Opinion
No. 03 Civ. 5168 (JFK).
July 29, 2004
SKADDEN, ARPS, SLATE, MEAGHER FLOM LLP, New York, New York, Constance S. Hunter, Esq., Douglas R. Nemec, Esq., for Plaintiff.
WILLKIE FARR GALLAGHER LLP, New York, New York, John M. DiMatteo, Esq., Thomas H. Golden, Esq., Eugene Chang, Esq., for Defendant.
ORDER
Background
Plaintiff Reuters Transaction Services Limited ("Reuters") instituted the underlying action alleging infringement of three patents by Defendant Bloomberg L.P. ("Bloomberg"). The patents-in-suit relate generally to electronic trading systems, which both Reuters and Bloomberg are in the business of making, selling and operating. In response to Reuters's Complaint, Bloomberg filed an Amended Answer in which it presented a variety of affirmative defenses and counterclaims. Among the affirmative defenses raised were those of "unclean hands" and "laches". Reuters has filed the instant motion pursuant to Rule 12(f) of the Federal Rules of Civil Procedure to strike the affirmative defenses of unclean hands and laches. For the reasons set forth herein, plaintiffs's motion is denied.
Discussion
Rule 12(f) provides that "the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Motions to strike affirmative defenses are not, however, looked upon with great favor by courts. See William Z. Salcer, Panfeld, Edelman, et al. v. Envicon Equities Corp., 744 F.2d 935, 939 (2d Cir. 1984). The prevailing sentiment is that parties should have the opportunity to support their contentions at trial. Bennett v. Spoor Behrins Campbell Young, Inc., 124 F.R.D. 562, 563 (S.D.N.Y. 1989). Thus, pleadings are to be treated liberally,see id., and motions to strike should be denied unless it is absolutely clear that there are no circumstances under which the defenses could succeed. See Salcer, et al., 744 F.2d at 939.
Three rather high hurdles must be cleared in order for a court to justify striking a defense. The movant must demonstrate that no facts exist which might allow the defense to succeed. In a similar vein, there must not be a substantial question of law, the resolution of which could allow the defense to succeed. Finally, the plaintiff must show that it would suffer prejudice were the defense not stricken. S.E.C. v. Toomey, 866 F. Supp. 719, 722 (S.D.N.Y. 1992). In instances such as the current one, where discovery has yet to be completed, these hurdles become a bit higher. See id. If, however, each of these hurdles can be cleared, the defense must be considered insufficient as a matter of law, and be stricken in order to prevent delay and the unnecessary expense of litigating an invalid claim. F.D.I.C. v. Eckert Seamans Cherin Mellott, 754 F. Supp. 22, 23 (E.D.N.Y. 1990).
Reuters contends that both the unclean hands and laches defenses asserted by Bloomberg are insufficient as a matter of law. Unclean hands is an equitable doctrine invoked by courts to prevent a plaintiff that might otherwise be entitled to relief from such relief on the basis that the plaintiff's own conduct is so egregious as to outweigh the need to punish the defendant.See Broad. Music, Inc. v. Hearst/ABC Viacom Entm't Servs., 764 F. Supp. 320, 329 (S.D.N.Y. 1990). The "doctrine is rooted in the historical concept of court of equity as a vehicle for affirmatively enforcing the requirements of conscience and good faith." Precision Instrument Mfg. Co. v. Auto. Maint. Machinery Co., 324 U.S. 806, 814 (1945). Because the doctrine is one of equity, its enforcement is left largely to the discretion of the court. See id. at 815; Aris-Isotoner Gloves, Inc. v. Berkshire Fashions, Inc., 792 F. Supp. 969, 969-70 (S.D.N.Y. 1992). Nonetheless, plaintiff must not only have dirty hands, but must have dirtied them in acquiring the right it seeks to assert.See Estee Lauder, Inc. v. Fragrance Counter, Inc., 189 F.R.D. 269, 272 (S.D.N.Y. 1999). Plaintiff's unconscionable act must, therefore, bear an immediate and necessary relation to the equity sought in the litigation or affect the equitable relation between the parties. See Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 245 (1933); Consol. Aluminum Corp. v. Foseco Int'l Ltd., 910 F.2d 804, 810 (Fed. Cir. 1990).
In addition to these general requirements, Reuters argues that with respect to patent law, the affirmative defense of unclean hands is typically recognized only in cases where plaintiffs are alleged to have committed fraud either on the United States Patent and Trademark Office ("PTO") or the court. In this instance, Reuters claims that the alleged wrongdoing does not fit within either of these generally accepted categories. Thus, according to the plaintiff, the defense of unclean hands is not available to Bloomberg.
Although Reuters is correct in its assertion that the doctrine of unclean hands has most commonly been invoked in cases of fraud on the PTO or the court, there is no authority to support the inference drawn by Reuters that those are the only circumstances in which the doctrine can be invoked in response to patent infringement litigation. Reuters, therefore, is in essence asking the Court to find as a matter of law that the circumstances in which the doctrine of unclean hands is available to a patent-infringement defendant are limited to the degree it asserts. Plaintiff asks this in the face of case law suggesting that the grounds cited by Reuters encapsulate the majority of situations in which the doctrine applies but that other instances may also call for the application of the doctrine. See, e.g., Keystone Driller Co., 290 U.S. at 245-46; Consol. Aluminum Corp., 910 F.2d at 812. A motion to strike does not, however, provide the proper vehicle for the Court to make such a determination. Rather, the fact that a question of law exists, the resolution of which could possibly lead to a successful claim of unclean hands, prevents the Court from granting the motion to strike. See Toomey, 866 F. Supp. at 722.
Even if the Court were willing to accept Reuters's assertion that as a matter of law unclean hands can only be invoked where fraud has been perpetrated on either the PTO or the court, granting the motion to strike still would not be appropriate. Whether the conduct alleged to Reuters by Bloomberg constitutes a fraud on the PTO, as Bloomberg seems to suggest, is a question of fact. As already stated, the presence of a question of fact is an impediment to a grant of a motion to strike. See id. Unclean hands is a fact-specific doctrine that is seldom vulnerable to a motion to strike prior to the completion of discovery. See Broad. Music, Inc., 46 F. Supp. at 330. For these reasons, the request to strike the defense of unclean hands is denied.
For similar reasons, Reuters's motion to strike the defense of laches must also be denied. Like unclean hands, laches is an equitable defense meant to prevent a plaintiff from capitalizing in part on its own wrongdoing. "To successfully invoke laches, a defendant must prove that the plaintiff delayed filing suit an unreasonable and inexcusable length of time after the plaintiff knew or reasonably should have known of its claim against the defendant and that delay resulted in material prejudice to the defendant." State Contracting Eng'g Corp. v. Condotte Am., Inc., 346 F.3d 1057, 1065 (Fed. Cir. 2003); see also Meyers v. ASICS Corp., 974 F.2d 1304, 1307 (Fed. Cir. 1992). As with other equitable defenses, the application of laches is committed to the sound discretion of the court. A.C. Auckerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1032 (Fed. Cir. 1992).
Reuters argues that Bloomberg cannot possibly support its claim of laches because it has not alleged the prejudice it suffered by Reuters's delay in filing. The failure to support this required element of its affirmative defense in its pleadings renders the defense insufficient as a matter of law, according to plaintiff. Reuters has conflated the burden of proof required of Bloomberg and Bloomberg's pleading burden. Reuters is correct that to ultimately succeed in this defense, Bloomberg must demonstrate that the delay resulted in material prejudice. Reuters is incorrect, however, in its assertion that the pleadings must contain the facts necessary to support its claim. As the Federal Circuit stated, "[T]he defense of laches usually requires factual development beyond the content of the complaint. The facts evidencing unreasonableness of the delay, lack of excuse, and material prejudice to the defendant, are seldom set forth in the complaint." Advanced Cardiovascular Sys., Inc. v. Scimed Life Sys., 988 F.2d 1157, 1161 (Fed. Cir. 1993). In light of this reality, striking the affirmative defense is not warranted.
Conclusion
Reuters's motion to strike the affirmative defenses of unclean hands and laches is hereby denied. The parties are directed to continue with pre-trial discovery as set forth in the Case Management Plan entered on October 7, 2003.
SO ORDERED.