Baker Botts L.L.P.
Properly filing inequitable conduct allegations is a challenging task. However, it can be overcome with early diligence and attention to details in your pleading. Therasense, Inc., v. Becton, Dickenson and Co., (649 F.3d 127) (Fed. Cir. Judge Lund’s finding in Rieth Riley regarding the proper standard to be met when pleading intent is of great interest. ArrMaz Products, Inc. (ArrMaz) sued Rieth-Riley Construction Co., Inc. (Rieth-Riley) for infringement of two patents related to surface-paving technologies. Rieth-Riley asserted counterclaims, including its Third, Fourth, and Fifth Counterclaims related to inequitable conduct before the USPTO.2 Judge Lund recently granted ArrMaz’s Motion for Partial Judgment on the Pleadings and dismissing Rieth-Riley’s Third, Fourth, and Fifth Counterclaims, under the following framework.
LEGAL FRAMEWORK
Judgment on the pleadings is dictated by Fed. R. Civ. R. Civ. P. 12(b)(6), which analyzes whether the claim is sufficiently plead, and the Court must view the facts alleged in the light most favorable to the non-moving party.4 To survive a Rule 12(c) motion, a counterclaim must “plead
factual content that allows the court to draw the reasonable inference that the plaintiff is liable for the misconduct alleged.”5[]Claims alleging inequitable conduct, similar to fraud or mistake claims, “must be pled with particularity,” and are governed by the higher standard set forth in Rule 9.6 The accused infringer has the burden to set forth by clear and convincing evidence that (1) the reference was “material” to the prosecution of the Patent and (2) the applicant had “specific intent” to deceive the PTO.7
Materiality
. Materiality. Judge Lund explained that the Federal Circuit requires the “but-for” materiality to establish inequitable behavior. Id. Id. Prior art is “but-for” material if it would have been denied a claim if the PTO had known about the undisclosed information. Rieth-Riley must allege specific facts about the “who, what and when, where and how” of the material misrepresentation of prior art during prosecution before PTO. This includes (1) the identity of the specific person who was required to disclose during prosecution. “Who both known of the material and deliberately misrepresented it,” (2) “what claims and which limitations in these claims the withheld references relate to,” and (3) “where” . . to explain both ‘why’ the withheld information is material and not cumulative, and ‘how’ an examiner would have used this information in assessing the Patentability of the claims.”10Specific Intent.
To establish specific intent, the “accused infringer must demonstrate that the applicant knew of the reference, knew that it was material, and deliberately withheld it.” Order at 4.11 Direct evidence of deception is rare, thus Courts allow indirect or circumstantial evidence. Id. The answer must plead sufficient facts “from which the court may reasonably infer that a specific individual” had knowledge of the material reference and deliberately withheld it with the intent to deceive the PTO.” Id.12THIRD COUNTERCLAIM
For the Third Counterclaim, Judge Lund focused on the materiality and specificity requirements, ultimately dismissing this counterclaim for failing to meet this standard.
MATERIALITY
Who and What. Judge Lund found that Rieth Riley adequately pleaded the “who” in identifying the prosecuting lawyer, the inventors who knew material information and intentionally withheld or misrepresented it, and the “what” in pointing out certain elements of ‘941 patent. Judge Lund, however, found that Rieth Riley failed to adequately plead the “where,” the “why,” and the “how” required to meet the element of materiality. Order at 5-6.
Where. Rieth Riley claimed that prior art references which purportedly disclosed or anticipated at least claim 1 in the ‘941 Patent were withheld or misrepresented by prosecution. Judge Lund, however, found that the “where”, was not sufficiently pled as Rieth Riley failed to include any specific material information regarding these prior art references because Rieth Riley only “refers generally to these references and only uses conclusory statement to support its accusations.” Order at 6-8.
Why? Similarly Judge Lund found that the “why” or “how” wasn’t sufficiently pleaded because Rieth Riley “doesn’t provide anything other than conclusory statement that these references are not cumulative.” Order 8-10. Rieth-Riley argued, for example, that (1) the NovaChip Agreement “teaches that various Spray Pavers, like the RoadTec SP-200 spray paver, are ‘the Equipment for Applying’ the NovaChip Technology allegedly covered by ‘941 Patent”, and (2) that the Examiner cited prior art references when denying the 941 Patent application in the initial rejection, “demonstrating their Material, Non-Cumulative Nature.” Id. However, Judge Lund found that Rieth-Riley failed to “explain why the NovaChip Agreement is not cumulative or how the PTO would examine it differently to assess Patentability.” Further, the Examiner actually reviewed and consider these disclosed prior art references during prosecution and “the Examiner relied on its assessment of the NovaChip Agreement to ultimately issue the ‘941 Patent.” Id.
SPECIFICITYJudge Lund also found that Rieth-Riley’s pleading of deceptive intent failed to meet the low “reasonable inference” standard.13 Specifically, the Court granted Plaintiff’s motion for judgment on the pleadings with regard to Defendant’s inequitable conduct counterclaim and first determined the appropriate standard to apply regarding allegations of specific intent. “Plaintiff claims that to survive a Rule 12c) motion, a pleading must show that the individual’s deceptive intention in withholding prior arts is the’most reasonable inference’ drawn from the evidence. On the other hand Defendant argues ‘inequitable behavior at the pleadings stage’ only requires facts that support a reasonable inference of specific intent to mislead–a much lower threshold. The Defendant argues further that Plaintiff’s “most reasonable inference” standard is a evidentiary standard and should not be applied at the stage of pleading. The pleading stage requires only the lower standard, ‘a reasonable assumption’. The Court agrees and applies the lower standard. “14
Rieth Riley’s pleading failed to meet the Exergen Standard, which allows pleading “information and belief,” but still requires that the pleading set forth “
the specific facts on which the belief is reasonable based.” Order, at 10. Rieth Riley alleged, for example, that Ms. Wilkinson must have been aware of Road Science LLC’s other offerings, and aware of references in Road Science brochures relating to the ’941 Patent, because she prosecuted it on behalf of Road Science LLC (“Road Science”). Order at 12. She was therefore “aware of [the importance of] the
” because she misrepresented those references to the PTO, which Judge Lund found circular and conclusory. Order at 12. Ultimately, Judge Lund found Rieth-Riley “fail[set] to allege sufficient facts for the Court to make a reasonable inference of specific intent to deceive,” and thus does not “sufficiently plead inequitable conduct.”
FOURTH COUNTERCLAIM[prior art]Rieth-Riley alleged in its Fourth Counterclaim that during the prosecution of the ‘843 Patent, Ms. Wilkinson fraudulently submitted declarations from the inventors of the ‘941 Patent to state that Mr. Barnat, a co-inventor of the ‘843 Patent, also was an inventor of the ‘941 Patent in order to overcome a double Patenting rejection. Order at 13-14. ArrMaz claimed the omission of Mr. Barnat from the ‘941 Patent was an inadvertent mistake.[ed]Judge Lund ultimately dismissed the Fourth Counterclaim because Rieth-Riley’s pleadings did not include sufficient facts to justify a reasonable inference that 1) Mr. Barnat was not a properly named inventor of the ‘941 Patent, 2) that at least Ms. Wilkinson or any one of the inventors knew that Mr. Barnat was not a properly named inventor of the ‘941 Patent, and 3) that this person also intended to deceive the Patent office during the prosecution. Order at 16. Rieth-Riley relied solely on the fact that Ms. Wilkinson added Mr. Barnat as an inventor of the ‘941 Patent after the ‘843 Patent double Patenting rejection, which was insufficient.
FIFTH COUNTERCLAIM
Rieth-Riley alleged an antitrust claim in its Fifth Counterclaim, claiming ArrMaz “has engaged in a pattern of anticompetitive conduct by fraudulently procuring and then attempting to enforce
, which it knew were invalid . . . to illegally acquire monopoly power in Indiana and U.S. markets for bonded-paving technology.” Order at 18-19.
Otherwise known as a Walker Process claim, the antitrust-plaintiff must show two things to prevail: (1) the “antitrust-defendant obtained the Patent by knowing and willful fraud on the Patent office and maintained and enforced the Patent with knowledge of the fraudulent procurement,” and (2) establish a Sherman Act monopolization claim subject to the Rule 8(a)(2) pleading standard.16 The first element must be plead with particularity under Rule 9(b).17
To establish a Sherman Act monopolization claim, the following elements are required: “(1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly power.” TransWeb, 821 F.3d at 1306 (citation omitted). The courts consider “the relevant market” and the defendant’s capability to reduce or destroy competition on the market when determining whether element (3) is dangerous. Judge Lund also found that Rieth-Riley failed to plead the first element as it relied on conclusory statements in order to allege Plaintiffs’ anticompetitive behavior. It also failed to include sufficient facts in order to establish a market of “bonded paving technologies.” Order at 21. Thus, Judge Lund dismissed the Fifth Counterclaim.[the asserted Patents]CONCLUSION
Judge Lund dismissed all three counterclaims for the same underlying reason: failure to adequately plead sufficient facts with particularity. As a tip, make sure your pleadings contain enough factual detail to make the allegation. Avoid conclusory statements. It is acceptable to plead “on information and believe” as long as the underlying facts are adequately pleaded. 2024), D.I. 59 (“Order”)
In Rieth-Riley’s Third Counterclaim, Rieth claims that Plaintiff obtained the ‘941 Patent after Plaintiff made affirmative false statements or omissions in relation to prior art references to the PTO, and that Plaintiff obtained the ‘843 Patent after listing an individual incorrectly as an inventor in an earlier ‘941 Patent, to avoid a Double Patenting rejection. Rieth Riley claims in its Fourth Counterclaim that “at least” one individual was involved with the prosecution of ‘843 patent. . . Intentionally and deceptively fail
to disclose information that is material to the Patentability ‘843 Patent. . . .” Order at 13. In its Fifth Counterclaim Rieth Riley alleges that ArrMaz has engaged in a pattern anticompetitive behavior by fraudulently procuring [d] and then attempting enforce it, which they knew was invalid. . . Order at 18.
– See Fed. R. Civ. P. 12(c); Supreme Laundry Serv., LLC v. Hartford Cas. Ins. Co., 521 F.3d 743, 746 (7th Cir. Co., 521 F.3d 743, 746 (7th Cir. 1990); N. Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 164 F.3d 452, 7th Cir. Adams v. City of Indianapolis 742 F.3d 728 (7th Circuit. 2014) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
Fed. R. Civ. P. 9(b); Exergen Corp. Cir. Cir. Cir. Cir. Id.
[1] Id. At 1290 (emphasis in original).
[2] citing Therasense 649 F.3d, at 1290.[ed] citing Delano Farms Co. v. California Table Grape Comm’n 655 F.3d, 1337, 1350, (Fed. Cir. Cir. Judge Lund agreed that the “pleading stage” only requires a “reasonable inference.” Id.[the asserted Patents] Id.
[3] quoting Exergen, citing Exergen, citing Exergen, citing Exergen, quoting Exergen, quoting Exergen, quoting Exergen, quoting Exergen, citation at 1330.
[4] TransWeb, LLC v. 3M Innovative Properties Co., Cir. 2016). Walker Process Equip. v. Food Mach. & Chem. & Chem. BUS. L. 361, 398 (2014). Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 456 (2009).
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