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Eagle View Technologies, Inc. v. Xactware Solutions, Inc.

United States District Court, D. New Jersey, Camden Vicinage

March 28, 2018

Eagle View Technologies, Inc. et al., Plaintiffs,
Xactware Solutions, Inc. et al., Defendants.



         This is a patent infringement action brought by Eagle View Technologies and Pictometry International (together “Plaintiffs”) against Xactware Solutions and Verisk Analytics (together “Defendants”). Before the Court are two motions by Plaintiffs: one under Federal Rule of Civil Procedure (“Fed. R. Civ. P.” or “Rule”) 12(b) 6 to dismiss the Inequitable Conduct Counterclaim (Count XIX) in Defendants' Second Amended Answer (“Answer”), and the other under Fed.R.Civ.P. 12(f) to strike from the Answer Defendants' Twelfth Affirmative Defense of Inequitable Conduct.

         For the reasons below, Plaintiffs' motion to dismiss under Rule 12(b) (6) is granted without prejudice and with leave for Defendants to amend; and, Plaintiffs' motion to strike under Fed.R.Civ.P. 12(f) is also granted without prejudice and with leave for Defendants to amend in accordance with the Rules.

         An appropriate Order accompanies this Opinion.

         1.0 Background

         1.1 Parties' Business Relationship

         Plaintiffs are the owners of the patents at issue[1] that recite, among other things, business methods, systems, and computer readable storage media for providing a roof repair estimate. The claimed invention applies photogrammetric methods, that is, trigonometric calculations, to images of rooves in aerial photographs to compute measurements of those rooves. Defendant Xactware Solutions, Inc., is a subsidiary of Defendant Verisk Analytics, and provides online technology tools and systems to insurance carriers, remodelers and construction service providers for determining replacement-cost calculations for damaged buildings and construction estimates. The parties have asserted they are competitors to each other (Doc. 15:¶1)[2].

         1.2 Relevant Procedural History

         On 23 September 2015, plaintiffs filed their original complaint against defendants and on 30 November 2015, an amended complaint. Both of these (Docs. 1 and 30) allege direct and indirect infringement under 35 U.S.C. § § 271(a) and (b) of at least one claim of each patent at issue. On 12 November 2015, defendants answered the complaint (Doc. 15) and counterclaimed, asserting the invalidity of each of plaintiffs' claims at issue and that defendants' software tools and systems can therefore not infringe. On 18 May 17, on leave from the Court, Defendants filed a Second Amended Answer, including affirmative defenses and counterclaims (“Amended Answer”___) Plaintiffs filed a joint motion (Doc. 245) to dismiss Defendants' inequitable conduct Counterclaim (Count XIX in the Amended Answer) and to strike the twelfth affirmative defense relating to that counterclaim. On 3 July 2017, defendants opposed these joint motions (Doc. 255); and on 13 July 2017, plaintiffs replied to defendants' opposition (Doc. 266). The parties' arguments focus on whether the inequitable conduct counterclaim has been pled with required particularity and therefore complies with the pleading standards of the Federal Circuit and the Third Circuit.

         2.0 Pleading Standards

         2.1 General Pleading Standard for Motion to Dismiss under Rule 12(b)(6)

         As a general rule, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true to “state a claim to relief that is plausible on its face.' “Ashcroft v. Iqbal, 556 U.S. 662, 677, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) [quoting Bell Atl. Corp. v. Twombly, 550 U.S.544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)]. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Twombly, 550 U.S. at 556. This pleading requirement applies to pleadings made under Rule 9. Iqbal, 556 U.S. at 686-87.

         In reviewing a motion to dismiss pursuant to Rule 12(b)(6), “the Court must ‘accept all factual allegations as true and construe the complaint in the light most favorable to the plaintiff [or challenger].” Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 291 F.3d 361, 374 n. 7 (3d Cir.2002)). “[J]udging the sufficiency of a pleading is a context- dependent exercise” (West Penn Allegheny Health System, Inc. v. UPMC, 627 F.3d. 85, 98 (3d Cir.2010)) since “[s]ome claims require more factual explication than others to state a plausible claim for relief”. Id. Specifically, the more complicated ones may demand more factual allegations. Id. In the determination of fact sufficiency, courts may consider allegations in the complaint and exhibits attached thereto, information in the public record, and documents forming the basis of a claim. Lum v. Bank of Am., 361 F.3d 271, 222 n. 3 (3d Cir.2004).

         Bistrain v. Levi, 696 F.3d 352, 365 (3d Cir. 2014) details three steps to determine whether a complaint meets the pleading standard: 1) the court first outlines the elements a plaintiff must plead to state claim for relief; 2) then peels away allegations that are only conclusions, and 3) then identifies well- pled factual allegations, assumes their veracity and analyzes “whether they plausibly give rise to an entitlement of relief.” Id.

         2.2 Inequitable Conduct Pleading Standard for a Rule 12(b)(6) Motion

         A claim of inequitable conduct in acquiring or maintaining a patent has two elements: intent to deceive and materiality of the omission / misrepresentation to the PTO. Determining sufficiency of a motion pleading inequitable conduct before the PTO is a question of patent law and, as such, governed by Federal Circuit law. Exergen Corporation v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1312 (Fed.Cir. 2009).

         The standard for pleading inequitable conduct is different than that for proving it. See Phillips v. County of Allegheny, 515 F.3d 224, 230 (3d Cir.2008) [stating generally that pleading a claim does not require proving it]. The Federal Circuit recently heightened the merits standard of proving inequitable conduct, requiring that deception before the PTO be “but-for” material. Therasense, Inc. v. Becton Dickinson and Co., 649 F.3d 1276, 1291-92 (Fed.Cir. 2011). No longer is it enough to show the omission/misrepresentation was highly material to patentability and reasonably implied intent to deceive. Now, it must be shown that, because of the misrepresentation or omission, the patent at issue is not patentable. Id. at 1291.

         Even though different, the pleading standard for inequitable conduct is related to the merits standard in that both allegations must be pled with Rule 9(b) specificity. As with alleging fraud, inequitable conduct must be pled with the particularity required by Rule 9(b). Exergen, 575 F.3d at 1326.

         The standard for pleading inequitable conduct standard is set forth in Exergen 575 F.3d at 1326- 1337, which demands the inclusion of sufficient allegations of material facts so that a court may reasonably infer that a specific individual either knew information was withheld from, or falsely reported to, the PTO, and did so with specific intent. Id. at 1328-29. “A reasonable inference is one that is plausible and that flows logically from the facts alleged.” Depomed, Inc. v. Purdue Pharma, L.P. et al., No. 13-571, 2017 WL 2804953, at *4 (D.N.J. 28 June 2017) [quoting Exergen, 575 F.3d at 1329 n.5.] That is, the factual allegations must present something more than the mere possibility of legal misconduct. Id. at 1326-27; In re Lipitor Antitrust Litigation, MDL 2332, 2013 WL 4780496, at *13 (D.N.J. 5 September 2013) [citing Iqbal, 556 U.S. at 681].

         To the point, pleading inequitable conduct properly requires identifying the specifics of who, what, when, where, why, and how of the material misrepresentation / omission before the PTO. Exergen, 575 F.3d at 1328; see also Fresenius Kabi USA, LLC v. Fera Pharm. LLC, No. 15-3654, 2016 WL 5348866, at * 10 (D.N.J. 23 September 2013). The “who” must be pled with the name of the person who withheld or misrepresented the information; the “what' and “where” pled by identifying the germane claims and claim terms, their connection to the withheld or false information, and what segments of the information are relevant; the “why” pled by explaining why the information is material; and the “how” pled by showing how the information is relevant to a PTO examiner's assessment of patentability of the claims. Exergen, 575 F.3d at 1327; Fresenius Kabi USA, 2016 WL 5348866, * 10; Senju Pharmaceutical Co., Ltd et al. v. Apotex Inc. et al., 921 F.Supp.2d 297, 306-307 (D.De. 2013).

         Even though Exergen did not concern a Rule 12(b) (6) motion, [3] this court has consistently applied the Exergen pleading standard to such motions relating to inequitable conduct claims in patent infringement cases. Judge Simandle of this Court has pointed out the Federal Circuit extended its Exergen standard in Delano Farms Co. et al. v. California Table Grape Comm'n, 655 F.3d 1337, 1350 (Fed.Cir. 2011), which expressly concerned, post-Therasense, a Rule 12(b)(6) motion of inequitable conduct. Mycone Dental Supply Co., Inc. v. Creative Nail Design, al., No. 11-4380, 2013 WL 3216145, at *4-5 (D.N.J. 24 June 2013). Moreover, this Court in Depomed, 2017 WL 280-4953, at *4 acknowledged that Delano Farms exemplified Exergen's standard in a Rule 12(b)6 context. See also Warner Chilcott Co., LLC et al. v. Amneal Pharmaceuticals, LLC, et al., Nos. 11-5989, 11-6936, and 12-1474, 2013 WL 6627694, at *3 (D.N.J. 20 December 2013) and Taro Pharmaceuticals N.A. et al. v. Suven Life Sciences, Ltd., No. 11- 2452, 2012 WL 2513523, at * 5 (D.N.J. 28 June 2012) [each citing Exergen and Delano Farms together as setting the standard]. Further, Judge Wolfson of this Court cites Exergen 575 F.3d at 1331 to emphasize that fact allegations must suggest the deliberate nature of the fraud on the PTO. Jersey Asparagus Farms, Inc. v. Rutgers University, 803 F.Supp.2d 295, 308 (D.N.J.2011).

         Moreover, other courts in this Circuit have relied on the Exergen standard in a motion to dismiss inequitable conduct claims. For example, Chief Judge Conti interpreted the Exergen standard to mean that a factual deficiency with respect to the required who, what, where, where, how, and why elements is “fatal under Rule 9(b).' “ ILIFE Technologies Inc. v Body Media, Inc., No. 14-990, 2015 WL 1000193, at *2 (W.D.Pa. 6 March 2015). See also IBM Corp. v. The Priceline Group, Inc., No. 15-137, 2017 WL 1349175 at *4 (D.De. 4 Apr 2017); Courtesy Products, L.L.C. v. Hamilton Beach Brands, Inc., No. 13-2012, 2015 WL 6159113, at *4 (D.De. 20 October 2015); Senju Pharmaceutical, 921 ...

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