Epic Games, Inc. v. Acceleration Bay LLC

Background

Epic Games brought an action seeking a declaratory judgment that it did not infringe certain patents owned by Acceleration Bay. Acceleration Bay later asserted infringement counterclaims against Epic. Epic answered those counterclaims and asserted six counterclaims-in-reply seeking findings that the asserted patents were invalid.

Acceleration Bay moved under Federal Rule of Civil Procedure 12(f) to strike Epic’s counterclaims-in-reply. Alternatively, it asked the court to reclassify them as amendments to Epic’s complaint. Acceleration Bay argued that Epic was using the counterclaims to avoid statutory limits on inter partes review, or IPR, a process in which the Patent Trial and Appeal Board reviews patent validity.

Court’s analysis

The court explained that Rule 12(f) permits striking redundant, immaterial, impertinent, or scandalous material from a pleading. Motions to strike are generally disfavored, and courts should view the challenged pleading favorably to the party that filed it when the allegations might be relevant.

The court recognized that the Federal Rules do not expressly authorize counterclaims-in-reply. However, courts may permit compulsory counterclaims-in-reply, and courts also have authority to manage pleadings by striking or reclassifying them. The court further explained that a declaratory-judgment counterclaim is discretionary and may be dismissed when it merely repeats issues already raised by the complaint or affirmative defenses.

The court agreed that Epic’s patent-invalidity counterclaims-in-reply were redundant of its affirmative defense of patent invalidity. Epic had not asserted new matters beyond those defenses, and the counterclaims addressed the same patent claims involved in Acceleration Bay’s infringement counterclaims. The court also reasoned that deciding Acceleration Bay’s infringement counterclaims would necessarily require deciding whether the patents were valid.

Even so, the court concluded that striking the counterclaims would be futile. Acceleration Bay did not challenge, and the court found no basis to strike, Epic’s affirmative defenses of patent invalidity. Those defenses would not constitute civil actions subject to the IPR restrictions, so the court would still have to decide patent validity. Unlike an affirmative defense, a patent-invalidity counterclaim could remain as an independent issue if the infringement claims were dismissed. The court relied on the value of resolving patent validity independently and avoiding later relitigation.

The court acknowledged that the IPR statutes appeared to leave a gap: a declaratory-judgment counterclaimant might litigate patent validity in district court and later seek IPR without the same apparent time limit or estoppel restriction discussed in the opinion. The court stated that this issue was for Congress to resolve.

Disposition

Judge Yvonne Gonzalez Rogers denied Acceleration Bay’s motion to strike or reclassify Epic’s counterclaims-in-reply. The order terminated Docket Number 53. It did not decide whether the patents were valid or whether Epic infringed them.