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Cascades Branding Innovation, LLC v. Walgreen Co.

May 3, 2012


The opinion of the court was delivered by: Hon. Harry D. Leinenweber



Before the Court are Defendant Best Buy Co. Inc.'s ("Best Buy") Motion to Dismiss, Defendant Target Corp.'s ("Target") Partial Motion to Dismiss and Plaintiff's Motion to Disqualify Defendant Best Buy's counsel, Robins, Kaplan, Miller & Ciresi ("Robins Kaplan"). For the reasons stated herein, Defendants' Motions are denied and Plaintiff's motion is granted.


Plaintiff Cascades Branding Innovation, LLC ("Cascades Branding") is wholly owned by Cascades Ventures, LLC ("Cascades Ventures"). Cascades Ventures, in turn, is wholly owned by Anthony O. Brown ("Brown"). Brown is also the President and Co-Founder of Cascades Branding. As Brown sees it, he and Cascades Ventures were put on this earth to assist inventors and their companies in "overcome[ing] obstacles to effective patent licensing," helping David-like small inventors slay Goliath "giant enterprises" who infringe their patents. Dkt. 54-1, 1. Other people call Brown the "original patent troll." Dkt. 64-1, Page ID 371.

Cascades Branding, an Illinois limited liability company, is the exclusive licensee of the patent in suit, U.S. Patent No. 7,768,395 ("the '395 Patent"). The patent relates to improvements in mobile devices, allowing devices to locate branded products and services in their vicinity. Best Buy and Target each have a mobile device application ("app") that allows mobile devices to locate nearby stores without the user having to enter location information. Plaintiff claims this infringes on the '395 patent and that the apps have no substantial non-infringing use. Plaintiff accuses both Defendants of inducing infringement and contributory infringement by making their apps available for customers (among others) to download and use.

Defendants Best Buy and Target are each incorporated in Minnesota and have their principal places of business there also. Best Buy is represented by Robins Kaplan. Specifically, Emmett J. McMahon ("McMahon") of Robins Kaplan has appeared pro hac vice on Best Buy's behalf.

Brown, as owner of Cascades Ventures, approached Robins Kaplan partner Ronald J. Schutz ("Schutz") in the summer of 2010 as owner of Cascades Ventures, seeking representation for Cascades Ventures (or a to-be-formed affiliate) in the licensing and enforcement of a patent portfolio (the "Elbrus Portfolio") unrelated to the patent in suit. The two exchanged a series of e-mails which have been submitted to the Court by agreement of both Plaintiff and Robins Kaplan. Schutz declined to represent Cascades, and informally notified him of this in an August 27, 2010 e-mail. More formally, Schutz definitively closed the file on May 20, 2011 and communicated this in an e-mail of the same date.

The parties agree no attorney-client relationship was formed, but dispute whether Schutz learned confidential information during that exchange that could help Best Buy in the current litigation.

Several years ago, Schutz and McMahon represented a company called TechSearch, LLC, which Brown co-founded and headed as President until he sold it lock, stock and barrel in 2005. As part of that representation, Schutz, McMahon and other Robins Kaplan attorneys helped litigate two lawsuits related to a patent portfolio (the "Chan Portfolio") unrelated to the patent at issue in this lawsuit or the patents that were the issue of the 2010 negotiations. As part of the representation, Robins Kaplan represented TechSearch in reaching settlement or licensing agreements with at least eight companies. That relationship lasted from approximately 2002 to 2004.

Cascades contends that, through the two interactions, Robins Kaplan has gained privileged information relating to Brown's (and thus Cascades Branding's) litigation strategy, business model, and approach to negotiating settlements, licenses and reasonable royalties. Dkt. 54-1, 3.

Events in this litigation began percolating on April 14, 2011, when attorneys for Cascades Branding notified Best Buy it was infringing on the patent (the same day they filed suit).

II. Motions to Dismiss

A. Legal Standard

On a motion to dismiss, all of a plaintiff's allegations are treated as true. FED. R. CIV. P. 12(b)(6); Wigod v. Wells Fargo Bank, N.A., No. 11-1423, 2012 U.S. App. LEXIS 4714, at *2 (7th Cir. March 7, 2012). Complaints will survive a motion to dismiss if they contain sufficient factual matter to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). However, "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1940.

B. Analysis

1. Direct Infringement

Target does not dispute the sufficiency of the direct infringement charge, but Best Buy does, claiming Plaintiff's complaint is conclusory and does not meet the standards of Iqbal and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Plaintiff responds that neither of those cases invalidated Form 18 of the Rules of Civil Procedure (a sample form for patent infringement complaints) and that its complaint is at least as sufficient as that boilerplate. It points to McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007), a post-Twombly but pre-Iqbal case that allowed a bare-bones pro se infringement complaint to proceed. Best Buy says Colida v. Nokia, Inc., 347 Fed.Appx. 568, 571 n.2 (Fed. Cir. Oct. 6, 2009), casts doubt on McZeal's efficacy in light of Iqbal.

This Court believes that the Federal Circuit knows how to overrule itself, and a passing footnote reference in a design patent case, where the Plaintiff did not even contend it met Form 18 standards, does not overrule McZeal. While it is true McZeal was a pro se case, and made reference to additional latitude for such litigants, it did not stand for the proposition that such litigants could fall below the minimum required and the case merely outlined that floor, which has been met here. Plaintiff notes in the Complaint that Defendants have infringed the '395 patent through "making, using (for example by testing), offering to sell and/or selling" the app. This equates with Form 18. Even if it did not, the specific example of "testing" is non-conclusory language not included in the statutory language or Form 18 that brings the Complaint above that level. The Motion to Dismiss the direct infringement allegation is denied.

2. Indirect Infringement

A question requiring more examination is whether Plaintiff's allegations in regard to inducement of infringement and contributory infringement meet pleading standards.

The Court agrees with the numerous cases cited by Defendants that hold that Form 18 does not apply to indirect infringement. See, e.g., Elan Microelecs. Corp. v. Apple, Inc., No. C 09-01531 RS, 2009 WL 2972374, at *2 (N.D. Cal. Sept. 14, 2009) ("[i]n the absence of any other form that addresses indirect infringement and is made binding on the courts through Rule 84, the Court must apply the teachings of Twombly and Iqbal.")

Indirect infringement requires that the party inducing or contributing to infringement know of the patent (or be willfully blind to the existence of such a patent) and that the product or activity at issue infringes. Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009) (hereinafter Lucent). Defendants say Plaintiff has failed to plead this level of scienter.

The Court disagrees. Plaintiff's Complaint specifically alleged that it sent both Defendants, on April 14, 2011, a "Notice of Infringement [that] included an infringement claim chart for the Cascades Patent." Defendants fault Plaintiff for trying to attach said notices of infringement in its response, but the Court did not consider these, because the necessary information appears in the Complaint itself. It is arguably sufficient to merely note that a notice of infringement was sent to a defendant, because implicit in this is the inference that such notice (1) notified a defendant of the existence of the patent in suit and (2) informed them of the infringement.

Additionally, Plaintiff's Complaint went even further and noted that the notice "included an infringement claim chart for the Cascades Patent, and a firm license offer to abate Best Buy's [and Target's] infringement." This makes those inferences explicit, and, particularly when coupled with the allegation that the apps are incapable of any non-infringing use, meets the scienter requirement.

The next objection is that indirect infringement requires a primary instance of infringement by a third party (See, e.g., DSU Med. Corp. v. JMS Co. Ltd., 471 F.3d 1293, 1303 (Fed. Cir. 2006)) and that Plaintiff failed to sufficiently allege this. ...

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