Appellant Nalco wins reversal at CAFC: The “purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.”

The outcome:



Nalco Company (“Nalco”) appeals from the district
court’s decision dismissing its Fourth Amended Complaint
(“4AC”) with prejudice for failure to state a claim
upon which relief can be granted. The 4AC alleged infringement
of U.S. Patent No. 6,808,692 (“the ’692 patent”)
by Appellees Chem-Mod, LLC, Arthur J. Gallagher
& Co., Gallagher Clean Energy, LLC, AJG Coal, Inc., and
various Refined Coal LLCs (collectively, “Defendants”).
Nalco Co. v. Chem-Mod, LLC (Nalco 4AC Order), No. 14-
cv-2510, 2016 WL 1594966 (N.D. Ill. Apr. 20, 2016),
reconsideration denied, Nalco Co. v. Chem-Mod, LLC
(Nalco 4AC Reconsideration Order), No. 14-cv-2510, 2016
WL 4798950 (N.D. Ill. Sept. 14, 2016). We conclude that
the district court erred in dismissing Nalco’s direct infringement
claims and, thus, reverse the district court’s
order as to those claims. We also reverse the district
court’s dismissal of Nalco’s doctrine of equivalents, indirect,
and willful infringement claims. We remand for
further proceedings in this matter.



The technology in question was removing mercury from flue gas
from the combustion of coal: “Enhanced Mercury Control in Coal-Fired Power
Plants,” which describes a method for the removal of
elemental mercury, a toxic pollutant, from the flue gas
created by combustion in coal-fired power plants.

The legal issue:


Federal Rule of Civil Procedure 8(a)(2) “generally requires
only a plausible ‘short and plain’ statement of the
plaintiff’s claim,” showing that the plaintiff is entitled to
relief. Skinner v. Switzer, 562 U.S. 530 (2011). “Because
it raises a purely procedural issue, an appeal from an
order granting a motion to dismiss for failure to state a
claim upon which relief can be granted is reviewed under
the applicable law of the regional circuit.” In re Bill of
Lading Transmission & Processing Sys. Patent Litig., 681
F.3d 1323, 1331 (Fed. Cir. 2012) (citing McZeal v. Sprint
Nextel Corp., 501 F.3d 1354, 1355–56 (Fed. Cir. 2007));
C & F Packing Co. v. IBP, Inc., 224 F.3d 1296, 1306 (Fed.
Cir. 2000)). The Seventh Circuit reviews a district court’s
dismissal for failure to state a claim under Rule 12(b)(6)
de novo, and the district court’s decision to dismiss with
prejudice under Rule 12(b)(6) for abuse of discretion.
Manistee Apartments, LLC v. City of Chi., 844 F.3d 630,
633 (7th Cir. 2016). In so doing, the Seventh Circuit
“assume[s] all well-pleaded allegations are true and
draw[s] all reasonable inferences in the light most favorable
to the plaintiff.” Id.

(...)

Defendants do not seem to challenge that Nalco met
the notice requirement of FRCP Rule 8 or the pleading
standard required under Twombly and Iqbal. Instead,
Defendants assert that Nalco’s infringement claims
simply are not plausible because “a party may plead itself
out of court by pleading facts that establish an impenetrable
defense to its claims.” Tamayo v. Blagojevich, 526
F.3d 1074, 1086 (7th Cir. 2008) (citing Massey v. Merrill
Lynch & Co., Inc., 464 F.3d 642, 650 (7th Cir. 2006)).
Defendants contend that Nalco has done just this.



As to pleading oneself out of court:



The only argument Defendants make regarding the
implausibility of this theory is that the thermolabile
bromine precursor could not survive the extreme heat of
the combustion areas of the furnace without decomposing,
as thermolabile materials are unstable when heated.
Defendants’ objection relies on a factual finding that a
thermolabile material could not survive passing from the
combustion zone to the flue. But Defendants have not
explained why we should—or could—make such a finding
at this stage in light of Nalco’s explicit pleadings to the
contrary. Nor does any of the evidence cited by the parties
indicate that Nalco has pled itself out of court. Nalco
asserts that Felsvang (U.S. Patent No. 5,435,980), cited
on the face of the ’692 patent, teaches injecting a thermolabile
halide precursor into the combustion zone to have
an effect in the flue region. Nalco asserts that the inventor
of the ’692 patent developed the claimed invention by
mixing coal with a bromine precursor and then injecting
the treated coal mixture into the combustion zone. Nalco
also cites to the Board’s rejection of the position that
“thermolabile” included a temperature restriction. J.A.
4913. Though Nalco was not required to provide evidentiary
support for its claims at this stage of the proceedings,
its evidence is not inconsistent with its claims as the
district court seemed to believe.


Bottom line:


It is not appropriate to
resolve these disputes, or to determine whether the method
claimed in the ’692 patent should be confined to the
preferred embodiment, on a Rule 12(b)(6) motion, without
the benefit of claim construction. The “purpose of a
motion to dismiss is to test the sufficiency of the complaint,
not to decide the merits.” Gibson v. City of Chi., 910 F.2d
1510, 1520 (7th Cir. 1990) (emphasis added) (citation
omitted). The plausibility standard “does not impose a
probability requirement at the pleading stage; it simply
calls for enough fact to raise a reasonable expectation that
discovery will reveal evidence” to support the plaintiff’s
allegations. Twombly, 550 U.S. at 556.