ZapFraud, Inc. v. Barracuda Networks, Inc., Civil Action No. 19-1687-CFC-CJB

• Court: United States District Courts. 3th Circuit. United States District Court (Delaware)
• Writing for the Court: COLM F. CONNOLLY, UNITED STATES DISTRICT JUDGE
• Citation: 528 F.Supp.3d 247
• Parties: ZAPFRAUD, INC., Plaintiff, v. BARRACUDA NETWORKS, INC., Defendant.
• Decision Date: 24 March 2021
• Docket Number: Civil Action No. 19-1687-CFC-CJB

528 F.Supp.3d 247

ZAPFRAUD, INC., Plaintiff,
v.
BARRACUDA NETWORKS, INC., Defendant.

Civil Action No. 19-1687-CFC-CJB

United States District Court, D. Delaware.

Filed March 24, 2021

528 F.Supp.3d 248

Brian E. Farnan, Michael J. Farnan, FARNAN LLP, Wilmington, Delaware; Jonas R. McDavit, Wen Xue, DESMARAIS LLP, New York, New York, Counsel for Plaintiff.

Michael J. Flynn, Andrew Mark Moshos, MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Wilmington, Delaware; David Xue, Karineh Khachatourian, Nikolaus A. Woloszczuk, RIMON, P.C., Palo Alto, California, Counsel for Defendant.

MEMORANDUM OPINION

COLM F. CONNOLLY, UNITED STATES DISTRICT JUDGE

Pending before me are Defendant Barracuda Networks, Inc.’s objections to the Magistrate Judge's September 22, 2020 Report and Recommendation. D.I. 54. The Magistrate Judge recommended in his Report and Recommendation that I grant in part and deny in part Barracuda's motion to dismiss the claims of induced infringement, contributory infringement, and enhanced damages for willful infringement alleged in Plaintiff ZapFraud Inc.’s Second Amended Complaint. Barracuda objects only to the Magistrate Judge's recommendation that I deny Barracuda's request to dismiss ZapFraud's "post-suit" claims for induced and contributory infringement of U.S. Patent No. 10,277,628 (the #628 patent) and for enhanced damages—that is, claims based on alleged infringement of the #628 patent that occurred after the filing of the original Complaint in this action.

The Magistrate Judge had the authority to make his recommendation under 28 U.S.C. § 636(b)(1)(B). I review his recommendation de novo. § 636(b)(1) ; see also Fed. R. Civ. P. 72(b)(3) ; Brown v. Astrue , 649 F.3d 193, 195 (3d Cir. 2011).

ZapFraud filed the Complaint that initiated this action in September 2019. It filed a First Amended Complaint a month later and then filed its Second Amended Complaint in April 2020. In Count I of the Second Amended Complaint, ZapFraud accuses Barracuda of induced, contributory,

528 F.Supp.3d 249

and willful infringement "since at least the filing of this action." D.I. 37 ¶¶ 31, 32, 34. Although claims for induced and contributory infringement exist by virtue of § 271 of the Patent Act, there is no such thing as a claim for willful infringement. Nonetheless, "in the vast majority of patent cases filed today, claims for enhanced damages [under § 284 of the Patent Act] are sought based on allegations of willful misconduct—so much so that, even though the words ‘willful’ and ‘willfulness’ do not appear in § 284, plaintiffs and courts more often than not describe claims for enhanced damages brought under § 284 as ‘willful infringement claims.’ " Deere & Co. v. AGCO Corp. , 2019 WL 668492, at *3 (D. Del. Feb. 19, 2019).

Claims of indirect infringement—that is, induced or contributory infringement—require proof that the defendant's conduct occurred after the defendant (1) knew of the existence of the asserted patent and (2) knew that a third party's acts constituted infringement of the patent. Commil USA, LLC v. Cisco Sys., Inc. , 575 U.S. 632, 135 S. Ct. 1920, 1926, 191 L.Ed.2d 883 (2015) ; see also Global-Tech Appliances, Inc. v. SEB S.A. , 563 U.S. 754, 766, 131 S.Ct. 2060, 179 L.Ed.2d 1167 (2011) ("[I]nduced infringement under [ 35 U.S.C.] § 271(b) requires knowledge that the induced acts constitute patent infringement."); Aro Mfg. Co. v. Convertible Top Replacement Co. , 377 U.S. 476, 488, 84 S.Ct. 1526, 12 L.Ed.2d 457 (1964) (holding that contributory infringement under 35 U.S.C. § 271(c) "require[s] a showing that the alleged contributory infringer knew that the combination for which his component was especially designed was both patented and infringing"). Claims for enhanced damages based on willful infringement similarly require proof that the defendant knew about the asserted patents and knew or should have known that its conduct amounted to infringement of those patents. VLSI Tech. LLC v. Intel Corp. , 2019 WL 1349468, at *1 (D. Del. Mar. 26, 2019).

Barracuda argued in support of its motion that ZapFraud failed to meet the pleading requirements for indirect infringement and willfulness-based enhanced damages because the Second Amended Complaint lacks factual allegations from which it can be inferred that Barracuda knew of the existence of the #628 patent (and thus also of the infringement of that patent) before the filing of this suit. ZapFraud countered that the original Complaint provided Barracuda notice of the #628 patent's existence and how Barracuda and third parties infringe the patent and that ZapFraud therefore had stated cognizable claims for post-suit indirect infringement and enhanced damages. D.I. 26 at 2–3. The Magistrate Judge agreed with ZapFraud.

District courts across the country are divided over whether a defendant must have the knowledge necessary to sustain claims of indirect and willful infringement before the filing of the lawsuit.¹

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Current and recent judges of this District have also taken different views on the issue.² Neither the Federal Circuit nor the Supreme Court has addressed the issue.

I have held in prior opinions that the complaint itself cannot be the source of the knowledge required to sustain claims of induced infringement and willfulness-based enhanced damages. See VLSI Tech. LLC v. Intel Corp. , 2019 WL 1349468, at *2 (D. Del. Mar. 26, 2019) (dismissing willfulness-based enhanced damages claim where the plaintiff had alleged that the defendant gained "knowledge of the [patent] at least since the filing of this complaint"); Dynamic Data Techs., LLC v. Brightcove Inc. , 2020 WL 4192613, at *3 (D. Del. July 21, 2020) (dismissing induced infringement

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claims where the plaintiff had alleged that the defendant became "aware that its accused products allegedly infringe as of the filing of the Complaint").³ Though not without doubts, I am "not persuaded by Plaintiff[’s] contention that the requisite knowledge can be established by the filing of the Plaintiff[’s] Complaint." Mallinckrodt, Inc. v. E-Z-Em Inc. , 670 F. Supp. 2d 349, 354 n.1. (D. Del. 2009) (Farnan, J.).

"The purpose of a complaint is to obtain relief from an existing claim and not to create a claim." Helios Streaming, LLC v. Vudu, Inc. , 2020 WL 3167641, at *2 n.1 (D. Del. June 15, 2020). ZapFraud has identified, and I know of, no area of tort law other than patent infringement where courts have allowed a plaintiff to prove an element of a legal claim with evidence that the plaintiff filed...