Case 4:20-cv-00477-YGR Document 68 Filed 10/15/20 Page 1 of 10
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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
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`SENTIUS INTERNATIONAL, LLC,
`Plaintiff,
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`vs.
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`APPLE INC.,
`Defendant.
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`CASE NO. 4:20-cv-00477-YGR
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`
`ORDER GRANTING IN PART AND DENYING
`IN PART APPLE INC.’S PARTIAL MOTION
`TO DISMISS THIRD AMENDED COMPLAINT
`FOR PATENT INFRINGEMENT
`Re: Dkt. No. 61
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`Plaintiff Sentius International, LLC (“Sentius”) brings this patent infringement action
`against defendant Apple Inc. for alleged infringement of two of its patents, U.S. Patent No.
`RE43,633 (the “’633 Patent”) and 7,672,985 (the “’985 Patent”). On June 2, 2020, the Court
`granted Apple’s partial motion to dismiss on the grounds that Sentius failed to state a claim for
`direct infringement of the ’633 Patent method claims and joint infringement of the ’633 and ’985
`Patent method claims, with leave to amend. (Dkt. No. 55 (“Order”).) On June 23, 2020, Sentius
`filed an amended complaint, continuing to assert direct and joint infringement of the asserted
`method claims. (Dkt. No. 58 (“TAC”).)
`Now before the Court is Apple’s partial motion to dismiss the third amended complaint.
`(Dkt. No. 61 (“MTD”).) Having carefully reviewed the pleadings and submitted papers, and for
`the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART defendant’s partial
`motion to dismiss.1
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`I.
`BACKGROUND
`The background giving rise to this action is well-known, and the Court does not repeat it
`here. (See Order at 1:21-3:27.) In brief, Sentius asserts infringement of the ’633 Patent method
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`1 Pursuant to Federal Rule of Civil Procedure 78(b) and Civil Local Rule 7-1(b), the Court
`finds the motion appropriate for resolution without oral argument.
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`claims. (TAC ¶ 20.) Sentius accuses certain Apple products (such as iPhones and MacBooks) as
`well as Apple online applications (Pages and Keynote) through their spellcheck functionality. (Id.
`¶¶ 11-17.) Specifically, Sentius alleges that these products and applications practice the claimed
`methods when a user selects a misspelled word to see spelling suggestions. (Id. ¶ 12.)
`Previously, Sentius alleged that Apple uses the ’633 Patent methods through software that
`automatically executes the claimed steps in response to user selection. (See Dkt. No. 37 (“SAC”)
`¶¶ 35-46.) The Court dismissed these allegations because Federal Circuit precedent considers
`software to be instructions, such that party that operates the device to execute the software (the
`user) infringes a method claim, as opposed to the party that sells the device together with the
`software (Apple). (Order at 4:21-8:2.) In the third amended complaint, Sentius continues to assert
`infringement through software, but also alleges that “Apple and other users . . . have each
`respectively operated devices” to execute software that performs the claimed methods. (TAC ¶¶
`22-33.) Sentius also alleges that Apple operated these devices to execute the methods “on servers,
`computers and devices controlled by Apple.” (Id. ¶ 20.)
`Separately, Sentius asserts a “joint infringement” theory by alleging that Apple “is directly
`responsible for any infringing acts of its users” because it conditions a benefit of the spell check
`functionality on user performance of claimed steps. (Id. ¶¶ 34, 42.) The joint infringement theory
`is relevant to both the ’633 Patent—the claims of which require “selecting a discrete portion of an
`image of the textual source material” (i.e., the misspelled word)—and the ’985 Patent, the claims
`of which require linked content to be displayed “based upon user interaction with at least a portion
`of the one or more source documents.” (Id. ¶¶ 28, 59, 61.) Although the Court has previously
`dismissed these claims, it did so on the grounds that Sentius’ allegations did not reflect its theory
`of infringement and did not consider the merits. (Order at 9:7-20.)
`In response to Apple’s current motion, Sentius agrees not to pursue joint infringement for
`the ’633 Patent, but asserts, in its place, that Apple is vicariously liable for its users’ operation of
`the accused products. (Dkt. No. 63 (“Opp.”) at 1:19-25.) Although the third amended complaint
`does not allege vicarious infringement, the Court considers the issue to determine whether
`amendment would be futile.
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`II.
` LEGAL STANDARD
`Pursuant to Rule 12(b)(6), a complaint may be dismissed for failure to state a claim upon
`which relief may be granted. Dismissal for failure to state a claim under Federal Rule of Civil
`Procedure 12(b)(6) is proper if there is a “lack of a cognizable legal theory or the absence of
`sufficient facts alleged under a cognizable legal theory.” Conservation Force v. Salazar, 646 F.3d
`1240, 1242 (9th Cir. 2011) (citing Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
`1988)). The complaint must plead “enough facts to state a claim [for] relief that is plausible on its
`face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible on its face
`“when the plaintiff pleads factual content that allows the court to draw the reasonable inference
`that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
`(2009). If the facts alleged do not support a reasonable inference of liability, stronger than a mere
`possibility, the claim must be dismissed. Id. at 678–79. Mere “conclusory allegations of law and
`unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355
`F.3d 1179, 1183 (9th Cir. 2004).
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`III. DISCUSSION
`Apple moves to dismiss Sentius direct and joint infringement claims for the ’633 Patent
`and joint infringement claims for the ’633 and ’985 Patents. In light of Sentius’ representations
`that it will no longer pursue joint infringement claims for the ’633 Patent, the Court considers the
`three remaining issues: (1) direct infringement of the ’633 Patent, (2) vicarious infringement of
`the ’633 Patent, and (3) joint infringement of the ’985 Patent.2
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`A.
`Direct Infringement (’633 Patent)
`Direct infringement of a method claim occurs “where all steps of a claimed method are
`performed by or attributable to a single entity.” Akamai Techs., Inc. v. Limelight Networks, Inc.,
`797 F.3d 1020, 1022 (Fed. Cir. 2015). As stated in the Court’s Order, direct infringement of a
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`2 For ease of reference, the Court adopts the parties’ categories and refers to divided
`infringement as “joint” infringement. Nevertheless, the Court notes that divided infringement is a
`species of direct infringement and that “joint” infringement is, at least in theory, broader than
`divided infringement. See Akamai, 797 F.3d at 1022; Shockley v. Arcan, Inc., 248 F.3d 1349,
`1364 (Fed. Cir. 2001); cf. Restatement (Second) Torts § 875 (indivisible harm).
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`method claim requires that “(1) Apple actually operates the device to perform the method, (2) at
`least one step of the method is performed on equipment controlled by Apple (per SiRF), or (3)
`Apple exercises direction or control over the users.” (Order at 7:11-14.) For example, in
`Ericsson, Inc. v. D-Link Systems, Inc., the court held that device makers whose products
`automatically performed a claimed method were not directly liable because all of the steps were
`performed on user-controlled devices and defendants neither performed the steps nor exercised
`direction or control over the users. 773 F.3d 1201, 1221-22 (Fed. Cir. 2014).
`Here, Sentius alleges that each step of the claimed methods was performed when “Apple
`and other users of the accused functionality . . . each respectively operated devices, such as the
`Accused Products, executing the software that performed [the step].” (TAC ¶¶ 23-33.) Sentius
`also alleges that the claimed methods were executed on “servers, computers and devices controlled
`by Apple,” but clarifies that this refers to Apple’s own use of the devices. (Id. ¶ 20; Opp. at 6:6-
`13.) Sentius thus alleges two theories of direct infringement: (1) direct infringement through
`Apple’s own operation of the devices, and (2) direct infringement through direction and control
`over users who operate the devices.
`As to the first theory, Sentius states a viable claim. While Apple undoubtedly designs its
`products for other users, the Court finds it plausible that Apple may have tested its products or
`otherwise executed the relevant methods in the course of product development and support. See,
`e.g., Carnegie Mellon U. v. Marvell Tech. Grp., Ltd., 807 F.3d 1283, 1296-97 (Fed. Cir. 2015)
`(upholding jury verdict of direct infringement based on infringer’s simulation of accused feature
`operation during development); Finjan, Inc. v. Sophos, Inc., 244 F. Supp. 3d 1016, 1046 (N.D.
`Cal. 2017) (affirming jury verdict of direct infringement based on substantial evidence that
`defendant tested its products in the United States). But see Packet Intelligence LLC v. NetScout
`Sys., Inc., 965 F.3d 1299, 1314-15 (Fed. Cir. 2020) (reversing damages award based on device
`sales which was not tied to the internal use of the claimed methods).
`With regard to the second theory, Sentius argues that Apple directs and controls users’
`actions because Apple conditions the benefits of spell check on user performance of the claimed
`methods and establishes the manner and timing of that performance. (TAC ¶ 34.) This is the
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`standard for joint infringement. See Akamai, 797 F.3d at 1023 (expanding attribution principles
`for joint liability to include “condition[ing] participation in an activity or receipt of a benefit upon
`performance of a step or steps of a patented method and establish[ing] the manner or timing of that
`performance’). Apple thus argues that because Sentius abandoned its joint infringement claim, the
`“conditioned benefit” test is no longer applicable. Sentius disagrees and contends that the Federal
`Circuit intended to expand principles of attribution in Akamai to allow for direct liability where a
`third party performs all steps of a claimed method based on the defendant’s conditioned benefit
`and control.
`Sentius is correct. In Nalco Company v. Chem-Mod, LLC, an accused infringer allegedly
`practiced a method to remove mercury pollutant from power plant gas. 883 F.3d 1337, 1342-43
`(Fed. Cir. 2018). The patentee alleged “three ways” in which all steps of the method could be
`attributable to defendants, namely they (i) operated the process at a power plant, (ii) directed and
`controlled operation of a test facility that carried out all steps, and (iii) carried out all steps during
`testing. Id. at 1350. The district court dismissed the claims because the patentee “failed to allege
`that any Defendant is directly responsible for performing all method steps,” but the Federal Circuit
`reversed. Id. at 1351. The court noted that the testing facility was alleged to “obtain[] monetary
`benefits for performing the test requisitioned by Defendants” and that defendants “controlled all
`aspects of the power plant operations during the test.” Id. at 1352-53. In these circumstances, it
`“d[id] not matter” whether the party conducting the test was the defendant, a non-defendant power
`plant, or a facility performing pilot tests—all three were directed to perform all steps of the
`method by the defendants. Id. at 1353.
`Accordingly, a defendant may be directly liable for infringing a claimed method where a
`third party carries out all steps of the method to obtain a benefit conditioned by the defendant and
`the defendant controls the manner or timing of that performance. Id. at 1350; Akamai, 797 F.3d at
`1023. Apple’s cases to the contrary, Finjan, 244 F. Supp. 3d at 1044, and Rearden LLC v. Walt
`Disney Co., 293 F. Supp. 3d 963, 972-73 (N.D. Cal. 2018), were decided before Nalco and do not
`control. See Sound View Innovations, LLC v. Hulu, LLC, No. LA CV17-04146 JAK (PLAx),
`2019 WL 2619639, at **9-10 (C.D. Cal. Apr. 30, 2019).
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`Nevertheless, the Court finds that Sentius fails to state a claim under the “conditioned
`benefit” test for direction and control. Each Federal Circuit case under this standard involves
`some version of offline control and conditioned benefit over users. In Akamai, the defendant
`imposed contractual requirements for users to perform certain steps to use its service. 797 F.3d at
`1024. In Eli Lilly & Co. v. Teva Parenteral Medicines, Inc., doctors conditioned patient treatment
`on their taking of folic acid. 845 F.3d 1357, 1366 (Fed. Cir. 2017). In Travel Sentry, Inc. v.
`Tropp, the defendant had a “memorandum of understanding” with the TSA to perform certain
`steps. 877 F.3d 1370, 1383-84 (Fed. Cir. 2017). And in Nalco, the defendant apparently paid a
`test facility to perform the method. 883 F.3d at 1353. Each of these cases involved offline or
`“real world” control and conditioning—not control through a device.
`By contrast, the Court is aware of no case where software functionality alone satisfied the
`“conditioned benefit” test. Although the Federal Circuit warned against limiting the standard to
`legal obligations and technological prerequisites, it has repeatedly stated that “mere guidance or
`instruction is insufficient” to show conditioned benefit. Eli Lilly, 845 F.3d at 1367; Travel Sentry,
`877 F.3d at 1379. Under governing precedent, software is exactly that: instructions. See Ricoh
`Co., Ltd. v. Quanta Comp. Inc 550 F.3d 1325, 1335 (Fed. Cir. 2008) (“[S]oftware is not itself a
`sequence of actions, but rather it is a set of instructions that directs hardware to perform a
`sequence of actions.”); Fantasy Sports Props., Inc. v. SportsLine.com, Inc., 287 F.3d 1108, 1118
`(Fed. Cir. 2002) (“Software is a set of instructions, known as code, that directs a computer to
`perform specified functions or operations.”); see also Microsoft Corp. v. AT & T Corp., 550 U.S.
`437, 447 (2007) (relying on Fantasy Sports to equate software with instructions).
`Moreover, the Patent Act provides different provisions for infringement through supply of
`a device for infringement. See 35 U.S.C. § 271. Section 271(c) states that “[w]hoever offers to
`sell or sells . . . a material or apparatus for use in practicing a patented process . . . shall be liable
`as a contributory infringer.” Section 271(b) provides liability for “active inducement,” which
`includes providing instructions for infringement. See Barry v. Medtronic, Inc., 914 F.3d 1310,
`1336 (Fed. Cir. 2019). The Federal Circuit has consistently analyzed provision of infringing
`devices under these standards, not the direct infringement of section 271(a). See, e.g., Mirror
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`Worlds, LLC v. Apple Inc., 692 F.3d 1352, 1360 (Fed. Cir. 2012); Fujitsu Ltd. v. Netgear Inc., 620
`F.3d 1321, 1326-32 (Fed. Cir. 2010); Ricoh, 550 F.3d at 1341; see also Commil USA, LLC v.
`Cisco Sys., Inc., 575 U.S. 632 (2015); cf. Hilgraeve Corp. v. Symatec Corp., 265 F.3d 1336, 1342
`n.2 (Fed. Cir. 2001) (“While the parties, and the district court’s decision, speak of the accused
`devices as infringing, more properly the allegation is that the operation of the devices directly
`infringes the method claims at issue, or that that the sale of the devices induces customers to
`infringe the method claims.”).
`Thus, “in the context of the facts presented,” the Court concludes that Sentius fails to state
`a claim for direct infringement based on allegations of direction and control through the provision
`of infringing software to end-user devices. Sentius never alleges that users could only obtain the
`benefit of the sold devices by performing the claimed method. On the contrary, Sentius expressly
`alleges that users may obtain spell check benefits through other means. (TAC ¶ 12.) Sentius also
`does not allege that Apple has the right and ability to control users’ infringement after the devices
`are sold. See Travel Sentry, 877 F.3d at 1385 (citing Metro-Goldwyn-Mayer Studios Inc. v.
`Grokster, Ltd., 545 U.S. 913, 930 (2005)). Ultimately, Sentius may convince the Federal Circuit
`that software functionality should satisfy the “conditioned benefit” test. But absent explicit
`guidance, the Court declines to expand direct liability to hold parties that provide software for
`performing a method to end-user devices strictly liable.
`Accordingly, Sentius states a claim for direct infringement based on Apple’s own
`operation of the accused devices, but not for direction or control over users who operate the
`devices.
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`B.
`Vicarious Infringement (’633 Patent)
`Patent infringement is a tort action. Wordtech Sys., Inc. v. Integrated Network Sol., Inc.,
`609 F.3d 1308, 1313 (Fed. Cir. 2010). Patent law thus presumptively incorporates vicarious
`liability principles. See Meyer v. Holley, 537 U.S. 280, 285 (2003) (“[W]hen Congress creates a
`tort action, it legislates against a legal background of ordinary tort-related vicarious liability rules
`and consequently intends its legislation to incorporate those rules.”); see also Sony Corp. of Am. v.
`Universal City Studios, Inc., 464 U.S. 417, 435 (1984) (reading vicarious liability into the
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`Copyright Act because “vicarious liability is imposed in virtually all areas of the law”).3
`Under traditional vicarious liability principles, a principal or employer is liable for its
`agent’s or employee’s torts. Meyer, 537 U.S. at 285. In copyright law, vicarious liability has also
`been imposed on a party that “profit[s] from direct infringement while declining to exercise a right
`to stop or limit it.” Grokster, 545 U.S. at 930. This principle is “an outgrowth” of respondeat
`superior based on an analogy to “dance hall” cases that found operators of entertainment venues
`vicariously liable for infringing performances in their venues. Fonivisa, Inc. v. Cherry Auction,
`Inc., 76 F.3d 259, 261-62 (9th Cir. 1996). Imposing liability in these circumstances encourages a
`party that has the right and ability to police infringement to do so, and thus “place[s] responsibility
`where it can and should be effectively exercised.” Shapiro, Bernstein & Co. v. H.L. Green Co.,
`316 F.2d 304, 308 (2d Cir. 1963).
`Sentius now argues that the Federal Circuit expanded vicarious liability further in Akamai
`to find a party liable whenever it conditions a benefit and controls another party’s infringement.
`797 F.3d at 1023. However, as Akamai expressly noted, vicarious liability “is a misnomer” in that
`context. Id. at 1022 n.2. Akamai had expanded principles of attribution for purposes of direct
`infringement of a method claim. See id. at 1022. Although it did so using “general principles of
`vicarious liability,” the doctrines remain distinct. Id. Vicarious infringement is a secondary
`liability doctrine based on “an alleged infringer[’s] [liability] for a third party’s commission of
`infringement.” Id. at 1022 n. 2. Joint infringement is a direct liability doctrine based on “an
`alleged infringer [being] responsible for method steps performed by a third party.” Id. The
`distinction is slim to nonexistent where vicarious liability is a viable theory, but has an impact
`where vicarious liability is not available—most obviously, where there is no direct infringement
`because no party performs all of the steps of a method claim.
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`3 The lines between direct, contributory, and vicarious infringement have not always been
`“clearly drawn.” Sony, 464 U.S. at 435 n.17. Both the Supreme Court and the Federal Circuit
`have occasionally referred to contributory infringement as “vicarious” infringement. See id. at
`439-40; Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1273 (Fed. Cir. 2004).
`However, at least in the patent context, that is a misnomer. Contributory infringement is expressly
`defined in 35 U.S.C. § 271(c) and requires knowledge of the patent; vicarious infringement stems
`from common law principles and does not. See Grokster, 545 U.S. at 930 n.9; Shapiro, 316 F.2d
`at 307; see also A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1022-23 (9th Cir. 2001).
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` Accordingly, Sentius cannot state a claim for vicarious infringement based on the
`“conditioned benefit” test of Akamai. Nor do the rest of the allegations state a claim for vicarious
`infringement because Sentius fails to allege an agency relationship between Apple and its users or
`that Apple has the right and ability to police users’ direct infringement. See Centillion Data Sys.,
`LLC v. Qwest Commn’s Int’l, Inc., 631 F.3d 1279, 1287 (Fed. Cir. 2011) (no vicarious liability
`where “it is entirely the decision of the customer whether to install and operate . . . software”);
`Cross Medical Prods., Inc. v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293, 1311 (Fed. Cir.
`2005) (no vicarious liability without an agency relationship); Acceleration Bay LLC v. Activision
`Blizzard, Inc., 324 F. Supp. 3d 470, 482 (D. Del. 2018) (rejecting vicarious liability where
`customers chose whether to install software); Joao Control & Monitoring Sys. Of Cal., LLC v.
`Sling Media, Inc., No. C-11-6277 EMC, 2012 WL 3249510, at *7-8 (N.D. Cal. Aug. 7, 2012) (no
`vicarious liability based on customer relationship where defendant was not the “mastermind” who
`controls the infringement).
` Accordingly, the Court finds that amendment to the complaint to add vicarious
`infringement claims based on Sentius’ factual allegations would be futile.
`
`C.
`Joint Infringement (’985 Patent)
`Joint infringement stems from the principle that “a method patent is not directly infringed .
`. . unless a single actor can be held responsible for the performance of all steps of the patent.”
`Limelight Networks, Inc. v. Akamai Techs., Inc., 572 U.S. 915, 924 (2014). Where multiple
`parties are involved in performing the method steps, all steps must be ultimately attributable to the
`direct infringer. Akamai, 797 F.3d at 1022. A third-party’s performance of a step is attributable to
`the alleged infringer if (1) the third-party acts as the infringer’s agent, (2) the parties form a joint
`enterprise, (3) the alleged infringer contracts with the third-party to perform the steps, or (4) the
`alleged infringer “conditions participation in an activity or receipt of a benefit upon performance
`of a step or steps . . . and establishes the manner or timing of that performance.” Id. at 1023.
`Here, Sentius alleges that Apple performs the step of “syndicating one or more data objects
`. . . to one or more remote computers” from its own servers and conditions users’ performance of
`the remaining steps on their end-user devices. (TAC ¶¶ 43-48, 51-59.) These allegations state a
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`claim for direct infringement under SiRF Technology, Inc. v. International Trade Commission,
`601 F.3d 1319, 1331 (Fed. Cir. 2010). (See Order at 5 n.1, 7:11-14.) Although SiRF rejected the
`district court finding of joint infringement, the Court cannot conclude that Sentius fails as a matter
`of law in alleging joint infringement, in addition to or in the alternative to direct infringement. See
`SiRF, 601 F.3d at 1229. In particular, while the claims in SiRF were drawn to a single actor, and
`did not require a third-party to perform any step, claim 21 of the ’985 Patent requires user
`interaction. Id.; (TAC ¶ 59). Accordingly, Sentius states a claim for joint infringement.
`
`IV. CONCLUSION
`For the foregoing reasons, the Court GRANTS Apple’s partial motion to dismiss with
`respect to allegations of direct infringement based on direction and control over users, but DENIES
`the motion with respect to allegations of Apple’s own operation of the accused devices, as well as
`joint infringement of the ’985 Patent. Apple shall answer the complaint within twenty-one (21)
`days. The Court further SETS a case management conference for November 23, 2020, at 2:00 p.m.
`Instructions for a Zoom link will be docketed a few days before the hearing.
`This Order terminates docket number 61.
`IT IS SO ORDERED.
`
`Dated: October 15, 2020
`
`
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`
`
`YVONNE GONZALEZ ROGERS
`UNITED STATES DISTRICT COURT JUDGE
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`Northern District of California
`United States District Court
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`