MARK S. DAVIS, District Judge.
This matter is before the Court on CertusView Technologies, LLC's ("Plaintiff") Rule 72 objections, ECF No. 256, to the magistrate judge's January 16, 2015 Order granting S & N Communications, Inc., and S & N Locating Services, LLC, (collectively "Defendants" or "S & N") leave to amend their answer and counterclaims, and on Plaintiff's Motion to Strike and in the Alternative to Dismiss S & N's First Amended Answer and Counterclaims ("Motion to Dismiss"), ECF No. 260. After examining the briefs and the record, the Court determines that oral argument is unnecessary because the facts and legal contentions are adequately presented and oral argument would not aid in the decisional process. Fed.R.Civ.P. 78(b); E.D. Va. Loc. R. 7(J).
This is a patent infringement action involving the following five patents: U.S.
On October 28, 2014, Defendants moved for judgment on the pleadings, seeking to invalidate the asserted claims of the patents-in-suit because they did not claim patent-eligible subject matter under 35 U.S.C. § 101. Defs.' Mot. for J. on the Pleadings, ECF No. 197. On November 10, 2014, Defendants moved for leave to amend their answer to assert inequitable conduct declaratory judgment counterclaims. Defs.' Mot. for Leave to File First Am. Answer & Countercls., ECF No. 204. Defendants attached their proposed amended answer to their memorandum in support of the motion for leave to amend. Defs.' Mem. Supp. Mot. for Leave to File First Am. Answer & Countercls. Ex. A, ECF No. 204-1. In opposition to Defendants' motion for leave to amend, Plaintiff contended that the Court should deny leave to amend on the basis of futility because the inequitable conduct counterclaims in the proposed amended answer did not satisfy the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See Pl.'s Mem. Opp'n Mot. for Leave to File First Am. Answer & Countercls. at 1, ECF No. 224.
On January 16, 2015, the Court-by Order of the magistrate judge co-assigned to this action-granted Defendants' motion for leave to amend. Order at 2-3, ECF No. 248. The Court held that Defendants had sufficiently pleaded inequitable conduct and, therefore, that granting Defendants leave to amend their answer and counterclaims would not be futile. Id. at 2. The Court directed Defendants "to file the Amended Answer no later than January 23, 2015." Id. at 3.
On January 21, 2015, the Court granted Defendants' motion for judgment on the pleadings and held that each of the asserted claims of the patents-in-suit were invalid because they did not claim patent-eligible subject matter. See Opinion and Order at 95, ECF No. 250. On that same date, the Court entered judgment in favor of Defendants on Plaintiff's infringement claims. ECF No. 251. On January 23, 2015, Defendants filed their First Amended Answer. ECF No. 253.
On February 2, 2015, Plaintiff objected to the magistrate judge's January 16, 2015 Order. Pl.'s Objections to the Magistrate Judge's Order ("Pl.'s Objections"), ECF No. 256. In its objections, Plaintiff contends that the magistrate judge erred by granting leave to amend because Defendants' proposed amendments did not sufficiently allege an inequitable conduct claim upon which relief can be granted and, therefore, amendment was futile. Id. at 1.
Rule 72(a) of the Federal Rules of Civil Procedure provides that "[t]he district judge in the case must consider timely objections" to a magistrate judge's ruling on non-dispositive matters and must "modify or set aside any part of the order that is clearly erroneous or is contrary to law." Fed.R.Civ.P. 72(a); 28 U.S.C. § 636(b)(1)(A); see Fed. Election Comm'n v. Christian Coal., 178 F.R.D. 456, 459-60 (E.D.Va.1998) (citing Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir.1990)). A magistrate judge's "finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). If a court is not firmly convinced that such an error has occurred, then "the magistrate judge's order must be affirmed." Giganti v. Gen-X Strategies, Inc., 222 F.R.D. 299, 304-05 (E.D.Va.2004). Indeed, "altering a magistrat[e] [judge's] non-dispositive orders [is] `extremely difficult to justify.'" Carlucci v. Han, 292 F.R.D. 309, 312 (E.D.Va.2013) (quoting 12 Charles Alan Wright & Arthur R. Miller et al., Federal Practice & Procedure § 3069 (2d ed.1997)). However, "[f]or questions of law there is no practical difference between review under Rule 72(a)'s contrary to law standard and a de novo standard." Bruce v. Hartford, 21 F.Supp.3d 590, 594 (E.D.Va.2014) (Cacheris, J.) (alterations, citations, and internal quotation marks omitted).
Federal Rule of Civil Procedure 12(b)(6) permits dismissal of a complaint, or a claim within a complaint, based on the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R.Civ.P. 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) must be read in conjunction with Rule 8(a)(2), which requires "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed.R.Civ.P. 8(a)(2), so as to "`give the defendant fair notice of what the ... claim is and the grounds upon which it rests,'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)) (omission in original). The United States Supreme Court has interpreted the pleading standard set forth in Rule 8(a) as requiring that a complaint include enough facts for the claim to be "plausible on its face" and thereby "raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555, 570, 127 S.Ct. 1955 (internal citations omitted). The plausibility requirement is "not akin to a `probability requirement,' but it asks for more than a sheer possibility" that a defendant is liable. Ashcroft v. Iqbal, 556 U.S. 662, 678,
In a patent infringement suit, the laws of the regional courts of appeals govern whether to grant a motion to dismiss under Rule 12(b)(6). K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 (Fed.Cir.2013) (citations omitted). Because a Rule 12(b)(6) motion tests the sufficiency of a complaint without resolving factual disputes, a district court "`must accept as true all of the factual allegations contained in the complaint' and `draw all reasonable inferences in favor of the plaintiff.'" Kensington Volunteer Fire Dep't v. Montgomery County, 684 F.3d 462, 467 (4th Cir.2012) (quoting E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011)). Accordingly, "`Rule 12(b)(6) does not countenance ... dismissals based on a judge's disbelief of a complaint's factual allegations.'" Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (quoting Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989)) (omission in original). A complaint may therefore survive a motion to dismiss "even if it appears `that a recovery is very remote and unlikely.'" Id. (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).
In addition to the general pleading standard set forth in Rule 8(a), Rule 9 of the Federal Rules of Civil Procedure establishes pleading requirements for "special matters." Fed.R.Civ.P. 9. Subsection (b) of Rule 9 addresses the pleading requirements for "fraud or mistake" and "conditions of mind" and provides that: "(b) In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Fed.R.Civ.P. 9(b).
The Court of Appeals for the Federal Circuit has held that the defense of inequitable conduct must be pleaded with particularity under Rule 9(b). Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326-27 (Fed.Cir.2009) (citing Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Sys., LLC, 350 F.3d 1327, 1344 (Fed.Cir.2003)). Federal Circuit law governs whether a defendant has pleaded inequitable conduct with sufficient particularity under Rule 9(b). Id. at 1318 (citing Cent. Admixture Pharmacy Servs., Inc. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347, 1356 (Fed.Cir.2007)). In applying the Rule 9(b) standard to the defense of inequitable conduct, the Federal Circuit has held:
Exergen, 575 F.3d at 1328-29 (emphasis
The Court will begin by assessing Plaintiff's objections to the magistrate judge's January 16, 2015 Order granting Defendants leave to amend their answer and counterclaims. Federal Rule of Civil Procedure 15 governs amendments to pleadings. Under Federal Rule of Civil Procedure 15(a):
Fed.R.Civ.P. 15(a)(1)-(2). The law of the Court of Appeals for the Fourth Circuit governs whether to grant a motion for leave to amend under Rule 15. See Exergen, 575 F.3d at 1318 (citing Cent. Admixture, 482 F.3d at 1356).
As noted above, the text of Federal Rule of Civil Procedure 15(a)(2) requires that the Court "freely give leave [to amend] when justice so requires." Fed. R.Civ.P. 15(a)(2). "This liberal rule gives effect to the federal policy in favor of resolving cases on their merits instead of disposing of them on technicalities." Laber v. Harvey, 438 F.3d 404, 426 (4th Cir.2006) (en banc) (citations omitted). However, "a district court may deny leave to amend if the amendment `would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would have been futile.'" U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 461 (4th Cir.2013) (quoting Laber, 438 F.3d at 426). Regarding futility, leave to amend "`[may] be denied on the ground of futility when the proposed amendment is clearly insufficient or frivolous on its face.'" Anand v. Ocwen Loan Servicing, LLC, 754 F.3d 195, 200 (4th Cir.2014) (alteration in original) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir.
In this case, the crux of Plaintiff's objections to the magistrate judge's ruling concerns the sufficiency of the Defendants' proposed amended answer and counterclaims. In Plaintiff's view, the magistrate judge erred by granting Defendants leave to amend their answer and counterclaims because Defendants' inequitable conduct counterclaim allegations do not state a claim upon which relief can be granted and, therefore, granting leave to amend to add such claims was futile. See Pl.'s Objections at 5. In short, Plaintiff's objections turn on whether Defendants have sufficiently pleaded inequitable conduct in their amended answer and counterclaims to survive a motion to dismiss. And that is the same question presented in Plaintiff's motion to dismiss Defendants' inequitable conduct counterclaims, albeit in a slightly different procedural posture. Accordingly, the success of Plaintiff's Rule 72 objections essentially rises and falls with the Court's analysis of Plaintiff's motion to dismiss: if Defendants have adequately pleaded inequitable conduct with particularity, it can hardly be said that the magistrate judge should have denied Defendants leave to amend. As discussed below, Defendants pleaded sufficient factual matter to state an inequitable conduct claim and to satisfy Rule 9(b)'s particularity requirements under a number of theories. Therefore, the Court OVERRULES Plaintiff's objections to the magistrate judge's order granting Defendants leave to amend their answer and counterclaims.
As noted above, Defendants have alleged that Plaintiff engaged in inequitable conduct by: (1) materially misrepresenting inventorship; (2) failing to disclose material prior art; and (3) misrepresenting prior art. Plaintiff challenges both the procedural propriety of, and substantive allegations in, Defendants' amended answer and counterclaims. Therefore, the Court must begin by addressing Plaintiff's procedural argument.
With respect to procedure, Plaintiff contends that the Court's entry of judgment in favor of Defendants, on January 21, 2015, barred any further amendment to the pleadings thereafter, absent an order of the Court setting aside the judgment. Pl.'s Mot. to Dismiss at 4. Accordingly, in Plaintiff's view, the Court should strike Defendants' First Amended Answer because it was filed subsequent to the entry of judgment in Defendants' favor. Id. at 4-6. In response, Defendants argue that the Court granted them leave to file an amended answer prior to the entry of judgment and, therefore, the entry of judgment did not bar them from filing their amended answer and counterclaims thereafter in accordance with the date set forth in the Order granting leave to amend. Def.'s Resp. Opp'n Mot. to Dismiss at 8-9.
The point at which a court enters judgment is pivotal with respect to such court's ability to grant a party leave to amend its pleadings. The Fourth Circuit has established that "`a post-judgment motion to amend is evaluated under the same legal standard' — grounded on Rule 15(a) — `as a similar motion filed before judgment was entered.'" Matrix Capital Mgmt. Fund,
Here, the Court's entry of judgment in Defendants' favor in Plaintiff's patent-infringement action, on January 21, 2015, did not bar Defendants from filing their First Amended Answer on January 23, 2015 because the Court granted Defendants leave to amend their answer prior to the entry of judgment. Perhaps unsurprisingly, the Fourth Circuit has not considered to what extent the entry of judgment limits a party's ability to file an amended pleading in accordance with a pre-judgment order granting leave to amend. However, Laber distinguished between pre- and post-judgment motions for leave to amend, rather than pre- and post-judgment amendment filings. See 438 F.3d at 427. Thus, the Court concludes that the timing of a party's motion for leave to amend, not the timing of the filing of the amended pleading, determines the extent to which a judgment bars the amendment. In this case, Defendants moved to amend their answer on November 10, 2014, well in advance of the Court's entry of judgment in their favor on Plaintiff's infringement claims on January 21, 2015. Prior to the entry of judgment, Plaintiff had a full opportunity to litigate, before the magistrate judge, the propriety of Defendants' proposed amendments. Moreover, prior to the entry of judgment, the Court granted Defendants' motion for leave to amend and expressly authorized Defendants to file their amended answer "no later than January 23, 2015." Order at 2-3, ECF No. 248. In short, once the Court granted Defendants' pre-judgment motion for leave to amend their answer to assert an inequitable conduct counterclaim, the mere fact that the Court entered judgment on Plaintiff's infringement claims during the period-provided by the Court's Order-for filing such amendments did not require Defendants to move the Court to set aside or alter the judgment before filing their amended answer.
Having considered, and ultimately rejected, Plaintiff's procedural challenge to Defendants' First Amended Answer and Counterclaims, the Court must now consider Plaintiff's substantive challenge to the sufficiency of Defendants' inequitable conduct allegations. Therefore, the Court will assess the extent to which Defendants have pleaded with particularity each subset of the allegations comprising Defendants' alleged inequitable conduct counterclaims.
In their First Amended Answer and Counterclaims, Defendants, first, allege that Plaintiff engaged in inequitable conduct by misrepresenting the inventorship of the patents-in-suit. More specifically, Defendants allege (1) that Jeffrey Farr ("Farr"), Curtis Chambers ("Chambers"), Steven Nielsen ("Nielsen") — the named inventors of the '204, '341, and '001 patents — and Joseph Teja ("Teja") — the prosecuting attorney — misrepresented to the Patent and Trademark Office ("PTO") that Farr was an inventor of the '204, '341, and '001 patents; and (2) that Chambers, Nielsen, and Teja — as well as Farr with respect to the '204 and '341 patents — misrepresented the inventorship of the '204, '359, '344, and '341 patents to the PTO by failing to name Greg Block ("Block") as an inventor. See First Am. Answer & Countercls. ¶¶ 63, 65-66, 68.
With respect to Farr's inventorship, Defendants allege that Plaintiff engaged in inequitable conduct when Farr, Chambers, and Nielsen signed, and Teja submitted, declarations to the PTO that listed Farr as a named inventor of the '204, '341, and '001 patents, even though Farr was not, in fact, an inventor of such patents. Id. ¶¶ 63-65. According to Defendants, notwithstanding such declarations,
Id. ¶ 66.
In response, Plaintiff contests the sufficiency of Defendants' allegations that: Farr was not an inventor of the '204, '341, and '001 patents, the inclusion of Farr as an inventor was material, and any misrepresentation was made with the specific intent to deceive the PTO. See Pl.'s Mot. to Dismiss at 7-9. First, Plaintiff contends that Defendants have not alleged facts sufficient to support their assertion that Farr was not an inventor of the '204, '341, and '001 patents because Defendants have merely alleged that Farr was not involved in the development of the embodiment of the claims of the '203, '341, and '001 patents, the e-Sketch product, rather than alleging that Farr was not involved in the conception of the claims of such patents. See id. at 7-8. In other words, Plaintiff asserts that Defendants have not stated a plausible claim because inventorship hinges on development of the claims of the patents, rather than of the products embodying such claims. Second, Plaintiff argues that Defendants have failed to plead materiality because they have not adequately alleged that the inclusion of Farr as an inventor qualified as a material misrepresentation to the PTO. Id. at 8-9. Third, Plaintiff contends that Defendants have failed to plead intent because they have only done so "on information and belief." Id. at 9.
The Court concludes that Defendants have adequately pleaded inequitable conduct regarding Farr's inventorship of the '204, '341, and '001 patents. Defendants have identified the "who" of the alleged misrepresentations by identifying Farr, Chambers, and Nielsen as the individuals that signed, and Teja
The adequacy of Defendants' allegations regarding the "what" of inequitable conduct based on Farr's inventorship is a somewhat closer question. The core of Defendants' allegations with respect to Farr is that the declarations indicating that Farr was an inventor of the '204, '341, and '001 patents were misrepresentations because Farr has admitted that he was not involved in the conception of the idea that became the e-Sketch product, the embodiment of the asserted independent claims of such patents. See First Am. Answer & Countercls. ¶ 66. With respect to inventorship, the Federal Circuit has noted:
Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 776 F.3d 837, 845 (Fed.Cir.2015) (alteration in original) (internal citations and quotation marks omitted). In addition, "a co-inventor need not make a contribution to every claim of a patent. A contribution to one claim is enough. Thus, the critical question for joint conception is who conceived, as that term is used in the patent law, the subject matter of the claims at issue." Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed.Cir.1998) (internal citations omitted).
The Court finds that Defendants' allegations regarding the "what" of the alleged misrepresentations as to Farr are sufficient to survive Plaintiff's motion to dismiss. Plaintiff correctly notes that inventorship depends on the extent to which Farr contributed to the conception of the claims of the '204, '341, and '001 patents — rather than Farr's contribution to the embodiment of such claims — and that Farr need only have contributed to one claim of each such patent to qualify as an inventor thereof. Admittedly, Defendants have not expressly alleged that Farr did not contribute to any single claim of the '204, '341, and '001 patents. However, Defendants have alleged that Farr "admitted under oath that he was not involved in conception of the idea that became the e-Sketch product, which is Plaintiff's embodiment of the asserted independent claims of the Patents-in-Suit." First Am. Answer & Countercls. ¶ 66. While such allegation is not equivalent to an allegation that Farr did not contribute to the conception of any claim of the '204, '341, and '001 patents, to the extent that the e-Sketch product is Plaintiff's embodiment of the claims of such patents, if Farr was not involved in conceiving the idea that became such product, the Court reasonably can infer that he did not contribute to any claim of the '204, '341, and '001 patents. In other words, the Court recognizes the distinction between contributing to one of
As to Farr's inventorship, Defendants also have adequately pleaded materiality and intent. Contrary to Plaintiff's assertion, the Federal Circuit has held that misrepresentations regarding inventorship are material. See Advanced Magnetic Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 828 (Fed.Cir.2010) (citations omitted); Frank's Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd., 292 F.3d 1363, 1377 (Fed.Cir.2002); PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1322 (Fed.Cir.2000). Thus, Defendants' allegation that Farr, Chambers, Nielsen, and Teja misrepresented Farr's inventorship satisfies the materiality element of an inequitable conduct claim. Furthermore, Defendants have also sufficiently pleaded that, at a minimum, Farr misrepresented his inventorship with the specific intent to deceive the PTO. Plaintiff correctly notes that, as a general rule, a defendant cannot satisfy Rule 9(b) by pleading deceptive intent solely on information and belief. See Exergen, 575 F.3d at 1330. However, in this case, in addition to Defendants' conclusory allegations that "on information and belief, Farr's false statements regarding inventorship were made with the specific intent to deceive," First Am. Answer & Countercls. ¶ 68, Defendants allege facts that, if true, allow the Court to reasonably infer that Farr misrepresented his inventorship to the PTO with the specific intent to deceive such office. The allegation that the prosecuting attorney, "Teja[,] discussed with Farr whether he should be named as an inventor or co-inventor on any patent applications," id. ¶ 66, permits the Court to reasonably infer that Farr was aware of the requirement that he contribute to the conception of at least one claim of the '204, '341, and '001 patents to qualify as an inventor thereof. When combined with the allegation that Farr himself has admitted that he was not involved in the conception of the idea that became the product embodying the asserted independent claims of the patents-in-suit, the allegation that Farr met with Teja and specifically discussed whether Farr should be named as an inventor permits the Court to reasonably infer that Farr had the specific intent to deceive the PTO when he signed the declarations that listed himself as an inventor. Furthermore, Defendants' allegations
Defendants' allegations regarding Block's inventorship are essentially the converse of their allegations regarding Farr's alleged non-inventorship. Defendants allege that Plaintiff engaged in inequitable conduct when Nielsen, Farr, Chambers, and Teja failed to disclose Block as an inventor of the '204, '359, '344, and '341 patents. First Am. Answer & Countercls. ¶ 68. Defendants allege that Block "contributed in a significant manner to the conception and reduction to practice of the eSketch product," "was the `primary developer' at `the genesis' of what became the e-Sketch product that Nielsen, Chambers, and Farr later sought to patent," and "built the e-Sketch prototype and wrote much of the code himself for the prototype." Id. ¶ 69. Despite such alleged participation in the development of the e-Sketch product, Defendants allege that Nielsen and Chambers failed to name Block in declarations submitted during prosecution of the '204, '359, '344, and '341 patents, and that Farr failed to name Block in declarations submitted during prosecution of the '204 and '341 patents. See First Am. Answer & Countercls. ¶ 71 & 26 n. 1. Moreover, according to Defendants, "Nielsen, Chambers, and Farr were actively involved ... in identifying who would be named as purported inventors, and in reviewing in advance written submissions to the [PTO]." Id. ¶ 60. Defendants also allege that "Teja knew the standard for being named as an inventor or co-inventor, and discussed inventorship with Farr, Chambers, and Nielsen in connection with listing them as named inventors on the '204, '359, '344, and '341 patents." Id. ¶ 71.
Plaintiff challenges the sufficiency of Defendants' allegation with respect to Block for reasons similar to those asserted regarding Farr. In particular, Plaintiff argues that Defendants' allegations that Block contributed to the conception of the e-Sketch product, which is the embodiment of the independent claims of the patents-in-suit, do not permit the reasonable inference that Block contributed to any claim
Like Defendants' inequitable conduct allegations regarding Farr's inventorship, or alleged lack thereof, Defendants have plausibly alleged an inequitable conduct claim based on misrepresentations of Block's inventorship. As with the allegations regarding Farr's inventorship, the allegations that Farr, Nielsen, Chambers, and Teja submitted false declarations to the PTO during prosecution of the '204 and '341 patents, and that Nielsen, Chambers, and Teja did so during prosecution of the '344 patents and '359 patents are sufficient to satisfy the who, where, when, and how of an inequitable conduct claim. See supra Part III.B.1.a; First Am. Answer & Countercls. ¶¶ 68-71. And, again like the Farr-inventorship allegations, Defendants' allegations that Block contributed to the conception of the e-Sketch product permit the Court to reasonably infer that Block contributed to the conception of at least one of the claims of the '204, '341, '344, and '359 patents. Indeed, Defendants have alleged, in detail, that Block: "was the `primary developer' at `the genesis' of what became the e-Sketch product that Nielsen, Chambers, and Farr subsequently sought to patent," "`envisioned' the concept that became the e-Sketch product," "was the `architect' and `responsible for the overall design' of the project that Nielsen, Chambers, and Farr later sought to patent," and "built the e-Sketch prototype and wrote much of the code himself for the prototype." First Am. Answer & Countercls. ¶ 69. At the motion-to-dismiss stage, such allegations are sufficient for the Court to reasonably infer that Block contributed to the claims of the '204, '359, '344, and '341 patents and that Nielsen, Chambers, and Teja-as well as Farr, as to the '204 and '341 patents-misrepresented the inventorship of such patents by failing to name Block as an inventor.
The Court also concludes that Defendants have adequately alleged materiality and deceptive intent. For the same reasons stated above, the alleged misrepresentation of Block's inventorship is material. See, e.g., Advanced Magnetic Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 828 (Fed.Cir.2010) (citations omitted); supra Part III.B.1.a. Furthermore, the Court finds that Defendants have alleged sufficient factual matter to permit a reasonable inference that Farr, Nielsen, Chambers, and Teja misrepresented Block's inventorship, by submitting declarations that did not list him as an inventor, with the specific intent to deceive the PTO. Defendants have alleged that Farr, Chambers, and Nielsen were "actively involved ... in identifying who would be named as purported inventors," First Am. Answer & Countercls. ¶ 60, and that "Teja knew the standards for being named as an inventor or co-inventor, and discussed inventorship with Farr, Chambers, and Nielsen in connection with listing them as named inventors on the '204, '359, '344, and '341 patents," id. ¶ 71. Such allegations permit the reasonable inference that Farr, Chambers, Nielsen, and Teja understood the standard for inventorship prior to filing the declarations regarding inventorship. Considered in combination with the allegations of Block's significant contribution to the conception of the embodiment of the '204, '341, '344, and '359 patents-the e-Sketch product-including the allegations that Block "envisioned the concept that became the e-Sketch product" and "was the architect and responsible for the overall design of the project that Nielsen, Chambers, and Farr later sought to patent," id. ¶ 69 (internal quotation marks omitted), the Court reasonably can infer that Farr, Chambers, Nielsen, and Teja
Second, Defendants allege that Plaintiff engaged in inequitable conduct by failing to disclose material prior art during the prosecution of the patents-in-suit. More specifically, Defendants allege that Plaintiff failed to disclose the following material prior art: (1) the "TelDig Utility Suite product;" and (2) the "ESRI ArcPad software." Id. ¶¶ 82, 85. The Court will consider, in turn, Defendants' allegations with respect to each item of alleged prior art. However, before turning to Defendants' specific allegations with respect to TelDig Systems, Inc.'s ("TelDig") Utility Suite product and ESRI's ArcPad Software, the Court will set forth Defendants' general allegations regarding Plaintiff's prior art searches because such allegations pertain to both TelDig's and ESRI's alleged prior art.
Defendants allege that "[b]eginning in 2008 at the latest, Dycom[ — Plaintiff's parent company — ], Nielsen, Chambers, Farr, and Teja embarked on a plan to blanket their business sector with patent applications." Id. ¶ 60. According to Defendants, in April 2008, Plaintiff engaged a "third-party consulting company, Commercial Strategy, LLC, which is in the business of providing strategic management and intellectual property consulting in support of innovation and growth initiatives." Id. ¶ 75. "As part of its engagement, Commercial Strategy was asked to do a study and prepare a report on the prior art products and services that were material to the technology that Dycom was working on, specifically the e-Sketch technology that Nielsen, Chambers, and Farr later sought to patent and resulted in the patents asserted in this case." Id. ¶ 76. Defendants allege that this study generated the "Market Intelligence Report" ("MIR"). See id. ¶ 76. "The MIR stated that, `[t]he objective of this study is to analyze companies (industry players) of interest to Dycom for the express purpose of understanding ...' each company and its intellectual property.'" Id. ¶ 77 (alteration in original). Thus, according to Defendants, "[t]he MIR identified a `Target List' of companies and `a profile of each company from the Target List that was found of interest and therefore found to be highly relevant to Dycom objectives." Id. Additionally, Defendants allege that the MIR "contained discussion of material prior art specifically identified ... as highly relevant to what [Plaintiff] sought to patent." Id. According to Defendants, "[t]hroughout the prosecution of the asserted patents, representatives of Dycom and CertusView, including Nielsen, Chambers, and Farr, were actively involved in the prosecution, in what would be submitted to and what would be withheld from the [PTO], ... and in reviewing in advance written submissions to the [PTO]." Id. ¶ 60.
Regarding failure to disclose material prior art, Defendants first allege that Plaintiff's failure to disclose the TelDig Utility Suite product constitutes inequitable conduct. In addition to the general allegations set forth above, Defendants allege that the MIR identified TelDig as a company "having technology `highly relevant' to what Dycom was pursuing." Id. ¶ 77. Therefore, the MIR included "a five-page discussion regarding [TelDig]" and stated that "[o]f particular interest is the TelDig Utility Suite product which appears similar to the eSketch concept." Id. ¶ 79.
More specifically, according to Defendants, the MIR's discussion "ma[de] clear that TelDig's technology does more than just ticket management." Id. ¶ 81. Defendants allege that the MIR stated that "TelDig Utility Suite `has the unique capability to receive sketches and maps, edit them if necessary and send them out with the locate ticket in a totally paperless process.'" Id. Moreover, Defendants allege the MIR also stated that "in addition to ticket management, TelDig's technology has wireless data sharing, mapping and GIS, and image and audio storage capabilities." Id. Indeed, according to Defendants, "Nielsen, Chambers, and Farr knew that the TelDig technology was much more than just `ticket management software.'" Id. Yet, Defendants allege that "Teja did not receive the MIR, and was told by Nielsen, Chambers and Farr that TelDig's technology was merely `ticket management software.'" Id.
Defendants allege that "[d]espite the fact that Nielsen and Chambers were aware of the materiality of the TelDig Utility Suite product at least as early as July 22, 2008, they never disclosed the TelDig Utility Suite product, or any TelDig prior art, for that matter, to the [PTO] during the prosecution of the Patents-in-Suit." Id. ¶ 82. According to Defendants, "[d]uring prosecution of the '204, '001, '359, '344, and '341 [p]atents, the [PTO] concluded that the cited prior art did not disclose at least a digital representation of a physical locate mark, but this element is present in the TelDig Utility Suite product discussed in the MIR." Id. ¶ 83. Thus, Defendants allege that "[t]his element was not found by the examiners in any other cited prior art, and had the examiners of the[`] 204, '001, '359, '344, and '341 [p]atents known about the MIR and the TelDig Utility Suite product disclosed therein, the Patents-in-Suit would not have issued." Id.
Under Exergen, Defendants must allege the "who, what, when, where, and how" of the alleged failure to disclose prior art. 575 F.3d at 1328. Defendants have adequately alleged the "who" of the alleged inequitable conduct by alleging that Nielsen and Chambers failed to disclose the TelDig Utility Suite product to the PTO. Id. ¶ 82. Defendants have also adequately alleged the "when" of the alleged inequitable conduct by alleging that Nielsen and Chambers were aware of the TelDig Utility Suite product as early as the July 22, 2008 MIR, but never disclosed such alleged prior art to the PTO. See id. ¶¶ 81-82. Similarly, Defendants sufficiently have alleged "where" the material information allegedly withheld from the PTO can be found within the alleged omission by identifying the TelDig Utility Suite product and the allegedly material feature of such product — the "digital representation of a physical locate mark," First Am. Answer & Countercls. ¶ 83. See Keystone Global LLC v. Decor Essentials Ltd., No. 12 Civ. 9077(DLC), 2014 WL 888336, at *2 (S.D.N.Y. Mar. 6, 2014) (finding that factual allegations satisfied Rule 9(b)'s requirements, in part, by specifying the piece of prior art, a product, that the applicants allegedly failed to disclose to the PTO). And Defendants have adequately alleged "`how' an examiner would have used [the allegedly withheld] information in assessing the patentability of the claims." Exergen, 575 F.3d at 1329-30. Defendants allege that "the cited prior art did not disclose at least a digital representation of a physical locate mark, but this element is present in the TelDig Utility
However, Defendants have failed to allege the "what" of the inequitable conduct claim predicated on the nondisclosure of the TelDig Utility Suite product. To satisfy the "what" requirement, Defendants must identify to "which claims, and which limitations in those claims, the withheld references are relevant." Exergen, 575 F.3d at 1329. Here, Defendants have failed to satisfy that requirement because they do not identify any specific claims, much less any claim limitations, to which the TelDig Utility Suite product's "digital representation of a physical locate mark" element is relevant.
Defendants next allege that Plaintiff engaged in inequitable conduct by failing to disclose the ESRI ArcPad software. Along with the general allegations set forth above, Defendants allege that the MIR included a "nine-page discussion regarding ESRI" and stated that "many [ESRI] applications[,] including the ArcPad software, read very closely to the eSketch concept." Id. ¶ 84 (alterations in original). As alleged by Defendants, "the MIR state[d] that ESRI's technology included the following: GPS, wireless data sharing, data analysis, ticket management, utilization management, mapping and GIS, and image and audio storage." Id. The MIR also concluded that "ESRI does appear to be investing in problems Dycom is interested in solving." Id. (emphasis omitted).
Defendants allege that "[d]uring prosecution of the '204 and '344 [p]atents, the [PTO] concluded that the cited prior art did not disclose at least a digital representation of a physical locate mark, but this element is present in the ESRI ArcPad software discussed in the MIR." Id. ¶ 90. Moreover, according to Defendants, "[t]his element was not found by examiners in any other cited prior art, and had examiners of the '204 and '344 [p]atents known about the MIR and the ESRI ArcPad software disclosed therein, the '204 and '344 [p]atents would not have issued." Id.
Defendants allege that Nielsen and Chambers were "put on express notice of the materiality of the ESRI ArcPad software to that which they sought to patent as early as July 22, 2008." Id. ¶ 85. However, according to Defendants, Nielsen and Chambers did not disclose the ESRI ArcPad software or other ESRI prior art to the PTO during prosecution of the '344 patent. Id. Furthermore, Defendants allege that Nielsen and Chambers did not disclose the ESRI ArcPad software or other ESRI prior art to the PTO during the prosecution of the '204 patent, although they did disclose the ESRI ArcPad software roughly two weeks prior to the issuance of the '204 patent, but only in connection with the prosecution of the '359 patent and another patent. According to Defendants, Plaintiff also disclosed the ESRI ArcPad software during prosecution of the '001 and '341 patents. See id. ¶ 88.
The now-familiar Exergen standard governs the sufficiency of Defendants' pleading with respect to the inequitable conduct claims predicated on the nondisclosure of the ESRI ArcPad software during the prosecution of the '204 and '344 patents. In light of the similarity between Defendants' allegations regarding the TelDig Utility Suite product and the ESRI ArcPad software, the Court's analysis of Defendants' alleged inequitable conduct claim
In the third and final subset of inequitable conduct allegations, Defendants assert that Plaintiff engaged in inequitable conduct during the prosecution of the '344 patent because, "to overcome a rejection of all pending claims under 35 U.S.C. § 103(a),
Id. ¶ 96 (emphasis in original). Defendants further allege that "the language shown in bold above is shown in bold, for emphasis, in the original filed with the [PTO]" and that the "cited prior art references" are Tucker and Sawyer. id.
Defendants allege that the above-quoted statement of Chambers, Nielsen, and Teja, "including the language shown ... in bold for emphasis," in response to the October 6, 2011 office action, was false. Id. ¶ 97. Specifically, Defendants allege that "the concepts of a locate operation and a locate ticket are clearly present in these prior art references." Id. In support of such allegation, Defendants allege that Paragraph 44 of Sawyer "clearly discloses the concepts of a locate operation and locate ticket" and Defendants set forth the portion of such paragraph in Sawyer. Id. ¶ 98. Defendants also allege that Tucker "clearly describes a locate operation, for example in claims 1 and 6," and Defendants set forth such claims in Tucker. Id. ¶ 99.
Defendants allege that Chambers, Nielsen, and Teja made additional false statements in another portion of their response to the October 6, 2011 office action. According to Defendants, Chambers, Nielsen, and Teja told the examiner that "... Tucker ... is not concerned with locate operations to identify a presence or absence of underground facilities within a specified dig area in advance of planned excavation activities at the dig area." Id. ¶ 100 (emphasis in original). Likewise, Defendants allege that Chambers, Nielsen, and Teja told the examiner that "Sawyer... is not concerned with locate operations to identify a presence or absence of underground facilities within a specified dig area in advance of planned excavation activities in the dig area." Id. ¶ 101 (emphasis in original). According to Defendants, those two statements regarding Tucker and Sawyer were a "misrepresentation of the prior art" and "unmistakably false." Id. ¶¶ 100-01. Defendants allege that "Tucker is in fact concerned with locate operations to identify the presence or absence of underground facilities within a specified dig area in advance of [] planned excavation activities in the dig area." Id. ¶ 100. Likewise, according to Defendants, "Sawyer is in fact concerned with locate operations to identify the presence or absence of underground facilities within a specified dig area in advance of planned excavation activities in the dig area." Id. ¶ 101.
Defendants allege that "[g]iven that these statements were made with emphasis to the [PTO], and they were blatantly incorrect, the single most likely inference that can be drawn from the facts alleged is that they were made with specific intent to deceive the [PTO]." Id. ¶ 106. Additionally, Defendants allege that the "egregiousness of Teja, Nielsen, and Chambers' misrepresentations" is evidenced by the fact that, "according to Page Tucker, one of the named inventors on both the Tucker and Sawyer references ..., the concepts of a `locate operation' and a `locate ticket' are `clearly present' in the cited Tucker and Sawyer prior art references." Id. ¶ 103. Defendants allege that "Mr. Tucker does not know how one could have actually read his patents and made the statements that Teja, Nielsen, and Chambers made about them during prosecution." Id.
According to Defendants, "[t]he examiner would not have allowed claims 1-26 of the '344 [p]atent had he been aware of these unmistakably false statements regarding the prior art." Id. ¶ 106. Defendants allege that, although the examiner issued another office action rejecting the
Defendants have pleaded with particularity an inequitable conduct claim based on the alleged misrepresentation of Tucker and Sawyer during the prosecution of the '344 patent. Defendants have alleged the "who" with respect to Tucker and Sawyer by identifying Nielsen, Chambers, and Teja as the persons who allegedly misrepresented the Tucker and Sawyer prior art. See Exergen, 575 F.3d at 1328-29; First Am. Answer & Countercls. ¶¶ 92. Defendants have satisfied the "what" requirement by identifying claims 1-26 of the '344 patent, and by specifying that, following the examiner's rejection of claims 1-26 as obvious based on Sawyer in view of Tucker, Chambers, Nielsen, and Teja emphasized that the "recitation of a `locate operation'" and the "concept of a locate ticket including information identifying a dig area to be excavated or disturbed during planned excavation activities" rendered the claims of the '344 patent "allowable." See Exergen, 575 F.3d at 1329; First Am. Answer & Countercls. ¶¶ 94, 96. Additionally, Defendants have sufficiently identified the "what" of the alleged inequitable conduct by identifying the specific allegedly false statements regarding Tucker and Sawyer within Teja's response to the October 6, 2011 office action. See First Am. Answer & Countercls. ¶¶ 96, 100-101. Likewise, Defendants have adequately pleaded "when" the inequitable conduct occurred: in the response to the October 6, 2011 office action during the prosecution of the '344 patent. See Exergen, 575 F.3d at 1329. And Defendants have identified "where" in the Tucker and Sawyer references the information that allegedly renders false Defendants' statements regarding Tucker and Sawyer can be found: Paragraph 44 of Sawyer, First Am. Answer & Countercls. ¶ 98, and claims 1 and 6 of Tucker, id. ¶ 99. See Exergen, 575 F.3d at 1329. Finally, Defendants have identified "how" the examiner would have used the information that Chambers, Nielsen, and Teja allegedly misrepresented because they have alleged that Tucker and Sawyer both described a locate operation, First Am. Answer & Countercls. ¶¶ 98-99, and that the examiner considered the alleged misrepresentations regarding Tucker and Sawyer to reevaluate the examiner's prior assessment that claims 1-26 were obvious based on Sawyer in view of Tucker, First Am. Answer & Countercls. ¶¶ 94,106. Therefore, the Court concludes that Defendants have adequately alleged the who, what, when, where, and how of Plaintiff's alleged inequitable conduct through misrepresentation of Tucker and Sawyer.
The Court also finds that Defendants have alleged sufficient facts to show that the misrepresentation regarding Tucker and Sawyer was material, at least for the purposes of surviving the instant motion.
Finally, the Court finds that Defendants have pleaded sufficient facts to allow the Court to reasonably infer that Chambers, Nielsen, and Teja made the allegedly false statements about Tucker and Sawyer with the specific intent to deceive the PTO. Defendants have alleged that Nielsen and Chambers were "actively involved in prosecution, in what would be submitted to and what would be withheld from the [PTO]... and in reviewing in advance written submissions to the [PTO]." First Am. Answer & Countercls. ¶ 60. Defendants allege that, according to Mr. Tucker, the concepts of a locate operation and locate ticket are clearly present in Tucker and Sawyer. Id. ¶ 103. However, Defendants allege that, in response to the examiner's rejection of the claims of the '344 patent as obvious in view of Tucker and Sawyer, Nielsen, Chambers, and Teja falsely stated that the concept of a locate operation and locate ticket including information identifying a dig area to be excavated or disturbed during planned excavation activities were completely absent from the prior art and that Tucker and Sawyer did not concern locate operations. Id. ¶¶ 94, 96, 98-101. Indeed, according to Defendants, Chambers, Nielsen, and Teja made such statements "in bold, for emphasis." Id. ¶ 96. Considering those allegations in light of the other allegations in the First Amended Answer, for the purposes of this motion, the Court finds that it can reasonably infer that Chambers, Nielsen, and Teja knew of the falsity of their statements with respect
Although the parties failed to raise the issue, having granted in part Plaintiff's motion to dismiss, the Court must consider whether to grant Defendants leave to amend their First Amended Answer and Counterclaims to correct the deficiencies therein. Courts ordinarily grant leave to amend following a dismissal for failure to satisfy Rule 9(b)'s particularity requirement. See In re BP Lubricants USA Inc., 637 F.3d 1307, 1313 (Fed.Cir.2011) (citation omitted); see also Ostrzenski v. Seigel, 177 F.3d 245, 252-53 (4th Cir.1999) (noting that courts normally grant leave to amend following a dismissal under Rule 12(b)(6)). In considering whether to grant leave to amend, as noted above, "a district court may deny leave to amend if the amendment `would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would have been futile.'" U.S. ex rel. Nathan v. Takeda Pharm. N. Am., Inc., 707 F.3d 451, 461 (4th Cir.2013) (quoting Laber v. Harvey, 438 F.3d 404, 426 (4th Cir.2006)). Here, in its motion to dismiss, Plaintiff did not indicate whether the Court should dismiss Defendants' First Amended Answer with, or without, prejudice. However, there is no evidence of bad faith on the part of Defendants, nor prejudice to Plaintiff should the Court grant leave to amend. Moreover, at this stage, the Court cannot say that it would be futile to grant Defendants leave to amend their allegations with respect to failure to disclose the TelDig Utility Suite product and the ESRI ArcPad software because it is possible that Defendants may be able to allege additional facts to satisfy Rule 9(b)'s particularity requirement. Thus, the Court will dismiss such claims without prejudice.
For the reasons stated above, the Court
Based on the Court's ruling on the instant motion and Rule 72 objections, Defendants' inequitable conduct counterclaims remain pending in this matter. Accordingly, although the Court has entered judgment in Defendants' favor on Plaintiff's infringement claims, the Court DIRECTS the Clerk of the Court to re-open
The Clerk is
IT IS SO ORDERED.
Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288-89 (Fed.Cir.2011) (en banc) (internal citations omitted).
