We have a little time to catch up, with SCO quiet for their holiday break. We put up the documents for IBM's Motion to Strike, but we didn't have time to explain much. Here are three of the unpublished cases IBM submitted as Exhibit 3 attached to their Memorandum in Support of their Motion to Strike Affirmative Defenses. The PDF is here. SCO replied and then IBM responded. Whoever brings the motion gets the last word.
As you will notice on page three of IBM's Memorandum in Support of their Motion to Strike, they attached unpublished decisions for the convenience of the judge. These are cases on which IBM relies in support of its motion to strike. The other cases cited in the memorandum are readily available to the judge. The purpose of providing cases to a judge is to persuade him or her that your case is very much like the cases you are presenting in which the judge ruled the way you would like the judge to rule in your case.
Here, IBM has been accused by SCO of fraud and inequitabale conduct before the Patent Office and the Copyright Office, which might mean in the case of a patent that a party knew there was prior art, for example, and didn't reveal it. SCO is arguing that on the basis of IBM's alleged fraud and inequitable conduct, their patents and some of their copyrights should be declared unenforceable.
This isn't that atypical an allegation in a patent case. SCO perhaps felt it had to say something, because there really are no defenses to a valid patent. If you infringe, you just have no wiggle room. You have to stop or you have to license, if the other party is willing, and I'm thinking IBM isn't willing to help them out at this point. Each of the patents IBM put on the table here goes to the heart of SCO's business, so if they prevail, SCO could conceivably be unable to do any business until they rewrite some software. A fitting punishment you may be thinking.
So, that is the accusation. But you'll notice that SCO followed its usual vague pattern of making an accusation but without any specifics. IBM noted that and by means of these and other cases it is asking the judge to dismiss three of SCO's affirmative defenses based on the lack of particularity. In each of the cases they attach, that is what happened, although in some cases the party was given an opportunity to try again.
Why is it important to be specific? Because otherwise you haven't a clue what you can say in your defense, and that's not fair. To use an example from my own experience, before I switched fields, I did a lot of divorces. And in a divorce you have to state with specificity what the other party did wrong that justifies granting a divorce. You can't just say, "He was mean." You are required to state it more like this: "On such and such a date, at the marital residence and such and such an address, the defendant picked up the telephone and threw it at me with such force that I required medical attention..." or if it is a pattern, you can say "On numerous occasions, too numerous to relate, he made fun of me in front of my family and friends, causing me to feel humiliated. For example, on such and such a date, in my mother's home at such and such an address, during our daughter's 6th birthday party, he arrived at 3 PM in an intoxicated state, which I could discern from his slurred speech and the smell of liquor on his breath, and he announced in front of all my relatives and friends that I was a 'lousy wife' and that he planned to divorce me and marry his girl friend." Anyway, you get the idea. You can't just say that he was snotty or mean. You must spell it out. Otherwise the spouse is left saying, "I was not snotty." And who can say who is right? But if you spell it out, he can say, "On that date, I was on a business trip to Miami and here is my hotel receipt, so I couldn't have done what she says I did that day."
IBM is essentially saying the same thing. How are they supposed to know what they are accused of, if SCO doesn't spell it out? And since SCO failed to spell it out, they are asking the judge to throw those affirmative defenses out. There is a specificity requirement to accusations of fraud, IBM points out, under the Federal Rules of Civil Procedure. They present these cases, along with others cited in their papers, as indications to her that she not only can rule in their favor, that she ought to under Federal Rules of Civil Procedure 9(b), which requires that fraud allegations be pled with particularity: "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity."
If the judge does strike, she has, as you will see in the cases, the option of letting SCO try again, so long as she doesn't feel that SCO failed to plead with specificity as a delaying tactic. Hmmm. Here's hoping she reads Groklaw. Actually, would she even need to? IBM reminds her that they have already had to file motions to compel responses to discovery demands twice. They accuse SCO of throwing out the charges so they can do discovery and go fishing for facts to try to substantiate the allegations, which is the opposite of how it's supposed to go.
What SCO alleged in its Fifth Affirmative Defense was that "IBM's claims are barred by fraud, illegality, collusion, conspiracy and/or lack of clean hands." Where's the time, place and contents in that sentence, IBM asks? Who did it? What false statements? Where's the fair notice of the factual grounds so IBM can defend itself against a fraud charge?
As for inequitable conduct, all SCO said in its Fifteenth Affirmative Defense was that "On information and belief, one or more of the copyrights at issue is, or may be, unenforceable by reason of IBM's inequitable conduct, acts or omissions before the United States Patent and Trademark Office [sic]." They presumably meant the Copyright Office, IBM points out, highlighting yet another mistake on SCO's part.
And the 19th affirmative defense asserts: "On information and belief, the '746 Patent or one or more of the other patents at issue, is, or may be, unenforceable by reason of IBM's inequitable conduct, acts or omissions before the United States Patent and Trademark Office."
You are supposed to set forth "the time, place and contents of the false representation(s), the identity of the party making the false statements and the consequences thereof". SCO can't just throw out a wild charge of fraud without foundation, IBM points out, because it's a serious charge that "might injure its reputation and good will". And they have to have the facts before making the accusation, IBM says to the judge, not make the accusation and hope something turns up to justify it: "SCO may not properly accuse IBM of fraud in the hope that it may be able to cobble together some evidence of alleged wrongdoing during discovery."
These charges not only don't tell you the time, place and contents of any such conduct, IBM says, they don't even identify what the inequitable conduct is alleged to be. IBM highlights a case in which the Utah court itself had ruled that allegations of fraud should not be made "as a pretext for the discovery of unknown wrongs", which is what IBM is saying is going on here.
SCO's Reply Memorandum oddly argues that they threw in some other charges in the same affirmative defense, so the judge shouldn't throw the whole thing out:
"IBM's argument, however, ignores that these affirmative defenses assert several independent grounds, in addition to fraud and inequitable conduct, which are not subject to Rule 9(b)'s heightened pleading standard. As a result, IBM's effort to strike the defenses in their entirety must be denied. Moreover, the affirmative defenses as pled satisfy the pleading requirements necessary to provide adequate notice of SCO's defenses. "
9(b) doesn't apply to the nonfraud, noninequitable conduct grounds alleged, allegations of illegality, collusion, conspiracy, and unclean hands, SCO says. We thought it was enough, SCO lamely says. IBM knows what our affirmative defenses are, so what else do they need at this early stage?
IBM replies that fraud has a higher requirement, and SCO hasn't met that requirement.
If the judge strikes their affirmative defenses, SCO then asks that "to the extent any portion of SCO's affirmative defenses is stricken, it should be without prejudice to replead those defenses when additional facts become available", which is to say, if they ever stumble on some facts to prove something fraudulent or inequitable happened, they'd like a second shot down the road. That isn't exactly the same as saying you'd like to replead immediately, because you forgot to include something. They appear to say that they'd like to keep the door open indefinitely, because they have absolutely nothing in hand to support such allegations now.
It's hard to imagine the judge rewarding a baseless accusation of fraud in this way. IBM smoothly argues,
in its Reply Memorandum that if SCO wishes to drop the fraud and inequitable conduct charges and leave the rest, that is fine with them. Only the fraud and inequitable conduct charges relate to the patents and copyrights, so they don't mind one bit if SCO wishes to drop them. Bottom line: SCO goofed and IBM caught them. SCO is left struggling to stay in the game at all, and it merely says that the allegations shouldn't all be thrown out.
If SCO wishes to admit that it has no specifics to prove fraud and inequitable conduct and wishes to drop those affirmative defenses to that extent, that is fine with IBM. That's what their motion is asking for in the first place. I am guessing they were laughing out loud when they typed that part up. It's the same as saying that their motion will be granted. They surely don't care about the other allegations, some of which are so vague as to be risible, as in "other acts by IBM". Their motion to strike SCO's 5th, 15th and 19th affirmative defenses, pursuant to Rules 12(f) and 9(b) of the Federal Rules of Civil Procedure, which allege fraud and inequitable conduct on the grounds that they are improperly pleaded under Rule 9(b) thus should be stricken, they argue:
"Specifically, SCO fails to allege any facts concerning the fraud that IBM is alleged to have committed. Under any interpretation of Rule 9(b)'s requirements, therefore, SCO's affirmative defenses are defective . . .
"SCO ignores that the affirmative defenses against which IBM has moved are premised on fraud, and are therefore subject to Rule 9(b), which establishes heightened pleading requirements for such allegations. None of the cases cited by SCO involves challenges to affirmative defenses alleging fraud. . . .
"In a final attempt to salvage its affirmative defenses, SCO now argues that its defenses are in fact premised 'on additional grounds' other than fraud and thus should not be stricken in their entirety. (Opp'n Br. at 5.)
We have not argued that defenses based upon conduct other than fraud should be stricken, IBM says, likely choking back guffaws. "To the extent that SCO admits that the subparts of its Fifth Affirmative Defense claiming 'illegality, collusion, conspiracy and/or lack of clean hands' are not based on any alleged fraud by IBM, we do not contend that such parts of the defense should be stricken."
IBM has requested oral arguments, and after the last court appearance, can you blame them? With that introduction, here are some of the unpublished cases IBM submitted in support of their Motion to Strike.
1999 WL 33283820
52 U.S.P.Q.2d 1638
(Cite as: 1999 WL 33283820 (D.Ariz.))
United States District Court, D. Arizona.
James E. TREATCH, A-Communications, L.L.C. and JJ & D, L.L.C.,
NEXTEL COMMUNICATIONS, INC.,
Aug. 13, 1999.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for James E Treatch, and individual, pla.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for A-Communications LLC, a Nevada limited liability company, pla.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for JJ & D LLC, a Nevada limited liability company, pla.
Robert Conley Kahrl, Jones Day Reavis & Pogue, North Point, Cleveland, OH, Barry R Sanders, Allen Price & Padden PC, Phoenix, AZ, William H Oldach, III, Jones Day Reavis & Pogue, Washington, DC, Hilda C Galvan, Jones Day Reavis & Pogque[sic], Dallas, TX, for Nextel Communications, Inc., a Delaware Corporation, dft.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for James E Treatch, pla.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for A-Communications LLC, a Nevada limited liability company, and JJ & D LLC, a Nevada limited liability company, pla.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for James E Treatch, counter-defendant.
Marvin A Glazer, Cahill Sutton & Thomas PLC, Phoenix, AZ, for A-Communications LLC, counter-defendant.
*1 On July 6, 1998, Plaintiffs James Treatch, A-Communications, L.L.C. and JJ & D, L.L.C. filed their complaint against Defendant Nextel Communications, Inc. alleging claims of patent infringement. Plaintiffs amended their complaint on August 17, 1998. Defendant filed its answer on November 13, 1998, and asserted a counterclaim under the Federal Declaratory Judgments Act, 28 U.S.C. §§ 2201, et seq. Defendant's counterclaim seeks a declaration by the Court that it has not infringed upon Plaintiffs' patent and that Plaintiffs' patent is invalid. Currently pending before the Court is Plaintiffs' Motion to Strike allegations of inequitable conduct asserted in Defendant's affirmative defenses and counterclaims. After having considered the issues raised in the parties' pleadings, the Court finds that Defendant has failed to plead fraud with particularity as required by Fed.R.Civ.P. 9(b); accordingly, the Court will grant Plaintiffs' Motion to Strike.
In their Motion to Strike, pursuant to Fed.R.Civ.P. 12(f), Plaintiffs contend that portions of Defendant's answer and counterclaim which allege that Plaintiffs engaged in "inequitable conduct" during prosecution of their application upon which the '052 Patent issued must be stricken since Defendant's allegations fail to satisfy Fed.R.Civ.P. 9(b) particularity requirements. The Court agrees.
Rule 12(f) provides:
Upon motion made by a party before responding to a pleading or, if no responsive pleading is permitted by these rules, upon motion made by a party within 20 days after the service of the pleading upon the party or upon the court's own initiative at any time, the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.
Further, Rule 9(b) provides:
Fraud, Mistake, Condition of the Mind. In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.
In its response to Plaintiff's Motion to Strike, citing Scripps Clinic v. Baxter Travenol, 7 U.S.P.Q.2d 1562 (D.Del 1988), Defendant argues that since it has alleged "inequitable conduct" rather than "fraud," it is not required to satisfy the pleading requirements of Rule 9(b). In Scripps, much like the case here, the court was faced with the issue of whether it should strike allegations of inequitable conduct set forth in the defendant's answer for failing to satisfy the pleading requirements of Rule 9(b).
In response to the defendant's allegation that its averments did not set forth a defense of "fraud," the Scripps court recognized that "[w]hile the terms fraud and inequitable conduct are sometimes used synonymously, they are distinct defenses covering different conduct and leading to different consequences." Id. at 1563. Specifically, the Scripps court held that "[f]raud involves the 'misrepresentation of a material fact' to the PTO [Patent and Trademark Office] while inequitable conduct involves the omission of a material fact, as well as the misrepresentation of information." Id. (quoting J.P. Stevens & Co., Inc. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1559 (Fed.Cir.1984), cert. denied, 474 U.S. 822 (1985)). Therefore, the Scripps court held that "a charge of fraud on the PTO is subject to the strict pleading requirements of Rule 9(b)." 7 U.S.P.Q.2d at 1563; see also Micro Motion, Inc. V. Exac Corp., 112 F.R.D.2 (N.D.Cal.1985).
*2 With respect to whether the pleading requirements of Rule 9(b) applied to charges of inequitable conduct, the Scripps court recognized that the law was "unclear whether such a charge is subject to Rule 9(b)" and without ruling on the issue held that the defendant's pleading nonetheless satisfied the particularity requirements of Rule 9(b).
More recently, in Xilinx Inc. v. Altera Corp., 33 U.S.P.Q.2d 1149 (N.D.Cal.1994), the court addressed whether it should strike the defendant's affirmative defense of inequitable conduct because the defendant failed to plead inequitable conduct with particularity. In Xilinx, the defendant's answer alleged "[u]pon information and belief, the '302 and '487 patents are unenforceable because they were obtained by Xilinx through inequitable conduct in the United States Patent and Trademark Office." 33 U.S.P.Q.2d at 1150.
While noting that the Federal circuit had never ruled on the issue whether Federal Rule 9(b) applies to the affirmative defense of inequitable conduct and although recognizing that in the prior case Quantum Corp. v. Western Digital Corp, 10 U.S.P.Q.2d 1712 (N.D.Cal.1988), another court in the same district held that Rule 9(b) did not apply to allegations of inequitable conduct, the Xilinx court followed the majority of other district courts and held that "Rule 9(b)'s particularity requirements apply to the affirmative defense of inequitable conduct." Xilinx, 33 U.S.P.Q.2d at 1151; see also Micro Motion, Inc. v. Exac Corp., 112 F.R.D. at 3; IPPV Enterprises v. Cable/Home Communications, 25 U.S.P.Q.2d 1894, 1896 (S.D.Cal.1992); Energy Absorption Sys., Inc. v. Roadway Safety Servs., Inc., 28 U.S.P.Q.2d 1079 (N.D.Ill.1993).
Applying the holding in the Xilinx case to the present action, the Court finds that Defendant's allegations of inequitable conduct must satisfy Rule 9(b)'s particularity requirement. Rule 9(b) has been interpreted to require that "allegations of fraud are specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charges so that they can defend against the charge and not just deny that they have done anything wrong." Neubronner v. Milken, 6 F.3d 666, 671 (9th Cir.1993). A pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that the defending party can prepare an adequate response. Id. at 672. Paragraph 16 of Defendant's Answer alleges "[o]n information and belief, the '052 Patent is unenforceable due to inequitable conduct during prosecution of the underlying application." (See Doc. 14 at ¶ 16). Additionally, paragraph 6 of Defendant's counterclaim avers "[o]n information and belief, the '052 Patent is unenforceable due to inequitable conduct during prosecution of the underlying application." The Court finds that Defendant's allegations of inequitable conduct fail to satisfy Rule 9(b)'s pleading requirements. Accordingly, the Court will grant Plaintiff's Motion to Strike and deem stricken the portions of Defendant's answer and counterclaim asserting inequitable conduct on the part of Plaintiffs.
*3 IT IS THEREFORE ORDERED granting Plaintiff's Motion to Strike. The Court will deem stricken the portions of Defendant's answer and counterclaim asserting inequitable conduct on the part of Plaintiffs. (Doc. 15).
1999 WL 33283820, 1999 WL 33283820 (D.Ariz.), 52 U.S.P.Q.2d 1638
END OF DOCUMENT
1993 WL 767688
33 U.S.P.Q.2d 1149
(Cite as: 1993 WL 767688 (N.D.Cal.))
United States District Court,
XILINX, INC., a Delaware Corporation, Plaintiff,
ALTERA CORPORATION, a, California Corporation, Defendant.
No. C 93-20409 RMW (EAI).
Oct. 25, 1993.
ORDER GRANTING PLAINTIFF’S MOTION TO STRIKE
WHYTE, District Judge.
*1 The motion to strike of plaintiff XILINX, INC. (“Xilinx”), was heard on October 22, 1993. The court has read the moving papers and the opposition papers of the defendant ALTERA CORPORATION (“Altera”) and heard the oral argument of counsel. GOOD CAUSE APPEARING therefore,
The court grants plaintiff’s motion to strike defendant’s affirmative defense of inequitable conduct in the United States Patent and Trademark Office because defendant has not pleaded fraud with particularity as required by Federal Rule of Civil Procedure 9(b). The court also grants plaintiff’s motion the strike defendant’s affirmative defense of unclean hands, because that defense is not pleaded sufficiently to give fair notice to plaintiff.
On June 7, 1993, Xilinx filed suit against Altera alleging infringement of two patents: United State Patent No. 4,870,302 (“the ‘302 patent” or “Freeman patent”) and United States Patent No. 4,642,487 (“the ‘487 patent” or “Carter patent”). Both these patents deal with integrated circuits which perform logic functions.
In its answer filed on July 28, 1993, Altera asserted a number of affirmative defenses. The two affirmative defenses which are subject of Xilinx’s motion to strike are at page five of Altera’s Answer and are as follows:
20. Upon information and belief, the ‘302 and ‘487 patents are unenforceable because they were obtained by Xilinx through inequitable conduct in the United States Patent and Trademark Office.
22. Upon information and belief, Xilinx’s claims for equitable relief are barred by the doctrine of unclean hands.
Xilinx argues that both these affirmative defenses must be pleaded with particularity pursuant to Federal Rule of Civil Procedure 9(b).
II. Legal Standards
Motion to strike are governed by Federal Rule of Civil Procedure 12(f) which provides that “the court may order stricken from the pleading any insufficient defense …”
Federal Rule of Civil Procedure 9(b) provides:
In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.
As such, “allegations of fraud must be pleaded with specificity as to time, place and content of any misrepresentations or else be stricken.” Intel Corp. v. Hyundai Electronics America, Inc., 692 F.Supp. 1113, 1116 (N.D. Cal. 1987).
Notably, the Federal Circuit has never ruled on the issue of whether or not Federal Rule 9(b) applies to the affirmative defense of inequitable conduct. Xilinx argues that the Federal Circuit implicitly adopted this rule when it affirmed the district court’s decision in Solarex Corporation v. Arco Solar, Inc., 870 F.2d 642 (Fed. Cir. 1989), affirming, 121 F.R.D. 163 (E.D.N.Y. 1988). However, the issue of Rule 9(b)’s application to the affirmative defense of inequitable conduct was not on appeal and was not addressed by the Federal Circuit.
Despite the lack of Federal Circuit guidance, a growing number of district courts have held that Rule 9(b) is applicable to averments of inequitable conduct on the Patent Office. See e.g., Intel, supra, 692 F.Supp. at 1115 (Aguilar, J); Micro Motion, Inc. v. Exac Corp., 112 F.R.D. 2, 3 (N.D.Cal. 1985) (Aguilar, J); IPPV Enterprises v. Cable/Home Communications, 25 U.S.P.Q.2d 1895 (S.D.Cal. 1993); Energy Absorption Sys. v. Roadway Safety Servs., 28 U.S.P.Q.2d 1079 (N.D. Ill. 1992); Sun-Flex Co., Inc. v. Software Computer Products Corp., 18 U.S.P.Q.2d 1171 (N.D. Ill. 1990); Wolf v. Wagner Spray Tech. Corp., 10 U.S.P.Q.2d 1690 (S.D.N.Y. 1989); Scripps Clinic & Research Foundation, Inc. v. Baxter Travenol Laboratories, Inc., 7 U.S.P.Q.2d 1562 (D. Del. 1988); G & H Technology, Inc. v. United States, 227 U.S.P.Q. 491 (Cl.Ct. 1985).
*2 As the above citations indicate, at least two of the district court cases holding that 9(b) applies are from this district. Notably, however, there is also a case from this district which on its face holds the opposite. In Quantum Corp. v. Western Digital Corp., U.S.P.Q.2d 1712 (N.D. Cal. 1988), Judge Aguilar refused to strike the following affirmative defense under Rule 9(b):
U.S. Patents 4,396,959; 4,639,863; and Re. 32,075 are invalid for failure to comply with the requirements of Title 35, U.S.Code and are unenforceable.
In so holding, the court stated, “plaintiff’s reliance on Rule 9(b) is misplaced. Inequitable conduct before the Patent Office does not give rise to the level of common law fraud which is the subject of Rule 9(b)” Quantum, supra, 10 U.S.P.Q.2d at 1713. The court’s opinion did not distinguish, discuss or even recognize its prior holdings to the contrary in Micro Motion and Intel. The court seemed to rely to some extent on the fact that the affirmative defense pleaded by the defendants was one of the defenses cited in 35 U.S.C. § 282. How or why this moved the court to hold differently than it had in the past is unclear, however.
Despite the holding in Quantum, the majority of district courts have held that Rule 9(b) does apply and this court agrees. One of the most recent district court decisions dealing with this issue noted that, “the Federal Circuit has expressed frustration with the large number of unsupported allegations of inequitable conduct in patent case.” IPPV, supra 25 U.S.P.Q.2d at 1895 (citing Burlington Industries, Inc. v. Dayco Corporation, 849 F.2d 1814, 1818 (Fed. Cir 1988) and FMC Corporation v. Manitowoc Company, 835 F.2d 1411, 1415 (Fed. Cir. 1987)).
Given the Federal Circuit’s expressed frustration and the weight of authority in favor of applying Rule 9(b), the court holds that Rule 9(b)’s particularity requirements apply to the affirmative defense of inequitable conduct.
The affirmative defense of unclean hands presents a slightly different issue, however. In Intel, the court held that the pleading requirements of Rule 9(b) applied to the defense of unclean hands if the allegation of unclean hands involved the elements of fraud. Intel, supra, 692 F.Supp. at 1117. In this case, Altera’s opposition to the motion to strike makes clear that the defense of unclean hands is not based on allegations of fraud on the Patent Office as was the case in Intel. Rather, it appears from opposition that Altera is claiming that Xilinx brought this suit in bad faith. Thus, Rule 9(b) does not technically apply. However, Xilinx should at least be notified of the nature of the alleged defense of unclean hands. As such, the court strikes this affirmative defense but will not hold Altera to the particularity requirement of Rule 9(b).
Given the above discussion and GOOD CAUSE APPEARING therefore,
The court grants Xilinx’s motion to strike Altera’s affirmative defenses of “inequitable conduct” and “unclean hands” at paragraphs 20 and 22 of the Answer. Pursuant to Federal Rule of Civil Procedure 15 (a), Altera is granted leave to file an amended pleading in compliance with this order within twenty days of the date of this order.
1993 WL 767688, 1993 WL 767688 (N.D.Cal.), 33 U.S.P.Q.2d 1149
END OF DOCUMENT
Only the Westlaw citation is currently available.
United States District Court, M.D. North Carolina.
POINT DX INC., a Delaware Corporation, Plaintiff,
VOXAR LIMITED, Defendant.
No. Civ. 1:01CV01130.
Sept. 20, 2002.
*1 On December 21, 2001, Point DX Inc. ("Plaintiff") filed this action against Voxar Limited ("Defendant") alleging patent infringement in violation of 35 U.S.C. § 271 et seq. Defendant asserts as an affirmative defense and counterclaim that the patents in suit are unenforceable because they were obtained through fraud and inequitable conduct.
This matter is before the court on Plaintiff's motion to strike as insufficient or, in the alternative, to dismiss, pursuant to Federal Rules of Civil Procedure 12(f) and 12(b)(6), Defendant's allegations of fraud and inequitable conduct. For the following reasons, the court will grant Plaintiff's motion to dismiss without prejudice and allow Defendant twenty (20 days to file an amended answer and counterclaim.
Plaintiff is the exclusive licensee of several patents that relate to the methods and systems for conducting computer-assisted three-dimensional visualization of internal organs. Defendant is a manufacturer of medical imaging software and has developed custom imaging software packages for original equipment manufacturers. Plaintiff alleges that Defendant's medical imaging products infringe one or more claims of its four patents.
In its answer, Defendant denies that its products infringe any valid patent. Furthermore, Defendant includes as an affirmative defense and counterclaim that the patents in suit were obtained as a result of fraud and inequitable conduct. Defendant alleges that Plaintiff failed to disclose material information and made material misstatements to the United States Patent and Trademark Office ("PTO"). On May 23, 2002, Plaintiff filed a motion to strike or dismiss Defendant's allegations of fraud and inequitable conduct, arguing that Defendant failed to plead these allegations with particularity in violation of Federal Rule of Civil Procedure 9(b).
Federal Rule of Civil Procedure 9(b) provides that "[i]n all averments of fraud ..., the circumstances constituting fraud ... shall be stated with particularity." Fed.R.Civ.P. 9(b). Like an allegation of fraud, an allegation of inequitable conduct before the PTO is subject to the enhanced pleading requirements of Rule 9(b). See Rhone-Poulenc Agro S.A. v. Monsanto Co., 73 F.Supp.2d 537, 538 (M.D.N.C. 1999); Wicker Group V. Standard Register Co. Inc., 33 U.S.P.Q.2d 1678, 1679 (E.D.Va. 1994). Any pleading invoking the doctrine of inequitable conduct must plead the "time, place, and contents of the alleged fraudulent misrepresentation, as well as the identity of the person making the representation and what was obtained thereby." Rhone-Poulenc, 73 F.Supp.2d at 539 (quoting Breeden v. Richmond Cmty. Coll., 171 F.R.D. 189, 195 (M.D.N.C. 1997)). This mandate is intended to give parties against whom a charge of inequitable conduct is made "specific notice of the particular statements or omissions" constituting the inequitable conduct, which thereby ensures that they have sufficient information to formulate an appropriate response. Id.; see also Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999)(stating purposes of Rule 9(b)).
*2 Plaintiff asserts that Defendant's answer and counterclaim fails to give any specifics concerning what material information was withheld and what material misstatements were made to the PTO. Defendant's sixth affirmative defense reads:
The '762 Patent, the '162 Patent, the '366 Patent and the '319 Patent are unenforceable as they were obtained as a result of fraud and inequitable conduct arising from failures to disclose material information and the making of material misstatements to the United States Patent and Trademark Office ('PTO'), with the intent to deceive; including, without limitation, intentionally misleading and making material misrpresentations to the PTO in obtaining the '762 Patent, the '162 Patent, the '366 Patent and the '319 Patent by failing to disclose material prior art.
(Def.'s Answer and Countercl. at 7.) Paragraph 10 of Defendant's counterclaim essentially makes the same allegations as those stated in the sixth affirmative defense. Plaintiff argues that the only indication of what material information was not disclosed is the vague reference to some unidentified "material prior art."
Defendant contends that it has satisfied the particularity requirement of Rule 9(b). It argues that Plaintiff has ignored other paragraphs in its answer and counterclaim that provide additional information. Specifically, Defendant points to its second affirmative defense, which states in relevant part:
[I]f the claims of the patent are interpreted in a manner that results in the claims encompassing the Voxar medical imaging products, then the claims also encompass the relevant prior art, which includes but is not limited to prior art in the areas of volume rendering, three-dimensional walk-through animation of human organs, 'fly-through' and center line calculation and, therefore, are invalid.
(Def.'s Answer and Countercl. at 6) (emphasis added). Defendant argues that the inclusion of the prior art subject areas is specific enough to provide Plaintiff with adequate notice of the relevant prior art. The court disagrees.
Defendant's answer and counterclaim, even when viewed in its entirety, fails to provide the specificity required when pleading inequitable conduct. Defendant's reference to the prior art in the areas of volume rendering, walk-through animation, "fly-through," and center line calculation do not provide specific notice of the particular statements or omissions constituting the inequitable conduct. In fact, as Plaintiff correctly observes, many references identified and disclosed on the face of the subject patents could be characterized consistent with these subject areas. As such, Plaintiff is provided little guidance as to the specific prior art Defendant alleges it intentionally withheld.
In addition to a claim that Plaintiff failed to disclose relevant prior art, Defendant claims Plaintiff made material misstatements. Yet Defendant's answer and counterclaim is silent as to any circumstances related to this charge. Defendant does not identify who made the misstatements or what the misstatements were. Plaintiff is provided essentially no guidance on this claim and it cannot fairly be said that Plaintiff has enough information to formulate an appropriate response. Accordingly Plaintiff's motion to dismiss the sixth affirmative defense and Paragraph 10 of Defendant's answer and counterclaim will be granted.
*3 Defendant requests, in the alternative, leave to amend its answer and counterclaim. Federal Rule of Civil Procedure 15(a) provides that leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). Only when leave to amend is sought in bad faith or with a dilatory motive should it be denied. Foman v. Davis, 371 U.S. 178 (1962). Defendant's request for leave to amend does not appear to be made in bad faith or with the intent to cause delay. Therefore, Defendant will be granted leave to amend, with greater particularity as required by Rule 9(b), its answer and counterclaim.
For the reasons set forth in this opinion, Plaintiff's motion to dismiss Defendant's sixth affirmative defense and Paragraph 10 of Defendant's counterclaim will be granted. Defendant's request for leave to amend its answer and counterclaim also will be granted. Defendant shall file its amended answer and counterclaim within twenty (20) days of the date of this order.
An order in accordance with this memorandum opinion shall be entered contemporaneously herewith.
2002 WL 31189696 (M.D.N.C.)