Free Answering Brief in Opposition - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE ACCENTURE GLOBAL SERVICES GmbH, and ACCENTURE LLP, Plaintiffs, Case No. 07-826 (SLR) v. GUIDEWIRE SOFTWARE, INC., Defendant.

DEFENDANT GUIDEWIRE SOFTWARE, INC.'S ANSWERING BRIEF IN OPPOSITION TO ACCENTURE'S MOTION TO DISMISS
MORRIS, NICHOLS, ARSHT & TUNNELL LLP

Jack B. Blumenfeld (#1014) Julia Heaney (#3052) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 (302) 658-9200 [email protected] [email protected] Attorneys for Defendant Guidewire Software, Inc.
OF COUNSEL:

Daralyn J. Durie Clement S. Roberts Matthias Kamber JuNelle Harris KEKER & VAN NEST LLP 710 Sansome Street San Francisco, CA 94111 (415) 391-5400 April 21, 2008

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TABLE OF CONTENTS PAGES TABLE OF AUTHORITIES .......................................................................................................... ii I. II. III. SUMMARY OF ARGUMENT ...........................................................................................1 STATEMENT OF FACTS ..................................................................................................2 ARGUMENT.......................................................................................................................4 A. B. Legal Standard Under Rule 12(b)(6) .......................................................................4 Guidewire Has Properly Pleaded Its Fifth, Sixth, And Seventh Counterclaims In Accordance With Twombly .........................................................5 1. Guidewire Has Pleaded Facts Sufficient To Support The Elements Of § 43 Of The Lanham Act ........................................................5 a. Guidewire Has Pleaded Facts Supporting The "Commercial Advertising Or Promotion" Element Of § 43...................................................................................................6 Guidewire Has Alleged Facts Supporting The "False Or Misleading Statement" Element Of § 43 .........................................8 Guidewire Has Alleged Facts Regarding Accenture's Bad Faith........................................................................................11 Guidewire Has Pleaded The Remaining Elements Of Its § 43 Claim......................................................................................13

b. c. d. 2. 3. 4. C. IV.

Guidewire Has Pleaded All the Elements Of A Delaware Deceptive Trade Practices Act Claim ........................................................14 Guidewire Has Pleaded All the Elements Of A Delaware Common Law Unfair Competition Claim .................................................15 Noerr-Pennington Does Not Immunize Accenture's Public Statements ..................................................................................................15

Neither Trial Nor Discovery Should Be Bifurcated With Respect to Guidewire's Unfair Competition Counterclaims ...................................................17

CONCLUSION..................................................................................................................21

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TABLE OF AUTHORITIES PAGES CASES AirCapital Cablevision, Inc. v. Starlink Comm'ns Group, Inc., 634 F. Supp. 316 (D. Kan. 1986).............................................................................................17 Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955 (2007)............................................................................................... 4-5, 12, 14 Eastern R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).................................................................................................................15 Ecriz Corp. v. Exabyte Corp., 191 F.R.D. 611 (D. Colo. 2000) ..............................................................................................21 Edix Media Grp., Inc. v. Mahani, Civ. No. 2186-N, 2006 Del. Ch. LEXIS 207 (Dec. 12, 2006).................................................15 Enzo Life Sciences, Inc. v. Digene Corp., 295 F. Supp. 2d 424 (D. Del. 2003)............................................................................5-6, 14-15 Globetrotter Software, Inc. v. Elan Computer Grp, Inc., 362 F.3d 1367 (Fed. Cir. 2004).................................................................................... 11-12, 14 In re Innotron Diagnostics, 800 F.2d 1077 (Fed. Cir. 1986)................................................................................................17 In re Warfarin Sodium Antitrust Litigation, C.A. No. MDL 98-1232-SLR, 1998 U.S. Dist. LEXIS 19555 ..................................................7 ISCO v. Conductus Inc., C.A. No. 01-487 GMS, 2003 U.S. Dist. LEXIS 1883 (D. Del. Feb. 10, 2003).......................12 Judkins v. HT Window Fashion Corp., No. 07-1434, 2008 U.S. Dist. LEXIS 7423 (Fed. Cir. Apr. 8, 2008) ......................................12 Mine Workers v. Pennington, 381 U.S. 657 (1965).................................................................................................................16 MPT, Inc. v. Marathon Labels, Inc., No. 1:04-CV-2357, 2005 U.S. Dist. LEXIS 18270 (N.D. Ohio Aug. 26, 2005)........... 8-10, 15 Nabi Biopharmaceuticals v. Roxane Laboratories, Inc., 2007 WL 894473 (S.D. Ohio 2007).........................................................................................19 Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed. Cir.), cert. denied, 119 S. Ct. 178 (1998) ...............................................19

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Performance Aftermarket Parts Group, Ltd. v. TI Group Automotive Systems, Inc., 2006 WL 2850061 (S.D. Tex. 2006) .......................................................................................20 Phillips v. County of Allegheny, No. 06-2869, 2008 U.S. App. LEXIS 2513 (3d Cir. Feb. 5, 2008) ...........................................4 Professional Real Estate Investors, Inc. v. Columbia Pictures Indus. Inc., 508 U.S. 49 (1993)............................................................................................................. 16-17 Spectra-Physics Lasers, Inc. v. Uniphase Corp., 144 F.R.D. 99 (N.D. Cal. 1992)...............................................................................................17 Symbol Techs., Inc. v. Proxim Inc., 2002 U.S. Dist. LEXIS 28024 (D. Del. 2002) ....................................................................... 7-8 Symbol Techs. v. Proxim Inc., 2003 U.S. Dist. LEXIS 1973 (D. Del. 2003) .............................................................................8 Synopsys, Inc. v. Magma Design Automation, 2006 WL 1452803 (D. Del. 2006) ..................................................................................... 18-20 Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340 (Fed. Cir. 1999)......................................................................................5, 14, 16 FEDERAL: STATUTES, RULES 35 U.S.C. § 271..............................................................................................................................13 Federal Rule of Civil Procedure 8 .............................................................................................4, 14 Federal Rule of Civil Procedure Rule 12(b)(6)................................................................................4 Federal Rule of Civil Procedure 42(b)...........................................................................................17 STATE: STATUTES 6 Del. C.§ 2532(a)..........................................................................................................................14

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I.

SUMMARY OF ARGUMENT At this stage of the proceedings the Court need only decide a narrow question: whether

Guidewire has pleaded facts supporting its unfair competition counterclaims. It has. As set forth below, Guidewire has alleged facts that directly or inferentially support each element of each of its asserted claims. Because it cannot argue the facts, Accenture's motion focuses instead on a number of incorrect legal propositions. First, Accenture is wrong when it claims that press releases are not "commercial advertising." Multiple courts, including courts in this district, have held that press releases are commercial speech. Especially where, as here, the challenged press release contains statements that denigrate a competitor's products by alleging infringement, the speech is squarely within the realm of what Courts consider commercial. Second, Accenture is wrong when it asserts that its challenged statements are not false and misleading because they parrot the allegations in Accenture's complaint. This proposition is both untrue (because the challenged statements go well beyond the allegations in the complaint) and wrong (because even if true it does not constitute a valid defense). As discussed in more detail below, where a plaintiff brings a claim in bad faith, it cannot defeat a claim of unfair competition by arguing that it merely repeated those bad faith allegations to the press. In other words, accurately repeating false and misleading statements does not constitute telling the truth. Third, for the same reason, Accenture is wrong when it asserts that its statements are protected by the Noerr-Pennington doctrine. That doctrine protects the act of bringing a lawsuit. Furthermore, under the sham lawsuit exception, Noerr-Pennington has no possible application to statements about a lawsuit that Accenture brought in bad faith.. Fourth, Accenture is wrong when it suggests (in the alternative) that the Court should bifurcate and stay Guidewire's counterclaims. As discussed in more detail below, bifurcation

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would be inconvenient, would not avoid prejudice, and would complicate (rather than expedite) the discovery process. For these reasons, Guidewire submits that the Court should deny the motion to bifurcate, and should instead revisit the question of severing issues for trial based on what is revealed by the discovery process. II. STATEMENT OF FACTS Accenture filed its lawsuit against Guidewire on December 18, 2007, alleging both patent infringement and trade secret misappropriation. See Compl. (D.I. 1) ¶¶ 26-38. Before the suit, Accenture never approached Guidewire to inform it of the impending suit, never asked for an explanation of how the accused Guidewire systems operate, and never told Guidewire that it believed any of Guidewire's products infringed Accenture's patents. Answer and Counterclaims (D.I. 10) ¶ 75. In addition, Accenture never expressed any concern to Guidewire that Guidewire may have obtained and used Accenture trade secrets in developing Guidewire's products. Id. Instead of immediately serving Guidewire with the Complaint, Accenture issued a press release regarding its lawsuit. Id. ¶ 77. That press release states that "Guidewire willfully and deliberately developed, manufactured, used and sold, or offered for sale, computer software and services used for insurance claims management that are covered by Accenture U.S. Patent 7,013,284 (the `284 patent)." Id. It also states that "Guidewire willfully and maliciously obtained and used or intends to use Accenture trade secrets without authorization in designing, developing, manufacturing and selling claims management software and services to assist it in its ongoing efforts to unfairly compete against Accenture in the claims management market." Id. Accenture also made other efforts to attract media attention. To that end, Accenture partner John Del Santo gave an interview to Insurance & Technology, a trade publication. The related article quotes Del Santo as saying that "We carefully compared our U.S. patent to the information available about the Guidewire system and concluded that they not only infringed the

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patent but that they must have gotten access to our trade secrets at a client somewhere." Id. ¶ 78. It also quotes Del Santo as saying that "We believe that their product development trajectory was just too fast to result in the kind of product that they have, which looks fairly similar to ours. From our view that's too much of a coincidence, so there has to be a trade secret violation here, in our opinion." Id. Del Santo even went so far as saying "This is one [instance of breach] that we thought was pretty straightforward."1 (Modification in original). Guidewire filed its Answer and Counterclaims on February 6, 2008. Even though

Guidewire had only limited time to conduct an investigation of publicly available information, Guidewire discovered startling evidence of inequitable conduct related to the `284 patent. First, Accenture failed to submit U.S. Patent No. 6,937,990 to the USPTO while prosecuting the `284 patent, even though it knew of the patent. Id. ¶ 34. Second, Accenture failed to submit WO95/03569.2 Id. ¶ 35. Third, Accenture failed to relate the five common patent applications it filed on the same day. Id. ¶ 36. Fourth, Accenture failed to submit supplemental inventor declarations. Id. ¶ 37. Fifth, Accenture failed to name the proper inventors. Id. ¶ 38. Because these failures render the `284 patent unenforceable, and because they are not mere "clerical" errors, Accenture could have no objectively reasonable belief that it could successfully assert the `284 patent. See id. ¶ 105.

1

This quote was not cited in Guidewire's Answer and Counterclaims; however, as Accenture points out, the entire press release may be considered on a motion to dismiss. Accenture MTD at 4 n.2 (citing Winer Family Trust v. Queen, 503 F.3d 319, 328-29 (3d Cir. 2007). The press release is available at http://newsroom.accenture.com/article_display.cfm?article_id=4625. Guidewire also mistakenly alleged that Accenture failed to cite WO091/08543. Accenture correctly points out that WO091/08543 was in fact cited on the face of the `284 patent and in an IDS submitted on April 28, 2003. See Accenture MTD (D.I. 21) at 11 n.8.

2

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Accordingly, Guidewire asserted counterclaims for unfair competition.

Guidewire

alleged that, in light of Accenture's bad faith allegations, Accenture's public statements regarding the lawsuit against Accenture are false and misleading. Id. ¶ 77. Guidewire also pleaded that Del Santo's statements are false and misleading. Id. ¶ 78. On March 25, 2008, Accenture moved to dismiss Guidewire's Fifth, Sixth, and Seventh Counterclaims (D.I. 20). Those claims contain Guidewire's Lanham Act, Delaware Deceptive Trade Practices Act, and Delaware common law claims for unfair competition, respectively. Guidewire opposes Accenture's motion to dismiss those claims. III. ARGUMENT A. Legal Standard Under Rule 12(b)(6)

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the sufficiency of the pleadings, not the merits of a claim. Furthermore, Rule 8(a)(2) "requires a `showing,' rather than a blanket assertion, of entitlement to relief." Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1965 n.3 (2007); see also Phillips v. County of Allegheny, No. 062869, 2008 U.S. App. LEXIS 2513, at *17 (3d Cir. Feb. 5, 2008). Specifically, Rule 8(a) "`contemplate[s] the statement of circumstances, occurrences, and events in support of the claim presented' and does not authorize a pleader's `bare averment that he wants relief and is entitled to it.'" Twombly, 127 S. Ct. at 1965 n.3. Thus, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's [Rule 8] obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 127 S. Ct. at 1964-65 (alteration in original) (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1202 at 94, 95 (3d ed. 2004)). A complainant satisfies this standard by making

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either direct or inferential factual allegations respecting all the material elements necessary to sustain recovery under some viable legal theory. See id. at 1965-69. B. Guidewire Has Properly Pleaded Its Fifth, Sixth, And Seventh Counterclaims In Accordance With Twombly

In addition to pleading facts demonstrating bad faith, Guidewire has pleaded facts supporting all of the other necessary elements for its Lanham Act, Delaware Deceptive Trade Practices Act, and Delaware common law claims. 1. Guidewire Has Pleaded Facts Sufficient To Support The Elements Of § 43 Of The Lanham Act

The elements of a claim for unfair competition under § 43(a)(1)(B) of the Lanham Act are as follows: (1) (2) (3) (4) (5) the defendant made a false or misleading statement of fact in commercial advertising or promotion about the plaintiff's goods or services; the statement actually deceives or is likely to deceive a substantial segment of the intended audience; the deception is material in that it is likely to influence purchasing decisions; the defendant caused the statement to enter interstate commerce; and the statement results in actual or probable injury to the plaintiff.

See Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340, 1348 (Fed. Cir. 1999) (citing, among other cases, Ditri v. Coldwell Banker Residential Affiliates, Inc., 954 F.2d 869, 872 (3d Cir. 1992)); Enzo Life Sciences, Inc. v. Digene Corp., 295 F. Supp. 2d 424, 427 (D. Del. 2003). In addition, where a Lanham Act claim is founded on a patent owner's representation concerning infringement, a claimant must also show that the patent owner made the representation in bad faith. Zenith, 182 F.3d at 1353. This additional element exists to avoid conflict between the Lanham Act and the Patent Act. Id.

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a.

Guidewire Has Pleaded Facts Supporting The "Commercial Advertising Or Promotion" Element Of § 43

Guidewire has alleged that Accenture's press release regarding its lawsuit against Guidewire and Del Santo's statements to the press were false and misleading. See Answer and Counterclaims (D.I. 10) ¶¶ 77-78. As such, it has pleaded facts that, if proven true, would support its entitlement to relief under § 43 of the Lanham Act. Contrary to Accenture's assertion, press releases can constitute "commercial advertising or promotion" under § 43. For example, in Enzo, this Court denied a motion to dismiss an unfair competition counterclaim based on allegedly false and misleading statements appearing in: 1) a press release issued May 14, 2001, by Biochem announcing that "the Company" has been awarded the `581 Patent; and 2) a press release issued by Biochem on March 18, 2002, stating that "Enzo" is the owner of the `581 patent and that "Enzo" intends to pursue infringement claims against Digene. 295 F. Supp. 2d at 426 (citations omitted). Digene alleged that the statements were false and misleading because Enzo, and not Biochem, owned the `581 patent. Id. In evaluating whether Enzo's statements were "commercial advertising," the Court considered whether they were: "1) commercial speech; 2) by a defendant who is in commercial competition with plaintiff; 3) for the purpose of influencing consumers to buy defendant's goods or services; 4) that is disseminated sufficiently to the relevant purchasing public to constitute `advertising or `promotion' within the industry." Id. at 428. Applying that standard, the Court concluded that the "press releases constitute commercial advertising or promotion within the industry, because they were commercial speech, Digene and Biochem are competitors, and they were disseminated sufficiently to the relevant public." Id. at 428. The Court should similarly conclude that Accenture's press release and Del Santo's statements were "commercial advertising." As in Enzo, Accenture's statements were

commercial speech--they were issued in an official press release and made to an industry trade

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journal. For that reason, the statements were also disseminated sufficiently to the relevant purchasing public. In addition, Accenture and Guidewire are competitors in the field of claims management, underwriting and policy administration software. Answer and Counterclaims (D.I. 10) ¶ 53. And the most reasonable inference is that the statements were intended to influence customers or potential customers of Guidewire not to buy Guidewire's products--particularly because they combined negative statements about Guidewire with statements that favorably depicted Accenture's offering to the same market. See Accenture Press Release, supra n. 1 (stating that Accenture's software took millions of dollars to develop and enables insurance companies to optimize their handling of insurance claims, while at the same time stating that Guidewire willfully and deliberately copied Accenture's software and maliciously obtained trade secrets to do so.) Similarly, in In re Warfarin Sodium Antitrust Litigation, C.A. No. MDL 98-1232-SLR, 1998 U.S. Dist. LEXIS 19555, * 39-48 (D. Del. Dec. 7, 1998), the Court recognized that press releases, among other things, could constitute "commercial advertising." Id. In so doing, the Court ruled that the press releases at issue met the "commercial speech" prong of the "commercial advertising" requirement because they denigrated the plaintiff's product and touted the defendant's product. Id. at 43. Here we have a similar situation. Accenture's press release constitutes "commercial speech" because it denigrates Guidewire's product--claiming it

infringes and was the result of trade secret misappropriation--while touting the `284 patent and Accenture's insurance software services. See Accenture Press Release, supra n. 1. Thus, Accenture's press releases meets the "commercial advertising" element of a § 43(a) claim. Accenture's reliance on Symbol Technologies, Inc. v. Proxim Inc. is inapposite. C.A. No. 01-801-SLR, 2003 U.S. Dist. LEXIS 12767 (D. Del. July 30, 2003). In Symbol, this Court twice denied a motion to dismiss the defendant's § 43 counterclaim, which was based on statements

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made by the plaintiff in a press release announcing that it was suing the defendant for patent infringement. Symbol Techs., Inc. v. Proxim Inc., 2002 U.S. Dist. LEXIS 28024 (D. Del. 2002); Symbol Techs. v. Proxim Inc., 2003 U.S. Dist. LEXIS 1973 (D. Del. 2003). Accenture altogether ignores this fact when it relies on the Court's later summary judgment decision to try to dismiss Guidewire's counterclaims on the pleadings. Finally, Accenture argues that its press release and Del Santo's statements should be seen as "non-commercial speech" because of Guidewire's own statements to the press. But the fact that Guidewire has made public statements about the litigation says nothing about whether Accenture's statements are "commercial speech." And, in any event, whether Guidewire's statements qualify as "commercial speech" is beside the point: there is no allegation that Guidewire has violated the Lanham Act via false and misleading commercial advertising. b. Guidewire Has Alleged Facts Supporting The "False Or Misleading Statement" Element Of § 43

Guidewire alleged that Accenture's statements that Guidewire infringed the `284 patent are literally false because (1) the claims of the `284 patent do not cover Guidewire's products; (2) the `284 patent is invalid; and (3) Accenture obtained the `284 patent via inequitable conduct before the USPTO. Answer and Counterclaims (D.I. 10) ¶¶ 33-38, 81-84. Taken as true, these factual allegations satisfy the misrepresentation element of § 43. Accenture's press release statements are not immunized because they repeat the allegations in its Complaint. The court in MPT, Inc. v. Marathon Labels, Inc. denied a motion to dismiss unfair competition claims based on a similar argument to the one Accenture makes here. No. 1:04-CV-2357, 2005 U.S. Dist. LEXIS 18270 (N.D. Ohio Aug. 26, 2005). The allegedly false and misleading statements in MPT were made in a cease-and-desist letter the plaintiff sent to a customer of the defendant. In that letter, plaintiff's counsel stated:

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You should know that MPT, Inc., which licenses The Kennedy Group to make and sell placards for container re-labeling applications, is the owner of U.S. Patent 5,417,790 and U.S. Patent Re. 37, 164, and is currently suing Marathon Labels, Inc., for patent infringement based on Marathon Labels' sale of its Smart Surface Placards. If your company purchases placards from Marathon Labels and uses the placards in the way described in the patents, it may be infringing on the patented process. Id. at *4-5. Even though MPT was simply repeating the allegations in its complaint, the court refused to dismiss Marathon's counterclaims because Marathon's allegations of invalidity and unenforceability supported an inference of bad faith. Id. at *19-22. The court in Classen Immunotherapies, Inc. v. King Pharmaceuticals, Inc., dealt with a similar situation. 403 F. Supp. 2d 451 (D. Md. 2005). In Classen, King sought to bring counterclaims against both Classen Immunotherapies, which had filed the original suit, and to join Dr. Classen personally based on statements he made in a press release. Id. at 458. The press release at issue contained not only statements about the case, but also accusations by Dr. Classen that Elan was "infringing Classen's patents in the development of Skelaxin." Id. at 460, n.3. Specifically, the press release stated that: Classen Immunotherapies, Inc. announces it has filed a patent infringement suit against King Pharmaceuticals, Inc. (Bristol, Tennessee), Elan Pharmaceuticals, Inc. (South San Francisco, California) and Elan Corporation, PLC (Dublin, Ireland) alleging the companies have infringed Classen Immunotherapies' patented processes directed to the discovery, analysis and commercialization of adverse drug event information. The complaint alleges that the defendants have sold more than $500 million worth of products - specifically, the muscle relaxant Skelaxin® (metaxalone) - that infringe Classen Immunotherapies' United States Patents Nos. 6,584,472 and 6,219,674.3

3

See Classen Immunotherapies Nov. 29, 2004 press release, available at http://salesandmarketingnetwork.com/news_release.php?ID=2002083&key=King%20Ph armaceuticals.

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Classen's press release also quoted Dr. Classen as saying "In this instance, however, we believe the methods used by King, Elan and their customers with respect to Skelaxin® fall within the scope of our earlier-filed patents." Id. As in MPT, the court in Classen refused to dismiss King's counterclaims, even though Classen only repeated the allegations in the complaint in its press release. Classen

Immunotherapies, 403 F. Supp. 2d at 461. Given the allegation of bad faith, even the use of "the suit alleges that" language did not shield Classen from unfair competition counterclaims. Indeed, if such language did shield public pronouncements regarding litigation brought in bad faith, it would be far too easy for a party to dodge liability. Simply parroting what the complaint alleges is not (and should not) protect a statement when the underlying complaint is itself comprised of statements made in bad faith. Even if Accenture's "the suit alleges that" statements are deemed true--and therefore not actionable--Guidewire's Lanham Act claim still survives based on Del Santo's statements. Del Santo stated that Accenture "carefully compared our U.S. patent to the information available about the Guidewire system and concluded that they . . . infringed the patent." Id. ¶ 78. He even went so far as to say "This is one [instance of breach] that we thought was pretty straightforward." Del Santo did not couch these statements in the allegedly protective cloak of "the suit alleges that" language. Complaint. Nor did he refer to the allegations made in Accenture's

To the contrary, Del Santo affirmatively stated that Guidewire infringes.

Consequently, Guidewire has pleaded sufficient facts to meet the "false and misleading statement" element of its Lanham Act claim.4
4

In Classen the Court also allowed King to proceed with his claim against Dr. Classen. Id. Dr. Classen's statement that he believed King and its customers were infringing Classen's patents is similar to John Del Santo's statement that Accenture concluded that Guidewire infringed the `284 patent. See Answer and Counterclaims (D.I. 10) ¶ 78. (Continued . . .)

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c.

Guidewire Has Alleged Accenture's Bad Faith

Facts

Regarding

Accenture has explicitly conceded that the fact that it disputes Guidewire's claims of inequitable conduct is irrelevant at this stage in the proceedings. See Accenture MTD (D.I. 21) at 11, n.8. Despite this, Accenture puts substantial effort into defending its failures before the USPTO. For example, Accenture argues that its failure to submit material prior art to the examiner of the patent in suit was immaterial because Accenture submitted the prior art in subsequent applications. Suffice it to say, where a party fails to submit prior art to the examiner of the patent in suit, it cannot absolve itself of that sin by submitting the art in a different subsequent application. See McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897 (Fed. Cir. 2007); Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1367 (Fed. Cir. 2003). In any event, what matters for the current motion is that Guidewire's inequitable conduct allegations support an inference of bad faith. "A clear case of bad faith representations is made out `if the patentee knows that the patent is invalid, unenforceable, or not infringed, yet represents to the marketplace that a competitor is infringing the patent.'" Allen v. Howmedica Leibinger, Inc., 197 F. Supp. 2d 101, 110 (D. Del. 2002) (quoting Zenith, 182 F.3d at 1354). To find bad faith, a patent holder must have asserted objectively baseless claims of patent infringement. See Globetrotter, 362 F.3d at 1377. Here, Guidewire has alleged numerous facts supporting unenforceability. Specifically, Accenture filed multiple (nearly identical) applications on the same day, failed to relate those common applications, failed to submit known and material prior art, failed to submit

(. . . continued) Accordingly, John Del Santo's statements provide an independent basis for Guidewire's counterclaims.

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supplemental inventor declarations, and failed to name the proper inventors.

Answer and

Counterclaims (D.I. 10) ¶¶ 34-38. Given that all these patents were prosecuted by the same person, there is a clear inference that the acts were part of a pattern of intentionally deceptive conduct aimed at trying to increase the chances that at least one of the (nearly identical) applications would be granted. Thus, Guidewire has alleged facts that, if true, give rise to a reasonable inference that Accenture's conduct was intended to deceive the USPTO. See id. ¶ 33; see also Twombly, 127 S.Ct. at 1965. These factual allegations (if accepted as true) also give rise to a reasonable inference that Accenture's infringement suit is objectively meritless. Specifically, these facts give rise to a reasonable inference that Accenture knew that the patent in suit was obtained by inequitable conduct. Indeed, it strains credibility to suggest that nine different inventors from Accenture participated in simultaneously prosecuting five different patents for the same alleged invention-- without anyone from Accenture knowing what was happening. For these reasons, Guidewire has alleged facts that give rise to a reasonable inference that Accenture's public statements to the market about the litigation were made in bad faith. See ISCO v. Conductus Inc., C.A. No. 01-487 GMS, 2003 U.S. Dist. LEXIS 1883, *5-6 (D. Del. Feb. 10, 2003) (denying summary judgment on unfair competition claims where evidence of invalidity raised a material issue of fact regarding whether patentee's press release statements regarding infringement suit were made in bad faith). The inequitable conduct issues raised by Guidewire are obvious from the face of the patent and related applications, and do not even account for what Guidewire might find in discovery.5
5

The Federal Circuit's recent decision in Judkins v. HT Window Fashion Corp., No. 071434, 2008 U.S. App. LEXIS 7423 (Fed. Cir. April 8, 2008), does not suggest otherwise. In Judkins, the issue was whether the district court properly denied a preliminary injunction to prevent the plaintiff from sending HT's customers and potential customers letters stating that an HT product infringed his patents. Among other things, the Federal (Continued . . .)

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d.

Guidewire Has Pleaded Elements Of Its § 43 Claim

The

Remaining

Accenture does not contest that Guidewire has sufficiently pleaded the remaining elements of its federal unfair competition claim. Guidewire offers the following proof: · Accenture's statements deceive or are likely to deceive a substantial segment of the intended audience. Guidewire has pleaded that Accenture issued a press release and that Del Santo made statements to a trade journal that Guidewire infringes the `284 patent. Answer and Counterclaims (D.I. 10) ¶¶ 77-78. Guidewire has also pleaded facts that, if true, render the `284 patent unenforceable, and therefore not infringed. Id. ¶¶ 34-38. These facts support an inference that a substantial segment of the audience for Accenture's statements has been--or are likely to be--deceived into thinking that Guidewire is infringing when it is not. See id. ¶ 109. Accenture's deception is material in that it is likely to influence purchasing decisions. As a matter of fact, customers are likely to avoid purchasing Guidewire Insurance Suite and/or Guidewire ClaimCenter because of concerns about the continued availability of Guidewire's products and/or software updates. See id. ¶ 110. They may also be reluctant to use the software for fear of being sued for infringement themselves. See 35 U.S.C. § 271. Thus, one can reasonably infer based on the facts pleaded that Accenture's deceptive statements are likely to influence customers' decisions regarding purchasing Guidewire software. Guidewire has pleaded that its products travel in interstate commerce. "The Guidewire Insurance Suite and Guidewire ClaimCenter are sold throughout the United States, as are Accenture's competing products and services." Id. ¶ 111. Accenture does not--and cannot--dispute this. Accenture's statements result in actual or probable injury to Guidewire. As discussed above, based on Accenture's false and misleading statements, consumers may be intimidated into not purchasing the Guidewire Insurance Suite and/or Guidewire ClaimCenter, or at least delaying any purchase. As such, the facts pleaded support the inference that Guidewire has been or will probably be injured. See id. ¶ 111. For the benefit of the Court, however,

·

·

·

(. . . continued) Circuit had to evaluate whether HT was likely to succeed on the merits. That is an altogether different issue than the one presented here--whether Guidewire has satisfied pleading requirements. And while the Federal Circuit found no abuse of discretion in denying the preliminary injunction, the unfair competition claims as pleaded remained in the case. Thus, the Federal Circuit implicitly affirmed the viability of such claims.

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In sum, Guidewire has satisfied Rule 8 pleading standards by making either direct or inferential allegations respecting all the material elements necessary recovery for a violation of § 43 of the Lanham Act. See Twombly, 127 S.Ct. at 1969. 2. Guidewire Has Pleaded All the Elements Of A Delaware Deceptive Trade Practices Act Claim

The relevant portion of Delaware's Deceptive Trade Practices Act provides that: A person engages in a deceptive trade practice, when, in the course of a business, vocation, or occupation, that person: (5) Represents that goods or services have ... characteristics ... that they do not have, or that a person has a ... status ... that the person does not have; (8) Disparages the goods, services, or business of another by false or misleading representations of fact; (12) engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding. 6 Del. C.§ 2532(a). Notably, the Court in Enzo recognized that while the Act may not have been meant to address false and misleading statements relating to patent infringement, "the act is `remedial in nature and liberally construed.'" 295 F. Supp. 2d at 428 (quoting State ex rel. Brady v. Preferred Florist Network, Inc., 791 A.2d 8, 20 (Del. Ch. 2001)). State-law unfair competition claims based on a patentee's marketplace statements regarding its patent also require the additional element of bad faith. See Zenith, 182 F.3d at 1355; see also Globetrotter Software, Inc. v. Elan Computer Grp, Inc., 362 F.3d 1367, 1374 (Fed. Cir. 2004). As set forth in the discussion of Guidewire's Lanham Act claim, Guidewire has pleaded all the necessary elements for its Delaware's Deceptive Trade Practices Act claim. First,

Guidewire has pleaded facts that Accenture knowingly and willfully misrepresented that Guidewire's software products infringe the `284 patent, given the evidence of unenforceability due to inequitable conduct. Answer and Counterclaims (D.I. 10) ¶¶ 33-38, 105-06. Second, Guidewire has pleaded facts that Accenture knowingly and willfully disparaged Guidewire's

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software products by claiming that they infringe the `284 patent. See id. at ¶ 105-06. Third, Guidewire has alleged that Accenture engaged in other conduct that creates a likelihood of confusion or of misunderstanding. Id. at ¶ 109-10. Accordingly, as in Enzo, the Court should find that Guidewire has pleaded all the elements required under the Delaware statutory scheme to withstand Accenture's motion to dismiss Guidewire's Sixth Counterclaim. See 295 F. Supp. 2d at 428-29; see also MPT, Inc. v. Marathon Labels, Inc., No. 1:04-CV-2357, 2005 U.S. Dist. LEXIS 18270 (N.D. Ohio Aug. 26, 2005) (denying motion to dismiss Lanham Act and Ohio state law unfair competition claims). 3. Guidewire Has Pleaded All the Elements Of A Delaware Common Law Unfair Competition Claim See Edix Media Grp., Inc. v.

Delaware common law prohibits unfair competition.

Mahani, Civ. No. 2186-N, 2006 Del. Ch. LEXIS 207 (Dec. 12, 2006). To bring a Delaware common law unfair competition claim, a party must plead facts regarding an unreasonable interference with the promotion and conduct of its business. Id. at *44. Here, Guidewire has met this pleading standard by alleging that Accenture and Del Santo made false and misleading statements that Guidewire infringes the `284 patent, which statements have interfered with or are likely to interfere with Guidewire's sales. Answer and Counterclaims (D.I. 10) ¶¶ 105-11, 11415. 4. Noerr-Pennington Does Not Immunize Accenture's Public Statements

The Court should reject Accenture's attempts to seek refuge in the Noerr-Pennington doctrine. Under that doctrine, the act of bringing a lawsuit generally does not give rise to an antitrust or other violation.6 Accenture agrees with this principle. Accenture MTD (D.I. 21) at

6

This principle and resulting immunity are commonly referred to as the Noerr-Pennington doctrine and/or Noerr-Pennington immunity after the cases of Eastern R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) (no antitrust liability for (Continued . . .)

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9.

Nonetheless, Accenture argues that Noerr-Pennington immunizes its and Del Santo's

statements to the press. It does not. The basis for Guidewire's unfair competition counterclaims is not Accenture's filing of its lawsuit but rather the statements to the press. The distinction is important, and has been recognized by the Federal Circuit. See Zenith, 182 F.3d at 1349.7 Because Guidewire's claims depend on allegations of false statements, and not abuse of process, Noerr-Penningon does not apply. Even if Accenture were on the right track asserting Noerr-Pennington immunity--and it is not--that immunity does not apply here. There is an exception to Noerr-Pennington

immunity: if a lawsuit constitutes a "sham" litigation, then it is not protected by the NoerrPennington doctrine. Professional Real Estate Investors, Inc. v. Columbia Pictures Indus. Inc., 508 U.S. 49 (1993). To invoke that exception, a party must show that the suit was both objectively baseless and that the party subjectively asserted it for an improper anticompetitive purpose rather than to achieve a lawfully beneficial outcome. Id. at 60-61. Guidewire has sufficiently pleaded both elements. First, it has pleaded facts that, if true, would render Guidewire has provided detailed allegations of

Accenture's lawsuit objectively baseless.

inequitable conduct. See Answer and Counterclaims ¶¶ 34-38. It has asserted facts that give rise to a reasonable inference that Accenture has neither a basis for asserting infringement, nor a

(. . . continued) petitioning legislature); and Mine Workers v. Pennington, 381 U.S. 657, 669 (1965) (same).
7

Here, in contrast, Exzec's § 43(a) claim is not premised on a suit by Elo Touch for patent infringement and a defense that the patent is unenforceable for inequitable conduct before the Patent Office. Rather, the counterclaim against Elo Touch is based on alleged marketplace statements, i.e., the alleged Elo Touch statements to potential Exzec customers that Exzec's product is infringing and that Exzec is unable to design around the patents. The gravamen of Exzec's claim is marketplace misconduct, not abuse of the administrative and judicial process. Zenith, 182 F.3d at 1349.

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basis for believing the claims are valid. Id. at ¶¶ 82-83. Guidewire has also pleaded facts suggesting that Accenture subjectively asserted those claims to interfere with a stronger marketplace competitor rather than to redress a real legal wrong. See id. ¶¶ 85, 104. Given that Noerr-Pennington immunity does not apply because: (1) Guidewire's

counterclaims are not based on Accenture's filing of its lawsuit; and (2) Accenture has filed a sham litigation, little reason remains to address Accenture's argument that Noerr-Pennington also protects publicity "incidental to the lawsuit." The AirCapital case cited by Accenture does not suggest otherwise. AirCapital Cablevision, Inc. v. Starlink Comm'ns Group, Inc., 634 F. Supp. 316 (D. Kan. 1986). As AirCapital held, Noerr-Pennington protects attendant publicity only when the underlying lawsuit is not itself a sham. Id. at 326. Thus, because Guidewire has pleaded facts suggesting a sham litigation, Accenture's attendant publicity is not protected. Furthermore, in AirCapital, the court granted summary judgment because it had already deemed the underlying lawsuit legitimate. Id. at 322-23. Here, the parties are still in the pleading stages. It would therefore be premature to dismiss Guidewire's claims without first finding that the underlying lawsuit is legitimate--a question only discovery can answer. C. Neither Trial Nor Discovery Should Be Bifurcated With Respect to Guidewire's Unfair Competition Counterclaims

Accenture has provided no reason to bifurcate its patent infringement allegations from Guidewire's unfair competition counterclaims. Indeed, Accenture fails to cite even the

applicable rule regarding bifurcation: Rule 42(b) of the Federal Rules of Civil Procedure. Nor does it cite to the factors the Court should consider in evaluating a Rule 42(b) request. Under Rule 42(b), the Court has the discretion to sever claims for convenience, to avoid prejudice, or to expedite and economize. Fed. R. Civ. P. 42(b); see also In re Innotron

Diagnostics, 800 F.2d 1077, 1085 (Fed. Cir. 1986). The moving party has the burden of showing that these factors warrant bifurcation. See Spectra-Physics Lasers, Inc. v. Uniphase Corp., 144

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F.R.D. 99, 101 (N.D. Cal. 1992). Accenture has not analyzed these factors in its brief. As such, it has failed to satisfy its burden. On that basis alone the Court should deny Accenture's request. Should the Court nonetheless address Accenture's request, it should not bifurcate. Contrary to Accenture's claim, it is far from "standard practice" for courts to separate patent and antitrust issues. See Accenture MTD (D.I. 21) at 12. For example, the Court recently refused such a request in Synopsys, Inc. v. Magma Design Automation, 2006 WL 1452803, *4 (D. Del. 2006). That case is very similar to the facts here. Synopsys moved to dismiss Magma's antitrust, Lanham Act, and state-law unfair competition tort counterclaims, just as Accenture has moved to dismiss those counterclaims by Guidewire. Id. at *1. As here, defendant's

counterclaims were predicated on the plaintiff's alleged bad faith enforcement of its patent. Id. at *2-3. The Court denied the motion to dismiss. Id. at 2-3. It also denied Synopsys's motion to bifurcate the antitrust and unfair competition claims from the patent claims, as well as Synopsys' motion to stay the antitrust and unfair competition claims while the patent claims were being litigated. Id. at *4-5. In so ruling, the Court noted that the decision to bifurcate is a matter to be decided on a case-by-case basis. Id. at *4. So while other courts may routinely bifurcate patent and antitrust claims, this Court concluded that it had to evaluate the merits and make an independent judgment. Id. With that principle in mind, the Court found that that bifurcation was not necessary to prevent jury confusion, particularly given the presence of experienced attorneys. Id. It further concluded that bifurcation would not serve the interest of efficiency: Magma's antitrust claims are based in part on the allegation that Synopsys fraudulently-obtained two of its patents and asserted them against Magma in violation of Section 2 of the Sherman Act. Synopsys' alleged fraud is also a centerpiece of Magma's invalidity claims. Thus, were the court to bifurcate, the evidentiary presentation in one case would likely be substantially duplicative of the evidentiary presentation in the other.

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Id.

In addition, the Court concluded that bifurcation would require duplicating evidence

"because both juries would need to be educated in the same relevant technology." Id. The court similarly denied such a bifurcation motion in Nabi Biopharmaceuticals v. Roxane Laboratories, Inc., 2007 WL 894473 (S.D. Ohio 2007). There the court denied the plaintiff's motion to sever and stay antitrust claims from the infringement claims given the overlap between the patent claims and the sham litigation and Walker Process fraud issues.8 Id. at *8. For similar reasons, the Court should refuse to bifurcate the claims at issue here. First, as in Synopsys, the parties here are represented by experienced counsel that would help avoid jury confusion. Second, it would be far more convenient to have both the Court and/or the jury consider any evidence related to Accenture's infringement claims at the same time as it considers the evidence regarding Guidewire's unfair competition claims. The evidentiary presentation in one case would substantially overlap the evidentiary presentation in the other because both parties' claims require fact-finding related to issues of infringement, validity, and inequitable conduct. And both juries would have to be educated in the same underlying technology. Third, Guidewire would be prejudiced by any delay. Accenture's baseless lawsuit has interfered and continues to interfere with Guidewire's business; therefore Guidewire has every interest in expediting the adjudication of all existing claims. At most, the Court should allow Accenture to renew its motion to bifurcate trial at a later date, while denying Accenture's motion to bifurcate discovery. Other courts have done just that

8

In its brief, Accenture conflates these two different types of claims. See Motion to Dismiss (D.I. 21) at 11. Stripping a patentee's Noerr-Pennington immunity on the basis that the infringement action was a "sham" is distinct from stripping immunity based on the type of fraud deemed actionable in Walker Process. While conduct supporting a Walker Process type claim may also support a sham litigation claim, it need not. Similarly, the requirements of finding a sham litigation need not necessarily be satisfied to find a Walker Process type fraud. Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1071 (Fed. Cir.), cert. denied, 119 S. Ct. 178 (1998).

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in a similar situation. In Netflix, Inc. v. Blockbuster, Inc., for example, the court refused to stay discovery on the antitrust counterclaims because they presented overlapping factual issues with the patent infringement claim. 2006 WL 2458717, *10 (N.D. Cal. Aug. 22, 2006). For purposes of pretrial proceedings, the court ordered the claims to proceed in tandem. Id. Although the court also denied the patentee's request to bifurcate trial at the outset, it did so without prejudice to either side to seek bifurcation at the pretrial conference. Id. The court also denied a motion to bifurcate discovery in Performance Aftermarket Parts Group, Ltd. v. TI Group Automotive Systems, Inc., 2006 WL 2850061, *1­*2 (S.D. Tex. 2006). In so doing, the court recognized that bifurcation would seriously prejudice the prompt resolution of the antitrust and business disparagement claims. Id. at *1. That was particularly true where, as here, it was far from clear that the patentee would prevail on its patent infringement claims. Id. at *2. In addition, the court found that, even if "the fact issues on the patent infringement claims are distinct from the fact issues on the antitrust and business disparagement claims . . . many of the persons to be deposed and otherwise provide discovery would be the same for all claims." Id. The court therefore concluded, "it would be an inconvenience as well as a waste of lawyers' and witnesses' time and other resources to require the same witnesses to be deposed more than once." Id. The court noted that the parties could move for a bifurcated trial at a later time. Id. As in Netflix and Performance Aftermarket, there is no reason to bifurcate and stay discovery on Guidewire's counterclaims. Both Accenture's and Guidewire's claims require factfinding related to issues of infringement, validity, and inequitable conduct. To avoid wasting lawyers' and witnesses' time, discovery on those claims should proceed in tandem. Furthermore, bifurcating discovery is likely to lead to more, not less, motion practice. If the Court stays discovery related to Guidewire's counterclaims, disputes are bound to arise as to what

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information relates to the patent infringement and what information relates to unfair competition. For example, Accenture may refuse to produce evidence regarding statements to Guidewire customers or potential customers, arguing that such statement relate to the unfair competition counterclaims. But such statements may also provide evidence regarding Accenture's

interpretation of claim scope, and would therefore be relevant to the underlying infringement action. Ultimately, the Court would likely be called upon to settle such issues. Recognizing this avoidable predicament, courts in similar situations have refused to bifurcate discovery. See, e.g., Ecriz Corp. v. Exabyte Corp., 191 F.R.D. 611, 614 (D. Colo. 2000). If one or both parties subsequently conclude that trial should be bifurcated, the parties can so petition the Court at a later date. IV. CONCLUSION For the reasons stated above, Guidewire respectfully requests that the Court deny Accenture's motion to dismiss Guidewire's unfair competition counterclaims, and also deny Accenture's provisional request to bifurcate those counterclaims from Accenture's claims.

MORRIS, NICHOLS, ARSHT & TUNNELL LLP

/s/ Julia Heaney (#3052) Jack B. Blumenfeld (#1014) Julia Heaney (#3052) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 (302) 658-9200 [email protected] [email protected] Attorneys for Defendant GUIDEWIRE SOFTWARE, INC.

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OF COUNSEL: Daralyn J. Durie Clement S. Roberts Matthias Kamber JuNelle Harris KEKER & VAN NEST LLP 710 Sansome Street San Francisco, CA 94111 Dated: April 21, 2008
2300057

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CERTIFICATE OF SERVICE I hereby certify that on April 21, 2008 I electronically filed the foregoing with the Clerk of the Court using CM/ECF, which will send notification of such filing to:. Richard L. Horwitz David E. Moore POTTER ANDERSON & CORROON LLP I further certify that I caused to be served copies of the foregoing document on April 21, 2008 upon the following in the manner indicated: BY ELECTRONIC MAIL Richard L. Horwitz, Esquire David E. Moore, Esquire POTTER ANDERSON & CORROON LLP 1313 North Market Street Wilmington, DE 19801 James Pooley, Esquire L. Scott Oliver, Esquire MORRISON & FOERSTER LLP 755 Page Mill Road Palo Alto, CA 94304

/s/ Julia Heaney Julia Heaney (#3052)