United States: Resistance Is ‘Futile’ (Unless You Sufficiently Plead Issues Of Material Facts)

Last Updated: March 21 2014
Article by Monte Cooper

Motion Opposing Amendment of Answer for Futility Denied, Cypress Semiconductor Corp. v. GSI Tech., Inc., Case No. 13-cv-02013-JST (Judge Tigar)

Undoubtedly, for many companies, patent litigation can seem like a five year mission to explore strange new theories and strange new patents.  In a recent patent infringement suit, defendant GSI  "boldly" moved to amend its one-year-old answer in order to add various new affirmative defenses, including one raising the allegation that a reexamined patent was unenforceable due to inequitable conduct.  The plaintiff, Cypress, opposed the motion to the extent it would introduce the defense of inequitable conduct into the litigation.  Cypress claimed that GSI's amendment would be futile because GSI could not satisfy the two requirements of "but-for" materiality and scienter necessary to prove inequitable conduct under the Federal Circuit's controlling precedent of Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1291 (Fed. Cir. 2011) (en banc).  Judge Tigar disagreed.

The dispute regarding futility centered on GSI's argument that during the prosecution of one of the patents-in-suit, Cypress had knowingly failed to disclose prior art relevant to the broadest independent claim.  GSI claimed that this allegation satisfied the "but for" materiality requirement necessary to establish inequitable conduct.  In opposition, Cyprus argued that during reexamination of the patent, the examiner considered the deposition transcript of GSI's expert discussing the prior art, and yet nevertheless reissued the patent. Therefore, Cypress argued, but-for materiality could not ever be met, and leave to amend should be denied for futility.  However, GSI contended that Cypress was focusing on the wrong temporal point of prosecution.  GSI argued that the inequitable conduct defense related to the original issuance of claim 1, not the issuance of the later-amended claim 1 following reexamination.  Further, GSI contended that even if the PTO's process of reviewing the claim as amended during reexamination was relevant, the deposition transcript was insufficient to adequately disclose the prior art at the heart of the inequitable conduct defense.  Thus, it argued, its new defense was not futile.

Judge Tigar sided with GSI.  He held that Cypress did not meet the futility standard of showing that "no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient . . . defense."  Judge Tigar instead found that Cypress's first argument against amendment hinged on the assumption that the examiner did not find the prior art disclosed during reexamination to be relevant.  However, he agreed with GSI that the reexamination process would only be relevant insofar as the same claims and limitations were examined.  This was not the case.  During reexamination, the examiner was considering claim 1 with an additional limitation that had been added by the patentee during that process.  Judge Tigar thus found it was possible the Examiner would not have allowed the original broader claim 1 in the original prosecution of the patent had it been aware of the reexamination prior art.

GSI also argued that to the extent the deposition transcript was relevant, Cypress did not disclose where in the 1,000 pages the references were located, and figures from the actual prior art were not in the transcript.  Cypress separately argued that the deposition testimony covered the prior art references, so any further disclosure would have been cumulative.  Judge Tigar held that the question of whether undisclosed prior art is cumulative is a factual issue that should generally not be resolved at the pleading stage.  Only if there is no genuine issue of material fact is a ruling on the pleadings appropriate.  Here, there was an issue.

Finally, turning to the scienter requirement, Cypress argued that while the knowledge prong was met, GSI still failed adequately to plead intent, and instead was merely drawing inferences.  However, GSI pointed to specific affirmative misrepresentations made to the USPTO to argue that intent to deceive was the single most reasonable inference.  Judge Tigar held GSI need only plead sufficient allegations of underlying facts from which a court may reasonably infer that the specific intent to deceive is the single most reasonable inference.  GSI's factual allegations of Cypress's affirmative misrepresentations regarding known prior art, coupled with Cypress neglecting to argue other reasonable inferences, led Judge Tigar to hold GSI met its burden of sufficiently pleading scienter.  Thus, Judge Tigar granted GSI's motion to amend, and essentially issued the command of "Make it so!"

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