DeNiece Designs, LLC v. Braun
Filing
27
OPINION AND ORDER DENYING 8 Braun's MOTION to Dismiss and 24 Herrod's MOTION to Dismiss (Signed by Judge Melinda Harmon) Parties notified.(rvazquez)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
DENIECE DESIGN, LLC,
§
§
§
§
§
§
§
§
§
Plaintiff,
VS.
ELAINE BRAUN,
Defendant.
CIVIL ACTION H-12-2814
OPINION AND ORDER
The above referenced action seeks injunctive relief and a
declaratory
judgment
that
Plaintiff
DeNiece
Design
LLC’s
(“DeNiece’s”) products have not infringed and do not infringe
United States Patent 7,255,299 (the “‘299 patent”) for a fabric
storage
panel,
purportedly
owned
by
Defendant
Elaine
Braun
(“Braun”), or that the patent is invalid, or that Braun is barred
from enforcing the ‘299 Patent on the grounds of waiver, laches,
and
estoppel
because
of
Braun’s
action
or
inaction.
Braun
counterclaims for patent infringement, false marking under 35
U.S.C. § 292,1 and false designation of origin under 15 U.S.C. §
1
Section 292 provides in relevant part,
(a) whoever, without the consent of the patentee, marks
upon, or affixes to, or uses in advertising in connection
with anything made, used, offered for sale, or sold by
such person within the United States, or imported by the
person into the United States, the name or any imitation
of the name of the patentee, the patent number, or the
words “patent,” “patentee,” or the like, with the intent
of counterfeiting or imitating the mark of the patentee,
or of deceiving the public and inducing them to believe
-1-
1125(a).2
that the thing was made, offered for sale, sold, or
imported into the United States by or with the consent of
the patentee; or
Whoever marks upon, or affixes to, or uses in advertising
in connection with any unpatented article, the word
“patent” or any word or number importing the same is
patented for the purpose of deceiving the public; or
Whoever marks upon, or affixes to, or uses in connection
with any article, the words “patent applied for,” “patent
pending,” or any word importing that an application for
patent has been made, when no application for patent has
been made, or if made, is not pending, for the purpose of
deceiving the public-Shall be fined not more than $500 for every such offense.
Only the United States may sue for the penalty authorized
by this subsection.
(b) a person who has suffered a competitive injury as a
result of a violation of this section may file a civil
action in a district court of the United States for
recovery of damages adequate to compensate for the
injury.
2
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),
entitled “False designations of origin, false descriptions, and
dilution forbidden,” in relevant part provides a cause of action
for unfair competition:
(1) Any person who, on or in connection with any goods or
services, or any container for goods, uses in commerce
any word, term, name, symbol, or device, or any
combination thereof, or any false designation of origin,
false or misleading description of fact, or false or
misleading representation of fact which-–
(A) is likely to cause confusion, or to cause
mistake, or to deceive as to the affiliation,
connection, or association of such person with
another person, or as to the origin,
sponsorship, or approval of his or her goods,
services, or commercial activities by another
-2-
Pending before the Court are (1) Braun’s motion to dismiss
(instrument #8) Counts II (invalidity of patent) and III (waiver,
estoppel, and laches) of Plaintiff’s Complaint and (2) Counter
Defendant DeNiece Herrod’s motion to dismiss (#24).
I.
Factual Allegations of DeNiece’s Complaint (#1)
DeNiece’s complaint states that Braun claims to own the ‘299
patent for a “Fabric Storage Panel” (copy attached as Exhibit A).
Ms. Herrod (“Herrod”) by and through her company, DeNiece, makes,
manufactures and sells fabric organizers to store scraps and
yardage of fabrics.
She claims that she originated the concept of
the fabric organizer on January 30, 2004, that she filed for a
provisional patent No. 60/676.215,3 entitled “Fabric Organizer,” on
person, or
(B) in commercial advertising or promotion,
misrepresents the nature, characteristics,
qualities, or geographic origin of his or her
or another person’s goods, services, or
commercial activities,
shall be liable in a civil action by any person who
believes that he or she is or is likely to be damaged by
such act.
3
A provisional patent application is a legal document filed
with the United States Patent and Trademark Office (“USPTO”) to
establish an early filing date, but it does not become a formal
patent unless the applicant files a patent within one year. See,
e.g., Davis v. Brouse McDowell, LPA, 596 F.3d 1355, 1357-58 (Fed.
Cir. 2010). See also Lemkin v. Hahn, Loeser & Parks, No. 2:10-CV665,2012 WL 1058951, *1 n.3 (S.D. Ohio Mar. 28, 2012)(“A
provisional patent application is less costly than a standard
patent application and will not mature into an issued utility
patent unless further steps are taken. It serves to establish an
early effect filing date for priority in connection with a later
-3-
April 29, 2005, and that she filed application No. 11/381,086,
which claimed the benefit of 60/676.215, on May 1, 2006.
That
application went abandoned on June 14, 2010.
U.S. Patent ‘299 was filed on August 13, 2004 and issued on
August 14, 2007.
On August 15, 2007 Braun’s lawyers sent a cease
and desist letter to DeNiece asserting encroachment of the ‘299
patent.
On August 29, 2007 Herrod’s attorneys sent a response
detailing differences between her products and the claims of the
filed non-provisional patent application.
A provisional
application for a patent is automatically abandoned one year after
the date on which it is filed.”)(citing 35 U.S.C. section 111, et
seq.).
To establish the earlier filing date of the provisional
application, the application must provide an adequate description
of the invention in enough detail that one skilled in the art can
clearly conclude that the inventor invented the claimed invention
as of the filing date. Technologies Intern., Inc. v. eSpeed, Inc.,
595 F.3d 1340, 1359 (Fed. Cir. 2010). See also Pfizer Inc. v. Teva
Pharmaceuticals U.S.A., Inc., 882 F. Supp. 2d 643, 682 (D. Del.
2012)(To show that an asserted claim of a patent-in-suit is
entitled to the priority filing date of an earlier parent
application,” the patent application must satisfy section 112,
which “requires the application’s disclosure to describe the
claimed invention and enable a person of ordinary skill in the art
to make and use it.”). citing Ariad Pharms, Inc. v. Eli Lilly &
Co., 598 F.3d 1336, 142-55 (Fed. Cir. 201o)(en banc). The benefit
of the earlier filing date for priority is addressed in 35 U.S.C.
section 120 (quoted in relevant part):
An application for patent for an invention disclosed in
the manner provided by section 112(a) (other than the
requirement to disclose the best mode) in an application
previously filed in the United States, or as provided by
section 363, which names an inventor or joint inventor in
the previously filed application shall have the same
effect, as to such invention, as though filed on the date
of the prior application, if filed before the patenting
or abandonment of or termination of proceedings on the
first application . . . .
-4-
‘299
patent.
Neither
Herrod
nor
DeNiece
received
any
more
correspondence from Braun or her lawyers for nearly five years.
Then on June 13, 2012, Herrod received another cease and desist
letter from Braun and her lawyers.
Moreover Herrod’s retailers
have received such letters and have caused Herrod to lose customers
and/or business.
DeNiece and Herrod’s assert three claims for relief:
a
declaratory judgment of non-infringement of the ‘299 patent; a
declaratory
judgment
that
the
‘299
patent
is
invalid;
and
nonenforcement of the ‘299 patent based on waiver, laches, and
estoppel.
II.
Braun’s Motion to Dismiss Counts II and III (#8)
A. Standard of Review Generally
Federal Rule of Civil Procedure 8(a)(2) provides, “A pleading
that states a claim for relief must contain . . . a short and plain
statement of the claim showing that the pleader is entitled to
relief.”
The Fifth Circuit has held that the same Rule 8(a)
pleading standards apply to counterclaims and affirmative defenses.
Woodfield
v.
Bowman,
193
F.3d
354,
362
(5th
Cir.
1999)(“[A]
defendant must plead an affirmative defense with enough specificity
or factual particularity to give the plaintiff ‘fair notice’ of the
defense that is being advanced . . . and in some cases merely
pleading
the
sufficient”;
name
of
the
affirmative
defense
.
.
.
may
be
“[t]he ‘fair notice’ pleading requirement is met if
-5-
the defendant ‘sufficiently articulated the defense so that the
plaintiff was not a victim of unfair surprise.’”).
When a district court reviews a motion to dismiss pursuant to
Fed. R. Civ. P. 12(b)(6), it must construe the complaint in favor
of the plaintiff and take all well-pleaded facts as true. Randall
D. Wolcott, MD, PA v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011),
citing Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009).
“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, . . . a
plaintiff’s
obligation
‘entitle[ment]
to
to
relief’
provide
the
‘grounds’
requires
more
than
of
his
labels
and
conclusions, and a formulaic recitation of the elements of a cause
of action will not do . . . .”
S.
Ct.
1955,
1964-65
Bell Atlantic Corp. v. Twombly, 127
(2007)(citations
omitted).
“Factual
allegations must be enough to raise a right to relief above the
speculative level.”
Federal
Practice
Id. at 1965, citing 5 C. Wright & A. Miller,
and
Procedure
§
1216,
pp.
235-236
(3d
ed.
2004)(“[T]he pleading must contain something more . . . than . . .
a statement of facts that merely creates a suspicion [of] a legally
cognizable right of action”). “Twombly jettisoned the minimum
notice pleading requirement of Conley v. Gibson, 355 U.S. 41 . . .
(1957)[“a complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to
-6-
relief”], and instead required that a complaint allege enough facts
to state a claim that is plausible on its face.”
St. Germain v.
Howard,556 F.3d 261, 263 n.2 (5th Cir. 2009), citing In re Katrina
Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)(“To survive
a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough
facts to state a claim to relief that is plausible on its face.’”),
citing Twombly, 127 S. Ct. at 1974).
“‘A claim has facial
plausibility when the pleaded factual content allows the court to
draw the reasonable inference that the defendant is liable for the
misconduct alleged.’”
Montoya v. FedEx Ground Package System,
Inc., 614 F.3d 145, 148 (5th Cir. 2010), quoting Ashcroft v. Iqbal,
129 S. Ct. 1937, 1940 (2009).
The plausibility standard is not
akin to a “probability requirement,” but asks for more than a
“possibility that a defendant has acted unlawfully.”
U.S. at 556.
Twombly, 550
Dismissal is appropriate when the plaintiff fails to
allege “‘enough facts to state a claim to relief that is plausible
on its face’” and therefore fails to “‘raise a right to relief
above the speculative level.’”
Montoya, 614 F.3d at 148, quoting
Twombly, 550 U.S. at 555, 570.
In Ashcroft v. Iqbal, 129 S. Ct. at 1940, the Supreme Court,
applying the Twombly plausibility standard to a Bivens claim of
unconstitutional discrimination and a defense of qualified immunity
for a government official, observed that two principles inform the
Twombly opinion: (1) “the tenet that a court must accept as true
-7-
all of the allegations contained in a complaint is inapplicable to
legal conclusions.” . . . Rule 8 ”does not unlock the doors of
discovery
for
a
plaintiff
armed
with
nothing
more
than
conclusions.”; and (2) “only a complaint that states a plausible
claim for relief survives a motion to dismiss,” a determination
involving “a context-specific task that requires the reviewing
court to draw on its judicial experience and common sense.”
“[T]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements do not suffice” under Rule
12(b).
specific
Iqbal, 129 S. Ct. at 1949.
facts,
dismissal.
not
merely
The plaintiff must plead
conclusory
allegations,
to
avoid
Collins v. Morgan Stanley Dean Witter, 224 F.3d 496,
498 (5th Cir. 2000). “Dismissal is proper if the complaint lacks an
allegation regarding a required element necessary to obtain relief
. . . .“
Rios v. City of Del Rio, Texas, 444 F.3d 417, 421 (5th
Cir. 2006), cert. denied, 549 U.S. 825 (2006).
“Rule 12(b) is not a procedure for resolving contests about
the facts or the merits of a case.”
Authority of City of Port Arthur, Tex.,
Gallentine v. Housing
F. Supp. 2d
, Civ.
A. No. 1:12-CV-417, 2013 WL 244651, *3 (E.D. Tex. Jan. 22, 2012),
citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice
and Procedure:
B.
Civil 2d § 1356, at 294 (1990).
Federal Circuit’s Standard of Review for Patent Infringement
A few months after Twombly was issued and almost two years
-8-
before Iqbal was released, in McZeal v. Sprint Nextel Corp., 501
F.3d
1354,
1356-57
(Fed.
Cir.
2007),
the
Federal
Circuit,
addressing a pro se patent and trademark infringement complaint,
held
that
a
patentee
at
minimum
needs
only
to
plead
facts
sufficient to provide the alleged infringer with notice under Rule
8(a) of the plaintiff’s claims against him in order to survive a
motion to dismiss.
The Federal Circuit noted that the Supreme
Court has recognized a “less demanding standard” for
pro se
litigants on procedural matter such as pleading requirements.
F.3d at 1356.
501
It further observed that the Supreme Court has
concluded that Rule 8(a)(2) requires only “‘a short plain statement
of the claim showing that the pleader is entitled to relief’ in
order to ‘give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests.’”
U.S. at
555.
Id., citing Twombly, 550
It held that an acceptable way to put a defendant
on notice of the nature of a plaintiff’s allegations is the sample
patent infringement complaint in Form 16 (now Form 18) of the
Appendix of Forms to the Federal Rules of Civil Procedure. McZeal,
501 F.3d at 1356-57 (listing the elements of Form 16 and explaining
how plaintiff’s complaint included those elements).
Specifically
McZeal identifies the following as the only required elements
needed
to
plead
patent
infringement:
“1)
an
allegation
of
jurisdiction; 2) a statement that the plaintiff owns the patent; 3)
a statement that the defendant has been infringing the patent by
-9-
‘making, selling, and using [the device] embodying the patent’; 4)
a statement that the plaintiff has given the defendant notice of
its infringement; and 5) a demand for an injunction and damages.”
501 F.3d at 1357.
The Federal Circuit noted that Federal Rule of
Civil Procedure 84 states that “‘the forms in the Appendix suffice
under these rules and illustrate the simplicity and brevity that
these rules contemplate.’”
plaintiff
in
a
patent
Id. at 1334. It further stated that “a
infringement
suit
is
not
required
to
specifically include each element of the claims of the asserted
patent.”
Id. at 1357.
The Federal Circuit then vacated the trial
court’s dismissal of McZeal’s complaint and remanded the suit
“[b]ecause McZeal met the low bar for pro se litigants to avoid
dismissal on the basis of Fed. R. Civ. P. 12(b)(6).”
Id. at 1359.
In a dissent in McZeal, Judge Dyk objects, “In my view, the
majority’s decision in this respect is inconsistent with the
Supreme Court’s recent decision” in Twombly.
Id. at 1359 (Dyk, J.
concurring in part and dissenting in part).
He opined that
a bare allegation of literal infringement using the form
is inadequate to provide sufficient notice to an accused
infringer under a theory of literal infringement. The
form fails to state which claims are asserted and which
features of the accused device are alleged to infringe
the limitations of those claims. In alleging that the
“electric motors embod[y] the patented invention” the
form fails to recognize that a patent is only infringed
when the accused product satisfies all of the limitations
of the claims. However, I agree that under Rule 84 of
the Federal Rules of Civil Procedure, we would be
required to find that a bare allegation of literal
infringement in accordance with Form 16 would be
sufficient under Rule 8 to state a claim. One can only
-10-
hope that the rulemaking process will eventually result
in eliminating the form, or at least in revising it to
require
allegations
specifying
which
claims
are
infringed, and the features of the accused device that
correspond to the claim limitations.
Id. at 1360.
In the wake of McZeal there was some confusion about what is
necessary to state a direct4 patent infringement claim.
McZeal
acknowledged it was applying a more deferential standard to a pro
se complaint, and some courts concluded that its holding was
limited to such a context; others determined that McZeal was
abrogated by Iqbal. See generally Adam Steinmetz, “Pleading Patent
Infringement:
Applying the Standard Established by Twombly and
Iqbal to the Patent Context,”
13 Colum. Sci. & Tech. L. Rev. 482
(Sept. 9, 2012).
Recent post-Iqbal opinions by the Federal Circuit, however,
have reaffirmed its holding in McZeal in cases where the plaintiff
was not pro se.
See, e.g., K-Tech Communications, Inc. v. Time
Warner Cable, Inc.,
F.3d
, Nos. 2012-1425, 2012-1446, 2013
WL 1668960 (Fed. Cir. Apr. 18, 2013); R+L Carriers, Inc. v.
DriverTech LLC (In re Bill of Lading Transmission and Processing
System Patent Litigation), 681 F.3d 1323 (Fed. Cir. 2012).
Moreover, it has reiterated that Rule 84 and the Advisory Committee
4
McZeal’s holding and Form 18 apply to “measuring only the
sufficiency of allegations of direct infringement, and not indirect
infringement.” R+L Carriers, Inc. v. DriverTech LLC (In re Bill of
Lading Transmission and Processing System Patent), 681 F.3d 1323,
1336 (Fed. Cir. 2012).
-11-
Notes to the 1946 amendment “make[] clear that a proper use of the
Form contained in the Appendix of Forms effectively immunizes a
claimant from attack regarding the sufficiency of the pleading.”
K-Tech,
2013 WL 1668960 at *5.
“[T]o the extent that any conflict
exists between Twombly (and its progeny), we are ‘required to find
that a bare allegation of literal infringement in accordance with
Form [18] would be sufficient under Rule 8 to state a claim.’”
Id., citing R+L Carriers, 681 F.3d at 1334 (pleadings conforming to
the Forms are sufficient to state a claim even when they do not
meet the Twombly standard)(citing McZeal, 501 F.3d at 1360). “[T]o
the extent
. . . that Twombly and its progeny conflict with the
Forms and create differing pleadings requirements, the
Forms
control” because “any changes to the Federal Rules of Civil
Procedure ‘must be obtained by the process of amending the Federal
Rules, and not by judicial interpretation.’”
Id. at 1334-35,
citing McZeal, 501 F. 3d at 1360 (Dyk, J., concurring in part and
dissenting in part), and Leatherman v. Tarrant Cnty. Narcotics
Intelligence & Coordination Unit, 507 U.S. 162, 168 (1993), and
Twombly, 550 U.S. at 569, n.14.
A number of district courts in the
Fifth Circuit have followed this rule.
See, e.g., Lone Star
Document Management, LLC v. Atalasoft, Inc., Civ. A. Nos. 2:11-CV00319-JRG, 2012 WL 4033322, *2 (E.D. Tex. Sept. 12, 2012); InMotion
Imagery Technologies v. Brain Damage Films, No. 2:11-CV-414-JRG),
2012 WL 3283371 (E.D. Tex. Aug. 10, 1012).
-12-
Braun’s Motion to Dismiss Counts II and III
Count II of the complaint merely states, “The ‘299 Patent and
each and every claim thereof is invalid for failing to comply with
the requirements for patentability under the Patent Laws of the
United States, including 35 U.S.C.
102, 103, and 112.”5
DeNiece’s third cause of action is composed of a single
statement, “Ms. Braun is barred from enforcing the ‘299 Patent
against DeNiece Designs on the grounds of waiver, laches, and
estoppel due to action or inaction by Ms. Braun which has resulted
in extreme prejudice and detriment to DeNiece Designs.”
Braun charges that DeNiece’s conclusory allegations have
“taken inadequate pleading to a new level” in failing to identify
which of the numerous statutory subsections of these statutes apply
and in failing to provide any factual support.
She objects that
the second cause of action fails to state a claim under Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and Ashcroft
v. Iqbal, 129
S. Ct. 1937, 1949 (2007), and Federal Rules of Civil
Procedure 8(a) and 12(b)(6).
The mere listing of patent statutes
without any facts or legal elements does not give any notice, no
less fair notice, of DeNiece’s claim of patent invalidity and the
grounds on which it rests.
Braun points out that Section 102 of
the Patent Act has seven subsections, at least five of which set
5
Section 102 address novelty; section 103, nonobviousness;
and section 112, the specification or written description of the
invention.
-13-
forth numerous independent and far-ranging grounds for invalidating
a patent claim (e.g., prior public use, prior offer to sell, prior
printed publication, abandonment, prior patenting in a foreign
country by the inventor or his or her legal representatives or
assigns, prior published patent applications by others, prior
issued patents by others, non-joinder of inventors, prior invention
by others, etc.).
The same is true of DeNiece’s pleadings under
Sections 103 (additional bases for patent invalidity if “the
invention is not identically disclosed or described as set forth in
section 102") and 112 (including inter alia written description,
lack of enablement, claim indefiniteness, and failure to disclose
the best mode of the invention).
Braun argues that the third count should also be dismissed
because waiver, estoppel and laches are listed as affirmative
defenses under Fed. R. Civ. P 8(c), and thus are not independent
causes of action.
Crook v. El Paso I.S.D., 277 Fed. Appx. 477, 481
(5th Cir. May 8, 2008), cert. denied, 555 U.S. 956 (2008).
Thus
they must be dismissed as a matter of law for failing to state a
cause of action upon which relief can be granted.
DeNiece’s Response in Opposition (#14)
DeNiece argues that its complaint complies with the sample
Form 18 for notice pleading of a direct patent infringement claim
as required under McZeal and Federal Circuit progeny. If the Court
does not deny the motion to dismiss, DeNiece requests leave to
-14-
amend.
As for the invalidity claims, DeNiece states that patent rules
have built-in safeguards for adequate notice.
and
local
rules6
patent
require
that
The Federal Rules
detailed
invalidity
contentions are to be served on the Defendant.
DeNiece states it
will
with
serve
those
contentions
in
accordance
the
Court’s
schedule, which will provide Braun with sufficient time to conduct
discovery and mount her defense.
Court’s Determination
Count II of DeNiece’s complaint seeks a declaratory judgment
that the ‘299 patent is invalid for failure to comply with the
requirements for patentability under the Patent Laws of the United
6
See Better Bags, Inc. v. Illinois Tool Works, Inc.,
F.
Supp. 2d
, Civ. A. No. H-11-1516, 2012 WL 1455759, *5 (S.D. Tex.
Apr. 9, 2013)(discussing local patent rules of Southern District of
Texas and their deadline for serving Preliminary Invalidity
Contentions on other party and what information must be included
under Patent Rule 3-3. See also Teirstein v. AGA Med. Corp., Civ.
A. No. 6:06-cv-14, 2009 WL 704138, *5 (E.D. Tex. Mar. 16,
2009)(local patent rules requiring a party to state its preliminary
infringement and invalidity contentions shortly after the initial
case management conference are intended to make the parties
crystalize their theories of the case and lend further support to
the conclusion that detailed factual assertions are not required .)
Rules of Practice for Patent Cases in the Southern District of
Texas (effective Jan. 1, 2008) is available on the Court’s website.
Section 3-2 sets out the rule for document disclosure for patent
infringement claims, while 3-3 requires service of Preliminary
Invalidity Contentions by a deadline to be set forth in the
scheduling order and specifies particular information that must be
included regarding prior art and any other grounds for patent
invalidity. Rule 3-4 sets out the documents that a party opposing
a claim of patent infringement must produce or make available for
inspection and copying.
Rule 3-5 sets out the disclosure
requirement in patent cases seeking a declaratory judgment.
-15-
States, including 35 U.S.C. sections 102, 103 and 112.
Patent
invalidity can be a counterclaim and/or an affirmative defense to
patent infringement. Moody v. Aqua Leisure Intern., Action No.
4:10-cv-1961, 2011 WL 2604840, *1 n.4 ( S.D. Tex. June 30, 2011).
Nevertheless if framed as seeking a declaratory judgment of patent
invalidity, it can be a counterclaim.
2011 WL 3235683, at *2.
Target Training Intern.,
Thus far no appellate courts, but only
district courts have addressed the question “how Twombly and Iqbal
apply to patent invalidity counterclaims and affirmative defenses,
with conflicting results.” See, e.g., Palmetto Pharmaceuticals LLC
v. Astrazeneca Pharmaceuticals LP, No. 2:11-cv-00807-SB-JDA, 2012
WL 6025756, *5 (D.S.C. Nov. 6, 2012). For the reasons stated below
in the cases that the Court finds persuasive, the Court denies
Braun’s
motion
to
dismiss
DeNiece’s
claim
for
a
declaratory
judgment of patent invalidity.
As noted, the Fifth Circuit has held that Rule 8(a) notice
pleading
requirements
apply
to
defenses as well s to complaints.
counterclaims
and
affirmative
Woodfield, 193 F.3d at 362.
DeNiece’s complaint seeks a declaratory judgment under 28 U.S.C.
sections 2201 and 2202 that it is not infringing on Braun’s
invention, the mirror image of an infringement claim.
Enterprises, Inc. v. Skype Technologies S.A.,
In Gradient
F. Supp. 2d
,
No. 10-CV-6712L, 2012 WL 1208565, *4 (W.D.N.Y. Mar. 25, 2013), the
court concluded that because the Federal Circuit has held that
-16-
notice
pleading
applies
to
claims
of
direct
infringement,
a
counterclaim seeking a declaration of no direct infringement of the
patent in dispute is subject to Form 18, while the stricter Twombly
and Iqbal standard applies to a counterclaim for a declaration of
noninfringement
to
the
extent
that
it
relates
to
indirect
infringement.
In Hon Hai Precision Co., Ltd. v. Wi-LAN, Inc., 2013 WL
2322675, *8 (S.D.N.Y. May 28, 2013), the court wrote,
I find that the plausibility standard of Twombly does not
apply to Hon Hai’s declaratory claim for patent
invalidity.
This is so because it is not a “claim”
within the meaning of Rule 8(a)(2) at all. Instead it is
a defense, within the meaning of Rule 8(c), to the
underlying coercive suit of patent infringement. Unlike
Rule 8(a)(2), which requires a “short and plain statement
of the claim showing that the pleader is entitled to
relief,” Rule 8(c) requires only that “a party []
affirmatively state any avoidance or affirmative defense
. . . “
In addition to this “textual distinction between Rule 8(a) and Rule
8(c), the Hon Hai court, observing that the majority of district
courts in the Second Circuit which have considered the issue have
held that affirmative defenses are not subject to the Twombly
pleading standard, pointed out that Form 30 of the Federal Rules of
Civil Procedure indicate that notice pleading is sufficient to
plead an affirmative defense.
support).
Id. at *9 and n. 96 (citing cases in
Moreover a number of cases have concluded that “because
the Federal Circuit has held that notice pleading applies to claims
of direct infringement, it would be unfair to require a greater
-17-
showing for claims of invalidity.”
Id. at *8 and n.94.
In Teirstein v. AGA Medical Corp., No. 06:08-CV-14, 2009 WL
704138, *4-5 (E.D. Tex. Mar. 16, 2009), the court found sufficient
notice pleading of a counterclaim of patent invalidity based on the
the allegation that the patents failed to “satisfy one or more of
the statutory requirements for patentability set forth in 35 U.S.C.
sections
101,
102,
103
and/or
112"
because
it
also
met
the
requirements of “1) an allegation of jurisdiction; 2) a statement
that an actual case or controversy exists as a result of this suit;
3) a statement that the . . . patent is invalid; 4) a list of the
specific statutory provisions . . . compell[ing] invalidity; and 5)
a
demand
for
relief.”
See
also
Microsoft
Corp.
v.
Phoenix
Solutions, Inc., 742 F. Supp. 2d 1156 (C.D. Cal. 2010)(“With
respect to invalidity counterclaims, the Court agrees with other
district courts that it would be incongruous to require heightened
pleading when the pleading standard for infringement does not
require facts such as ‘why the accused products allegedly infringe’
or ‘to specifically list the accused products.’”); Palmetto
Pharmaceuticals, No. 2:11-cv-00807-SB-JDA, 2012 WL 6025756, at *6
(“This Court finds persuasive the reasoning of the district courts
that have found it would be ‘incongruous to require heightened
pleading’ for invalidity counterclaims when the pleading standard
for infringement does not require factual allegations to support
the infringement claims” and permitting a counterclaim that the
-18-
patent was invalid for failure to comply with one or more of the
conditions of patentability in 35 U.S.C. section 101, 102, 103
and/or 112); Graphic Packaging International, Inc. v. C.W. Zumbiel
Co., Civ. A. No. 1:110-cv-3008-At, 2011 WL 5829674, *2-4 (N.D. Ga.
Aug. 1, 2011)(same).
Thus applying to DeNiece’s complaint the elements of a Form 18
complaint (McZeal, 501 F.3d at 1357) and those modified for a
declaratory judgment patent invalidity counterclaim under Teirstein
(2009 WL 704138 at *4-5), the Court finds that the complaint
satisfies the minimal pleading requirements.
DeNiece states the
basis of the Court’s subject matter jurisdiction under 28 U.S.C.
sections
1331
(federal
question)
and
1338(a)(patent).
The
complaint states that “Ms. Braun claims to own U.S. Patent No.
7,255,299.”
Instead of asserting that the defendant has infringed
the patent by making, selling and using the device embodying the
patent, the complaint for a declaration of noninfringement claims
that “DeNiece does not make, use, offer for sale, import or sell
and has not made[,] used, offered for sale, imported or sold in the
United States any products which infringe any valid and enforceable
claims of the ‘299 patent . . . .”
It further states, “The ‘299
Patent and each and every claim thereof is invalid for failing to
comply with the requirements for patentability under the Patent
Laws of the United States, including 35 U.S.C. sections 102, 103
and 112 . . . .”
It alleges that Braun sent the first cease and
-19-
desist letter to DeNiece on August 15, 2007, receiving a response
on August 29, 2007, and sent a second such letter in June 2012,
with no communication between.
It seeks relief in the forms of a
judgment in favor of DeNiece against Braun, declaratory judgments
of noninfringement and patent invalidity, costs, disbursements, and
reasonable attorney’s fees.
DeNiece’s third count seeks to bar Braun from enforcing the
‘299 patent against DeNiece based on waiver, laches, and estoppel
due to action or inaction by Braun, which purportedly resulted in
extreme prejudice and detriment to DeNiece.
DeNiece does not
provide factual support for these conclusory assertions.
Laches, estoppel and/or waiver can serve as an affirmative
defense to patent infringement, while a claim for declaratory
judgment that Braun is barred from enforcing the ‘299 patent
against DeNiece on those grounds can constitute a counterclaim to
patent infringement.
See, e.g., Target Training Intern., Ltd. v.
Extended Disc North America, Inc., 2011 WL 3235683, *2 (S.D. Tex.
July 27, 2011).
DeNiece does not clearly indicate whether the
unenforceability allegation is a declaratory judgment counterclaim
or an affirmative defense to Braun’s claim of patent infringement.
Regardless, the Court finds that whether DeNiece intends these as
affirmative defenses, in which case they must be pleaded or lost,
or as counter claims, the Court concludes they should not be
dismissed because DeNiece sufficiently pleads them.
-20-
Federal Rule of Civil Procedure 8(c), which includes estoppel,
laches, and waiver on its express list of affirmative defenses,
requires
that
“[i]n
responding
to
a
pleading,
a
party
affirmatively state any avoidance or affirmative defense.”
must
Courts
are divided, here too, as to whether the plausibility standard of
Twombly and Iqbal applies to pleading affirmative defenses, and,
again, no court of appeals has addressed the issue.
Robert
A.
Matthews,
(“Applicability
of
6
Annotated
Iqbal
and
Digest
Twombly
See, e.g.,
section
to
39:11.75
affirmative
defenses”)(database updated June 2013)(discussing numerous cases
with varying conclusions); Chevron Corp. v. Donziger, 866 F. Supp.
2d 235, 267 (S.D.N.Y. 20120)(discussing division of courts over
whether Twombly and Iqbal apply to affirmative defenses); Matthews,
6 Annotated Patent Digest section
equitable
estoppel
39:16 (“Pleading laches and
defenses”)(database
updated
June
2013).
Moreover many of the cases do not consider the effect of McZeal and
progeny on pleading patent claims. The court in Chevron Corp, id.,
quoting Bayer CropScience AG v. Dow AgroSciences, LLC, Civil No.
10-1045 RMB/JS, 2011 WL 6934557, *1-2 (Del. Dec. 30, 2011)(some
punctuation modified), summarizes as persuasive reasoning the
rationale of courts that find Twombly and Iqbal do not apply,
including:
(1) textual differences between Rule 8(a), which requires
that a plaintiff asserting a claim show entitlement to
relief and Rule 8(c), which requires only that a
defendant state any defenses; (2) a diminished concern
-21-
that plaintiffs receive notice in light of their ability
to obtain more information during discovery; (3) the
absence of a concern that the defense is unlocking the
doors of discovery; (4) the limited discovery costs, in
relation to costs imposed on a defendant, since it is
unlikely that either side will pursue discovery on
frivolous defenses; (5) the unfairness of holding the
defendant to the same pleading standard as the plaintiff,
when the defendant has only a limited time to respond
after service of the complaint, while plaintiff has until
the expiration of the statute of limitations; (6) the low
likelihood that motions to strike affirmative defenses
would expedite the litigation, given that leave to amend
is routinely granted; the risk that a defendant will
waive a defense at trial by failing to plead it at the
early stage of the litigation; (8) the lack of detail in
Form 30,which demonstrates the appropriate pleading of an
affirmative defense; and (9) the fact that a heightened
pleading requirement would produce more motions to
strike, which are disfavored.
This Court finds these reasons persuasive and holds that Twombly
and Iqbal do not apply to the pleading of waiver, laches and
estoppel in the patent context.
As stated supra, “[c]ounterclaims and affirmative defenses are
subject
to
the
same
pleading
requirements
as
complaints.”
Teirstein, 2009 WL 704138 at *2, citing Woodfield, 193 F.3d at 362
(noting that Rule 8 requires “all pleadings to be simple, concise
and direct”), Form 30, Answer Presenting Defenses Under Rule 12(b),
Forms App., Fed. R. Civ. P. (“Form 30”), and Federal Rule of Civil
Procedure 12(h)(counterclaims should be “[s]et forth . . . in the
same way a claim is pleaded in a complaint”).
The court in
Teirstein observed that the Fifth Circuit has acknowledged “that in
some cases merely pleading the name of the affirmative defense . .
. may be sufficient.
Id., citing Woodfield at 362.
-22-
As discussed,
in the wake of McZeal, the Teirstein court concluded that requiring
the pleading of facts in an invalidity counterclaim to a patent
infringement action would improperly heighten pleading standards.
The court emphasized that specific information could be obtained
through discovery and further observed that local courts that have
adopted local patent rules, as the Southern District of Texas has,7
requiring parties at an early stage of the litigation “to serve
Invalidity Contentions, which detail anticipating and obviating
prior art; disclose grounds for indefiniteness; and include a claim
chart regarding invalidity,” makes up for the lack of factual
support at the pleading stage; indeed “[r]equiring such allegations
to
be
included
in
the
pleadings
would
turn
the
Invalidity
Contentions required by the Local Patent Rules into an exercise in
futility.”
7
Id. at 4 and 5.8
See footnote 6.
8
In 02 Micro Intern. Ltd. v. Monolithic Power Systems, Inc.,
467 F.3d 1355, 1365 (Fed. Cir. 2006), emphasizing “the broad
discovery regime under the Federal Rules of Civil Procedure,
especially given the particular importance of discovery in complex
patent cases,” the Federal Circuit observed that “[w]hile a party
asserting a claim or counterclaim must have a reasonable basis for
filing suit, the Federal Rules require only notice pleading by the
claimant.” It explained that in light of the simplified notice
pleading system, discovery under the rules “allows the plaintiff to
develop facts to support the theory of the complaint and allows the
defendant to develop facts to support its defenses.” Id. It is
“designed to allow the plaintiff to pin down the defendant’s
theories of defense, thus confining discovery and trial preparation
to information that is pertinent to the theories of the case.”
Moreover, local patent rules, “by requiring both the plaintiff and
the defendant in patent cases to provide early notice of
infringement and invalidity contentions, and to proceed with
-23-
This Court agrees that the fact that a patent infringement
claim does not have to be pleaded with factual particularity makes
it
unfair
to
require
such
for
an
affirmative
defense
counterclaim of laches, estoppel or waiver to such a claim.
or
With
regard to laches or equitable estoppel based on delay, DeNiece has
pleaded the dates of the two cease and desist letters with a gap
between them of nearly five years to state a plausible claim on its
face and put Braun on fair notice.
Teirstein, 2009 WL 704138 at
*7-8.
For these reasons, the Court denies Braun’s motion to dismiss.
DeNiece Herrod’s Motion to Dismiss (#24)
Seeking to dismiss Braun’s counterclaim against Herrod in her
personal capacity,9 Herrod points out that in Braun’s Counterclaim
III for false designation of origin under 15 U.S.C. section
1125(a), Herrod is personally named.
Her motion maintains that
Braun has not shown any reason to pierce the corporate veil.
Section 101.114 of the Texas Business Organizations Code
provides, “Except as and to the extent the company agreement
diligence in amending those contentions when new information comes
to light in the course of discovery.
The rules thus seek to
balance the right to develop new information in discovery with the
need for certainty as to legal theories.” Id. at 1365-66.
9
The Court notes that in her motion Herrod miscites Rule
12(b)(6) as Rule 12(b)(4) and erroneously refers to the current
standard of review as that under Conley v. Gibson, 355 U.S. 41, 4546 (1957).
-24-
specifically provides otherwise, a member or manager is not liable
for a debt, obligation, or liability of a limited liability
company,
including
a
debt,
obligation,
judgment, decree, or order of a court.”
or
liability
under
a
Section 101.113 of the
Code states “A member of a limited liability company may be named
as a party in an action by or against the limited liability company
only if the action is brought to enforce the member’s right against
or liability to the company.”
Herrod maintains that generally
courts should abide by the principle that the LLC is an entity
separate and distinct from its members, just as a corporation is an
entity separate and distinct from its shareholders.
Ingalls v.
Standard Gypsum, LLC, 70 S.W. 3d 252 (Tex. App.--San Antonio 2001,
pet. denied).
Herrod argues that Braun has not alleged that Herrod took any
actions
separate
and
distinct
from
those
representative capacity on behalf of DeNiece.
taken
in
her
A&E Engine and
Compression, Inc. v. Miss-Lou Petroleum, LLC, No. 2009 CA 1254,
2010 WL 1005870 (La. App. March 19, 2010).
Moreover Braun has not
made an alter ego argument or any argument that holding only the
limited liability company would have an inequitable result.
SSP
Partners v. Gladstrong Investments (USA) Corp., 275 S.W. 3d 3344
(Tex. 2008)(stating that there must be evidence of abuse or
injustice to disregard the corporate form; rejecting the single
business enterprise theory because the factors do not reflect
-25-
illegitimate use of limited liability); Mancorp, Inc. v. Culpepper,
802 S.W. 2d 226 (Tex. 1990)(courts may disregard the corporate
entity under the alter ego theory “when there exists such unity
between the corporation and individual that the corporation ceases
to be separate and when holding only the corporation liable would
promote injustice”); Matthews Constr. Co. v. Rosen, 796 S.W. 2d 692
(Tex. 1990)(“When the corporate form is used as an essentially
unfair device--when it is used as a sham--courts may act in equity
to
disregard
the
usual
rules
of
law
in
order
to
avoid
an
inequitable result”); Lucas v. Texas Indus., Inc., 696 S.W. 2d 372
(Tex. 1984)(noting policy reasons that courts are less reluctant to
pierce the veil in tort cases than in breach of contract cases, but
refusing to pierce the corporate veil in the instant tort case
because of the absence of evidence that the corporate form caused
plaintiff to fall victim to a “basically unfair device by which .
. . [the] corporate entity was used to achieve an inequitable
result.”).
Herrod argues that Braun’s counterclaims against Herrod fail
for insufficiency because Herrod’s name is not mentioned in the
section called “Background and Facts Common to All Counts” and
because Herrod’s name is mentioned only once in the counterclaims,
i.e., line 41, “DeNiece Designs and Ms. Herrod, in connection with
the Infringing Product have falsely described and made false
representations that the Infringing Product has had a patent
-26-
pending since 2004 when it has not.”
In sum, because Braun has failed to show a reason to pierce
the corporate veil to hold Herrod personally liable nor stated
adequate facts to support any claim against her in her personal
capacity, the Court should dismiss Herrod from the lawsuit.
Braun’s Response (#25)
Braun’s Answer, Affirmative Defenses and Counterclaim (#7),
although styled against DeNiece alone, asserts its Count III
Counterclaim (par. 41), against DeNiece and Herrod:
DeNiece Designs and DeNiece Herrod, in connection with
the Infringing Product, have falsely described and made
false representations that the Infringing Product has had
a patent pending since 2004 when it has not. This has
caused confusion in the marketplace, deceived the public
as to the Infringing Product’s Affiliation with the
patented Product, caused mistake, misrepresented the
nature of the Infringing Product in advertising and
promotion,
and
misrepresented
the
nature,
characteristics, and qualities of the Infringing Product.
Braun first argues that because a Rule 12(b)(6) motion must be
filed before a responsive pleading, Herrod’s motion is untimely10
and the Court should treat it as a Rule 12(c) motion for judgment
on the pleadings.
Jones v. Greninger, 188 F.3d 322, 324 (5th Cir.
1999)(a district court may treat an untimely Rule 12(b)(6) motion
as a Rule 12(c) motion).
A motion for judgment on the pleadings
under Rule 12(c) is subject to the same standard as a motion to
10
Braun filed her counterclaim on November 1, 2012; DeNiece,
after being granted an extension, filed its response on December 5,
2012; Herrod did not file her motion to dismiss until April 17,
2013.
-27-
dismiss under Rule 12(b)(6).
Great Plains Trust Co. v. Morgan
Stanley Dean Witter, 313 F.3d 305, 313 n.8 (5th Cir. 2002).
A Rule
12(c) motion is intended to dispose of cases where the material
facts are not in dispute and a judgment on the merits can be
rendered by looking at the substance of the pleadings and any
judicially noticed facts.
whether,
in
the
light
Id. at 313.
most
favorable
The Court must decide
to
complaint states a valid claim for relief.
the
plaintiff,
the
Hughes v. Tobacco
Inst., Inc., 278 F.3d 417, 420 (5th Cir. 2001), citing St. Paul Ins.
Co. v. AFIA Worldwide Ins. Co., 937 F.2d 274, 279 (5th Cir. 1991).
The pleadings should be construed liberally, and judgment on the
pleadings should be granted only if there are no disputed issues of
fact and only questions of law.
Hughes, 278 F.3d at 420.
All
well-pleaded facts should be viewed in a light most favorable to
the plaintiff.
Id.
Because Texas state corporate law, on which Herrod relies, is
not relevant here, Braun insists that Herrod can be personally
liable
under
15
U.S.C.
section
1125(a).
The
Counterclaim
sufficiently alleges a cause of action under section 1125(a), which
provides for a civil action for
(1) Any person who, on or in connection with any goods or
services, or any container for goods, uses in commerce
any word, term, name, symbol, or device, or any
combination thereof, or any false designation of origin,
false or misleading description of fact, or false or
misleading representation of fact, which–
(A) is likely to cause confusion, or to cause mistake, or
-28-
to deceive as to the affiliation, connection, or
association of such person with another person, or as to
the origin, sponsorship, or approval of his or her goods,
services, or commercial activities by another person . .
. .
Braun cites cases in which courts have found personal liability
under 15 U.S.C. section 1125(a) for officers and directors who
knowingly act in a manner which causes confusion, mistake, or
deception.
See Mead Johnson & Co. v. Baby’s Formula Serv., Inc.,
402 F.2d 19, 23 (5th Cir. 1968)11; Committee for Idaho’s High Desert,
Inc. v. Yost, 92 F.3d 814, 823 (9th Cir. 1996); Choice Hotels
Intern., Inc. v. Patel,
F. Supp. 2d
,
2013 WL 1655003, *6
(S.D. Tex. Apr. 16, 2012).
The Court agrees that an officer or director who actively and
knowingly causes confusion, mistake or deception can be personally
liable under section 1125(a).
See, e.g., Engineering Dynamics,
Inc. v. Structural Software, Inc., 26 F.3d 1335, 1350 (5th Cir.
1994); Chanel, Inc. v. Italian Activewear of Fla., 931 F.2d 1472,
1477 (11th Cir. 1991); Bynari, Inc. v. Alt-N Technologies Ltd, Civ.
A. No. 3:08-CV-242-L, 2008 WL 4790977, *7 (N.D. Tex. Oct. 24, 2008)
Nevertheless, the Court would point out that Herrod individually is
not named in its style nor identified clearly as a formal Counter
Defendant in the body of Braun’s Answer, Affirmative Defenses and
11
The elements of trademark infringement and false designation
of origin under 15 U.S.C. section 1125(a) are identical and the
same evidence will establish both claims. Philip Morris USA, Inc.
v. Lee, 547 F. Supp. 2d 667, 674 (W.D. Tex. 2008).
-29-
Counterclaim.
Moreover, even if she had been, the Answer (#15) to
Braun’s Counterclaim filed by the only named Counter Defendant,
DeNiece, conclusorily denies the section 1125(a) claim in paragraph
31, in accordance with Form 30.
Moreover DeNiece’s complaint
asserts facts contrary to those alleged by Braun (#1, paragraphs 4,
12, 14.
A motion for judgment on the pleadings under Rule 12(c)
should only be granted “where the material facts are not in dispute
and a judgment on the merits can be rendered by looking to the
substance of the pleadings and any judicially noticed facts.”
Great Plains, 313 F.3d at 312.
This issue, clearly contested on
the face of the pleadings, should be addressed on summary judgment
or at trial.
Thus the Court denies Herrod’s Rule 12(c) motion.
Accordingly, for the reasons stated above, the Court
ORDERS that
Braun’s motion to dismiss Counts II (invalidity
of patent) and III (waiver estoppel and laches) of Plaintiff’s
Complaint (instrument #8) and (2) Herrod’s motion to dismiss (#24),
construed under Rule 12(c), are DENIED.
SIGNED at Houston, Texas, this
19th
day of
June , 2013.
___________________________
MELINDA HARMON
UNITED STATES DISTRICT JUDGE
-30-
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