The Sliding Door Company v. KLS Doors LLC et al

REPLY in support of MOTION to Dismiss Counterclaims 11

C.D. Cal.April 15, 2013

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 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 Alex M. Weingarten (SBN 204410) aw@wbllp.com Ruth M. Moore (SBN 216848) rm@wbllp.com Vartanoush Defterderian (SBN 274416) vmd@wbllp.com WEINGARTEN BROWN LLP 10866 Wilshire Boulevard, Suite 500 Los Angeles, California 90024-4340 Telephone: (310) 229-9300 Facsimile: (310) 229-9380 Attorneys for Plaintiff The Sliding Door Company UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA THE SLIDING DOOR COMPANY, a California Corporation, Plaintiff, v. KLS DOORS, LLC, a California Limited Liability Company; COX U.S.A., a division of KLS DOORS, LLC, Defendants. CASE NO.: EDCV 13-00196-JGB- DTB PLAINTIFF’S REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS DEFENDANTS’ COUNTERCLAIMS Date: April 29, 2013 Time: 9:00 a.m. Hon. Jesus G. Bernal Location: Courtroom 1 3470 Twelfth Street Riverside, CA 92501 KLS DOORS, LLC, a California Limited Liability Company; COX U.S.A., a division of KLS DOORS, LLC, Counter-Plaintiffs, v. THE SLIDING DOOR COMPANY, a California Corporation, Counter-Defendant. Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 1 of 19 Page ID #:221 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 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 TABLE OF CONTENTS Page I. INTRODUCTION ........................................................................................... 1 II. PLAINTIFF’S LITIGATION WARNINGS CANNOT PLAUSIBLY BE CONSTRUED AS COMMERCIAL ADVERTISING ............................ 2 III. DEFENDANTS CANNOT ASSERT COUNTERCLAIMS BASED ON PLAINTIFF’S LITIGATION-RELATED COMMUNICATIONS ......... 6 IV. DEFENDANTS’ DECLARATORY RELIEF COUNTERCLAIMS SHOULD ALSO BE DISMISSED ................................................................. 9 A. Defendants’ Non-Infringement Counterclaims Serve No Useful Purpose and Threaten to Improperly Expand the Litigation ................ 9 B. Defendants Fail to Allege Facts Showing Patent Invalidity ............... 11 V. CONCLUSION ............................................................................................. 13 Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 2 of 19 Page ID #:222 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 ii REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P TABLE OF AUTHORITIES Page FEDERAL CASES Advanced Cardivascular Systems, Inc. v. Medtronic, Inc. No. C-95-3577 DLJ, 1996 WL 467293 (N.D.Cal., July 24, 1996) .................... 11 Ashcroft v. Iqbal 556 U.S. 662, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) .......................... passim Avery Dennison Corp. v. Acco Brands, Inc. CV99-1877DT(MCX), 2000 WL 986995 (C.D. Cal. Feb. 22, 2000) .............. 3, 5 Bell Atl. Corp. v. Twombly 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) .......................... passim Concrete Unlimited Inc. v. Cementcraft, Inc. 776 F.2d 1537 (Fed. Cir. 1985) ........................................................................ 3, 4 Cundiff v. Dollar Loan Center 726 F. Supp. 2d 1232 (D. Nev. 2010) .................................................................. 9 Elan Microelectronics Corp. v. Apple, Inc. No. C 09-1531 RS, 2009 WL 2972374 (N.D. Cal. Sept. 14, 2009) ................... 12 Englewood Lending Inc. v. G&G Coachella Invests., LLC 651 F. Supp. 2d 1141 (C.D. Cal. 2009) ................................................................ 9 Evers v. County of Custer 745 F.2d 1196 (9th Cir. 1984) .............................................................................. 6 Futuristic Fences, Inc. v Illusion Fence Corp. 558 F. Supp. 2d 1270 (S.D. Fla. 2008) ................................................................. 2 Gen-Probe, Inc. v. Amoco Corp., Inc. 926 F. Supp. 948 (S.D. Cal. 1996) ....................................................................... 7 Halton Co. v. Streivor, Inc. No. C 10-00655 WHA, 2010 WL 2077203 (N.D. Cal. May 21, 2010) ............ 12 Impeva Labs, Inc. v. System Planning Corp. No. 5:12-CV-00125-EJD, 2012 WL 3647716 (N.D. Cal. Aug. 23, 2012) ...... 3, 4 In re Bill of Lading Transmission and Processing Sys. Patent Litig. 681 F.3d 1323 (Fed. Cir. 2012) .......................................................................... 12 Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 3 of 19 Page ID #:223 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 iii REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P ISI Intern., Inc. v. Broden Ladner Gervais LLP 316 F.3d 731 (7th Cir. 2003) ................................................................................ 2 Knievel v. ESPN 393 F.3d (9th Cir. 2005) ....................................................................................... 4 M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., Inc. No. 97-1568-(JAG), 2007 WL 979854 (D.N.J. Mar. 30, 2007) ...................... 2, 4 Memory Control Enter., LLC v. Edmunds.com, Inc. No. CV 11-7658 PA, 2012 WL 681765 (C.D. Cal. Feb. 8, 2012) ............... 12, 13 Microsoft Corp. v. Phoenix Solutions, Inc. 741 F. Supp. 2d 1156 (C.D. Cal. 2010) ........................................................ 11, 12 Porous Media Corp. v. Pall Corp. 201 F.3d 1058 (8th Cir. 2000) .............................................................................. 2 Pro-Mold and Tool Co. v. Great Lakes Plastics, Inc. 75 F.3d 1568 (Fed. Cir. 1996) .............................................................................. 3 Raines v. Switch Mfg. No. C-96-2648 DLJ, 1997 WL 578547 (N.D. Cal. July 28, 1997) ...................... 8 Rice v. Fox Broad. Co. 330 F.3d 1170 (9th Cir. 2003) .............................................................................. 2 Santana Products, Inc. v. Bobrick Washroom Equipment, Inc. 249 F. Supp. 2d 463 (M.D. Pa. 2003) .................................................................. 7 Santana Products, Inc. v. Bobrick Washroom Equipment, Inc. 401 F.3d 123 (3d Cir. 2005) ................................................................................. 7 Sharper Image Corp. v. Target Corp. 425 F. Supp. 2d 1056 (N.D. Cal. 2006) ............................................................... 8 Societe de Conditionnement v. Hunter Eng. Co. 655 F.2d 938 (9th Cir. 1981) .............................................................................. 10 Theme Promotions, Inc. v. News Am. Mktg. FSI 546 F.3d 991 (9th Cir. 2008) ................................................................................ 6 White Mule Co. v. ATC Leasing Co. LLC 540 F. Supp. 2d 869 (N.D. Ohio 2008) ............................................................ 3, 5 Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 4 of 19 Page ID #:224 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 iv REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P Wistron Corp. v. Phillip M. Adams & Assocs., LLC C-10-4458 EMC, 2011 1654466, at *12 (N.D. Cal. Apr. 28, 2011) .................... 9 Zenith Electronics Corp. v. Exzec, Inc. 182 F.3d 1340 (Fed. Cir. 1999) ........................................................................ 3, 4 STATE CASES Ludwig v. Superior Court 37 Cal. App. 4th 8, 43 Cal. Rptr. 2d 350 (2007) .................................................. 6 RULES Fed. R. Civ. P. 8 ....................................................................................................... 11 Fed. R. Civ. P. 41(a) ................................................................................................ 10 Fed. R. Civ. P.84 ................................................................................................ 11, 12 CONSTITUTIONAL PROVISIONS U.S. Const. amend. I .............................................................................................. 6, 8 Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 5 of 19 Page ID #:225 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 1 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P I. INTRODUCTION The Lanham Act and Unfair Competition Law (“UCL”) counterclaims filed by Defendants KLS Doors, LLC and Cox U.S.A. (“Defendants”) should be dismissed at the pleading stage because a patent holder’s communications to purchasers or potential purchasers regarding its patent litigation and/or asserting its patent rights cannot form the basis of these claims. In its Motion to Dismiss, The Sliding Door Company (“Sliding Door” or “Plaintiff”) explained that these communications cannot constitute “commercial advertising or promotion” under the Lanham Act or “unlawful,” “unfair,” or “fraudulent” acts under the UCL and that both the First Amendment Noerr-Pennington doctrine and California litigation privilege preclude claims based on them. In an attempt to save their meritless counterclaims, Defendants creatively argue that the inclusion of a web link in the signature block of Plaintiff’s cease- and-desist emails turns those emails into commercial advertising. Defendants offer no support whatsoever for this argument. To the contrary, courts have repeatedly rejected the idea that a litigation threat against an infringer’s customers can amount to promotion to them. Defendants’ counterclaims should be dismissed now before Plaintiff is required to spend any more time or money on them. Defendants’ counterclaims for a judicial declaration of non-liability should also be dismissed. Because the parties’ disputes concerning Plaintiff’s patent and trade dress are already at issue on Plaintiff’s infringement action, Defendants’ counterclaims fail to serve any useful purpose under the Declaratory Judgment Act. Moreover, the vague and factually devoid allegations of Defendants’ counterclaims appear designed to subject Plaintiff to litigation and discovery untethered to the actual controversy between the parties. Accordingly, Defendants’ declaratory relief counterclaims should also be dismissed. Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 6 of 19 Page ID #:226 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 2 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P II. PLAINTIFF’S LITIGATION WARNINGS CANNOT PLAUSIBLY BE CONSTRUED AS COMMERCIAL ADVERTISING Defendants acknowledge that their Lanham Act counterclaim is based on Plaintiff’s February 6, 2013 email to customers and that their UCL claim is predicated solely on the Lanham Act claim. (See Opp’n at 2-3, 7-9, 10.) They do not contend that Plaintiff alleged patent infringement in any other type of communication. (See id.) Because the February 6, 2013 email is a warning of infringement liability, not a representation “for the purpose of influencing consumers to buy defendant’s goods or services,” both of these counterclaims fail. See Rice v. Fox Broad. Co., 330 F.3d 1170, 1181 (9th Cir. 2003). The email at issue identifies Plaintiff Sliding Door as the rightful owner of the ’729 Patent, advises of Plaintiff’s patent infringement suit against Defendants, and warns the recipient of its own potential liability if it purchases an infringing product.1 (Schwartz Decl. Ex. 1.) Courts have repeatedly held that communications informing the recipients of infringement allegations, asking them to avoid infringement, and seeking to protect the sender’s legal rights are not communications for the purpose of influencing customers to buy the sender’s products. Futuristic Fences, Inc. v Illusion Fence Corp., 558 F. Supp. 2d 1270, 1279-82 (S.D. Fla. 2008); accord ISI Intern., Inc. v. Broden Ladner Gervais LLP, 316 F.3d 731, 733 (7th Cir. 2003) (explaining that Lanham Act claim was untenable because letters to customers misleadingly asserting patent ownership were not false or misleading “commercial advertising or promotion”); Porous Media Corp. v. Pall Corp., 201 F.3d 1058, 1059 (8th Cir. 2000) (recognizing that press releases regarding litigation did not constitute “commercial advertising or promotion”); M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., Inc., No. 97- 1 Contrary to Defendants’ assertion, the email contains no statement as to whether it would be possible to design around Plaintiff’s patent. (Compare Opp’n at 9 with Schwartz Decl. Ex. 1.) Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 7 of 19 Page ID #:227 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 3 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P 1568-(JAG), 2007 WL 979854, at *15-16 (D.N.J. Mar. 30, 2007) (holding that infringement notices/letters to customers did not constitute commercial advertising); Avery Dennison Corp. v. Acco Brands, Inc., CV99-1877DT(MCX), 2000 WL 986995, at *6-8 (C.D. Cal. Feb. 22, 2000) (holding that letters to customers consisting of “cease and desist” language rather than any marketing or sales pitch were not commercial advertising); White Mule Co. v. ATC Leasing Co. LLC, 540 F. Supp. 2d 869, 893-94, 897-98 (N.D. Ohio 2008) (holding that patent holder’s statements regarding infringement lawsuit to alleged infringer’s potential customer were not commercial advertising) . Defendants incorrectly contend that two cases, Zenith and Impeva Labs, support the viability of their Lanham Act claim. (See Opp’n at 6-7.) In Zenith, the Federal Circuit expressly left open the question of whether the elements of a Lanham Act claim had been met, ruling only in the interlocutory appeal before it that a Lanham Act claim would not be in conflict with federal patent laws so long as an additional bad faith requirement is imposed. See Zenith Electronics Corp. v. Exzec, Inc., 182 F.3d 1340, 1348 & n. 3, 1354 (Fed. Cir. 1999) (“At this stage of the case it appears that neither the parties nor the district court have explicitly analyzed the relevant text of 43(a), or the required elements of a claim arising therefrom, to determine whether 43(a) reaches Excez’s allegations.”). Id. at 1348 n. 3. In the absence of allegations indicating the context of the patent holder’s representations, the court assumed that they were “marketplace” representations of patent infringement rather than “threats of and actual infringement suits.” Id. at 1348 n. 3, 1351 (distinguishing Pro-Mold and Tool Co. v. Great Lakes Plastics, Inc., 75 F.3d 1568 (Fed. Cir. 1996) and Concrete Unlimited Inc. v. Cementcraft, Inc., 776 F.2d 1537 (Fed. Cir. 1985) on this basis). Additionally, the patent holder asserted not only that the competitor was infringing its patent but also that the competitor could not manufacture or sell any competing products (any acoustic Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 8 of 19 Page ID #:228 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 4 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P touch panel or system) without infringing the patent. Id. at 1343. Even with these distinguishable assumptions, Zenith did not determine that a Lanham Act claim had been stated, but only that § 43(a) could reach bad faith statements regarding infringement “assuming the elements of such a claim are otherwise made out.” Id. at 1354 (emphasis supplied); see also M. Eagle Tool Warehouse, 2007 WL 979854, at *16 (quoting this language to reject argument that Zenith allows Lanham Act claim lacking “commercial advertising” element). In Impeva Labs, the district court determined that an accusation of patent infringement was commercial speech only because it was made in the process of advocating a competing bid in response to a request for proposal. See Impeva Labs, Inc. v. System Planning Corp., No. 5:12-CV-00125-EJD, 2012 WL 3647716, at *1, 4 (N.D. Cal. Aug. 23, 2012). The Impeva Labs infringement accusation also did not warn the recipient of liability. Here, in contrast, the emails at issue threaten the recipient with liability for contributory infringement and cannot plausibly be viewed as part of a bidding process or other solicitation. (See Schwartz Decl. Ex. 1.) Defendants contend that Plaintiff’s litigation warnings were commercial advertising because they contained a link to Plaintiff’s website and three product pictures. (See Opp’n at 9.) Defendants cite no precedent indicating that mere links to or depictions of a patentee’s products constitute promotion of them. Moreover, under the “incorporation by reference” doctrine, the court properly assesses Defendants’ allegations in the context in which the link and pictures actually appeared. See Knievel v. ESPN, 393 F.3d at 1068, 1076-78 (9th Cir. 2005). The February 6, 2013 email shows that they were simply part of the sender’s signature block. (See Schwartz Decl. Ex. 1.) If that were all it took to make a sales pitch, nearly every message sent by a corporate employee would become “commercial advertising or promotion” as soon as he hit “send” and a company email signature Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 9 of 19 Page ID #:229 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 5 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P was auto-generated. Accordingly, experience and common sense dictate that it is not plausible that incidental inclusion of a web link and pictures in a signature block, not even in the text of the message, would transform the message’s content from a litigation warning to a sales pitch. See Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (explaining that the determination of whether a claim is plausible “requires the reviewing court to draw on its judicial experience and common sense”). Defendants’ observation that Plaintiff’s website constitutes commercial advertising does not help their argument. (See Opp’n at 2-3.) Plaintiffs’ website does not contain the statements of patent infringement at issue. (See Opp’n, Doroshow Decl. Ex. B.) Defendants urge that this Court should not reject Defendants’ commercial advertising allegation at the pleading stage because the Avery Corp. case was decided on summary judgment following discovery. (Opp’n at 9.) The Supreme Court has made clear, however, that a pleading’s “basic deficiency should … be exposed at the point of minimum expenditure of time and money by the parties and the court.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007); see also White Mule, 540 F. Supp. 2d at 897-98 (dismissing Lanham Act claim at the pleading stage because alleged infringement accusation did not constitute commercial advertising or promotion). Defendants do not explain how discovery could possibly rescue their allegations from dismissal. In short, Defendants’ Lanham Act and UCL claims do not plausibly show any “commercial advertising or promotion” and are therefore properly dismissed under the pleading standards set forth in Twombly and Iqbal. Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 10 of 19 Page ID #:230 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 6 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P III. DEFENDANTS CANNOT ASSERT COUNTERCLAIMS BASED ON PLAINTIFF’S LITIGATION-RELATED COMMUNICATIONS Even if Defendants could satisfy the elements for a Lanham Act and/or UCL claim (which they cannot), the First Amendment’s Noerr-Pennington doctrine precludes them from basing any claim on Sliding Door’s communications advising potential purchasers of this patent infringement suit and warning them of potential liability. (See Memorandum of Points and Authorities in support of Plaintiff’s Motion to Dismiss (“Mem.”) at 10-12 (citing cases).) California’s similar litigation privilege additionally bars Defendants’ UCL counterclaim. (See Mem. at 12-13 (citing cases).) Defendants dispute that the Noerr-Pennington doctrine applies to Lanham Act claims, but can cite no precedent holding that it does not. (Opp’n at 11-12, 13.) While Defendants acknowledge the Ninth Circuit’s holding that Noerr- Pennington applies to state law torts (such as their UCL counterclaim), they overlook its reasoning for so holding. In Theme Promotions, the Court of Appeals explained that Noerr-Pennington is a constitutional doctrine, and “‘[t]here is simply no reason that a common-law tort doctrine can any more permissibly abridge or chill the constitutional right of petition than can a statutory claim such as antitrust.’” Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1007 (9th Cir. 2008) (quoting Video Int’l Prod., Inc. v. Warner-Amex Cable Communications, Inc., 858 F.2d 1075, 1084 (5th Cir. 1988)); accord Ludwig v. Superior Court, 37 Cal. App. 4th 8, 21 n. 17, 43 Cal. Rptr. 2d 350 (2007) (noting that Noerr-Pennington doctrine is a principle of constitutional law applicable to “virtually any tort”). See also Evers v. County of Custer, 745 F.2d 1196, 1204 (9th Cir. 1984) (citing Noerr to bar federal statutory claim under § 1983 under First Amendment right to petition). Because Noerr-Pennington “immunity is constitutional and rooted in the First Amendment right to petition, it “bars any Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 11 of 19 Page ID #:231 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 7 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P claim, federal or state, common law or statutory, that has as its gravamen constitutionally-protected petitioning activity.” Gen-Probe, Inc. v. Amoco Corp., Inc., 926 F. Supp. 948, 955-56 (S.D. Cal. 1996). Indeed, the constitutional nature of the Noerr-Pennington doctrine is likely the reason that the Ninth Circuit has not yet addressed its application to a Lanham Act claim. In Santana Products, Inc. v. Bobrick Washroom Equipment, Inc., 249 F. Supp. 2d 463, 470, 492-94 (M.D. Pa. 2003), a district court applied the Noerr- Pennington doctrine to bar a Lanham Act claim. The Third Circuit affirmed on other grounds because “‘courts have a duty to avoid passing upon a constitutional question if the case may be disposed of on some other grounds.’” Santana Products, Inc. v. Bobrick Washroom Equipment, Inc., 401 F.3d 123, 130-31 (3d Cir. 2005). As discussed in the prior section, a Lanham Act claim premised on a patentee’s assertions of infringement liability is readily dismissed, without reaching the constitutional issue, because it fails to allege the “commercial advertising or promotion” element. Defendants do not allege facts plausibly showing the application of the Noerr-Pennington doctrine’s sham exception. As discussed in Sliding Door’s moving papers, a claim challenging litigation-related conduct is properly dismissed at the pleading stage in the absence of factual allegations showing that the suit was objectively baseless and that it was subjectively motivated by bad faith. (See Mem. at 11-12 (citing cases).) Defendants have stated no facts to satisfy these elements, but have merely asserted in conclusory fashion that Sliding Door’s infringement claims were objectively baseless because Defendants’ products “are missing one or more fundamental, required elements of all claims of the ’729 Patent.” (Opp’n at 12-13.) Defendants do not identify what that key missing element supposedly is. Of course, conclusory allegations not supported by properly alleged facts should be disregarded in considering a motion to dismiss. Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 12 of 19 Page ID #:232 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 8 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P Twombly, 550 U.S. at 557, 564; Iqbal, 556 U.S. at 679. Defendants also point to no ostensible allegation of bad faith in their counterclaims. (See Opp’n at 12-13.) Defendants erroneously cite Raines v. Switch Mfg., No. C-96-2648 DLJ, 1997 WL 578547 (N.D. Cal. July 28, 1997) to assert that they have nonetheless adequately alleged bad faith. (See Opp’n at 12.) But the Raines court did not, as Defendants state, allow a claim to survive even though no specific facts showing bad faith were alleged. (See id.) Exactly the opposite, the Raines court granted a motion to dismiss and stressed that “if a bare allegation of bad faith litigation were sufficient to defeat the Noerr-Pennington bar, every claimant would be able to avoid the intent of the Supreme Court merely by alleging bad faith on the part of the party seeking to enforce the patent.” Raines, 1997 WL 578547, at *6. With respect to the California litigation privilege, Defendants cite no support for their contention that infringement allegations and warnings lose their protection if they were intended to influence purchasing activity or turn out to be incorrect. (See Opp’n at 11.) Indeed, a patentee generally threatens liability to deter purchases of infringing products, and the absolute privilege is only useful if it applies before the truth or falsity of the patentee’s claim is determined. Accordingly, the Sharper Image court held that the litigation privilege barred a claim based on a patentee’s infringement allegations and warnings to potential customers even though the patentee admitted “that one purpose of the letters was to promote [its] products” and its letters turned out to be false and misleading. Sharper Image Corp. v. Target Corp., 425 F. Supp. 2d 1056, 1076, 1077-78 (N.D. Cal. 2006). The court explained that the test is whether the statements advance the patentee’s interest in the litigation, not whether that is all they do. See id. at 1078. In sum, Noerr-Pennington doctrine of the First Amendment right of petition bars Defendants’ Lanham Act and UCL counterclaims, and California’s litigation Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 13 of 19 Page ID #:233 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 9 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P privilege additionally bars their UCL counterclaim. Because Defendants have not identified any amendments that would rescue these causes of action, they should be dismissed with prejudice. IV. DEFENDANTS’ DECLARATORY RELIEF COUNTERCLAIMS SHOULD ALSO BE DISMISSED A. Defendants’ Non-Infringement Counterclaims Serve No Useful Purpose and Threaten to Improperly Expand the Litigation Sliding Door seeks dismissal of Defendants’ counterclaims for a judicial declaration of non-infringement because they fail to identify which of Defendants’ products are claimed to be non-infringing and at best would be needlessly duplicative. (See Mem. at 14-15.) A claim that does not specify the products accused of infringement fails to satisfy the constitutional case or controversy requirement. Wistron Corp. v. Phillip M. Adams & Assocs., LLC, C-10-4458 EMC, 2011 1654466, at *12 (N.D. Cal. Apr. 28, 2011). Defendants assert in their Opposition that “the products they claim are non-infringing are precisely the same products that Plaintiff claims are infringing.” (Opp’n at 15.) The counterclaims, however, are not so clear. This raises the concern that Defendants will exploit their vague pleading to pursue discovery and litigation with respect to other products and issues unrelated to the actual case or controversy between the parties. Thus, Defendants have either failed to sufficiently plead the products at issue or, at best, they have asserted duplicative declaratory relief claims that “serve no useful purpose” and “add nothing to the litigation.” Cundiff v. Dollar Loan Center, 726 F. Supp. 2d 1232, 1240-41 (D. Nev. 2010); see also Englewood Lending Inc. v. G&G Coachella Invests., LLC, 651 F. Supp. 2d 1141, 1144-47 (C.D. Cal. 2009). Either way, their non-infringement claims are properly dismissed. Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 14 of 19 Page ID #:234 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 10 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P Defendants’ assertion that declaratory relief is commonly sought in a patent infringement action ignores the factual circumstances under which that is the case. (See Opp’n at 15-16.) A claim for a judicial declaration of non-infringement is appropriate when a patent holder has failed to sue because the patent holder otherwise wields the patent as a “scarecrow” inflicting on competitors the in terrorem choice between accruing infringement liability and abandoning their enterprise. Societe de Conditionnement v. Hunter Eng. Co., 655 F.2d 938, 943 (9th Cir. 1981). Declaratory relief serves a useful purpose in that case because it cures the in terrorem effect. Here, in contrast, Sliding Door has filed this very lawsuit against Defendants for patent infringement. Declaratory relief of non-infringement thus serves no purpose here. Defendants’ assertion that a patent infringement plaintiff could seek to dismiss its claims without prejudice does not sustain their vague, and at best redundant, pleading. (See Opp’n at 17.) Under Federal Rule of Civil Procedure 41(a), Sliding Door could dismiss only with Defendants’ consent or upon court order. That procedure allows a defendant to contest a non-merits dismissal at the appropriate time. Moreover, in the unlikely hypothetical event that Sliding Door were to move to dismiss its claims without either a judgment or settlement, Defendants could then bring applicable declaratory relief claims. Defendants point out that their trade dress non-infringement counterclaim also includes allegations other than non-infringement, i.e., “that Plaintiff’s asserted trade dress is functional, commonly found in third party products, not inherently distinctive, and has not acquired secondary meaning, among other things.” (Opp’n at 17.) To the extent that these allegations seek a judicial declaration of “the validity of Plaintiff’s alleged trade dress” regardless of whether Defendants have infringed that trade dress (see id.), they may be alleged as a separate cause of action but do not save Defendants’ Third Claim for Relief for “Non-infringement,” Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 15 of 19 Page ID #:235 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 11 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P which seeks only a “declaration that Counter-Plaintiffs have not infringed Sliding Door’s alleged trade dress as set forth in the Complaint.” Accordingly, Defendants’ non-infringement counterclaims should be dismissed. B. Defendants Fail to Allege Facts Showing Patent Invalidity Defendants’ counterclaim for a declaration of patent invalidity and their affirmative defense of invalidity should be dismissed because Defendants have failed to state what patentability requirements have not been met. As discussed in the moving papers, a pleading that fails to provide the factual basis for alleging a patent’s invalidity is “radically insufficient” and fails to satisfy Rule 8’s fair notice requirement. (See Mem. at 15 (citing Qarbon.com Inc. v. eHelp Corp., 315 F. Supp. 2d 1046, 1049-51 (N.D. Cal. 2004); Grid Sys. Corp. v. Texas Instruments, Inc., 771 F. Supp. 1033, 1042 (N.D. Cal. 1991); PageMelding, Inc. v. ESPN, Inc., C 11-06263 WHA, 2012 WL 3877686, at *3 (N.D. Cal. Sept. 6, 2012).) See also Advanced Cardivascular Systems, Inc. v. Medtronic, Inc., No. C-95-3577 DLJ, 1996 WL 467293, at *13 (N.D.Cal., July 24, 1996) (striking affirmative defense of patent invalidity for failure to state facts providing fair notice of the defense). Defendants cite Microsoft Corp. v. Phoenix Solutions, Inc., 741 F. Supp. 2d 1156, 1159 (C.D. Cal. 2010) for the contrary proposition that the “heightened pleading standards of Twombly and Iqbal” do not apply to invalidity counterclaims.2 (See Opp’n at 17-18.) The district court in that case reasoned that conclusory counterclaims of patent invalidity should be allowed because Federal Rule of Civil Procedure 84 allows a complaint of infringement using Form 18, which alleges “little more than a conclusory statement that the defendant infringed 2 Although the cited opinion refers to Twombly and Iqbal as providing a “heightened pleading standard,” the Supreme Court stated in Twombly that “we do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.” 550 U.S. at 570. Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 16 of 19 Page ID #:236 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 12 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P the plaintiff’s patent,” so conclusory pleading of invalidity should also suffice. Microsoft, 741 F. Supp. 2d at 1159. The Federal Circuit has rejected this reasoning, explaining that “[t]he Forms are controlling only for causes of action for which there are sample pleadings.” In re Bill of Lading Transmission and Processing Sys. Patent Litig., 681 F.3d 1323, 1336 (Fed. Cir. 2012) (citing Twombly, 550 U.S. at 564 n. 10, which discussed the requirements of model Form 9 for pleading negligence)); accord Halton Co. v. Streivor, Inc., No. C 10-00655 WHA, 2010 WL 2077203, at *3 (N.D. Cal. May 21, 2010) (dismissing conclusory allegations of indirect infringement because Form 18 only provides a model complaint for direct infringement); Elan Microelectronics Corp. v. Apple, Inc., No. C 09-1531 RS, 2009 WL 2972374, at *2 (N.D. Cal. Sept. 14, 2009) (“In the absence of any other form that addresses [the claim] and is made binding on the courts through Rule 84, the Court must apply the teachings of Twombly and Iqbal.”). No Federal Rule or Form approves a conclusory pleading of invalidity. See Memory Control Enter., LLC v. Edmunds.com, Inc., No. CV 11-7658 PA (JCx), 2012 WL 681765, at *3 (C.D. Cal. Feb. 8, 2012). The court in Memory Control Enterprise therefore dismissed a conclusory claim of patent invalidity, elaborating: [W]hile the Appendix of the Federal Rules of Civil Procedure includes a form for patent infringement, it includes no such form for patent invalidity. Until such a form is included, defendants must meet the pleading standard the Supreme Court announced in Twombly and Iqbal. Just as Twombly and Iqbal did not rewrite the Federal Rules of Civil Procedure-thus, Rule 84 still applies, and Form 18 still suffices-a court cannot write Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 17 of 19 Page ID #:237 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 13 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P into the Federal Rules a form for a claim for declaratory judgment of patent invalidity. Additionally, the Memory Control Enterprise court determined that a claim of invalidity resembling Defendants’ invalidity claim here would not provide the same degree of notice as a direct infringement claim on Form 18. Id. at *2-3. “Merely reciting possible ways that a patent can be held invalid, stated in such a conclusory manner, with absolutely no facts supporting it, hardly provides fair notice to Plaintiff.” Id. at *3. Accordingly, because Defendants undeniably and admittedly state only conclusory allegations of invalidity without any facts rendering those allegations plausible, their invalidity allegations should be dismissed under the pleading standards of Twombly and Iqbal.3 V. CONCLUSION For the foregoing reasons, Defendants’ Counterclaims fail to state a claim and should be dismissed. Defendants’ affirmative defense of invalidity should likewise be dismissed. Because no amendment could cure their deficiency, the dismissal of Defendants’ affirmative counterclaims based upon Sliding Door’s litigation warning to customers should be dismissed with prejudice. 3 Contrary to Defendants’ assertion (see Opp’n at 18), and regardless of whether Form 18 allowed it to plead less, Sliding Door pleaded facts showing that Defendants infringed its patent. Sliding Door alleged that Defendants’ Wardrobe Aluminum Doors, Surface Aluminum Doors, Aluminum Room Dividers, and Aluminum Partitions incorporate Sliding Door’s “patented safety latch mechanism, upper roller assembly, and removable divider strips,” as shown by the Complaint’s side-by-side comparison of the ‘729 Patent with Defendants’ products. (Complaint ¶¶ 26-30.) Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 18 of 19 Page ID #:238 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 14 REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIMS 23900.2 W E IN G A R T E N B R O W N L L P Dated: April 15, 2013 WEINGARTEN BROWN LLP Alex M. Weingarten Ruth M. Moore Vartanoush Defterderian By: /s/ Alex M. Weingarten Alex M. Weingarten aw@wbllp.com Attorneys for Plaintiff The Sliding Door Company Case 5:13-cv-00196-JGB-DTB Document 17 Filed 04/15/13 Page 19 of 19 Page ID #:239