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Ioengine, LLC v. Paypal Holdings, Inc.

United States District Court, D. Delaware

May 15, 2019

IOENGINE, LLC, Plaintiff,
v.
PAYPAL HOLDINGS, INC., Defendant. INGENICO INC., Plaintiff,
v.
IOENGINE, LLC, Defendant. IOENGINE, LLC, Counterclaim Plaintiff,
v.
INGENICO INC., INGENICO CORP., and INGENICO GROUP, S.A., Counterclaim Defendants.

          MEMORANDUM OPINION AND ORDER

          WILLIAM C. BRYSON UNITED STATES CIRCUIT JUDGE

         This is a patent infringement action brought by plaintiff IOENGINE, LLC (“IOENGINE”) against defendant PayPal Holdings, Inc. (“PayPal”). Before the Court is IOENGINE's motion to dismiss PayPal's third, sixth, and ninth counterclaims and to strike PayPal's fifth affirmative defense. Dkt. No. 59. In connection with the motion to dismiss and strike, IOENGINE has submitted a request that the Court hear oral argument on the motion. Dkt. No. 69. The Court denies the motion to dismiss and denies the request for oral argument.

         BACKGROUND

         IOENGINE is the assignee of all right, title, and interest in and to U.S. Patent Nos. 8, 539, 047 (“the '047 patent”), 9, 059, 969 (“the '969 patent”), and 9, 774, 703 (“the '703 patent”), each of which is entitled “Apparatus, Method and System for a Tunneling Client Access Point.” Dkt. No. 1, at 4. The applications that led to the '047, '969, and '703 patents were continuation applications from U.S. Patent Application No. 10/807, 731, which issued as U.S. Patent No. 7, 861, 006 (“the '006 patent”). Id.; Dkt. No. 60, at 1 n.1. IOENGINE alleges that PayPal has infringed, and continues to infringe, one or more claims of the '047, '969, and '703 patents. See Dkt. No. 1, at 7, 35, 37, 64, 66, 97.

         In its Answer, PayPal denies infringement of the asserted claims. Dkt. No. 52, at 1-31. PayPal also raises nine counterclaims, including three alleging inequitable conduct. The third counterclaim alleges that “the '047 patent is unenforceable due to the named inventor Scott McNulty's and/or his patent attorneys' inequitable conduct during the prosecution of the applications that led to the '047 patent and its parent, [the '006 patent].” Id. at 44. The sixth counterclaim alleges that “the '969 patent is unenforceable due to the named inventor Scott McNulty's and/or his patent attorneys' inequitable conduct during the prosecution of the applications that led to the '969 patent and its parent patents (the '006 and '047 patents).” Id. at 46. And the ninth counterclaim similarly alleges that “the '703 patent is unenforceable due to the named inventor Scott McNulty's and/or his patent attorneys' inequitable conduct during the prosecution of the applications that led to the '703 patent and its parent patents (the '006, '047, and '969 patents).” Id. at 48.

         In addition, PayPal raises nine affirmative defenses. PayPal's fifth affirmative defense is that “[a]ll of the Asserted Patents, as well as [the '006 patent], which is a parent patent to all of the Asserted Patents, are unenforceable due to the named inventor Scott McNulty's and/or his patent attorneys' inequitable conduct during the prosecution of the applications that led to the '006, '047, and '969 patents.” Id. at 32-38.

         IOENGINE moves to dismiss with prejudice PayPal's third, sixth, and ninth counterclaims under Federal Rule of Civil Procedure 12(b)(6), and it moves to strike with prejudice PayPal's fifth affirmative defense under Federal Rule of Civil Procedure 12(f). Dkt. No. 59.

         DISCUSSION

         I. Standard of Review

         A. Pleading Inequitable Conduct

         “Courts use the same standard in ruling on a motion to dismiss a counterclaim under Rule 12(b)(6) as they do in assessing a claim in a complaint.” Princeton Digital Image Corp. v. Konami Digital Entm't Inc., No. CV 12-1461-LPS-CJB, 2017 WL 239326, at *3 (D. Del. Jan. 19, 2017). In considering whether a complaint should be dismissed for failure to state a claim upon which relief can be granted, courts “accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002). Nonetheless, as the Supreme Court has made clear, the complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

         Above and beyond the Iqbal/Twombly pleading standard, allegations of inequitable conduct must satisfy Federal Rule of Civil Procedure 9(b), which requires that “a party must state with particularity the circumstances constituting fraud or mistake.” See Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009) (“‘[I]nequitable conduct, while a broader concept than fraud, must be pled with particularity' under Rule 9(b)” (quoting Ferguson Beauregard/Logic Controls, Div. of Dover Resources, Inc. v. Mega Sys., LLC, 350 F.3d 1327, 1344 (Fed. Cir. 2003))); Wyeth Holdings Corp. v. Sandoz, Inc., No. CIV.A. 09-955-LPS, 2012 WL 600715, at *5 (D. Del. Feb. 3, 2012). “[I]n pleading inequitable conduct in patent cases, Rule 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.” Exergen, 575 F.3d at 1327.

         Rule 9(b) also states that “[m]alice, intent, knowledge, and other conditions of a person's mind may be alleged generally.” Fed.R.Civ.P. 9(b). “The relevant ‘conditions of mind' for inequitable conduct include: (1) knowledge of the withheld material information or of the falsity of the material misrepresentation, and (2) specific intent to deceive the PTO.” Exergen, 575 F.3d at 1327. Although knowledge and intent may be asserted generally, a sufficient pleading of inequitable conduct must “recite[] facts from which the court may reasonably infer that a specific individual both knew of invalidating information that was withheld from the PTO and withheld that information with a specific intent to deceive the PTO.” Delano Farms Co. v. California Table Grape Comm'n, 655 F.3d 1337, 1350 (Fed. Cir. 2011) (citing Exergen, 575 F.3d at 1318, 1330).

         B. Motion to Strike Under Rule 12(f)

         “Rule 12(b)(6) does not offer a mechanism for dismissing an affirmative defense.” Wyeth, 2012 WL 600715, at *4. Instead, “pursuant to Rule 12(f), the Court ‘may strike from a pleading any insufficient defense.'” Id. (quoting Fed.R.Civ.P. 12(f)). Generally, motions to strike under Rule 12(f) are disfavored and “[a] court should not strike a defense unless the insufficiency is ‘clearly apparent.'” Fesnak & Assocs., LLP v. U.S. Bank Nat'l Ass'n, 722 F.Supp.2d 496, 502 (D. Del. 2010) (quoting Cipollone v. Liggett Grp., Inc., 789 F.2d 181, 188 (3d Cir. 1986)). “However, ‘a court is not required to accept affirmative defenses that are mere bare bones conclusory allegations, and may strike such inadequately pleaded defenses.'” Fesnak, 722 F.Supp.2d at 502 (quoting Sun Microsystems, Inc. v. Versata Enters., Inc., 630 F.Supp.2d 395, 408 (D. Del. 2009)).

         II. The Imation Litigation

         IOENGINE has brought two previous actions in this district on some of the same claims against different defendants. One of those cases was IOENGINE, LLC v. GlassBridge Enterprises, Inc. (formerly Imation Corp.), C.A. No. 1:14-cv-01572 (D. Del.) (“Imation”). That case, which was presided over by Judge Sleet, went to verdict and was settled shortly thereafter. In that case, in which IOENGINE asserted the '047 patent, the defendant Imation asserted inequitable conduct by Mr. McNulty as a counterclaim and a defense. Imation, Dkt. No. 48-1, at 5, 7-37.

         In the Imation case, as in this one, IOENGINE moved to dismiss the inequitable conduct counterclaim and strike the defense of inequitable conduct. Imation, Dkt. No. 53. After briefing and argument, Judge Sleet denied ...


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