Restoring Equilibrium: Why Twombly and Iqbal Should Apply to All Pleadings in Patent Cases

• Author: Sarah E. Jack
• Position: J.D. Candidate, The University of Iowa College of Law, 2018; B.S., Wichita State University, 2015
• Pages: 1301-1327

Restoring Equilibrium: Why Twombly and Iqbal Should Apply to All Pleadings in Patent Cases Sarah E. Jack * ABSTRACT: The Supreme Court’s decisions in Twombly and Iqbal have caused a major shift in the pleading requirement for complaints and, in most district courts, counterclaims. By requiring that a claim be accompanied by “plausible” facts, the Court gave district courts a great deal more latitude to dismiss poorly pled cases. However, the full application of Twombly and Iqbal to pleadings filed by the defendant has not occurred. Courts only inconsistently apply plausible pleading to counterclaims and affirmative defenses. The effect of the higher pleading standard on patent litigation is generally positive, decreasing the amount of abusive patent litigation that gains access to full discovery. But, the imbalance between plaintiffs’ and defendants’ pleading burdens exacerbates what is already a heavily imbalanced high rate of success for defendants in patent litigation. This Note argues that the Federal Circuit should combat the already skewed defendant success rate in patent litigation by requiring defendants to plausibly plead affirmative defenses and counterclaims. I. INTRODUCTION ........................................................................... 1302 II. BACKGROUND ............................................................................. 1303 A. T HE F EDERAL R ULES OF C IVIL P ROCEDURE ............................. 1303 B. T HE P LEADING R ULES IN P RACTICE ........................................ 1304 C. P LEADING P LAUSIBLY AND P ATENT L ITIGATION ...................... 1308 D. P ATENTS : P OLICY AND P ROBLEMS .......................................... 1309 III. PROTECTING THE RIGHTS OF HONEST INVENTORS AND TROLLS ....................................................................................... 1312 * J.D. Candidate, The University of Iowa College of Law, 2018; B.S., Wichita State University, 2015. Thank you to Professor Jason Rantanen for cultivating my interest in patent law and for support during the Note-writing process; to my Note Editors, Logan Eliasen and Evelyn Anderson; and to the editors and student writers of Volumes 102 & 103 of the Iowa Law Review . Finally, thank you to my father, Kenneth Jack, for unending support and for sparking my interest in patent law. 1302 IOWA LAW REVIEW [Vol. 103:1301 A. P LAUSIBLE P LEADING : I MPEDING A CCESS W HILE I NCREASING E FFICIENCY ......................................................... 1312 B. H OW P LAUSIBILITY H AS P LAYED O UT T HUS F AR .................... 1316 1. Application of Twiqbal to Indirect Infringement ...... 1316 2. Application of Twiqbal to Counterclaims ................... 1317 3. Inconsistent Application of Twiqbal to Affirmative Defenses ................................................... 1319 IV. APPLICATION OF T WIQBAL TO ALL PATENT PLEADINGS .............. 1321 A. P LAUSIBLE P LEADING R ESTORES E QUILIBRIUM ....................... 1322 B. I MPLEMENTING THE S TANDARD ............................................. 1324 C. A DDRESSING THE C RITICS ...................................................... 1325 V. CONCLUSION .............................................................................. 1326 I. INTRODUCTION Courts have evaluated pleadings under a uniform standard for centuries. In 2007, the Supreme Court announced a “plausible pleading” standard (alternatively referred to as the “ Twiqbal ” 1 standard), demanding that plaintiffs allege more facts than were previously required under the notice-pleading standard. 2 Until the elimination of Form 18 in December 2015, district courts evaluated direct patent infringement complaints under a lower standard set out in the form. 3 Following the elimination of Form 18, the plausible-pleading standard applies to all civil complaints. 4 This higher pleading standard increases the burden on plaintiffs, but leaves defendants able to plead affirmative defenses or counterclaims under the less strict standards of notice pleading. The result is a pleading standard that is out of equilibrium, favoring defendants at the pleading phase of litigation. Although courts and policymakers are seeking a solution to the problem of “patent trolls,” 5 the ultimate solution should not decrease a legitimate plaintiff’s ability to recover for infringement, as uneven pleading burdens do. 1. “ Twiqbal ” is derived from the two Supreme Court cases that resulted in a higher pleading standard. See Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). 2. The Court’s notice-pleading rule established that “all the Rules require is ‘a short and plain statement of the claim’ that will give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957) (footnote omitted) (quoting FED. R. CIV. P. 8(a)(2)). 3 . See FED. R. CIV. P. Form 18 (abrogated Dec. 1, 2015) (providing a simple form for patent plaintiffs to plead patent infringement). 4 . See generally Brandon L. Garrett, Applause for the Plausible , 162 U. PA. L. REV. ONLINE 221 (2014), https://www.pennlawreview.com/online/162-U-Pa-L-Rev-Online-221.pdf (discussing the difficulty of pinning down a definition of “plausible” pleading). 5 . See infra Part II.D (discussing how the Court and legislatures have attempted to curb the activity of patent trolls). 2018] RESTORING EQUILIBRIUM 1303 Courts ought to evaluate affirmative defenses and counterclaims under the same pleading standard as complaints to shift plaintiffs’ and defendants’ pleading burdens back into equilibrium. This is especially true in highly complex litigation, such as patent litigation, where a slight imbalance can have a negative impact on the impartial resolution of a case. 6 This Note argues that the plausible-pleading standard established by the Supreme Court in Twombly 7 and Iqbal 8 should apply equally to all pleadings in patent litigation, including counterclaims and affirmative defenses. Part II addresses the history of the development of the pleading standard in patent litigation. Part III identifies the problems created by using two different pleading standards for complaints and affirmative defenses in patent litigation. Finally, Part IV suggests potential solutions and responds to common objections to a uniform pleading standard. II. BACKGROUND A. T HE F EDERAL R ULES OF C IVIL P ROCEDURE The Federal Rules of Civil Procedure (“Rules”) provide the procedural framework that civil litigants must follow in federal district courts. 9 Each year, the United States Supreme Court suggests changes and additions, 10 which are automatically adopted as an amendment to the Rules if Congress does not reject them during a statutorily mandated seven-month period for review. 11 The stated purpose of the Rules is “to secure the just, speedy, and inexpensive determination of every action and proceeding.” 12 One of the Rules’ functions is to guide the first phase of civil litigation: the pleadings. 13 Rule 8(a) governs complaints and counterclaims, requiring, among other things, that “[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” 14 Rule 8(c) requires that in response to a pleading, “a 6 . See infra Part IV.A (discussing how an already unequal system of patent litigation can be heavily impacted by imbalanced burdens). 7. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). 8. Ashcroft v. Iqbal, 556 U.S. 662 (2009). 9 . Current Rules of Practice & Procedure , U.S. CTS., http://www.uscourts.gov/rules-policies/ current-rules-practice-procedure (last visited Dec. 10, 2017). The Federal Rules of Civil Procedure were first effective in 1938. Id. 10 . See 28 U.S.C. § 2072(a) (2012) (giving the Supreme Court “power to prescribe general rules of practice and procedure and rules of evidence”). 11 . Id. § 2074(a) (requiring submission of proposed rules “not later than May 1” for rules going into “effect no earlier than December 1” of a given year). For an overview of the process by which the judiciary establishes new rules, see Overview for the Bench, Bar, and Public , U.S. CTS., http://www.uscourts. gov/rules-policies/about-rulemaking-process/how-rulemaking-process-works/overview-bench-barand-public (last visited Dec. 10, 2017). 12. FED. R. CIV. P. 1. 13 . See id. RR. 7–15. 14 . Id. R. 8(a)(2). 1304 IOWA LAW REVIEW [Vol. 103:1301 party must affirmatively state any . . . affirmative defense[s].” 15 Rule 8(d) clarifies that “[n]o technical form is required,” 16 and 8(e) requires that “[p]leadings must be construed so as to do justice.” 17 Although no particular form is required, the Rules safeguard against the inclusion of factually unsupported or inaccurate substance in pleadings through Rule 11, which requires attorneys to represent to the court that they have made a “reasonable” inquiry into the underlying facts. 18 Furthermore, Rule 12(b)(6) allows a court to dismiss a claim or counterclaim for “failure to state a claim” in the pleading 19 and 12(f) allows the court to “strike from a pleading an insufficient defense.” 20 Although the Rules prescribe much of the procedure used by district courts, they also allow individual districts and judges to establish more specific practices. 21 Local rules are rules adopted by “a majority of district judges” that are consistent with the Rules, but local rules govern more specific court procedures and practices. 22 Judges’ directives are court practices, consistent with the Rules and local rules, promulgated by an individual judge for management in her courtroom. 23 Nearly all district courts have some local rules and these rules “vary widely on procedural matters.” 24 Currently, 32 district courts have adopted local rules specific to patent litigation. 25 B. T HE P LEADING R ULES IN P RACTICE The 1957 decision in Conley v. Gibson , a case dealing...