Pleading the Facts

Last year the Court of Appeals For The Federal Circuit (the “C.A.F.C.”) handed down its Exergen decision which increased the level of detail required when pleading inequitable conduct. Now the pleading must set forth “the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.” This heightened requirement has, on at least one occasion, led a patentee to file what can most diplomatically be described as “ill advised” motions to dismiss inequitable conduct affirmative defenses and counterclaims. (Mediostream, Inc. v. Microsoft Corporation et al.)

Mediostream is one of the legion of companies that have sued Microsoft for patent infringement. In defending itself in this matter, Microsoft alleged that Mediostream had engaged in inequitable conduct by: (1) failing to disclose four prior art devices which were on sale more than a year before the filing date of the Mediostream patents, (2) failing to disclose prior rejections in related patent applications, (3) failing to disclose cited references from related patent applications, and (4) generally failing to disclose any material information to the patent office.

Mediostream filed motions to strike or dismiss each of these defenses on the grounds that they were not pleaded with sufficient specificity.

The Magistrate Judge who “heard” (judicial speak for “decided”) these motions consolidated them, and wrote a 12-page decision. With respect to the alleged sale of prior art devices, he noted that Microsoft had identified the specific devices and had cited deposition and documentary evidence that the inventors of the Mediostream patents – and, in some cases, the attorneys prosecuting the patent applications – were aware both of the sales and that the said prior art devices “met all of the limitations of at least one claim” of each of the (two) patents-in-suit.

With respect to the alleged failure to disclose prior claim rejections, he noted that Microsoft had pled that one of the patents-in-suit, a continuation of an earlier application, “was filed with the original claims that had been rejected as anticipated during the prosecution of the [earlier] application, but … Mediostream did not inform the patent office that these claims had been previously rejected, and the claims ultimately issued …” These allegations were supported by citations to the official patent office records of the prosecution of the patents (the “file wrappers”).

Turning to the alleged failure to disclose a prior art reference cited in a related patent application, he noted that Microsoft had identified the reference in question and cited portions of the file wrapper of the earlier application to establish that Mediostream knew of the materiality and relevance of the withheld reference.

Finally, with respect to the allegation that Mediostream had “generally” withheld information which should have been disclosed to the patent office, he observed that Microsoft had pled that the previously “alleged acts of inequitable conduct evidence a pattern of inequitable conduct intentionally pursued in order to secure issuance of the [patents-in-suit].”

Having reiterated the facts alleged in Microsoft’s pleadings, the Judge found them – each and every one – to be sufficiently specific. “For each individual alleged act of inequitable conduct, [Microsoft has] identified at least one individual [who] knew of the withheld information and/or withheld the information, and supported these allegations with facts … Because [Microsoft’s] individual allegations sufficiently allege inequitable conduct, [the] collective failure to disclose allegation is sufficient …”

Although the Judge did not decide whether Mediostream had committed inequitable conduct, after reading the decision our money is on Microsoft.

THE LESSON TO BE LEARNED: While some judges may complain about overuse or misuse of charges of inequitable conduct, sometimes inequitable conduct apparently does exist; however, to paraphrase Sergeant Joe Friday, “you’ve got to plead the facts.”