Sloan Valve Company v. Zurn Industries, Inc. et al

Filing 279

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 4/1/2012:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SLOAN VALVE COMPANY, a Delaware
corporation,
Plaintiff,
v.
ZURN INDUSTRIES, INC., a Delaware
corporation, and ZURN INDUSTRIES, LLC, a
Delaware limited liability company,
Defendants.

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No. 10-cv-204

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
Plaintiff Sloan Valve Company (“Sloan”) moves to dismiss, pursuant to Federal Rule of
Civil Procedure (“Rule”) 12(b)(6), Defendants Zurn Industries, Inc.’s and Zurn Industries,
LLC’s (collectively, “Zurn”) inequitable conduct counterclaims (Counts III and IV) for failure to
comply with Rule 9(b), and it seeks an award of attorney’s fees and costs associated with its
motion. For the reasons explained below, the Court grants in part and denies in part Sloan’s
motion to dismiss, and denies its request for attorney’s fees and costs. Specifically, the Court
denies Sloan’s motion with respect to Count III and grants the motion with respect to Count IV.
Zurn, however, has cited additional factual information it has obtained from discovery
regarding Count IV in its response brief, which, if added to its counterclaims, would render
Count IV sufficient under Rule 9(b). Importantly, allowing Zurn to amend its allegations will
not prejudice Sloan. This case has been pending for over two years, and the parties have
engaged in extensive discovery. Sloan has had notice, through such discovery, of the factual
basis for Zurn’s claim. See Vicom, Inc. v. Harbridge Merchant Servs., 20 F.3d 771, 777 (7th Cir.

1994) (stating that Rule 9(b) “serve[s] three main purposes: (1) protecting a defendant’s
reputation from harm; (2) minimizing ‘strike suits’ and ‘fishing expeditions’; and (3) providing
notice of the claim to the adverse party.”) (citation omitted); see also Exergen Corp. v. Wal-Mart
Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009) (in adopting a Rule 9(b) pleading standard for
inequitable conduct claims, the court “follow[ed] the lead of the Seventh Circuit in fraud cases”).
Therefore, pursuant to Rule 15(a)(2), the Court grants Zurn leave to amend its Counterclaims
consistent with the terms of this Memorandum Opinion and Order by April 9, 2012.
BACKGROUND
I.

Procedural Background
Sloan filed this lawsuit on January 13, 2010, alleging that Zurn had appropriated its “dual

mode flush valve invention,” therefore infringing U.S. Patent No. 7,607,635, entitled “Flush
Valve Handle Assembly Providing Dual Mode Operation” (the “‘635 Patent”) and the
corresponding U.S. Patent Application Publication No. 2006/0151729 (the “‘729 Patent
Application”). (R. 1.) On February 8, 2010, Zurn filed its Answer, Counterclaims, and
Affirmative Defenses, asserting invalidity and non-infringement of the ‘635 Patent as well as
inequitable conduct during the prosecution of the ‘635 Patent. (R. 17.) Sloan moved to dismiss
certain counterclaims and affirmative defenses, arguing in relevant part that Zurn failed to plead
materiality of the withheld information. (R. 24.) On May 4, 2010, the Court granted in part and
denied in part Sloan’s motion to dismiss, holding that Zurn had adequately alleged materiality of
the withheld information. (R. 70.) Zurn subsequently filed an Amended Answer,
Counterclaims, and Affirmative Defenses and, later, a Second Amended Answer, Counterclaims,

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and Affirmative Defenses. (R. 72, 85.) Sloan answered Zurn’s Second Amended Counterclaims
on August 12, 2010. (R. 104.)
On December 16, 2010, upon Zurn’s motion, the Court stayed the proceedings because
the U.S. Patent and Trademark Office (“PTO”) had granted its request for an ex parte
reexamination of the ‘635 Patent. (R. 149, 157.) On September 27, 2011, the PTO issued an Ex
Parte Reexamination Certificate for the ‘635 Patent, which provides that certain of Sloan’s
claims in the ‘635 Patent were amended and others were added. (R. 184-1, Ex Parte
Reexamination Certificate.) On October 7, 2011, Sloan filed a motion to re-open the case and
lift the stay, which the Court granted on November 10, 2011. (R. 183, 192.)
On November 29, 2011, Sloan filed its Amended and Supplemental Complaint (the
“Complaint”),1 asserting direct and willful infringement of claims 1, 4-6, 10-12, 14, 19, 29-31,
and 33-34 of the ‘635 Patent, infringement of the ‘729 Patent Application, induced infringement
of the ‘635 Patent, and contributory infringement of the ‘635 Patent. (R. 197.) On December 9,
2011, Zurn filed its Answer, Counterclaims, and Affirmative Defenses to Sloan’s Complaint, in

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Sloan filed a redacted version of the Complaint on November 29, 2011 and an
unredacted copy under seal on December 11, 2011. (R. 197, 204.)
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which Zurn asserts four counterclaims, including two for inequitable conduct (the
“Counterclaims”). (R. 202, 207.) In its motion, Sloan seeks dismissal of the Counterclaims.
II.

Factual Background
A.

Sloan’s Complaint

Sloan’s Complaint contains the following allegations.2 Sloan is a leading manufacturer
of plumbing products. (R. 197, Compl. ¶ 8.) In 2004, John Wilson, an engineer working in
Sloan’s research and development group, conceived a new dual flush valve and handle assembly
that distributed one amount of water when pushed down and a reduced quantity of water when
lifted up. (Id. ¶ 12.) Sloan recognized Wilson’s invention as a solution to satisfy the need for a
dual mode flush product for commercial application and accordingly decided to invest in testing,
developing, and commercializing Wilson’s invention. (Id. ¶¶ 12-13.) After testing a number of
experimental handle assemblies, Sloan announced the commercial introduction of its dual flush
product on August 1, 2005. (Id. ¶¶ 14, 17.)
On August 4, 2005, Zurn announced a water-saving valve and handle assembly that
Sloan alleges Zurn derived by copying Sloan’s dual mode flush handle. (Id. ¶¶ 19-22, 24.)
Since December 2005, Zurn has offered for sale dual mode handle assemblies and dual mode
flush valves, including Zurn Commercial Brass product P6000-M-ADA-DF, which incorporate
features of Wilson’s invention and are covered by the ‘635 Patent’s claims and the ‘729 Patent
Application. (Id. ¶ 32.)

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Much of this factual background section is identical to the factual background section
in the Court’s earlier opinion regarding Sloan’s first motion to dismiss. See Sloan Valve Co. v.
Zurn Indus., Inc., 712 F. Supp. 2d 743, 746-48 (N.D. Ill. 2010). The Court has updated the
previous factual allegations with Sloan’s and Zurn’s newly-asserted allegations.
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Sloan filed a patent application with the PTO, claiming the unique features of the dual
mode flush handle assembly and valves, which the PTO published as the ‘729 Patent Application
on July 13, 2006. (Id. ¶¶ 35-36.) On October 27, 2009, the PTO issued the ‘635 Patent. (Id.
¶ 37.)
Sloan’s Complaint contains four counts. Count I alleges that Zurn’s making, using,
offering to sell, importing or selling dual mode handle assemblies and dual mode flush valves
infringes claims 1, 4-6, 10-12, 14, 19, 29-31, and 33-34 of the ‘635 Patent. (Id. ¶ 78.) Count II
alleges that Zurn infringed the ‘729 Patent Application by making, using, or offering for sale the
invention in at least claims 10-11 and 15 between the publication of the ‘729 Patent Application
and the issuance of the ‘635 Patent. (Id. ¶¶ 83-85.) Sloan also alleges claims against Zurn for
inducement to infringe the ‘635 Patent (Count III) and for contributory infringement of the ‘635
Patent (Count IV). (Id. ¶¶ 86-95.)
B.

Zurn’s Answer, Counterclaims, and Affirmative Defenses

Zurn seeks a declaration of invalidity (Count I) and non-infringement (Count II) of the
asserted ‘635 Patent claims, as well as unenforceability of the ‘635 Patent due to inequitable
conduct (Counts III and IV). (R. 202, Answer, Counterclaims, and Aff’tive Defs.) Zurn also
asserts an affirmative defense of invalidity and unenforceability of the ‘635 Patent. (Id.) Zurn’s
allegations with respect to its inequitable conduct counterclaims are discussed more fully below.
LEGAL STANDARD
Although this is a patent case, the Court applies the Seventh Circuit’s Rule 12(b)(6)
standard. Exergen Corp., 575 F.3d at 1318 (regional circuit law applies to procedural issues that
are not specific to patent law); see also Ferguson Beauregard/Logic Controls v. Mega Sys., LLC,

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350 F.3d 1327, 1344 (Fed. Cir. 2003) (“This court reviews the dismissal of a claim under Rule
12(b)(6), a matter of procedure, by applying the law of the regional circuit.”) (citation omitted).
“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to state a claim upon
which relief may be granted.” Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7,
570 F.3d 811, 820 (7th Cir. 2009). “The issue is not whether a plaintiff will ultimately prevail
but whether the claimant is entitled to offer evidence to support the claims.” AnchorBank, FSB
v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011) (quoting Caremark, Inc. v. Coram Healthcare Corp.,
113 F.3d 645, 648 (7th Cir. 1997)). “In evaluating the sufficiency of the complaint,” the court
must “view it in the light most favorable to the plaintiff, taking as true all well-pleaded factual
allegations and making all possible inferences from the allegations in the plaintiff’s favor.” Id.
(citing Wilson v. Price, 624 F.3d 389, 391 (7th Cir. 2010)).
To survive a Rule 12(b)(6) motion, “the complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face.” Indep. Trust Corp. v.
Stewart Info. Servs. Corp., 665 F.3d 930, 934 (7th Cir. 2012) (quoting Ashcroft v. Iqbal, 556
U.S. 662, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009)). It is not enough to put “a few words
on paper that, in the hands of an imaginative reader, might suggest that something has happened
to her that might be redressed by the law.” AnchorBank, 649 F.3d at 614 (quoting Swanson v.
Citibank, N.A., 614 F.3d 400, 403 (7th Cir. 2010) (emphasis in original)). An asserted claim,
however, “need not be probable, only plausible: ‘a well-pleaded complaint may proceed even if
it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very
remote and unlikely.’” Indep. Trust Corp., 665 F.3d at 935 (citing Bell Atl. Corp. v. Twombly,
550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).

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ANALYSIS
I.

Pleading Requirements for Inequitable Conduct Claims
“Each individual associated with the filing and prosecution of a patent application has a

duty of candor and good faith in dealing with the [PTO], which includes a duty to disclose to the
[PTO] all information known to that individual to be material to patentability. . . .” 37 C.F.R.
§ 1.56(a); see also Honeywell Int’l Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 999
(Fed. Cir. 2007). “A breach of this duty–including affirmative misrepresentations of material
facts, failure to disclose material information, or submission of false material
information–coupled with an intent to deceive, constitutes inequitable conduct.” Honeywell, 488
F.3d at 999 (citing Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995)). In order
to plead a claim for inequitable conduct, Zurn must allege that “(1) an individual associated with
the filing and prosecution of a patent application made an affirmative misrepresentation of a
material fact, failed to disclose material information, or submitted false material information; and
(2) the individual did so with a specific intent to deceive the PTO.” Exergen, 575 F.3d at 1327
n.3 (citations omitted).
Although inequitable conduct is a “broader concept than fraud,” it is well established
Federal Circuit law that a party must plead inequitable conduct with particularity under Rule
9(b). See id. at 1326-27; Ferguson Beauregard/Logic Controls, 350 F.3d at 1344; Cent.
Admixture Pharm. Servs., Inc. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1347, 1356-57
(Fed. Cir. 2007). Federal Circuit law applies to the issue of whether Zurn’s allegations of
inequitable conduct meet Rule 9(b)’s heightened pleading requirements. See Exergen, 575 F.3d
at 1318 (“Whether inequitable conduct has been pleaded with particularity under Rule 9(b) is a

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question governed by Federal Circuit law.”) (citing Cent. Admixture, 482 F.3d at 1356)). Rule
9(b) requires that a plaintiff plead “the circumstances constituting fraud” with particularity,
although “[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged
generally.” Fed. R. Civ. P. 9(b). “A pleading that simply avers the substantive elements of
inequitable conduct, without setting forth the particularized factual bases for the allegation, does
not satisfy Rule 9(b).” Exergen, 575 F.3d at 1326-27 (citing King Auto., Inc. v. Speedy Muffler
King, Inc., 667 F.2d 1008, 1010 (CCPA 1981)).
In Exergen, the Federal Circuit articulated the substantive pleading requirements for
inequitable conduct claims. Similar to fraud cases, in order to satisfy Rule 9(b)’s particularity
requirements, the pleading must set forth the “who, what, when, where, and how of the material
misrepresentation or omission committed before the PTO.” 575 F.3d at 1327. Although the
party asserting the counterclaim may aver knowledge and intent 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.” Id. at 1328-29. “A
reasonable inference is one that is plausible and that flows logically from the facts alleged,
including any objective indications of candor and good faith.” Id. at 1329, n.5.
Almost two years after Exergen, the Federal Circuit decided Therasense, Inc. v. Becton,
Dickinson and Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc), in which it tightened the proof
requirements with respect to the materiality and intent elements of an inequitable conduct claim.

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Id. at 1285.3 Therasense did not address inequitable conduct claims at the pleading stage, nor
did it override Exergen’s pleading requirements. See Delano Farms Co. v. Cal. Table Grape
Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011) (affirming that, post-Therasense, “[a] charge of
inequitable conduct based on a failure to disclose will survive a motion to dismiss only if the
plaintiff’s complaint recites facts from which the court may reasonably infer that a specific
individual both knew of invalidating information that was withheld from the PTO and withheld
that information with a specific intent to deceive the PTO”) (citing Exergen, 575 F.3d at 1318,
1330; citing generally Therasense); Pfizer Inc. v. Teva Pharms. USA, Inc., 803 F. Supp. 2d 409,
432 (E.D. Va. 2011) (“Exergen still states the correct elements required for pleading inequitable
conduct after Therasense.”). But see Hansen Mfg. Corp. v. Enduro Sys., Inc., No. 11-4030, 2011
WL 5526627, at *4 (D. S.D. Nov. 14, 2011) (“Therasense tightened the standards for pleading
inequitable conduct. . . .”).
Therasense, however, made clear that district courts may no longer assess allegations of
materiality by the “reasonable examiner” or PTO Rule 56 standards. Instead, “in assessing the
materiality of a withheld reference,” the court must determine whether there are sufficient
allegations from which a court may reasonably infer that “the PTO would not have allowed the
claim if it had been aware of the undisclosed prior art.” Therasense, 649 F.3d at 1291-94
(rejecting the relatively broad “reasonable examiner” and PTO Rule 56 materiality standards and
holding that inequitable conduct claims based on “nondisclosure of prior art references to the

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The Federal Circuit, in both Therasense and Exergen, expressed concern with the
frequency with which parties assert inequitable conduct claims. Indeed, the court announced
that it undertook review of the panel’s decision in Therasense at least in part because it
recognized “the problems created by the expansion and overuse of the inequitable conduct
doctrine.” Therasense, 649 F.3d at 1285.
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PTO” or “failure to mention prior art references” must allege “but for” materiality); Capital
Mach. Co., Inc. v. Miller Veneers, Inc., No. 09-cv-702, 2012 WL 243563, at *3 (S.D. Ind. Jan.
25, 2012) (noting that after Therasense, “materiality requires that the patent would not have
issued but for the misrepresentation”); Recticel Automobilesysteme GMBH v. Auto. Components
Holdings, LLC, No. 10-cv-14097, 2011 WL 5307797, at *7 (E.D. Mich. Nov. 3, 2011) (applying
Therasense’s “but for” materiality standard in ruling on motion to dismiss inequitable conduct
counterclaims).4 Therasense also reaffirmed that district courts “may not infer intent solely from
materiality.” 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.”); see also Am. Calcar, Inc. v. Am. Honda Motor Co., 651 F.3d 1318, 1334 (Fed. Cir.
2011).5

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The “but for” materiality requirement applies except in cases of affirmative egregious
misconduct, in which case such misconduct is material in and of itself. Therasense, 649 F.3d at
1292 (“When the patentee has engaged in affirmative acts of egregious misconduct, such as the
filing of an unmistakably false affidavit, the misconduct is material.”) (citing cases).
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The Court rejects Sloan’s argument that Zurn must, at the pleading stage, make an
initial showing from which the Court may plausibly infer that “the intent to deceive is the single
most likely explanation for the non-disclosure.” As Exergen makes clear, “[i]n contrast to the
pleading stage, to prevail on the merits, the accused infringer must prove both materiality and
intent by clear and convincing evidence. Whereas an inference of deceptive intent must be
reasonable and drawn from a pleading’s allegations of underlying fact to satisfy Rule 9(b), this
inference must be ‘the single most reasonable inference able to be drawn from the evidence to
meet the clear and convincing standard.’” 575 F.3d at 1329 n.5 (citing Star Scientific, Inc. v.
R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365-66 (Fed. Cir. 2008)). Nothing in Therasense
alters this distinction. At the pleading stage, Zurn must allege facts from which an inference of
deceptive intent is “‘reasonable,’ meaning that it must be ‘plausible and [] flow[] from the facts
alleged.’” Itex, Inc. v. Westex, Inc., No. 05 CV 6110, 2010 WL 2901793, at *2 (N.D. Ill. July 21,
2010) (citing Exergen, 575 F.3d at 1329 n.5).
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II.

Count III
A.

Allegations

The Court accepts the following well-pleaded factual allegations as true for the purposes
of Sloan’s motion to dismiss Zurn’s inequitable conduct counterclaim in Count III. See
Anchorbank, 649 F.3d at 614. Count III derives from statements Sloan made to the PTO during
reexamination of Patent No. 7,481,413 (the “‘413 Patent”), which Sloan allegedly failed to
disclose to the PTO examiner during the prosecution of the ‘635 Patent. On May 11, 2009 and
July 10, 2009, respectively, Sloan filed a Request for Reexamination of the ‘413 Patent and a
Corrected Request for Reexamination of the ‘413 Patent (collectively, “Request for
Reexamination of the ‘413 Patent”). (R. 202, Counterclaims ¶¶ 15-16.) Zurn alleges that Sloan
made statements concerning prior art in the Request for Reexamination of the ‘413 Patent that
are inconsistent with and material to the specifications of the ‘729 Patent Application and the
‘635 Patent.
Specifically, Sloan, through its attorneys, stated in the specification for the ‘635 Patent
that part of its invention included a plunger having an appreciably smaller diameter than the
inside of the bushing. (Id. ¶ 21.) At least claim 1 of the ‘635 Patent covers a plunger having an
appreciably smaller diameter than the inside diameter of the bushing passage. (Id. ¶ 22.) In the
Request for Reexamination of the ‘413 Patent, however, Sloan, through its attorneys, argued that
a plunger having a diameter that is appreciably smaller than the inside diameter of the bushing is
inherently taught by prior art references, including U.S. Patent No. 1,912,937 (the “George
Reference”). (Id. ¶ 23.) In its Request for Reexamination of the ‘413 Patent, Sloan’s attorneys
stated the following with respect to the George Reference:

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The bore is inherently larger than the plunger so as to allow the plunger to
passes [sic] there through. One of ordinary skill would understand the bore
to be sized sufficiently larger than the plunger so as to avoid excessive
frictional forces that would cause operation to be difficult and that would
result in greater amount of operational wear. Effectively the bore is a large
cylinder with the smaller diameter plunger disposed therein. Because of the
inherent relative sizes, gravity will result in the plunger resting on the
bottom of the bore. Thus, the central axis of the bore will inherently be
nonaxisymmetric with the plunger having a smaller radius and disposed
therein.
(Id. ¶ 24; see also ¶ 25.) Sloan did not disclose the Request for Reexamination of the ‘413
Patent to the PTO during its prosecution of the ‘635 Patent, and Sloan willfully failed to advise
the PTO that prior art taught a plunger having an appreciably smaller diameter than the inside
diameter of the bushing. (Id. ¶¶ 26-27.) Though Sloan knew that such a design would inherently
allow the plunger to tilt and produce different flush volumes depending on which direction the
handle was actuated, it did not disclose that information to the PTO. (Id. ¶ 27.)
The PTO examiner’s reasons for allowance of the ‘635 Patent stated that the prior art
references considered during prosecution “lack[ed] the plunger traveling along a first and second
axis as well as a non-symmetrical bushing passage,” yet prior art, including the George
Reference, taught a “central axis of the bore [that] will inherently be nonaxisymmetric with the
plunger having a smaller radius and disposed therein,” which would necessarily allow the
plunger to travel along a first and second axis. (Id. ¶¶ 30-31.) Therefore, had the examiner been
aware of Sloan’s statements in the Reexamination of the ‘413 Patent regarding the inherent
properties of prior art, the examiner would have disallowed at least one of the ‘635 Patent’s
claims. (Id. ¶¶ 29, 32.)

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During the PTO’s reexamination of the ‘635 Patent, the examiner rejected claims 1, 5, 7,
8, 12, 14, 18, 19 and 31 as being anticipated by a separate Sloan patent (U.S. Patent No.
3,279,742 or the “‘742 Patent”), which Sloan also did not cite during prosecution of the ‘635
Patent, on the grounds that it teaches “that the bushing passage is larger than the plunger which
allows for slight tilting movement of the plunger.” (Id. ¶ 33.) As a result, Sloan was forced to
amend claims 1, 4-6, 12, 14, 18, and 19 in reexamination in an attempt to define over the ‘742
Patent. (Id. ¶ 34.)
Sloan seeks dismissal of Count III for failing to comply with Rule 9(b), arguing that Zurn
does not 1) identify an individual who allegedly committed inequitable conduct; 2) sufficiently
plead materiality; or 3) sufficiently plead intent to deceive the PTO.
B.

Sloan has waived its Rule 12(b)(6) identity and intent arguments with respect
to Count III

Before the Court reaches the merits of Sloan’s motion, it addresses Zurn’s contention that
Sloan has waived its Rule 12(b)(6) arguments with respect to Count III. (R. 219, Zurn Resp. at
1, 7.) Zurn asserted essentially the same claim in Count III of its original Answer, Affirmative
Defenses and Counterclaims, which it filed on February 8, 2010 (the “Original Count III”).
(R. 17.) Sloan previously moved to dismiss Count III under Rule 12(b)(6), arguing that Zurn
failed to state a claim because it did not allege that the information Sloan allegedly withheld
from the PTO was material. (R. 24.) Notably, Sloan did not argue that Count III failed to
identify an individual who allegedly engaged in inequitable conduct, nor did it argue that Sloan
failed to sufficiently plead intent to deceive the PTO. On May 4, 2010, the Court issued an
Order denying Sloan’s motion to dismiss Count III, concluding that Zurn had adequately alleged
materiality. See Sloan Valve, 712 F. Supp. 2d at 753-54. Thereafter, Zurn filed an Amended
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Answer, Counterclaims, and Affirmative Defenses and a Second Amended Answer,
Counterclaims, and Affirmative Defenses. (R. 72, 85.) Sloan answered Zurn’s Second
Amended Counterclaims before the Court granted Zurn’s motion to stay the case. (R. 104.)
After the Court lifted the stay, Sloan filed its Complaint, and Zurn filed its Answer,
Counterclaims, and Affirmative Defenses to the Complaint. (R. 201, 207.)
Under Rule 12(g)(2), “a party that makes a motion under [Rule 12] must not make
another motion under this Rule raising a defense . . . that was available to the party but omitted
from its earlier motion.” Fed. R. Civ. P. 12(g)(2). A related rule, Rule 12(h)(2), however,
preserves a party’s ability to make a failure to state a claim argument in three situations: in any
pleading under Rule 7(a), in a Rule 12(c) motion, or at trial. See Fed. R. Civ. P. 12(h)(2). Sloan
presented its argument in a Rule 12(b)(6) motion, which does not fall within any of the three
exceptions to Rule 12(g) that are outlined in Rule 12(h)(2). See id. Therefore, unless Sloan’s
arguments were unavailable to it at the time it filed its Rule 12(b)(6) motion to dismiss Zurn’s
Original Count III, it has waived those arguments in the limited context of a Rule 12(b)(6)
motion. See Fed. R. Civ. P. 12(g)(2); see also 766347 Ontario, Ltd. v. Zurich Capital Mkts.,
Inc., 274 F. Supp. 2d 926, 930 (N.D. Ill. 2003) (“Rule 12(g) generally precludes a defendant
from bringing successive motions to dismiss raising arguments that the defendant failed to raise
at the first available opportunity.”); Makor Issues & Rights, Ltd. v. Tellabs, Inc., No. 02 C 4356,
2008 WL 2178150, at *3 (N.D. Ill. May 22, 2008); see also Wright & Miller, 5C Fed. Prac. &
Proc. Civ. § 1388 (3d ed.) (“The filing of an amended complaint will not revive the right to
present by motion defenses that were available but were not asserted in timely fashion prior to
amendment.”).

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Count III of Zurn’s most recent Counterclaims contains substantially the same allegations
as the Original Count III. As Zurn points out, the most recent Count III adds additional
allegations, which, if anything, render the claim more factually detailed and less objectionable
under Rule 9(b). Sloan’s identity and intent arguments were available to it at the time it filed its
original motion to dismiss, yet Sloan admits that it raised only the issue of materiality in its
previous motion to dismiss. (R. 243, Sloan Reply at 5.) Sloan, therefore, has waived such
arguments for the purposes of a Rule 12(b)(6) motion.
Even if Sloan had not waived its identity and intent arguments, however, Zurn’s claim, if
amended consistent with the information Zurn obtained during discovery as identified in its
response to Sloan’s motion to dismiss, would satisfy Rule 9(b). Cf. United States v. Midwest
Generation, LLC, 781 F. Supp. 2d 677, 693 (N.D. Ill. 2011) (“A plaintiff may oppose a motion
to dismiss with additional facts asserted by affidavit or brief if those facts are consistent with the
allegations in the complaint.”) (citing Hentosh v. Herman M. Finch Univ. of Health Sci./The
Chicago Med. Sch., 167 F.3d 1170, 1173 n.3 (7th Cir. 1999); Rene v. G.F. Fishers, Inc., --- F.
Supp.2d ----, No. 11-cv-514, 2011 WL 4349473 (S.D. Ind. Sept. 16, 2011) (“The facts alleged in
a plaintiff’s briefs may be considered so long as the brief’s allegations are consistent with the
complaint.”); Flying J Inc. v. City of New Haven, 549 F.3d 538, 542 n.1 (7th Cir. 2008)
(additional facts may be presented on appeal of a district court’s denial of a Rule 12(b)(6) motion
as long as the additional facts are consistent with the complaint).
Although Sloan is correct that Zurn’s pleading does not identify by name the specific
individual alleged to have committed inequitable conduct in Count III, Sloan clarifies in its
response brief that discovery revealed that at least two specific Sloan attorneys, Michael Rectin

15

and Matthew Martin, failed to disclose the withheld reference. Zurn further states in its response
brief that the attorneys’ names appear on the relevant prosecution/reexamination documents and
that Sloan is well aware of who those individuals are, as demonstrated in its discovery responses.
Specifically, Sloan’s answers to Zurn’s interrogatories state that Messrs. Rechtin and Martin
“prosecuted the patent application which matured into the ‘635 Patent,” and did not disclose
statements and arguments made during the Reexamination of the ‘413 Patent during the
prosecution of the ‘635 Patent. (Resp., Ex. A at 26.)
With respect to intent, Zurn alleges that Sloan’s attorneys “both knew of the material
information and deliberately withheld or misrepresented it” to the PTO.6 Exergen, 575 F.3d at
1329. Specifically, Zurn alleges that those attorneys made certain statements in the Request for
Reexamination of the ‘413 Patent that they knew were material to the prosecution of the ‘635
Patent, yet they “intentionally, knowingly, and willfully concealed [those statements] from the
Examiner” in an attempt to avoid invalidating several pending claims of the patent application
which matured into the ‘635 Patent.7 (Counterclaims ¶¶ 21-28, 36-37.) Additionally, those
attorneys’ statements to the PTO during the reexamination of the ‘413 Patent regarding the
inherent properties of prior art allegedly directly contradicted statements they made in support of
the patentability of the ‘635 Patent.8 (Id. ¶¶ 28, 35.) If Zurn amends its allegations to further

6

Zurn should identify the attorneys by name in its amended Counterclaims.

7

Zurn also alleges that Sloan filed the Request for Reexamination of the ‘413 Patent
while the ‘729 Patent Application was pending. (Counterclaims ¶ 18.)
8

Sloan argues that the statements are not inconsistent (see R. 211, Mem. of Law at 10),
but that is a merits argument that is not appropriately decided in a Rule 12(b)(6) motion to
dismiss. See Cler v. Illinois Educ. Ass’n, 423 F.3d 726, 729 (7th Cir. 2005) (Rule 12(b)(6)
motion tests the legal sufficiency of the complaint, not the merits of the case).
16

clarify, consistent with its response brief, the specific individual(s) who acted with the requisite
intent, Zurn’s intent allegations will satisfy Rule 9(b)’s heightened pleading requirement.
Although “[t]he mere fact that an applicant disclosed a reference during prosecution of one
application, but did not disclose it during prosecution of a related application, is insufficient” to
allege deceptive intent, see Exergen, 575 F.3d at 1331, Zurn’s assertions, as amended, reach
beyond the deceptive intent threshold because they “show that the individual who had previously
cited the [withheld reference] knew of the specific information that is alleged to be material to
the [patent-in-suit] and then decided to deliberately withhold it from the relevant examiner.” Id.
Accordingly, the Court grants Zurn leave to amend its Counterclaims consistent with the
additional facts and clarifications provided in its response brief by March 30, 2012.
C.

Zurn has adequately pleaded “but for” materiality

Although Sloan moved to dismiss Zurn’s Original Counterclaim III before the Federal
Circuit’s decision in Therasense, wherein the court rejected the relatively broad “reasonable
examiner” materiality standard and held that inequitable conduct claims based on nondisclosure
of prior art references to the PTO must generally meet the “but for” materiality standard, this
Court’s previous conclusion that Zurn’s materiality allegations in Count III are sufficient
remains unchanged even after Therasense. 649 F.3d at 1291-93.
Zurn has adequately alleged that the PTO would not have allowed at least one claim of
the ‘635 Patent had it been aware of the undisclosed prior art. See id. Specifically, Zurn alleges
that the affirmative statements Sloan’s attorney made during reexamination of the ‘413 Patent
regarding the relative size of the plunger and bushing passage as taught by the prior art reference
were highly material and would have prevented at least claim 1 of the ‘635 Patent from being

17

allowed. (Counterclaims ¶¶ 22, 32, 33, 36.) Zurn’s contention is supported by the factual
allegations that the examiner’s reasons for allowance of the ‘635 Patent stated that the prior art
references considered during prosecution of the ‘635 Patent “lack[ed] the plunger traveling along
a first and second axis as well as a non-symmetrical bushing passage,” yet prior art, including the
George Reference, taught a “central axis of the bore [that] will inherently be nonaxisymmetric
with the plunger having a smaller radius and disposed therein,” which would necessarily allow
the plunger to travel along a first and second axis. (Id. ¶¶ 30-31.) These facts are sufficient to
allege but for materiality.
Additionally, Zurn clarifies in its response brief that disclosure of the prior art reference
would have caused the PTO examiner to reject, at a minimum, claims 1, 5, 7, 8, 12, 13, 18, 19
and 31 of the ‘635 Patent because it would have disclosed that the George Reference “taught that
the bushing passage is larger than the plunger which allows for slight tilting movement (i.e., a
plunger traveling along a first and second axis).” (Resp. at 17 (citing Counterclaims ¶ 33)).
Indeed, as Zurn points out, during reexamination of the ‘635 Patent, the examiner actually
rejected those claims for anticipation under 35 U.S.C. § 102(b) over a prior art reference that
taught the same feature that Sloan represented was inherently taught by the George Reference.
(Id. at 12 (citing Counterclaim ¶ 33).) Zurn should have included those clarifications in its
Counterclaims, and therefore the Court grants it leave to add those additional allegations.9
III.

Count IV
Zurn asserts an additional counterclaim for inequitable conduct in Count IV and alleges

9

Because Zurn has adequately alleged but for materiality, the Court need not address
Zurn’s alternative argument that Sloan’s conduct constituted affirmatively egregious misconduct.
18

the following facts in support of that claim. On or about July 12, 2004, John Wilson, a Sloan
engineer and the first named inventor of the ‘635 Patent, conducted flush volume tests on
standard and modified flush valve handles and recorded the results (“Wilson’s Test Results”) in
an Inventor’s New Concept Disclosure (“Inventor’s Disclosure”). (Counterclaims ¶ 41.) Peter
Jahrling, Director of Design Engineering at Sloan, supervised Wilson’s work, signed the
Inventor’s Disclosure, and was involved in the prosecution of the ‘635 Patent. (Id. ¶¶ 50-51.)
Wilson’s Test Results established, among other things, that standard prior art flush valve
handles, including the flush valve handle upon which Sloan’s dual flush product was based,
dispense different volumes of water depending on which direction the handle is actuated. (Id.
¶ 43.) Zurn further alleges that Wilson has admitted that standard prior art flush valves
necessarily allowed sufficient tilting of the plunger rod within the bushing passage to arrive at a
flush volume differential of 10% depending on the direction of handle actuation. (Id. ¶¶ 47-48.)
Despite this alleged fact, Sloan’s attorneys, throughout the prosecution and reexamination of the
‘635 Patent, characterized several prior art flush valves, including the flush valve identified,
tested, and documented in the Inventor’s Disclosure, as “single mode” or “single volume.” (Id.
¶ 45.)
Zurn alleges that one or more claims of the ‘635 Patent, including but not limited to claim
23, would be anticipated by the standard prior art flush valve upon which Sloan’s dual flush
product was based. (Id. ¶ 49.) Mr. Jahrling, who was involved in the prosecution of the ‘635
Patent, testified at a deposition in this case that the standard prior art flush valve identified,
tested, and documented in the Inventor’s Disclosure fell within the scope of claim 23 of the ‘635
Patent. (Id. ¶ 51.) Sloan’s attorneys had the Inventor’s Disclosure in their possession at the time

19

they began the prosecution of the ‘729 Patent Application, and at least one of Sloan’s attorneys
who prosecuted the ‘729 Patent Application had read the Inventor’s Disclosure one month before
the ‘635 Patent was issued and understood that the data therein reflected a variance in flush
volumes due to tilting of the plunger rod within the bushing passage. (Id. ¶¶ 52-54.) At least
one of Sloan’s attorneys who prosecuted the ‘729 Patent Application also testified that the
standard prior art flush valve identified, tested, and documented in the Inventor’s Disclosure fell
within the scope of claim 23 of the Wilson Patent. (Id. ¶ 55.) Neither Wilson nor Jahrling, nor
any of Sloan’s attorneys, disclosed Wilson’s Test Results or the Inventor’s Disclosure to the
examiner during prosecution of the ‘635 Patent. (Id. ¶ 56.)
Sloan’s attorneys, despite filing at least five Information Disclosure Statements during
prosecution of the ‘635 Patent, deliberately decided to withhold Wilson’s test results, allegedly
because they wanted to initiate this lawsuit against Zurn as soon as possible. (Id. ¶¶ 59-60, 62.)
According to Zurn’s allegations, Sloan initiated this lawsuit knowing that one or more claims of
the ‘635 Patent, including claim 23, were anticipated by the standard prior art flush valve handle
upon which Sloan’s dual flush product was based and would not have been allowable over the
withheld Inventor’s Disclosure. (Id. ¶¶ 63-64.) Sloan stipulated at the outset of the litigation
that it would not seek to assert several claims of the ‘635 Patent, including claims 18 and 23,
against any current or past Zurn product, which Zurn contends is an admission by Sloan that at
least claim 23 would have been anticipated by the withheld prior art. (Id. ¶¶ 64-66.)
Sloan argues that Zurn fails to state a claim in Count IV because Zurn 1) fails to identify
an individual who allegedly committed inequitable conduct as required by Rule 9(b); 2) fails to
plead materiality with particularity as required by Rule 9(b); and 3) fails to adequately plead

20

intent to deceive.
A.

Identity

In Exergen, the Federal Circuit held that a pleading must identify “the specific individual
associated with the filing or prosecution of the application . . . who both knew of the material
information and deliberately withheld or misrepresented it” to survive a Rule 9(b) challenge.
575 F.3d at 1329. Sloan argues, correctly, that the allegations relating to Count IV fail to
identify any specific individual whom Zurn accuses of inequitable conduct and instead refers
only to “Sloan attorneys,” “at least one of SLOAN’s attorneys,” “any SLOAN attorneys,” and
“SLOAN through its attorneys,” and “SLOAN.”
In its response, however, Zurn clarifies that Sloan’s attorney, Matthew Martin, whom
Sloan admits was involved with the prosecution of the ‘635 Patent, testified in this case that “(i)
he had reviewed [the] Inventor’s Disclosure document approximately one month prior to the
issuance of the patent in suit; (ii) claim 23 was anticipated by the standard prior art flush valve
analyzed in the Inventor’s Disclosure document, and (iii) this document had not been submitted
to the Examiner.” (Resp. at 13 (citing Counterclaim ¶¶ 53-56).) If Zurn supplements its
allegations with those additional facts, which it learned through discovery, it will have identified
at least one specific individual whom it alleges knew about the information in the Inventor’s
Disclosure, understood that it was material to the ‘635 Patent application in that it fell within the
scope of claim 23 of that patent, was involved in the prosecution of the ‘635 Patent, and failed to
bring the Inventor’s Disclosure to the attention of the examiner. Such allegations would comply
with Rule 9(b). See Exergen, 575 F.3d at 1329; see also VG Innovations, Inc. v. Minsurg Corp.,
No. 10-cv-1726, 2011 WL 1466181, at *3 (M.D. Fla. Apr. 18, 2011) (holding that although the

21

complaint referred often to the defendants generally, it also identified one specific person by
name who allegedly failed to disclose information to the PTO, which is sufficient under
Exergen).10
B.

Materiality

Sloan argues that Zurn’s allegations regarding materiality are insufficient because they
do not 1) identify the claims or claim limitations that would not have been allowed if Sloan had
disclosed the Wilson Test Results to the examiner; or 2) allege facts to support an inference that
such claims would not have been allowed if Sloan had disclosed the Wilson Test Results to the
examiner. (Mem. of Law at 12-13.) Sloan further contends that Zurn fails to plead any facts in
support of its “conclusory allegation” of but for materiality. The Court agrees that Zurn’s
current Counterclaim does not comply with Rule 9(b)’s pleading requirement, but finds that if
Zurn amends its allegations with the additional facts and clarification set forth in its response
brief, Zurn’s materiality allegations will be sufficient under Rule 9(b).
To satisfy Rule 9(b)’s pleading standards, Zurn 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–i.e., the ‘what’ and ‘where’ of the material omissions.”
Exergen, 575 F.3d at 1329. Zurn alleges that the standard prior art flush valve analyzed in the
Inventor’s Disclosure document anticipated claim 23 of the ‘635 Patent11 and that “but for the

10

Zurn also alleges that the inventor of the patent-in-suit, Wilson, and his supervisor,
Peter Jahrling, knew of the material information, yet did not disclose it to the PTO.
(Counterclaims ¶¶ 48, 50-51, 56.)
11

Claim 23 provides as follows:
A system for a flush valve which can provide at least two flush volumes of water during
operation, comprising:
22

failure of SLOAN’s attorneys to disclose Wilson’s test results, one or more claims, (e.g., claim
23) of the [‘635 Patent] would not have been allowed.” (Counterclaims ¶ 49 (“One or more
claims of the Wilson Patent, including without limitation claim 23, would be anticipated by the
standard prior art flush valve upon which SLOAN’s dual flush product was based.”); ¶ 51
(alleging that Mr. Jahrling, one of Sloan’s employees, testified that the prior art identified in the
Inventor’s Disclosure fell within the scope of claim 23); ¶¶ 58, 63-66).12 Such allegations
sufficiently allege at least one claim to which the withheld reference is relevant and why such
claim would not have been allowed if Sloan had disclosed the Wilson Test Results to the
examiner. They do not, however, sufficiently identify the specific claim limitations to which the
withheld reference is relevant.

a user handle operable in at least a first and second direction to cause a face plate to pivot
about at least a respective first face plate direction and a second face plate direction;
a plunger mechanism having a plunger coupled to the user handle; and
a bushing receiving the plunger into a bushing passage and the plunger positioned in the
bushing passage such that movement of the user handle in the first direction causes the face plate
to pivot about the first face plate direction engaging the plunger to move a first distance
associated with a first flush volume of water and movement of the user handle in the second
direction causes the face plate to pivot about the second face plate direction engaging the plunger
to move a second distance associated with a second flush volume of water.
(R. 211-1, U.S. Patent No. 7,607,635).
12

Sloan takes issue with Zurn’s allegations that the omission may implicate additional
unspecified claims, arguing that such allegations render Count IV insufficient. (Mem. of Law at
12 (arguing that Zurn “hedges its bets” by identifying claim 23 and other unidentified claims)).
Sloan, however, provides no authority in support of its position. Moreover, Zurn explains,
convincingly, that its use of inclusive language is necessary in light of the fact that the Court has
not yet construed the claims in this case. (Resp. at 15 (Zurn’s use of inclusive language is “a
recognition that the Court’s construction of terms that have been disputed by the parties from the
outset (i.e., ‘dual mode,’ ‘dual flush,’ and ‘dual volume’) may render one or more additional
claims anticipated.”)).
23

Zurn clarifies in its response brief that “claims merely reciting multiple flush volumes,
including without limitation claim 23, are anticipated by the mischaracterized “single mode”
prior art flush valve analyzed in the Inventor’s Disclosure document which exhibited a flush
volume differential of up to 10%.” (Resp. at 15; see also Counterclaims ¶ 58.) If Zurn
supplements its Complaint consistent with those additional facts regarding the claims and the
claim limitations to which the prior art flush valve is relevant, Zurn will have adequately alleged
materiality. See Exergen, 575 F.3d at 1329-30.
C.

Intent

In order to adequately allege intent, the pleader must name the individual(s) associated
with the filing or prosecution of the application “who both knew of the material information and
deliberately withheld or misrepresented it.” Exergen, 575 F.3d at 1329. As explained above, if
Zurn amends its Counterclaims consistent with the facts it learned through discovery as
identified in its response brief, Zurn will have adequately identified an individual who both knew
of the material information and withheld or misrepresented it. The remaining question, then, is
whether Zurn has adequately alleged that the individual intended to deceive the PTO in
withholding or misrepresenting the information.
Zurn alleges that “at least one of Sloan’s attorneys” was aware of the Inventor’s
Disclosure, including Wilson’s Test Results, during the prosecution of the ‘635 Patent, knew that
it was material, and despite filing at least five Information Disclosure Statements during
prosecution of the ‘635 Patent, deliberately decided to withhold the Inventor’s Disclosure in
order to initiate this lawsuit against Zurn as soon as possible. (Counterclaims ¶¶ 53-62.)
Although it appears from Zurn’s response brief that it means to refer to Sloan’s attorney,

24

Matthew Martin, as the attorney in question (Resp. at 13), that is not clear on the face of Zurn’s
pleading. Zurn further alleges that Sloan stipulated at the outset of the litigation that it would not
seek to assert several claims of the ‘635 Patent, including claims 18 and 23, against any current
or past Zurn product, which Zurn contends is an admission by Sloan that it was aware that at
least claim 23 would have been anticipated by the withheld standard prior art flush valve
(Counterclaims ¶¶ 63-66.)
If Zurn amends its allegations consistent with the facts it learned during discovery
regarding the identity of the Sloan attorney(s), then its allegations will be sufficient to support a
reasonable inference of intent to deceive the PTO. AnchorBank, 649 F.3d at 614 (on a Rule
12(b)(6) motion to dismiss, the Court must well-pleaded facts as true and make all possible
inferences in the pleader’s favor). Contrary to Sloan’s argument, at the pleading stage the
inference of deceptive intent need not be the “single most reasonable” inference–rather, it must
only be “‘reasonable,’ meaning that it must be ‘plausible and [] flow[] from the facts alleged.’”
Itex, 2010 WL 2901793, at *2 (citing Exergen, 575 F.3d at 1329 n.5). Moreover, the inference
“need not be probable, only plausible.” Indep. Trust Corp., 665 F.3d at 935.
III.

The Court Grants Zurn Leave to Amend Pursuant to Rule 15(a)(2)
Under Rule 15(a)(2), courts are to “freely give leave [to amend] when justice so

requires.” Fed. R. Civ. P. 15(a)(2). As explained above, amendment in this case would not be
futile, and Sloan identifies no persuasive reason to deny leave to amend. Therefore, the Court
grants Zurn’s request for leave to amend.
CONCLUSION

25

For the reasons set forth above, the Court denies Sloan’s motion to dismiss Count III, but
grants Sloan’s motion to dismiss Count IV. Sloan’s request for attorney’s fees and costs is
denied. Zurn is granted leave to amend its Counterclaims consistent with this Memorandum
Opinion and Order by April 9, 2012. Sloan shall answer Zurn’s Amended Counterclaims by
April 20, 2012.
DATED: April 1, 2012

ENTERED

___________________________________
AMY J. ST. EVE
United States District Court Judge

26