Oracle America, Inc. v. Terix Computer Company, Inc., et al

MOTION to Strike 178 Answer to Amended Complaint, 180 Answer to Amended Complaint, 181 Answer to Amended Complaint, 179 Answer to Amended Complaint Oracle's Notice and Motion to Strike Defendants' Affirmative Defenses

N.D. Cal.June 6, 2014

REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES A/76203132.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BINGHAM MCCUTCHEN LLP Geoffrey M. Howard (SBN 157468) geoff.howard@bingham.com Thomas S. Hixson (SBN 193033) thomas.hixson@bingham.com Kyle Zipes (SBN 251814) kyle.zipes@bingham.com Three Embarcadero Center San Francisco, CA 94111-4067 Telephone: 415.393.2000 Facsimile: 415.393.2286 ORACLE CORPORATION Dorian Daley (SBN 129049) dorian.daley@oracle.com Deborah K. Miller (SBN 95527) deborah.miller@oracle.com 500 Oracle Parkway M/S 5op7 Redwood City, CA 94065 Telephone: 650.506.4846 Facsimile: 650.506.7114 LATHAM & WATKINS LLP Daniel M. Wall (SBN 102580) dan.wall@lw.com Christopher B. Campbell (SBN 254776) christopher.campbell@lw.com 505 Montgomery Street, Suite 2000 San Francisco, California 94111-6538 Telephone: 415.391.0600 Facsimile: 415.395.8095 ORACLE CORPORATION Jeffrey S. Ross (SBN 138172) jeff.ross@oracle.com 10 Van de Graaff Drive Burlington, MA 01803 Telephone: 781.744.0449 Facsimile: 781.238.6273 Attorneys for Plaintiffs Oracle America, Inc., and Oracle International Corporation UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION ORACLE AMERICA, INC., a Delaware corporation; ORACLE INTERNATIONAL CORPORATION, a Delaware corporation Plaintiff, v. TERIX COMPUTER COMPANY, INC., a California corporation; MAINTECH INCORPORATED, a Delaware corporation; VOLT DELTA RESOURCES, LLC, a Nevada limited liability company; SEVANNA FINANCIAL, INC., a Nevada corporation; WEST COAST COMPUTER EXCHANGE, INC., a Nevada corporation; and DOES 1-50, Defendants. No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES Date: July 8, 2014 Time: 10:00 a.m. Location: Courtroom 5, 4th Floor Judge: Hon. Paul S. Grewal Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page1 of 32 TABLE OF CONTENTS Page i No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. INTRODUCTION ............................................................................................................. 2 II. ARGUMENT ..................................................................................................................... 4 A. Twombly/Iqbal and the Two Step Heightened Pleading Standard ........................ 4 B. Twombly and Iqbal Apply to Affirmative Defenses.............................................. 5 C. Defendants’ Affirmative Defenses All Fail the Twombly/Iqbal Standard ............ 6 1. Most of Defendants’ Affirmative Defenses Fail Step 1 ............................. 6 1. The Rest of Defendants’ Affirmative Defenses Fail Step 2 ....................... 8 a. Waiver (Maintech defense 1, Terix defense 14, WEX and Sevanna defense 10) ....................................................................... 8 b. Estoppel (Maintech defense 1, Terix defense 15, WEX and Sevanna defense 11) ..................................................................... 11 c. Laches (Maintech defense 2, Terix defense 13, WEX and Sevanna defense 9) ....................................................................... 12 d. Unclean Hands (Maintech defense 11, Terix defense 16, WEX and Sevanna defense 12) .................................................... 13 e. Copyright Misuse (Maintech defense 3, Terix defense 4, WEX and Sevanna defense 3) ...................................................... 14 f. Express or Implied License (Maintech defense 12, Terix defenses 7 and 8) .......................................................................... 15 g. Fair Use (Maintech defense 8, Terix defense 6, WEX and Sevanna defense 5) ....................................................................... 19 h. Failure to Mitigate, Contributory Negligence (Maintech defenses 15 and 16, Terix defenses 11, 12 and 17, WEX and Sevanna defenses 7, 8 and 13)............................................... 21 2. Terix, WEX and Sevanna’s Illegitimate Attempt to Cross- Reference Terix’s Counterclaims ............................................................. 22 3. Defenses That Are Not Affirmative Defenses ......................................... 23 D. The Court Should Deny Leave to Amend ............................................................ 24 III. CONCLUSION ................................................................................................................ 25 Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page2 of 32 TABLE OF AUTHORITIES Page(s) ii No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Federal Cases A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001) ....................................................................................... 9, 10, 20 Allen v. AVT Event Techs., Inc., No. C-13-1922, 2013 WL 3157905 (N.D. Cal. June 20, 2013) ............................................ 2, 6 Ansari v. Electronic Document Processing, Inc., No. 5:12-CV-01245, 2012 WL 3945482 (N.D. Cal. Sept. 10, 2012) ................................... 2, 6 Apple Inc. v. Psystar Corp., 658 F.3d 1150 (9th Cir. 2011) ........................................................................................... 14, 15 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ......................................................................................................... passim Avaya Inc. v. Telecom Labs, Inc., No. 06-2490, 2014 WL 97335 (D.N.J. Jan. 7, 2014) .............................................................. 16 Barnes & Noble, Inc. v. LSI Corp., 849 F. Supp. 2d 925 (N.D. Cal. 2012) ..................................................................................... 5 Barnes v. AT&T Pension Benefit Plan-Nonbargained Program, 718 F. Supp. 2d 1167 (N.D. Cal. 2010) .......................................................................... passim Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ......................................................................................................... passim Bhandari v. Capital One, No. 5:12-cv-04533, 2013 WL 5423707 (N.D. Cal. Sept, 27, 2013) ....................................... 24 Bottoni v. Sallie Mae, Inc., No. C 10-03602, 2011 WL 3678878 (N.D. Cal. Aug. 22, 2011) ................................... 5, 8, 25 Broadcast Music, Inc. v. Evie’s Tavern Ellention, Inc., No. 8:11-cv-2056, 2011 WL 6012201 (M.D. Fla. Nov. 30, 2011) ......................................... 16 Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994) ................................................................................................................ 19 Campion v. Old Republic Int’l Corp., No. C 12-0443, 2012 WL 2838738 (N.D. Cal. July 10, 2012) .............................................. 19 Carmichael Lodge No. 2013 v. Leonard, No. CIV S-07-2665, 2009 WL 2985476 (E.D. Cal., Sept. 16, 2009) ..................................... 11 Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page3 of 32 TABLE OF AUTHORITIES (continued) Page(s) iii No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Central Laborers’ Pension Fund v. Integrated Elec. Servs., Inc., 497 F.3d 546 (5th Cir. 2007) ................................................................................................... 19 In re Century Aluminum Co. Secs. Litig., 729 F.3d 1104 (9th Cir. 2013) ................................................................................................... 8 CTF Dev., Inc. v. Penta Hospitality, LLC, No. C 09-02429, 2009 WL 3517617 (N.D. Cal. Oct. 26, 2009) .............................................. 5 Dion v. Fulton Friedman & Gullace LLP, No. 11-2727, 2012 WL 160221 (N.D. Cal. Jan. 17, 2012) ............................................ 5, 6, 17 Dream Games of Arizona, Inc. v. PC Onsite, 561 F.3d 983 (9th Cir. 2009) ................................................................................................... 13 Eclectic Properties East, LLC v. Marcus & Millichap Co., __ F.3d __, No. 12-16526, 2014 WL 1797676 (9th Cir. May 7, 2014) ............................ 4, 5, 6 Hampton v. Paramount Pictures Corp., 279 F.2d 100 (9th Cir. 1960) ............................................................................................... 9, 11 Hernandez v. Dutch Goose, Inc., No. C 13-03537, 2013 WL 5781476 (N.D. Cal. Oct. 25, 2013) .................................... 1, 6, 24 J&J Sports Productions, Inc. v. Barwick, No. 5:12-CV-05284, 2013 WL 2083123 (N.D. Cal. May 14, 2013) ..................................... 16 J&J Sports Productions, Inc. v. Mendoz-Govan, No. C 10-05123, 2011 WL 1544886 (N.D. Cal. April 25, 2011) ............................................ 6 Jamison v. Capello, No. 1:10-cv-01633, 2013 WL 618203 (E.D. Cal. Nov. 25, 2013) .......................................... 25 Marchi v. Board of Cooperative Educational Servs. of Albany, 173 F.3d 469 (2d Cir. 1999) .................................................................................................... 19 Michael v. Internet Ent’t Group, Inc., 5 F Supp. 2d 823 (C.D. Cal. 1998).......................................................................................... 16 Micro Star v. Formgen, Inc., 154 F.3d 1107 (9th Cir. 1998) ................................................................................................. 10 Monge v. Maya Magazines, 688 F.3d 1164 (9th Cir. 2012) ................................................................................................. 24 Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page4 of 32 TABLE OF AUTHORITIES (continued) Page(s) iv No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Oracle USA, Inc. v. Rimini Street, Inc., No. 2:10-CV-00106, 2010 WL 4386957 (D. Nev. Oct. 29, 2010) ......................................... 15 Oracle USA, Inc. v. Rimini Street, Inc., No. 2:10-CV-00106, 2014 WL 576097 (D. Nev. Feb. 13, 2014) ..................................... 15, 16 Perez v. Gordon & Wong Law Grp., P.C., No. 11-CV-03323, 2012 WL 1029425 (N.D. Cal. March 26, 2012) ................................. 5, 24 Petrella v. Metro-Goldwyn-Mayer, Inc., __ U.S. __, No. 1201315, 2014 WL 2011574 (U.S. May 19, 2014) ................................ 12, 13 Polo v.Shwiff, No. C 12-04461, 2013 WL 1797671 (N.D. Cal. April 29, 2013) ............................................ 6 Practice Mgmt. Info. Corp. v. AMA, 121 F.3d 516 (9th Cir. 1997) ................................................................................................... 14 Qarbon.com Inc. v. eHelp Corp., 315 F. Supp. 2d 1046 (N.D. Cal. 2004) .................................................................................... 5 Salameh v. Tarsadia Hotel, 726 F.3d 1124 (9th Cir. 2013) ................................................................................................. 24 Starbuzz Tobacco, Inc. v. Saeed, No. C 13-3837, 2013 WL 6354438 (N.D. Cal. Dec. 5, 2013) ................................................. 6 Sun Microsystems, Inc. v. Datarm Corp., No. CIV. 96-20708, 1997 WL 50272 (N.D. Cal. Feb. 4, 1997) ....................................... 18, 19 Supermarket of Homes, Inc. v. San Fernando Valley Bd. of Realtors, 786 F.2d 1400 (9th Cir. 1986) ................................................................................................. 13 Surface Supplied, Inc. v. Kirby Morgan Dive Systems, Inc., No. C-13-0575, 2013 WL 5496961 (N.D. Cal. Oct. 3, 2013) ................................................. 6 Triad Systems Corp. v. Southeastern Express Co. 64 F.3d 1330 (9th Cir. 1995) ................................................................................................... 15 Ujhelyi v. Vilsack, No. C 12-04282, 2013 WL 6174491 (N.D. Cal. Nov. 25, 2013) ............................................. 5 Velez v. Bank of America, No. 5:13-cv-02834, 2014 WL 1422972 (N.D. Cal. April 11, 2014) ...................................... 25 Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page5 of 32 TABLE OF AUTHORITIES (continued) Page(s) v No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Federal Statutes 17 U.S.C. § 102 ............................................................................................................................... 7 17 U.S.C. § 107 ............................................................................................................................. 20 17 U.S.C. § 410 ............................................................................................................................... 7 17 U.S.C. § 507 ............................................................................................................................. 13 18 U.S.C. § 1030 ..................................................................................................................... 13, 24 Computer Fraud and Abuse Act .................................................................................................... 24 Lanham Act ................................................................................................................................. 7, 9 State Statutes Cal. Bus. & Prof. Code § 17208 ................................................................................................... 13 Cal. Code Civ. Proc. § 337 ............................................................................................................ 13 Cal. Code Civ. Proc. § 338 ............................................................................................................ 13 Rules Fed. R. Civ. Proc. 8 ................................................................................................................. 1, 4, 5 Fed. R. Civ. Proc. 12 ......................................................................................................... 1, 5, 8, 25 Fed. R. Civ. Proc. 15 ..................................................................................................................... 19 Other Authorities 4 Nimmer on Copyright § 13.06 ..................................................................................................... 9 4 Nimmer on Copyright § 13.07 ................................................................................................... 11 4 Nimmer on Copyright § 13.08 ................................................................................................... 24 4 Nimmer on Copyright § 13.09 ................................................................................................... 13 Restatement (Second) of Torts § 463 ............................................................................................ 21 Restatement (Second) of Torts § 464 ............................................................................................ 21 Restatement (Second) of Torts § 465 ............................................................................................ 22 Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page6 of 32 TABLE OF AUTHORITIES (continued) Page(s) vi No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Restatement (Second) of Torts § 918 ...................................................................................... 21, 22 Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page7 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 1 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION TO STRIKE TO ALL PARTIES AND THEIR COUNSEL OF RECORD, PLEASE TAKE NOTICE that on July 8, 2014 at 10:00 a.m., in courtroom 5 of the above-listed Court, Plaintiffs Oracle America, Inc. and Oracle International Corporation (together, “Oracle” or “Plaintiffs”) will, and hereby do, move for an order pursuant to Federal Rule of Civil Procedure 12(f), striking each and every affirmative defense alleged by Defendants TERiX Computer Company, Inc. (“Terix”), Maintech, Incorporated and Volt Delta Resources, LLC (both together, “Maintech”), Sevanna Financial, Inc. (“Sevanna”), and West Coast Computer Exchange, Inc. (“WEX”) (collectively, “Defendants”). This motion is based on this Notice and Motion, the Defendants’ amended answers to Oracle’s First Amended Complaint (“FAC”), the accompanying motion to shorten time and request for judicial notice, the pleadings on file in this matter, and such oral argument as the Court permits. MOTION TO STRIKE Pursuant to Federal Rule of Civil Procedure 12(f), Oracle moves to strike all of the Defendants’ affirmative defenses alleged in their amended answers to the FAC. See D.I. 181 (Terix’s amended answer), D.I. 178 (Maintech’s amended answer), D.I. 180 (Sevanna’s amended answer), D.I. 179 (WEX’s amended answer). These defenses fail the requirement in Federal Rule of Civil Procedure 8(b)(1) to “state in short and plain terms [the] defenses to each claim asserted” because they are threadbare and conclusory and lack factual content that would allow the Court to infer that the defenses have plausibility, in violation of the pleading standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which apply to affirmative defenses. See Barnes v. AT&T Pension Benefit Plan- Nonbargained Program, 718 F. Supp. 2d 1167, 1172 (N.D. Cal. 2010) (“Rule 8’s requirements with respect to pleading defenses in an answer parallel[] the Rule’s requirements for pleading claims in a complaint.”) (Patel, J.); Hernandez v. Dutch Goose, Inc., No. C 13-03537, 2013 WL 5781476, *4 (N.D. Cal. Oct. 25, 2013) (Beeler, J.) (“[T]here is widespread agreement among courts in this district that the Iqbal-Twombly pleading standard for claims for relief also applies to affirmative defenses”). In addition, several of the Defendants’ affirmative defenses are not an Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page8 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 2 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 affirmative defenses at all and should be stricken for that reason as well. See Barnes, 718 F. Supp. 2d at 1174. Accordingly the Court should grant Oracle’s motion and strike all of the Defendants’ affirmative defenses without leave to amend. MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Oracle’s First Amended Complaint alleges six claims for relief against Defendants related to their scheme to misappropriate and distribute Oracle’s copyrighted software code. D.I. 110. Oracle stated its claims by providing detailed factual support for the allegations that it made regarding Defendants’ longstanding, unlawful conduct that has resulted in significant harm to Oracle. In stark contrast, Defendants’ original answers to the FAC asserted a litany of affirmative defenses that contained no factual content needed to satisfy Twombly and Iqbal’s plausibility requirement. See Iqbal, 556 U.S. at 678 (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard . . . asks for more than a sheer possibility that a defendant has acted unlawfully.”) (citations omitted). As a result, Oracle moved to strike all of the Defendants’ affirmative defenses, D.I. 158, relying on more than a dozen decisions by the Northern District of California granting motions to strike defenses based on the Twombly and Iqbal standards. E.g., Allen v. AVT Event Techs., Inc., No. C-13-1922, 2013 WL 3157905, *2 (N.D. Cal. June 20, 2013) (Chesney, J.) (striking all of defendant’s affirmative defenses because they all failed the Twombly-Iqbal pleading standards); Ansari v. Electronic Document Processing, Inc., No. 5:12-CV-01245, 2012 WL 3945482, *5 (N.D. Cal. Sept. 10, 2012) (Koh, J.) (same). Defendants chose not to oppose Oracle’s motion, and Oracle stipulated for them to have leave to amend but reserved its right to move to strike affirmative defenses contained in Defendants’ amended complaint. D.I. 176, ¶¶ 1, 2, 4. As demonstrated below, Defendants have done little to correct the deficiencies in their original answers. Despite the parties’ having engaged in fairly extensive early discovery and Defendants having the burden of proof on their affirmative defenses, Defendants continue either to litter their answers with boilerplate defenses that have no merit or relevance to this case (such Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page9 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 3 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 as the “essential step” defense, or that the works are unregistered), or state substantive defenses (such as copyright fair use, express license and implied license) without the required factual allegations to show that the defense applies. While Oracle will conduct discovery on Defendants’ defenses should they remain in effect, it should not have to suffer the burden and expense of doing so simply to comprehend what the foundation of the defenses are, nor of having to move for summary judgment on those that have no obvious basis at all. Barnes, 718 F. Supp. 2d at 1173 (striking defenses because “[i]f the court were to permit legally unsustainable affirmative defenses to survive, [Plaintiff] would be required to conduct expensive and potentially unnecessary and irrelevant discovery.”). Granting this motion will “serve to weed out the boilerplate listing of affirmative defenses which is commonplace in most defendants’ pleadings where many of the defenses alleged are irrelevant to the claims asserted.” Id. These policy concerns are especially important in this case. Defendants largely have admitted to Oracle’s factual allegations. Terix’s witnesses have admitted to password trafficking and large-scale copying and distribution of Oracle’s copyrighted software in a manner clearly designed to avoid detection by Oracle. Maintech’s documents show that it has provided Solaris patches to its customers, despite its counsel’s repeated statements to the Court that Maintech is supposedly only in the hardware support business. Defendants’ litigation strategy is essentially obstruction and delay, the only purpose being to increase the cost of the litigation for Oracle and put off a public trial of their knowingly unlawful activities. They filed lengthy motions to dismiss Oracle’s original complaint, and - with one exception that Oracle cured through amendment - the Court rejected those motions as baseless. They dragged their feet for half a year on any meaningful document production, and then leveraged that delay into further delaying additional fact witness depositions. Consistent with this approach, Defendants’ answers reflect a kitchen sink approach by listing every affirmative defense imaginable, including some that do not even exist, with no attempt to meet the governing pleading standards. Under Twombly and Iqbal, this type of excess and drag on the litigation is improper and, consequently, the Court should strike all of the Defendants’ affirmative defenses as Oracle has requested. As a roadmap to this motion, the attached Exhibit A is a chart listing all 87 affirmative Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page10 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 4 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 defenses asserted by Defendants, together with the reason each should be stricken and where the defenses are addressed in this motion. Because Defendants have already had the opportunity to amend their answers, and it is clear that their defenses come nowhere near satisfying the governing pleading standards, the Court should deny Defendants further leave to amend. II. ARGUMENT A. Twombly/Iqbal and the Two Step Heightened Pleading Standard In Twombly, the Supreme Court held that plaintiff’s lengthy complaint did not have enough factual content to satisfy Rule 8’s standard that a complaint “must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. Proc. 8(a)(2). The complaint’s defect was that its attempt to allege an antitrust conspiracy relied on facts that were also consistent with no conspiracy; that is, the key allegation that there was a conspiracy was a mere conclusion. 550 U.S. at 555-57. The Court explained that a complaint “requires . . . enough factual matter” to provide “plausible grounds” to let the Court “infer” that the alleged wrongdoing actually happened. Id. at 556. “The need at the pleading stage for allegations plausibly suggesting (not merely consistent with)” wrongdoing “reflects the threshold requirement of Rule 8(a)(2) that the ‘plain statement’ possess enough heft to ‘sho[w] that the pleader is entitled to relief.” Id. at 557 (emphasis supplied). This plausibility standard “calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal” conduct. Id. The Supreme Court expanded on the plausibility standard in Iqbal. In that case, the Court explained that a claim has “plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 556 U.S. at 678. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. Instead, the “well-pleaded facts” must “show” that the plaintiff is entitled to relief, not merely suggest it. Id. at 679. The Ninth Circuit has interpreted Twombly and Iqbal to require “a two-step process” in evaluating the legal sufficiency of a pleading, Eclectic Properties East, LLC v. Marcus & Millichap Co., __ F.3d __, No. 12-16526, 2014 WL 1797676, *2 (9th Cir. May 7, 2014): Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page11 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 5 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Step 1: “First, a court should ‘identif[y] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.’” Id. (quoting Iqbal, 556 U.S. at 679). Step 2: “Then a court should ‘assume the[] veracity’ of ‘well pleaded factual allegations’ and ‘determine whether they plausibly give rise to an entitlement to relief.’” Id. (quoting Iqbal, 556 U.S. at 678). B. Twombly and Iqbal Apply to Affirmative Defenses “Rule 8’s requirements with respect to pleading defenses in an answer parallel[] the Rule’s requirements for pleading claims in a complaint.” Barnes, 718 F. Supp. 2d at 1172; see also Perez v. Gordon & Wong Law Grp., P.C., No. 11-CV-03323, 2012 WL 1029425, *7 (N.D. Cal. March 26, 2012) (Koh, J.) (applying Twombly and Iqbal to affirmative defenses because “‘[a]ffirmative defenses are governed by the same pleading standards as complaints…’”) (quoting Qarbon.com Inc. v. eHelp Corp., 315 F. Supp. 2d 1046, 1049 (N.D. Cal. 2004)). Accordingly, “courts in this district consistently have applied the Twombly-Iqbal pleading standard to the pleading of affirmative defenses, requiring a defendant to allege enough facts to state a claim to relief that is plausible on its face.” Bottoni v. Sallie Mae, Inc., No. C 10- 03602, 2011 WL 3678878, *1 (N.D. Cal. Aug. 22, 2011) (Beeler, J.); see also Barnes, 718 F. Supp. 2d at 1171-72 (“the vast majority of courts [in this district] presented with the issue have extended Twombly’s heightened pleading standard to affirmative defenses”) (citing, among other cases, CTF Dev., Inc. v. Penta Hospitality, LLC, No. C 09-02429, 2009 WL 3517617, *7-8 (N.D. Cal. Oct. 26, 2009) (Alsup, J.)); Barnes & Noble, Inc. v. LSI Corp., 849 F. Supp. 2d 925, 928 (N.D. Cal. 2012) (Chen, J.); Dion v. Fulton Friedman & Gullace LLP, No. 11-2727, 2012 WL 160221, *2 (N.D. Cal. Jan. 17, 2012) (Conti, J.) (citing Barnes, 718 F. Supp. 2d at 1172); Ujhelyi v. Vilsack, No. C 12-04282, 2013 WL 6174491, *2 (N.D. Cal. Nov. 25, 2013) (White, J.) (“the majority of courts within this District have applied Twombly and Iqbal to affirmative defenses”). Courts in this District have also observed that “[a] showing of prejudice is not required” by the Plaintiff “to strike an ‘insufficient’” affirmative defense Rule 12(f), while also observing that “in any event, the obligation to conduct expensive and potentially unnecessary and irrelevant discovery is a prejudice.” Bottoni, 2011 WL 3678878, at *2; Barnes, 718 F. Supp. 2d at 1173. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page12 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 6 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Courts in this District have frequently granted motions to strike all affirmative defenses where the defendant fails to comply with the Twombly-Iqbal pleading standards. See Starbuzz Tobacco, Inc. v. Saeed, No. C 13-3837, 2013 WL 6354438, *2 (N.D. Cal. Dec. 5, 2013) (Illston, J.) (striking all affirmative defenses); Hernandez, 2013 WL 5781476, at *7 (same); Surface Supplied, Inc. v. Kirby Morgan Dive Systems, Inc., No. C-13-0575, 2013 WL 5496961, *8-9 (N.D. Cal. Oct. 3, 2013) (Chesney, J.) (same); Allen, 2013 WL 3157905, at *2 (same); Polo v.Shwiff, No. C 12-04461, 2013 WL 1797671, *5 (N.D. Cal. April 29, 2013) (White, J.) (same); Ansari, 2012 WL 3945482, at *4-5 (same); Dion, 2012 WL 160221, at *4 (same); J&J Sports Productions, Inc. v. Mendoz-Govan, No. C 10-05123, 2011 WL 1544886, *7 (N.D. Cal. April 25, 2011) (Alsup, J.) (same); Barnes, 718 F. Supp. 2d at 1176 (same). This Court should do the same here. C. Defendants’ Affirmative Defenses All Fail the Twombly/Iqbal Standard 1. Most of Defendants’ Affirmative Defenses Fail Step 1 Most of Maintech’s affirmative defenses, and about half of Terix’s, WEX’s and Sevanna’s affirmative defenses, fail the Twombly/Iqbal pleading standard at step one. That is, once the Court identifies the allegations that are not entitled to the assumption of truth because they are conclusory, see Eclectic Properties, 2014 WL 1797676, at *2, there is simply nothing left of the defenses. This is true for Maintech defenses 4-7, 9, 10, 13, 14, 17-24, Terix defenses 2, 3, 5, 9, 10, 18-20, 22, 24, 25, WEX defenses 1, 2, 4, 6, 14-16, 18, 19, and Sevanna defenses 1, 2, 4, 6, 14-16, 18, 19.1 Each of these defenses refers to a statute or legal doctrine and then contains one or two sentences asserting its applicability in a conclusory fashion. A complaint drafted in such a manner would be dismissed under Twombly/Iqbal simply for the lack of non- conclusory factual allegations, and these defenses should be stricken for the same reason. For example, Maintech’s fourth affirmative defense asserts that “one or more” of the 1 Terix defense 2, WEX defense 1 and Sevanna 1 defense 1 - which assert that the copyrights at issue do not contain copyrightable subject matter - each contain a statement that Solaris has lost copyright protection because it was made open source. That assertion has nothing to do with whether the software was copyrightable, which is the purported defense. Accordingly, Oracle addresses the open source assertion in its discussion of the waiver defense below. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page13 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 7 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 copyright registrations at issue is invalid, and then recites the language of 17 U.S.C. § 102(b): One or more of the copyright registrations that are allegedly infringed by Answering Defendants are invalid for failure to comply with the requirements for copyrightable subject matter set forth in 17 U.S.C. § 102. With respect to the versions of Solaris subject to the copyright registrations and application identified in the First Amended Complaint, Answering Defendants are informed and believe, and based thereon allege, that the Solaris source and object code consists of functional, efficiency-driven and structural elements. These “idea[s], procedur[es], process[es], system[s], method[]s of operation, concept[s], principles, or discover[ies] are not protectable under 17 U.S.C. § 102(b). The legal standard to show invalidity is especially high for the registrations at issue in this case, which are entitled to the presumption of validity under 17 U.S.C. § 410(c). Yet all Maintech provides is a threadbare recitation of the elements of a defense. This does not satisfy the first step of the Twombly/Iqbal pleading standard. See Iqbal, 556 U.S. at 680-81 (“These bare assertions . . . amount to nothing more than a ‘formulaic recitation of the elements’ of a constitutional discrimination claim”) (citations omitted). As another example, Terix’s twenty-second affirmative defense for nominative fair use states: “Oracle’s claim for relief under the Lanham Act fails because Oracle’s Solaris Updates and firmware are products and/or services that are not readily identifiable without reference thereto, and TERiX’s use constitutes use reasonably necessary to identify the product or service, and TERiX has taken no action that would, in conjunction with references to Oracle’s products and services, suggest sponsorship or endorsement by Oracle.” That is just a formulaic recitation of the elements of a nominative fair use defense. It does not have any factual content to it or demonstrate how it can be a defense to any of Terix’s conduct. As another example, WEX and Sevanna’s sixteenth affirmative defense of statute of limitations states: “Each of Oracle’s claims for relief is barred by the applicable statutes of limitations. Oracle, through its predecessor Sun, was aware of or on notice of the activities of which it now complains as early as 2008. TERiX and Oracle, through its predecessor Sun, communicated regarding, inter alia, TERiX and others’ activities in assisting its customers with server maintenance and specifically regarding Solaris Updates. Oracle, through its predecessor Sun, did not timely file suit after such notice. As a result, Oracle was aware of TERiX’s and Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page14 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 8 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 others’ alleged conduct before the acquisition of Sun by Oracle in January 2010.” That defense pleads the conclusion that Oracle was on notice of something and should have sued earlier, but once the Court strips away that conclusion there is no factual content left on which the Court could perform step two’s plausibility analysis. WEX and Sevanna do not allege what Oracle was told, or when, or even whether it was told anything or was supposed to have been “on notice” of something. Recall that allegations do not survive step two’s plausibility analysis when “plaintiffs’ explanation is merely possible rather than plausible. To render their explanation plausible, plaintiffs must do more than allege facts that are merely consistent with both their explanation and defendants competing explanation.” In re Century Aluminum Co. Secs. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013) (emphasis original). Here, the affirmative defense is so conclusory there are no factual allegations to evaluate to determine if the defense is merely possible as opposed to plausible. This lack of factual content forecloses all of these affirmative defenses. Between them, Defendants have alleged a total of 87 affirmative defenses. Many of the defenses overlap, but by Oracle’s count Defendants have alleged at least 31 distinct affirmative defenses, and most of them have essentially no factual content and are far beyond the scope of the issues raised by Oracle’s six claims for relief. “‘[A] district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed,” Twombly, 550 U.S. at 558 (citation omitted). “The purpose of a Rule 12(f) motion is to avoid spending time and money litigating spurious issues.” Bottoni, 2011 WL 3678878, at *1. The Court should strike these spurious defenses. 1. The Rest of Defendants’ Affirmative Defenses Fail Step 2 Defendants’ other affirmative defenses fail the second step of the Twombly/Iqbal pleading standard. For these defenses, the briefly stated affirmative defenses either have nothing to do with what the defense is under governing legal standards, or they come nowhere close to pleading facts that would satisfy the elements of the defense. For some of these defenses, one or more of the Defendants also fails step one of the Twombly/Iqbal standard. a. Waiver (Maintech defense 1, Terix defense 14, WEX and Sevanna defense 10) Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page15 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 9 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants assert waiver as an affirmative defense. Maintech asserts it as a defense to “Oracle’s copyright claim.” Terix, WEX and Sevanna do not specifically identify what claims they assert a waiver defense for, but all three state that “Oracle knowingly waived its right to sue regarding Solaris Updates,” and they make assertions concerning how Oracle licensed and distributed its software. That sounds like they are asserting a waiver defense only to the copyright claim, as those assertions about software licensing and distribution do not have anything to do with, for example, the Lanham Act. Defendants do not plead facts that plausibly suggest a waiver defense. “[S]trictly speaking, ‘waiver’ itself does not serve as a defense to copyright infringement.” 4 Nimmer on Copyright § 13.06. “Instead, abandonment of the copyright . . . constitutes an effective defense in an infringement action.” Id. “Abandonment of the copyright occurs only if there is an intent by the copyright proprietor to surrender rights in his work. There is, moreover, strong authority holding that an overt act evidencing such an intent is necessary to establishment abandonment.” Id. The Ninth Circuit follows the Nimmer treatise on these points. See A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1026 (9th Cir. 2001). Importantly, “lack of action” to enforce a copyright cannot amount to abandonment. Hampton v. Paramount Pictures Corp., 279 F.2d 100, 104 (9th Cir. 1960). Defendants’ allegations come nowhere close to plausibly suggesting that Oracle abandoned its rights in Solaris to the public. Terix, WEX and Sevanna argue that customers that purchased “licensed copies of Solaris 7, 8, 9, and/or 10” received from Sun/Oracle “perpetual license rights to that version” and to updates to it. These Defendants contend that “[t]hose license rights are set forth in original Solaris license documents.” But licensing customers to use Solaris does not plausibly suggest that Oracle abandoned its copyrights. It shows the opposite, as there would be no need for a license if Oracle had abandoned its copyrights. These Defendants and Maintech also assert that Oracle failed to take adequate steps to prevent them from stealing its software, and that Oracle has launched an “aggressive litigation campaign for allegations of copyright infringement.” However, those allegations do not show abandonment, see Hampton, 279 F.2d at 104, and certainly litigation to enforce copyrights Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page16 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 10 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 negates a showing of abandonment. Maintech also asserts that in December 2012 “a blogger noticed” that “someone” had posted a .tar file on the internet that contained the source code for Solaris 11, and “[t]his event was covered extensively in the media.” That does not show that Oracle abandoned its copyrights, or even that Oracle did anything to contribute to this improper posting by an unauthorized third party. Maintech asserts that Sun “released Solaris 10 between 2005 and 2010 in open source form under the CDDL,” which stands for the Common Development and Distribution License. Maintech states that “[t]hese open source and/or publicly available releases of Solaris were readily available at no cost over the Internet.” However, distributing a source code version of Solaris under a broad licensing regime does not show abandonment of the copyright, and indeed the licensing regime itself shows the opposite. Further, Oracle is not suing Defendants for distributing source code versions of Open Solaris; it is suing them for distributing object code Solaris Updates and firmware updates regarding the commercial version of Solaris that was installed on its servers, i.e., the updates that Oracle provides to its paying customers. E.g., FAC ¶¶ 1, 8. Maintech’s allegations concerning source code distribution under the CDDL have no relevance to nor plausibly suggest a license defense applicable to, the accused conduct. See Micro Star v. Formgen, Inc., 154 F.3d 1107, 1114 (9th Cir. 1998) (“Given that it overtly encouraged players to make and freely distribute new levels, FormGen may indeed have abandoned its exclusive right to do the same. But abandoning some rights is not the same as abandoning all rights, and FormGen never overtly abandoned its rights to profit commercially from new levels.”) (citation omitted). Defendants’ allegations do not plausibly suggest a waiver defense to Oracle’s copyright claim and therefore fail the Twombly/Iqbal pleading standards. If Defendants contend their waiver defense somehow relates to other claims, then the defense is merely conclusory because nothing in it shows “the intentional relinquishment of a known right with knowledge of its existence and the intent to relinquish it,” A&M Records, 239 F.3d at 1026 (citation and quotation marks omitted), for Oracle’s other claims either. The Court should strike the defense. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page17 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 11 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 b. Estoppel (Maintech defense 1, Terix defense 15, WEX and Sevanna defense 11) There are four “necessary elements” to the defense of estoppel: (1) the plaintiff must know the facts of the defendant’s infringing conduct; (2) the plaintiff must intend that its conduct shall be acted on or must so act that the defendant has a right to believe that it is so intended; (3) the defendants must be ignorant of the true facts; and (4) the defendant must rely on the plaintiff’s conduct to its injury. 4 Nimmer on Copyright § 13.07[A] (following Hampton, 279 F.2d at 104); see also Carmichael Lodge No. 2013 v. Leonard, No. CIV S-07-2665, 2009 WL 2985476, *15 (E.D. Cal., Sept. 16, 2009) (test is the same for non-copyright claims). Defendants plead no facts to establish any of these elements. Maintech pleads its estoppel defense together with its waiver defense, discussed above. Those allegations have nothing to do with, and do not establish the elements of, estoppel. Terix’s estoppel defense asserts, without any factual support for the conclusion, that Oracle is estopped from suing Terix because Oracle itself engages in similar conduct with respect to other software companies. Terix defense 11 (“On information and belief, Oracles accesses other OEM websites and downloads patches in its capacity as a software service provider. Oracle knew or should have known that TERiX and others would and did rely on such facts, inter alia, to engage in the conduct Oracle now complains of as being unlawful.”). Terix fails to provide any specifics regarding this alleged conduct, such as who the other OEMs are, what patches Oracle has downloaded or when such conduct occurred, if at all. Terix also says nothing about what these other OEM’s policies are with respect to downloading patches, whether Oracle had authorization for other OEM software, or whether “Oracle accesses other OEM websites and downloads patches” in a manner that is similar to or different from the admittedly covert and fraudulent methods in which Terix acquires Oracle’s software. Terix’s “you do it too” assertion is speculative, not factual. Regardless, even aside from the lack of factual content, it is just not an estoppel defense. For example, Terix has no allegations that satisfy elements 1 and 3 of the estoppel defense. WEX and Sevanna contend that Oracle is estopped because Sun “previously provided Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page18 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 12 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Updates for free and/or made them open source” and “Oracle knew or should have known that Defendants and others would and did rely on these facts to engage in the conduct Oracle now complains of as being unlawful.” Those allegations are deficient. They are a conclusory (and knowingly false based on allegations in Terix’s and Maintech’s separately pleaded counterclaims2) - and therefore defective - assertion of element 4 of the defense, not quite even a conclusory allegation of element 2, and nothing in even the most conclusory form concerning elements 1 and 3. c. Laches (Maintech defense 2, Terix defense 13, WEX and Sevanna defense 9) Defendants assert a laches defense for Oracle’s claims relating to their distribution of Solaris Updates and firmware.3 However, the Supreme Court’s recent decision in Petrella v. Metro-Goldwyn-Mayer, Inc., __ U.S. __, No. 1201315, 2014 WL 2011574 (U.S. May 19, 2014), disposes of Defendants’ laches defense. In that case, the Court considered whether laches could serve as a defense to a copyright infringement case. However, the answer the Court provided sweeps far broader than just copyright claims. The Court held that “laches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation.” Id. at *9. Accordingly, “we adhere to the position that, in [the] face of a statute of limitations enacted by Congress, laches cannot be invoked to bar legal relief.” Id. Because the Copyright Act has a three-year statute of limitations that starts running each time a new infringing act is discovered, id. at *9 & *6 n.4, the Court held that laches could not bar the claim. The Court was clear that its reasoning applies beyond the copyright context, stating that “[t]here is nothing at all ‘different’ 2 See, e.g., D.I. 144, ¶ 51, 52 (Terix counterclaim alleging that Oracle does not make Solaris patches available for free and that before Oracle acquired Sun, some percentage of Solaris patches had always been restricted). 3 None of the allegations in Maintech defense 2, Terix defense 13, and WEX and Sevanna defense 9 relate to false advertising, so Defendants do not plead laches as a defense to Oracle’s Lanham Act claim. FAC ¶¶ 87-95. For that matter, WEX and Sevanna are not defendants on Oracle’s Lanham Act claim. See id. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page19 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 13 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 about copyright cases in this regard.” Id. at *9.4 Here, all of Oracle’s claims to which Defendants assert a laches defense are subject to explicit statutes of limitations. 17 U.S.C. § 507(b); 18 U.S.C. § 1030(g); Cal. Code Civ. Proc. §§ 337(1), 338; Cal. Bus. & Prof. Code § 17208. Under Petrella, laches cannot bar Oracle’s claims. Further, Defendants make no factual allegations that would support limiting Oracle’s requested injunctive relief. Oracle seeks an injunction against Defendants’ ongoing illegal conduct. There is nothing extraordinary about that; it’s what every copyright plaintiff seeks. Under Petrella, Defendants have no laches defense. d. Unclean Hands (Maintech defense 11, Terix defense 16, WEX and Sevanna defense 12) “Plaintiff’s action will be dismissed under the theory of unclean hands if defendant establishes that plaintiff’s evidence was false and that plaintiff was involved in a scheme to defraud the public.” Supermarket of Homes, Inc. v. San Fernando Valley Bd. of Realtors, 786 F.2d 1400, 1408 (9th Cir. 1986). The Ninth Circuit has rejected broader application of the unclean hands defense to the illegal use of a copyrighted work. Dream Games of Arizona, Inc. v. PC Onsite, 561 F.3d 983, 991 (9th Cir. 2009) (“illegal operation of a copyrightable work neither deprives the work of copyright protection nor precludes generally available remedies”); see also 4 Nimmer on Copyright § 13.09[B] (“such a defense is recognized only rarely,” such as “when the plaintiff misused the process of the courts by falsifying a court order, by falsifying evidence, 4 The Court did acknowledge that “[i]n extraordinary circumstances, however, the consequences of a delay in commencing suit may be of sufficient magnitude to warrant, at the very outset of the litigation, curtailment of the relief equitably awardable.” Id. at *13. The Court then gave as an example a case decided by the Sixth Circuit in which “the defendants were alleged to have used without permission, in planning and building a housing development, the plaintiffs’ copyrighted architectural design.” Id. Finding that laches could not bar a copyright infringement brought within the three-year limitations period, the Court of Appeal nevertheless held that “[t]he plaintiffs, even if they might succeed in proving infringement of their copyrighted designs, would not be entitled to an order mandating destruction of the housing project.” Id. The Supreme Court cited this example with approval as an illustration of extraordinary circumstances that could limit injunctive remedies. The Court then remanded the case, instructing the lower courts to “closely examine MGM’s alleged reliance” on plaintiffs’ delay. Id. at *14. No similar concerns are present in this case. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page20 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 14 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 or by misrepresenting the scope of his copyright to the court and opposing party”). Defendants make no allegations to support an unclean hands defense. Maintech asserts that Oracle has engaged in anticompetitive conduct “by attempting to leverage copyright monopoly over the market for support of Oracle/Sun software and related hardware” and that Oracle “is attempting through litigation to unilaterally change the terms of its agreements with its customers.” (Maintech defense 11.) Terix, WEX and Sevanna assert that Sun gave away Solaris Updates for free and Oracle “changed these policies without adequate or fair notice to customers or ISPs” and that Oracle itself engages in the conduct as to other software companies “of which it accuses TERiX.” (Terix defense 16, WEX and Sevanna defense 11.) However, those allegations simply have nothing to do with an unclean hands defense. They do not show, or attempt to show, that Oracle falsified a court order, falsified evidence, misrepresented the scope of its copyrights to the Court or the Defendants, or submitted false evidence and participated in a scheme to defraud the public. The Court should strike the defense. e. Copyright Misuse (Maintech defense 3, Terix defense 4, WEX and Sevanna defense 3) Defendants’ copyright misuse defense is legally defective for the same reasons that Maintech and Terix’s counterclaims for copyright misuse are defective, as explained in Oracle’s motion to dismiss. D.I. 173 at 22-24. As Oracle explained, the copyright misuse doctrine does not prohibit using conditions to control the use of a firm’s copyrighted material. Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1159 (9th Cir. 2011). To the contrary, it is used “sparingly” and applies only where a copyright is used to stifle competition. Id. at 1157. To date, the Ninth Circuit has only upheld its application in situations where a customer is prohibited from using the products of any other competitors. See Practice Mgmt. Info. Corp. v. AMA, 121 F.3d 516, 521 (9th Cir. 1997) (finding misuse where the copyright holder “[c]ondition[ed] the license on [the customer’s] promise not to use competitors’ products”); see also Psystar, 658 F.3d at 1157 (noting that the “decision in Practice Management is the only case in which we upheld a copyright misuse defense”). On the other hand, the Ninth Circuit has rejected copyright misuse theories on facts Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page21 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 15 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 similar to those asserted here. For example, in Triad Systems Corp. v. Southeastern Express Co., the plaintiff (Triad) designed computers for use in the automotive industry, and licensed unique diagnostic software to service those computers. 64 F.3d 1330, 1333 (9th Cir. 1995). The defendant was an independent service organization that serviced Triad computers. Id. Triad sued the defendant for copyright infringement, asserting that, in servicing Triad computers, the defendant necessarily copied Triad’s proprietary software to the computer’s random access memory and thereby infringed Triad’s copyright. Id. Affirming a preliminary injunction, the Ninth Circuit rejected the defendant’s copyright misuse claim because “Triad did not attempt to prohibit [the defendant] or any other ISO from developing its own service software to compete with Triad.” Id. at 1337. As the Ninth Circuit recently explained, Triad stands for the proposition that a “software licensing agreement may reasonably restrict use of the software as long as it does not prevent the development of competing products.” Psystar, 658 F.3d at 1159. Here, Defendants do not allege that Oracle prohibits its customers from accepting Solaris software or hardware services from Maintech, Terix or any other ISO that those companies develop on their own. Defendants also do not allege that Oracle prohibits Defendants from developing any “competing products” that might help them provide such services - except of course from using Oracle’s proprietary, copyrighted software. Absent alleged facts showing, for example, that Oracle prohibits customers from doing business with Defendants or otherwise prohibits its licensees from participating in the software and hardware service markets in which Defendants compete, Defendants’ copyright misuse defense fails as a matter of law. See Oracle USA, Inc. v. Rimini Street, Inc., No. 2:10-CV-00106, 2010 WL 4386957, *5 (D. Nev. Oct. 29, 2010) (striking copyright misuse defense because Oracle’s “licensing agreement does not preclude a customer from using either a competing company or no company at all to access its support materials”). f. Express or Implied License (Maintech defense 12, Terix defenses 7 and 8) “As the party alleging the affirmative defense,” each Defendant “has the initial burden to identify any license provision(s) that it believes excuses its infringement.” Oracle USA, Inc. v. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page22 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 16 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Rimini Street, Inc., No. 2:10-CV-00106, 2014 WL 576097, *4 (D. Nev. Feb. 13, 2014) (citing Michael v. Internet Ent’t Group, Inc., 5 F Supp. 2d 823, 831 (C.D. Cal. 1998); Broadcast Music, Inc. v. Evie’s Tavern Ellention, Inc., No. 8:11-cv-2056, 2011 WL 6012201, *2 (M.D. Fla. Nov. 30, 2011) (Defendants must “plead and prove the [license] defense.”) (emphasis supplied). A license defense has to be asserted on a customer by customer basis. See Oracle USA, 2014 WL 576097, *4 (“As each customer’s software licensing agreement is different, the court must evaluate [defendant’s] express license affirmative defenses separately for each customer at issue); cf. Avaya Inc. v. Telecom Labs, Inc., No. 06-2490, 2014 WL 97335, *5 (D.N.J. Jan. 7, 2014) (party “failed to prove the software licensing agreements entered into by TLI/C’s 470 customers upon purchasing their” equipment, where it “introduced only two incomplete sets of the unknown number of licensing agreements”). At the pleading stage this requires enough factual content to move the defense “across the line from conceivable to plausible,” Iqbal, 556 U.S. at 680. Without sufficient “factual allegations,” a license “defense fails and must be stricken.” J&J Sports Productions, Inc. v. Barwick, No. 5:12-CV-05284, 2013 WL 2083123, *3 (N.D. Cal. May 14, 2013) (Koh, J.). Terix. Terix’s seventh defense for express license contains a three-sentence assertion that licenses exist that authorized Terix’s conduct, but does not identify any of those licenses or any of their terms, or indicate which licenses apply to its hundreds of customers and their thousands of servers even after months of discovery on this very issue. Its eighth defense for implied license also contains a three sentence assertion that unspecified industry customs authorized Terix’s conduct. These defenses are devoid of factual information which is remarkable given that Terix, in particular, has touted the alleged existence of such licenses as the cornerstone of its response to Oracle’s claims. Iqbal’s examples of allegations that are so conclusory they “are not entitled to the assumption of truth” look positively detailed compared to Terix’s threadbare license defenses. See 556 U.S. at 680-81 Further, Oracle pointed out this defect in Terix’s license defense in its prior motion to strike, D.I. 168 at 8, and Oracle then stipulated to give Terix leave to amend to try to allege a license defense, D.I. 176. In response, Terix made only one change to its seventh and eighth Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page23 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 17 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 defenses: It added a sentence to the end of each, saying “[f]urther factual allegations in support of this affirmative defense are set forth in TERiX’s Counterclaim, Docket No. 144, including at Paragraphs 25 through 30.” (emphasis supplied) First, giving Oracle a non-exhaustive list of places to go look in search of Terix’s license defense does not give Oracle fair notice of what the defense is. See Dion, 2012 WL 160221, at *3 (“Defendants must give Plaintiff fair notice of” what their affirmative defenses are “rather than leaving it to Plaintiff, and this Court, to guess”). Second, the cited paragraphs 25 through 30 of Terix’s counterclaim do not add any relevant factual content identifying licenses or their terms. Paragraph 26 of the counterclaim is essentially a copy of Terix’s seventh affirmative defense, and paragraphs 25 and 27-30 do nothing further to identify any licenses or their terms. Terix’s license defenses are threadbare and conclusory, and the gambit of telling Oracle to look in Terix’s counterclaims is both unreasonable and ultimately fruitless because the factual information is not there either. Maintech. Maintech alleges in conclusory fashion that “[c]ustomers who obtained licensed copies of Solaris” or who “otherwise obtain[e]d a licensed version of Solaris” received an entitlement to perpetual updates. But Maintech provides no factual content to show what licenses any of its customers obtained or were operating under regarding their use of Solaris or, more importantly, what licenses apply to the versions of Solaris supported by Maintech that grant the incredibly broad right to use not only the version of Solaris licensed but all future patches and updates that Sun/Oracle may ever release. Maintech asserts that Oracle “impliedly” granted a license “for continued support and updates,” but Maintech does not identify what conduct impliedly did that, or to whom Oracle somehow granted these unwritten licenses. Maintech refers to one license in its affirmative defense - “Sun’s Binary Code License Agreement” (“BCL”) - but provides no factual content concerning: which of its customers, if any, licensed anything under the BCL; what time period the BCL existed; what versions of Solaris the BCL applied to; or whether the BCL is applicable to any of the servers for which Maintech provides support. Maintech is well aware, and has alleged in its counterclaims, that Solaris has existed since the early 1990s (D.I. 145, ¶ 14) and that there have been many versions Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page24 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 18 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of Solaris released over the years. D.I. 145, ¶ 17. That Maintech refers to only one BCL version for Solaris, which has been in commercial release for over twenty years, merely underscores the lack of any factual basis that Maintech has regarding its license defense. Moreover, Maintech is asserting a license defense in response to Oracle’s allegations that Maintech has provided illegal support services to hundreds of customers over the span of several years. FAC ¶¶ 55-63. Maintech itself alleges in its counterclaims that is has “over 500 customers” on Oracle hardware and that Oracle’s licensing practices changed over time. D.I. 145, ¶¶ 12, 25, 27-29. Yet Maintech’s affirmative defense identifies only one license agreement and does not identify any customers who were parties to it or the servers that are running version of Solaris covered by it. As to the BCL, Maintech quotes language that customers who were parties to it had a license to the underlying Solaris program and “any error corrections provided by Sun.” Maintech quotes a Sun policy document stating that customers could obtain patches “when they are rolled into a complete OS release.” Neither statement comes close to saying that the BCL or any other unidentified license entitled a customer to any and all free-standing Solaris patches (i.e., what Oracle alleges Defendants copied and distributed) in perpetuity. In fact, completely inconsistent to this conclusory assertion in Maintech’s license defense is Defendants’ allegation in their counterclaims that Sun always had “private” patches for which a support agreement was required. E.g., D.I. 144, ¶ 52. Maintech’s (and Terix’s) license defense would have failed even before Twombly and Iqbal were decided and courts applied the former notice pleading standard. For example, in Sun Microsystems, Inc. v. Datarm Corp., No. CIV. 96-20708, 1997 WL 50272 (N.D. Cal. Feb. 4, 1997), Sun sued Dataram for patent infringement concerning single in-line memory modules (“SIMMS”). Similar to Defendants’ license defense here, Dataram asserted a license defense claiming that “it is selling its products to end users of Sun computers who have a license from Sun to use Dataram’s SIMMs.” Id. at *3. Dataram contended that customers need SIMMs “because Sun sells customers computer equipment with insufficient memory in reliance upon memory manufacturers such as Dataram.” Id. Dataram then went further and alleged that Sun “tell[s] customers that they could obtain memory modules from independent manufacturers.” Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page25 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 19 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Court struck the license defense for lack of sufficient “factual allegations.” Id. at *4. “The legal conclusion that Sun customers have a license to use Dataram SIMMS is inadequate.” Id. Defendants’ license defense is no different here. Denial of leave to amend. It is also clear that the license defense cannot be saved by amendment. Oracle deposed Terix and Maintech’s Rule 30(b)(6) witnesses concerning their license defense. See Oracle’s Request for Judicial Notice (“RJN”), Ex. A (Depo. Ex. 52, topic 13), Ex. B (Quinn Depo. at 14:1-7), Ex. C (Depo Ex. 1, topic 12), Ex. D (Coscia Depo. at 16:5- 10). See Central Laborers’ Pension Fund v. Integrated Elec. Servs., Inc., 497 F.3d 546, 556 (5th Cir. 2007) (in determining whether leave to amend should be granted under Rule 15 when a pleading is defective, it is proper to consider a party’s deposition testimony to determine if amendment would be futile, and upholding denial of leave to amend because it was futile); Marchi v. Board of Cooperative Educational Servs. of Albany, 173 F.3d 469, 477-79 (2d Cir. 1999) (same); Campion v. Old Republic Int’l Corp., No. C 12-0443, 2012 WL 2838738 (N.D. Cal. July 10, 2012) (denying leave to amend pleading because “[g]iven that testimony under oath, Campion cannot now allege in good faith” the required elements of his claim) (Seeborg, J.). Maintech’s 30(b)(6) deponent had and had . RJN, Ex. D (Coscia Depo. at 144:17-145:14, 184:13-185:9). Terix’s 30(b)(6) witness testified that he had , and that Terix usually . Id., Ex. B (Quinn Depo. at 80:23-81:8, 83:16-85:14). Defendants cannot allege facts to show that a license defense is plausible, rather than merely possible - which is their burden under Twombly and Iqbal - because they do not know, and never knew, of any such facts. g. Fair Use (Maintech defense 8, Terix defense 6, WEX and Sevanna defense 5) The Supreme Court has explained that “the heart of the fair use” doctrine is whether the defendant “adds something new” to the copyrighted work: “it asks, in other words, whether and to what extent the new work is ‘transformative.’” Campbell v. Acuff-Rose Music, Inc., 510 U.S. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page26 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 20 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 569, 579 (1994). 17 U.S.C. § 107 lists the factors a court considers in determining whether the defendant’s use of a copyrighted work is fair use, which include the purpose and character of the defendant’s use of the work, the portion of the work the defendant used in relation to the work as a whole, and the effect of the defendant’s use on the market for the copyrighted work. See generally A&M Records, 239 F.3d at 1015-19 (discussing section 107 requirements). Maintech’s fair use defense does not have any allegations that are even relevant to the fair use doctrine. Maintech asserts that Oracle “expressly or impliedly granted a license” to owners of Oracle hardware, and that Maintech operates under those licenses; that Oracle permitted Solaris software to “to be ‘open source’ and freely available over the internet”; and that “Oracle is attempting to use its copyright monopoly over the operating software” and software patches “to try to drive competing ISOs out of business.” (Maintech defense 8.) Those allegations relate to Oracle’s conduct, not Maintech’s use of the software. They are irrelevant because a fair use defense relates to the defendant’s conduct. Terix, WEX and Sevanna’s fair use defense is threadbare and conclusory and fails step one of the Twombly/Iqbal pleading standard. For these defendants, the entire defense is six sentences long. (Terix defense 6, WEX and Sevanna defense 5.) The first sentence refers to 17 U.S.C. § 107 and states that the Defendant invokes the fair use defense - a pure legal conclusion. The next two sentences recite some of the elements of the defense listed in section 107 and assert they have been satisfied. The fourth sentence states that Oracle made portions of the Solaris software available as “open source,” which has nothing to do with section 107. The fifth sentence recites the remaining elements of the section 107 defense. And then the sixth sentence tells Oracle to look through Terix’s counterclaims, including but not limited to more than 40 paragraphs, to see if more information can be found there about fair use. Oracle has done so, and there is nothing, which is not surprising, as Terix’s counterclaims have nothing whatever to do with the fair use doctrine. A complaint that pleaded conclusions in what is really only three sentences would never survive a motion to dismiss under Twombly/Iqbal. Again, Terix’s threadbare allegations are much less detailed than what the Supreme Court held inadequate in Iqbal. 556 U.S. at 680-81. Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page27 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 21 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 h. Failure to Mitigate, Contributory Negligence (Maintech defenses 15 and 16, Terix defenses 11, 12 and 17, WEX and Sevanna defenses 7, 8 and 13) Defendants also plead failure to mitigate damages and contributory negligence. Terix calls contributory negligence “invitation to/inducement of conduct” (Terix defense 12) and “acts or omissions of others” (Terix defense 17). However, those are not real affirmative defenses, and in both Terix asserts that Oracle is responsible for the harm it has suffered (in defense 17 - for “acts or omissions of others” - Terix explicitly refers to “Oracle’s negligence”), so in substance those are a contributory negligence defense. WEX and Sevanna do the same in their defenses 7 and 8. Those defenses are conclusory and do not survive the Twombly/Iqbal pleading standard. The defense of failure to mitigate damages is set forth in section 918 of the Restatement (Second) of Torts: “1. Except as stated in Subsection 2, one injured by the tort of another is not entitled to recover damages for any harm that he could have avoided by the use of reasonable effort or expenditure after the commission of the tort. 2. One is not prevented from recovering damages for a particular harm resulting from a tort if the tortfeasor intended the harm or was aware of it and was recklessly disregardful of it, unless the injured person with knowledge of the danger of the harm intentionally or heedlessly failed to protect his own interests.” The standard for contributory negligence is defined in section 463 of the Restatement (Second) of Torts: “Contributory negligence is conduct on the part of the plaintiff which falls below the standard to which he should conform for his own protection, and which is a legally contributing cause co-operating with the negligence of the defendant in bringing about the plaintiff’s harm.” Section 464 clarifies that “the standard of conduct to which he must conform for his own protection is that of a reasonable man under like circumstances.” Defendants make no factual allegations that would allow the Court to infer that Oracle could have avoided any harm after the tort was committed through the use of reasonable effort or expenditure, or that Oracle’s conduct fell below the standard to which Oracle should conform for its own protection. Defendants say that Sun used to make Solaris Updates available for free, and that portions of the Solaris source code have been available open source (Terix defenses 11, 12, Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page28 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 22 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17, WEX defenses 7, 8, 13, Sevanna defenses 7, 8, 1, Maintech defenses 15, 16). But Defendants do not allege that they obtained from Sun for free any of the Solaris Updates that Oracle has sued them for distributing. Nor do Defendants allege that any of their conduct was caused or influenced by the open source availability of some versions of Solaris. Defendants allege that “all other original equipment manufacturers (‘OEM’) of licensed operating systems provide similar such patches for free.” (Terix defense 11; see also WEX defense 7, Sevanna defense 7). But so what? Defendants do not allege facts showing the required causal nexus, see Restatement (Second) of Torts §§ 465, 918, between any of these things and Oracle’s damages. Defendants also say that Oracle should have redesigned its website to make it harder for Defendants to steal Oracle’s software. In other words, it was supposedly Oracle’s fault that Defendants unlawfully accessed Oracle’s password-protected support website and then wrongfully downloaded thousands upon thousands of propriety software patches over the past several years, all the while concealing this conduct from Oracle through the use of fictitious entities and individuals. Terix defense 11 states: “By failing to take steps to prevent customers and/or others to access materials for allegedly unsupported Oracle hardware, Oracle has failed to mitigate its alleged losses.” See also Terix defense 17, WEX and Sevanna defense 7, Maintech defenses 15, 16. Presumably, “and/or others” is the meaningful part of that sentence, referring to Defendants. However, that defense is a threadbare conclusion, with no factual content, and certainly no alleged facts or conduct that shows the defense to be plausible. 2. Terix, WEX and Sevanna’s Illegitimate Attempt to Cross-Reference Terix’s Counterclaims Terix, WEX and Sevanna attempt an end run around Twombly and Iqbal by ending several of their threadbare defenses with a generic statement that “[f]urther factual allegations in support of this affirmative defense are set forth in TERiX’s Counterclaim, Docket No. 144.” They do this in Terix defenses 2, 4-8, 12-16, 23, 25, WEX defenses 3-5, 8-12, 17, 18, and Sevanna defenses 3-5, 8-12, 17, 18. In every case, they give a non-exhaustive list of paragraphs to read in the counterclaim - usually paragraphs 25 through 66 (see, e.g., Terix defense 12) - but they always clarify that this is a non-exhaustive list, and they are incorporating all of the Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page29 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 23 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 paragraphs in the 141-paragraph counterclaim including the specifically identified ones. The one affirmative defense where this is arguably appropriate is copyright misuse, since that is also a claim that Terix alleges in its counterclaim. It is possible for Oracle to read Terix’s counterclaim and figure out what Terix thinks it copyright misuse defense is. But for the rest of the defenses, this is just a snow job. Terix’s counterclaims are for antitrust violations, false advertising, business torts and unfair competition. There is no logical connection between those claims and Defendants’ defenses. The counterclaims of course do not say which allegations within them relate to which of Defendants’ defenses, and read fairly, the answers do not either, since they simply incorporate by reference all of the allegations in the counterclaims “including” a large subset of them. The purposes of the Twombly/Iqbal pleading standard are to give Oracle notice of what the defenses are and to allow the Court to determine if they have enough factual heft to get past the pleading stage. Iqbal, 556 U.S. at 678-80. Generically incorporating Terix’s counterclaims into 33 affirmative defenses by these three Defendants defeats both purposes. It is the equivalent of handing the Court and Oracle a telephone directory and saying, “Go rummage through here and see if you can find anything relevant to our defenses.” And, of course, there is nothing relevant in Terix’s counterclaims. Why would there be? One would not expect Terix’s Lanham Act claim to contain factual allegations showing that Oracle filed its interference claim against Terix after the statute of limitations had lapsed. Likewise, one would not expect Terix’s allegations of attempted monopolization to show how laches could apply to Oracle’s copyright infringement claim against Terix. These subjects are simply unrelated to each other. Accordingly, Terix, WEX and Sevanna’s incorporation by reference of Terix’s counterclaims into their affirmative defenses does nothing to satisfy the Twombly/Iqbal pleading standard. 3. Defenses That Are Not Affirmative Defenses In addition, several of the Defendants’ defenses are not actually affirmative defenses. Terix defense 1 is that “Oracle’s allegations in its complaint fail to state a claim upon which relief can be granted.” However, that is not an affirmative defense. See Barnes, 718 F. Supp. 2d Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page30 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 24 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 at 1174, 1176 (striking this defense); Hernandez, 2013 WL 5781476, at *7 (same). Terix defense 23, and WEX and Sevanna defenses 17 assert that the Defendants had “innocent intent” because they had no reason to believe their “acts constituted infringements.” However, “[i]n actions for statutory copyright infringement, the innocent intent of the defendant constitutes no defense to liability.” 4 Nimmer on Copyright § 13.08[B][1]; see also Monge v. Maya Magazines, 688 F.3d 1164, 1170 (9th Cir. 2012) (“‘the innocent intent of the defendant constitutes no defense to liability.’”) (quoting Nimmer). Maintech defense 9 and Terix defense 21 assert that Oracle’s claims “for violations of the Computer Fraud and Abuse Act are barred” because Defendants were authorized to access Oracle’s support website. However, proving unauthorized access is an element of Oracle’s claim; it is not an affirmative defense. See 18 U.S.C. § 1030(a)(2), (a)(4), (a)(6). These non-affirmative defenses should be stricken. See Perez, 2012 WL 1029425, *11 (striking defenses that are not actually affirmative defenses). D. The Court Should Deny Leave to Amend The Court should deny Defendants leave to amend their affirmative defenses. See Salameh v. Tarsadia Hotel, 726 F.3d 1124, 1133 (9th Cir. 2013) (“A district court’s discretion to dent leave to amend is ‘particularly broad’ where” the party “has previously amended”); Bhandari v. Capital One, N.A., No. 5:12-cv-04533, 2013 WL 5423707, *5 (N.D. Cal. Sept, 27, 2013) (Grewal, J.) (denying leave to amend where plaintiff had previously amended, was on notice of what was defective in the pleading, and the amendment failed to cure it). Defendants’ affirmative defenses cannot be saved by amendment because the substantive governing legal standards make clear the defenses have no merit. For example, Defendants’ “waiver” defense (Maintech defense 1, Terix defense 14, WEX and Sevanna defense 10) requires factual allegations showing that Oracle abandoned its copyrights in Solaris. Defendants’ assertions that Oracle could have taken unspecified steps to protect its intellectual property even more than it already did are not only conclusory and threadbare, they are simply aiming at the wrong legal standard. Likewise, Defendants’ fair use defense (Maintech defense 8, Terix defense 6, WEX and Sevanna defense 5) has no factual content because all Defendants did Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page31 of 32 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED 25 No. 5:13-cv-03385 PSG ORACLE’S NOTICE AND MOTION TO STRIKE DEFENDANTS’ AFFIRMATIVE DEFENSES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 was steal Oracle’s software and distribute it. They did not transform it or add to it in any way. All of Defendants’ affirmative defenses are legally defective; that is why there are no adequate factual allegations to support them. See, e.g., Velez v. Bank of America, No. 5:13-cv-02834, 2014 WL 1422972, *2-3 (N.D. Cal. April 11, 2014) (Grewal, J.) (where amendment failed to cure the flaws in the original pleading, denial of leave to amend was warranted). Defendants have already been given leave to amend to attempt to address these problems. Common sense indicates that the “failure to correct the deficiencies” in a pleading “reasonably suggests” the inability to do so, and therefore “[l]eave to amend” should be “denied.” Jamison v. Capello, No. 1:10-cv-01633, 2013 WL 618203, *5 (E.D. Cal. Nov. 25, 2013). In addition, Oracle would be prejudiced by giving Defendants’ further leave to amend their affirmative defenses. “The purpose of a Rule 12(f) motion is to avoid spending time and money litigating spurious issues.” Bottoni, 2011 WL 3678878, at *1. “[T]o permit legally unsustainable affirmative defenses to survive” requires the plaintiff “to conduct expensive and potentially unnecessary and irrelevant discovery.” Barnes, 718 F. Supp. 2d at 1173. This is a “showing of prejudice” to Oracle. Id.; see also Bottoni, 2011 WL 36788678, at *2 (“the obligation to conduct expensive and potentially unnecessary and irrelevant discovery is a prejudice,” warranting the grant of a motion to strike). The only way to cure this prejudice, after Defendants have already been given leave to amend and failed to cure the deficiencies in their affirmative defenses, is to deny further leave to amend these meritless defenses. III. CONCLUSION The Court should strike Defendants’ affirmative defenses without leave to amend. DATED: June 6, 2014 Bingham McCutchen LLP By: /S/ Geoffrey M. Howard Geoffrey M. Howard Attorneys for Plaintiffs Oracle America, Inc. and Oracle International Corporation Case5:13-cv-03385-PSG Document186 Filed06/06/14 Page32 of 32