Sun Microsystems, Inc. v. Versata Enter., Inc.

• Decision Date: 01 July 2009
• Docket Number: Civil Action No. 07-782-JJF.
• Parties: SUN MICROSYSTEMS, INC., Plaintiff/Counter-Defendant v. VERSATA ENTERPRISES, INC., Versata Software, Inc., Versata Development Group, Inc., Versata Computer Industry Solutions, Inc., Versata, Inc., Trilogy, Inc., and Nextance, Inc., Defendants/Counter-Claimants.
• Court: U.S. District Court — District of Delaware

630 F.Supp.2d 395

SUN MICROSYSTEMS, INC., Plaintiff/Counter-Defendant v. VERSATA ENTERPRISES, INC., Versata Software, Inc., Versata Development Group, Inc., Versata Computer Industry Solutions, Inc., Versata, Inc., Trilogy, Inc., and Nextance, Inc., Defendants/Counter-Claimants.

Civil Action No. 07-782-JJF.

United States District Court, D. Delaware.

July 1, 2009.

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Jeffrey G. Randall, Esquire and David W. Hansen, Esquire of Skadden, Arps, Slate, Meagher & Flom LLP, Palo Alto, CA, Darryl M. Woo, Esquire and Charlene M. Morrow, Esquire of Fenwick & West LLP, Mountain View, CA, Paul J. Lockwood, Esquire and Michael A. Barlow, Esquire of Skadden, Arps, Slate, Meagher & Flom LLP, William J. Wade, Esquire and Anne Shea Gaza, Esquire of Richard Layton & Finger, P.A., Wilmington, DE, for Plaintiff/Counter-Defendant.

Peter J. Ayers, Esquire; James N. Willi, Esquire and John B. Campbell, Esquire of McKool Smith, P.C., Austin, TX, Jack B. Blumenfeld, Esquire and Karen Jacobs Louden, Esquire of Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE, for Defendants/Counter-Claimants.

MEMORANDUM OPINION

FARNAN, District Judge.

Pending before the Court is Sun Microsystems, Inc.'s ("Sun") Motion to Dismiss Defendants' Non-Patent Counterclaims (D.I. 28 in 07-782-JJF) and Motion to Dismiss Counterclaims Pursuant to Rule 12(b)(6). Also before the Court is Sun's Motion to Strike Pursuant to Rule 12(f) (D.I. 27 in 08-504-JJF). For the reasons discussed, both Motions will be granted in part and denied in part.

I. BACKGROUND

Sun is the assignee of the seven U.S. Patents at issue in this suit. The suit involves U.S. Patent Nos. 6,832,223 ("the '223 patent"), 5,870,719 ("the '719 patent"), 5,963,950 ("the '950 patent"), 5,761,662 ("the '662 patent"), 5,727,203 ("the '203 patent"), 6,076,092 ("the '092 patent"), and 6,912,520 ("the '520 patent"). The patents cover various methods, systems, processes, or apparatuses for managing different types of website user-generated data. Sun alleges that Versata has made, used, offered for sale, and/or sold a system that infringes one or more claims of the '223 patent, the '719 patent, the '950 patent, and the '662 patent, in violation of 35 U.S.C. § 271(b) and (c). (D.I. 1 in 07-782-JJF ¶¶ 5-24.) Sun also alleges, upon information and belief, that Versata has made, used, offered for sale, and/or sold the Logic Suite and Business Rules Management System and related components, which Sun alleges infringes the '203 patent, the '092 patent, and the '520 patent. (D.I. 1 in 08-504-JJF ¶¶ 5-22.)

On November 30, 2007, Sun filed a first action against Versata Enterprises, Inc., Versata Software, Inc., Versata Development Group, Inc., Versata Computer Industry Solutions, Inc., Versata, Inc., Trilogy, Inc., and Nextance, Inc. (collectively, "Versata"), alleging infringement of the '223 patent, the '719 patent, the '950 patent, and the '662 patent. (D.I. 1 in 07-782-JJF.) Versata filed its Answer to this action on January 25, 2008. (D.I. 22 in 07-782-JJF.) In its Answer, Versata denies that it is infringing any of the patents asserts a variety of defenses, and seeks declarations of noninfringement and/or invalidity and/or unenforceability. (D.I. 22 in 07-782-JJF at 2-12.) In addition, Versata asserts six non-patent counterclaims, alleging that Sun engaged in several different monopolistic, unfair, and fraudulent business practices. (D.I. 22 in 07-782-JJF at 12-52.) On April 18, 2008, Sun filed a Motion to Dismiss these non-patent counterclaims. (D.I. 28 in 07-782-JJF.) Specifically, Sun has moved to dismiss Counts Five (Attempted Monopolization Under 15 U.S.C. § 2 Sham Litigation), Six (Attempted Monopolization Under 15 U.S.C. § 2 Walker Process Fraud), Eight (Unfair Competition Under California Business & Professions Code § 17200 et seq.), Nine (Intentional Misrepresentation & Concealment), and Ten (Negligent Misrepresentation) of Versata's counterclaims.

Sun filed a second action against Versata on August 11, 2008, alleging infringement of the three other Sun patents at issue: the '203 patent, the '092 patent, and the '520 patent. (D.I. 1 in 08-504-JJF.) Versata filed its Answer and Amended Counterclaims in this action on October 24, 2008. (D.I. 24 in 08-504-JJF.) In its Answer and Amended Counterclaims, Versata denies that it is infringing any of the patents, asserts a variety of defenses, and seeks declarations of noninfringement and/or invalidity and/or unenforceability. (D.I. 24 in 08-504-JJF at 2-9.) On November 7, 2008, Sun filed a Motion to Dismiss Counterclaims Pursuant to Rule 12(b)(6) and Motion to Strike Pursuant to Rule 12(f). (D.I. 27 in 08-504-JJF.) In that Motion, Sun requested that the Court dismiss all three of Versata's counterclaims and that the Court strike Versata's Fourth through Twelfth Defenses.¹ (Id.)

On September 16, 2008, Versata filed a Motion to Consolidate the two actions. (D.I. 11 in 08-504-JJF.) The Court granted Versata's Motion to Consolidate Cases on December 1, 2008, combining the two actions under Civ. No. 07-782-JJF. (D.I. 34 in 08-504-JJF.)

II. THE PARTIES' CONTENTIONS

Although the Court consolidated Civil Action Nos. 07-782-JJF and 08-504-JJF into Civil Action No. 07-782-JJF, it did not do so until the briefing on Sun's motion to dismiss in each action was nearly complete. Accordingly, below, the Court will refer separately to Sun's Motion To Dismiss in the first action (07-782-JJF) and Sun's Motion To Dismiss in the second action (08-504-JJF).

A. Sun's Motion To Dismiss In The First Action (07-782-JJF)

Sun contends in its Opening Brief in Support of Its Motion to Dismiss Defendants' Non-Patent Counterclaims in the first action that Versata has failed to state claims for relief in Counts Five, Six, Eight, Nine, and Ten of its Answer to Complaint and Counterclaims. (D.I. 30 in 07-782-JJF.)

Sun argues that the Court should dismiss Counts Five and Six, which deal with violations of the Sherman Act, 15 U.S.C. § 2, because Versata has not pleaded facts sufficient to establish the essential elements of a prima facie antitrust claim. (D.I. 30 in 07-782-JJF at 6.) Specifically, Sun argues that Versata has not pleaded facts sufficient to show that Sun had a "dominant, or even significant, share of the market for `web-enabled software platforms,'" has not adequately defined the proposed relevant market, and has not addressed other essential elements of an antitrust claim. (Id. at 10-12).

As for Versata's misrepresentation counterclaims (Counts Nine and Ten), Sun contends that Versata has failed to allege either intentional or negligent misrepresentation, and that Versata has not alleged facts establishing Sun's duty to speak, an essential element of a misrepresentation claim. (Id. at 13-16). Finally, Sun argues that the Court should dismiss Versata's unfair competition counterclaim (Count Eight) because it necessarily relies on the defective misrepresentation counterclaims in order to establish the essential element of an unlawful, unfair, or fraudulent act on Sun's part. (Id. at 16-19.) Should the Court not dismiss these five counterclaims, Sun argues that they should be stayed pending resolution of the patent issues on which they are predicated. (Id. at 19-21.)

Versata responds in its Answering Brief (D.I. 39 in 07-782-JJF) that all five non-patent counterclaims Sun seeks to dismiss comply with the pleading requirements of Federal Rule of Civil Procedure 8(a), which requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." (See D.I. 39 in 07-782-JJF at 5 (citing Fed.R.Civ.P. 8(a)(2)).) Versata argues that even after Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), all that Versata is required to do is "plead sufficient facts to suggest that the evidence could be discovered," and that Versata has done just that with respect to all five counterclaims Sun seeks to dismiss. (D.I. 39 in 07-782-JJF at 6-7 (emphasis in original).) With respect to Counts Five and Six, Versata argues that not only has it satisfied pleading requirements as to the elements of its antitrust claims, but also that the issues of Sun's monopoly power and the relevant market are "particularly fact-intensive [inquiries] that are seldom properly made at the pleading stage." (Id. at 9-10.) Versata next contends that Count Eight, unfair competition, is adequately pleaded, even in the absence of Counts Five, Six, Nine, and Ten, because Count Seven, which Sun does not dispute is properly pleaded, alleges inequitable conduct by Sun. (Id. at 12-13.) This, Versata argues, satisfies the California unfair competition statute's requirement of an unlawful, unfair, or fraudulent business practice in order to sustain an unfair competition claim. (Id.)

As for its misrepresentation counterclaims (Counts Nine and Ten), Versata contends that it has pleaded both an affirmative misrepresentation and concealment on Sun's part. (Id. at 14-16.) Specifically, Versata argues that "Sun promised not to sue developers such as Versata for developing, testing, and using Java-based applications," that Versata justifiably relied on that promise and developed such an application, and that Sun then sued Versata for infringement, reneging on its promise. (Id. at 14.) Versata also argues that Sun failed to disclose "the fact that [it] was planning to seek patent protection for a Java-based configurator application," a fact that materially qualified its invitation to Versata and other users to download Java and begin creating Java-based applications. (Id. at 15.) Finally, Versata argues that it should be given an opportunity to amend its counterclaims, should the Court dismiss them, and that the Court should not stay its counterclaims or bifurcate the action, should the Court deny Sun's motion to dismiss them. (Id. at 17-19.)

B. Sun's Motion To Dismiss In The Second Action (08-504-JJF)

With...