Turning Up the Heat on Pleading
'Inequitable Conduct'

By Stanley F. Chalvire

September 2009

Those involved with the filing and prosecution of a patent application before the United States Patent and Trademark Office (the USPTO) are subject to a duty of candor and good faith in dealing with the USPTO. This duty, among other things, requires that such individuals disclose to the USPTO all information known to be material to patentability. An accused patent infringer may allege a breach of the patentee’s duty of candor, referred to as inequitable conduct, as a defense to patent infringement, but must do so in accordance with the evidentiary standards articulated by the recent United States Court of Appeals for the Federal Circuit Exergen Corporation v. Wal-Mart Stores, Inc., et al., 575 F.3d 1312 (Fed. Cir. 2009) decision.

That decision was based on an appeal by SAAT Systems Application of Advance Technology, Ltd. and Daiwa Products, Inc. (collectively “SAAT”) of a Massachusetts District Court denial of SAAT’s motion for leave to amend its answer to assert that two of Exergen Corporation’s patents relating to the measurement of body temperature using infrared thermometers were unenforceable due to inequitable conduct. The Federal Circuit affirmed the District Court’s ruling that SAAT failed to satisfy the inequitable conduct evidentiary pleading standards required by the Federal Rule of Civil Procedure 9(b).

The Federal Circuit held that pleading inequitable conduct in patent cases must be done with sufficient particularity, requiring the identification of the “specific who, what, when, where, and how of the material misrepresentation or omission” before the USPTO. Id. at 1327. The court also held that a defendant pleading inequitable conduct must allege sufficient underlying facts from which a court may reasonably infer scienter (i.e., that the patentee (1) knew of the withheld material information or the falsity of the misrepresentation, and (2) withheld or misrepresented such information with the specific intent to deceive the USPTO). Id. at 1328-1329.

In affirming the District Court’s denial of SAAT’s motion, the Federal Circuit found that among other things, SAAT failed to identify specific individuals that deliberately withheld or misrepresented information, and failed to identify the patent claim limitations to which such information was relevant to patentability. Id. at 1329-1330. The court also found that SAAT failed to sufficiently plead facts in support of their allegations and from which the Court could reasonably infer scienter. Id. at 1330.

The standard for pleading inequitable conduct articulated by the Federal Circuit places the burden on defendants to clearly articulate grounds supporting an allegation of inequitable conduct and to establish facts which support a reasonable conclusion that the patentee had the requisite scienter. It remains to be seen how pleading in accordance with the requirements of Rule 9(b) will impact the frequency with which alleged patent infringers raise an inequitable conduct defense, and whether and to what extent Congress will address the inequitable conduct defense in the proposed patent reform legislation.

For more information on patent filings and prosecutions including inequitable conduct, please contact Stan Chalvire.

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