Entrust Datacard Corporation v. Atlantic Zeiser Gmbh et alMOTION to Dismiss Counterclaims of Patent Invalidity and strike affirmative defenses , MOTION to dismiss for failure to state a claimD. Minn.June 8, 20178330749v7 1 UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF FLORIDA JACKSONVILLE DIVISION Entrust Datacard Corporation, Plaintiff, v. Atlantic Zeiser GmbH, Atlantic Zeiser, Inc., and Innovatime Industrie SARL Defendants. Court File No. 3:17-CV-00110-BJD-MCR PLAINTIFF ENTRUST DATACARD’S DISPOSITIVE MOTIONS TO DISMISS COUNTERCLAIMS OF PATENT INVALIDITY AND TO STRIKE AFFIRMATIVE DEFENSES Plaintiff Entrust Datacard Corporation (“EDC”) moves the Court pursuant to Local Rule 3.01 and under Rule 12(b)(6), Federal Rules of Civil Procedure, to dismiss the counterclaims of Defendant Atlantic Zeiser GmbH (“AZG”) and Atlantic Zeiser, Inc. (“AZI”) for Declaratory Judgments of Invalidity, and under Rule 12(f), F.R.Civ.P., to strike all of the affirmative defenses of AZG and AZI1. The counterclaims and affirmative defenses at issue are contained in Defendants Atlantic Zeiser GmbH and Atlantic Zeiser, Inc.’s Answer to the Complaint and Demand for Jury Trial and Counterclaims (ECF 20), with additional factual allegations in Atlantic Zeiser GmbH and Atlantic Zeiser, Inc.’s Response to Plaintiff’s Confidential Appendix to Complaint and 1 AZG and AZI will be referred to collectively as “AZ” or the “AZ Defendants.” Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 1 of 22 PageID 194 8330749v7 2 Demand for Jury Trial (ECF 21)2. Both pleadings were submitted jointly on behalf of both parties. Plaintiff respectfully requests the following relief: 1. The counterclaims of the AZ Defendants for Declaratory Judgments of Invalidity of Plaintiff EDC’s Patents No.’s 6,695,205 (the “’205 Patent”) and 6,474,925 (the “’925 Patent”) as alleged in Counts I & II of the Counterclaims should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim; 2. All the affirmative defenses asserted by the AZ Defendants in their Answer and Counterclaims should be stricken pursuant to Rule 12(f). Plaintiff’s basis for the relief sought in these Motions is that the AZ Defendants’ Counterclaims for Invalidity and its affirmative defenses are boilerplate allegations, lacking any supporting factual allegations or statement of the grounds or basis for the claims. They fail to conform to Rule 8, F.R.Civ.P. and the pleading standards established in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009). MEMORANDUM OF LEGAL AUTHORITY. A. BACKGROUND. 2 Plaintiff was allowed to file under seal a Confidential Appendix(S-11) to its Complaint(ECF 1), to comply with a Protective Order in a prior litigation between the parties. The Confidential Appendix is part of the Complaint, and the Response to the Confidential Appendix is properly considered part of AZ’s Answer and Counterclaims. AZ’s pleadings will be referred to separately as “Answer,” “Counterclaims,” and “Response to Confidential Appendix,” and collectively as “Answer and Counterclaims.” Plaintiff EDC’s Complaint and Demand for Jury Trial will be referred to as “Complaint.” Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 2 of 22 PageID 195 8330749v7 3 Although recently filed in this Court, this case has a history, and the fact that it does bears on Plaintiff’s Motions. As is apparent in the pleadings, EDC and the AZ Defendants are competitors in the sale of card issuance equipment. Card issuance equipment is the machines upon which cards such as ID cards, drivers’ licenses, and credit cards are personalized to the end-user cardholder. Card issuance machines are typically modular, with each module fulfilling a specific function in the personalization process. Some cards have chips on them which are essentially a small computer. The generic term is “ICC,” meaning “Integrated Circuit Card,” but other generic names are used such as “chip card,” “smartcard,” and “EMV Card.” EDC’s ‘205 and ‘925 Patents apply to machines having a module commonly called an “ICC Programming Module.” The purpose of such a module is to program the integrated circuit chip on the card. The typical card issuance machine is capable of turning out thousands of cards per hour. The chips on ICC Cards are slow to be programmed relative to other personalization operations. The programming time depends on the particular chip and on the amount of data being loaded on the chip, and can be several seconds per card up to 20 or 30 seconds. ICC programming becomes the bottleneck in the card issuance process. In very general terms, the EDC patents cover several embodiments of ICC Programming Modules, one of which is a vertical carriage with multiple programming stations. As each card is inserted in a programming station, the carriage racks up or down, so another new card can be inserted in another station while the cards already inserted in stations are programmed. By this means several ICC Cards can be Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 3 of 22 PageID 196 8330749v7 4 simultaneously programmed, helping to relieve the bottleneck created by the ICC programming. The AZ PERSOMASTER machines which are accused of infringing, comprise vertical carriage ICC Programming Modules. In early 2016, Costco was planning to convert all of its private label credit cards from American Express to VISA. This meant that several million new cards needed to be issued to Costco’s card holders by a relatively short deadline. EDC became aware that the AZ Defendants were proposing to supply a number of machines to a facility operated by Source One Direct, Inc. (“Source One Direct”) in Jacksonville, FL where the Costco cards were going to be personalized. Source One Direct is a subsidiary of a French company, Gemalto S.A.3 EDC filed suit in the United States District Court for the District of Minnesota on November 30, 2015 and sent a “cease and desist” letter, believing that the machines being sent to Source One Direct by the AZ Defendants infringed at least EDC’s ‘205 Patent. The parties then entered into extensive settlement negotiations under Rule 408, Federal Rules of Evidence. Most of the factual allegations in the AZ Defendants’ Answer and Counterclaims are statements about who said what to whom during those negotiations, incorrect and misstated by AZ, and inadmissible in evidence. One fairly glaring omission from their allegations is that, although the AZ Defendants did indeed offer EDC assurances that they could, and would, make modifications to their machines to eliminate infringement, they refused to provide EDC with drawings and documentation of the proposed modifications, or to permit access to the equipment to insure that the 3 See paras. 5-10, Defendant’s Response to Confidential Appendix. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 4 of 22 PageID 197 8330749v7 5 proposed changes had, in fact, been made, and that the machines, after the modifications, did not infringe EDC’s patents. After months of delays by the AZ Defendants, EDC was forced to make a Motion in the Minnesota Court for expedited discovery to allow EDC to inspect the equipment. A subpoena was issued to Source One Direct out of this Court - the Middle District of Florida - and with the assistance of this Court (Case No. 3:16-mc-00032-TJC-PDB) EDC was able to view the equipment twice at Source One’s facility in Jacksonville. The first time, two of EDC’s outside counsel, an EDC in-house lawyer, and one technical employee were permitted to see the machines, with no recording devices whatsoever. The second time, one outside lawyer for EDC and the same technical employee were present while certain tests were run that had been agreed on in advance with Source Once Direct. A court videographer was allowed to video the equipment during the tests. The AZ Defendants’ counsel of record in both this litigation and the Minnesota litigation was present at both viewings. The discussions during the negotiations between EDC and AZ focused on three elements of the AZ PERSOMASTER machines which EDC viewed as infringing claim limitations of the EDC patents. It is unnecessary for purposes of the present motions to go into these elements in detail. In general terms, they were: - a limitation in at least Claim 1 of the ‘925 Patent for a parallelepiped plate on which the programming stations are mounted. - a limitation in Claim 8 of the ‘205 Patent for “non-consecutive loading.” Claim 8 is a method claim. The claimed method includes the limitation that as the carriage Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 5 of 22 PageID 198 8330749v7 6 moves to allow new cards to be loaded into programming stations, the cards are loaded non-consecutively into programming stations - in other words, instead of being loaded successively into station 1, then 2, then 3, etc., the cards might be loaded into station 1, then 3, then 5, etc. The inventors had realized that non-consecutive loading, although counterintuitive, allowed for faster loading and programming of the cards. - a limitation in Claim 4 of the ‘205 Patent (and its dependents, 5 and 6) for a “pass-through location through which a card is able to pass without programming.” It was EDC’s understanding from AZ’s counsel that, as originally shipped, the first of the five PERSOMASTER machines sent to the Source One Direct facility had a “pass through slot.” “Pass through slot” is described in the ‘205 Patent specification. It is one example of the “pass through location” limitation in the claims. AZ was going to remove the “pass through slot” and contended that would eliminate infringement of the “pass through location” limitation. EDC told AZ’s counsel early and often that EDC was skeptical that infringement would be eliminated by this means. With this background, Plaintiff’s Complaint and Confidential Appendix alleged specific detail about AZ’s alleged infringement: 1. It specifically identified the products which were alleged to infringe the patents, namely the AZ PERSOMASTER line of machines, and it identified the five machines shipped to Source One Direct in Jacksonville by serial number (PMR001-005). Complaint, ¶¶6, 7. 2. It specifically identified the ICC Programming Module as the mechanism that is the focus of the infringement. Id., ¶6. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 6 of 22 PageID 199 8330749v7 7 3. It specifically alleged that AZG and AZI contended that changes were made to the PERSOMASTER machines after AZ received notice of the infringement. ¶7 4. It specially referenced the Minnesota litigation. ¶7 5. It alleged that notwithstanding the changes AZ claimed to have made, the PERSOMASTER machines continue to infringe EDC’s patents. 6. It specifically alleged the patents (which were attached to the Complaint as Exhibits), and identified the claims of each patent alleged to be infringed, namely, claims 4, 5, 6, and 8 of the ‘205 Patent, and claim 1 of the ‘925 Patent. Id., ¶¶8-11. 7. It specifically identified the structures or steps which were at issue in the alleged infringement, namely the non-sequential loading, the pass through location, and the parallelepiped plate, and attempted to provide “before and after” allegations, setting out to the extent Plaintiff had information about them, what structures caused infringement before the changes AZ claims to have made, and what structures continue to cause infringement after the changes. Id. (Bear in mind that most of the information Plaintiff has about the changes comes from representations by AZ’s counsel. EDC has been provided no documentation or proof as to what was changed, or when the changes were made.) 8. In its Confidential Appendix, Plaintiff alleged which of the three defendants manufactured which parts of the PERSOMASTER machines, which sold them, which imported them, and which were involved in setting up the machines, conducting Site Acceptance Tests in Jacksonville, and training customers, in other word, Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 7 of 22 PageID 200 8330749v7 8 which defendant(s) were involved in what part of manufacturing, importing, offering to sell, selling, and using the equipment, and inducing infringing use by the customer. Thus, Plaintiff’s Complaint was thorough and detailed. The AZ Defendants filed no 12(b)(6), 12(f), or 12(e) Motions. In preparing its Answer and Counterclaims, AZ had the benefit of a great deal of specificity about Plaintiffs’ claims and the basis for the claims and the benefit of more than a year of litigation. Nevertheless, their affirmative defenses and their counterclaims for Declaratory Judgments of Invalidity of the EDC Patents provide no supporting facts or allegations at all, and no explanation of basis. Their Counterclaim allegations are boilerplate, alleging that the claims of the patent “are invalid for failing to comply with one or more of the requirements of the Patents Laws, including but not limited to 35 U.S.C. §§ 101, 102, 103, and/or 112.” Counterclaims, ¶¶71, 77. The affirmative defenses are simply a laundry list of statute numbers and names of legal doctrines. Answer, p.8, ¶¶A-G. B. ARGUMENT AND LEGAL AUTHORITIES. 1. The AZ Defendants’ Counterclaims for Declaratory Judgment of Invalidity Should Be Dismissed. The AZ Defendants allege two counterclaims seeking declaratory judgments that the asserted claims of ‘205 and ‘925 Patents are invalid. The counterclaims simply list some patent statutes, but fail to allege supporting facts, nor what basis they assert against which claims of the Patents. They are insufficiently pled and must be dismissed. A pleading that states a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief. Fed.R.Civ.P. 8(a)(2). “[D]etailed factual allegations” are not required, but “[a] pleading that offers ‘labels and Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 8 of 22 PageID 201 8330749v7 9 conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’” Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ “ Id. (quoting Twombly, 550 U.S. at 570); Shinew v. Wszola, No. CIV.A. 08-14256, 2009 WL 1076279, at *3 (E.D. Mich. Apr. 21, 2009). Factual allegations must be enough to raise a right to relief above the speculative level. Id. Addressing insufficiently alleged patent counterclaims, Judge Dalton of this Court stated in PPS Data, LLC v. Availity, LLC, No. 3:11-CV-747-J-37TEM, 2012 WL 252830, at *1 (M.D. Fla. Jan. 26, 2012)4, “Iqbal and Twombly require something more than bald assertions unsupported by factual allegations.” Like the counterclaims in Availity, the AZ Defendants’ Counterclaims of Invalidity allege no facts. AZ simply alleges in Count I of their counterclaims that “[t]he asserted claims of the ‘205 patent are invalid for failing to comply with one or more of the requirements of the Patent Laws, including but not limited to 35 U.S.C. §§ 101, 102, 103, and/or 112.” Counterclaim, ¶71. In Count II they make the identical allegation directed at the ‘925 patent. This is completely insufficient, the AZ Defendants simply “point to the Patent Act and proclaim the patents invalid.” Availity, at *2. 4 See also PPS Data, LLC v. Allscripts Healthcare Solutions, Inc. No. 3:11-CV-273-J- 37TEM, 2012 WL 243346, at *1 (M.D. Fla. Jan. 25, 2012). Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 9 of 22 PageID 202 8330749v7 10 AZ’s Counterclaims request relief under the Federal Declaratory Judgment Act. As Judge Dalton pointed out in Availity, the Act requires an “actual controversy.” 28 U.S.C. §2201(a): In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007), the U.S. Supreme Court explained, “Our decisions have required that the dispute be ‘definite and concrete, touching the legal relations of parties having adverse legal interests'; and that it be ‘real and substantial’ and ‘admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.’ “ In other words, “the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id. (emphasis added). Thus, the scope of a permissible declaratory judgment turns on the facts alleged in the complaint and counterclaim. [Emphasis supplied.] Id., at *2, and see Nationwide Indus., Inc. v. D&D Techs. (USA), Inc., No. 812CV02372T27EAJ, 2013 WL 12157159, at *2 (M.D. Fla. Mar. 11, 2013). As in Availity, the AZ Defendants allege no facts in support of their Counterclaims. They do not show the existence of a case or controversy. This Court has no idea what validity issues it is being asked to rule on. Availity is good law, and in accord with the majority of Courts that have ruled on the specificity required in pleading claims for Declaratory Judgment of Invalidity since Twombly and Iqbal. See e.g. Gradient Enterprises, Inc. v. Skype Technologies S.A., 932 F. Supp. 2d 447, 452 (W.D.N.Y. 2013) (conclusory allegations of invalidity are insufficient); Orientview Technologies LLC v. Seven For All Mankind, LLC, No. 13 CIV. 0538 PAE, 2013 WL 4016302, at *1, *6-7 (S.D.N.Y. Aug. 7, 2013); GE Lighting Solutions, LLC v. Lights of America, Inc., No. 1:12-CV-3131, 2013 WL 1874885 at *1 (N.D. Ohio May 3, 2013); Nationwide Industries, Inc. v. D&D Technologies (USA), Inc., Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 10 of 22 PageID 203 8330749v7 11 2013 WL 12157159 (citing Availity, 2012 WL 252830), and see Grid Systems Corp. v. Texas Instruments Inc., 771 F. Supp. 1033, 1041-42 (N.D. Cal. 1991) (simply listing statutes is “radically insufficient”). The Courts have identified several policy grounds for dismissing claims that are unsupported by factual assertions or that are merely formulaic recitations of claim elements. First, it complies with the language of the Federal Rules of Civil Procedure. In ruling on a 12(b)(6) Motion, the Courts are not bound to accept as true, legal conclusions couched as a factual allegation. Iqbal, 129 S.Ct. at 1949-50, citing Twombly, 127 S.Ct. at 1955-56. Thus, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements,” are insufficient. Id. “Where the pleading suggests only a mere possibility of misconduct, it has not complied with Rule 8(a)(2),” it has not “show[n]”-“that the pleader is entitled to relief.” Iqbal, 129 S.Ct. at 1950. Second, it is not a justification that discovery can used to weed out unfounded claims. In Twombly, the Court made very clear that a party must allege facts supporting a plausible claim before it will be allowed to put the opposing party and the Court to the very high costs of discovery. 127 S.Ct. at 1967. Third, the pleading must give fair notice to the respondent. “Effective notice pleading should provide the defendant with a basis for assessing the initial strength of the plaintiff’s claim, for preserving relevant evidence, for identifying any related counter- or cross-claims, and for preparing an appropriate answer. Grid Systems Corp., 771 F. Supp. at 1037; Qarbon.com Inc. v. eHelp Corp., 315 F.Supp.2d 1046, 1051 (N.D. Cal. 2004). Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 11 of 22 PageID 204 8330749v7 12 The AZ Defendants’ allegations in support of their Counterclaims for Patent Invalidity are radically insufficient. They are nothing but a list of statutes under which a patent might be invalidated. The language of the counterclaims is virtually identical to the language of counterclaims which other Courts have found defective. See e.g. Availity, 2012 WL 252830, at *1; Orientview Technologies, 2013 WL 4016302, at *4; GE Lighting Solutions, 2013 WL 1874885, at *1; Xilinx, Inc. v. Invention Inv. Fund I LP, No. C 11-0671 SI, 2011 WL 3206686, at *6 (N.D. Cal. July 27, 2011). In some past cases, two countervailing arguments have been raised to support conclusory patent counterclaims. They are: (1) proportionality - that a pleading imbalance would exist if a defendant were required to provide detailed allegations in support of its counterclaims, while the plaintiff could plead a direct infringement claim by complying with the sparse requirements of Form 18, and (2) that conclusory allegations might be permissible in Courts which have patent specific Local Rules requiring the parties to exchange claim charts and invalidity contentions early in the litigation. Neither of these apply. Form 18 and Rule 84 were abolished effective December 1, 2015. Plaintiff’s Complaint is not a Form 18 pleading and the AZ Defendants have not claimed otherwise. It is detailed and specific. The “Local Rules issue” does not apply here either. This Court does not have patent specific Local Rules nor does it issue patent specific Scheduling Orders. Nothing in the Local Rules calls for early exchange of claim charts and invalidity information. See Gradient Enterprises, Inc. 932 F. Supp. 2d 447, 452 (the argument is inapplicable where the district does not have patent specific rules). Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 12 of 22 PageID 205 8330749v7 13 The argument is also sometimes made that a defendant has only 21 days to formulate its response to the Complaint and cannot be expected to provide detail, but this too is inapplicable. This matter was the subject of the Minnesota litigation and the AZ Defendants had the Nov. 30, 2015 Complaint for over a year. They requested and received an extension to Answer or otherwise respond in this case. They admit that they attended two viewings of the equipment in Jacksonville, and during one of those, watched tests run that were agreed on between EDC and Source One Direct. Counterclaims, ¶56. AZ’s counsel claims that they have prior art that will supposedly invalidate the patents. But despite this history and the detail provided by Plaintiff in its Complaint, the best AZ can apparently do in their invalidity counterclaims is to list statutes under which a patent might possibly be invalidated. The AZ Defendants had a great deal of time and notice to prepare a sufficient pleading, they simply did not do it5. Defendant is simply playing “hide the ball.” They claim to have prior art and grounds for invalidating Plaintiff’s patents, but decline to say what any of it is. Proportionality here works in favor of the Plaintiff, which has, in its Complaint, provided AZ with considerable detail in support of its claims. AZ’s Counterclaims of Invalidity are not proportional, they provide no facts, no explanation of the grounds or bases, no statement of which subjects covered by the patent statutes they intend to rely on. As Judge Dalton noted in Availity, 2012 WL 252830, at *2 (citing Panduit Corp. v. 5 The AZ Defendants claim incorrectly that the ‘925 Patent was not identified as being infringed before the present lawsuit was started, but its own pleadings make plain AZ knew infringement of the ‘925 Patent was at issue, and it modified its machines accordingly. Answer, ¶11. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 13 of 22 PageID 206 8330749v7 14 Denninson Mfg. Co., 810 F.2d 1561, 1570 (Fed. Cir. 1987), there are over 20 grounds that could apply. There are two separate and unrelated patents. AZ fails to identify any specific defects in either patent or to identify what defect might affect which patent. See Grid Systems Corp., 771 F. Supp. at 1041-42; Grid Systems Corp., 771 F. Supp. at 1041- 42; Armstrong Pump, Inc. v. Hartman, No. 10-CV-446S SC, 2012 WL 1029645, at *3 (W.D.N.Y. Mar. 26, 2012). AZ gives no notice to the patentees as to the basis of their invalidity counterclaims. Availity, 2012 WL 252830, at *2; Grid Systems Corp., 771 F. Supp. at 1041-42; Armstrong Pump, 2012 WL 1029645, at *3. 2. The AZ Defendants’ Affirmative Defenses Should Be Stricken. With the exception of their alleged affirmative defense of noninfringement, the AZ Defendants’ affirmative defenses suffer from the same fatal flaws as their Counterclaims - they are simply shotgun allegations with no supporting facts or statement of the basis of the defense. As for their noninfringement affirmative defense, there is no such thing, the alleged defense is simply a denial of Plaintiff’s infringement allegations and should be treated as such. Insufficiently pled affirmative defenses may be stricken from a pleading under Rule 12(f), F.R.Civ.P. (“The Court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter”). A Motion to Strike may be served within 21 days after the pleading. Rule 12(f)(2). Motions to Strike serve “to clean up the pleadings, streamline litigation, and avoid unnecessary forays into immaterial matters, Sun Microsystems, Inc. v. Versata Enters., Inc., 630 F. Supp. 2d 395, 402 (D. Del. 2009) quoting McInerney v. Moyer Lumber & Hardware, Inc. 244 F. Supp. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 14 of 22 PageID 207 8330749v7 15 2d 393, 402 (E.D. Pa. 2002). A defense is insufficiently pled if it fails to give the plaintiff fair notice of the nature of the defense. Barnes v. AT & T Pension Ben. Plan- Nonbargained Program, 718 F. Supp. 2d 1167, 1170 (N.D. Cal. 2010): and see Shinew v. Wszola, 2009 WL 1076279 (Motion to Amend to plead a “grocery list” of defense doctrines denied). Although neither Twombly nor Iqbal directly address affirmative defenses, the vast majority of courts presented with the issue have extended Twombly's heightened pleading standard to affirmative defenses. Barnes, 718 F. Supp. 2d at 1171. Applying the standard for heightened pleading to affirmative defenses serves a valid purpose in requiring at least some valid factual basis for pleading an affirmative defense and not adding it to the case simply upon some conjecture that it may somehow apply.” Hayne, 263 F.R.D. at 650; see also CTF Dev., Inc., 2009 WL 3517617, at *7-8. Applying the same standard will also serve to weed out the boilerplate listing of affirmative defenses … . Id. at 1172. Before Twombly some courts applied a proportionality analysis to affirmative defenses, that is, where the Complaint is general the affirmative defenses may be general, see e.g. Advanced Cardiovascular Systems, Inc. v. Scimed Systems, Inc., No. C-96-0950 DLJ, 1996 WL 467277 at *3 (N.D. Cal. July 24, 1996). However, as with patent counterclaims, past arguments no longer apply. Twombly and Iqbal are now the law, and as of December 1, 2015 patent infringement Complaints may no longer be pled out under former Form 18 and former Rule 84. Applying a rule that simply stating the names of affirmative defenses is sufficient, as the AZ Defendants have done in the present case, is incongruous and would cause all the high discovery costs that the Court in Twombly and Iqbal found unjustified. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 15 of 22 PageID 208 8330749v7 16 Further, such a procedure would be prejudicial. As the Court stated in Holtzman v. B/E Aerospace, Inc., No. 07-80551-CIV, 2008 WL 2225668, at *2 (S.D. Fla. May 29, 2008): Plaintiff should not be left to discover the bare minimum facts constituting a defense until discovery, for the “purpose of discovery is to find out additional facts about a well-pleaded claim, not to find out whether such a claim exists.” Stoner v. Walsh, 772 F. Supp. 790, 800 (S.D.N.Y. 1991). (a) AZ’s Affirmative Defense of Failure to State a Claim. AZ’s first affirmative defense is that Plaintiff’s Complaint “fails to state a claim upon which relief may be granted.” (Answer, p. 8, ¶A). The AZ Defendants did not, prior to filing an Answer, file any Rule 12(b)(6) Motion to Dismiss nor have they otherwise challenged Plaintiff’s Complaint. Their affirmative defense fails to allege any facts in support or to state any grounds or basis for dismissal of the Complaint. If they have a basis, they should plead it, if they do not then it does not belong in the AZ Defendants’ Answer. The affirmative defense, as pled, does not give Plaintiff fair notice as to the basis of the defense or how it arises, and the defense should therefore be stricken. See Qarbon.com Inc. v. eHelp Corp., 315 F. Supp. 2d 1046, 1049 (N.D. Cal. 2004). (b) AZ’s Affirmative Defense of Noninfringement. AZ’s second affirmative defense is that “AZG and AZI do not infringe, and have not infringed, either directly or indirectly, any claim of the Patents-In-Suit, either literally or under the doctrine of equivalents.” (Answer, p.8, ¶B). Noninfringement is a denial, not an affirmative defense. Adams v. Jumpstart Wireless Corp., 294 F.R.D. 668, 617 (S.D. Fla. 2013). It is redundant of the AZ Defendants’ denials of Plaintiff’s infringement Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 16 of 22 PageID 209 8330749v7 17 allegations, and should be stricken under 12(f) as redundant matter, or it may be allowed to stand as pled, but simply treated by the Court as a denial and not an affirmative defense. Id. (c) AZ’s Affirmative Defense of Invalidity and the Related Defense of a Statutory Bar to Costs. AZ’s third affirmative defense is that “The asserted claims of the Patents-In-Suit are invalid for failure to comply with one or more requirements of the Patent Laws, including but not limited to 35 U.S.C. §§ 101, 102, 103, and/or 112.” (Answer, p. 8, ¶C). AZ’s sixth affirmative defense is related, and alleges that “Entrust is barred from recovering costs under 35 U.S.C. § 288.” Answer, p. 8, ¶F. § 288 provides that when a claim of a patent is invalid, the patentee may pursue any valid claims but may recover no costs unless a disclaimer of the invalid claim has been entered at the Patent and Trademark Office. AZ’s invalidity affirmative defense and the related “costs bar” defense fail for the same reasons as their invalidity counterclaims. They allege no facts in support, specify no prior art, and fail to state any grounds or bases for the defense. There are over 20 possible grounds of invalidity. Plaintiff has alleged infringement of two separate and unrelated patents which were issued to different patentees at different times, and the applications were separate filings and separate prosecutions. The ‘925 Patent has undergone not only its initial examination, but two subsequent reexaminations instituted by adverse third parties. AZ does not say which of the over 20 grounds apply, nor do they say which grounds apply to which patents, nor to which claims of which patents. As pled, the defenses provide no notice to Plaintiff and are prejudicial. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 17 of 22 PageID 210 8330749v7 18 (d) AZ’s Affirmative Defense of Prosecution Estoppel. AZ’s fourth affirmative defense is that “Entrust is estopped by representations and concessions made to the Patent Office from claiming infringement either literally or under the doctrine of equivalents.” (Answer, p. 8, ¶D). This appears to be a prosecution estoppel argument of some kind, but it is insufficiently pled for several reasons. As noted, there are two separate patents and were two separate prosecutions. With respect to the ‘925 Patent, there were also two re-examinations. AZ fails to allege what representations or concessions were made that result in any estoppel, which of the four separate examinations/re-examinations the statements were made in, nor which claims or claim limitations of which patents or reexamination certificates the estoppel applies to. Having failed to allege any such statements or concessions, AZ does not say what the ground or basis for the estoppel is. The affirmative defense provides no notice to Plaintiff and is prejudicial. (e) AZ’s Affirmative Defenses of Statutory Damage Bars. AZ’s fifth affirmative defense alleges that “Entrust’s claims for damages, if any, are limited by 35 U.S.C. §§ 286 and/or 287. “ (Answer, p. 9, ¶E). § 286 is the statutory bar to recovery of any damages incurred more than 6 years before suit was file. § 287 is the statutory provision that bars damages prior to the marking of the patent number of product manufactured by the patent holder, or notice of the patent to the AZ Defendants. The § 286 defense appears to have no bearing on this case at all. From the information developed in the Minnesota litigation it appears that the first sale and importation of a PERSOMASTER machine was in 2015, well within the 6 year limit. All Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 18 of 22 PageID 211 8330749v7 19 of the dates of activity alleged in the Complaint and Confidential Appendix are in 2015 or later, well within the statutory period. If AZ has some real reason why § 286 might apply, they should allege it, but simply putting the statute number in a grocery list of defenses is not sufficient. The § 287 defense is also insufficiently pled. AZ has had actual notice from the Plaintiff of Plaintiff’s claims of infringement with respect to both the ‘205 and the ‘925 Patents. No marking defense applies after the dates of notice. AZ has failed to allege any facts in support of the defense, and therefore have failed to allege when they had notice and if or why any notice was insufficient. As for the marking allegation, AZ fails to allege any product made or sold by the Plaintiff that practiced either one of the patents and that was not marked. This provides Plaintiff with no fair notice of the defense, and makes it impossible for Plaintiff to know what evidence or documents to preserve and concerning what products. (f) AZ’s Affirmative Defenses of Estoppel, Waiver, Acquiescence, and/or Unclean Hands. AZ’s final affirmative defense is a laundry list of miscellany: “Entrust’s requested relief is barred, in whole or in part, under the doctrines of estoppel, waiver, acquiescence, and/or unclean hands.” (Answer, p. 8, ¶G). AZ fails to provide any factual basis for any of these claims, and fails to say even what the claims are. There are, for example, several types of estoppel, each with its own set of elements. AZ does not state what estoppel they are asserting, whether collateral, promissory, equitable, or any of several other types. Cf. Qarbon.com, Inc., 315 F. Supp. 2d at 1049. There are also several types or ways a waiver can arise. AZ does not say which type of waiver Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 19 of 22 PageID 212 8330749v7 20 applies or how it arises. The same applies to acquiescence and unclean hands, AZ fails to say anything about what the basis is for any of these defenses. Some types of estoppel, waiver, acquiescence and unclean hands invoke Rule 9’s requirement of pleading certain matters with particularity. See F.R.Civ.P. 9(b)(fraud or mistake) & (c)(conditions precedent). As pled, Plaintiff has no idea if a Rule 9 challenge is appropriate. AZ’s allegations are utterly insufficient to provide Plaintiff with any notice as to what these defenses are or what their basis is. Qarbon.com, Inc., 315 F. Supp. 2d at 1049. This affirmative defense, as pled, is just a grocery list and should be stricken. Cf. Shinew v. Wszola, WL 1076279, at *2 (E.D. Mich. Apr. 21, 2009) (denying Motion to Amend Answer to assert a grocery list of affirmative defenses). CONCLUSION The Counterclaims of the AZ Defendants for Declaratory Judgments of Invalidity of the ‘205 and ‘925 Patents must be dismissed under Rule 12(b)(6). They are merely recitations of patent statutes that might apply to any question of invalidity, are devoid of any supporting factual allegations or statement of grounds or bases showing that there actually is any validity question. There are two patents and five claims at issue. The Counterclaims fail to specify what defects exist with which claim(s), they specify no prior art, and provide no basis or grounds for any invalidity claim. They are merely are recitation of the patent statutes and are radically insufficient to state a claim. The AZ Defendants’ affirmative defenses are likewise insufficiently pled, and must be stricken under Rule 12(f). Like the Counterclaims, they are supported by no factual allegations (except the noninfringement defense, which is not an affirmative Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 20 of 22 PageID 213 8330749v7 21 defense). They do not specify which defense applies to which patent, or to which of the four examinations/reexaminations of the patents. The affirmative defenses are merely a laundry list of legal doctrines, and in some instances, such as defense (G), they merely assert classes of legal doctrines without saying which specific doctrine applies. As pled, they do not provide fair notice to Plaintiff. Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 21 of 22 PageID 214 8330749v7 22 Dated: June 8, 2017 By: /s/ John B. Lunseth John B. Lunseth (Minn. #65341) BRIGGS AND MORGAN, P.A. 2200 IDS Center 80 South Eighth Street Minneapolis, MN 55402-2157 Telephone: (612) 977-8400 Facsimile: (612) 977-8659 jlunseth@briggs.com ATTORNEYS FOR PLAINTIFF ENTRUST DATACARD CORPORATION Case 3:17-cv-00110-BJD-MCR Document 27 Filed 06/08/17 Page 22 of 22 PageID 215
