ConAgra Foods Food Ingredients Company, Incorporated v. Archer Daniels Midland Company
Filing
113
MEMORANDUM AND ORDER granting 83 Motion to Dismiss Defendant's Counterclaim. Signed by District Judge Eric F. Melgren on 2/3/2014. (cm)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
CONAGRA FOODS FOOD INGREDIENTS
COMPANY, INC.,
Plaintiff,
vs.
Case No. 12-cv-2171-EFM-KGS
ARCHER-DANIELS-MIDLAND
COMPANY,
Defendant.
MEMORANDUM AND ORDER
Plaintiff ConAgra Foods Food Ingredients Company, Inc. (“ConAgra”) filed this suit
alleging that Defendant Archer-Daniels-Midland Company (“ADM”) is infringing its ‘172, ‘360
and ‘298 Patents. In its Answer, ADM brings seven counterclaims against ConAgra, including
one for “Declaratory Judgment of Unenforceability of the ‘172 Patent and All Patents Claiming
Priority to the ‘172 Patent, Including the ‘360 Patent and the ‘298 Patent.” ADM contends that
ConAgra’s ‘172, ‘360 and ‘298 Patents are unenforceable under a theory of inequitable conduct
before the United States Patent and Trademark Office (“PTO”). ConAgra now moves to dismiss
this counterclaim on the basis that it does not state a claim for relief. For the reasons set forth
below, the Court grants ConAgra’s motion to dismiss.
BACKGROUND
ConAgra and ADM are competing manufacturers in the field of agriculture that sell
wheat flour to customers who use the flour to manufacture products sold to consumers. ConAgra
filed this lawsuit on March 21, 2012, alleging that ADM is infringing its U.S. Patent No.
8,017,172 (the “ ‘172 Patent”). At the time ConAgra filed its Complaint, it was also prosecuting
two continuation applications to the ‘172 Patent before the PTO.
The first continuation
application issued as U.S. Patent No. 8,252,360 (the “ ‘360 Patent”) on August 28, 2012. Two
days later, ConAgra filed a First Amended Complaint adding a claim for infringement of the
‘360 Patent. On March 26, 2013, the PTO issued the second continuation application as U.S.
Patent No. 8,404,298 (the “ ‘298 Patent”). ConAgra filed its Second Amended Complaint on
April 10, 2013, asserting infringement of all three patents, i.e., the ‘172, ‘360, and ‘298 Patents.
In its Answer to ConAgra’s Second Amended Complaint, ADM asserts seven affirmative
defenses and brings seven counterclaims against ConAgra. ADM’s seventh counterclaim seeks a
declaratory judgment that the ‘172 Patent, and all patents claiming priority to the ‘172 Patent,
including the ’360 and ‘298 Patents, are unenforceable due to inequitable conduct before the
PTO. ADM generally asserts that during the prosecution of the ‘172 Patent’s application,
ConAgra failed to inform the PTO of material information and prior art that were known to at
least the ‘172 Patent’s co-inventor, Elizabeth Arndt, and were withheld from the PTO with the
intent to deceive the PTO into granting the ‘172 Patent and its progeny.
Specifically, ADM asserts that during the prosecution of the ‘172 Patent, the PTO
rejected claims that ultimately issued as claims 1 and 35 of the ‘172 Patent on the basis that they
were unpatentable in light of a Canadian patent application owned by ConAgra (hereafter
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referred to as “Chigurupati I”).1 Chigurupati I disclosed a whole wheat flour wherein 100% of
the flour particles were smaller than 150 micrometers. ADM alleges that to overcome the PTO’s
rejections, the inventors of the ‘172 Patent submitted declarations stating that the flour disclosed
in Chigurupati I would not qualify as a whole wheat flour under federal regulations to persons of
skill in the art.
ADM further alleges that Arndt was aware of two articles, one published by Kay Behall
et al. and one published by Judith Hallfrisch et al. (the “Behall and Hallfrisch articles”), that
disclose a whole wheat flour wherein 100% of its particles were smaller than 150 micrometers
and that the flour disclosed in these articles was considered a whole wheat flour by persons of
skill in the art. According to ADM, Arndt did not disclose these articles to the PTO and
misrepresented the existence of a whole wheat flour where in 100% of its particles were smaller
than 150 micrometers to the PTO during the prosecution of the ‘172, ‘360, and ‘298 Patents.
ADM alleges that the whole wheat flour disclosed in the Behall and Hallfrisch articles is material
to the patentability of the ‘172, ‘360, and ‘298 Patents and invalidates at least one of the asserted
claims of those patents.
ConAgra now moves to dismiss ADM’s inequitable conduct counterclaim on the basis
that it does not state a claim for relief. ConAgra contends that ADM’s counterclaim does not
satisfy the heightened pleading requirements under Federal Rule of Civil Procedure 9(b) required
for an inequitable conduct claim.
LEGAL STANDARD
1
ADM’s counterclaim identifies the Canadian patent application as “CA 2,141,974 to Chigurupati et
al.” and also refers to the patent application as “Chigurupati I.” ADM’s Answer to Second Amended Complaint,
Doc. 79, pp.11-12.
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“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’ ”2 “[T]he mere
metaphysical possibility that some plaintiff could prove some set of facts in support of the
pleaded claims is insufficient; the complaint must give the court reason to believe that this
plaintiff has a reasonable likelihood of mustering factual support for these claims.”3 “The
court’s function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties
might present at trial, but to assess whether the plaintiff’s complaint alone is legally sufficient to
state a claim for which relief may be granted.”4
Because inequitable conduct sounds in fraud, to survive a motion to dismiss, the accused
infringer must satisfy the heightened pleading standard of Federal Rule of Civil Procedure 9(b).5
Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the
circumstances constituting fraud or mistake.”6 Therefore, “[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).”7
Whether an accused infringer has satisfied the heightened pleading standard of Rule 9(b)
in pleading inequitable conduct is governed by Federal Circuit law because it bears on an issue
2
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
3
Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007).
4
Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003).
5
Exergen Corp. v. Walmart Stores, Inc., 575 F.3d 1312, 1326-27 (Fed. Cir. 2009).
6
Fed. R. Civ. P. 9(b).
7
Exergen, 575 F.3d at 1326-27.
(2007)).
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unique to patent law.8 The Federal Circuit has held that to plead inequitable conduct, the
accused infringer must allege that: (1) “the applicant misrepresented or omitted material
information” (2) “with the specific intent to deceive the PTO.”9 To satisfy the heightened
pleading requirement of Rule 9(b), the accused infringer must identify “the specific who, what,
when, where, and how of the material misrepresentation or omission committed before the
PTO.”10 “ ‘[K]nowledge’ and ‘intent’ may be averred generally.”11 However, “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.”12
ANALYSIS
ConAgra seeks to dismiss ADM’s inequitable conduct counterclaim on two bases. First,
ConAgra argues that the counterclaim does not satisfy the “who,” “what,” “why,”13 and “how”
elements of pleading an inequitable conduct counterclaim under Rule 9(b). Second, ConAgra
8
Cent. Admixture Pharm. Servs. v. Advanced Cardiac Solutions, P.C., 482 F.3d 1247, 1356 (Fed. Cir.
9
Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc).
10
Exergen, 575 F.3d at 1327.
11
Id. at 1328-29 (quoting Fed. R. Civ. P. 9(b)).
2007).
12
Id.; see also Delano Farms Co. v. Cal. Table Grape Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011)
(“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.”).
13
In Exergen, the Federal Circuit initially states that Rule 9(b) requires the pleading to state the “who,
what, when, where, and how” of the alleged fraud. 575 F.3d at 1327. However, later in the decision, the court
expands this to require allegations that “explain both ‘why’ the withheld information is material and not cumulative,
and ‘how’ an examiner would have used this information in assessing the patentability of the claims.” Id. at 1329.
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asserts that the counterclaim does not plead sufficient facts to infer that any alleged misconduct
was performed with the specific intent to deceive the PTO. As explained below, the Court finds
that ADM’s counterclaim fails to sufficiently plead the “what” and “how” elements of an
inequitable conduct claim and fails to plead sufficient facts alleging an intent to deceive.
A.
The Circumstances of Inequitable Conduct
1.
The “Who”
In its counterclaim, ADM alleges that “ConAgra, including Arndt, was aware of at least
two peer reviewed prior art references disclosing a ‘fine ground whole wheat flour’ produced by
ConAgra in approximately 1999 wherein 100% of the flour’s particles were smaller than 150
micrometers . . . .”14
ADM alleges that “[u]pon information and belief, notwithstanding
ConAgra’s knowledge – at least the knowledge of its agent, Arndt – both the 1999 disclosures of
an ultrafine whole wheat flour wherein 100% of the particles were smaller than 150 micrometers
and its materiality to the patentability of the ‘172 Patent application and its progeny, ConAgra –
including Arndt – did not disclose the Behall or Hallfrisch articles to the Patent Office during the
prosecution of the ‘172 Patent, the ‘360 Patent or the ‘298 Patent and made misrepresentations
regarding the existence of such a flour to the Patent Office.”15 ConAgra asserts that these
allegations do not meet the “who” element of pleading an inequitable conduct claim under Rule
9(b). The Court disagrees.
In Exergen, the Federal Circuit instructed that the pleading must “name the specific
individual associated with the filing or prosecution of the application . . . who both knew of the
14
15
Answer to Second Amended Complaint, Doc. 94, p. 13.
Id. at 15.
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material information and deliberately withheld or misrepresented it.”16 The court found that the
mere identification of a corporate party or simply referring to a corporate party’s “agents and/or
attorneys” is not sufficient to satisfy the “who” requirement under Rule 9(b).17 Here, although
ADM’s counterclaim refers to ConAgra, it also specifically names Arndt as the individual who
was aware of the whole wheat flour disclosed in the Behall and Hallfrisch articles and who
deliberately withheld or misrepresented this information before the PTO. The Court finds that
this is sufficient to meet the “who” element of pleading an inequitable conduct claim. The Court
notes, however, that ADM’s counterclaim is deficient to the extent it references unnamed
individuals through the use of the words or phrases “ConAgra, including its agents and/or
attorneys and/or others owing a duty of candor to the United States Patent and Trademark
Office,” “ConAgra,” and “ConAgra’s attorneys.”18
2.
The “What”
To plead the “what” of an inequitable conduct claim, an accused infringer must “identify
which claims, and which limitations in those claims the withheld references are relevant to.”19
ADM argues that it meets this requirement through the following allegations in paragraph 42 of
its counterclaim: “[d]uring the prosecution of the ‘172 patent application, the Patent Office
repeatedly rejected claims that ultimately issued as claims 1 and 35 of the ‘172 patent,
concerning a whole wheat flour wherein at least 98% of particles were smaller than 212
16
Exergen, 575 F.3d at 1329.
17
Id. at 1329.
18
See Zvelo, Inc. v. SonicWall, Inc., 2013 WL 5443858, at *3 (D. Colo. Sept. 30, 2013) (stating that
specificity as to two individuals does not give the accused infringer the license to use the vague phrase “and/or other
[sic] substantively involved in preparation and original examination of the application” in its pleading).
19
Exergen, 575 F.3d at 1329.
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micrometers.”20 ConAgra asserts that this allegation is insufficient because it merely describes
the prosecution history of the ‘172 Patent and does not allege that any particular prior art had a
direct bearing on any specific patent claims being issued.
ConAgra’s reading of ADM’s counterclaim is unduly narrow. With respect to the ‘172
Patent, paragraph 42 sufficiently identifies claims 1 and 35 as the claims that the Behall and
Hallfrisch articles allegedly invalidate. However, the Court still finds that ADM has failed to
meet the “what” element in pleading its inequitable conduct claim. ADM does not identify
which limitations with claims 1 and 35 that the articles are relevant to. The phrase “concerning a
whole wheat flour wherein at least 98% of particles were smaller than 212 micrometers”21 in
paragraph 42 appears to generally describe claims 1 and 35. Furthermore, claim 35 does not
claim a whole wheat flour, but instead a coarse fraction wherein 97% of the particles are less
than 212 micrometers. With respect to the ‘360 and ‘298 Patents, the counterclaim is completely
deficient. ADM has not identified a single claim or limitation within these patents that the
Behall and Hallfrisch articles invalidate.22 Therefore, the Court finds that ADM’s counterclaim
does not sufficiently plead the “what” element of an inequitable conduct claim.
3.
The “Why” and “How”
An inequitable conduct claim must plead the “particular claim limitations, or combination
of claim limitations, that are supposedly absent from the information of record,” because such
20
Answer to Second Amended Complaint, Doc. 79, p. 15.
21
Id.
22
To the extent ADM’s counterclaim is unclear regarding its assertion that all three patents in suit are
unenforceable due to inequitable conduct, ADM has submitted a Second Amended Counterclaim as an exhibit to its
Opposition to ConAgra’s Motion to Dismiss ADM’s Inequitable Conduct Counterclaim. The Court disregards this
attachment, as ADM has not moved to amend its Answer to Second Amended Complaint, and an attachment to a
motion is not a sufficient filing per Fed. R. Civ. P. 15(a) or D. Kan. Rule 15.1.
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allegations are necessary “to explain both ‘why’ the withheld information is material and not
cumulative, and ‘how’ an examiner would have used this information in assessing the
patentability of the claims.”23 ConAgra contends that ADM has not shown “why” the Behall or
Hallfrisch articles are material and non-cumulative or “how” an examiner would have used these
articles in invalidating the ‘172, ‘360, and ‘298 Patents’ claims.
The parties first dispute the standard under which ADM must plead materiality. ADM
argues that the correct standard for materiality is set forth in 37 C.F.R. § 1.56, which states:
information is material to patentability when it is not cumulative to information
already of record . . ., and
(1) It establishes, by itself or in combination with other information, a prima facie
case of unpatentability of a claim; or
(2) It refutes, or is inconsistent with, a position the applicant takes in: (i)
Opposing an argument of unpatentability relied on by the Office, or (ii) Asserting
an argument of patentability.24
The Federal Circuit, however, rejected this standard in Therasense, when it held that to prove
materiality, an accused infringer must show “but-for” materiality. Specifically, the Federal
Circuit stated that “the materiality required to establish inequitable conduct is but-for materiality.
When an application fails to disclose prior art to the PTO, that prior art is but-for material if the
PTO would not have allowed a claim had it been aware of the undisclosed prior art.”25 Thus,
following Therasense, the appropriate standard for pleading materiality is “but-for” materiality.26
23
Exergen, 575 F.3d at 1329-30.
24
37 C.F.R. § 1.56.
25
Therasense, 649 F.3d at 1291.
26
See SAP Am., Inc., v. Purple Leaf, LLC, 2012 WL 2237995, at *6 (N.D. Cal. June 15, 2012) (“Under
Twombly/Iqbal, it is not enough to simply allege – as a legal conclusion – that the information was material – rather,
there must be facts alleged supporting that element. And, following Therasense, the type of materiality that supports
the claim is but-for materiality.”); Aevoe Corp. v. AE Tech. Co., Ltd., 2013 WL 876036, at *7 (D. Nev. Mar. 7,
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Applying this standard, the Court finds that ADM has sufficiently plead why the Behall
and Hallfrisch articles are material to patentability. ADM’s counterclaim alleges that during
prosecution, the PTO examiner rejected claims 1 and 35 of the ‘172 Patent on the basis that prior
art disclosed a whole wheat flour wherein 100% of the flour particles were smaller than 150
micrometers. It also alleges that the PTO only allowed these claims to issue after Dr. Arndt
submitted a declaration stating that such flour was not considered a whole wheat flour to persons
of ordinary skill in the art. The counterclaim further alleges that the Behall and Hallfrisch
articles disclose “a fine ground whole wheat flour”27 produced by ConAgra wherein 100% of the
flour’s particles were less than 150 micrometers. Finally, the counterclaim alleges that the flour
disclosed in the Behall and Hallfrisch articles invalidate at least one of the asserted claims of the
‘172, ‘360, and ‘298 Patents. Taken as a whole, these allegations plead but-for materiality.
The Court also finds that ADM has sufficiently plead why the Behall and Hallfrisch
articles are not cumulative. The Federal Circuit has held that “[i]t is well-established . . . that
information is not material if it is cumulative of other information already disclosed to the
PTO.”28 Here, ADM’s counterclaim alleges that “the Behall or Hallfrisch articles were not
otherwise before the patent examiner during the prosecution of the ‘172 patent, the ‘360 patent or
the ‘298 patent.” Therefore, ADM’s counterclaim adequately pleads “why” the Behall and
Hallfrisch articles are material and not cumulative.
2013) (applying the “but-for” materiality standard when determining whether an inequitable conduct claim was
sufficiently plead under Rule 9(b)); ZAGG Intellectual Prop. Holding Co. v. XO Skins, LLC, 2012 WL 896352, at *4
(D. Utah, March 15, 2012) (applying the “but-for” materiality standard when determining whether an inequitable
conduct claim was sufficiently plead under Rule 9(b)).
27
Answer to Second Amended Complaint, Doc. 79, p. 13.
28
Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1367 (Fed. Cir. 2008) (citing
Honeywell Int’l, Inc. v. Univ. Avionics Sys. Corp., 488 F.3d 982, 1000 (Fed. Cir. 2007)).
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ADM, has not, however, adequately plead “how” an examiner would have used the
Behall and Hallfrisch articles in assessing the patentability of the claims. ADM asserts that had
the PTO examiner known of the flour disclosed in the Behall and Hallfrisch articles, it would
have “maintained its rejections of Claims 1 and 35 of the ‘172 Patent.” In support of this
assertion, ADM relies on allegations in its counterclaim stating that (1) claims 1 and 35 of the
‘172 Patent were rejected on the basis that prior art disclosed a whole wheat flour wherein 100%
of the flour particles were smaller than 150 micrometers; (2) prior art disclosing a whole wheat
flour wherein 100% of the particles were small than 150 micrometers was thus highly material to
the patentability of the ‘172 Patent; and (3) the Behall and Hallfrisch articles and the whole
wheat flour disclosed in those articles invalidates at least one of the asserted claims of the ‘172,
‘360, and ‘298 Patents. Although ADM alleges that the Behall and Hallfrisch articles invalidate
at least one of the claims of the ‘172, ‘360, and ‘298 Patents, it does not identify the specific
basis on which the examiner would have rejected these claims. This specificity is required when
pleading an inequitable conduct claim.29 Therefore, the Court finds that ADM has not plead the
“how” element of an inequitable conduct claim as required by Rule 9(b).
B.
Scienter
ConAgra asserts that ADM’s counterclaim does not contain sufficient facts alleging
deceptive intent. In Exergen, the Federal Circuit held that an accused infringer must plead 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
29
Aevoe, 2013 WL at *8 n. 3 (“To satisfy Exergen, the pleading, itself, must specifically identify the
basis on which the examiner would have rejected the claims.”).
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intent to deceive the PTO.”30 Here, although ADM’s counterclaim identifies Arndt as the
individual who withheld and/or misrepresented information, it does not identify a specific
individual who acted with the intent to deceive the PTO. Indeed, paragraph 58 of ADM’s
counterclaim states that “the failure to disclose the aforesaid information to the Patent Office on
the part of ConAgra was with the intent to deceive the Patent Office into granting the ‘172 Patent
and its progeny.”31 Alleging ConAgra’s intent to deceive is not the same as alleging a specific
individual’s intent to deceive. Therefore, ADM’s counterclaim does not contain sufficient facts
to meet Rule 9(b)’s requirements for pleading scienter in an inequitable conduct claim.
Even if ADM had named a specific individual, the counterclaim does not provide
sufficient grounds to infer scienter. ADM argues that it has plead specific intent to deceive the
PTO because it alleges that Arndt knew of the Behall and Hallfrisch articles and that the flour
disclosed in those articles was considered a whole wheat flour by persons with skill in the art.
But, as Exergen notes, an intent to deceive may not be inferred solely from some level of
knowledge of a prior art reference.32
ADM’s counterclaim also alleges that Arndt’s
understanding of the flour disclosed in the Behall and Hallfrisch articles as a whole wheat flour
contradicts her prior representation to the PTO that the Chigurupati I flour would not be
considered a whole wheat flour by one of ordinary skill in the art. An alleged contradiction,
however, does not support an inference of specific intent to deceive.33
30
Exergen, 575 F.3d at 1328-29 (emphasis added).
31
Answer to Second Amended Complaint, Doc. 79, p. 17 (emphasis added).
32
Thus, ADM’s
Exergen, 575 F.3d at 1331.
33
Everlight Elec. Co., Ltd. v. Nichia Corp., 2012 WL 5389696, at *9 (E.D. Mich. Nov. 2, 2012)
(citations omitted).
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counterclaim does not contain sufficient facts to infer that a particular individual acted with the
specific intent to deceive the PTO.
For this reason, and all of the other reasons discussed above, ADM’s counterclaim must
be dismissed.
IT IS ACCORDINGLY ORDERED this 3rd day of January, 2014, that Plaintiff
ConAgra Foods Food Ingredients Company, Inc.’s Motion to Dismiss Defendant Archer-DanielMidland Co.’s Inequitable Conduct Counterclaim (Doc. 83) is hereby GRANTED.
IT IS SO ORDERED.
ERIC F. MELGREN
UNITED STATES DISTRICT JUDGE
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