge James L. Robart. (SS)
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CEMCO LLC v. KPSI Innovations Inc et al Doc. 76 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 CEMCO, LLC, 10 CASE NO. C23-0918JLR Plaintiff, 11 ORDER v. 12 KPSI INNOVATIONS, INC., et al., 13 Defendants. 14 15 I. INTRODUCTION 16 Before the court is Defendants KPSI Innovations, Inc. (“KPSI”), James Klein 17 (“Mr. Klein”), Serina Klein (“Ms. Klein”), and Kevin Klein’s (collectively, 18 “Defendants”) motion to dismiss Plaintiff CEMCO, LLC’s (“CEMCO”) third amended 19 complaint (“TAC”). (Mot. (Dkt. # 70); Reply (Dkt. # 75); see 3d Am. Compl. (Dkt. 20 # 69).) CEMCO opposes Defendants’ motion. (Resp. (Dkt. # 71).) The court has 21 // 22 // ORDER - 1 Dockets.Justia.com 1 considered the parties’ submissions, the relevant portions of the record, and the governing 2 law. Being fully advised, 1 the court DENIES Defendants’ motion to dismiss. 3 4 II. BACKGROUND A. 5 Factual Background CEMCO owns United States Patent Nos. 7,681,365 (’365 Patent (Dkt. # 1-1)), 6 7,814,718 (’718 Patent (Dkt. # 1-2)), 8,136,314 (’314 Patent (Dkt. # 1-3), and 8,151,526 7 (’526 Patent (Dkt. # 1-4)) (collectively, the “Asserted Patents”). (3d Am. Compl. ¶ 10.) 8 The Asserted Patents “generally claim head-of-wall products that comprise an 9 intumescent strip . . . affixed on a sidewall of a header, wherein the intumescent strip 10 expands in a fire to seal the gap between the header and the ceiling to inhibit the spread 11 of smoke and fire.” (Id. ¶ 11; see also ’365 Patent at 6:42-8:29; ’718 Patent at 12 10:9-12:22; ’314 Patent at 10:20-65; ’526 Patent at 7:32-8:46.) 13 Mr. Klein is the sole named inventor on each of the Asserted Patents. (See 14 generally ’365 Patent; ’718 Patent; ’314 Patent; ’526 Patent.) He is also a former 15 CEMCO employee. (3d Am. Compl. ¶ 24.) A series of lawsuits and settlements 16 involving CEMCO and its affiliates, Mr. Klein and his businesses, and Ohio-based 17 nonparty Clarkwestern Dietrich Building Systems LLC resulted in Mr. Klein and his 18 companies “g[iving] up the right to make, use, offer for sale, or sell any product covered 19 // 20 // 21 22 1 CEMCO requests oral argument (Resp. at 1), but Defendants do not (see Mot. at 1). The court concludes that oral argument would not be helpful to its disposition of the motion. See Local Rules W.D. Wash. LCR 7(b)(4). ORDER - 2 1 by the [Asserted] Patents.” (Id. ¶ 30; see also id. ¶¶ 24-50 (describing four prior 2 lawsuits).) 3 The court expanded upon the parties’ “thorny history” in a prior order. (See 4 10/31/23 Order (Dkt. ## 46 (sealed), 48 (redacted)) at 3-6.) Here, it suffices to say that 5 KPSI is the latest entity with ties to Mr. Klein that CEMCO asserts is infringing its 6 patents. CEMCO maintains that Defendants’ “Fire Rated Gasket” (“FRG”) products 7 infringe the Asserted Patents when installed in a particular manner at construction sites. 8 (See 3d Am. Compl. ¶¶ 41, 44.) 9 B. 10 Procedural History The present motion is Defendants’ third motion to dismiss. (See generally 1st 11 MTD (Dkt. # 27); 2d MTD (Dkt. # 54); Mot.) Although CEMCO’s previous complaints 12 included allegations of direct patent infringement (e.g., 2d Am. Compl. (Dkt. # 52) ¶ 77), 13 CEMCO no longer alleges direct patent infringement (see generally 3d Am. Compl. See 14 also 2/21/24 Order (Dkt. # 68) at 3 (dismissing CEMCO’s direct patent infringement 15 claims with prejudice)). In its present complaint, CEMCO asserts claims against 16 Defendants for induced infringement of the Asserted Patents under 35 U.S.C. § 271(b) 17 and the fraudulent transfer of assets under RCW 19.40 et seq. (3d Am. Compl. ¶¶ 91-162 18 (asserting seven counts in total).) 19 Because the court denied Defendants’ prior motion to dismiss CEMCO’s claims 20 for the fraudulent transfer of assets (10/31/23 Order at 21-22), Defendants’ current 21 motion only seeks dismissal of CEMCO’s claims for induced patent infringement (see 22 // ORDER - 3 1 generally Mot.). The court considers the relevant legal standards before addressing 2 Defendants’ motion. 3 4 5 III. LEGAL STANDARDS A. Rule 12(b)(6) Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a complaint for 6 “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A 7 Rule 12(b)(6) dismissal may be based on “the lack of a cognizable legal theory or the 8 absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica 9 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A plaintiff’s complaint must “contain 10 sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 11 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 12 550 U.S. 544, 570 (2007)). Although the pleading standard announced by Federal Rule 13 of Civil Procedure 8 does not require “detailed factual allegations,” it demands more than 14 “an unadorned, the-defendant-unlawfully-harmed me accusation.” Id. (citing Twombly, 15 550 U.S. at 555) (requiring the plaintiff to “plead[] factual content that allows the court to 16 draw the reasonable inference that the defendant is liable for the misconduct alleged”); 17 see Fed. R. Civ. P. 8(a). 18 When considering a Rule 12(b)(6) motion, the court takes the well-pleaded factual 19 allegations as true and views such allegations in the light most favorable to the 20 plaintiff. Wyler Summit P’ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 21 1998). The court need not, however, accept as true a legal conclusion presented as a 22 factual allegation, Iqbal, 556 U.S. at 678, nor is the court required to accept as true ORDER - 4 1 “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 2 inferences,” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 3 2001). Additionally, in evaluating a complaint under Rule 12(b)(6), courts may consider 4 “documents attached to the complaint, documents incorporated by reference in the 5 complaint, or matters of judicial notice.” United States v. Ritchie, 342 F.3d 903, 908 (9th 6 Cir. 2003). The court need not “accept as true allegations that contradict matters properly 7 subject to judicial notice or by exhibit.” Sprewell, 266 F.3d at 988. 8 B. 9 Induced Patent Infringement “Whoever actively induces infringement of a patent shall be liable as an 10 infringer.” 35 U.S.C. § 271(b). To prove induced infringement, the plaintiff must show 11 that (1) “a third party directly infringed the asserted claims,” (2) the defendant “induced 12 those infringing acts,” and (3) the defendant “knew the acts it induced constituted 13 infringement.” Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 843 F.3d 14 1315, 1332 (Fed. Cir. 2016). 15 The first element requires the plaintiff to show that a third party made, used, 16 offered to sell, sold, or imported into the United States a product or process that meets 17 every element or limitation of the asserted claims. See 35 U.S.C. § 271(a); Rohm & Haas 18 Co. v. Brotech Corp., 127 F.3d 1089, 1092 (Fed. Cir. 1997); see also Laitram Corp. v. 19 Rexnord, Inc., 939 F.2d 1533, 1535 (Fed. Cir. 1991) (“[T]he failure to meet a single 20 limitation is sufficient to negate infringement of the claim . . . .”). 21 22 The second element requires the plaintiff to show that the defendant “engaged in an affirmative act” to “recommend, encourage, promote, or suggest” the third party’s ORDER - 5 1 direct infringement. Impinj, Inc. v. NXP U.S., Inc., No. 19-cv-03161-YGR, 2022 WL 2 20508659, at *4 (N.D. Cal. Oct. 27, 2022) (quoting Cal. Beach Co., LLC v. Exqline, Inc., 3 No. C 20-01994 WHA, 2020 WL 6544457, at *3 (N.D. Cal. Nov. 7, 2020)). 4 The third element requires the plaintiff to show the defendant’s “specific intent to 5 induce infringement.” Id. at *5 (citing DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1305 6 (Fed. Cir. 2006) (en banc)). This standard “requires that the accused inducer . . . knew of 7 the asserted patent and performed or knowingly induced the performance of the steps of 8 the claimed methods.” Move, Inc. v. Real Est. All. Ltd., 709 F.3d 1117, 1123 (Fed. Cir. 9 2013). The Federal Circuit has held that “[p]roviding instructions to use a product in an 10 infringing manner is evidence of the required mental state for inducing infringement.” 11 Microsoft Corp. v. DataTern, Inc., 755 F.3d 899, 905 (Fed. Cir. 2014). 12 IV. DEFENDANTS’ MOTION 13 Defendants argue that CEMCO’s patent infringement claims must be dismissed 14 because its TAC lacks plausible allegations of the necessary elements to establish a prima 15 facie case for induced infringement. (See Mot. at 2.) CEMCO responds that the factual 16 allegations in its TAC, when taken as true, plausibly establish that Defendants induce 17 their customers to infringe the Asserted Patents by selling them FRG products with 18 instructions on how to use them in an infringing manner. (Resp. at 2-3.) The court 19 considers each element of CEMCO’s prima facie case in turn. 20 A. 21 22 Element 1: Direct Infringement Defendants argue that CEMCO’s TAC fails to plausibly allege acts of third-party infringement because CEMCO makes “merely” conclusory assertions concerning ORDER - 6 1 Defendants’ customers’ infringing activities. (Mot. at 3.) CEMCO responds with four 2 arguments: it (1) alleges that Defendants’ customers apply Defendants’ FRG products to 3 header tracks in an infringing manner; (2) identifies three customers who are alleged to 4 have committeed infringing acts; (3) identifies 15 “current UL listings” instructing 5 Defendants’ customers to apply their FRG products to header tracks in an infringing 6 manner; and (4) provides 48 pages of claim charts “which show how the application of 7 FRG products to header tracks by these customers according [to] a representative UL 8 listing . . . would infringe at least one independent claim in each of the asserted patents.” 9 (Resp. at 1. See generally ’365 Claim Chart (Dkt. # 69-10); ’718 Claim Chart (Dkt. 10 # 69-11); ’314 Claim Chart (Dkt. # 69-12); ’526 Claim Chart (Dkt. # 69-13).) The court 11 agrees with CEMCO that it has plausibly made a case for direct infringement of the 12 Asserted Patents by Defendants’ customers. 13 CEMCO identifies three customers—Painting America Inc., Price Ceiling & 14 Drywall, and PCI—it alleges “apply [Defendants’] FRG products to header tracks 15 according to the UL Listings [on KPSI’s website] in an infringing manner.” (3d Am. 16 Compl. ¶ 67; see id. ¶ 61 (listing 15 UL listings on KPSI’s website).) Contrary to 17 Defendants’ assertion, these allegations do not amount to a mere “conclusory assertion of 18 the legal claim of patent infringement itself.” (Mot. at 3.) CEMCO’s allegations identify 19 the customers and the alleged infringing acts. To help explain those infringing acts, 20 CEMCO provides detailed claim charts that “set forth” how “the application of FRG 21 products to header tracks to build head-of-wall assemblies pursuant to the UL Listings 22 directly infringes at least one claim in each of the [Asserted] Patents.” (3d Am. Compl. ORDER - 7 1 ¶ 64. See generally ’365 Claim Chart; ’718 Claim Chart; ’314 Claim Chart; ’526 Claim 2 Chart.) Defendants do not address these claim charts in their motion (see generally 3 Mot.), and their reply brief ignores the “according to the UL Listings” language in 4 CEMCO’s complaint; indeed, Defendants appear to selectively omit this key language 5 several times (see Reply at 2 (using ellipses to omit the phrase and mischaracterizing 6 CEMCO’s allegations as merely stating that Defendants’ customers “apply FRG to 7 header tracks,” period).) 8 9 10 11 The court therefore concludes that CEMCO’s TAC plausibly alleges direct infringement of each of the Asserted Patents by three of Defendants’ customers. B. Element 2: Affirmative Act to Induce Infringement Defendants next argue that CEMCO’s TAC fails to plausibly allege that they 12 induced infringement because CEMCO’s complaint does not allege that Defendants run 13 the website with the relevant UL listings. (Mot. at 6.) CEMCO argues that Defendants 14 “miss the point,” and the court agrees. (Resp. at 3.) 15 CEMCO’s TAC plausibly alleges that KPSI owns the website at issue and that the 16 Kleins operate it. (See 3d Am. Compl. ¶ 59 (alleging that a former Klein company 17 “assigned assets relating [to] fire-blocking head-of-wall products to KPSI, including 18 the . . . website”); id. ¶ 61 (alleging that “KPSI’s website features” the UL listings); id. 19 ¶ 78 (alleging that “KPSI induces infringement of the [Asserted] Patents by . . . 20 recommending the use of the UL Listings and through its advertising on its website”); id. 21 ¶ 130 (alleging that Ms. Klein “provid[es] instructions on KPSI’s website showing how 22 to use the FRG products in an infringing manner and recommending the application of ORDER - 8 1 the FRG products on header tracks in advertising and promotional literature”); id. ¶ 134 2 (alleging that Mr. Klein “manag[es] the content of KPSI’s website to promote infringing 3 uses”). These allegations are more than sufficient to plausibly allege that Defendants 4 took affirmative steps to induce infringement of the Asserted Patents. See Impinj, 2022 5 WL 20508659, at *4. 6 The court therefore concludes that CEMCO’s TAC plausibly alleges that 7 Defendants took affirmative acts to induce infringement of the Asserted Patents. 8 C. Element 3: Specific Intent 9 Defendants do not challenge CEMCO’s allegations that Defendants “had 10 knowledge of” the Asserted Patents. (Id. ¶ 129. See generally Mot.) CEMCO’s TAC 11 alleges that a jury has already found that one of the Kleins’ former companies “willfully 12 infringed the [Asserted] Patents.” (3d Am. Compl. ¶ 48.) The court has no trouble 13 concluding that such allegations are sufficient to plausibly allege the requisite specific 14 intent in this case, in which Defendants allegedly continue to make sales of FRG products 15 and advertise infringing uses through the guise of KPSI. See Microsoft, 755 F.3d at 905. 16 V. CONCLUSION 17 18 19 For the foregoing reasons, the court DENIES Defendants’ motion to dismiss (Dkt. # 70). Dated this 2nd day of April, 2024. A 20 JAMES L. ROBART United States District Judge 21 22 ORDER - 9
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