Properly pleading inequitable conduct claims is a challenge, a challenge that can be met with early due diligence and attention to detail in your pleading. The leading case that set forth the legal framework for inequitable conduct, Therasense, Inc. v. Becton, Dickenson and Co., 649 F.3d 127 (Fed. Cir. 2011), has since been clarified by Judge Lund in a recent case, ArrMaz Products, Inc. v. Rieth-Riley Construction Co. Inc., 3:23-CV-778-GSL-MGG (N.D. Ind. 2024).1 Of great interest in Rieth-Riley is Judge Lund's finding regarding the proper standard to be met when pleading intent, i.e., that "the pleading stage only demands the lower standard of a reasonable inference," but the whole opinion is worthy of study.
ArrMazProducts, Inc. ("ArrMaz") sued Rieth-Riley Construction Co., Inc. ("Rieth-Riley") for infringement of two Patents related to surface-paving technology. 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. P. Rule 12(c), which states a party may move for judgment on the pleadings after the complaint and answer have been filed.3 Rule 12(c) motions are subject to the same standard as a motion to dismiss under Fed 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. Judge Lund explained to satisfy the "materiality" element, the Federal Circuit requires "but-for materiality" to establish inequitable conduct. Id. at 1291. Prior art is considered "but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art." Id. Rieth-Riley, as the accused infringer, must also allege the specific factual bases for the "who, what, when, where, and how of the materialmisrepresentation or omission" of the prior art references during prosecution before the PTO.8 This includes (1) the name of the specific individual who had a duty to disclose during prosecution, "whoboth knew of the material information and deliberately withheld or misrepresented it," (2) what "claims, and which limitations in those claims, the withheld references are relevant to," and (3) "where in those references the material information is found."9 The pleading must also "identify the particular claim limitations, or combinations of claim limitations, that are supposedly absent from the information of record . . . 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."10
Specific 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.12
THIRD 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 sufficiently plead the "who" by identifying
the prosecuting attorney, the inventors, who knew of material
information and deliberately withheld or misrepresented the
information, and the "what" by pointing to certain
elements of the '941 Patent. However, Judge Lund found that
Rieth-Riley failed to sufficiently plead the "where,"
"why," and "how" necessary to meet the
materiality element. Order at 5-6.
Where. Rieth-Riley claimed that several prior art references, which purportedly disclose or anticipate at least claim 1 of the '941 Patent, were withheld or misrepresented during prosecution. However, Judge Lund found that the "where" was not sufficiently pled because Rieth-Riley failed to include specific material information about these prior art references in its Answer because Rieth-Riley only "refers to these references generally and only uses conclusory statements to support its allegations." Order at 6-8.
Why and How. Similarly, Judge Lund found the "why" and "how" was not sufficiently plead because Rieth-Riley "doesn't provide anything beyond conclusory statements that these references are material and not cumulative." Order at 8-10. For example, Rieth-Riley argued that (1) one prior art reference, 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 the '941 Patent" and (2) the Examiner cited other prior art references in the initial denial of the '941 Patent application, "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.
SPECIFICITY
Judge 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 argues that, to survive a Rule
12(c) motion, the pleading must demonstrate that the
individual's deceptive intent in withholding prior art is
'the most reasonable inference drawn from the
evidence.' On the other hand, Defendant argues that
'inequitable conduct at the pleading stage only requires facts
supporting a reasonable inference' of specific intent
to deceive—a lower threshold. Defendant further argues that
Plaintiff's 'most reasonable inference'
standard is an evidentiary standard, not to be applied at the
pleading stage. Instead, the pleading stage only demands the lower
standard of 'a reasonable inference.' The Court
agrees with Defendant and applies this lower
standard."14
Rieth Riley's pleading also failed to meet the Exergen standard, which allows pleading "information and belief," but still requires the pleading to "[set] forth the specific facts upon which the belief is reasonably based." Order at 10.15
The issue with Rieth-Riley's pleading is it failed "to justify a reasonable inference that each of the six individuals actually knew of the omitted or misrepresented references, knew of specific information within each reference that was material to the claims of the '941 Patent, and actually appreciated the materiality of that information to the asserted claims." Order at 12. For example, Rieth-Riley alleged that because Ms. Wilkinson prosecuted the '941 Patent for Road Science LLC ("Road Science"), she must be aware of Road Science's other offerings and aware of references attached to Road Science's brochures related to the '941 Patent. Thus, she was "aware of the importance of the [prior art] because she made misrepresentations to the PTO about those references," which Judge Lund found to be conclusory and circular. Order at 12. Ultimately, Judge Lund found Rieth-Riley "fail[ed] 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
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.
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 [the asserted Patents], 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). In determining the dangerous probability of achieving monopoly power for element (3), the courts look at "the relevant market and the defendant's ability to lesson or destroy competition in the market." Id.
Judge Lund found that similar to the Third and Fourth Counterclaims, Rieth-Riley failed to adequately plead the first element, as it relied on the same arguments as those counterclaims. Judge Lund found Rieth-Riley also failed under the second element, as it "relie[d] on conclusory statements to allege Plaintiff's anticompetitive conduct" and also failed include sufficient facts to establish a relevant market of "bonded paving technology." Order at 21. Thus, Judge Lund dismissed the Fifth Counterclaim.
CONCLUSION
Judge Lund dismissed all three counterclaims for the same underlying reason: failure to adequately plead sufficient facts with particularity. As a practice tip, ensure your pleadings include factual detail with sufficiency to make the allegation, thereby avoiding conclusory statements. Pleading "on information and belief" and acceptable, so long as the underlying factual bases is adequately plead.
Footnotes
1 ArrMaz Products, Inc. v. Rieth-Riley Construction Co. Inc., 3:23-CV-778-GSL-MGG (N.D. Ind. 2024), D.I. 59 ("Order").
2 In its Third Counterclaim, Rieth-Riley "alleges that Plaintiff procured the '941 Patent only after Plaintiff made affirmative misrepresentations or omissions to the PTO related to prior art references, and that Plaintiff procured the '843 Patent only after improperly listing an individual as an inventor in the earlier '941 Patent to avoid a double Patenting rejection." Order at 3. In its Fourth Counterclaim, Rieth-Riley asserts that "at least one individual associated with the prosecution of the '843 Patent . . . intentionally and deceptively fail[ed] to disclose information material to the Patentability of the '843 Patent . . . ." Order at 13. Finally, in its Fifth Counterclaim, Rieth-Riley alleges ArrMaz "has engaged in a pattern of anticompetitive conduct by fraudulently procuring and then attempting to enforce [the asserted Patents], which it knew were invalid . . . to illegally acquire monopoly power in Indiana and U.S. markets for bonded-paving technology." Order at 18.
3 See Fed. R. Civ. P. 12(c); Supreme Laundry Serv., LLC v. Hartford Cas. Ins. Co., 521 F.3d 743, 746 (7th Cir. 2008).
4 See Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990); N. Ind. Gun & Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998).
5 Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
6 Fed. R. Civ. P. 9(b); Exergen Corp. v. Walmart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009) (citation omitted).
7 See Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1290-1291 (Fed. Cir. 2011).
8 Judge Lund cites Exergen, which includes the "when." However, this appears to be a typo, as both Exergen and Judge Lund's analyses instead focuses on the "why." Order at 4; Exergen Corp., 575 F.3d at 1328-30.
9 Id. at 1329.
10 Id. at 1329-30 (emphasis added).
11 citing Therasense, 649 F.3d at 1290.
12 citing Delano Farms Co. v. California Table Grape Comm'n, 655 F.3d 1337, 1350 (Fed. Cir. 2011).
13 Plaintiff argued that the "pleading must demonstrate that the individual's deceptive intent in withholding prior art is 'the most reasonable inference drawn from the evidence.' Order at 10. Judge Lund agreed with Defendant's argument that the "pleading stage only demands the lower standard of 'a reasonable inference.'" Id.
14 Id.
15 quoting Exergen, 575 F.3d at 1330.
16 TransWeb, LLC v. 3M Innovative Properties Co., 821 F.3d 1295, 1306 (Fed. Cir. 2016). See Walker Process Equip. v. Food Mach. & Chem. Corp., 382 U.S. 172, 173-174 (1965).
17 Gideon Mark & T. Leigh Anenson, Inequitable Conduct and Walker Process Claims After Therasense and the America Invents Act, 16 U. PA. J. BUS. L. 361, 398 (2014). Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438, 456 (2009).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.