Juniper Networks Inc. v. Palo Alto Networks Inc.

Filing 53

MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 8/2/2012. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

JUNIPER NETWORKS, INC.,

)

Plaintiff,
v.
PALO ALTO NETWORKS, INC.,
Defendant.

)
)
)
) Civ. No. 11-1258-SLR
)
)
)
)

Jack B. Blumenfeld, Esquire and Jennifer Ying, Esquire of Morris, Nichols, Arsht &
Tunnell LLP, Wilmington, Delaware. Counsel for Plaintiff. Of Counsel: Morgan Chu,
Esquire, Jonathan S. Kagan, Esquire and Lisa Glasser, Esquire of lrell & Manella LLP.
Phillip A. Rovner, Esquire and Jonathan A. Choa of Potter Anderson & Corroon LLP,
Wilmington, Delaware. Counsel for Defendant. Of Counsel: Daralyn J. Durie, Esquire,
Ragesh K. Tangri, Esquire, Ryan M. Kent, Esquire, Sonali D. Maitra, Esquire, and Brian
C. Howard, Esquire of Durie Tangri LLP.

MEMORANDUM OPINION

Dated: August~, 2012
Wilmington, Delaware

I. INTRODUCTION
On December 19, 2011, Juniper Networks Inc. ("Juniper" or "plaintiff'), a
Delaware corporation involved in the design, manufacture and sale of firewall
technologies, filed suit against Palo Alto Networks, Inc. ("PAN" or "defendant"), another
Delaware-based corporation in the same industry, alleging infringement of six patents,
including United States Patent Nos.: 8,077,723 ("the '723 patent"); 7,779,459 ("the '459
patent"); 7,650,634 ("the '634 patent"); 7,302,700 ("the '700 patent"); 7,093,280 ("the
'280 patent"); and 6,772,347 ("the '347 patent"). (D. I. 1) Defendant answered plaintiff's
complaint on February 9, 2012, affirmatively asserting that the patents were invalid.
(D.I. 9) On February 28, 2012, plaintiff filed a motion to strike defendant's affirmative
defense of invalidity based upon the doctrine of assignor estoppel. (D.I. 12) Plaintiff's
motion to strike is presently before the court. The court has jurisdiction pursuant to 28
U.S.C. §§ 1331 and 1338(a). For the reasons discussed below, the court grants in part
and denies in part the pending motion. 1

II. BACKGROUND
A. The Parties

Juniper is a leading manufacturer of computer networking technologies, including
firewalls. 2 (D.I. 1 at ,-r 1) In April 2004, Juniper bought the company NetScreen, an
industry innovator in high-end network security devices, for $4 billion; NetScreen's
1

2

Defendant's motion for leave to file a sur-reply is granted. (D.I. 37)

According to plaintiff, firewalls "are designed to permit or deny network
transmissions, typically based on a set of rules, and are frequently used to protect
networks from unauthorized access while permitting legitimate communications to pass.
As such, firewalls are important for running a secure network." (D.I. 13 at 4)

intellectual property rights were included as a part of this acquisition. (/d. at 1f13)
Yuming Mao ("Mao") and Nir Zuk ("Zuk"), employees of NetScreen, began working for
Juniper after the acquisition. (/d. at 1J14)
According to plaintiff, by 2006, Mao and Zuk had left Juniper to start PAN, a
competing firewall manufacturer. (D.I. 13 at 6) Plaintiff notes that PAN's website
identifies Zuk as PAN's "Founder and CTO" and a member of its Board of Directors and
Mao as PAN's "Founder and Chief Architect." (/d. at 7) Plaintiff also emphasizes that
several former Juniper employees work in high level positions at PAN. (/d.)
Defendant recounts a different version of events relating to Zuk and Mao's
departure from Juniper and the formation of PAN. According to defendant, Zuk left
Juniper in February 2005 to start PAN "with the notion of developing a new security
switch. . . . Within a few months founding PAN, he conceived of the idea for the nextgeneration of firewall devices." (D.I. 21 at 3) By December of 2005, Zuk claims that he
and three others, including Dave Stevens, Gerhard Eshelbeck and Fenming Gong,
"developed a detailed business plan and architectural schema for [their next-generation
firewall idea]." (/d.) It was not until January of 2006 that Mao left Juniper for
employment at PAN. (/d.) According to defendant, Mao has never been an officer of
PAN, has never served on the board of directors and has never been a regular
participant at executive staff meetings; instead he has always reported to a vice
president at the company. 3 (/d.) While defendant acknowledges that Mao was given
the title "founder," he apparently asked for this title and was given it so that it would
3

Originally he reported to the VP of Engineering but, after switching
departments, now reports to the VP of Sales. (D. I. 21 at 4)

2

appear that he was receiving a promotion by joining PAN. (/d. at 4-5)
B. The Patents-in-Suit
The patents-in-suit "all relate to core aspects of firewall technology." (0.1. 1 at~
2) Mao and/or Zuk are listed as inventors on all the patents-in-suit. (See '723 patent
listing Mao and Zuk as inventors; '459 patent listing Mao as an inventor; '634 patent
listing Zuk as the inventor; '700 patent listing Mao as an inventor; '280 patent listing
Mao as an inventor; and '34 7 patent listing Mao as an inventor) Mao and Zuk also
signed inventor's oaths averring that they were the "first" and "original" inventors of the
respectively claimed subject matter. (See 0.1. 14 at exs. A, C, E, G, I and K)
Furthermore, either Mao or Zuk assigned the "entire right, title and interest" of each of
the claimed inventions to either NetScreen or Juniper for "valuable consideration." (See

0.1. 14 at exs. B, 0, F, H, J, L)
C. The Lawsuit
Plaintiff claims to have "initiated this lawsuit after discovering that a substantial
part of what Mao and Zuk brought to PAN when they founded it was the very same
technology that they had previously developed and then assigned to NetScreen and
Juniper during their employment." (D.I. 13 at 7) Defendant, in its answer to the
complaint, lists the invalidity of the patents-in-suit as one of its affirmative defenses.

(0.1. 9

at~

53) In response, plaintiff filed the present motion to strike, claiming that any

invalidity defense is inapplicable in light of the assignor estoppel doctrine. (0.1. 12)

Ill. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(f) states: "The court may strike from a

3

pleading an insufficient defense or any redundant, immaterial, impertinent, or
scandalous matter." "As a general matter, motions to strike under Rule 12(f) are
disfavored." Fesnak and Associates, LLP v. U.S. Bank Nat'/ Ass'n, 722 F. Supp. 2d
496, 502 (D. Del. 201 0). "When ruling on a motion to strike, the [c]ourt must construe
all facts in favor of the nonmoving party and deny the motion if the defense is sufficient
under law. Further, a court should not grant a motion to strike a defense unless the
insufficiency of the defense is clearly apparent." Symbol Technologies, Inc. v. Aruba

Networks, Inc., 609 F. Supp. 2d 353, 356 (D. Del. 2009) (internal quotations and
citations omitted).

IV. DISCUSSION
A. The Assignor Estoppel Doctrine

In Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988),
the Federal Circuit reaffirmed the existence of the doctrine of assignor estoppel. As the
court explained, "[a]ssignor estoppel is an equitable doctrine that prevents one who
assigned the rights to a patent (or patent application) from later contending that what
was assigned is a nullity. The estoppel also operates to bar other parties in privity with
the assignor, such as a corporation founded by the assignor." /d. As the Court
explained, the doctrine recognizes "the implicit representation by the assignor that the
patent rights that he is assigning (presumably for value) are not worthless ... To allow
the assignor to make that representation at the time of the assignment (to his
advantage) and later to repudiate it (again to his advantage) could work an injustice
against the assignee." /d.

4

In Diamond, Dr. Clarence Welter ("Dr. Welter") developed a vaccine against
gastroenteritis in swine and filed a patent application in conjunction with this invention.

/d. at 1222. He subsequently assigned all rights to the application and patent to
Diamond Scientific Co. ("Diamond"), his employer, for valuable consideration. /d. Dr.
Welter eventually left Diamond to form his own company, Ambico, Inc. ("Ambico"),
which began manufacturing and selling a gastroenteritis vaccine for swine. /d.
Diamond filed suit for patent infringement, and Dr. Welter raised invalidity defenses. /d.
After concluding that assignor estoppel remained a valid defense, the Federal
Circuit stated that an analysis of the doctrine "must be concerned mainly with the
balance of equities between the parties." /d. at 1225. With this notion in mind, the
Court noted the following:
Dr. Welter assigned the rights to his inventions to Diamond in exchange for
valuable consideration (one dollar plus other unspecified considerationpresumably his salary over many years and other employment benefits). Dr.
Welter also executed an inventor's oath, which stated his belief, inter alia,
that he was the first and sole inventor, that the invention was never known
or used before his invention and that it was not previously patented or
described in any publication in any country. Furthermore, Dr. Welter
apparently participated actively in the patent application process, including
drafting the initial version of the claims and consulting on their revision.

/d. The Court then concluded:
We agree with the district court that the equities weigh heavily in favor of
Diamond. Although the doctrine of assignor estoppel may no longer be a
broad equitable device susceptible of automatic application, the case before
us is appropriate for its use. When the inventor-assignor has signed the
Oath, Power of Attorney and Petition, which attests to his belief in the
validity of the patents, and has assigned the patent rights to another for
valuable consideration, he should be estopped from defending patent
infringement claims by proving that what he assigned was worthless. That
is an implicit component of the assignment by Welter to Diamond which is
immune from contradiction. The inventor's active participation in the

5

prosecution and preparation of the patent applications, as is alleged here,
would tilt the equities even more heavily in favor of the assignee, but
consideration of this factor is not necessary to the result.

/d. at 1225-26.
While privity did not appear to be a primary concern in Diamond (presumably
because there were no major questions surrounding Dr. Welter's formation of or the
extent of control he exercised over Ambico ), the Court did note that privity concerns are
relevant in an assignor estoppel analysis. 4 /d. at 1224. The Federal Circuit, in
Shamrock Technologies, Inc. v. Medical Sterilization, Inc., 903 F.2d 789, 793 (Fed. Cir.

1990), reiterated that "[a]ssignor estoppel is an equitable doctrine ... that is mainly
concerned with the balance of the equities between the parties ... [and t]hose in
privity with the assignor partake of that balance; hence, extension of the estoppel to
those in privity is justified." The Shamrock Court went on to explain that, "[p]rivity, like
the doctrine of assignor estoppel itself, is determined upon a balance of equities." /d.
In other words, "[i]f an inventor assigns his invention to his employer company A and
leaves to join company B, whether company B is in privity and thus bound by the
doctrine will depend on the equities dictated by the relationship between the inventor
and company B in light of the act of infringement." /d. at 793. "The closer that
relationship, the more the equities will favor applying the doctrine to company B." /d.
In Shamrock, Robert Luniewski ("Luniewski"), an employee of Shamrock
Technologies, Inc. ("Shamrock"), agreed, as a condition of his employment, to assign all
4

While neither party set out to define the term "privity," the court notes that it is
generally defined as a "[d]erivative interest founded on, or growing out of, contract,
connection or bond of union between parties; mutuality of interest." BLACK'S LAW
DICTIONARY 1199 (6th ed. 1990).

6

work-related inventions to his employer. /d. at 790. One such invention was an
apparatus and method for processing polytetrafluoroethylene ("PTFE") with radiation.

/d. After assigning his rights to Shamrock, Lunieski left Shamrock and joined Medical
Sterilization, Inc. ("MSI") as a vice president in charge of operations; thereafter MSI
began processing PTFE with radiation. /d. On summary judgment, the district court
concluded that the doctrine of assignor estoppel was applicable to MSI and Lunieski's
claims of invalidity. /d. at 790. The Federal Circuit affirmed, explaining:
The district court correctly determined that, considering the balance of
equities and the relationship of Luniewski and MSI, no genuine issue of
material fact exists regarding privity in this case. The undisputed facts are:
(1) in July 1983 Luniewski left Shamrock to join MSI as Vice-President in
charge of Operations; (2) Luniewski owns 50,000 shares of MSI stock; (3)
MSI was formed in 1982 to sterilize surgical instruments and manufacture
other medical goods; yet as soon as Luniewski was hired in 1983, MSI built
facilities for processing PTFE with radiation; (4) Luniewski oversaw the
design and construction of those facilities; (5) Luniewski was hired in part
to start up MSI's infringing operations; (6) the decision to begin processing
PTFE with radiation was made jointly by Luniewski and the president of
MSI; (7) MSI began manufacturing PTFE with radiation in 1985; and (8)
Luniewski was in charge of MSI's PTFE operation.

/d. at 794.
B. The Parties' Contentions
Plaintiff argues, based upon its reading of Diamond, that defendant should be
estopped from asserting invalidity defenses since: 1) Zuk or Mao assigned the rights to
each patent-in-suit for valuable consideration; 2) Zuk or Mao each signed inventor's
oaths on the patents-in-suit; and 3) Zuk and Mao are founders of PAN, i.e. in privity with
PAN. (0.1. 13 at 11-14). In short, plaintiff asserts that defendant falls squarely within
the holding of Diamond.

7

Defendant disagrees. First, defendant argues that Mao, the inventor and
assignor of the '700, '280, '347 and '457 patents, is not in privity with PAN. (D.I. 21 at
8-11) Second, defendant argues that Zuk never signed an inventor's oath on the '723
patent or assigned it to Juniper. 5
C. Analysis
1. Mao and PAN's privity: the '700, '280, '347 and '459 patents
Defendant argues that the doctrine of assignor estoppel is not applicable to the
'700, '280, '347 and '459 patents because Mao is not in privity with PAN or, at the least,
the issue of privity can not be determined at this point in time. 6 (D.I. 21 at 11) The
court agrees with defendant.
As discussed above, privity is determined based upon a balancing of the
equities; the greater the connection between Mao and PAN relative to the allegedly
infringing activities, the more likely it is that privity exists. At this point of the litigation,
the court is not willing to say that the equities counsel in favor of applying the doctrine of
assignor estoppel based upon Mao's connection to PAN. While plaintiff notes that
PAN's website identifies Mao as a "founder and chief architect" (D.I. 13 at 13),

5

At points throughout its briefs, defendant emphasizes that the '723 and '459
patents issued from continuation applications that neither Zuk nor Mao ever assigned or
attested to being the first inventors of; defendant also emphasizes that all the patentsin-suit (except patent '347) issued after Zuk and Mao left Juniper. (D.I. 21 at 5) The
Diamond Court explained that these arguments are "irrelevant" to the issue of assignor
estoppel. Diamond, 848 F.2d at 1226. Accordingly, those facts are not addressed in
any further detail.
6

Defendant does not appear to dispute that these patents were all assigned by
Mao to Juniper or NetScreen for valuable consideration and Mao signed an inventor's
oath.

8

defendant claims that Mao joined PAN well after its founding, he is not an officer or
senior executive and he was not instrumental in the development of the allegedly
infringing product. (/d. at 10-11) Defendant's answer also denies that Mao is a
founder. (D. I. 9 at ,-r 3) In short, a factual dispute exists with respect to the degree of
connection between Mao and PAN. Because the determination of privity (and the
applicability of the assignor estoppel doctrine) with respect to these four patents is a
fact-sensitive inquiry that must be resolved outside the pleadings, and given the
standard of review applicable to motions to strike, the court denies plaintiff's motion at
this time. A number of other courts have also denied similar motions at the pleadings
stage, emphasizing that factual concerns relating to privity precluded such an early
resolution of the matter. See e.g., Third Wave Technologies, Inc. v. Eragen

Biosciences, Inc., 2002 WL 32344427, at *1 (W.O. Wis. Dec. 16, 2002); Schultz v.
iGPS Co. LLC, 2011 WL 37839, at *3 (N.D. Ill. Jan. 3, 2011 ). 7 In summary, because
issues of material fact prelude resolution at this stage, summary judgment is a more
appropriate venue for these arguments.

2. The '723 patent
The '723 patent lists as inventors Mao and Zuk. Mao executed an inventor's
oath and assigned his rights in the invention to Juniper; Zuk signed neither of these
documents. Accordingly, any motion to strike under the doctrine of assignor estoppel
7

Plaintiff correctly points out that the court may look beyond the pleadings when
considering a motion to strike based upon the doctrine of assignor estoppel; however,
the court emphasizes that the matters should ordinarily be "uncontested factual
matters." Diamond, 848 F.2d at 1227. The parties have asked the court to look well
beyond the pleadings here and into highly disputed factual matters. Diamond did not
indicate that such activity would be appropriate.
9

must be based on Mao's assignment8 and, as discussed above, that is a matter more
properly reserved for summary judgment.

3. The '634 patent
Zuk signed an inventor's oath with respect to the '634 patent and also assigned
the invention claimed therein to NetScreen for valuable consideration. (D. I. 14 at exs.
E, F) He has acknowledged being a founder of PAN. (0.1. 9

at~

3) As such, the '634

patent falls squarely within the holding of Diamond. Diamond, 848 f.2d at 1224-26.
Defendant does not genuinely contest that Zuk is in privity with PAN and falls within the

Diamond holding. (D. I. 21 at 14-15) Accordingly, with respect to the '634 patent,
plaintiff's motion to strike is granted. 9

V. CONCLUSION
For the reasons discussed above, the court grants plaintiff's motion with respect
to the '634 patent but denies plaintiff's motion with respect to the remaining patents-insuit. An appropriate order shall issue.

8

Plaintiff admits as much in its reply brief. (D. I. 28 at 4, n.2) As plaintiff

explains:
Zuk is also a co-inventor of the '723 patent, which is an independent basis
for assignor estoppel as to that patent. For purposes of this motion to strike,
however, Juniper relies exclusively upon Mao's assignment of the '723
patent. The reason for this is that Zuk refused to sign the public, judiciallynoticeable PTO assignment document. Accordingly, his assignment must
be proven by employment documents which cannot be considered on a
motion to strike.
(/d.)
9

As defendant correctly points out, however, this finding does not preclude
defendant from defending on the ground of non-infringement. Diamond, 848 F .2d
1226.

10