Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 1 of 19 PageID #: 1564
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`C.A. No. 18-1519-MN-MPT
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`FINJAN, INC., a Delaware Corporation,
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` Plaintiff,
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` v.
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`RAPID7, INC., a Delaware Corporation
`and RAPID7 LLC, a Delaware Limited
`Liability Company,
`
` Defendants.
`
`REPORT AND RECOMMENDATION
`
`I.
`
`INTRODUCTION
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`Plaintiff Finjan, Inc. (“Finjan”) filed this patent infringement action on October 1,
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`2018 against defendants Rapid7, Inc. and Rapid7 LLC (“defendants”).1 The action
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`arises from defendants’ alleged willful infringement of Finjan’s patents, including U.S.
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`Patent Nos. 8,677,494 (the “‘494 Patent”); 8,079,086 (the “‘086 Patent”); and 8,141,154
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`(the “‘154 Patent) (collectively, “the Asserted Patents”). Defendants filed an answer
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`with jury demand and affirmative defenses on December 5, 2018.2 Currently before the
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`court is plaintiff’s motion to strike defendants’ Third, Fourth, Fifth, and Sixth Affirmative
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`defenses based on inequitable conduct and defendants’ Seventh Affirmative defense
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`based on unclean hands.3
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`II.
`
`BACKGROUND
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`Finjan is a Delaware Corporation with its principal place of business in Palo Alto,
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`1 D.I. 1.
`2 D.I. 15.
`3 D.I. 18.
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`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
`
`C.A. No. 18-1519-MN-MPT
`
`))
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`)
`)
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`))
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`)
`)
`)
`)
`)
`
`FINJAN, INC., a Delaware Corporation,
`
` Plaintiff,
`
` v.
`
`RAPID7, INC., a Delaware Corporation
`and RAPID7 LLC, a Delaware Limited
`Liability Company,
`
` Defendants.
`
`REPORT AND RECOMMENDATION
`
`I.
`
`INTRODUCTION
`
`Plaintiff Finjan, Inc. (“Finjan”) filed this patent infringement action on October 1,
`
`2018 against defendants Rapid7, Inc. and Rapid7 LLC (“defendants”).1 The action
`
`arises from defendants’ alleged willful infringement of Finjan’s patents, including U.S.
`
`Patent Nos. 8,677,494 (the “‘494 Patent”); 8,079,086 (the “‘086 Patent”); and 8,141,154
`
`(the “‘154 Patent) (collectively, “the Asserted Patents”). Defendants filed an answer
`
`with jury demand and affirmative defenses on December 5, 2018.2 Currently before the
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`court is plaintiff’s motion to strike defendants’ Third, Fourth, Fifth, and Sixth Affirmative
`
`defenses based on inequitable conduct and defendants’ Seventh Affirmative defense
`
`based on unclean hands.3
`
`II.
`
`BACKGROUND
`
`Finjan is a Delaware Corporation with its principal place of business in Palo Alto,
`
`1 D.I. 1.
`2 D.I. 15.
`3 D.I. 18.
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`Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 2 of 19 PageID #: 1565
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`California.4 It was founded in 1997 as a wholly-owned subsidiary of Finjan Software
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`Ltd., an Israeli corporation that moved its headquarters to San Jose, California in 1998.5
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`Finjan developed security technologies capable of detecting online security threats,
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`recognized today as malware.6 These technologies protect networks and endpoints by
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`identifying suspicious patterns and behaviors of content delivered over the Internet.7
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`Rapid7, Inc. is a Delaware Corporation with its principal place of business in
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`Boston, Massachusetts.8 Rapid7 LLC is a Delaware limited liability company and a
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`wholly-owned subsidiary of Rapid7, Inc., also located in Boston, Massachusetts. 9
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`Finjan has numerous patents issued by the United States Patent and Trademark
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`Office (“PTO”), where all rights, title, and interest of the patents have been assigned to
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`it and it is the sole owner.10 These patents include U.S. Patent Nos. 7,975,305 (“the
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`‘305 Patent”); 8,225,408 (“the ‘408 Patent”); 7,757,289 (“the ‘289 Patent”); 7,613,918
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`(“the ‘918 Patent”); 8,079,086 (“the ‘086 Patent”); and 8,677,494 (“the ‘494 Patent”). 11
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`Moshe Rubin, Moshe Matitya, Artem Melnick, Shlomo Touboul, Alexander
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`Yermakov and Amit Shaked were issued the ‘305 Patent on July 5, 2011, and the ‘408
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`Patent on July 17, 2012.12 The ‘305 and ‘408 Patents are generally directed towards
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`network security and, in particular, rule based scanning of web-based content for
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`4 D.I. 1 at 1.
`5 Id. at 2.
`6 Id.
`7 Id.
`8 Id. at 1.
`9 Id.
`10 Id. at 2.
`11 Id. at 3-8.
`12 Id. at 3.
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`2
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`exploits.13
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`The PTO issued to David Gruzman and Yuval Ben-Itzhak the ‘289 Patent on July
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`13, 2010, and the ‘154 Patent on March 20, 2012. T he ‘289 Patent is generally directed
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`towards a system and method for inspecting dynamically generated executable code,
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`while the ‘154 Patent is generally directed towards a gateway computer protecting a
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`client computer from dynamically generated malicious content.14
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`On November 3, 2009, the ‘918 Patent issued to Yuval Ben-Itzhak, and it
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`generally addresses a system and method for enforcing a security context on a
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`Downloadable.15
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`Thereafter, the PTO issued to Yigal Mordechai Edery, Nimrod Itzhak Vered,
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`David R. Kroll and Shlomo Touboul the ‘086 Patent on December 13, 2011, and the
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`‘494 Patent on March 18, 2014. The ‘086 Patent is generally directed towards
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`computer networks and, more particularly, provides a system that protects devices
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`connected to the Internet from undesirable operations from web-based content.16 The
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`‘494 Patent generally addresses a method and system for deriving security profiles and
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`storing the security profiles.17
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`Finjan asserts these patents result from years of research and development
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`efforts, supported by a dozen inventors and over $65 million in R&D investments.18
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`Using its patented technologies, Finjan built and sold software, including application
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`13 Id.
`14 Id. at 7.
`15 Id.
`16 Id.
`17 Id.
`18 Id. at 8.
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`3
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`program interfaces (APIs) and appliances for network security.19 Finjan’s pioneering
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`approach to online security drew equity investments from two major software and
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`technology companies, the first in 2005 followed by the second in 2006.20
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`Finjan claims it generated millions of dollars in product sales and related services
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`and support revenues through 2009.21 Pursuant to a merger in 2009, it was bound to a
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`non-compete and confidentiality agreement, under which it could not make or sell a
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`competing product or disclose the existence of the non-compete clause.22 Finjan
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`became a publicly traded company in June 2013, capitalized with $30 million.23 After
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`the non-compete expired in March 2015, it re-entered the development and production
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`sector of secure mobile products for consumer markets.24
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`Finjan notes that it had numerous contacts with defendants both in person and in
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`writing, to specifically identify defendants’ continued infringing behavior of the Asserted
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`Patents, specifically the ‘305, ‘086, and ‘494 Patents. 25
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`Finjan claims that from approximately May 11, 2016 to January 4, 2018, it
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`attempted to engage in good faith negotiations with defendants regarding their ongoing
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`alleged infringement of its patent portfolio.26 On or about January 4, 2018, Finjan sent
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`another letter to defendants stating that their Nexpose products infringe the ‘494 Patent,
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`19 Id.
`20 Id.
`21 Id.
`22 Id.
`23 Id.
`24 Id.
`25 Id.
`26 Id.
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`4
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`and their AppSpider product continued to infringe the ‘305 Patent.27 Finjan provided a
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`PowerPoint presentation to defendants on or about February 8, 2018, where it
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`described how Nexpose, Metasploit, InsightVM, InsightAppSec, and AppSpider
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`products infringed its patents, including the ‘494, ‘305, ‘408, ‘289, ‘154, ‘918, and ‘086
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`Patents.28
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`Finjan alleges defendants knew they infringed the Asserted Patents well before
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`this action was filed, and acted egregiously and willfully by continuing their infringing
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`conduct and, on information and belief, took no action to avoid infringement.29 Instead,
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`defendants continued to develop technologies and products that infringed the Patents.30
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`Defendants are closely related companies that operate as a single business
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`entity directed and controlled by Rapid7, Inc. They make, use, sell, and import the
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`alleged infringing products and services that utilize InsightIDR, InsightVM (Nexpose),
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`InsightAppSec, AppSpider, Metasploit and Komand technologies, including Rapid7
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`Insight Platform products (collectively, the “Accused Products”).31 Defendants
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`represent themselves to be one entity regarding the Accused Products in their annual
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`reports to the United States Securities and Exchange Commission.32 They share the
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`same principal place of business and many of the same corporate executives and
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`directors.33
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`27 Id. at 9.
`28 Id.
`29 Id.
`30 Id.
`31 Id.
`32 Id.
`33 Id. at 11.
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`5
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`Defendants’ products are all interrelated through the Rapid7 Insight Platform.34
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`The Rapid7 Insight Platform integrates its detection and analytic technologies across
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`various product offerings.35
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`InsightIDR receives data from a network’s endpoints, cloud and virtual services,
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`and utilizes a combination of scanning technology, machine learning, live threat feeds,
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`and a library of behavioral threat analytics in order to scan and monitor network events
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`for both new and existing threats.36 InsightIDR is commonly deployed along with
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`Rapid7’s InsightVM.37
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`InsightVM (Nexpose) receives data from a network’s endpoints, cloud and virtual
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`services, and utilizes a combination of scanning technology, live threat feeds, and a
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`library of threat analytics in order to scan and monitor the network for both new and
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`existing vulnerabilities. InsightVM uses RealRisk to assign a risk score to each detected
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`threat.38
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`InsightAppSec searches and assesses web applications to detect SQL Injection,
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`XSS, and CSRF threats.39 InsightAppSec normalizes network traffic and uses scan
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`engines (cloud or on-premise) to detect threats, which includes scans for over 90
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`different known attack types.40 InsightAppSec works alongside AppSpider to detect and
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`generate a summary of vulnerabilities, which defendants’ other Accused Products also
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`34 Id.
`35 Id.
`36 Id. at 12.
`37 Id.
`38 Id. at 13.
`39 Id. at 14.
`40 Id.
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`6
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`use.41
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`Metasploit is a penetration testing software that utilizes a database of exploits.42
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`Metasploit allows simulation of real-world attacks on the network so that further
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`cybersecurity measures can be implemented.43 Komand connects existing
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`cybersecurity tools to a library of plugins in order to integrate, orchestrate and automate
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`workflows in order to efficiently detect and contain malicious malware, domains, and
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`other threat indicators.44
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`Finjan alleges that defendants have directly and indirectly infringed the Asserted
`
`Patents, by making, using, importing, selling, and offering for sale the defendants’
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`products and services that utilize InsightIDR, InsightVM (Nexpose), Metasploit and
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`Komand technologies, including Rapid7 Insight Platform products.45
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`III.
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`STANDARD OF REVIEW
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`A.
`
`Motion to Strike Under 12(f)
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`In reviewing a motion to strike pursuant to FED. R. CIV. P. 12(f), “[t]he court may
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`strike from a pleading . . . any redundant, immaterial, impertinent, or scandalous
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`matter.”46 “Immaterial matter is that which has no essential or important relationship to
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`the claims for relief or the defenses being pleaded.”47 “Impertinent matter consists of
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`41 Id.
`42 Id.
`43 Id.
`44 Id. at 15.
`45 Id.
`46 FED. R. CIV. P. 12(f).
`47 Delaware Health Care, Inc. v. MCD Holding Co., 893 F. Supp. 1279,
`1291-1292 (D. Del. 1995).
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`7
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`statements that do not pertain, and are not necessary, to the issues in question.”48
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`Scandalous matter is defined as “that which improperly casts a derogatory light on
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`someone, most typically on a party to the action.”49
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`Although motions to strike “serve to ‘clean up the pleadings, streamline litigation,
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`and avoid unnecessary forays into immaterial matters,’” as a general matter, these
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`motions are disfavored.50 They “ordinarily are denied ‘unless the allegations have no
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`possible relation to the controversy and may cause prejudice to one of the parties.’”51
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`Therefore, even where the challenged material is redundant, immaterial,
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`impertinent, or scandalous, a motion to strike should not be granted unless the
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`presence of the surplusage will prejudice the adverse party.52 When ruling on a motion
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`to strike, the court must construe all facts in favor of the nonmoving party, and only
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`grant the motion when the allegation is clearly insufficient.53
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`FED. R. CIV. P. 8 addresses the requirements of pleading affirmative defenses.
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`An affirmative defense is “a pleading subject to Rule 8(a), and therefore must include a
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`48 Id. at 1292.
`49 Aoki v. Benihana, Inc., 839 F. Supp. 2d 759, 764 (D. Del. 2012) (quoting
`Carone v. Whalen, 121 F.R.D. 231, 233 (M.D. Pa. 1988)).
`50 Penn Mut. Life Ins. Co. v. Norma Espinosa 2007-1 Ins. Trust, C.A. No.
`09-300-LPS, 2011 U.S. Dist. LEXIS 17172, at *4 (D. Del. Feb. 22, 2011) (quoting
`McInerney v. Moyer Lumber & Hardware, Inc. 244 F. Supp. 2d 393, 402 (E.D. Pa.
`2002)).
`51 Sun Microsystems, Inc. v. Versata Enters., 630 F. Supp. 2d 395, 402 (D. Del.
`2009) (quoting McInerney v. Moyer Lumber and Hardware, Inc., 244 F. Supp. 2d 393,
`402 (E.D. Pa. 2002)).
`52 Symbol Techs., Inc. v. Aruba Networks, Inc., 609 F. Supp. 2d 353, 359 (D. Del.
`2009) (internal quotations omitted).
`53 Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993).
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`8
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`short and plain statement of the defense.”54 A defense may be deemed meritless
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`because it is simply a conclusory allegation which fails to provide an appropriate
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`statement of facts or to allege the necessary elements of the claims.55 “The purpose of
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`requiring the defendant to plead available affirmative defenses in his answer is to avoid
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`surprise and undue prejudice by providing the plaintiff with notice and the opportunity to
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`demonstrate why the affirmative defenses should not succeed.”56 “In responding to a
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`pleading, a party must affirmatively state any avoidance or affirmative defense . . . .”57
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`IV.
`
`ANALYSIS
`
`Finjan contends that defendants’ Third, Fourth, Fifth, and Sixth Affirmative
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`Defenses, based on inequitable conduct, and Seventh Affirmative Defense, based on
`
`unclean hands, fall short of the heightened pleading standard under FED. R. CIV. P. 9(b).
`
`A.
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`Inequitable Conduct
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`Finjan contends defendants failed to allege facts showing the plausibility of “but-
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`for materiality” and “specific intent to deceive the PTO.” Finjan maintains that
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`defendants’ affirmative defenses fail at a fundamental level, and their factual allegations
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`do not show any misrepresentation to, or reliance by, the PTO on but-for materiality and
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`or evidence of specific intent to deceive the PTO.
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`Applicants for patents and their legal representatives owe a duty of candor, good
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`54 Do It Best Corp. v. Heinen Hardware, LLC, No. 13-69, 2013 U.S. Dist. LEXIS
`94567. See also 8(b) which requires when "responding to a pleading, a party must state
`in short and plain terms its defenses to each claim asserted.”
`55 Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir.
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`1989).
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`56 In re Sterten, 546 F.3d 278, 285 (3d. Cir. 2008).
`57 FED. R. CIV. P. 8(c)(1).
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`9
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`faith, and honesty in their dealings with the PTO.58 A breach of this duty constitutes
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`inequitable conduct. If inequitable conduct is established, the entire patent is rendered
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`unenforceable.59
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`Inequitable conduct, like similar allegations of fraud or mistake, must be pled with
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`particularity under Rule 9(b).60 “[A] pleading of inequitable conduct under Rule 9(b)
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`must include sufficient allegations of underlying facts from which a court may
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`reasonably infer that a specific individual (1) knew of the withheld material information
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`or of the falsity of the material misrepresentation, and (2) withheld or misrepresented
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`this information with a specific intent to deceive the United States Patent and
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`Trademark Office (‘PTO’).”61 A “reasonable inference” is “one that is plausible and that
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`flows logically from the facts alleged, including any objective indications of candor and
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`good faith.”62
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`To properly plead inequitable conduct in a patent case, Rule 9(b) requires
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`identification of the specific who, what, when, where, why, and how of the material
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`misrepresentation or omission committed before the PTO.63 To satisfy the “who” and
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`“when,” the pleading must name the person who knew of the material information and
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`deliberately withheld or misrepresented it, and indicate when the conduct occurred.64
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`58 Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995); 37 C.F.R.
`§ 1.56(a).
`59 Molins PLC, 48 F.3d at 1178.
`60 Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009).
`61 Id. at 1328-29 (footnote omitted).
`62 Id. at 1329 n. 5 (citing Greenstone v. Cambex Corp., 975 F.2d 22, 26 (1st Cir.
`1992)).
`63 Id. at 1327.
`64 Id. at 1329.
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`10
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`To fulfill the “what” and “where” of the material omissions, the pleading must identify
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`“which claims, and which limitations in those claims, the withheld references are
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`relevant to, and where in these references the material information is found[.]”65 The
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`pleading must set forth “why” the withheld information was material and not cumulative,
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`and “how” an examiner would have used the information in assessing patentability.66
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`The pleading must further indicate “the particular claim limitations, or combination of
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`claim limitations,” that are supposedly absent from the information of record.67 A factual
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`deficiency with respect to any of the above elements is “fatal under Rule 9(b).”68
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`1.
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`Third and Fourth Affirmative Defenses (the ‘494 Patent)
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`Finjan claims that the court should strike defendants’ Third Affirmative defense
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`regarding statements to the PTO concerning inventorship of the ‘494 Patent, because
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`the Touboul Declaration is accurate and defendants did not allege any facts to the
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`contrary. Finjan further contends that defendants’ claims are baseless and not facially
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`plausible because there are no facts alleged that indicate a misrepresentation. Finjan
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`argues that defendants’ Fourth Affirmative defense fails because it does not provided a
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`sufficient factual basis that Ms. Bey submitted incorrect information to the PTO or
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`shows a specific intent to deceive. Finjan notes that defendants’ contentions were a
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`single, conclusory sentence that “Ms. Bey’s representation that the delayed priority
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`claim was ‘unintentional’ was false and intended to deceive the USPTO.”
`
`65 Id. (citing Regents of Univ. of Cal. v. Eli Lilly & Co., 119 F.3d 1559, 1570 (Fed.
`Cir. 1997)).
`66 Id. at 1329-30 (Larson Mfg. Co. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1333
`(Fed. Cir. 2009)).
`67 Id. at 1329.
`68 Id. 1330.
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`On May 7, 2013, Finjan submitted a declaration from one of the named inventors
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`of the ‘494 Patent, Shlomo Touboul. Touboul’s Declaration provides:
`
`The declaration made herein is to establish that I had the ideas described
`in the patent application, and first developed a working system that is
`described in the patent application and in claims 1, 3, 4-6, 9, 10, 12-15,
`and 18 pending as of the signing of this declaration (herein sole invention)
`prior to September 10, 1997, which is the filing date of the U.S. Patent No.
`5,983,348 to Ji (“the ‘348 patent”). I hereby declare that my sole invention
`was in my mind and developed by at least November 18, 1996. The
`remaining pending dependent claims were co-invented by or with one or
`more of the listed inventors.69
`
`Defendants allege that Touboul’s declaration is false regarding the conception
`
`date of the claimed inventions in the ‘494 Patent, and his assertion as the sole inventor
`
`of these claims.70 They further contend Touboul’s misrepresentations were knowingly
`
`false because he jointly invented with other named Finjan employees.71
`
`Defendants further contend that Finjan’s attorney submitted a petition to accept
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`unintentionally delayed claims of priority under 35 U.S.C. §§ 119(e) and 120 for the
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`benefit of a prior-filed application under 37 C.F.R. § 1.78(a)(3) to extend the chain
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`priority.72
`
`Defendants argue that Finjan submitted the application without making a claim
`
`and Ms. Bey engaged in a pattern of petitioning for unintentionally delayed priority
`
`claims.73 Defendants maintain Finjan knowingly misrepresented inventorship and the
`
`conception date with the intent to deceive the PTO as to the ‘494 Patent, and that Ms.
`
`69 D.I. 15 at 22.
`70 Id.
`71 Id.
`72 Id.
`73 Id. at 25.
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`12
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`Bey knowingly misrepresented the delay in filing petitions for priority for the Asserted
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`Patents to manipulate the patent system to benefit from a later expiration date, while
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`also preserving the ability to overcome the invalidating prior art.
`
`Defendants emphasize Mr. Touboul’s declaration, arguing his assertion as the
`
`sole inventor and the conception date were incorrect. However, Touboul merely stated
`
`that “my sole invention was in my mind and developed by at least November 18, 1996.
`
`The remaining pending dependent claims were co-invented by or with one or more of
`
`the listed inventors.” He did not assert to have invented all claims himself, but only
`
`those listed in his declaration. Moreover, the ‘494 Patent identifies the multiple
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`inventors.
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`Defendants contend that the ‘494 Patent is unenforcable based on inequitable
`
`conduct. Defendants claim that Finjan and Ms. Bey delayed claiming priority to
`
`maximize the value of the ‘494 Patent during pre-suit licensing negotiations and only
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`attempted to correct the claim of priority to overcome invalidity attacks on this patent.
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`Defendants further allege that Ms. Bey’s misrepresentation of a material fact to
`
`the PTO regarding with the ‘494 Patent is also a part of an overarching scheme which
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`Finjan deliberately planned and carefully executed to defraud the PTO.
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`In light of defendants’ contentions noted above, they pled sufficient facts with
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`particularity showing inequitable conduct. “In all averment of fraud or mistake, the
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`circumstances constituting fraud or mistake shall be stated with particularity.”74
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`74 Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys.,
`LLC, 350 F.3d 1327, 1343 (Fed. Cir. 2003) (quoting FED. R. CIV. P. 9(b)).
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`13
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`Defendants allege the who, what, when, where, why, and how by Finjan of affirmative
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`misrepresentations of material facts, its failure to disclose information, and its intent to
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`deceive the PTO.
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`2.
`
`Fifth Affirmative Defense
`
`Finjan claims that defendants’ Fifth Affirmative defense does not meet the
`
`heightened pleading standard because its allegations are not supported by the ‘154
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`Patent’s file history and fail to show materiality and specific intent.
`
`Finjan claims defendants’ allegations that its attorney committed inequitable
`
`conduct by her filing of petitions to the Patent Office is facially implausible in view of the
`
`record. Similar to the ‘494 Patent, Finjan maintains Ms. Bey merely corrected an error
`
`in the printed patent through the ‘154 Patent Petition to correct the ‘154 Patent’s priority
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`claim, which was not reflected in the printed patent, through a certificate of correction.75
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`Finjan further contends that defendants’ answer fails to allege any but-for
`
`materiality regarding Ms. Bey’s statements in the ‘154 Patent Petition, nor is there per
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`se materiality because their allegations do not show an unusually frequent pattern of
`
`petitioning to correct priority claims. Finjan asserts that the petitions in the ‘494, ‘086,
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`‘633 patents involve correcting the same issue, perfecting the priority claim chain
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`related to their common parent, U.S. Provisional Application No. 60/030,639. As a
`
`result, Finjan argues that Ms. Bey’s multiple submissions were to correct the same
`
`mistake so that the Finjan patent portfolio would have consistent priority claims.
`
`75 D.I. 19 at 15.
`
`14
`
`
`
`Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 15 of 19 PageID #: 1578
`
`Defendants adequately pled facts to support its inequitable conduct claims.
`
`Defendants asserted that Ms. Bey alleged unintentionally delayed claim of priority in her
`
`petitions under 35 U.S.C. § 120 for the Benefit of a Prior-Filed Application under 37
`
`C.F.R. section 1.78(a)(3) by identifying October 16, 2013 as the date when this
`
`occurred, and why the withheld information was material and not cumulative. Further,
`
`defendants properly addressed why and how an examiner would use the information in
`
`assessing patentability. Their pleading identified the required facts to meet the
`
`heightened pleading standard of FED. R. CIV. P. 9(b).
`
`3.
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`Sixth Affirmative Defense
`
`Finjan contends that defendants’ Sixth Affirmative defense does not meet the
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`Rule 9(b) or Therasense heightened pleading standard because its allegations are not
`
`supported by the ‘086 Patent’s file history and there are no facts alleged which are
`
`sufficient to show materiality and specific intent. Finjan asserts that this Affirmative
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`defense mirrors defendants’ Fourth and Fifth Affirmative defenses, namely that Ms.
`
`Bey, Finjan’s counsel, committed inequitable conduct when she made the filing. Finjan
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`further argues that defendants also failed to adequately allege a factual basis to support
`
`specific intent to deceive the PTO on the part of Ms. Bey, and that these are merely
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`conclusory allegations of intent absent any factual support.
`
`In Therasense, the Court of Appeals for the Federal Circuit addressed the
`
`heightened pleading standard for inequitable conduct based on nondisclosure of a
`
`reference to the PTO. Under Therasense, a challenger must plead, both that: (1) "the
`
`patentee acted with the specific intent to deceive the PTO”; and (2) the nondisclosed
`
`15
`
`
`
`Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 16 of 19 PageID #: 1579
`
`reference was a "but for" cause of the PTO's allowance of the claims.76 Defendants
`
`pled sufficient facts to establish a claim for inequitable conduct regarding the ‘086
`
`Patent from which this court may reasonably infer that Ms. Bey knew of the withheld
`
`material information or of the falsity of the material misrepresentation, and withheld or
`
`misrepresented this information with a specific intent to deceive the PTO.
`
`B.
`
`Unclean Hands
`
`The “unclean hands doctrine is rooted in the historical concept that the court as a
`
`‘vehicle for affirmatively enforcing the requirements of conscience and good faith,’
`
`requires the parties to have ‘acted fairly and without fraud or deceit as to the
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`controversy in issue.’”77 “The notion of unclean hands working as a bar to the
`
`application of laches stems from the belief that an equitable defense, such as laches,
`
`cannot be used to reward a party's inequities or to defeat justice.”78 To invoke the
`
`unclean hands doctrine, a patentee must prove that “‘the infringer has engaged in
`
`particularly egregious conduct [that] would change the equities significantly in the
`
`plaintiff's favor.’”79
`
`76 Therasense Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290, 91-92 (Fed.
`Cir. 2011) (citations omitted).
`77 Crown Packaging Tech., Inc. v. Rexam Bev. Can Co., 679 F. Supp. 2d 512,
`521 (D. Del. 2010) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co.,
`324 U.S. 806, 814-15 (1945)).
`78 Id. (quoting Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813,825 (7th Cir.
`1999)).
`79 Id. (alteration and emphasis in original) (quoting Odetics, Inc. v. Storage Tech.
`Corp., 14 F. Supp. 2d 800, 806 (E.D. Va. 1998)).
`
`16
`
`
`
`Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 17 of 19 PageID #: 1580
`
`1.
`
`Seventh Affirmative Defense
`
`Finjan contends that Rapid7 failed to plead adequately facts demonstrating that
`
`its counsel’s actions during prosecution constituted an egregious act of misconduct or
`
`were done in bad faith. Rapid7 claims that Finjan misrepresented a material fact and
`
`violated its duty of candor by filing a petition to claim a certain priority date.
`
`Finjan asserts the prosecution of ‘494, ‘086, and ‘154 Patents were well within
`
`the PTO’s procedures, and defendants provide no factual basis for their unsupported
`
`allegation that on multiple occasions Finjan waited to see if a patent would be granted
`
`or provided with a later priority date, and only when it was clear that the patent would
`
`not be granted, did Finjan seek to ‘correct’ its ‘unintentionally’ delayed priority claim to
`
`moot the asserted prior art.
`
`Finjan claims that Rapid7 merely walks through the prosecution history of the
`
`‘822 Patent, and pled no facts showing how the steps during prosecution constituted
`
`“an egregious act of misconduct” or were made in bad faith. Finjan also contends that
`
`there is no reasonable inference that the prosecution with continuations and related
`
`filings from an initial application was done in bad faith. It notes that defendants merely
`
`pled Finjan prosecuted a family of patents over a period of time and it corrected the
`
`priority chain of the ‘822 Patent, which is allowed under the MPEP, and does not
`
`constitute unclean hands or egregious misconduct or bad faith.
`
`Overall, Finjan’s arguments are directed to disputed issues of fact, rather than
`
`the adequacy of Defendants’ factual support in this affirmative defense.
`
`Defendants counter that Finjan, through Ms. Bey, has an unusually frequent
`
`17
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`
`
`Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 18 of 19 PageID #: 1581
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`practice of petitioning for allegedly “unintentionally” delayed claims of priority after one
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`of its applications is rejected over prior art that predates its filing, but post-dates the
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`belatedly asserted priority document.
`
`Defendants further argue that on multiple occasions Finjan waited to determine
`
`whether a patent would be granted or given a later priority date thereby benefitting from
`
`a later expiration date, and when it is apparent that neither will occur, then Finjan
`
`proceeds to correct.
`
`Defendants allege Ms. Bey misrepresented a material fact to the PTO and
`
`violated her duty of candor when she represented that the delayed claim of priority in
`
`the ‘822 Patent was unintentional. Defendants contend that Finjan intentionally delayed
`
`claiming priority of the ‘822 Patent to enable it to benefit from a later expiration date
`
`unless an earlier priority date was required to overcome prior art.
`
`The doctrine of unclean hands “necessarily gives wide range to the equity
`court's use of discretion. . . . It is ‘not bound by formula or restrained by
`any limitation that tends to trammel the free and just exercise of
`discretion.’ Accordingly one's misconduct need not necessarily have been
`of such a nature as to be punishable as a crime or as to justify legal
`proceedings of any character. Any willful act concerning the cause of
`action which rightfully can be said to transgress equitable standards of
`conduct is sufficient cause for the invocation of the maxim.”80
`
`Defendants pled sufficient facts regarding their defense of unclean hands. The
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`elements of misrepresentation of material fact and violation of Finjan’s duty of candor
`
`are sufficiently supported by factual allegations which demonstrate bad faith
`
`80 France Telecom S.A. v. Novell, Inc., C.A. No. 02-437-GMS, 2002 U.S. Dist.
`LEXIS 19967, *11 (D. Del. 2002) (omission in original) (quoting Precision Instrument
`Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 815 (1945)).
`
`18
`
`
`
`Case 1:18-cv-01519-MN Document 44 Filed 06/25/19 Page 19 of 19 PageID #: 1582
`
`misrepresentation or egregious misconduct.
`
`V.
`
`CONCLUSION
`
`For the foregoing reasons, I recommend that Plaintiff’s motion to strike
`
`defendants’ Third, Fourth, Fifth, Sixth, and Seventh affirmative defenses (D.I. 18) be
`
`DENIED.
`
`This Report and Recommendation is filed pursuant to 28 U.S.C. §636(b)(1)(B),
`
`FED R. CIV. P. 72(b)(1), and D. DEL. LR 72.1. The parties may serve and file specific
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`written objections within fourteen (14) days after being served with a copy of this Report
`
`and Recommendation. Objections and responses are limited to ten (10) pages each.
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`The parties are directed to the Court’s Standing Order in Non-Pro Se matters for
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`Objections Filed under FED. R. CIV. P. 72, dated October 9, 2013, a copy of which is
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`available on the Court’s website, www.ded.uscourts.gov.
`
`Date: June 25, 2019
`
`/s/ Mary Pat Thynge
`Chief U.S. Magistrate Judge
`
`19
`
`
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