Courtesy Products LLC v. Hamilton Beach Brands Inc.

Filing 76

REPORT AND RECOMMENDATIONS- granting-in-part 37 MOTION to Dismiss for Failure to State a Claim and MOTION to Strike, denying 21 Renewed Partial Motion to Dismiss Willful Infringement Claims. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 11/6/2015. Signed by Judge Sherry R. Fallon on 10/20/2015. (lih)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
COURTESY PRODUCTS L.L.C.,
Plaintiff,
v.
HAMILTON BEACH BRANDS, INC.,
Defendant. _,

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Civil Action No. 13-2012-SLR-SRF

REPORT AND RECOMMENDATION
I.

INTRODUCTION
Presently before the court in this patent infringement action are defendant Hamilton

Beach Brands, Inc.' s ("Hamilton Beach" or "defendant") renewed partial motion to dismiss
plaintiff Courtesy Products, L.L.C.'s ("Courtesy Products" or "plaintiff') willful infringement
claims pursuant to Federal Rule of Civil Procedure 12(b)(6) (D.I. 21); and Courtesy Products'
partial motion to dismiss and strike Hamilton Beach's· inequitable conduct counterclaims and
defenses 1 (D.I. 37). For the following reasons, I recommend that the court deny Hamilton
Beach's motion to dismiss, and grant-in-part Courtesy Products' partial motion to dismiss and
strike. I recommend that Hamilton Beach be granted permission to amend its pleading to correct
the deficiencies in the inequitable conduct counterclaim and affirmative defense. To the extent
that Courtesy Products' pending motion seeks dismissal of Hamilton Beach's antitrust

1

Courtesy Products filed a combined partial motion to dismiss Hamilton Beach's inequitable
conduct and antitrust counterclaims, and motion to strike Hamilton Beach's inequitable conduct
defense regarding U.S. Patent Numbers 7,311,037 ("the '037 patent"); 7,258,884 ("the '884
patent"); and 7,770,512 ("the '512 patent"). This Report and Recommendation will only address
the motions as they pertain to the inequitable conduct counterclaims and defenses. Issues
pertaining to the antitrust counterclaims are reserved for resolution by Judge Robinson.

counterclaim, this issue is reserved for resolution by Judge Robinson.

II.

BACKGROUND
On December 9, 2013, Courtesy Products filed a complaint asserting that Hamilton

Beach directly, indirectly, and willfully infringed United States Patent Numbers 7,311,037 ("the
'037 patent"), 7,258,884 ("the '884 patent"), and 7,770,512 ("the '512 patent") (collectively, the
"patents-in-suit") directed to disposable brew basket technology for electric coffee makers. (D.I.
1) Hamilton Beach subsequently moved to dismiss Courtesy Products' complaint, and on
November 5, 2014, the court granted the motion with respect to the direct and indirect
infringement claims of the '844 patent and the willful infringement claims regarding all three
patents-in-suit. (D.I. 8; D.I. 18-19) Courtesy Products filed an amended complaint on December
12, 2014 in an effort to cure the deficiencies in the original complaint. (D.I. 20) Hamilton
Beach then filed its renewed motion to dismiss on January 5, 2015, challenging the sufficiency
of Courtesy Products' willful infringement claims. (D.I. 21) On February 26, 2015, Courtesy
Products filed a motion to dismiss for failure to state a claim regarding Hamilton Beach's
counterclaim for inequitable conduct, and a motion to strike Hamilton Beach's affirmative
defense of inequitable conduct. (D .I. 37)

III.

LEGAL STANDARDS
A.

Rule 12(b)(6)

Rule l 2(b)(6) permits a party to move to dismiss a complaint for failure to state a claim
upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering a Rule 12(b)(6)
motion to dismiss, the court must accept as true all factual allegations in the complaint and view
them in the light most favorable to the plaintiff. Umland v. Planco Fin. Servs., 542 F.3d 59, 64
(3d Cir. 2008).

2

To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint
must contain a "short and plain statement of the claim showing that the pleader is entitled to
relief." Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required, the
complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that
is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft

v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations
allow the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.
When determining whether dismissal is appropriate, the court must take three steps. 2 See

Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify
the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject
conclusory allegations. Id at 678. Third, the court should assume the veracity of the wellpleaded factual allegations identified under the first prong of the analysis, and determine whether
they are sufficiently alleged to state a claim for relief. Id; see also Malleus v. George, 641 F.3d
560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on
[the court's] experience and common sense." Id at 663-64; see also Fowler v. UPMC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal, "where

the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to
relief."' Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

2

Although Iqbal describes the analysis as a "two-pronged approach," the Supreme Court
observed that it is often necessary to "begin by taking note of the elements a plaintiff must plead
to state a claim." 556 U.S. at 675, 679. For this reason, the Third Circuit has adopted a threepronged approach. See Santiago v. Warminster Twp., 629 F.3d 121, 130 n.7 (3d Cir. 2010);
Malleus v. George, 641F.3d560, 563 (3d Cir. 2011).
3

B.

Rule 12(f)

Rule 12(b)(6) does not offer a mechanism for dismissing affirmative defenses because it
refers only to "claim[s]." See Wyeth Holdings Corp. v. Sandoz, Inc., C.A. No. 09-955-LPS-CJB,
2012 WL 600715, at *4 (D. Del. Feb. 3, 2012). However, Rule 12(±) provides: "The court may
strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or
scandalous matter." Fed. R. Civ. P. 12(±). "When ruling on a motion to strike, the [c]ourt must
construe all facts in favor of the nonmoving party and deny the motion if the defense is sufficient
under the law. Further, a court should not grant a motion to strike a defense unless the
insufficiency of the defense is clearly apparent." Symbol Techs., Inc. v. Aruba Networks, Inc.,
609 F. Supp. 2d 353, 356 (D. Del. 2009) (citations and internal quotation marks omitted). "As a
general matter, motions to strike under Rule 12(f) are disfavored." Fesnak & Assocs., LLP v.

US. BankNat'l Ass'n, 722 F. Supp. 2d 496, 502 (D. Del. 2010).

IV.

DISCUSSION
A.

Willfulness

In support of the motion to dismiss Courtesy Products' willful infringement claims,
Hamilton Beach contends that Courtesy Products failed to cure the deficiencies in the factual
content of the original complaint regarding the objective recklessness prong of the willfulness
inquiry. (D.I. 22 at 4-6) According to Hamilton Beach, knowledge of the patents-in-suit alone is
insufficient to establish willfulness, and allegations regarding a license for a product not at issue
in this case are irrelevant. (Id) In·response, Courtesy Products alleges that it sufficiently
pleaded objective recklessness in the amended complaint by alleging that Hamilton Beach had
pre-filing knowledge of a patent, sold infringing products to its clients, and instructed its clients
in their use of the infringing products. (D.I. 29 at 2-5) Moreover, Courtesy Products contends

4

that a plaintiff is not required to establish a link between the knowledge and objective
recklessness requirements to sufficiently state a claim for willful infringement. (Id at 6)
The Federal Circuit has set forth a two-pronged standard for establishing willful
infringement, an objective prong and a subjective prong. With respect to the former, "a patentee
must show by clear and convincing evidence that the infringer acted despite an objectively high
likelihood that its actions constituted infringement of a valid patent. The state of mind of the
accused infringer is not relevant to this objective inquiry." In re Seagate Tech., LLC, 497 F.3d
1360, 1371 (Fed. Cir. 2007) (internal citations omitted). If the objective prong is satisfied, the
patentee must next establish that "this objectively-defined risk (determined by the record
developed in the infringement proceeding) was either known or so obvious that it should have
been known to the accused infringer." Id. This subjective prong hinges on the fact finder's
assessments of the credibility of witnesses. LG Elecs. US.A., Inc. v. Whirlpool Corp., 798 F.
Supp. 2d 541, 557 (D. Del. 2011). "The drawing of inferences, particularly in respect of an
intent-implicating question such as willfulness, is peculiarly within the province of the fact finder
that observed the. witnesses." Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1225
(Fed. Cir. 2006) (citation and internal quotation marks omitted).
At the pleading stage, a plaintiff alleging a cause of action for willful infringement must
"plead facts giving rise to at least a showing of objective recklessness of the infringement risk."

St. Clair Intellectual Prop. Consultants, Inc. v. Hewlett-Packard Co., C.A. No. 10-425-LPS,
2012 WL 1134318, at *2-3 (D. Del. Mar. 28, 2012) (internal citation and quotation marks
omitted). "Actual knowledge of infringement or the infringement risk is not necessary to plead a
claim for willful infringement," but the complaint must adequately allege "factual circumstances

5

in which the patents-in-suit [a]re called to the attention" of the defendants. MONEC Holding AG
v. Motorola Mobility, Inc., 897 F. Supp. 2d 225, 236 (D. Del. 2012).
The amended complaint adequately pleads facts in support of objective recklessness. The
court dismissed Courtesy Products' willful infringement claims in the original complaint
primarily because the allegations contained insufficient facts to establish the knowledge prong of
the willfulness inquiry. 3 (D.I. 18 at 9) The parties agree that the amendments have cured the
deficiencies in the knowledge allegations. (D.I. 22 at 4) The amended allegations regarding the
knowledge requirement, combined with allegations that Hamilton Beach directly and/or
indirectly infringed the patents-in-suit, and that it intentionally advised third party customers to
use the accused products in systems that infringe the patents-in-suit, adequately allege that
Hamilton Beach was objectively reckless as to the infringement risk. (D.I. 20 at ,-r,-r 11-15; 20-24;
29-33)
Cases within this district have held that allegations of willful infringement are sufficiently
pleaded when the complaint claims (1) knowledge of the patent-in-suit by the alleged infringer,
(2) sales of the accused product to customers, and (3) knowledge that those customers will use
the accused product for its infringing use. In Fairchild Semiconductor Corp. v. Power
Integrations, Inc., the court held that the disputed counterclaim adequately stated a cause of
action for willful infringement because it alleged that, in addition to the plaintiffs knowledge of

3

With respect to the objective recklessness requirement, the decision states that "the complaint
contains no facts establishing 'objective recklessness of the infringement risk,"' citing
Intellectual Ventures I LLC v. Toshiba Corp., 66 F. Supp. 3d 495 (D. Del. 2014). In Intellectual
Ventures, the court determined that the objective recklessness requirement was not sufficiently
pleaded where the defendant received notice of the alleged infringement one day before the
complaint was filed. Id. at 500. In contrast, the amended complaint in the present case alleges
that Hamilton Beach has been on notice of the alleged infringement since 2009, approximately
four years before the filing of the original complaint. (D.I. 20 at ,-r,-r 15, 24, 33)
6

the patent-in-suit, "customers have in fact directly infringed" the patent-in-suit, and the plaintiff
"has knowledge of these infringing uses by its customers." 935 F. Supp. 2d 772, 778 (D. Del.
2013). In St. Clair Intellectual Property Consultants, Inc. v. Hewlett-Packard Co., the court
determined that the complaint adequately pleaded allegations of willful infringement by stating
that defendant "deliberately infringed the Patents in Suit and acted recklessly and in disregard to
the Patents in Suit in designing and making and selling" certain products, in addition to setting
forth facts regarding the defendant's knowledge of the infringement. C.A. No. 10-425-LPS,
2012 WL 1134318, at *3 (D. Del. Mar. 28, 2012). Similarly, in Bonutti Skeletal Innovations
LLC v. Conformis, Inc., the court concluded that allegations of willful infringement were
sufficiently stated in a complaint alleging that the defendant had pre-filing knowledge of the
patent-in-suit, sold infringing products to its clients, and instructed its clients in the use of those
infringing products. C.A. No. 12-1109-GMS, 2013 WL 6040377, at *2 n.5 (D. Del. Nov. 14,
2013)
Hamilton Beach's efforts to distinguish the court's holdings in Fairchild, St. Clair, and
Bonutti based on the level of detail included in the pleadings are not compelling. In Fairchild
and St. Clair, the court directly quoted language from the pleadings in support of the conclusion
that those pleadings met the requirements for objective recklessness. The quoted language, cited
in the previous paragraph, is consistent with the allegations in the instant complaint that
Hamilton Beach "intentionally advis[ es] and/or instruct[s] third parties that purchase components
of its systems to use the components for or in systems that infringe one or more claims" of the
patents-in-suit (D.I. 20 at ifif 13, 31), 4 and "knew or had reason to know that the use of its

4

The language of the corresponding allegation for the '884 patent varies slightly, accusing
Hamilton Beach of "intentionally advising and/or instructing third parties that purchase its

7

systems by third parties would infringe" the patents-in-suit (Id at~~ 14, 32). 5 Similarly, the
court in Bonutti based its conclusion regarding the sufficiency of the objective recklessness
allegations on the fact that the complaint stated that the defendant had knowledge of the patentin-suit, "sold infringing products to its clients and instructed its clients in their use of these
infringing products." Bonutti, 2013 WL 6040377, at *2 n.5. The court's rulings in these cases
were not based on any additional details in support of the objective recklessness requirement.
The parties next dispute whether a plaintiff must plead a link between knowledge and
objective recklessness to state a claim for willful infringement ':111d, if so, whether the complaint
in the present case sufficiently pleads the link. See St. Clair, 2012 WL 1134318, at *3 ("The
Proposed Complaint demonstrates a link between the various allegations of knowledge of the
patents-in-suit and the allegations that the risks of infringement" were either known or obvious to
the defendant); ReejEdge Networks, LLC v. Juniper Networks, Inc., 29 F. Supp. 3d 455, 458 (D.
Del. 2014) (quoting MONEC, 897 F. Supp. 2d at 236 ("[t]he complaint must demonstrate a link
between the various allegations of knowledge of the patents-in-suit and the allegations that the
risks of infringement were either known or were so obvious that they should have been
known.")). The allegations in the amended complaint sufficiently establish a link between
knowledge and objective recklessness by pleading that, "[h]aving executed a license in the year
2009 to practice claims of the [patents-in-suit] for a specific product ... and thus being on notice
of the [patents-in-suit], Hamilton Beach's continued activities demonstrate a willful disregard of
the [patents-in-suit] and thus constitute willful patent infringement." (D.I. 20

at~~

15, 24, 33)

components to use the components to perform methods of supplying in-room beverage service
that directly infringe one or more claims of the '884 patent." (D.I. 20 at~ 22)
5
The language of the corresponding allegation for the '884 patent varies slightly, stating that
Hamilton Beach "knew or had reason to know that the use of its single-cup coffeemakers and
disposable brew baskets by third parties would infringe the '884 patent." (D.I. 20 at~ 23)
8

For the foregoing reasons, I recommend that the court deny Hamilton Beach's motion to
dismiss the willful infringement allegations of the amended complaint.

B.

Inequitable Conduct

"An individual associated with the filing and prosecution of a patent application commits
inequitable conduct when he or she (1) makes an affirmative misrepresentation of a material fact,
fails to disclose material information, or submits false material information to the PTO; (2) with
the specific intent to deceive the PTO." XpertUniverse, Inc. v. Cisco Sys., Inc., 868 F. Supp. 2d
376, 379 (D. Del. 2012) (internal quotation marks omitted). Courtesy Products asks the court to
dismiss and strike Hamilton Beach's inequitable conduct allegations because they do not meet
the minimum requirements for pleading inequitable conduct under Fed. R. Civ. P. 9(b) and
Federal Circuit precedent. (D.I. 38 at 2-11)
A claim of patent unenforceability premised on inequitable conduct is a claim sounding
in fraud. Under Rule 9(b), fraud is a clear exception to the otherwise broad notice-pleading
standards. A party alleging unenforceability, therefore, must plead with particularity those facts
which support the claim that the patent holder acted fraudulently before the PTO. Exergen Corp.

v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009).
"To prevail on a,claim of inequitable conduct, the accused infringer must prove that the
patentee acted with the specific intent to deceive the PTO." Therasense, Inc. v. Becton,

Dickinson & Co., 649 F.3d 1276, 1290 (Fed. Cir. 2011). The standard for proving inequitable
.conduct is a more rigorous one than the standard for pleading inequitable conduct. Accordingly,
the proper standard of review is that articulated in Exergen, which held that "Rule 9(b) requires
identification of the specific who, what, when, where, and how of the material misrepresentation
or omission committed before the PTO." 575 F.3d at 1327; see also Evonik Degussa GmbH v.

9

Materia Inc., C.A. No. 09-636, 2012 WL 4503771, at *6 (D. Del. Oct. 1, 2012) (discussing
Exergen as the applicable heightened pleading standard for inequitable conduct).
Moreover, although "knowledge" and "intent" may be averred generally, a
pleading of inequitable conduct under Rule 9(b) must include sufficient
allegations of underlying facts from which a court may reasonably infer that a
specific individual (1) knew of the withheld material information or of the falsity
of the material misrepresentation, and (2) withheld or misrepresented this
information with a specific intent to deceive the PTO.

Exergen, 575 F.3d at 1328-29.
Just as a claim for inequitable conduct must meet the heightened pleading requirements
of Rule 9(b), a defendant is also "required to plead this affirmative defense with particularity
under Rule 9(b)." See Bayer CropScience AG v. Dow AgroSciences LLC, C.A. No. 10-1045,
2011 WL 6934557, at *3 (D. Del. Dec. 30, 2011). As a result, Hamilton Beach's counterclaim
and affirmative defense of inequitable conduct rise or fall together. See XpertUniverse, 868 F.
Supp. 2d at 379-83 (assessing the sufficiency of counterclaims and affirmative defenses of
inequitable conduct together); Southco, Inc. v. Penn Eng'g & Mfg. Corp., 768 F. Supp. 2d 715,
721-24 (D. Del. 2011) (same).
Courtesy Products' motion to dismiss and strike the inequitable conduct allegations is
based on the assertion that Hamilton Beach failed to adequately plead inequitable conduct as
articulated by the Federal Circuit and required by Fed. R. Civ. P. 9(b). Specifically, Courtesy
Products maintains that Hamilton Beach has not sufficiently pleaded facts to show: (1)
misrepresentations of facts that contradict other positions offered by the applicant to the PTO; (2)
but-for materiality; or (3) intent to deceive. The court considers each separately, as required by
the Federal Circuit. See Therasense, 649 F.3d at 1290 ("A district court should not use a ,.sliding
scale,' where a weak showing of intent may be found sufficient based on a strong showing of
materiality, and vice versa.").
10

1.

Misrepresentatfons of Fact

Hamilton Beach's inequitable conduct allegations sufficiently identify the who, what,
when, where, and how of the material misrepresentations. See Exergen, 575 F.3d at 1327. The
counterclaim and affirmative defense identify the applicant, Douglas Albrecht, as making
affirmative misrepresentations to obtain each of the three patents-in-suit, and set forth allegedly
contradictory factual statements made in the prosecution history and submitted declarations.
(D.I. 23 at 'if'if 43-50) The examiner rejected the claims of the patents-in-suit on the grounds that
it would have been obvious to substitute the filter baskets identified in the prior art references to
provide a pre-measured amount of coffee in one-time use baskets. (Id at 'if'if 42, 48) In response,
the pleading alleges the applicant affirmatively misrepresented that the modification would
increase the cost per cup of coffee and add steps to the brewing process, which would outweigh
the advantages of preventing cleaning of the brew basket. (Id at 'if'if 43, 49-50) The pleading
further specifically contrasts other dated portions of the prosecution history in which the
applicant represented that disposable brew baskets would serve as a cost-saving measure. (Id at

'if'if 45-47)
The veracity and context of these statements is a question to be resolved by the finder of
fact following discovery. At the pleading stage, the court does not decide the merits of the claim,
only whether materiality has been alleged with sufficient particularity. See Maio v. Aetna, Inc.,
221F.3d472, 482 (3d Cir. 2000). The court's determination is not whether the non-moving
party "will ultimately prevail," but rather whether that party is "entitled to offer evidence to
support the claims." United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302
(3d Cir. 2011) (citations and internal quotation marks omitted). This "does not impose a
probability requirement at the pleading stage, but instead simply calls for enough facts to raise a

11

reasonable expectation that discovery will reveal evidence of the necessary element." Phillips v.
County ofAllegheny, 515 F.3d 224, 234 (3d Cir. 2008) (internal citations and quotation marks
omitted). Reading the disputed statements in the light most favorable to Hamilton Beach, the
inequitable conduct allegations sufficiently aver material misrepresentations under the
heightened Rule 9(b) standard to survive at this stage of the proceedings.

2.

But-For Materiality

The court next considers separately whether the pleading adequately satisfies the but-for
materiality standard. Hamilton Beach has failed to sufficiently plead the but-for materiality of
the alleged misrepresentations and, therefore, I recommend that the court grant Courtesy
Products' motion to dismiss Hamilton Beach's inequitable conduct counterclaim and affirmative
defense. "[A]s a general matter, the materiality required to establish inequitable conduct is butfor materiality," meaning that a misrepresentation is immaterial if it is "not the but-for cause of
the patent's issuance." Therasense, 649 F.3d at 1291 (citing Corona Cord Tire Co. v. Dovan
Chem. Corp., 276 U.S. 358, 373-74 (1928)). Courts are unwilling "to extinguish the statutory
presumption of validity where the patentee made a misrepresentation to the PTO that did not
affect the issuance of the patent." Id. At the pleading stage, the court does not decide the merits
of the claim, and focuses only on whether materiality was properly alleged with sufficient
particularity. Evonik Degussa GmbH v. Materia Inc., C.A. No. 09-636, 2012 WL 4503771, at *6
(D. Del. Oct. 1, 2012). Therefore, allegations that "are not self-evidently false ... must be taken
as true at the motion to dismiss stage of litigation." Senju Pharm. Co., Ltd. v. Apotex, Inc., 921
F. Supp. 2d 297, 306 (D. Del. 2013).
Neither the challenged pleading nor Hamilton Beach's answering brief identifies how the
cited misrepresentations in the May 21, 2007 response to the PTO' s office action led to the

12

issuance of the patents-in-suit. Hamilton Beach alleges in a footnote contained in the answering
brief that the '884 patent was allowed after receipt of the May 21, 2007 response. (D.I. 41 at 6
n.2) However, the counterclaim and affirmative defense contain no allegations or inferences that
the alleged misrepresentations in the May 21, 2007 response were the "but-for" cause of the
ultimate allowance of the patents-in-suit. 6
Moreover, in a subsequent rejection of the '037 patent application issued on July 25,
2007, 7 the examiner expressly noted that "[a]pplicant's arguments filed 21 May 2007 have been
fully considered but they are not persuasive," indicating that the alleged misrepresentations were
not the but-for cause of the issuance of the patents-in-suit. (D.I. 38, Ex. A at 4) The inequitable
conduct counterclaim states that the applicant "relied on similar misrepresentations as those
made during the prosecution of the '03 7 patent to support statements made during the
_prosecution of the '884 patent and the '512 patent," but does not identify portions of the
prosecution history indicating that those misrepresentations resulted in the issuance of the
patents-in-suit. (D.I. 23 at if 48) Hamilton Beach's inequitable conduct allegations therefore fail
to satisfy the materiality requirement. See Unverferth Mfg. Co., Inc. v. Par-Kan Co., 2014 WL
2206922, at *4-5 (N.D. Ind. May 27, 2014) (dismissing inequitable conduct counterclaim and

6

There are no allegations by either party that the "egregious affirmative misconduct" exception
to the "but-for" materiality requirement applies in this case.
7
In reviewing a motion to dismiss, "' [c]ourts generally consider only the allegations contained in
the complaint, exhibits attached to the complaint and matters of public record."' Collins &
Aikman Corp. v. Stockman, C.A. No. 07-265, 2010 WL 184074, at *3 (D. Del. Jan. 19, 2010)
(quoting Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir.
1993)). Because Exhibit A to Courtesy Products' opening brief contains the prosecution history
of the '037 patent, which is publicly available through the PTO's Public Patent Application
Information Retrieval ("PAIR") database, it is a public document that the court may rely upon in
deciding this motion to dismiss. See, e.g., Benihana of Tokyo, Inc. v. Benihana Inc., C.A. No.
10-1051, 2011 WL 3861897, at *2 n.1 (D . Del. Sept. 1, 2011) (considering, on a motion to
dismiss, a document that was submitted to the PTO and publicly available).
13

affirmative defense because pleading's statements regarding materiality were conclusory and did
not explain why the misrepresentation was material in granting the patent, and the PTO explicitly
stated that the declaration was insufficient to overcome the rejections).

3.

Intent to Deceive

Viewing the allegations in the light most favorable to Hamilton Beach as the nonmoving
party, the court concludes that Hamilton Beach sufficiently pleaded allegations regarding the
specific intent requirement of the inequitable conduct inquiry. "Because direct evidence of
deceptive intent is rare, a district court may infer intent from indirect and circumstantial
evidence. However, to meet the clear and convincing evidence standard, the specific intent to
deceive must be 'the single most reasonable inference able to be drawn from the evidence.'"
Therasense, 649 F.3d at 1290 (quoting Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537
F.3d 1357, 1366 (Fed. Cir. 2008)). The inquiry regarding specific intent often turns on facts that
cannot be gleaned from public documents, and discovery is helpful to shed light on the reasoning
behind decisions to make allegedly material omissions or misrepresentations. See Micron Tech.,
Inc. v. Rambus Inc., 917 F. Supp. 2d 300, 323 (D. Del. 2013).
The inequitable conduct allegations in the present case specifically state that the
applicant's ''misrepresentation was knowingly false and made with specific intent as evidenced
by his own submission to the PTO." (D.I. 23 at 18, 21; ifif 44, 53) This allegation, in
conjunction with averments that the applicant knew the statements regarding the increased costs
. of disposable brew baskets were false because they contradicted his third-party declaration, are
sufficient to satisfy the specific intent requirement at this stage. It is reasonable to infer from the
applicant's conduct, as alleged by Hamilton Beach, that the applicant intended to deceive the
PTO. See Quest Integrity USA, LLCv. Clean Harbors Indus. Servs., Inc., C.A. No. 14-1482-

14

SLR, 2015 WL 4477700, at *5 (D. Del. July 22, 2015). Hamilton Beach need not prove by clear
and convincing evidence that the applicant's specific intent to deceive the PTO is the single most
reasonable inference to be drawn from the facts alleged in the pleading before discovery has
taken place. The fact that Courtesy Products disagrees with Hamilton Beach's characterization
of the facts in the counterclaim and affirmative defense "is irrelevant, as the court is not required
to judge the merits of the parties' respective positions at this stage of the proceedings." Id
Although Hamilton Beach sufficiently pleaded the specific intent requirement in its
affirmative defense and counterclaim, the deficiencies in the pleading with respect to the
materiality requirement warrant dismissal of the pleading without prejudice to amend.

V.

CONCLUSION
For the foregoing reasons, I recommend that the court deny Hamilton Beach's renewed

partial motion to dismiss (D.I. 21) and grant-in-part Courtesy Products' motion to dismiss and
strike regarding Hamilton Beach's inequitable conduct counterclaim and defense. I recommend
that Hamilton Beach be given permission to file an amended pleading curing the deficiencies in
its inequitable conduct counterclaim and affirmative defense. To the extent that Courtesy
Products' motion seeks dismissal of Hamilton Beach's antitrust counterclaim, this issue is
reserved for resolution by Judge Robinson.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B), Fed. R.
Civ. P. 72(b)(1 ), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b)(2). The objections and responses to the objections are limited to ten (10)
pages each. The failure of a party to object to legal conclusions may result in the loss of the right
to de novo review in the District Court. See Sincavage v. Barnhart, 171 F. App'x 924, 925 n. l

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(3d Cir. 2006); Henderson v. Carlson, 812 F.2d 874, 878-79 (3d Cir. 1987).
The parties are directed to the court's Standing Order For Objections Filed Under Fed. R.
Civ. P. 72, dated October 9, 2013, a copy of which is available on the court's website,
http://www.ded.uscourts.gov.

Dated: October

~O

, 2015

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