WI3, Inc. v. Actiontec Electronics, Inc.

Citations: 71 F. Supp. 3d 358; 2014 U.S. Dist. LEXIS 163417; 2014 WL 6627582Docket: No. 14-CV-6321 EAW

Court: District Court, W.D. New York; November 20, 2014; Federal District Court

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Plaintiff Wi3, Inc. initiated a lawsuit on June 11, 2014, against Defendant Actiontec Electronics, Inc. for allegedly infringing United States Patent No. 6,108,331, titled “Single Medium Wiring Scheme for Multiple Signal Distribution in Building and Access Port Therefor,” which was issued on August 22, 2000. Wi3 claims that Actiontec infringed claims 26, 27, 29, and 30 of the patent through its MoCA Network Adapters and Network Extenders. Actiontec denies the infringement and has filed two counterclaims: one for a declaratory judgment of non-infringement and another for a declaratory judgment of invalidity of the '331 Patent.

On September 15, 2014, Wi3 moved to dismiss Actiontec’s counterclaims and strike a section of its answer labeled “Reservation of Defenses.” Actiontec opposed the motion on October 6, 2014. Wi3 later withdrew its request to dismiss the non-infringement counterclaim and responded solely to that counterclaim. On October 20, 2014, Wi3 submitted reply papers regarding the remaining aspects of its motion. The court granted Wi3’s motion to dismiss the Invalidity Counterclaim but denied the request to strike the “Reservation of Defenses” section.

The legal standard for a motion to dismiss counterclaims follows Rule 12(b)(6), which requires sufficient factual grounds for a claim to avoid dismissal. Counterclaims must meet the pleading requirements established by the Twombly and Iqbal cases, necessitating that they contain enough facts to present a plausible claim for relief. The plausibility standard allows claims to proceed even if actual proof seems unlikely, provided they present a reasonable inference of liability.

A counterclaim challenged by a Rule 12(b)(6) motion must present more than mere labels and conclusions, avoiding a formulaic recitation of the cause of action elements. Under Rule 12(f) of the Federal Rules of Civil Procedure, the court may strike insufficient defenses or irrelevant matters, but motions to strike affirmative defenses for legal insufficiency are generally disfavored unless the defense is entirely insufficient as a matter of law. The decision to strike is at the court’s discretion.

In this case, the plaintiff seeks to dismiss the Invalidity Counterclaim, arguing it lacks sufficient factual allegations to provide fair notice. The defendant contends the counterclaim aligns with Form 18 of the Federal Rules and adequately presents its basis for relief. The Invalidity Counterclaim reiterates previous paragraphs and asserts that the '331 Patent is invalid under 35 U.S.C. Sections 101, 102, 103, and/or 112, creating a justiciable controversy.

Case law, including Gradient Enterprises and Armstrong Pump, demonstrates that similar invalidity counterclaims were dismissed due to insufficient factual allegations linking the claims' invalidity to specific deficiencies. The courts ruled that merely stating a patent is invalid under certain statutes is not adequate to withstand a motion to dismiss, as such allegations require more substantive factual support.

The Invalidity Counterclaim presented by the Defendant lacks sufficient factual allegations, mirroring the inadequacies found in prior cases such as Gradient Enterprises and Armstrong Pump. The Court maintains that a counterclaim for patent invalidity must include more than a mere allegation of non-compliance with certain legal sections. The out-of-circuit case cited by the Defendant, Microsoft Corp. v. Phoenix Solutions, Inc., is deemed unpersuasive; it incorrectly suggests relaxed pleading standards for invalidity claims compared to infringement claims. The Court emphasizes that the standards established in Twombly and Iqbal do not constitute heightened pleading requirements but rather demand minimal factual allegations to establish plausibility. Local Patent Rules do not change this standard. Consequently, the Defendant's Invalidity Counterclaim is dismissed without prejudice for failing to state a claim.

Regarding the Plaintiff's Motion to Strike the "Reservation of Defenses" clause in the Defendant’s answer, the Plaintiff contends it improperly circumvents Federal Rule of Civil Procedure 15 governing pleadings amendments. The Defendant argues against being barred from asserting new defenses based on future evidence. The Court finds that the clause’s intent appears to be reserving the right to seek leave to amend rather than unilaterally adding defenses at will, which would be inconsistent with Rule 15. Therefore, the Court declines to strike the Reservation of Defenses Clause, as it cannot conclusively determine that the Defendant seeks more than reserving its right to amend the answer as new facts emerge.

The Court decided to retain the Reservation of Defenses Clause, clarifying that this does not exempt future amendments from the constraints of Rules 15 and 16. The Defendant's request for leave to amend its answer, mentioned in opposition to the Plaintiff's motion, does not constitute a proper motion as it does not conform to the Local Rules of Civil Procedure. Specifically, Local Rule 15(a) mandates that a proposed amended pleading must be attached as an unsigned exhibit, and Local Rule 15(b) requires amendments to be marked clearly using a red-line function. Due to non-compliance with these rules, the Court denies the Defendant's "cursory or boilerplate request" for amendment, advising that any future request must follow proper procedures. Consequently, the Plaintiff's motion is granted without prejudice concerning the dismissal of the Invalidity Counterclaim (Counterclaim 2) under Rule 12(b)(6) but denied regarding the Reservation of Defenses Clause.