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KID Stuff Marketing, Inc. v. Creative Consumer Concepts, Inc.

United States District Court, D. Kansas

June 2, 2015

KID STUFF MARKETING, INC., Plaintiff,
v.
CREATIVE CONSUMER CONCEPTS, INC. and STEAK N SHAKE OPERATIONS, INC., Defendants.

MEMORANDUM AND ORDER

JOHN W. LUNGSTRUM, District Judge.

This matter comes before the Court on defendants' motion to dismiss certain claims (Doc. # 10). For the reasons set forth below, the motion is granted in part and denied in part. The motion is granted with respect to plaintiff's claim for contributory copyright infringement (Count IV), although plaintiff is granted leave to amend its complaint to cure its defective pleading of that claim by June 12, 2015. The motion is otherwise denied.

I. Governing Standard

The Court will dismiss a cause of action for failure to state a claim only when the factual allegations fail to "state a claim to relief that is plausible on its face, " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), or when an issue of law is dispositive, see Neitzke v. Williams, 490 U.S. 319, 326 (1989). The complaint need not contain detailed factual allegations, but a plaintiff's obligation to provide the grounds of entitlement to relief requires more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not do. See Bell Atlantic, 550 U.S. at 555. The Court must accept the facts alleged in the complaint as true, even if doubtful in fact, see id., and view all reasonable inferences from those facts in favor of the plaintiff, see Tal v. Hogan, 453 F.3d 1244, 1252 (10th Cir. 2006). Viewed as such, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic, 550 U.S. at 555. The issue in resolving a motion such as this is "not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

II. Analysis

By its complaint, plaintiff Kid Stuff Marketing, Inc. asserts claims against defendants Creative Consumer Concepts, Inc. ("C3") and Steak N Shake Operations, Inc. ("SNS") for patent infringement (Count I, against both defendants), induced patent infringement (Count II, against SNS), copyright infringement (Count III, against both defendants), and contributory copyright infringement (Count IV, against SNS). According to the complaint, plaintiff supplied paperboard cars that SNS used in its restaurants in connection with its children's meals, which designs were protected by registered copyrights and a patent; SNS switched to C3, a competitor of plaintiff, for the supply of the cars; and C3 produced cars in violation of plaintiff's copyrights and patent. By the present motion, defendants seek dismissal of plaintiff's claim of willful patent infringement as alleged in Counts I and II of the complaint, as well as dismissal of Counts II, III, and IV in their entirety.

A. Counts I and II - Willful Patent Infringement

In Counts I and II, plaintiff not only asserts claims for patent infringement, but it also alleges that such infringement was willful. Defendants argue that plaintiff has not stated a claim for willful infringement because it has failed to allege facts to support a plausible claim that defendants had knowledge of plaintiff's patent. See, e.g., Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 511 (Fed. Cir. 1990) ("a party cannot be found to have willfully' infringed a patent of which the party had no knowledge").

The Court rejects this argument. Plaintiff has alleged as follows: plaintiff's designs were protected by U.S. Patent No. 5, 454, 508 (the '508 Patent), which expired in March 2014; in April 2014, SNS contacted plaintiff by telephone, referenced the expiration of the '508 Patent, and mentioned that it had received a bid from a competing vendor; that plaintiff told SNS "that it had applied for a new patent, that it had received a notice of allowance for the new patent, and that the new patent would cover [plaintiff's] original car specifications and designs;" U.S. Patent No. 8, 783, 548 (the '548 Patent) was issued on July 22, 2014, and covers the designs for plaintiff's paperboard cars; SNS replaced plaintiff with C3 as its supplier of the paperboard cars; and SNS and C3 infringed the '548 Patent. Thus, plaintiff has alleged that SNS specifically referenced the expiration of the original patent and that it told SNS that a new patent would also cover the designs. The Court concludes that these alleged facts are sufficient to support a plausible inference that SNS had knowledge of the '548 Patent.

Defendants rely on the district court's opinion in Vasudevan Software, Inc. v. TIBCO Software Inc., 2012 WL 1831543 (N.D. Cal. May 18, 2012). In that case, the court relied on and quoted the following language from a Federal Circuit case:

To willfully infringe a patent, the patent must exist and one must have knowledge of it. A "patent pending" notice gives one no knowledge whatsoever. It is not even a guarantee that an application has been filed. Filing an application is no guarantee any patent will issue and a very substantial percentage of applications never result in patents. What the scope of claims in patents that do issue will be is something totally unforeseeable.

See State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985), quoted in part in Vasudevan, 2012 WL 1831543, at *2. In this case, however, SNS was not merely told that a patent application had been filed; rather, plaintiff has alleged that it told SNS that it had already received a notice of allowance for a new patent that would, like the expired patent, cover the design of the cars supplied to SNS by plaintiff. Indeed, in Vasudevan, the court made this same distinction, noting that it might present a different case if the defendant had notice of the claims that were to be allowed, instead of merely having knowledge that an application had been filed. See Vasudevan, 2012 WL 1831543, at *3. Thus, Vasudevan does not support dismissal in this case.

The Court also concludes that plaintiff's allegations are sufficient with respect to C3's knowledge. Not only has plaintiff plausibly alleged that SNS had knowledge of the patent and transferred the business to C3, which subsequently produced infringing cars; plaintiff has also alleged that C3 was its direct competitor, had attempted to buy plaintiff's business in the past, and was aware of plaintiff's products. Thus, plaintiff has alleged facts to support a plausible inference that C3 had the requisite knowledge to support a claim of willful infringement, and plaintiff should be permitted to ...


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