Read the Fine Print: Federal Circuit Vacates Dismissal of Patent Infringement Claims Based on an Express License, Where Some Transactions Could Fall Within the Scope of the Claims Yet Remain Unlicensed
Written by: Nickolas Taylor & Daniel Kiang
Before Stark, Lourie, and Bryson. Appeal from the United States District Court for the District of Connecticut.
Summary: A narrowly defined patent license may result in some activity falling within the scope of the patent claims, but outside the scope of the license. Additionally, a trial court’s determination that an allegation in a complaint is merely conclusory and need not be taken as true when evaluating a motion to dismiss is reviewed de novo.
AlexSam sued Aetna for patent infringement, alleging that Aetna marketed Mastercard and VISA products which infringed AlexSam’s patent relating to multifunctional debit/credit card technology. AlexSam and Mastercard had previously entered into a licensing agreement for that patent authorizing Mastercard to process, and enable others to process, “Licensed Transactions”—defined as “each process of activating or adding value” to an account. Aetna filed a motion to dismiss that the district court granted. The district court held that (1) Aetna had an express license via the licensing agreement to market the Mastercard products, and (2) AlexSam failed to plausibly allege infringement based on the VISA products. The Federal Circuit vacated the district court’s decision.
The Federal Circuit analyzed the Mastercard license and concluded that the scope of the license extended only to transactions involving activation of, or adding value to, an account. Because AlexSam asserted claims which were not limited to transactions involving activation or adding value, it was possible that transactions involving Aetna’s Mastercard products could fall within the scope of AlexSam’s claims yet remain outside the scope of the license. Thus, the Federal Circuit vacated the dismissal as to the Mastercard products.
The Federal Circuit also held, for the first time, that de novo review applies to a trial court’s determination whether an allegation in a patent-infringement claim is well-pled and factual, and therefore taken as true in a motion to dismiss, or is a legal or conclusory allegation that is not presumed to be true. Applying this standard of review to the VISA-related allegations, the Federal Circuit disagreed with the district court that the allegations in AlexSam’s complaint were conclusory and did not need to be taken as true. Accordingly, the Federal Circuit vacated and remanded for further proceedings.
Editor: Sean Murray