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Inequitable Conduct Ruling Gives Pleading Rules Real Teeth


Written by Chris Mammen
Posted: August 6, 2009 @ 2:49 am
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Dr. Chris Mammen

On August 4, 2009, the Federal Circuit decided Exergen Corp. v. Wal-Mart Stores, Inc., et al., Case Nos. 2006-1491, 2007-1180 (Fed. Cir. 2009). In a post to this blog several months ago, I argued that Congress, the Supreme Court or the Federal Circuit should reform the doctrine of inequitable conduct this year, to rein in the resurgent plague of inequitable conduct claims in patent infringement cases. The Federal Circuit’s ruling in this case may do more to restrain use of the doctrine than any of the substantive reforms under discussion. The case starts with what should be seen as the unremarkable proposition that Federal Rule of Civil 9(b) applies to the inequitable conduct defense, meaning that it must be pled with particularity. This proposition has long been followed in the district courts, and was endorsed by the Federal Circuit in Central Admixture v. Adv. Cardiac Solutions, 482 F.3d 1347, 1356-1357 (Fed. Cir. 2007). But, it would not be an understatement to say, Exergen gives the Rule 9(b) requirement real teeth.

The case eases into its holdings benignly enough: “A pleading that simply avers the substantive elements of inequitable conduct, without setting forth the particularized factual bases for the allegation, does not satisfy Rule 9(b).” (Slip Op. at 21). Then the ruling starts to get interesting, if still fairly general: “We hold that in pleading inequitable conduct cases, Rule 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission before the PTO.” (Slip Op. at 22). And on the issue of intent: “Although ‘knowledge’ and ‘intent’ may be averred generally, our precedent, like that of several regional circuits, requires that the pleadings allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind.” (Id.).

A couple of pages later, the court elaborates on what it meant by “the requisite state of mind.” The pleading must include sufficient factual allegations to permit a reasonable inference “that a specific individual (1) knew of the withheld information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO.” (Slip Op. at 24-25).

Then things start to get interesting. In footnote 5, the court notes that “this [reasonable] inference must be ‘the single most reasonable inference able to be drawn from the evidence.” (Slip Op. at 25 n.5 (citing Star Scientific, emphasis in Exergen)).

But the magnitude of the pleading standard announced in Exergen does not really become apparent until the court applies these general standards to the actual pleading in that case. The court found several deficiencies in the pleading:

  • First, the pleading must name the specific individuals who are alleged to have committed inequitable conduct. This is the “who.” However, in an acknowledgement of the reputational harm that can be wrought by such specific naming of names, the court noted, “a district court may require that filings be made under seal, require redaction of individuals’ names, and impose other safeguards” (Slip Op. at 25-26 and n.6) This acknowledgement will be viewed by some as a welcome shift from the approach the Federal Circuit took in Nisus Corp. v. Perma-Chink Systems, Inc., 497 F.3d 1316 (Fed. Cir. 2007), in which it held that “The alleged ‘fraud,’ that [the prosecuting attorney] committed inequitable conduct, does not aggrieve him in the sense of inflicting a legal injury” and therefore he had no standing to challenge the inequitable conduct ruling.
  • Second, the pleading must identify the specific limitations in the specific claims that are affected by the alleged inequitable conduct – and must also identify the specific passages in the withheld reference that are material. In other words, the pleading requires pincites of both the patent claim and the withheld reference. (Slip Op. at 26). This is the “what” and “where.”
  • Third, to establish non-cumulativeness, the pleading must “identify the particular claim limitations, or combination of claim limitations, that are supposedly absent from the information of record.” (Slip Op. at 26). In other words, the pleading must establish that the allegedly material pincite is not to be found in the prior art of record. This is the “how” and “why.”
  • Finally, it is no longer permissible to allege merely that “on information and belief,” the information was withheld with intent to deceive. The pleading must include factual allegations that a specific person knew of the specific information in a withheld reference. “Thus, one cannot assume that an individual, who generally knew that a reference existed, also knew of specific material information contained in that reference.” (Slip Op. at 27 (emphasis in original)). And the pleading must also allege facts to plausibly suggest a “’deliberate decision to withhold a known material reference’ or to make a knowingly false misrepresentation.” (Slip Op. at 29).

Wow. Anyone who has ever seen an inequitable conduct pleading that goes into that level of detail, please raise your hand.

About the Author

With over a decade of experience as a patent litigator in San Francisco and Silicon Valley law firms, Dr. Christian E. Mammen maintains a solo practice in Berkeley, California. Dr. Mammen has recently been appointed as a Resident Scholar at UC Hastings for the Fall 2009 semester. His article, “Controlling the ‘Plague’: Reforming the Doctrine of Inequitable Conduct,” is forthcoming in the Fall 2009 issue of the Berkeley Technology Law Journal. A pre-publication version of the article is available on SSRN.


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7 comments
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  1. This was trying to add a defense and counterclaim of inequitable conduct to existing litigation, presumably after there had been a discovery opportunity. Before any discovery is possible (as in an initial answer to a complant) it would be impossible to provide such exact details of “who, where what and when.”

  2. Never say impossible – let’s say extremely time-consuming and difficult. A set of facts may include the failure of the attorney for an owner of a patent-in-suit to cross-cite in a copending US application a category X reference uncovered in a corresonding PCT patent application where the US attorney and PCT agent are one in the same. One would be able to calculate the who, where, what and when but only after publc discovery from the WO published application with International Search Report attached.

  3. So, in this case, even after discovery, the IC charges were so poorly supported that they were severly thumped.

    The lesson here, even given Paul’s point about when the details may or may not be known, is that the days of simply throwing about unfounded IC charges are at an end.

  4. Noise-

    I agree with you. I think this case is a significant step forward. The days of rampant and unsupported inequitable conduct charges are (or should be) over.

    The fact that a pleading could not include such information prior to discovery is the exact point. Inequitable conduct is and always has been a fraud theory. It was never required to be plead with specificity like fraud though, but rather thrown out as a common alternative defense. If you have no evidence or knowledge of fraud you should not be able to allege it, period. Pretty simple concept that every other area of law has followed exclusively. Nice to see patent law and the Federal Circuit catching up with the times.

    -Gene

  5. Chris,

    Good to hear from you again. I do hope that Exergen is the coming trend from the Federal Circuit on how “particularly” inequitable conduct must plead and must also be factually proved, especially with regard to the “intent” prong. We might not even need legislation to remove this “plague.” And if the Federal Circuit would add some FRCP 11 and 35 USC 285 bite when inequitable conduct is plead “friviously” the “plague” might even go back in the bottle where it belongs.

  6. “Thus, one cannot assume that an individual, who generally knew that a reference existed, also knew of specific material information contained in that reference.” (Slip Op. at 27 (emphasis in original))”

    Suppose that a reference was cited in a PCT application as teaching subject matter of a claim, and the applicant cancelled that claim at the PCT stage. Then the Applicant adds the claim back at the US National stage but does not submit the reference in question, and the claim is allowed. How much more of a smoking gun is needed?

  7. broje,

    I’m not sure your hypothetical could exist in reality as the US national stage application flowing from the PCT application would have, of record, the PCT reference and subsequent applicant actions. The applicant would be estopped from reintroducing claims already withdrawn for patentability reasons.

    No gun needed as the amendment is DOA without bullits.