Acacia to Appeal Dismissal in Rebooted Flash Storage Campaign

  • January 5, 2020
  • Category: Patent Litigation Feature
    Market Sector: Consumer Electronics and PCs

As recently reported by RPX, Acacia Research Corporation has been an increasingly active plaintiff since it underwent a late-2018 leadership shake-up, launching its first new campaigns since 2015 and reviving a series of older ones. Amidst that ongoing ramp-up, Acacia has faced a recent setback in one of those rebooted campaigns, one waged by subsidiary Super Interconnect Technologies LLC (SIT). In mid-December, a Delaware judge ruled that SIT had insufficiently pled infringement in a storage technology lawsuit filed last January against HP. The plaintiff has now chosen to fight this ruling before the Federal Circuit, filing a notice of appeal on January 2. This setback comes as Acacia appears primed for further expansion, given a late-November announcement that it would receive up to $400M from hedge fund Starboard Value “for strategic investments and acquisitions”.

SIT sued HP (1:18-cv-01728) as part of a November 2018 wave of litigation filed in Delaware that kicked off a revival of this campaign, suing Huawei (2:18-cv-00462), Lenovo (1:18-cv-01729), Motorola Mobility (1:18-cv-01730), Sony (1:18-cv-01731), and ZTE (3:18-cv-02932) on the same day—variously targeting mobile devices and laptops offering Universal Flash Storage (UFS). However, SIT voluntarily dismissed its complaint against HP on the same day that it was filed, refiling the case in late January 2019 (1:19-cv-00169).

See here for an overview of the campaign’s first case, an Eastern District of Texas lawsuit filed in May 2015 in which the parties disputed standing and claim construction before settling a year later. That article also provides background on SIT’s other, previously terminated campaign, as well as various campaigns revived in the wake of Acacia’s 2018 leadership change.

HP’s Pleadings Challenge

HP moved to dismiss the case against it in April 2019, alleging that SIT had failed to adequately plead direct infringement, and by extension indirect infringement, through its claims that the accused HP laptops infringed via their alleged support of UFS. SIT’s complaint failed in this regard, argued HP, because it did not plead infringement using either of the two accepted approaches: 1) through a sufficient factual showing that all elements of at least one asserted claim are met by the accused products (the Twombly/Iqbal pleading standard), or 2) through a showing that the accused products infringe by implementing the mandatory provisions of a standard that are also shown to map to the asserted claims (the approach provided by the Federal Circuit’s 2010 opinion in Fujitsu v. LG Electronics).

Rather, HP argued, SIT’s allegations were deficient through their reliance on cursory citations to a 2012 third-party article that “references two industry standards[,]. . . the “UFS specification” and the “MIPI M-PHY protocol for physical layer communication”; further describes MIPI M-PHY as offering two “types”, “type 1” and “type 2”; and states that the “UFS specification calls out type 1”. HP alleged that the NPE had attempted to claim infringement by highlighting an HP advertisement stating that the accused laptops offer “UFS storage”, citing the article as supporting the assertion that this advertised UFS support necessarily “uses the MIPI M-PHY protocol”, and by alleging that this constituted infringement through (for each count) “a conclusory paragraph that pulls some words or phrases from an asserted claim—but not from the supposed ‘UFS specification,’ the supposed ‘MIPI M-PHY protocol,’ or the internet article”.

This pleading was insufficient, explained HP, because SIT had failed to show that the article “attempts to depict, or accurately depicts, the operation of either the referenced ‘UFS specification’ or ‘MIPI M-PHY protocol’”; nor had it shown a relationship between the article’s cited “UFS specification” and the “UFS storage” mentioned in the HP advertisement. Additionally, the NPE allegedly had not shown “whether the accused HP product is in fact compliant with the unidentified ‘UFS specification’ or ‘MIPI M-PHY protocol’ mentioned in the third-party article”; nor had it shown “whether compliance with the ‘UFS specification’ that supposedly ‘calls out type 1’ of the protocol” requires any accused HP product to “implement ‘type 1’ of the protocol”. Furthermore, it had failed to show “whether the words or phrases copied from the asserted claims into the complaint have any relation whatsoever to any portions of the ‘MIPI M-PHY protocol,’ the ‘UFS specification,’ or even the 2012 article, and if so, what specific claim elements correspond to what specific portions”—nor “how the accused HP product encompasses any of the elements of the asserted claims”. Additionally, HP argued, SIT had not shown how the implementation of any of the requirements purportedly established by the “UFS specification”, the “MIPI M-PHY protocol”, and the article would constitute infringement, because the complaint merely “includes conclusory paragraphs that do little more than incompletely summarize the claims”, ignoring certain limitations entirely.

SIT pushed back in a reply filed later that month, arguing that HP had “overstated” the applicable pleading standard—asserting in part that its pleadings met the lower standard laid out by the Federal Circuit in its 2018 decision in Disc Disease Solutions v. VGH Solutions. In that opinion, the Federal Circuit held that for cases that “‘involve[ ] a simple technology’[,] a complaint is ‘sufficient under the plausibility standard of Iqbal/Twombly’ if it (1) names products accused of infringing the asserted patents, (2) includes photographs of the packaging of the accused products, and (3) alleges that the accused products meet every element of at least one claim of the asserted patents” (as later summarized by the court in the HP suit). In the present case, SIT argued, its infringement claims met this standard, asserting that “[f]actually, the Complaint provides notice of the Asserted Patents, asserted claims, specific Accused Products, as well as an explanation of how underlying technology in the Accused Products results in infringement of the Asserted Patents”.

HP subsequently rejected SIT’s arguments as an attempt “to set the pleading bar at the level of preponderance of the evidence, rather than plausibility”—and countered that “the complaint does not clear the plausibility bar”, further asserting that SIT had inappropriately relied “on factual allegations not included in the complaint” and had “mischaracterize[d] the factual allegations that are actually present in the complaint”.

The Court Grants HP’s Motion to Dismiss

District Judge Colm F. Connolly granted HP’s motion on December 18, accepting the defendant’s arguments about how SIT’s pleadings fell short. “For each of the asserted patents”, the court held, “SIT’s direct infringement allegations consist of: identifying an accused product, alleging that the accused product incorporates technology that complies with an industry standard, and asserting that that technology meets the elements of one identified claim. These allegations fall short of the Iqbal/Twombly pleading standard because they fail to allege facts showing how the technology, the standard, or the accused product plausibly reads on the claim elements.”

In particular, the court found that “SIT makes no attempt in the Complaint to connect specific components of the MIPI M-PHY standard, the UFS technology, or the accused product to elements of the asserted claims”. While images included in the complaint plausibly show that the accused HP laptop includes UFS technology and that UFS “incorporates the MIPI M-PPHY standard”, the descriptive language included in each count merely asserts that “UFS devices have certain characteristics and that they infringe the claims”. However, Judge Connolly found that the complaint “does not allege facts to support its allegation that UFS devices have those characteristics. Nor does it explain how those characteristics connect to the asserted claims”.

By so concluding, Judge Connolly rejected SIT’s reliance on Disc Disease and its argument that the pleadings provide “fair notice of infringement of the asserted patents” under the requirements established in that case. The court explained in a footnote that “[i]n this case, the technology is far from simple, and the photographs and conclusory allegations in SIT’s [complaints] do not provide fair notice of SIT’s infringement claims.”

Judge Connolly then dismissed both SIT’s direct infringement claims and, as a result, those alleging indirect infringement. SIT filed a notice of appeal of that ruling to the Federal Circuit on January 2.

Meanwhile, four other SIT cases remain open: claim construction briefing began on December 20 in its lawsuits against Lenovo, Motorola Mobility, and Sony, while Google has filed a mandamus petition with the Federal Circuit to challenge the denial of a motion to dismiss for improper venue. In late September, Judge Connolly denied a motion to dismiss for pleading inadequacies in the Sony case, expressing “doubts that this case involves the type of ‘simple technology’ at issue in Disc Disease, but denying the motion because the defendant’s reply brief contained no rebuttal of SIT’s arguments that its pleadings offered sufficient detail under the Disc Disease standard, “therefore waiv[ing] the issue of Disc Disease’s applicability to its motion”. The cases against Huawei and ZTE have been dismissed due to apparent settlements.

Acacia Secures New Funding, Gearing Up for Further Expansion

As previously reported by RPX, Acacia’s ongoing revival strategy has included the appointment of a new CEO and CIO as well as the reconstitution of its board of directors, which is reportedly working to “advance” the company’s IP business. In September, CEO Clifford Press disclosed that the NPE’s new “IP focused, absolute return strategy” will involve diversifying the company’s business, including “adding new revenue streams” and augmenting Acacia’s IP portfolio “through acquisitions and partnerships”.

Acacia took another step to further its transformation in November with the announcement of its $400M funding deal with Starboard. According to a press release, Starboard will work “directly with Acacia” to identify and execute on opportunities for investments as well as strategic acquisitions.

For more details on Acacia’s deal with Starboard—as well as a subsequent announcement that the NPE had acquired an interest in a golf company—see “Acacia Partners with Hedge Fund Starboard Value, Makes a $2.1M Investment in Drive Shack” (December 2019).

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