Sapphire Crossing LLC v. Abbyy Production LLC

Background

Sapphire Crossing LLC brought two patent-infringement actions against Abbyy USA Software House, Inc. and Evernote Corporation concerning U.S. Patent No. 6,891,633, titled “Image Transfer System.” The patent had two remaining claims, claims 19 and 20, after the Patent Trial and Appeal Board found the other claims invalid. The patent apparently expired in July 2019.

Sapphire accused the defendants’ Abbyy Business Card Reader and Evernote App of carrying out the patented method. According to the complaints, the applications allow users to photograph business cards, upload contact information from the defendants’ servers, and merge that information with the image. Sapphire alleged direct infringement during the defendants’ internal testing and also alleged that the defendants indirectly infringed by inducing customers to infringe and providing software for that purpose.

Motions to dismiss

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. They argued that they provided software rather than the required image-transfer device, did not direct or control users for purposes of divided infringement, and that Sapphire had not pleaded compliance with the patent-marking statute, 35 U.S.C. § 287(a).

The defendants did not challenge Sapphire’s allegations concerning internal testing. The court therefore denied the motions to dismiss as to direct infringement based on those internal-testing allegations.

Direct infringement based on user operation

The court rejected Sapphire’s theory that claim construction—the process of determining what patent terms mean—could make the defendants’ software applications the required “image transfer device.” Although claim construction generally is not resolved on a motion to dismiss, the court held that it did not have to accept an implausible infringement theory. The court also held that the Federal Circuit’s decision in SiRF Technology did not support Sapphire’s claim because the patent claims here required steps to be performed on end-user devices, unlike the claims in SiRF.

The court concluded that Sapphire failed to state a direct-infringement claim based on end users performing the claimed methods on their smartphones.

Divided infringement

Divided infringement involves a patented method whose steps are performed by multiple actors. The court explained that Sapphire had to allege facts supporting a reasonable inference that all steps were performed and that one party directed or controlled the others, or that the actors formed a joint enterprise.

The court adopted reasoning from an earlier opinion and held that providing software that performs a claimed method on end-user devices did not establish the necessary direction or control under the facts alleged. It therefore found that Sapphire failed to state a divided-infringement claim based on the defendants’ provision of software to end users.

Patent marking

The court declined to dismiss for failure to plead compliance with § 287(a), the patent-marking statute. It reasoned that Sapphire asserted method claims, which neither require nor can receive product marking. The court also stated that, even if marking were required, defendants generally must first identify unmarked products, and Sapphire’s allegations of willful infringement met the minimal pleading standard for this issue.

Disposition

The court granted the defendants’ motions to dismiss as to direct and divided infringement based on user operation of the defendants’ software, and denied the motions as to the defendants’ internal testing of the software. The court also did not dismiss on the patent-marking ground. Sapphire was ordered to file either an amended complaint consistent with Rule 11 or a notice that it would stand on the operative complaint by November 9, 2020; the defendants were to respond within fourteen days after that filing.