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MercAsia USA, Ltd. v. Zhu

United States District Court, N.D. Indiana, South Bend Division

August 13, 2018

MERCASIA USA, LTD, Plaintiff,
v.
JIANQING ZHU and 3BTECH, INC., Defendants.

          OPINION AND ORDER

          JON E. DEGUILIO JUDGE

         This is a patent infringement action. Plaintiff MercAsia USA, Ltd. holds the rights to a patent for a device that can aerate and dispense wine from a bottle. It alleges that 3BTech, Inc. has sold a product, called the Waerator, that infringes that patent. In addition to suing 3BTech, MercAsia sued 3BTech's president, Jianqing “Johnny” Zhu. It asserts theories of direct, induced, and contributory infringement against both defendants. 3BTech filed an answer to the complaint, but Mr. Zhu moved to dismiss, arguing that the complaint does not allege a basis on which to hold him personally liable for the alleged infringement. For the following reasons, the Court agrees and grants the motion to dismiss.

         I. FACTUAL BACKGROUND

         MercAsia holds the rights to U.S. Patent No. 7, 882, 986 for a “Liquid Dispenser.” The patented device can be placed on top of a wine bottle, and with the push of a button, it will aerate and dispense the wine into a glass. MercAsia markets its embodiment of the patented device under the name Aervana domestically, and the name Vinaera abroad.

         MercAsia alleges in this action that the defendants have sold a device that infringes on that patent. In particular, it alleges that 3BTech sells an electric wine aerator called the Waerator, and that the Waerator infringes on the patent. 3BTech is incorporated in the State of Indiana. It has also sold the Waerator under the assumed name Better Choice Online, and it services warranties under the assumed name Warranty Pro. It has registered both of those assumed names with Indiana's secretary of state. The trademark for the Waerator is held by Zake IP Holdings, LLC, which is also affiliated with Mr. Zhu and has the same business address as 3BTech.

         MercAsia alleges that, in addition to selling an infringing device, 3BTech has made false and misleading statements about the device. In promotional materials, 3BTech stated that the Waerator uses “a patented air injection process, ” even though 3BTech does not hold a patent on the device. 3BTech also purchased the internet domain name www.vinaerausa.com-Vinaera being a name under which MercAsia markets its embodiment of the patent-and forwarded traffic from that site to the Waerator's website.

         In addition to suing 3BTech, MercAsia also sued 3BTech's president, Mr. Zhu. MercAsia alleges that 3BTech is merely Mr. Zhu's alter ego, so he should be held liable for its infringing sales. MercAsia also alleges that another company that Mr. Zhu owns or operates, Zake International, Inc., has also infringed the patent. Though 3BTech answered the complaint, Mr. Zhu moved to dismiss the claims against him personally. That motion has now been fully briefed.

         II. STANDARD OF REVIEW

         In reviewing a motion to dismiss for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6), the Court construes the complaint in the light most favorable to the plaintiff, accepts the factual allegations as true, and draws all reasonable inferences in the plaintiff's favor. Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146 (7th Cir. 2010). A complaint must contain only a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). That statement must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and raise a right to relief above the speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). However, a plaintiff's claim need only be plausible, not probable. Indep. Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 935 (7th Cir. 2012). Evaluating whether a plaintiff's claim is sufficiently plausible to survive a motion to dismiss is “‘a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'” McCauley v. City of Chicago, 671 F.3d 611, 616 (7th Cir. 2011) (quoting Iqbal, 556 U.S. at 678).

         III. DISCUSSION

         Mr. Zhu has moved to dismiss each of MercAsia's claims against him. The Court begins with the claim of direct patent infringement, which is the focus of the parties' briefs, and then addresses the claims for induced and contributory infringement.

         A. Direct Infringement

         MercAsia first asserts a claim for direct patent infringement under 35 U.S.C. § 271(a). That statute provides a cause of action against a defendant who “without authority makes, uses, offers to sell, or sells any patented invention.” 35 U.S.C. § 271(a). A corporate officer such as Mr. Zhu can, under certain circumstances, be held liable for the corporation's acts of infringement. Wordtech Sys., Inc. v. Integrated Networks Solutions, Inc., 609 F.3d 1308, 1313 (Fed. Cir. 2010); Al-Site Corp. v. VSI Int'l, Inc., 174 F.3d 1308, 1331 (Fed. Cir. 1999). “However, the corporate veil shields a company's officers from personal liability for direct infringement that the officers commit in the name of the corporation, unless the corporation is the officers' alter ego.” Wordtech, 609 F.3d at 1313; see also Al-Site, 174 F.3d at 1331 (“Personal liability under § 271(a), however, requires sufficient evidence to justify piercing the corporate veil.”). Mr. Zhu argues that MercAsia's allegations do not give rise to a basis for piercing the corporate veil, so the complaint fails to state a claim against him for direct infringement.

         MercAsia offers a threshold argument in response, contending that Indiana law holds corporate officers responsible for torts they commit in their employment, and that because patent infringement is a tort, Mr. Zhu can be held liable without needing to pierce the corporate veil. However, patent infringement is a federal statutory cause of action. Thus, federal law governs the scope of liability for patent infringement, not state law. And as just noted, federal courts have consistently held federal law holds corporate officers liable for direct infringement only when there is a basis to pierce the corporate veil. Wordtech, 609 F.3d at 1313; Wechsler v. Macke Int'l Trade, Inc., 486 F.3d 1286 (Fed. Cir. 2007); Al-Site, 174 F.3d at 1331; Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 552 (Fed. Cir. 1990) (holding that for officers “to be personally liable for [their employer's] infringement under section 271(a), there must be evidence to justify piercing the corporate veil”). In fact, the Federal Circuit acknowledged in Wordtech that ‚Äúpatent infringement is a tort, and in ...


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