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Vandor Corp. v. Matthews International Corp.

United States District Court, S.D. Indiana, Indianapolis Division

January 17, 2019



          Tim A. Baker United States Magistrate Judge

         I. Introduction

         At issue is Plaintiff Vandor Corporation's motion to strike two of Defendants Matthews International Corp.'s and Matthews International Cremation Division's affirmative defenses.[1][Filing No. 56.] The affirmative defenses allege inequitable conduct on the part of Vandor, its patent attorney, and three individual inventors, which would invalidate the patent Vandor is seeking to enforce against Matthews. Vandor argues that Matthews failed to meet the heightened pleading particularity requirements of Rule 9(b). However, Vandor tries to set the bar higher than the rule requires. Matthews' affirmative defenses adequately set out “the specific who, what, when, where, and how” of the alleged inequitable conduct, as required by Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1328 (Fed. Cir. 2009). Therefore, the Court denies Vandor's motion to strike Matthews' affirmative defenses numbers five and six. [Filing No. 56.]

         Vandor filed this action in 2015 alleging Matthews violated its patent, U.S. Patent No. 8, 104, 151. The ‘151 patent covers a “lightweight casket having foldable features.” [Filing No. 1.] The Court stayed the action during the Patent and Trademake Office's inter partes review of the ‘151 patent, but the Court lifted the stay following the PTO's decision upholding the patent. With the case active, Vandor moved to strike affirmative defenses from Matthews' answer. In response, Matthews filed its amended answer, reasserting the affirmative defenses. In this motion, Vandor again seeks to strike Matthews' fifth and sixth affirmative defenses, in which Matthews alleges the ‘151 patent is invalid due to inequitable conduct.

         II. Discussion

         Vandor argues that Matthews' fifth and sixth affirmative defenses should be stricken because Matthews fails to sufficiently plead inequitable conduct. In Matthews' fifth affirmative defense, it alleges Vandor, patent attorney Harold C. Moore, and the three inventors, Gary L. Cox, Gerald H. Davis, and Chad L. Eversole, all committed inequitable conduct by failing to disclose 16 prior art references that were material to patentability. Vandor argues this affirmative defense should be stricken because Matthews fails to adequately plead the requisite knowledge that would allow for the inference of intent, or the “who, what, when, where, and how” of the alleged inequitable conduct, as required by Exergen, 575 F.3d at 1328. In its sixth affirmative defense, Matthews alleges Moore committed a fraud on the PTO when he petitioned to revive the ‘151 patent, which Matthews believes was intentionally abandoned and not revivable. Vandor argues Matthews fails to present evidence of a reasonable basis for this belief.

         Matthews argues that it would waste judicial resources to strike the affirmative defenses now because, if evidence of inequitable conduct is discovered, Matthews will have to yet again amend its answer. Further, Matthews argues striking the defenses risks future discovery disputes regarding the scope of the case. Surprisingly, Vandor concedes that, “During discovery, Matthews will have the opportunity to obtain documents relating to every aspect of the prosecution of the ‘151 patent. At that point, Matthews will have a much more solid ground upon which to plead facts, should there be any to plead.” [Filing No. 64, at ECF p. 9.] Arguably, such permissive discovery would moot the entire issue because there would be no purpose to striking the affirmative defenses if Matthews is nonetheless permitted to conduct discovery into “every aspect of the prosecution of the ‘151 patent.” Nevertheless, the Court addresses the substance of Vandor's motion to strike.

         The two affirmative defenses at issue are based on inequitable conduct. Charges of inequitable conduct are not to be taken lightly. They accuse one or more people involved in prosecuting a patent of violating their duty of candor and good faith to the PTO. 37 C.F.R. § 1.56. Individuals before the PTO have a “duty to disclose to the Office all information known to that individual to be material to patentability.” Id. A patent is not valid “if the duty of disclosure was violated through bad faith or intentional misconduct.” Id. A finding of inequitable conduct renders the entire patent unenforceable (i.e. it is not case specific) and can have far-reaching effects, including spreading to other patents, spawning antitrust and unfair competition claims, destroying attorney-client privilege under the crime or fraud exception, and ruining the patent attorney's reputation. Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011). Claims of inequitable conduct have gummed up the patent system, leading to over-disclosure of marginally relevant prior art at the PTO and plaguing the Courts. Id. at 1289-90. In response, the Federal Circuit has tightened the standards on the equitable doctrine “that has been overused to the detriment of the public.” Id. at 1290.

         Whether inequitable conduct has been properly pleaded is governed by Federal Circuit law because it “pertains to or is unique to patent law.” Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009) (quoting Cent. Admixture Pharm. Servs., Inc. v. Adv. Cardiac Sols., P.C., 482 F.3d 1347, 1356 (Fed. Cir. 2007)). “‘[I]nequitable conduct, while a broader concept than fraud, must be pled with particularity' under Rule 9(b).” Id. (quoting Ferguson Beauregard/Logic Controls, Div. of Dover Res., Inc. v. Mega Systems, LLC, 350 F.3d 1327, 1344 (Fed. Cir. 2003)).

         a. Fifth Affirmative Defense

         Regarding Matthews' fifth affirmative defense, Vandor contends that Matthews failed to plead the what, where, or how showing material information was withheld, and failed to show the information was knowingly withheld to deceive the PTO. To satisfy Rule 9(b)'s particularity requirement regarding the materiality of a withheld or misrepresented reference, “the pleading must identify the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.” Id. at 1328.[2] The Court, however, is not convinced. To satisfy the what and where requirements, the pleading must “identify which claims, and which limitations in those claims, the withheld references are relevant to, and where in those references the material information is found.” Id. at 1329. In other words, what information was withheld, and where can that information be found. To satisfy the how (and why) requirement, the pleading must “identify the particular claim limitations, or combination of claim limitations, that are supposedly absent from the information of record.” Id.In other words, “‘how' an examiner would have used this information in assessing the patentability of the claims.” Id. at 1330.

         The affirmative defense alleges Harold C. Moore, Gary L. Cox, Gerald H. Davis, and Chad L. Eversole committed inequitable conduct when they withheld 16 prior art references from the PTO, 10 of which Vandor had submitted to the PTO on eight other occasions.

         Matthews alleges Claim 1 of the ‘151 patent shows a casket with two configurations. In the first, the side panels extend upward, making a casket body. In the second configuration, the panels extend in other directions, making it more compact. Matthews contends each of the 16 prior art references teach these configurations, but the Examiner at the PTO cited the configurations as the innovation for which the ‘151 patent was patentable. [Filing No. 44, at ECF p. 11.] As an example, Matthews points to U.S. Patent No. 6, 317, 943):

[The ‘943 patent] is a patent directed to caskets that can be stored and shipped in “a relatively compact collapsed condition” and which “may be erected to adopt a relatively upright erected condition.” The ‘943 patent discloses the same elements as the ‘151 patent, including a bottom panel, side panels, and end panels, “wherein the bottom panel, side panels and the end panels form a casket body at least in the first configuration.” In particular, the ‘943 patent discloses side panels having a lower section between fold lines 15 and 23 and an upper section above fold line 23, and end panels having a lower section between fold lines 13 and 27, and an upper section above fold line 27. The ‘943 patent also discloses that in the first configuration (i.e., ...

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