In its recent Therasense opinion, the Federal Circuit "tightened the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public," because "the inequitable conduct doctrine has plagued not only the courts but the entire patent system." Therasense, Inc. v. Becton-Dickinson & Co., 649 F.3d 1276, 1289-90 (Fed. Cir. 2011) (en banc). This tightened standard severed the "sliding-scale" link between intent and materiality – intent to deceive cannot be inferred from materiality alone – established that "but-for" materiality is generally required, and clarified that clear and convincing evidence of deceptive intent means that a specific intent to deceive the PTO must be "the single most reasonable inference able to be drawn from the evidence." Id. at 1290-91. The Therasense opinion altered the substantive elements of inequitable conduct, and has also led to a flurry of challenges to inequitable conduct defenses and counterclaims at the pleading stage. A number of recent opinions have discussed whether and how Therasense changed the standards for pleading, not just proving, inequitable conduct.
Under Federal Circuit law, inequitable conduct is viewed as a type of fraud subject to the heightened pleading requirements of Rule 9(b):
Moreover, although 'knowledge' and 'intent' may be averred generally, a pleading of inequitable conduct under Rule 9(b) must include sufficient allegations of underlying facts from which a court may reasonably infer that a specific individual (1) knew of the withheld material information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO.
Exergen Corp. v. Wal-Mart Stores, 575 F.3d 1312, 1328-29 (Fed. Cir. 2009). The substantive changes to the merits determination of inequitable conduct in Therasense do require a corresponding change in pleadings so that, for example, the facts alleged support a finding of but-for materiality if taken as true, and do not base intent solely on materiality. See, e.g., Eon Corp. IP Holdings, LLC v. T-Mobile USA, Inc., et al., No. 6:10-CV-379-LED-JDL, slip op. at 6 (E.D. Tex. Dec. 13, 2011).
Some patent-holders have argued that Therasense implicitly raised the Exergen pleading standard so that a "reasonable inference" is no longer enough and that the facts plead in support of inequitable conduct must, if taken as true, require a finding of deceptive intent (i.e. it must be the "single most reasonable inference"). E.g., id. at 5-6. The lower courts have, however, rejected this argument as "collapsing the distinction between pleading determinations and determinations on the merits." Id. at 7.1 Further, "no Federal Circuit decision, before Therasense or after Therasense, has stated that facts in a pleading for inequitable conduct must meet the clear and convincing standard." Human Genome Sciences, Inc. v. Genentech, Inc. et al., Case No. 2:11-cv-6519-MRP (JEMx), Order at 5 (C.D. Cal. Dec. 9, 2011) (Pfaelzer, J.). In fact, a post-Therasense opinion by the Federal Circuit cited Exergen for the proposition that at the pleading stage, inequitable conduct requires only a reasonable inference of deceptive intent. See Delano Farms Co. v. California Table Grapes Comm'n, 655 F.3d 1337, 1350 (Fed. Cir. 2011). This standard is consistent with the Supreme Court's mandate that "to survive a motion to dismiss, the facts alleged must state a claim that is 'plausible' as opposed to a claim that is merely 'possible'," see Human Genome Sciences, Order at 6 (quoting Ashcroft v. Iqbal, et al., 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009)); it does not require an accused infringer prove their inequitable conduct claim in the pleading.
In sum, it is not surprising that patent-holders would argue for a heightened pleading standard in the wake of Therasense, but the courts have rebuffed those efforts and taken the view that "it would be inappropriate at the motion to dismiss stage to hold that [a party] cannot plead inequitable conduct based on a case that addressed the heightened standards not for pleading but for proving the elements of such a claim." Oracle Corp. v. DrugLogic, Inc., No. C 11-00910 JCS, 2011 WL 3443889, at *13 (N.D. Cal. Aug. 8, 2011).
Footnote
1. See also Pollin Patent Licensing, LLC v. Capital One Auto Fin., Inc., No 1:10-cv-07420, 2011 WL 5118891, at *3 (N.D. Ill. Oct. 25, 2011) (only a reasonable inference of deceptive intent required at the pleading stage);Tivo Inc. v. Verizon Commc'ns, No. 2:09-cv-257, slip op. at 5 (E.D. Tex. Sept. 7, 2011) (ruling that Therasense did not change Exergen's pleading standards); Pfizer, Inc. v. Teva Pharm. USA, Inc. Civil No. 2:10-cv-128, 2011 WL 3563112, at *16 (E.D. Va. Aug. 12, 2011) ("Exergen still states the correct elements required for pleading inequitable conduct after Therasense."); Jersey Asparagus Farms, Inc. v. Rutgers Univ., Civil No. 10-2849 (FLW), 2011 WL 2148631, at *14 (D. N.J. May 31, 2011) ("Therasense does not address the initial pleading stages..." ).
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