Last week, Judge Stark denied a motion to dismiss and strike a counterclaim and affirmative defense of inequitable conduct in Diebold Nixdorf, Inc. v. Hyosung TNS, Inc., C.A. No. 19-1695-LPS. His ruling serves as a reminder that pleading a defense of inequitable conduct is not the same as proving that defense.
In Diebold, the defendants asserted that named inventors had engaged in inequitable conduct during prosecution of one of the patents-in-suit. The defense was based on two separate failures to disclose: First, the failure to disclose a prior art ATM; and second, the failure to disclose several prior art patents.
Among other things, plaintiffs argued that defendants had failed to adequately alleged intent to deceive the PTO with regard to the failure to disclose the prior art ATM. Judge Stark explained that the demanding Therasense standard for proving inequitable conduct did not dictate the standard for pleading inequitable conduct:
"Defendants are not required at the pleading stage to prove (or even plead) that a specific deceptive intent is the single most reasonable inference to the drawn from the facts alleged. Rather, at this early stage, the Court only assesses 'whether the facts as pled give rise to a reasonable inference that material information was misrepresented with the specific intent . . . to deceive the PTO.'"
Judge Stark found that specific intent had been adequately pleaded, and that "[w]hether Defendants will ultimately prove that a specific intent is the single most reasonable inferences is a matter for another day."
Similarly, with regard to the prior art patent, Judge Stark rejected plaintiffs' argument that defendants had not adequately alleged but-for materiality because defendants "failed to explain how [the prior art patent] would change the obviousness analysis."
"[A]t the pleading stage, the Court does not decide the merits of the claim, focusing instead on whether materiality was properly alleged with sufficient particularity."
Judge Stark permitted the defense to proceed on the failure to disclose the ATM and one of the prior art patents (defendants apparently did not contest the motion to dismiss/strike on the defense as it related to the other prior art patents).
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