American Fireglass v. Moderustic Inc., 3:15-cv-02866

American Fireglass (Plaintiff) manufactures and sells tempered fireglass; Moderustic (Defendant) is a competitor that holds patents relating to processes for producing such glass (notably the ’505 patent).
Moderustic obtained U.S. Patent No. 8,419,505 (’505) after reexamination narrowed its claims; Moderustic has asserted the ’505 patent and allegedly threatened suits against sellers, including Plaintiff’s dealers.
Plaintiff filed a declaratory judgment action (invalidity/non‑infringement) in Dec. 2015; Moderustic filed counterclaims in Aug. 2016 for patent infringement and Lanham Act/California unfair competition claims based on allegedly false statements by Plaintiff.
In September 2016 Plaintiff answered and asserted counterclaims in reply (labelled “counter‑counterclaims”) alleging Moderustic made false advertising/unfair competition statements by threatening dealers and publicizing patent rights.
Moderustic moved to strike Plaintiff’s counterclaims in reply, arguing they are not permitted because they are not compulsory counterclaims arising from the same transaction or occurrence.
The district court denied the motion, finding Plaintiff’s Lanham Act claims in reply are compulsory because both parties’ false advertising claims depend on the same core operative fact—whether Plaintiff infringes the ’505 patent.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether counterclaims in reply are permitted (i.e., compulsory)	Plaintiff: counterclaims arise from same aggregate set of operative facts (the ’505 patent/infringement) and thus are compulsory under Rule 13(a) and Ninth Circuit precedent	Moderustic: the facts underlying its counterclaims (Plaintiff’s public statements) differ from Plaintiff’s reply claims (Moderustic’s threats to dealers); thus they are separate transactions and not compulsory	Denied motion to strike; court held Plaintiff’s reply counterclaims are compulsory because both sides’ Lanham Act claims share the same core operative fact—whether Plaintiff infringes the ’505 patent

Mattel, Inc. v. MGA Entm’t, Inc., 705 F.3d 1108 (9th Cir. 2013) (liberal test for compulsory counterclaims focuses on shared operative facts rather than legal theory)
In re Pegasus Gold Corp., 394 F.3d 1189 (9th Cir. 2005) (adopts the "logical relationship" test for compulsory counterclaims)
McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007) (procedural law governing counterclaims in patent cases governed by regional circuit law)
Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir. 1997) (elements of a Lanham Act false advertising claim)
Moore v. N.Y. Cotton Exch., 270 U.S. 593 (U.S. 1926) (transaction test for compulsory counterclaims)
Zenith Elecs. Corp. v. Exzec, Inc., 182 F.3d 1340 (Fed. Cir. 1999) (bad faith requirement for Lanham Act statements involving patent infringement)
Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242 (9th Cir. 1990) (Lanham Act elements authority)
Metal Lite, Inc. v. Brady Const. Innovations, Inc., 558 F. Supp. 2d 1084 (C.D. Cal. 2007) (literal truth can still mislead; patent‑infringement statements require bad faith)