In an opinion on Friday, visiting Judge Stephanos Bibas of the Third Circuit pointed out a split in District of Delaware cases regarding whether a party can bring unclean hands counterclaims in patent cases:
Nor does TexasLDPC persuade me this declaratory-judgment counterclaim fails as a matter of law. True, courts disagree whether “unclean hands” can support a declaration that a patent is unenforceable. Compare In re Gabapentin Patent Litig., 649 F. Supp. 2d 340, 348 (D.N.J. 2009) (concluding it cannot), and Kimberly-Clark Worldwide, Inc. v. Cardinal Health 200, LLC, 2012 U.S. Dist. LEXIS 104983, at *2–3 (D. Del. Jul. 27, 2012) (same),[ ]with The Meds. Co. v. Teva Parenteral Meds., Inc., 2011 WL 13141923, at *1 n.2 (D. Del. Oct. 6, 2011) (denying motion to dismiss or strike unclean hands counterclaim).
Judge Bibas sided with the cases holding that "unclean hands" is a proper counterclaim in a patent action:
Still, I will not stop Defendants from demanding a declaratory judgment about the unclean-hands doctrine. In my view, I may grant such relief. See Qualcomm Inc. v. Broadcom Corp., 548 F.3d 1004, 1025–26 (Fed. Cir. 2008) (“[A] district court may ... order patents unenforceable as a result of [misconduct] as long as the scope of the ... remedy is properly limited in relation to [that misconduct].”); see also Aptix Corp. v. Quickturn Design Sys., Inc., 269 F.3d 1369, 1377 (Fed. Cir. 2001) (“[I]f [Plaintiff] had procured its patent by inequitable conduct before the [Patent and Trademark Office], the trial court would have full discretion to declare the … patent unenforceable.”).
The Court relied in part on the fact that the defendants sought a limited remedy:
Here, Defendants limit their remedy to unenforceability “as to Defendants and their affiliates,” not against the world. D.I. 256 ¶ 108. So they can bring this counterclaim.
I hadn't noticed this split previously. It's not something that comes up often, because defendants typically plead unclean hands as an affirmative defense in order to face the lower burden of a motion to strike rather than a motion to dismiss.
The Court also held, as others have, that there is nothing wrong with pleading unclean hands (or other affirmative defenses) as both an affirmative defense and a counterclaim:
Mere redundancy within a pleading is not a problem. Defendants may repeat an affirmative defense in a declaratory-judgment counterclaim. See Bd. of Trs. of the Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., 583 F.3d 832, 840 (Fed. Cir. 2009). That makes sense. If a plaintiff’s claims fail, mooting the affirmative defense, a court can still reach the issue on the counterclaim.
I doubt we'll start seeing a rash of unclean hands counterclaims. It is a defense that is pled far more often than it is actually litigated, and the benefit of having it as a counterclaim is limited. It worked for this case because they had some extraordinary facts, including allegations of misconduct.
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