Counterclaim for Invalidity Dismissed Even Though It Complied with Form 18 Because It Contained Conclusory Allegations

September 12, 2012

Plaintiff Wisconsin Technology Venture Group, LLC ("Wisconsin Technology") contended that Fatwallet, Inc. ("Fatwallet") infringed its patent pertaining to Internet technology. Fatwallet filed several affirmative defenses, as well as counterclaims for invalidity and non-infringement of the patent-in-suit. Wisconsin Technology moved to dismiss the counterclaims under Fed.R.Civ.P. 12(b)(6) for defendant's failure to comply with the pleading standards set forth in Fed.R.Civ. P. 8 and the Supreme Court's decisions in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

The district court granted the motion with respect to the counterclaim of invalidity for failing to allege facts sufficient to satisfy the pleading requirements of Rule 8 for that claim, but denied the motion with respect to the counterclaim for noninfringement. As stated by the district court, "Defendant's only allegations in support of its counterclaim for noninfringement are that "[plaintiff] asserts in this action that [defendant] is liable for infringement of the '418 patent," and that defendant "is not infringing, has not infringed, and is not liable for any infringement of the '418 patent. . . ." Dft.'s Ans. & Counterclaim, dkt. #5, ¶¶ 34-34. With respect to its invalidity counterclaim, defendant alleges that "[t]he '418 patent is invalid for failure to meet one or more of the conditions of patentability specified in Title 35, U.S.C., or the rules, regulations, and law related thereto, including, without limitation, in 35 U.S.C. §§ 101, 102, 103, and/or 112." Id. at ¶ 38. Plaintiff contends that these allegations fail to satisfy the applicable pleadings standards because they are wholly conclusory and provide no factual details about why defendant believes its products are not infringing and why it believes plaintiff's patents are invalid."

The district court then analyzed whether the non-infringement counterclaim was satisfactory. "Although Form 18 applies to claims of direct infringement, I see no reason why the standard should not apply to defendant's noninfringement counterclaim. If a plaintiff can state a claim for direct infringement by alleging that it owns a patent and that "defendant has been infringing the patent 'by making, selling, and using [the device] embodying the patent,'" Bill of Lading, 681 F.3d at 1334, defendant may state a mirror-image counterclaim of noninfringement by alleging that its accused product does not infringe plaintiff's patent. Thus, under Form 18 and the rule in Bill of Lading, defendant's allegations are sufficient. I agree with the conclusion reached by the court in Microsoft Corp. v. Phoenix Solutions, Inc., 741 F. Supp. 2d 1156, 1159 (C.D. Cal. 2010), that both "a party alleging direct infringement" and "a declaratory judgment claim of no direct infringement" need only comply with Form 18."

The district court next addressed whether the invalidity counterclaim was sufficient. "Defendant's claim of invalidity provides no allegations that would suggest why plaintiff's patent may be unenforceable. Instead, defendant relies on the bare assertion that the claims are unenforceable for one or more unspecified reasons. As I have explained in a previous case, such conclusory assertions do not satisfy Rule 8 or the standards set forth in Twombly and Iqbal. Genetic Technologies Ltd. v. Interleukin Genetics Inc., 2010 WL 3362344, *1-2 (W.D. Wis. Aug. 24, 2010) (dismissing defendant's counterclaim for failure to state claim where defendant stated in conclusory fashion that plaintiff's patents were invalid under one or more sections of Title 35 of United States Code). See also Cleversafe, Inc. v. Amplidata, Inc., 2011 WL 6379300 (N.D. Ill. Dec. 20, 2011) (dismissing invalidity counterclaim because defendant "d[id] not allege that [plaintiff's] asserted patents are invalid for any specific reason or under any certain statutory provision"). Because there is no Form in the Federal Rule of Civil Procedures that allows defendant to rely on such bare assertions, I will dismiss defendant's counterclaim of invalidity. However, defendant may file an amended counterclaim that complies with Fed. R. Civ. P. 8."


Wisconsin Technology Venture Group, LLC v. Fatwallet, Inc., Case No. 12-cv-326-bbc (W.D. Wisc. Aug. 29, 2012)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.