CyboEnergy, Inc. v. Northern Electric Power Technology, Inc.

Background

CyboEnergy alleged that Northern Electric’s NEP BDM-330x2, BDM-600, and BDM-600x inverters infringed U.S. Patent No. 8,786,133, entitled “Smart and Scalable Power Inverters.” CyboEnergy also alleged that Northern Electric breached the parties’ October 19, 2022 settlement agreement from a prior related proceeding, Case No. 3:21-cv-08534-SI. Northern Electric moved to dismiss the direct patent-infringement and breach-of-contract claims. The motion did not address CyboEnergy’s indirect-infringement allegations.

Direct Patent Infringement

The court applied the standard for dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). For direct infringement, the complaint had to allege facts showing that the accused product practiced every element of at least one patent claim. For the system claim, CyboEnergy needed to allege that Northern Electric made, used, sold, or offered to sell a complete system that included multiple daisy-chained inverters and the other required components. For the method claim, CyboEnergy needed to allege that Northern Electric actually performed every required step.

The court found that CyboEnergy relied on allegations that Northern Electric’s individual inverters enabled users to assemble an infringing system and that Northern Electric’s manuals explained how to connect multiple inverters in a daisy chain. But CyboEnergy did not allege, for example, that Northern Electric provided the required direct-current power sources, connected those power sources to the inverters, or provided alternating-current power to the power grid. The court therefore concluded that CyboEnergy had failed to state a claim for direct infringement.

The court granted leave to amend the direct-infringement claims “out of an abundance of caution,” although it stated that it appeared unlikely CyboEnergy would be able to allege direct infringement. The court did not dismiss these claims with prejudice at this stage.

Breach of Contract

CyboEnergy did not respond to Northern Electric’s arguments about the breach-of-contract claim. The court treated that failure as a concession that the claim should be dismissed. Independently, after reviewing the settlement agreement, the court concluded that the claim failed as a matter of law.

CyboEnergy alleged that Northern Electric had agreed not to sell certain NEP inverters with features supporting daisy-chaining after June 30, 2023. The court found that the settlement agreement contained no such provision. Instead, the agreement provided that CyboEnergy would not assert the patent against Northern Electric for sales through June 2023, and it did not bar Northern Electric from continuing to manufacture or sell the products at issue.

The court dismissed the breach-of-contract claim with prejudice.

Disposition

Judge Jon S. Tigar granted Northern Electric’s motion to dismiss CyboEnergy’s direct-infringement and breach-of-contract claims, with leave to amend as to the direct-infringement claims and with prejudice as to the breach-of-contract claim. CyboEnergy could file an amended complaint solely to correct the identified direct-infringement deficiencies within 21 days of the order. The court stated that failure to amend by that deadline would result in dismissal of the direct-infringement claims with prejudice.