The Split on Pleading Scienter for Inequitable Conduct

by David Hricik, Mercer Law School

Federal Rule of Civil Procedure 9(b) requires that fraud or mistake be pled with particularity.  The Federal Circuit has held that, although inequitable conduct is “broader than fraud” inequitable conduct must be pled with particularity in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1330 (Fed. Cir. 2009).  (A digression:  I think this is wrong because the Supreme Court has held that Rule 9(b) is limited to “fraud” and “mistake” and it is improper to rely on judicial policies to expand the plain meaning of the rule.  See David Hricik, Wrong about Everything: The Application by the District Courts of Rule 9(b) to Inequitable Conduct, 86 Marquette Law Review  895 (2003) (here).)

One issue that has split the district courts is whether the “single most reasonable inference” standard for scienter applies at the pleading stage. The court in Deere & Co v. Kinze Mfg., Inc (No. 4:20-cv-00389-RGE-HC, C.D. Iowa May 1, 2023) collected the cases:

iLife Techs. Inc. v. AliphCom, No. 14-CV-03345-WHO, 2015 WL 890347, at *4 n.1 (N.D. Cal. Feb. 19, 2015) (“I recognize that there is currently a dispute among courts as to the pleading requirements for an inequitable conduct counterclaim.”) (collecting cases); see also Wyeth Holdings Corp. v. Sandoz, Inc., CIV.A. No. 09-955-LPS-CJB, 2012 WL 600715, at *7 (D. Del. Feb. 3, 2012) (“Several district courts have recently confronted this question and have reached different conclusions.”) (collecting cases); Cutsforth, Inc. v. LEMM Liquidating Co., L.L.C., No. 12-cv-1200 (SRN/JSM), 2013 WL 2455979, at *4 (D. Minn. June 6, 2013) (“District courts are currently conflicted on the effect of the Federal Circuit’s holding in Therasense on the pleading requirements for the specific intent to deceive element.”) (collecting cases). More recent decisions, however, have acknowledged that a majority of courts do not view Therasense as requiring pleadings of inequitable conduct to satisfy the “single most reasonable inference” standard. See Jaguar Land Rover Ltd. v. Bentley Motors Ltd., No. 2:18cv320, 2021 WL 8086357, at *2 (E.D. Va. May 6, 2021) (“[T]he majority position among district courts is that even applying the Rule 9(b) standard requiring heightened specificity when pleading fraud, it is not necessary that intent to deceive be the ‘single most reasonable inference,’ at the pleading stage.” (quoting W.L. Gore & Assocs., Inc. v. Medtronic, Inc., 850 F. Supp. 2d 630, 633 (E.D. Va. 2012))); Front Row Techs., L.L.C. v. NBA Media Ventures, L.L.C., 163 F. Supp. 3d 938, 986 (D.N.M. 2016) (A “line of cases . . . hold[s] that the pleader ‘need only allege facts from which the Court could reasonably infer that the patent applicant made a deliberate decision to deceive the [US]PTO.’ . . . Th[is] . . . line of cases is now the majority position.” (quoting Wyeth Holdings, 2012 WL 600715, at *7)).

The John Deere court ultimately held pleadings showing only a reasonable inference of scienter was required, not the single most reasonable inference, reasoning in part:

Moreover, as multiple courts have noted, the Federal Circuit’s opinion in Delano Farms Co. v. California Table Grape Commission––decided after Therasense––affirmed the Exergen pleading standard on a motion to dismiss an inequitable conduct counterclaim alleging the withholding of material references. Delano Farms Co. v. Cal. Table Grape Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011). The Delano Farms court stated the charge of inequitable conduct would survive “only if the plaintiff’s complaint recites facts from which the court may reasonably infer that a specific individual both knew of invalidating information that was withheld from the [US]PTO and withheld that information with a specific intent to deceive the [US]PTO.” Id. (emphasis added); see also Wyeth Holdings, 2012 WL 600715, *8 (citing Delano Farms, 655 F.3d 1337); Human Genome Scis., Inc., 2011 WL 7461786, at *3 (“Delano Farms, a post-Therasense case . . . also seems to indicate that the less rigorous standard applies.” (citing same)); accord Cutsforth, 2013 WL 2455979, at *4; Mentor Graphics Corp. v. EVE-USA, Inc., 13 F. Supp. 3d 1116, 1125–26 (D. Or. 2014); Illumina Inc. v. BGI Genomics Co., Ltd., No. 20-cv-01465-WHO, 2021 WL 428632, at *4 (N.D. Cal. Feb. 8, 2021); Jaguar Land Rover Ltd., 2021 WL 8086357, at *2; Front Row Techs., 163 F. Supp. 3d at 986; TiVo Inc. v. Verizon Commc’ns, Inc., No. 2:09-cv-257, 2011 WL 13134426, at *3 (E.D. Tex. Sept. 7, 2011); Graphic Packaging Int’l, Inc. v. C.W. Zumbiel Co., No. 3:10–cv–891–J–37JBT, 2011 WL 4862498, at *3 (M.D. Fla. Sept. 12, 2011).

It seems to me that it’s much too high a bar to require the single most reasonable inference at the pleading stage in part because the facts to establish scienter largely will be in the patentee’s possession and if pleading is denied, there won’t be any discovery since it is, largely, limited to information relevant to a pled claim or defense.