Another Inequitable Conduct Defense Bites the Dust after Thereasense

September 5, 2011

Abaxis, Inc. ("Abaxis") filed a patent infringement action against Cepheid asserting that Cepheid infringed four of Abaxis' patents. In its answer, Cepheid asserted a defense of inequitable conduct and Abaxis moved to dismiss the defense. The United States District Court for the Northern District of California granted the motion.

In support of the inequitable conduct defense, Cepheid alleged that the patent prosecutor knowingly and intentionally failed to disclose to the United States Patent and Trademark Office ("PTO") material prior art during the prosecution of the patents. Cepheid also explained that the undisclosed prior art anticipated and/or rendered the patents obvious and, therefore, the patents would not have issued had the prior art been before the PTO. Cepheid also alleged that the patent prosecutor made statements to the PTO during the patent prosecution to distinguish prior art cited by the by the PTO that were knowingly false in light of the information withheld from the PTO and "but for" these statements and the withholding of the material prior art the patents would not have issued.

Applying the Federal Circuit's recent decision in Thereasense, Inc. v. Becton, Dickinson & Co., 2011 WL 2028255 (Fed. Cir. 2011) as well as the decision in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009), the district court granted the motion to dismiss the inequitable conduct defense finding that Cepheid had not pled sufficient facts to support a reasonable inference of knowledge and intent. Focusing initially on Exergen, the district court stated that "[i]n Exergen, as here, a material reference was disclosed during prosecution of one patent but not disclosed during prosecution of the patents-in-suit . . . As in Exergen, this Court finds that Cepheid fails to allege sufficient facts to support a reasonable inference that [the patent prosecutor] 'knew of specific information in the [patent] that is allaged to be material to the claims of the [patents-in-suit].' . . . Thus, although the inequitable conduct claim here does not suffer from the additional defect of failing to identify a specific person alleged to have knowledge of he material reference as in Exergen . . . the claim here still fails for failure to sufficiently allege knowledge."

Turning to the requirement of specific intent, the district court found that Cepheid's answer failed to allege that the patent prosecutor withheld the patent with the specific intent to deceive the PTO. In reaching this conclusion, the district court found that Cepheid's reliance on the argument that the patent prosecutor knew of the information in the undisclosed patent and of its but-for materiality to the patents-in-suit was not sufficient as specific intent may not be inferred from the combination of knowledge and but-for materiality under Thereasense. "Thereasense restricts the Court's ability to infer intent based on the materiality of a withheld reference. '[A] district court may not infer intent solely from materiality. Proving that the application knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not provide specific intent to deceive.' Thereasense, 2011 WL 202825, at *10. Thus, Cepheid's inequitable conduct counterclaim and defenses also fail to adequately plead specific intent and are therefore dismiss."

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After Thereasense, it remains very difficult to establish an inequitable conduct defense as, in particular, the requirements for specific intent are difficult, if not impossible, to satisfy at an early pleading stage. Absent an outright admission by an inventor or a patent prosecutor of an intent to deceive the patent office, it is likely to be difficult to meet this requirement. With that in mind, expect more challenges--and more dismissals--of inequitable conduct defenses.

Abaxis, Inc. v. Cepheid, Case No. 10-CV-02840-LHK (N.D. Cal. Aug. 25, 2011)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.