Do Twombly and Iqbal Apply to Counterclaims for Patent Invalidity?

Posted on January 6, 2012 by Dabney Carr

While no Virginia court has addressed the issue, a split has developed in orher federal district courts on whether the requirements of Bell Atlantic v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) apply to counterclaims for patent invalidity.  The Northern District of Illinois recently weighed in on the issue, holding that the Twombly/Iqbal standard applied and dismissing a counterclaim for invalidity. Cleversafe, Inc. v. Amplidata, Inc., 2011 U.S. Dist. LEXIS 145995 (N.D. Ill. Dec. 20, 2011) found here.

The Ruling

In Cleversafe, the defendant/counterclaim plaintiff, Amplidata, alleged only that the asserted patents were “invalid for failing to comply with provisions of the United States patent laws, including one or more of 35 U.S.C. §§ 101-103 and/or 112.” 

The Court dismissed the counterclaim under Twombly/Iqbal because Amplidata did not articulate why the patents were invalid, identify the statutory provisions that applied or provide any factual support for the counterclaim. The Court also dismissed Amplidata’s affirmative defense of invalidity on the grounds that “bare bones conclusory allegations” did not meet the Seventh Circuit’s standard for an affirmative defense under Fed. R. Civ. P. 8(c).

Split Among the District Courts

Some courts have reached the same conclusion as Cleversafe, while others have applied a more lenient standard to patent invalidity counterclaims. Compare Groupon, Inc. v. MobGob LLC, 2011 WL 2111986 (N.D. Ill. May 25, 2011) (dismissing counterclaim); and Tyco Fire Products LP v. Victaulic Co., 777 F.Supp.2d 893 (E.D. Pa. 2011) (dismissing counterclaim but not affirmative defense); with Pfizer v. Apotex, Inc., 726 F.Supp. 2d 921 (N.D. Ill. 2010) (notice of claim sufficient for invalidity counterclaim); and Elan Pharma Int’l. Ltd. v. Lupin Ltd., 2010 U.S. Dist. LEXIS 32306 (D.N.J. Mar. 31, 2010) (same). 

As courts on both sides of the split have noted, applying Twombly and Iqbal to counterclaims may impose a higher standard on counterclaims for invalidity than on infringement claims, which must include only the barebones allegations of Form 18 of the Federal Rules of Civil Procedure. See McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007). (see our earlier posts on McZeal here and here).

Practical Problems Faced by Accused Infringers

The dichotomy between the requirements for pleading infringement and pleading invalidity raises an important issue. How can an infringement defendant assert potential counterclaims if a plaintiff-patentee is not required to identify the claims it asserts are infringed or how the accused product meets the elements of those claims? In Cleversafe and the other cases to date, the courts have not had to wrestle with that problem because the counterclaims at issue have only made broad, general claims of invalidity.

Likewise, it is not clear what a counterclaim for patent invalidity must allege to comply with Twombly/Iqbal. Must a counterclaim identify specific invalidating prior art? How can it do that without a disclosure of the plaintiff’s theory of infringement or proposed claim construction? Often, there is little that an accused infringer can assert based on the allegations of the Complaint, other than that it believes the patent is invalid as anticipated, obvious or unenforceable. Conversely, the standard for proving invalidity is so high that nothing short of specific allegations of how prior art invalidates the claims of a patent may rise to the level of factual plausibility necessary to meet Twombly/Iqbal.

Virginia Authority

In Virginia, several courts have referenced the Twombly/Iqbal standard when considering motions to dismiss counterclaims, see e.g. Columbia Gas Transmission, LLC v. David N. Martin Revocable Trust, 2011 U.S. Dist. LEXIS 134612 (E.D. Va. Nov. 22, 2011), but no Virginia Court has addressed the issue in the patent context. Further, there appears to be a split among Virginia federal courts on application of Twombly and Iqbal to affirmative defenses. Compare Francisco v. Verizon South, Inc., No. 3:09cv737, 2010 U.S. Dist. LEXIS 77083 (E.D. Va. July 29, 2010) (dismissing affirmative defense under Twombly/Iqbal); and Palmer v. Oakland Farms, Inc., 2010 U.S. Dist. LEXIS 63265 (W.D.Va. June 24, 2010) (same); with Lopez v. Mediterranean Food, Inc., No. 1:10CV1218, 2011 U.S. Dist. LEXIS 2265 (E.D.Va. Jan. 10, 2011) (rejecting Francisco and holding that an affirmative defense must only give fair notice of the nature of the defense). Thus, it remains to be seen how the Virginia federal courts will deal with this issue.
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Judge Jackson Issues a Slew of Rulings in FiOS Patent Suit

Posted on August 19, 2011 by Dabney Carr

Following up on the jury’s $115 million verdict in favor of ActiveVideo in its patent infringement suit against Verizon, Judge Jackson has issued three separate written opinions relating to invalidity and inequitable conduct claims made at trial, including:

  • Granting ActiveVideo’s Motion for Judgment as a Matter of Law on the validity of its four patents on the grounds that Verizon’s expert failed to give a detailed explanation of how the elements of the asserted claims were described in the prior art.  ActiveVideo Networks, Inc. v. Verizon Comm's., Inc., Case No. 2:10CV248, 2011 U.S. Dist. LEXIS 91722 (E.D.Va. Aug. 17, 2011).
  • Denying both parties’ Motions for Judgment under Fed. R. Civ. P. 52(c) on their respective claims of inequitable conduct. Judge Jackson ruled that Verizon had not show materiality because none of the prior art that ActiveVideo failed to disclose would have anticipated any of the asserted claims. Judge Jackson also declined to infer an intent to deceive based merely on ActiveVideo’s awareness of the prior art, stating that an intent to withhold prior art was not enough to show an intent to deceive.  ActiveVideo Networks, Inc. v. Verizon Comm's., Inc., Case No. 2:10CV248 (E.D.Va. Aug. 17, 2011) 
  • Granting Verizon’s Motion for Judgment as a Matter of Law on the validity of its two asserted patents on the grounds that ActiveVideo’s expert failed to opine whether the asserted prior art would enable one of skill in the art to practice the invention.   ActiveVideo Networks, Inc. v. Verizon Comm's., Inc., Case No. 2:10CV248, 2011 U.S. Dist. LEXIS 91658 (E.D. Va. Aug. 17, 2011).
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Netscape v. Valueclick: Summary judgment granted in part, denied in part, granted in part, denied in part, granted in part, ... (etc.).

Posted on February 10, 2010 by Robert Angle

On January 29, 2010, Judge Ellis issued a comprehensive, 49-page opinion (available here) on the parties’ motions for summary judgment in Netscape Communs. Corp. v. Valueclick, Inc., et al., Civil Action No. 1:09cv225 (E.D. Virginia). Plaintiff Netscape claims that the Defendants willfully infringed U.S. Patent No. 5,774,670 (the ‘670 Patent), known as the “Internet cookie patent.” After several months of discovery, the parties filed for summary judgment on twelve separate issues. Specifically, the parties filed cross-motions on:

(1) invalidity based on the on-sale bar of 35 U.S.C. § 102(b); and

(2) whether plaintiff waived its right to enforce the ‘670 patent.  

In addition, Netscape moved for summary judgment on the Defendants’ affirmative defenses based on:

(3) invalidity based on public use of the invention under 35 U.S.C. § 102(b);

(4) invalidity based on anticipation;

(5) invalidity under 35 U.S.C. § 102(f) based on misjoinder or nonjoinder of inventors;

(6) equitable estoppel; and

(7) federal preemption of defendants’ state law counterclaims of fraud, misrepresentation and unfair competition. 

 

Separately, Defendants moved for summary judgment on:

 

(8) invalidity of three claims based on indefiniteness;

(9) laches;

(10) non-infringement of claims 1-8 under any claim construction;

(11) non-infringement of all claims under defendants’ proposed claim construction; and

(12) willful infringement. 

 

In its ruling, the Court took the opportunity to clear out many issues and gave each side partial victories, but left the core issues for resolution at trial, which is set to begin on April 26, 2010.

For plaintiff Netscape, Judge Ellis dismissed the defenses of equitable estoppel, public use, inventorship, and granted summary judgment on defendants’ state law counterclaims, but denied Netscape’s motion to dismiss the anticipation defense.   

 

For defendants, Judge Ellis invalidated claim 1 of the ‘670 patent based on the on-sale bar and dismissed the claim of willful infringement, but denied defendants’ motion on their defenses of indefiniteness, waiver, laches and application of the on-sale bar to the remaining claims of the patent and denied defendants’ motion based on non-infringement.  

 

Although the rulings were based mainly on the absence of supporting facts or the existence of disputed material facts, Judge Ellis reached several notable legal conclusions. 

 

  • As to the “on-sale bar,” Judge Ellis concluded that the cookies-functional web browser was "ready for patenting" prior to the critical date of the patent-in-suit even though the web browser was not released until after the critical date. Judge Ellis found “the undisputed record evidence shows that draft cookies source code existed [prior to the critical date], [and thus] the second [Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998)] prong is satisfied. Moreover, with respect to inventions involving computer code, Pfaff simply requires complete conception of the invention, not the source code's actual completion, provided that there is an enabling disclosure that would allow one skilled in the art to complete the invention."
  • With respect to willful infringement, Judge Ellis noted that “plaintiff's claim is based on defendants' use of the cookies technology following the initiation of the instant suit, as defendants had no pre-litigation knowledge of the '670 patent. While not dispositive, plaintiffs’ decision not to seek a preliminary injunction has been deemed relevant…  Moreover, while not all of defendants' arguments are meritorious, defendants do present legitimate defenses and credible invalidity arguments.”
  • Finally, Judge Ellis held that defendants’ state law claims for fraud, misrepresentation and unfair competition based on plaintiff's acts of enforcing its patent rights were preempted by federal patent law: “[A]lthough clear and convincing evidence establishes that the § 102(b) on-sale bar invalidates claim 1 of the [patent-in-suit], this conclusion does not necessarily demonstrate objective baselessness, as questions of infringement and invalidity remain as to [other] claims.”
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