TOWN & COUNTRY LINEN CORP. and TOWN & COUNTRY HOLDINGS v. INGENIOUS DESIGNS LLC

Background

Town & Country Linen Corp. and Town & Country Holdings, Inc. (together, TNC) sued Ingenious Designs LLC (IDL), Joy Mangano, and HSN, Inc. The complaint alleged patent and copyright infringement, trade-secret misappropriation, idea misappropriation, breach of contract, and related New York claims. The dispute involved, among other things, a portable garment dryer and luggage made with aramid fiber. The parties had entered into a Mutual Non-Disclosure Agreement covering information exchanged for a possible business transaction.

The defendants filed an amended answer containing 15 affirmative defenses and six counterclaims. An affirmative defense is a defendant’s stated reason why the plaintiff should not win even if the complaint’s allegations are accepted. The counterclaims included requests for declarations of patent non-infringement, patent invalidity based on incorrect inventorship, patent unenforceability based on inequitable conduct, no trade-secret or idea misappropriation, and breach of the confidentiality agreement.

TNC moved to dismiss or strike six affirmative defenses and the reservation of “Other Defenses.” TNC also moved to dismiss or strike Counts I, IV, V, and VI of the amended counterclaims.

Rulings on Count IV and the Fourth Affirmative Defense

Count IV sought a declaration that the D399 patent was unenforceable because TNC allegedly failed to identify Mangano and possibly other IDL employees as inventors in the patent application. The court applied the heightened pleading requirement for fraud, which requires specific facts identifying who made the alleged misrepresentation or omission, what occurred, when and where it occurred, and how it was fraudulent. The pleading also had to support a reasonable inference that a specific person knew of the relevant information, knew it was material, and deliberately intended to deceive the Patent Office.

The court held that the defendants did not plead those facts with enough detail. The allegations did not identify a specific individual who knew that Mangano’s alleged contributions had to be disclosed and deliberately withheld that information. The allegations concerning patent counsel’s knowledge and intent were conclusory, and the cited email did not support the alleged intent to deceive. The court therefore granted the motion to dismiss Count IV and struck the Fourth Affirmative Defense. The court did so without leave to amend.

Ruling on Count VI and Discovery Sanctions

Count VI alleged that TNC breached the Mutual Non-Disclosure Agreement by disclosing information about the Aramid Fiber Luggage Project to third parties. TNC argued that the defendants had not adequately pleaded damages and had disclosed the counterclaim too late during discovery.

The court denied dismissal for failure to state a claim. It concluded that nominal damages—damages awarded when a contract was breached even if substantial financial loss is not shown—are available for a breach-of-contract claim under the authorities discussed in the opinion. Thus, the defendants’ request for nominal damages was sufficient at the pleading stage.

The court nevertheless imposed a discovery-related remedy under Federal Rule of Civil Procedure 37. The defendants had been asked during discovery to identify the legal and factual bases for intended counterclaims but did not identify the contract counterclaim until after the close of business on the last day of discovery. The court found that the delay was not sufficiently serious to justify striking or dismissing the counterclaim, but it prejudiced TNC by preventing discovery on the claim. The court reopened discovery for depositions of three third-party witnesses limited to Count VI and ordered that the defendants pay TNC’s fees and costs for that discovery.

Eleventh, Twelfth, Thirteenth, and Fourteenth Affirmative Defenses

The court denied the motion to strike the Eleventh Affirmative Defense, which invoked statutory limits on patent damages. The court treated those limits as limitations on damages rather than affirmative defenses requiring detailed factual pleading. The court also denied the motion to strike the Twelfth Affirmative Defense, which denied willful infringement. The court treated that defense as a denial rather than an affirmative defense subject to the heightened plausibility standard.

The court denied the motion to strike the Thirteenth Affirmative Defense only in part as a legal matter. The defense asserted that TNC’s patent claim was barred by an express or implied license. The court found sufficient factual allegations elsewhere in the amended answer and counterclaims to support an express-license theory based on Mangano’s alleged co-inventorship of the D399 patent. The court struck the defense to the extent it asserted an implied license or an express license based on a theory other than Mangano’s alleged co-inventorship. The court also declined to reopen discovery on this defense.

The court granted the motion to strike the Fourteenth Affirmative Defense. That defense broadly asserted acquiescence, equitable estoppel, unclean hands, laches, and waiver without identifying which defenses applied to which claims or alleging facts supporting any particular defense. The court found that the pleading did not provide adequate notice or satisfy the required plausibility standard. The court denied leave to amend this defense.

First Affirmative Defense and “Other Defenses”

The First Affirmative Defense asserted failure to state a claim. The court struck it to the extent it sought to relitigate the legal sufficiency of claims already decided in earlier proceedings in the case. The court otherwise denied the motion to strike because a failure-to-state-a-claim defense may operate as a general denial and is not necessarily subject to striking merely because it is redundant. The court denied leave to amend the portion that was struck.

The court denied the motion to strike the reservation of “Other Defenses.” It construed that language as preserving the defendants’ ability to seek permission to amend their answer based on later-discovered facts, not as giving them an automatic right to add defenses without court approval. The court stated that any new affirmative defense would require a motion to the court.

Counts I and V

The court denied the motion to dismiss Counts I and V. Count I sought a declaration of non-infringement of the D399 patent, and Count V sought declarations that the defendants had not misappropriated trade secrets or ideas. The court rejected TNC’s argument that these counterclaims were merely redundant mirror images of TNC’s claims. The court held that the counterclaims could present an independent dispute that would remain if TNC withdrew its claims before a decision on the merits.

Disposition

Judge Lewis J. Liman granted in part and denied in part TNC’s motion. The court granted the motion to dismiss and/or strike Count IV, the Fourth Affirmative Defense, and the Fourteenth Affirmative Defense without leave to amend. It granted the motion to strike the First Affirmative Defense without leave to amend to the extent that defense sought to relitigate previously decided issues. It denied the motion to dismiss and/or strike Counts I and V, the Eleventh and Twelfth Affirmative Defenses, and the reservation of “Other Defenses.” It denied dismissal of Count VI but reopened limited discovery at the defendants’ expense. It denied the motion to strike the Thirteenth Affirmative Defense while limiting that defense to an express-license theory based on Mangano’s alleged co-inventorship.