from the United States District Court for the Northern
District of Illinois in No. 1:14-cv-02510, Senior Judge John
William Bryan Farney, Farney Daniels, PC, Georgetown, TX,
argued for plaintiff-appellant. Also represented by Cassandra
Richard Mark, Gibson, Dunn & Crutcher LLP, New York, NY,
argued for defendants-appellees. Also represented by Joseph
Evall, Paul J. Kremer; Steven Eric Feldman, Sherry Lee Rollo,
Hahn Loeser & Parks, LLP, Chicago, IL.
Moore, Schall, and O'Malley, Circuit Judges.
O'MALLEY, CIRCUIT JUDGE.
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.
is the exclusive licensee of the '692 patent, titled
"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. '692 patent,
Abstract. Previous attempts to filter mercury from coal
combustion flue gas failed due to lack of commercial
viability or excessive expense. Id., col. 1, l.
29-col. 3, l. 51.
methods claimed in the '692 patent solve this problem by
reacting halogens, such as molecular chlorine
(Cl2) or molecular bromine (Br2), with
elemental mercury (Hg) in flue gas to form mercuric halides
(HgCl2 or HgBr2), which precipitate
into solid particles that can be filtered from the flue gas
more easily. Molecular halides, however, cannot be injected
into the flue gas on their own due to their corrosive
properties. The '692 patent thus claims the injection of
a halide precursor-a molecule that reacts to create an
elemental halide-into the flue gas. The halide precursor is
thermolabile, meaning that it reacts in the heat of the flue
gas to create a molecular halide. The '692 patent
explains that the preferred location to inject the halide
precursor is in the combustion zone of the furnace.
Id., col. 4, l. 66-col. 5, l. 27.
claim 1 recites:
method of treating coal combustion flue gas containing
injecting a bromide compound that is a thermolabile molecular
bromine precursor into said flue gas to effect oxidation of
elemental mercury to a mercuric bromide and providing
alkaline solid particles in said flue gas ahead of a
particulate collection device, in order to adsorb at least a
portion of said mercuric bromide.
J.A 27, col. 2, ll. 42-51. In a preferred embodiment
described in the '692 patent, a source of molecular
halide (such as a bromine precursor) is injected directly
into a region of the flow path of the flue gas downstream
from the combustion zone. '692 patent, col. 3, l. 66-col.
4, l. 11.
Power, a non-party to this action, requested inter partes
reexamination of the '692 patent; the Patent and
Trademark Office ("PTO") initiated a proceeding in
2009. The Patent Trial and Appeal Board ("the
Board") affirmed the validity of the asserted claims of
the '692 patent, as amended, and the PTO issued a
reexamination certificate on April 7, 2014.
District Court Proceedings
filed five successive complaints against various
Defendants in this proceeding, claiming that
Defendants' Chem-Mod process operates in the same manner
as the process encompassed by claim 1 of the '692 patent.
The district court dismissed Nalco's complaints on three
separate occasions. Nalco Co. v. Chem-Mod, LLC
(Nalco 1AC Order), No. 14-cv-2510, 2015 WL 507921
(N.D. Ill. Feb. 4, 2015) (dismissing First Amended Complaint
("1AC") without prejudice); Nalco Co. v.
Chem-Mod, LLC (Nalco 3AC Order), No.
14-cv-2510, 2015 WL 6122811 (N.D. Ill. Oct. 15, 2015)
(dismissing Third Amended Complaint ("3AC") without
prejudice); Nalco 4AC Order, 2016 WL 1594966
(dismissing 4AC with prejudice), reconsideration
denied, Nalco 4AC Reconsideration Order, 2016
WL 4798950. In these orders, the district court concluded
that each of Nalco's complaints suffered from factual
deficiencies that precluded relief, as detailed further
Original Complaint and 1AC
filed its first complaint against Chem-Mod on April 8, 2014,
one day after the PTO issued the reexamination certificate
for the '692 patent. Nalco's Compl. for Patent
Infringement, Nalco Co. v. Chem-Mod, LLC, No.
14-cv-2510 (N.D. Ill. Apr. 8, 2014), ECF No. 1. Nalco amended
its complaint to add A.J. Gallagher and Gallagher Clean
Energy, LLC as Defendants. Nalco's First Am. Compl. for
Patent Infringement at 1, Nalco Co. v. Chem-Mod,
LLC, No. 14-cv-2510 (N.D. Ill. July 25, 2014), ECF No.
alleged that these Defendants directly and indirectly
infringed the '692 patent through the use and licensing
of the Chem-Mod Solution in the United States. Id.
at 3-6. According to the 1AC, the Chem-Mod Solution
"comprise[d] dual injection of two additives [molecular
bromine precursors MerSorb and S-Sorb] on the coal feed belts
of coal burning power generation stations before the coal is
fed into a coal combustion process." Id. at 3.
The 1AC alleged that use of the Chem-Mod Solution practices
all steps of at least claim 1 of the '692 patent because
it "is a method of treating coal combustion flue gas
containing mercury, which requires injecting a bromide
compound that is a thermolabile molecular bromine precursor
into a flue gas to effect oxidation of elemental mercury to a
mercuric bromide." Id. Nalco asserted that the
only difference between its patented method and
Defendants' Chem-Mod Process is that the Chem-Mod Process
injects MerSorb or S-Sorb in a different area of the plant
than described in a preferred embodiment of the '692
district court granted Defendants' motion to dismiss the
1AC under Federal Rule of Civil Procedure 12(b)(6),
concluding that the 1AC could not support a finding of direct
infringement because the '692 patent "differs from
the Chem-ModTM Solution in both when it is applied
(after the coal is burned vs. before the coal is burned) and
how it is applied (injected into the flue gas vs. mixed with
cold coal)." Nalco 1AC Order, at *3. The
district court also dismissed Nalco's indirect
infringement claims based on failure to state a claim for
direct infringement. Id.
Second Amended Complaint ("2AC"), Nalco attempted
to address what it believed was the district court's
misunderstanding of what the '692 patent claimed. Nalco
pled that Defendants infringed the '692 patent based on
use of the Chem-Mod Solution, by mixing Mer-Sorb or S-Sorb
with coal and then injecting this mixture (the "Chem-Mod
Solution Mixture") into flue gas to form the mercuric
bromide compound. Nalco's Second Am. Compl. for Patent
Infringement at 7-8, Nalco Co. v. Chem-Mod, LLC, No.
14-cv-2510 (N.D. Ill. Mar. 3, 2015), ECF No. 64. Nalco
asserted that the claims of the '692 patent do not
restrict when, where, or how the "injecting" step
is performed. Id. at 5-6. Nalco explicitly
incorporated infringement contentions into this pleading.
Id. at 10.
includes as Defendants AJG Coal, Inc. and 34 John Doe limited
liability company parties, unnamed coal refinery facilities
that allegedly made coal using the Chem-Mod Solution and sold
it to power plant operators. Id. at 11. Nalco also
added allegations that Defendants acted in concert, under the
direction and control of A.J. Gallagher, to earn Section 45
tax credits from the sale of refined coal. Id. at
10-16. Section 45 tax credits are offered for the sale of
refined coal to an unrelated person for the production of
steam in a coal-fired power plant. Id. at 11, 13.
Nalco alleged that Defendant A.J. Gallagher formed
wholly-owned subsidiary Defendants Gallagher Clean Energy and
AJG Coal, controlled and directed the actions of Defendant
Chem-Mod, and formed each of the Defendant Refined Coal LLCs
solely to use the Chem-Mod Solution and to induce operators
of coal-fired power plants to use the Chem-Mod Solution to
obtain Section 45 tax credits. Id. at 11.
moved to dismiss the 2AC. In response, Nalco amended its
complaint to replace the John Doe coal refineries with the 21
Refined Coal LLCs that allegedly operate them. Nalco's
Third Am. Compl. for Patent Infringement at 2, 4-11,
Nalco Co. v. Chem-Mod, LLC, No. 14-cv-2510 (N.D.
Ill. Apr. 24, 2015), ECF No. 75. Nalco did not alter its
allegations as to the relationships between the Defendant
entities or their allegedly infringing actions. The district
court deemed Defendants' motion to dismiss the 2AC as
filed against the 3AC because Nalco amended the 2AC before
the district court resolved the motion to dismiss.
district court granted the motion to dismiss. On direct
infringement, the district court concluded that Nalco failed
to plead facts supporting its allegations that the Chem-Mod
Solution is "injected" as required by the claims of
the '692 patent. Nalco 3AC Order, at *3. In the
district court's view, the 3AC incorporated documents
showing that MerSorb is added to coal in three locations: (1)
on the coal feed belt before coal reaches the coal bunker;
(2) between the coal bunker and coal feeder; and (3) in the
coal feeder, before coal is pulverized. Id. In all
of these locations, the MerSorb and coal mixture is added to
the Chem-Mod process before coal combustion, prior
to interaction with flue gas, and the district court
concluded this process did not satisfy the
"injecting" requirement. Id.
district court also held that, even if the 3AC had
successfully pled that the '692 claims covered use of the
Chem-Mod Solution, Nalco's "direction and
control" argument failed because the 3AC failed to
allege that Defendants were responsible "for both
preparing the Chem-Mod Solution Mixture and injecting the
treated coal into coal combustion flue gas."
Id. The district court found that "[a]ny
argument that compliance with Section 45 of the tax code is
evidence that Defendants direct and control the infringement
of a patent in this case is unpersuasive and
unconvincing." Id. at *2.
district court also dismissed Nalco's indirect and
willful infringement claims for failure to plead underlying
direct infringement. Id. at *4. The district court
further found that Nalco had not pled intent to induce
infringement because the district court was unpersuaded that
receipt of Section 45 tax credits was indicative of the
requisite intent. Id. On contributory infringement,
the district court further found that the 3AC failed to
allege facts to support the conclusion that "MerSorb and
S-Sorb have no substantial non-infringing uses."
and Motion for Reconsideration
makes similar allegations in the 4AC, supported by
incorporated infringement contentions and various other
evidence. Nalco alleges two theories of direct infringement
in the 4AC. First, it alleges that "[t]he
Chem-ModTM Solution involves the step of
'injecting a bromide compound . . . into said flue gas .
. . ' as recited in claim 1 of the '692 Patent."
Nalco 4AC, at 15-16. Nalco further explains that,
"[i]n the Chem-ModTM Solution, the
proprietary additive MerSorbTM is mixed with coal
. . . . The Chem-ModTM Solution Mixture is then
injected into coal combustion flue gas to effect oxidation of
elemental mercury into a mercuric bromide." Id.
at 16. Alternatively, Nalco alleges that, "when a coal
combustion furnace is operating, gases and other materials
injected via coal injectors flow under pressure into areas of
the coal combustion furnace beyond the areas of the furnace
in which the coal component of the Chem-Mod' Solution
Mixture combusts and into additional areas of the furnace in
which the coal combustion flue gas exists. Thus, this is an
additional mechanism by which the MerSorb additive component
of the Chem-Mod' Solution Mixture is 'injected into .
. . coal combustion flue gas.'" Id. at
also pleads various ways in which Defendants control or
direct the performance of the steps claimed in the '692
patent, through commercial applications and through testing
of the Chem-Mod Solution both on pilot scale and full scale.
Id. at 26-40. The 4AC also alleges Defendants
induced infringement of, contributorily infringed, and
willfully infringed the '692 patent, and that Defendants
infringed under the doctrine of equivalents.
district court granted Defendants' motion to dismiss the
4AC with prejudice. As in the order dismissing the 3AC, the
district court found that "the Chem-Mod Solution differs
from the '692 Patent in both the location and method of
application." Nalco 4AC Order, at *2. And the
district court rejected Nalco's argument that, even if
"injecting" of the solution is restricted to a
specific time or location, Defendants still infringe the
'692 patent under the doctrine of equivalents, finding
that Nalco failed to support its contention that Defendants
perform all claimed steps or their equivalents. Id.
at *3. The district court concluded that its dismissal of
Nalco's complaint prior to claim construction was not
premature, as the facts Nalco pled did not support an
undivided claim of direct infringement. Id.
district court dismissed Nalco's divided infringement
claim for the same reasons cited in its dismissal of the 3AC:
compliance with Section 45 of the tax code is insufficient to
allege that Defendants direct and control infringement of a
patent. Id. Nor, according to the district court,
was it sufficient for Nalco to allege that instructing power
plants on the use of the Chem-Mod Solution Mixture
demonstrated any control over the plants' performance of
any infringing method steps. Id. The district court
also refused to find that Nalco had alleged sufficiently that
Defendants partnered in a joint enterprise with coal-fired
power plant operators-finding that the existence of a
contract between the Refined Coal LLCs and several power
plants for purchase of the Chem-Mod Solution Mixture was
insufficient to establish a joint enterprise, or an equal
right of control. Id. at *4.
the district court rejected Nalco's claims for induced
and contributory infringement due to a failure to plead
direct infringement. Id. The district court also
found that Nalco failed to plead an induced infringement
claim because it failed to plead facts indicating an intent
to induce infringement. Id.
filed a motion for reconsideration and attached additional
intrinsic and extrinsic evidence. The district court denied
Nalco's motion for reconsideration, finding that Nalco
failed to establish "manifest error of law or
fact." Nalco 4AC Reconsideration Order, at *3.
The district court also denied Nalco's request to allow
it to, once again, amend the complaint because Nalco had
multiple opportunities to present and incorporate its new
evidence into a prior pleading yet had failed to do so.
Id. at *2-3.
timely appealed from the district court's final decision.
We have jurisdiction over this appeal under 28 U.S.C. §
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
contests the district court's dismissal of its direct and
indirect infringement claims ...