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Do Twombly and Iqbal Apply to Counterclaims for Patent Invalidity?

While no Virginia court has addressed the issue, a split has developed in orher federal district courts on whether the requirements of Bell Atlantic v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) apply to counterclaims for patent invalidity.  The Northern District of Illinois recently weighed in on the issue, holding that the Twombly/Iqbal standard applied and dismissing a counterclaim for invalidity. Cleversafe, Inc. v. Amplidata, Inc., 2011 U.S. Dist. LEXIS 145995 (N.D. Ill. Dec. 20, 2011) found here.

The Ruling

In Cleversafe, the defendant/counterclaim plaintiff, Amplidata, alleged only that the asserted patents were “invalid for failing to comply with provisions of the United States patent laws, including one or more of 35 U.S.C. §§ 101-103 and/or 112.” 

The Court dismissed the counterclaim under Twombly/Iqbal because Amplidata did not articulate why the patents were invalid, identify the statutory provisions that applied or provide any factual support for the counterclaim. The Court also dismissed Amplidata’s affirmative defense of invalidity on the grounds that “bare bones conclusory allegations” did not meet the Seventh Circuit’s standard for an affirmative defense under Fed. R. Civ. P. 8(c).

Split Among the District Courts

Some courts have reached the same conclusion as Cleversafe, while others have applied a more lenient standard to patent invalidity counterclaimsCompare Groupon, Inc. v. MobGob LLC, 2011 WL 2111986 (N.D. Ill. May 25, 2011) (dismissing counterclaim); and Tyco Fire Products LP v. Victaulic Co., 777 F.Supp.2d 893 (E.D. Pa. 2011) (dismissing counterclaim but not affirmative defense); with Pfizer v. Apotex, Inc., 726 F.Supp. 2d 921 (N.D. Ill. 2010) (notice of claim sufficient for invalidity counterclaim); and Elan Pharma Int’l. Ltd. v. Lupin Ltd., 2010 U.S. Dist. LEXIS 32306 (D.N.J. Mar. 31, 2010) (same). 

As courts on both sides of the split have noted, applying Twombly and Iqbal to counterclaims may impose a higher standard on counterclaims for invalidity than on infringement claims, which must include only the barebones allegations of Form 18 of the Federal Rules of Civil Procedure. See McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007). (see our earlier posts on McZeal here and here).

Practical Problems Faced by Accused Infringers

The dichotomy between the requirements for pleading infringement and pleading invalidity raises an important issue. How can an infringement defendant assert potential counterclaims if a plaintiff-patentee is not required to identify the claims it asserts are infringed or how the accused product meets the elements of those claims? In Cleversafe and the other cases to date, the courts have not had to wrestle with that problem because the counterclaims at issue have only made broad, general claims of invalidity.

Likewise, it is not clear what a counterclaim for patent invalidity must allege to comply with Twombly/Iqbal. Must a counterclaim identify specific invalidating prior art? How can it do that without a disclosure of the plaintiff’s theory of infringement or proposed claim construction? Often, there is little that an accused infringer can assert based on the allegations of the Complaint, other than that it believes the patent is invalid as anticipated, obvious or unenforceable. Conversely, the standard for proving invalidity is so high that nothing short of specific allegations of how prior art invalidates the claims of a patent may rise to the level of factual plausibility necessary to meet Twombly/Iqbal.

Virginia Authority

In Virginia, several courts have referenced the Twombly/Iqbal standard when considering motions to dismiss counterclaims, see e.g. Columbia Gas Transmission, LLC v. David N. Martin Revocable Trust, 2011 U.S. Dist. LEXIS 134612 (E.D. Va. Nov. 22, 2011), but no Virginia Court has addressed the issue in the patent context. Further, there appears to be a split among Virginia federal courts on application of Twombly and Iqbal to affirmative defenses. Compare Francisco v. Verizon South, Inc., No. 3:09cv737, 2010 U.S. Dist. LEXIS 77083 (E.D. Va. July 29, 2010) (dismissing affirmative defense under Twombly/Iqbal); and Palmer v. Oakland Farms, Inc., 2010 U.S. Dist. LEXIS 63265 (W.D.Va. June 24, 2010) (same); with Lopez v. Mediterranean Food, Inc., No. 1:10CV1218, 2011 U.S. Dist. LEXIS 2265 (E.D.Va. Jan. 10, 2011) (rejecting Francisco and holding that an affirmative defense must only give fair notice of the nature of the defense). Thus, it remains to be seen how the Virginia federal courts will deal with this issue.

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