Powertech Technology Inc v. Tessera Inc

Filing 141

ORDER by Judge Claudia Wilken GRANTING IN PART, AND DENYING IN PART, 112 MOTION TO STRIKE AFFIRMATIVEDEFENSES. (ndr, COURT STAFF) (Filed on 5/16/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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POWERTECH TECHNOLOGY, INC.,

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Plaintiff,

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TESSERA, INC.,
Defendant.
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United States District Court
For the Northern District of California

ORDER GRANTING IN
PART, AND DENYING
IN PART, MOTION TO
STRIKE AFFIRMATIVE
DEFENSES
(Docket No. 112)

v.

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No. C 10-945 CW

Plaintiff Powertech Technology, Inc. (PTI) moves to strike

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all of the affirmative defenses asserted by Defendant Tessera,

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Inc. in this action.

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Plaintiff’s motion under submission on the papers.

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considered the papers filed by the parties, the Court GRANTS PTI’s

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motion in part and DENIES it in part.

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Tessera opposes the motion.

The Court took
Having

BACKGROUND

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PTI filed this action on March 5, 2010, seeking declarations

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of non-infringement and invalidity of Tessera’s United States

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Patent No. 5,663,106 patent (the ’106 patent).

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it faces an imminent threat of injury because, in the

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International Trade Commission (ITC) and in another district court

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action then pending in Texas, Tessera had accused of infringement

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companies who had directly or indirectly purchased products from

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PTI.

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PTI maintains that

On April 1, 2010, Tessera moved to dismiss the case for lack

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of subject matter jurisdiction, stating that, to its knowledge,

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“PTI is a licensee in good standing and it and its customers

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therefore enjoy protection against any suit accusing its licensed

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products of infringement of the ’106 patent or any other licensed

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patent.”

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license with PTI “protects PTI and its customers.”

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Tessera further argued that, because the License Agreement

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required PTI to pay royalties on licensed products whether or not

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they were covered by a licensed patent, a justiciable controversy

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could not exist.

Docket No. 14 at 6.

Tessera also asserted that its
Id. at 3.

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In June 2010, this Court dismissed the action for lack of

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subject matter jurisdiction, finding that there was no Article III

United States District Court
For the Northern District of California

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case or controversy between the parties, because Tessera had

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explicitly excluded licensed products from its enforcement actions

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and because PTI failed to allege an actual controversy regarding

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the licensing agreement.

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Inc., 2010 U.S. Dist. Lexis 53621, at *7-9 (N.D. Cal.).

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Powertech Technology, Inc. v. Tessera,

Several months later, on September 30, 2011, the Federal

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Circuit reversed this Court’s dismissal, finding that a

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controversy did exist between the parties.

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Inc. v. Tessera, Inc., 660 F.3d 1301, 1307-10 (Fed. Cir. 2011).

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The court specifically noted that

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Powertech Technology,

we have no doubt that PTI’s customers and products were
specifically targeted in [the ITC and Texas actions].
For example, witnesses for Elpida testified that the
accused products . . . were licensed from several
licensees, including PTI. Indeed, Tessera’s
infringement expert . . . focused part of his analysis
on an Elpida wBGA chip that was clearly packaged by PTI
and identified with a PTI model number.
Powertech, 660 F.3d at 1308 n.4.

The court also stated,

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In essence, Tessera’s argument is that PTI must breach
its license before it can challenge the validity of the
underlying patent. This contention, however, is
contrary to the Supreme Court’s decision in MedImmune
[Inc. v. Genentech, Inc., 549 U.S. 118 (2007)], in which
the Court held that a licensee did not need to repudiate
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a license agreement by refusing to pay royalties in
order to have standing to declare a patent invalid,
unenforceable, or not infringed. . . . Like the
petitioner in MedImmune, PTI is seeking to define its
rights and obligations under its contract with Tessera.
It need not repudiate its license agreement to do so.
There is also no provision in the license agreement in
which PTI has agreed not to argue non-infringement or
invalidity.

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Id. at 1308 (internal citations omitted).

On this basis, the

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court held that “the dispute between PTI and Tessera--as to
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whether the license agreement requires royalty payments to be tied
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to valid patent coverage--is sufficient to support declaratory
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judgment jurisdiction,” but declined to opine on the merits of the
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United States District Court
For the Northern District of California

dispute.

Id. at 1310.

The mandate issued on January 19, 2012.

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Docket No. 101.
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On February 17, 2012, Tessera filed its answer to PTI’s
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complaint and included seven affirmative defenses.

The first five

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affirmative defenses allege that “PTI’s claims for relief against
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Tessera are barred, in whole or in part, by”: (1) “the doctrine of
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waiver”; (2) “the doctrine of estoppel”; (3) “the doctrine of
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laches”; (4) “the doctrine of forfeiture”; and (5) “the equitable
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doctrine of unclean hands.”

Answer ¶¶ 31-35.

The sixth

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affirmative defense alleges, “No justiciable controversy exists
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with respect to PTI’s claims for relief against Tessera.”

Id. at

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¶ 36.

The seventh affirmative defense alleges, “PTI cannot assert

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its claims for relief against Tessera in light of the terms of the
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Agreement between the parties.”

Id. at ¶ 36.

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PTI filed the instant motion to strike on March 12, 2012,
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twenty-four days after Tessera filed its answer.
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DISCUSSION
I.

Timeliness of PTI’s motion to strike

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Tessera argues that PTI’s motion to strike is untimely,

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because the motion was filed twenty-four days after Tessera served

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its answer through electronic filing.

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Federal Rule of Civil Procedure 12(f) states that a party may
make a motion to strike a pleading for which a response is not

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allowed “within 21 days after being served with the pleading.”

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Federal Rule of Civil Procedure 6(d) provides, “When a party may

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United States District Court
For the Northern District of California

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or must act within a specified time after service and service is

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made under Rule 5(b)(2)(C), (D), (E), or (F), 3 days are added

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after the period would otherwise expire under Rule 6(a).”

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Here, Tessera served its answer and affirmative defenses by

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electronic means pursuant to Rule 5(b)(2)(E).

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that, while Rule 6(d) was created to allow additional time for the

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mailing of documents and is anachronistic in the context of

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e-filing, it technically still applies here.

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allowed three additional days beyond the twenty-one days provided

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for in Rule 12(f) to make its motion to strike.

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Islands Restaurants, LP, 2012 WL 524086, at *3 (S.D. Cal.)

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(allowing twenty-four days for a motion to strike affirmative

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defenses where the answer was served electronically).

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motion was timely.

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II.

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The Court notes

Accordingly, PTI was

See Kohler v.

Thus, PTI’s

Tessera’s justiciability defense
PTI argues that Tessera’s sixth affirmative defense, alleging

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that there is no justiciable controversy, should be struck as

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contrary to the law of the case.

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Tessera responds that, although the Federal Circuit found

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there was a justiciable controversy at the outset of this case,

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one must exist throughout the stages of this proceeding and thus

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Tessera may be able to challenge the continued justiciability in

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the future based on changed circumstances, without contradicting

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the law of the case.

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PTI replies that Tessera is continuing to maintain claims

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against PTI’s products in its petition for certiorari to review

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the ITC decision and in the Texas action, so “no relevant facts

United States District Court
For the Northern District of California

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have changed.”

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circumstances which do not exist here, there is simply no proper

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basis upon which Tessera can maintain this alleged defense at this

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time in light of the Federal Circuit’s ruling.”

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deny that changed circumstances may in the future impact the

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justiciability of this case.

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Reply at 6.

PTI contends, “Absent changed

Id.

PTI does not

Because Tessera concedes that it cannot presently, under the

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law of the case, proffer sufficient facts to support this defense,

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and can only speculate about future events, the Court GRANTS PTI’s

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motion to strike this affirmative defense.

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prejudice to Tessera moving to amend its answer to assert this

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defense in the future, should facts later develop that could

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support it.

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160221, at *3 (N.D. Cal.) (noting that the Ninth Circuit “has

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liberalized the requirement that affirmative defenses be raised in

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a defendant’s initial pleading and allows affirmative defenses to

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be asserted in a later motion absent prejudice to the non-moving

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party” and that “Rule 15 permits Defendants to amend their Answer

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at any time with the Court’s leave”).

This ruling is without

See Dion v. Fulton Friedman & Gullace LLP, 2012 WL

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III. Tessera’s license defense

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PTI argues that Tessera’s seventh defense, in which Tessera

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contends that “PTI cannot assert its claims for relief against

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Tessera in light of the terms of the Agreement between the

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parties,” lacks factual support and is contrary to the law of the

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case.

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In the context of its motion to strike the pleadings, the

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Court declines to consider PTI’s argument that the record lacks

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factual support for this defense.

This is an evidentiary

United States District Court
For the Northern District of California

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argument, which is more appropriate for adjudication at the

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summary judgment stage.

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The Court DENIES PTI’s motion to strike this defense as

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contrary to the law of the case.

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the absence of a “provision in the license agreement in which PTI

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has agreed not to argue non-infringement or invalidity,” it also

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declined to express any view on the merits of the dispute as to

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whether the license agreement means either that PTI does not have

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to pay royalties if the chips do not infringe or the patents are

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invalid, or that royalty payments are due regardless of these

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factors.

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contradict the Federal Circuit’s decision to find ultimately that

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the license agreement provides Tessera with a defense.

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IV.

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While the Federal Circuit noted

Powertech, 660 F.3d at 1308-10.

Thus, it would not

Tessera’s first through fifth affirmative defenses
PTI argues that Tessera has not adequately plead the factual

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basis for its remaining affirmative defenses under the standards

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set forth in the Supreme Court’s decisions in Bell Atlantic Corp.

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v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S.

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662 (2009).
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Rule 8 requires that, when “responding to a pleading, a party

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must . . . state in short and plain terms its defenses to each

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claim asserted against it.”

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Rule 12(f) provides that, on its own or on a motion from a party,

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a “court may strike from a pleading an insufficient defense or any

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redundant, immaterial, impertinent, or scandalous matter.”

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Federal Rule of Civil Procedure 12(f).

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12(f) motion is to avoid spending time and money litigating

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spurious issues.”

Federal Rule of Civil Procedure 8(b).

“The purposes of a Rule

Barnes v. AT&T Pension Benefit Plan--

United States District Court
For the Northern District of California

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Nonbargained Program, 718 F. Supp. 2d 1167 (N.D. Cal. 2010)

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(citing Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir.

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1993)).

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the opposing party, leave to amend should be freely given.”

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Wyshak v. City Nat’l Bank, 607 F.2d 824, 826 (9th Cir. 1979).

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“The Ninth Circuit has long held that ‘[t]he key to

If a defense is struck, “[i]n the absence of prejudice to

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determining the sufficiency of pleading an affirmative defense is

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whether it gives plaintiff fair notice of the defense.’”

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Gordon & Wong Law Group, P.C., 2012 WL 1029425, at *6 (N.D. Cal.)

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(quoting Wyshak, 607 F.2d at 827).

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decisions in Twombly and Iqbal, requiring that plaintiffs meet a

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plausibility standard in their pleadings, courts have been

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considering whether these decisions also “redefine[] what

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constitutes ‘fair notice’ of an affirmative defense pled in an

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answer.”

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Perez v.

Since the Supreme Court’s

Id.

As both parties acknowledge, neither the Ninth Circuit nor

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the Supreme Court has directly addressed this question.

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district courts have split on the issue, most have found that the

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heightened pleading standard does apply to affirmative defenses.
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While

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See, e.g., Perez, 2012 WL 1029425, at *8 (collecting cases);

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Barnes, 718 F. Supp. 2d at 1171 (collecting cases); Hayne v. Green

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Ford Sales, Inc., 263 F.R.D. 647, 649-50 (D. Kan. 2009)

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(collecting cases).

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it appears that the judges who have decided the issue thus far

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have uniformly found that the Twombly and Iqbal standard does

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apply to affirmative defenses.

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*6-8 (Koh, J.); Barnes & Noble, Inc. v. LSI Corp., 2012 WL 359713,

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at *2 (N.D. Cal.) (Chen, J.); Bottoni v. Sallie Mae, Inc., 2011 WL

Within the Northern District of California,

See Perez, 2012 WL 1029425, at

United States District Court
For the Northern District of California

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3678878, at *2 (N.D. Cal.) (Beeler, M.J.); Dion, 2012 WL 160221,

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at *2 (Conti, J.); J & J Sports Productions, Inc. v.

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Mendoza-Govan, 2011 WL 1544886, at *1 (N.D. Cal.) (Alsup, J.);

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Barnes, 718 F. Supp. 2d at 1171-72 (Patel, J.).1

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As other judges in the Northern District of California have

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already explained, Twombly and Iqbal changed the legal foundation

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underlying the Ninth Circuit’s Wyshak decision, and the reasoning

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in those decisions also applies in the context of affirmative

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defenses.

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pleading standard was governed by Conley v. Gibson, 355 U.S. 41

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(1957), which held that ‘a complaint [could] not be dismissed for

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failure to state a claim unless it appear[ed] beyond doubt that

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the plaintiff [could] prove no set of facts in support of his

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claim which would entitle him to relief.’”

“At the time Wyshak was decided, the fair notice

Perez, 2012 WL

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The Court notes that a Ninth Circuit panel cited Wyshak’s
fair notice standard in 2010, after Iqbal was decided. See
Simmons v. Navajo Cty., 609 F.3d 1011, 1023 (9th Cir. 2010).
However, as other district courts have stated, the panel in that
case “did not have the issue of Rule 8 pleading standards squarely
before it, and its citation appeared in a discussion focused on
when, not how, to plead an affirmative defense.” Perez, 2012 WL
1029425, at *8 n.4 (citing Simmons, 609 F.3d at 1022–23).
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1029425, at *6.

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pleading standard for complaints to the pleading of affirmative

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defenses.”

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decisions in 2007 and 2009, respectively, departed from Conley and

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redefined the pleading requirements under Rule 8.”

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have observed that ‘Rule 8’s requirements with respect to pleading

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defenses in an answer parallel the Rule’s requirements for

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pleading claims in a complaint,’”

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Supp. 2d at 1172), and “this parallelism appears to be the very

Id.

“In Wyshak, the Ninth Circuit applied the Conley

“However, the Supreme Court’s Twombly and Iqbal

Id.

“Courts

id. (quoting Barnes, 718 F.

United States District Court
For the Northern District of California

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reason the Ninth Circuit applied Conley to the pleading of

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affirmative defenses in Wyshak,” id. (citing Wyshak, 607 F.2d at

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827).

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the burden of proof on an affirmative defense, as the plaintiff

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does on a claim for relief, “‘Twombly’s rationale of giving fair

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notice to the opposing party would seem to apply as well to

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affirmative defenses given the purpose of Rule 8(b)’s requirements

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for defenses.’”

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Especially in light of the fact that the defendant bears

Barnes & Noble, Inc., 2012 WL 359713, at *2.

Thus, this Court agrees with the other judges in this

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district that the heightened pleading standard set forth in

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Twombly and Iqbal also applies to affirmative defenses.

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Defendant’s affirmative defenses include only conclusory

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allegations, without providing any information about the grounds

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upon which the defenses rest, it has insufficiently plead these

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defenses as required to provide fair notice under either standard.

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See Yates v. Perko’s Cafe, 2011 WL 2580640, at *3 (N.D. Cal.) (“An

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insufficiently pled defense fails to comply with Rule 8 pleading

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requirements by not providing ‘plaintiff fair notice of the nature

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of the defense’ and the grounds upon which it rests.”) (citing
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Because

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Wyshak, 607 F.2d at 827).

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dismiss Tessera’s first five affirmative defenses.

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granted leave to amend to plead these defenses with greater

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specificity.

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Thus, the Court GRANTS PTI’s motion to
Tessera is

PTI also argues that the fifth affirmative defense, which is

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based on unclean hands, should be dismissed as failing to meet the

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requirements of Rule 9(b), to the extent that it is predicated on

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conduct that involves fraud or mistake.

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does not predicate this defense on fraud or mistake and thus Rule

Tessera responds that it

United States District Court
For the Northern District of California

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9(b) is not relevant.

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to satisfy the requirements of Rule 8, if Tessera bases this

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defense on conduct involving fraud or mistake, it must also

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satisfy Rule 9(b).

In amending its fifth affirmative defense

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CONCLUSION
For the reasons set forth above, the Court GRANTS in part,

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and DENIES in part, PTI’s motion to strike Tessera’s affirmative

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defenses (Docket No. 112).

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amended answer to plead properly its first five affirmative

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defenses, which are stricken, within two weeks of the date of this

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Order, if it can truthfully do so.

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defense is stricken without prejudice.

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denied as to the seventh affirmative defense.

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Tessera is granted leave to file an

Tessera’s sixth affirmative
PTI’s motion to strike is

IT IS SO ORDERED.

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Dated: 5/16/2012

CLAUDIA WILKEN
United States District Judge

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