ALD Social, LLC v. Verkada, Inc.

• Court: District Court, N.D. California
• Decided: February 7, 2023
• Docket: 3:23-cv-00049
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ALD SOCIAL, LLC, Case No. 23-cv-00049-JSC

8 Plaintiff, ORDER RE: MOTION TO DISMISS 9 v. FOR FAILURE TO STATE A CLAIM

10 VERKADA, INC., Re: Dkt. No. 12 Defendant. 11

12 13 ALD Social sues Verkada for infringement of two patents directed to systems to detect 14 crowd safety risks and to alert emergency personnel of that risk: U.S. Patent Nos. 9,198,054 (“the 15 ’054 patent”) and 9,402,158 (“the ’158 patent”). (Dkt. No. 1.)1 Verkada’s motion to dismiss for 16 failure to state a claim is now pending before the Court. (Dkt. No. 12.) Having carefully reviewed 17 the parties’ briefing and with the benefit of oral argument on February 2, 2023, the Court 18 GRANTS the motion to dismiss with leave to amend. In light of the claim chart Plaintiff attached 19 to its complaint, its infringement claims are not plausible. 20 BACKGROUND 21 A. ALD Social’s Patents 22 Plaintiff filed a patent infringement suit against Verkada for infringement in the Western 23 District of Texas. (Dkt. No. 1.) Both the ’054 patent and the ’158 patent (“Asserted Patents”) are 24 entitled “Aggregate Location Dynometer (ALD).” (Dkt. No. 1 at 4.) The ’158 patent is a 25 continuation of the ’054 patent. ’158 patent, col. 1 ll. 4-13. Both Asserted Patents’ abstracts 26 describe: 27 An Aggregate Location Dynometer (ALD) in a physical wireless 1 network alerts to a problematic crowd risk using location based services (LBS). An Aggregate Location Dynometer (ALD) comprises 2 a Network Monitor, a Crowd Risk Determinant and an Alert Module. The Network Monitor monitors wireless traffic for a potential viral 3 event, associated with a formation of a plurality of wireless devices. The Crowd Risk Determinant requests location information 4 associated with a plurality of wireless devices in a given area regarding a respective viral event. The Crowd Risk Determinant 5 determines if the viral event also indicates a crowd safety risk, based on the shape and movement of observed wireless devices. The Alert 6 Module triggers an alert of an impending crowd problem when crowd risk is above a given threshold. Historical databases are empirically 7 determined and maintained in the Aggregate Location Dynometer (ALD) for use in viral event and crowd risk assessment. 8 ’054 patent, abstract; ’158 patent, abstract. The Asserted Patents elaborate on the significance of 9 wireless devices: 10 The Aggregate Location Dynometer (ALD) analyzes a bird’s-eye 11 view of people formation, presuming those individuals possess respective handheld wireless devices that permit collection of current 12 location information, whether that current location information be obtained from the wireless devices themselves, and/or from a 13 network-based location server. 14 ’054 patent, col. 2 ll. 57-63; ’158 patent, col. 2 ll. 61-67. 15 At a high level, the invention is a system to track the geographic location of wireless 16 devices and determine whether a particular geographic region represents a “crowd related public 17 safety risk.” ’054 patent, col. 2 ll. 45–col. 3 ll. 26; ’158 patent, col. 2 ll. 51–col. 3 ll. 30. One such 18 risk is a potential viral outbreak when the system detects, e.g., too many wireless devices in one 19 geographical area. Id. More specifically, claim 1 of the ’054 patent states: 20 1. An aggregate location dynometer in a physical wireless 21 network server, said aggregate location dynometer comprising: 22 a network monitor to monitor a wireless network for an 23 indication of a viral event;

24 a location aggregator to obtain a location of each of a plurality of wireless devices associated with said viral 25 event;

26 a crowd risk determinant, triggered by said network monitor, to determine a crowd risk based on an 27 aggregation of said location of each of said plurality of an alert module to initiate an alert message relating to a 1 public safety risk determined from an analysis of said viral event. 2 3 ’054 patent, col. 9 ll. 10-24. Claim 1 of the ’158 patent states: 4 1. An aggregate location dynometer in a physical wireless 5 network server, said aggregate location dynometer comprising: 6 a network monitor to monitor a wireless network for an 7 indication of a potential viral event indicated by an aggregation of current locations of a plurality of physical 8 wireless devices associated with said potential viral event; and 9 a crowd risk determinant to assess said aggregation of said 10 current locations of said plurality of physical wireless devices pertaining to said potential viral event triggered by 11 said network monitor. 12 13 ’158 patent, col. 9 ll. 18-29. 14 B. Complaint Allegations 15 Plaintiff alleges Verkada’s Crowd Notifications system (the “Accused Product”) directly 16 infringes, literally and/or under the doctrine of equivalents, at least claim 1 of both the ’054 and 17 ’158 patents. (Dkt. No. 1 at 5-6.) Plaintiff further alleges Verkada induces infringement. (Dkt. 18 No. 1 at 4.)2 Plaintiff’s complaint attaches claim charts for each patent. (Dkt. No. 1-1 at 35-48.) 19 C. The Accused Product 20 Verkada’s product is a “camera system to monitor for cases of overcrowding.” (Dkt. No. 21 1-1 at 36, 44.) The system uses “edge-based people detection capabilities” to identify 22 overcrowding. (Dkt. No. 1-1 at 37, 45.) For example, Plaintiff’s claim chart offers the following 23 illustration of the Accused Product: 24 25 26

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a 12 □□ . . (Dkt. No. 1-1 at 39, 47.) This image shows the Accused Product’s detection of people “in a single 413 = frame.” (Dkt. No. 1-1 at 39, 47.) Users can “[b]e alerted when cameras detect a number of people 14 in-frame that exceeds a pre-set threshold.” (Dkt. No. 1-1 at 40, 48.) The alert includes “a 15 □□□ notification via email or SMS with an image and a link to review the associated footage.” (Dkt. 16 = No. 1-1 at 38, 45.) “Users” are “Site Admins” or others who want to “track activity through the 17 = facility... or alert local staff to take action.” (Dkt. No. 1-1 at 40-41, 45.) 4 18 D. Procedural Background 19 While the matter was pending in the Western District of Texas, Verkada filed a motion to 20 dismiss the Complaint. (Dkt. No. 12.) The case was then transferred to this Court. (Dkt. Nos. 23, 21 24.) Verkada’s motion to dismiss the Complaint is now pending. (Dkt. Nos. 12, 17, 18.) 22 LEGAL STANDARD 23 A complaint must contain a “short and plain statement of the claim showing that the 24 pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To meet this requirement, the complaint 25 must provide “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. 26 Twombly, 550 U.S. 544, 570 (2007). “Determining whether a complaint states a plausible claim 27 for relief is ‘a context-specific task that requires the reviewing court to draw on its judicial 28

1 experience and common sense.’” Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (citation 2 omitted).3 For purposes of a Rule 12(b)(6) motion, courts “accept factual allegations in the 3 complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 4 Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But, “only 5 pleaded facts, as opposed to legal conclusions, are entitled to assumption of the truth.” United 6 States v. Corinthian Colls., 655 F.3d 984, 991 (9th Cir. 2011). Courts may also review 7 “documents attached to the complaint” at the 12(b)(6) stage. United States v. Ritchie, 342 F.3d 8 903, 908 (9th Cir. 2003). 9 An “element-by-element pleading standard for patent infringement . . . is unsupported and 10 goes beyond the standard the Supreme Court articulated in Iqbal and Twombly.” Bot M8 LLC v. 11 Sony Corp. of Am., 4 F.4th 1342, 1352 (Fed. Cir. 2021). Rather, “[t]he adequacy of the facts pled 12 depends on the breadth and complexity of both the asserted patent and the accused product or 13 system and on the nature of the defendant’s business activities.” K-Tech Telecomms., Inc. v. Time 14 Warner Cable, Inc., 714 F.3d 1277, 1286 (Fed. Cir. 2013). For a “simple technology,” a plaintiff 15 may plausibly plead by providing the asserted patents, identifying the accused products “by name 16 and by attaching photos of the product packaging,” and alleging that the accused products meet 17 “each and every element of at least one claim… either literally or equivalently.” Disc Disease 18 Sols. Inc. v. VGH Sols., Inc., 888 F.3d 1256, 1260 (Fed. Cir. 2018). 19 But, even when a complaint provides sufficient factual statements, a plaintiff may still fail 20 to plausibly state a claim where (1) the infringement allegation rests on an implausible claim 21 construction, Ottah v. Fiat Chrysler, 884 F.3d 1135, 1141-42 (Fed. Cir. 2018), or (2) “the factual 22 allegations are actually inconsistent with and contradict infringement.” Bot M8 LLC, 4 F.4th at 23 1354. Both bases for dismissal apply here. Because the Complaint requires either implausible 24 25 3 The law of the regional circuit governs “procedural issues, including the grant of a motion to 26 dismiss.” Disc Disease Sols. Inc. v. VGH Sols., Inc., 888 F.3d 1256, 1259 (Fed. Cir. 2018). Federal Circuit law governs issues “unique to patent law.” Woods v. DeAngelo Marine Exhaust, 27 Inc., 692 F.3d 1272, 1279 (Fed. Cir. 2012) (quotation marks and citation omitted). Here, the Ninth 1 claim construction or makes allegations inconsistent with infringement, the Court grants 2 Verkada’s motion to dismiss. 3 DISCUSSION 4 I. Direct Infringement 5 A party who “makes, uses, offers to sell, or sells” a patented invention “without authority” 6 directly infringes a patent. 35 U.S.C. § 271(a). Direct infringement requires the accused product 7 to literally infringe or infringe under the doctrine of equivalents. Ottah v. Bracewell LLP, No. 8 2022-1876, 2022 WL 16754378, at *2 (Fed. Cir. Nov. 8, 2022). Verkada argues Plaintiff fails to 9 plausibly state a claim for infringement under either liability theory. The Court agrees.

10 A. Plaintiff Pleads an Implausible Claim Construction or Facts Inconsistent with 11 Literal Infringement. “A finding of literal patent infringement ‘requires that each and every limitation set forth in 12 a claim appear in an accused product.’” Bracewell LLP, 2022 WL 16754378, at *2 (quoting V- 13 Formation, Inc. v. Benetton Grp. SpA, 401 F.3d 1307, 1312 (Fed. Cir. 2005)). Plaintiff’s claim 14 charts4 provide two possible constructions of “wireless devices”: “people” or a “camera system.” 15 (Dkt. No. 1-1 at 38-39 (“Crowd Notifications deliver real-time alerts when more than a specified 16 number of people are detected in frame.”), 46-47 (same), 38 (“Verkada’s Crowd Notifications 17 allow users to track activity of the crowd through the facility by using the camera system.”), 44 18 (“Verkada’s Crowd Notifications utilize the camera system to monitor for cases of 19 overcrowding.”).) The first construction— “people” as “wireless devices”—is implausible. The 20 latter construction— “cameras” as “wireless devices”—fails because it is inconsistent with 21 infringement. 22 1. Implausible Claim Construction 23 Claim construction is generally not proper at the 12(b)(6) stage. See Nalco Co. v. Chem- 24 Mod, LLC, 883 F.3d 1337, 1350 (Fed. Cir. 2018); see also Fujitsu Ltd. v. Belkin Int'l, Inc., 782 F. 25 Supp. 2d 868, 890 (N.D. Cal. 2011) (explaining that a “motion to dismiss is not the proper time to 26 27 1 initiate claim construction”). But, the Court may dismiss a complaint prior to claim construction 2 when the complaint rests on an implausible claim construction. See Fiat Chrysler, 884 F.3d at 3 1141-42; see also Nalco Co., 883 F.3d at 1349 (explaining the patent infringement plaintiff must 4 plead sufficient facts “to raise a reasonable expectation that discovery will reveal evidence” to 5 support the plaintiff's allegations) (quoting Twombly, 550 U.S. at 556). 6 In Fiat Chrysler, for example, the Federal Circuit affirmed dismissal at the pleading stage 7 because a “book holder” could not “plausibly be construed to include or be the equivalent of a 8 camera holder, in view of the specification and the prosecution history.” Fiat Chrysler, 884 F.3d 9 at 1141-42; see also Bracewell LLP, 2022 WL 16754378, at *3 (affirming dismissal at pleading 10 stage because “‘a book holder,’… by its plain language, does not cover a camera mounting 11 system”). The allegations of this case are analogous. Plaintiff alleges Verkada’s Accused Product 12 uses a camera to detect a “number of people.” (Dkt. No. 1-1 at 38-39 (“Crowd Notifications 13 deliver real-time alerts when more than a specified number of people are detected in frame.”), 46- 14 47 (same).) But, the patents claim a system to “determine a crowd risk based on an aggregation of 15 said location of each of said plurality of wireless devices associated with said viral event” and 16 “assess said aggregation of said current locations of said plurality of physical wireless devices 17 pertaining to said potential viral event.” ’054 claim 1; ’158 claim 1 (emphasis added). The 18 specification explains “wireless devices… permit collection of current location information” of 19 people. ’054 patent, col. 2 ll. 57-63; ’158 patent, col. 2 ll. 61-67. Just as claims to a device 20 configured to hold books cannot plausibly cover a device configured to hold a camera, see Fiat 21 Chrysler, 884 F.3d at 1141-42, claims to a system which determines crowd risk based on tracking 22 a “plurality of wireless devices” cannot cover a system which determines crowd risk based on 23 image analysis of human beings. (Dkt. No. 1-1 at 38-39, 44-45.) Put differently, the Accused 24 Product “counts the number of people in a single frame—not wireless devices.” (Dkt. No. 12 at 25 9.) So, Plaintiff’s implausible construction—construing people as wireless devices—fails to state 26 a claim for literal infringement. See Fiat Chrysler, 884 F.3d at 1141-42. 27 // 1 2. Pleading Inconsistent with Infringement 2 Plaintiff alleges Verkada’s “camera system” could satisfy the “wireless devices” claim 3 element. (Dkt. No. 1-1 at 38 (“Verkada’s Crowd Notifications allow users to track activity of the 4 crowd through the facility by using the camera system.”), 44 (“Verkada’s Crowd Notifications 5 utilize the camera system to monitor for cases of overcrowding.”).)5 Even assuming this 6 construction is plausible, Plaintiff fails to plausibly plead infringement because the claim charts 7 allege facts inconsistent with infringement. See Bot M8 LLC, 4 F.4th at 1354. 8 In Bot M8 LLC, the complaint alleged the accused device included an authentication 9 program located on the PlayStation 4 motherboard. Id. But, the asserted claim required the 10 authentication program to be stored in memory separate from motherboard memory. Id. Because 11 a program could not be stored both on the motherboard and in a different memory location, the 12 plaintiff “pleaded itself out of court” by making an allegation “inconsistent with” infringement. 13 Id. 14 The same principle applies here. Assuming a “camera system” is a “wireless device,” the 15 claims require determination of a crowd risk based on “an aggregation of said location of each of 16 said plurality of wireless devices [(i.e., camera system)]” or an “aggregation of said current 17 locations of said plurality of physical wireless devices [(i.e., camera system)].” ’054 patent, 18 claim 1; ’158 patent, claim 1 (emphasis added). Plaintiff’s own claim charts attached to the 19 complaint allege Verkada’s camera system locates a plurality of people. (Dkt. 1-1 at 38-39, 46- 20 48.) These allegations are inconsistent with infringement because Plaintiff does not (and indeed, 21 cannot) allege Verkada’s camera system locates a plurality of camera systems. See Bot M8 LLC, 22 4 F.4th at 1354; see also Mosaic Brands, Inc. v. The Ridge Wallet LLC, No. 22-CV-04556 AB- 23 JCx, 2020 WL 5640233, at *4-5 (C.D. Cal. Sept. 3, 2020) (dismissing infringement claims as 24 implausible for, among other reasons, pleading the same product feature satisfied multiple, 25 distinctive claim elements). 26 5 Verkada argues Plaintiff failed to plead the “camera” theory for the relevant elements in the 27 Complaint (Element 1[d] of the ’054 Patent and Element 1[c] of the ’158 Patent). (Dkt. No. 18 at 1 *** 2 Plaintiff’s reliance on Disc Disease Sols. Inc, 888 F.3d at 1260 is unpersuasive. 3 Implausible claim construction or allegations inconsistent with infringement represent exceptions 4 to that standard. See Fiat Chrysler, 884 F.3d at 1141-42; Bot M8 LLC, 4 F.4th at 1354; see also 5 Regents of Univ. of Michigan v. Leica Microsystems Inc., No. 19-CV-07470 LHK, 2020 WL 6 2084891, at *8 (N.D. Cal. Apr. 30, 2020) (recognizing a “narrow” exception permitting dismissal 7 when “an infringement theory rests on an implausible claim construction” but denying 12(b)(6) 8 motion to resolve noninfringement after claim construction). 9 In sum, Plaintiff’s claim charts prove too much. Plaintiff either pleads an implausible 10 construction (“people” are “wireless devices”) or a potentially plausible construction (“cameras” 11 are “wireless devices”) inconsistent with infringement. As in Bot M8 LLC, Plaintiff “pleaded 12 itself out of court” with its detailed claim charts. See 4 F.4th at 1354. Therefore, the Court grants 13 Verkada’s motion to dismiss Plaintiff’s claim of direct, literal infringement. 14 B. Plaintiff Fails to Plausibly Allege Infringement Under the Doctrine of 15 Equivalents. 16 “[A] product or process that does not literally infringe upon the express terms of a patent 17 claim may nonetheless be found to infringe if there is ‘equivalence’ between the elements of the 18 accused product or process and the claimed elements of the patented invention.” Warner– 19 Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 21 (1997) (quotation marks and citation 20 omitted). Equivalence “requires a showing that the difference between the claimed invention and 21 the accused product or method was insubstantial or that the accused product or method performs 22 the substantially same function in substantially the same way with substantially the same result as 23 each claim limitation of the patented product or method.” AquaTex Indus., Inc. v. Techniche Sols., 24 479 F.3d 1320, 1326 (Fed. Cir. 2007). In Nalco Co., for example, the plaintiff overcame a 25 12(b)(6) motion by identifying the step that the Accused Product infringed under the doctrine of 26 equivalents and explaining how it was equivalent. 883 F.3d at 1354. 27 Plaintiff provides no such explanation here. Instead, Plaintiff makes only a conclusory 1 1 at 5-6.) That conclusory allegation is insufficient when, as here, the literal infringement 2 allegations rely on implausible claim construction or a claim construction that is fatally 3 inconsistent with infringement. See, e.g., Ottah v. BMW, 230 F. Supp. 3d 192, 196-97 (S.D.N.Y. 4 2017), aff'd sub nom. Ottah v. Fiat Chrysler, 884 F.3d 1135 (Fed. Cir. 2018) (holding the claim 5 term “book” could not plausibly be construed to mean “camera,” even under the doctrine of 6 equivalents); Bot M8 LLC v. Sony Corp. of Am., No. 19-CV-07027 WHA, 2020 WL 418938, at 7 *2-3 (N.D. Cal. Jan. 27, 2020), aff'd in part, rev’d in part on other grounds, 4 F.4th 1342 (Fed. 8 Cir. 2021) (granting motion to dismiss because complaint pled facts inconsistent with 9 infringement despite pleading literal infringement and infringement under doctrine of equivalents). 10 Put differently, because Plaintiff’s literal infringement allegation is implausible, a conclusory 11 reference to the doctrine of equivalents is insufficient to make the direct infringement claim 12 plausible. 13 Thus, the Court grants Verkada’s motion to dismiss Plaintiff’s claim of direct infringement 14 under the doctrine of equivalents. 15 II. Indirect Infringement 16 Verkada argues the Complaint fails to plead facts sufficient to constitute a pre-suit 17 inducement claim. (Dkt. No. 12 at 14-15.) They argue the Complaint does not allege “knowledge 18 of the patents in suit and knowledge of infringement.” (Dkt. No. 12 at 15.) Plaintiff provides no 19 response. (Dkt. No. 17.) The Court agrees with Verkada. 20 Under 35 U.S.C. § 271(b), “[w]hoever actively induces infringement of a patent shall be 21 liable as an infringer.” Induced infringement requires “knowledge that the induced acts constitute 22 patent infringement,” including “knowledge of the existence of the patent that is infringed.” 23 Glob.-Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754, 765-66 (2011); see also Warsaw 24 Orthopedic, Inc. v. NuVasive, Inc., 824 F.3d 1344 (Fed. Cir. 2016) (holding proof of induced 25 infringement requires not “only knowledge of the patent” but also “proof the defendant knew the 26 [induced] acts were infringing.”) (quotation marks and citation omitted). Courts may infer 27 knowledge of infringement “from circumstantial evidence.” Warsaw Orthopedic, Inc., 824 F.3d at 1 1347. Further, “liability for inducement must be predicated on direct infringement.” Limelight 2 Networks, Inc. vy. Akamai Techs., Inc., 572 U.S. 915, 920-21 (2014). 3 Plaintiff merely alleges that Verkada induced infringement. (Dkt. No. 1 at 4.) The 4 || Complaint does not include the requisite allegations, including that Verkada had knowledge of the 5 Patents, that Verkada knew their Product infringed the Patents, and that Verkada’s actions led 6 || another to directly infringe. Further, the Complaint must state a plausible claim for direct 7 || infringement to plausibly state a claim for indirect infringement. See Limelight Networks, Inc., 8 || 572 U.S. at 920-21. 9 The Court grants Verkada’s motion because Plaintiffs fails to plead facts sufficient to 10 || permit the Court “to draw the reasonable inference that the defendant is liable for the misconduct 11 alleged.” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 12 CONCLUSION 13 Drawing all reasonable inferences in Plaintiff's favor, Plaintiff does not plead factual 14 || content sufficient to draw a reasonable inference that Verkada is liable for direct or indirect patent 3 15 infringement. Verkada’s motion to dismiss is therefore GRANTED. Plaintiff is given 20 days a 16 || leave to file an amended complaint, provided Plaintiff can amend consistent with Plaintiff 3 17 counsel’s obligations under Federal Rule of Civil Procedure 11. 18 This Order disposes of Docket No. 12. 19 IT IS SO ORDERED. 20 Dated: February 7, 2023 , Std 21 ne ACQUELINE SCOTT CORLEY 22 United States District Judge 23 24 25 26 27 28