## Facts

- Estée Lauder Inc. and affiliated cosmetics companies owned trademarks including “Estée Lauder,” “Origins,” “Clinique,” and “Prescriptives.”
- The Fragrance Counter, Inc. sold fragrances and cosmetics online and purchased banner advertising placements triggered by users’ entry of plaintiffs’ trademarked search terms on Internet portals.
- Excite, Inc., an Internet search portal, sold advertising keyed to search terms, including plaintiffs’ marks.
- Plaintiffs sued for trademark infringement, dilution, unfair competition, and false advertising based on defendants’ Internet marketing practices.
- Excite’s answer asserted, among other defenses, a tenth affirmative defense alleging “trademark misuse,” unclean hands, and unfair competition, contending plaintiffs used trademark enforcement and distribution controls to restrain lawful competition and reduce price competition.
- Plaintiffs moved under Fed. R. Civ. P. 12(f) to strike the tenth affirmative defense and sought a Fed. R. Civ. P. 26(c) protective order to block discovery into plaintiffs’ dealer relationships and distribution practices relevant to that defense.

## Issues

1. Whether the tenth affirmative defense (styled as trademark misuse/unclean hands/unfair competition) was legally insufficient and should be stricken under Fed. R. Civ. P. 12(f).
2. Whether plaintiffs showed “good cause” under Fed. R. Civ. P. 26(c) to preclude discovery directed to the tenth affirmative defense.

## Decision

- The court denied the Rule 12(f) motion to strike the tenth affirmative defense.
- The court denied the Rule 26(c) motion for a protective order.
- Excite was permitted to pursue discovery concerning plaintiffs’ distribution practices and relationships with authorized dealers to the extent relevant to the equitable defense.

## Legal Principles

- Motions to strike affirmative defenses under Rule 12(f) for legal insufficiency are disfavored and should be granted only when it is certain the plaintiff would prevail regardless of any facts that could be proved to support the defense.
- On a Rule 12(f) motion, the court accepts as true the factual allegations in the challenged pleading and limits the inquiry to legal sufficiency.
- An equitable defense framed as unclean hands (including alleged misuse of trademark enforcement to restrain competition) is not facially barred at the pleading stage if it could affect the equities of relief.
- A protective order under Rule 26(c) requires the movant to show “good cause” to prevent discovery on grounds such as undue burden or oppression; where an affirmative defense remains in the case, discovery relevant to it is generally permitted absent a specific showing of good cause.

## Conclusion

The court refused to eliminate Excite’s equitable defense at the pleading stage and, because plaintiffs did not show good cause to limit discovery, allowed defendants to seek discovery into plaintiffs’ distribution and enforcement practices relevant to the unclean-hands theory.


Estée Lauder, Inc. v. Fragrance Counter, Inc., 189 F.R.D. 269 (S.D.N.Y. 1999)