Following the lead of the U.S. Court of Appeals for the Seventh Circuit, the U.S. Court of Appeals for the Federal Circuit held that when pleading inequitable conduct in patent cases, Rule 9(b) of the Federal Rules of Civil Procedure requires identification of the specific who, what, when, where and how of the material misrepresentation or omission committed before the U.S. Patent and Trademark Office (USPTO). Exergen Corp. v. Wal-Mart Stores, Inc., Case Nos. 06-1491, 07-1180 (Fed. Cir., Aug. 4, 2009) (Linn, J.)

S.A.A.T. Systems Application of Advanced Technology and Daiwa Products, Inc. (SAAT) appealed a district court’s denial of its motion for judgment as a matter of law (JMOL) after a jury found that SAAT willfully infringed three of Exergen’s patents directed to infrared thermometers. SAAT also appealed the lower court’s denial of its motion for leave to amend its answer to allege that two of the patents at issue were unenforceable due to inequitable conduct. Concluding that Exergen failed to introduce substantial evidence to support the jury’s finding that two of the asserted patents were infringed and also that all of the claims of the third patent were anticipated by prior art, the Federal Circuit reversed the lower court’s holding as to infringement and validity. On the issue of SAAT’s motion to amend its answer, the Court affirmed the district court’s decision that SAAT’s allegations of inequitable conduct failed to satisfy the heightened pleading requirement of Federal Rule of Civil Procedure 9(b).

In the motion for leave of the lower court to amend its answer, SAAT had alleged that two of the Exergen patents were unenforceable due to inequitable conduct by Exergen, its agents and attorneys. The main thrust of SAAT’s inequitable conduct contention was that for the prosecution of those two patents, two prior art patents known to Exergen were material and intentionally withheld by Exergen from the USPTO. One of these prior art patents was cited by Exergen for the prosecution of the third Exergen patent-in-suit, but not for the other two patents.

On appeal, SAAT argued that its allegations of Exergen’s inequitable conduct were sufficient under the U.S. Court of Appeals for the First Circuit’s “time, place, and content” test for Rule 9(b). The Court, however, disabused SAAT on this point, noting that the Federal Circuit properly applies its own law, not the law of the regional circuit, to the question of whether inequitable conduct has been pleaded with sufficient particularity under Rule 9(b). Regarding the “particularity” requirement of Rule 9(b), the Court adopted the test of the Seventh Circuit in Dileo v. Ernst & Young and held that in pleading inequitable conduct cases, Rule 9(b) requires identification of the specific who, what, when, where and how of the material misrepresentation or omission committed before the USPTO.

Noting that SAAT’s factual allegations were not specific and that deceptive intent was pleaded solely on information and belief, the Court stated that the district court was correct not to draw any permissive inference of deceptive intent with regard to the prior art patent that was cited for just the sole Exergen patent, “lest inequitable conduct devolve into ‘a magic incantation to be asserted against every patentee’ and its ‘allegation established upon a mere showing that art or information having some degree of materiality was not disclosed.’”

Practice Note: Going forward, supplemental inequitable conduct pleadings may be required after initial discovery to meet the standard announced in this case.