Failure to Plead Patent Invalidity Counterclaims with Particularity could Lead to Disastrous Results

This is an urgent KLIP Alert from the Intellectual Property Department at Kramer Levin Naftalis & Frankel LLP.

In a little noticed but important decision for the patent bar, Judge William Skretny of the Western District of New York dismissed an alleged infringer's general counterclaim for patent invalidity as failing to meet minimal pleading standards because it did not provide a plausible basis as to how or why the patents are invalid. Armstrong Pump, Inc. v. Hartman, 10-cv-446, NYLJ 1202547512922, at *1 (W.D.N.Y. Mar. 25, 2012). The counterclaim at issue asserted that "[a]ll claims of the [suit] patent[s] are invalid for failing to meet one or more conditions for patentability set forth in 35 U.S.C. §§ 101, 102, 103, and /or 112." In most patent cases, in our experience, invalidity counterclaims are asserted in this bare bones manner. To the extent other courts follow Judge Skretny's approach, the bar will be raised for defendants to assert invalidity counterclaims early in a patent litigation (as the bar was recently raised for defendants to assert inequitable conduct counterclaims in Therasense, Inc. v. Becton, Dickinson, 649 F. 3d 1276 (Fed. Cir. 2011)).

In Armstrong Pump, Judge Skretny held that whether considered under the Supreme Court's Twombly/Iqbal plausible pleading requirements (550 U.S. 544 (2007); 556 U.S. 662 (2009)) or the simplicity and brevity allowed under Form 18 of the Appendix to the Federal Rules of Civil Procedure to plead patent infringement, the alleged infringer's invalidity counterclaims were insufficient because:

Here, [the alleged infringer] conclusorily alleges that every claim in each of the three patents fails to meet one or multiple unspecified conditions for patentability. The . . . counterclaims are devoid of any facts that would suggest which deficiency(ies) apply to which patent(s) or claim(s) and therefore do not give fair notice to [the patent owner] of the basis for the counterclaims. Even the Appendix Forms, on which [the alleged infringer] relies, require some factual content, minimal or generalized though it may be. Each requires that a plaintiff identify a date, document, event, and/or conduct that forms the basis for his or her claims. None suggest a declaration that a statute has been violated, standing alone, is sufficient to survive a motion to dismiss.

There has always been a tension between the sparse pleading requirements seemingly allowed by Federal Rules forms and the Supreme Court plausibility standards set forth in Twombly/Iqbal. Several other courts have addressed this issue, in some cases agreeing with Judge Skretny, while other courts have declined to require additional detail. See, e.g., Pfizer v. Apotex, Inc., 726 F.Supp. 2d 921 (N.D. Ill. 2010) (notice of claim sufficient for invalidity counterclaim); Elan Pharma Int'l. Ltd. v. Lupin Ltd., 2010 U.S. Dist. LEXIS 32306 (D.N.J. Mar. 31, 2010) (same); Groupon, Inc. v. MobGob LLC, 2011 WL 2111986 (N.D. Ill. May 25, 2011) (dismissing counterclaim); Tyco Fire Prods. LP v. Victaulic Co., 777 F.Supp.2d 893 (E.D. Pa. 2011) (dismissing counterclaim but not affirmative defense).

We expect that this issue will be resolved by the Federal Circuit in the relatively near future. In the meanwhile, it may be prudent to wait until later in the case to assert a counterclaim of invalidity (as defendants now typically do before asserting counterclaims of inequitable conduct). An alternative approach is to provide a modicum of additional information over the bare minimum, for example, identifying both a specific statutory provision and a general category of prior art that form the basis for the invalidity claim (mirroring the bare minimum disclosure of the plausible basis for infringement that a patent owner plaintiff must disclose). When in a jurisdiction with local patent rules (unlike the Western District of New York) that require the alleged infringer to provide detailed invalidity contentions after the patent owner has provided detailed infringement contentions, there may not be much of a problem with a short notice pleading, or it may be acceptable to simply note in the counterclaim that further information will be provided in invalidity contentions pursuant to the court's schedule.

Time will tell if alleged infringers will be faced with the dilemma of pleading broadly (because no further information is available) and risking dismissal of the invalidity claims (and perhaps defenses), or performing the necessary expensive due diligence even earlier in the case than previously required.