MYCONE DENTAL SUPPLY CO., INC. v. CREATIVE NAIL DESIGN, INC. et al

Filing 135

OPINION. Signed by Chief Judge Jerome B. Simandle on 6/24/2013. (TH, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
MYCONE DENTAL SUPPLY CO.,
INC.,
Plaintiff,

Civil Action
No. 11-4380 (JBS-KMW)

v.
OPINION
CREATIVE NAIL DESIGN, INC., et
al.,
Defendants.
APPEARANCES:
Ira A. Rosenau, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers, LLP
457 Haddonfield Road, suite 510
Cherry Hill, NJ 08002-2220
Attorney for Plaintiff
Robert G. Shepherd, Esq.
Porzio Bromberg & Newman P.C.
29 Thanet Road, suite 201
Princeton, NJ 08540-3661
-andAdam Hess, Esq.
Christopher T. La Testa, Esq.
Venable, LLP
575 7th St., NW
Washington, DC 20004
Attorneys for Defendants
SIMANDLE, Chief Judge:
I.

INTRODUCTION

This matter comes before the Court on the motion [Docket
Item 73] of Plaintiff Mycone Dental Supply Co., d/b/a Keystone
Research and Pharmaceutical (“Keystone”) to dismiss the
inequitable conduct affirmative defense and counterclaim which

Defendant Creative Nail Design (“CND”) asserted in its Answer
[Docket Item 54].1 Keystone alleges that CND is infringing
Keystone’s United States Patent No. 5,965,147 (“the ‘147
Patent”), which embodies Keystone’s invention of a
toxicologically and dermatologically safe nail coating product
comprised of a substantially acid-free hydrophilic acrylate
monomer gel.2 CND alleges that the claims of the ‘147 Patent are
unenforceable because Keystone breached its duty of candor and
good faith in dealing with the United States Patent and
Trademark Office (“PTO”) and engaged in inequitable conduct
during the prosecution of the ‘147 Patent. Keystone has moved to
dismiss this inequitable conduct claim and affirmative defense.
Because CND has not pled sufficient facts indicating that
1

After the briefing for the present motion was complete,
Plaintiff filed an Amended Complaint Against All Defendants
[Docket Item 108] with Defendants’ written consent. The Court
asked the parties via letter [Docket Item 112] whether the
Amended Complaint moots the pending motion to dismiss and
whether the parties wanted the Court to decide the issue as it
was presently briefed. The parties responded via joint letter
[Docket Item 115] noting that the Amended Complaint supersedes
all previous pleadings. The parties stated, however, that the
inequitable conduct issue had not changed and asked the Court to
decide the issue on the present papers. The Court has complied
with the parties’ request. All citations in this Opinion
therefore reference CND’s first Answer [Docket Item 54], not
CND’s Answer [Docket Item 116] to the Amended Complaint.
2

Plaintiff Keystone also claims that Defendants Beauty Systems
Group, LLC, East Coast Salon Services, Inc., and Emiliani
Enterprises, Inc. are infringing the ‘147 Patent by using,
selling, or offering for sale CND’s products that infringe the
‘147 Patent.
2

Keystone had specific intent to deceive the PTO, CND’s
inequitable conduct counterclaim will be dismissed and its
inequitable conduct affirmative defense will be stricken,
without prejudice to seeking leave to amend.
II.

BACKGROUND
A. Factual Background

The Court previously issued an Opinion [Docket Item 50]
addressing Defendants’ Motion to Dismiss [Docket Item 13].
Mycone Dental Supply Co., Inc. v. Creative Nail Design, Inc.,
CIV. 11-4380 (JBS-KMW), 2012 WL 3599368 (D.N.J. Aug. 17, 2012).3
The present Opinion focuses only on the relevant allegations in
CND’s Answer and Counterclaim.
CND’s Ninth Affirmative Defense and Third Counterclaim
allege that the ‘147 Patent is unenforceable because of
Keystone’s inequitable conduct before the PTO. CND claims that
Keystone breached its duty of candor and good faith dealing with
the PTO and engaged in inequitable conduct in prosecuting the
‘147 Patent because Keystone “(a) knowingly and with deceptive
3

The August 17, 2012 Opinion dismissed Plaintiff’s unjust
enrichment claim against all Defendants and dismissed
Plaintiff’s common law unfair competition claim against
Defendants Beauty Systems Group, East Coast Salon Services, and
Emiliani Enterprises. The Court did not dismiss the common law
unfair competition claim against CND. In addition, the Court
denied Defendants’ motion to dismiss Plaintiff’s claims for
violation of § 43(a)(1)(B) of the Lanham Act against CND and
violation of the New Jersey Fair Trade Act against CND.
3

intent failed to disclose to the PTO prior art that was material
to the patentability of one or more claims of the ‘147 patents;
and (b) knowingly and with deceptive intent failed to disclose
to the PTO material information regarding inventorship of the
‘147 patent.” (CND Answer and Counterclaims to Plaintiff’s
Complaint (“CND Answer”) ¶ 22.)
CND claims that, as early as 1993 or 1994, Keystone
approached CND seeking to become a “second source” supplier for
CND’s products. (CND Answer ¶ 23.) During these discussions,
Keystone stated that it had noticed a “patent pending” marking
on RADICAL, one of CND’s nail care products, and inquired about
CND’s pending patent application. (CND Answer ¶ 23.) CND asserts
that “Keystone alleged that it wanted to know more about the
patent application to avoid infringing CND’s forthcoming
patent.” (CND Answer ¶ 23.)
CND alleges that Keystone and CND met several times. (CND
Answer ¶ 24.) One meeting occurred in Irvine, California, soon
after RADICAL’s introduction in 1993, and involved two issues:
“Keystone’s desire to do business with CND and Keystone’s desire
for more information about CND’s patent application.” (CND
Answer ¶ 24.) The following employees attended the Irvine
meeting: Cary Robinson, Keystone’s President; Larry Steffier,
Keystone’s head scientist and the sole named inventor of the
4

‘147 patent; Jim Nordstrom, CND’s then-president; and Douglas
Schoon, CND’s Director of Research and Design. (CND Answer ¶
24.)
CND “declined to show the application to Keystone,” but
Schoon described its contents and the RADICAL product. (CND
Answer ¶ 24.) RADICAL was a liquid artificial nail product that
improved upon TURBO, one of CND’s earlier liquid artificial nail
products. (CND Answer ¶ 24.) RADICAL and TURBO had excellent
adhesive properties because they included a monomer called
hydroxyethyl methacrylate (“HEMA”). (CND Answer ¶ 25.) Schoon
allegedly explained to Keystone that HEMA could improve the
adhesive properties of a primer or could be added directly to
the monomer blend to provide excellent adhesive properties
without using an additional primer. (CND Answer ¶ 25.) Schoon
also allegedly explained the chemical mechanism by which HEMA
improved adhesion to the natural nail plate and how RADICAL was
developed from TURBO and another CND product called SOLAR NAIL.
(CND Answer ¶ 25.)
CND ultimately decided not to do business with Keystone.
(CND Answer ¶ 26.)
In 1996, over one year before Keystone filed the ‘147
Patent application, CND allegedly stopped using HEMA and began
using another monomer, hydroxypropyl methacrylate (“HPMA”), in
5

the RADICAL formulation. (CND Answer ¶ 26.) CND had found that
HPMA provided the same adhesive qualities as HEMA with less skin
irritation. (CND Answer ¶ 26.)
On December 3, 1997, Keystone filed the application for the
‘147 Patent, which listed Larry Steffier, Keystone’s head
scientist, as the sole inventor. (CND Answer ¶ 27.) Claim One of
the ‘147 Patent claimed: “A pretreatment composition for
increasing the adhesion of adhesives and coatings to
proteinaceous substrates comprising a liquid substantially acidfree hydrophilic acrylate monomer composition.” (CND Answer ¶
27.) Examples of the claimed “substantially acid-free
hydrophilic acrylate monomers” listed in the patent application
included both HEMA and HPMA, specifically listing HEMA as a
preferred “substantially acid-free hydrophilic acrylate
monomer.” (CND Answer ¶ 27.)
Keystone allegedly distinguished its use of claimed
monomers from prior art “by pointing out that the cited prior
art included acrylate and methacrylate polymers, but that
Keystone’s invention used monomers.” (CND Answer ¶ 28.) Keystone
asserted that its invention was “novel” and “that no one had
ever used these monomers in treating compositions for improving
adhesion of adhesives and coatings.” (CND Answer ¶ 28.) Keystone
allegedly “did not disclose to the Patent Office any information
6

about CND’s use of HEMA in RADICAL” and “failed to disclose that
CND was using HEMA in RADICAL for the purpose of improving
adhesive qualities and that CND had provided information
concerning HEMA to Keystone, including Larry Steffier, well
before the filing of the application for the ‘147 patent.” (CND
Answer ¶ 29.)
CND alleges, “During the prosecution of the application for
the ‘147 patent, at least the named inventor and others involved
with the prosecution of the application knowingly and with
deceptive intent withheld material prior art from the PTO,
including information provided to Keystone and the named
inventor by CND employees.” (CND Answer ¶ 30.)

CND also alleges

that “the named inventor and others involved with the
prosecution of the application knowingly and with deceptive
intent withheld material information regarding inventorship from
the PTO, including the fact that CND inventors should be named
as sole or joint inventors of the ‘147 patent.” (CND Answer ¶
31.) CND concludes that “[b]ut for the PTO’s ignorance of the
prior art and material information withheld by Keystone and the
named inventor, one or more claims of the ‘147 patent would
never have issued.” (CND Answer ¶ 32.)
CND seeks, inter alia, the dismissal with prejudice of
Keystone’s Complaint, a declaration that the claims of the ‘147
7

Patent are unenforceable due to Keystone’s inequitable conduct
before the PTO, and a declaration that this is an exceptional
case meriting an attorneys’ fees award under 35 U.S.C. § 285.
B. Plaintiff’s Motion to Dismiss Inequitable Conduct
Counterclaim and Affirmative Defense
Keystone filed a motion to dismiss [Docket Item 73] CND’s
inequitable conduct allegations, i.e., CND’s Ninth Affirmative
Defense and Third Counterclaim.4 Keystone emphasizes that there
is no evidence in the record corroborating CND’s allegations.5
Keystone argues that CND’s pleadings lack many of the “who,
what, when, where, and how” details that are required for
4

The title of Keystone’s motion refers to “inequitable conduct
affirmative defenses and counterclaims.” Despite the plural
nouns in the title, the Notice of Motion only identifies the
Ninth Affirmative Defense and Third Counterclaim. This Opinion
only addresses the Ninth Affirmative Defense and Third
Counterclaim.
5

Keystone also emphasizes that CND’s counterclaims in this case
are not CND’s “first bite at the apple” because CND made the
same inequitable conduct affirmative defense and counterclaim in
a previously filed case in the Southern District of California
involving the ‘147 Patent. (Pl. Mem. Supp. Mot. Dismiss at 1.)
Keystone filed a motion to dismiss the inequitable conduct
allegations in the California case. Keystone argues that, in the
present case, CND “had the benefit of Keystone’s analysis
showing why its inequitable conduct pleadings in the previously
filed case were insufficient” and this prior briefing “further
underscores that CND’s claims are without merit.” (Pl. Mem.
Supp. Mot. Dismiss at 2.) The California case was dismissed with
prejudice because, although that action was filed before the
present action, the California action fell within an exception
to the first-filed rule. The California court never addressed
the merits of Plaintiff’s motion to dismiss the inequitable
conduct allegations and, therefore, the Court will disregard any
arguments about the import of prior briefing.
8

pleading inequitable conduct claims under Federal Circuit law
and under Fed. R. Civ. P. 9(b). (Pl. Mem. Supp. Mot. Dismiss at
4.) Keystone notes that CND does not describe which claims in
the ‘147 patent were disclosed in Schoon’s verbal description of
CND’s patent application and does not identify the CND employees
that should have been named as inventors. Keystone also notes
that CND does not identify the pending patent application that
Schoon described. Keystone argues that CND’s pleadings regarding
mis-inventorship are inadequate and that CND failed to
adequately plead intent to deceive.
In Opposition [Docket Item 83], CND argues that Keystone
did not disclose to the PTO any information about CND’s
commercial use of HEMA. CND also argues that Keystone improperly
distinguished the prior art on the basis that Keystone said the
prior art involved the use of polymers, not monomers, even
though CND’s products involved the use of monomers. And CND
argues that Keystone failed to identify Schoon as an inventor on
the ‘147 patent.
III. ANALYSIS
a. Standard of Review on Rule 12(b)(6) Motion to
Dismiss
A motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) may be granted only if, accepting all well-pleaded
allegations in the complaint as true and viewing them in the
9

light most favorable to the plaintiff, a court concludes that
the plaintiff failed to set forth fair notice of what the claim
is and the grounds upon which it rests that make such a claim
plausible on its face.6 Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007). A complaint will survive a motion to dismiss if
it contains sufficient factual matter to “state a claim to
relief that is plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). Although a court must accept as true all
factual allegations in a complaint, that tenet is “inapplicable
to legal conclusions,” and “[a] pleading that offers labels and
conclusions or a formulaic recitation of the elements of a cause
of action will not do.” Id.
In addition, “if a complaint is vulnerable to 12(b)(6)
dismissal, a district court must permit a curative amendment,
unless an amendment would be inequitable or futile.” Phillips v.
County of Allegheny, 515 F.3d 224, 236 (3d Cir. 2008).

6

Keystone argues that CND “attaches no documents to its
pleadings corroborating its claim” and that “the only ‘evidence’
that is proffered by CND is its own attorneys’ vague
characterizations as to what was supposedly said at a meeting
that occurred almost twenty years ago.” (Keystone Mot. to
Dismiss at 6-7.) At the motion to dismiss stage, the Court tests
the sufficiency of the allegations, not the evidence. Keystone’s
arguments about that lack of corroborative evidence lack merit
at this procedural posture.
10

b. Inequitable Conduct
An inequitable conduct claim invalidates a patent on the
grounds that the patentee deceived the PTO while prosecuting the
patent. “Inequitable conduct is an equitable defense to patent
infringement that, if proved, bars enforcement of a patent.”
Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285
(Fed. Cir. 2011). To prevail on an inequitable conduct claim, an
accused infringer must show that the patent applicant: “(1) made
an affirmative misrepresentation of material fact, failed to
disclose material information, or submitted false material
information, and (2) intended to deceive the [PTO].” Leviton
Mfg. Co., Inc. v. Universal Sec. Instruments, Inc., 606 F.3d
1353, 1358 (Fed. Cir. 2010) (internal quotation omitted).
Inequitable conduct claims must be pled with particularity
in accordance with Fed. R. Civ. P. 9(b), which states: “In
alleging fraud . . ., a party must state with particularity the
circumstances constituting fraud . . . .” Federal Circuit law
determines whether an inequitable conduct claim satisfies the
Rule 9(b) requirements. See Exergen Corp. v. Wal-Mart Stores,
Inc., 575 F.3d 1312, 1326 (Fed. Cir. 2009) (“we apply our own
law . . . to the question of whether inequitable conduct has
been pleaded with particularity under Rule 9(b)”). The Exergen
court held that “in pleading inequitable conduct in patent
11

cases, Rule 9(b) requires identification of the specific who,
what, when, where, and how of the material misrepresentation or
omission committed before the PTO.” Id. at 1327.
The relevant “conditions of mind” for inequitable conduct
include: “(1) knowledge of the withheld material information or
of the falsity of the material misrepresentation, and (2)
specific intent to deceive the PTO.” Exergen, 575 F. 3d at 1327.
Although Rule 9(b) provides that “[m]alice, intent, knowledge,
and other conditions of a person's mind may be alleged
generally,” the Federal Circuit has held that inequitable
conduct pleadings are subject to a higher standard:
[A]lthough “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 1328-29.7 An inequitable conduct claim must
therefore allege that a specific individual “knew of the
reference, knew that it was material, and made a deliberate
decision to withhold it.” Therasense, 649 F. 3d at 1290.
7

The standards for pleading a claim of inequitable conduct are
more lenient than the standards for obtaining relief. At the
pleading stage, deceptive intent must be a reasonable inference;
prevailing on an inequitable conduct claim requires a showing
that deceptive intent is the single most reasonable inference.
Exergen, 575 F. 3d at 1329 at n.5.
12

CND cites Jersey Asparagus Farms, Inc. v. Rutgers Univ.,
803 F. Supp. 2d 295 (D.N.J. 2011), for the proposition that
these requirements do not apply to the pleading stage because
Exergen involved a motion to amend after a full trial on the
merits. (CND Opp’n at 9-10.) The Jersey Asparagus court did
state that “Exergen does not address the pleading standard
applicable on a motion to dismiss under Rule 12(b)(6).” Jersey
Asparagus, 803 F. Supp. 2d at 308. But Jersey Asparagus was
decided on May 31, 2011; on August 14, 2011, the Federal Circuit
decided Delano Farms Co. v. California Table Grape Comm'n, 655
F.3d 1337 (Fed. Cir. 2011), cert. denied, 133 S. Ct. 644 (2012),
which held:
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.
Id. at 1350. Delano Farms clearly held that to survive a motion
to dismiss, a claimant must satisfy the requirement to plead
facts leading to a reasonable inference of knowledge of
materiality and intent to deceive. Moreover, other courts in
this District have held that Exergen applies to the pleading
stage. See, e.g. Sepracor Inc. v. Teva Pharmaceuticals USA,
Inc., 09-CV-01302 (DMC-MF), 2010 WL 2326262, at *5 (D.N.J. June
13

7, 2010) (“the Court agrees with Plaintiff that Defendants
failed to meet the stringent pleading standard set forth by the
Federal Circuit in Exergen . . . .); Teva Neuroscience, Inc. v.
Watson Laboratories, Inc., Civ. 10-5078 (JLL), 2011 WL 741250,
at *2 (D.N.J. Feb. 24, 2011) (“The Exergen court summarized the
applicable pleading standard for inequitable conduct as follows
. . . .”). The Court will apply Exergen’s standards.
The Federal Circuit has defined a reasonable inference as
“one that is plausible and that flows logically from the facts
alleged, including any objective indications of candor and good
faith.” Exergen, 575 F. 3d at 1329 n.5. Thus, according to the
Federal Circuit, a court is not free to disregard the patentee’s
objective indications of candor and good faith when it assesses
whether the pleadings create a reasonable inference of specific
intent to deceive the PTO; at the Rule 12(b)(6) stage, any such
objective indications of candor and good faith must derive only
from the pleadings and those materials referenced in or attached
to the pleadings that may permissibly be considered in a Rule
12(b)(6) motion.
c. Tightening the Standards for Inequitable Conduct
In 2011, the Federal Circuit addressed problems with
inequitable conduct claims and, in response, “tighten[ed] the
standards for finding both intent and materiality in order to
14

redirect a doctrine that has been overused to the detriment of
the public.” Therasense, 649 F.3d at 1290. The Therasense court
emphasized the origins of the inequitable conduct doctrine in
three United States Supreme Court cases involving “deliberately
planned and carefully executed scheme[s] to defraud not only the
PTO but also the courts” through perjury, manufactured evidence,
bribery, and/or suppression of evidence. Id. at 1287, 1293
(internal citations omitted). The Therasense court addressed
problems arising from expansions of the inequitable conduct
doctrine because inequitable conduct “has become an absolute
plague” and “has been overplayed, is appearing in nearly every
patent suit, and is cluttering up the patent system.” Id. at
1289 (internal citations omitted).
In redirecting the inequitable conduct doctrine, the
Therasense court emphasized that “[i]ntent and materiality are
separate requirements” and that “[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.” Id. at 1290. Therasense directed district courts to
“weigh the evidence of intent to deceive independent of its
analysis of materiality.” Id.
CND argues that Therasense “did not . . . address pleading
issues and certainly did not tighten the standard for pleading
15

inequitable conduct . . . .” (CND Opp’n at 9.) CND’s argument is
essentially that Therasense tightened the standards for proving
inequitable conduct, without modifying the standards for
pleading such claims.
While Therasense involved a district court’s finding of
inequitable conduct after a bench trial, many of the concerns
that the Federal Circuit raised in that case apply to the
pleading stage. For example, the Therasense court noted that
“[a] charge of inequitable conduct conveniently expands
discovery into corporate practices before patent filing and
disqualifies the prosecuting attorney from the patentee’s
litigation team.” Therasense, 649 F.3d at 1288. It also
“discourages settlement and deflects attention from the merits
of validity and enforcement issues.” Id. Inequitable conduct
disputes “increase[e] the complexity, duration and cost of
patent infringement litigation that is already notorious for its
complexity and high cost.” Id. (citation omitted). The Federal
Circuit’s concerns included the impact of loosely pled
inequitable conduct claims on the litigation process,
particularly during discovery and settlement negotiations. These
concerns necessarily involve the pleading stage because
otherwise a claim of inequitable conduct that is insufficiently
pled will open the door to intrusive and time-consuming
16

discovery and will color settlement negotiations in a manner
than is unfair to the patentee and clogs the litigation. While
CND need not prove its inequitable conduct claim at this
procedural posture, it must plead a plausible claim for relief
in accordance with Therasense. See Bayer Cropscience AG v. Dow
Agrosciences LLC, Civ. 10-1045 (RMB-JS), 2012 WL 1253047, at *2
(D. Del. Apr. 12, 2012) (“Although the Therasense decision did
not squarely address the pleading requirements for an
inequitable conduct defense, but instead involved the review of
a district court's opinion after a bench trial, the decision is
still relevant to the pleading issues involved herein.”).
Thus, the heightened standards for proving inequitable
conduct recently set by the Federal Circuit are reflected in the
heightened standards that are required for pleading inequitable
conduct at the Rule 12(b)(6) stage. The questions for the
present Opinion are thus whether CND has made sufficient factual
allegations from which one can reasonably infer that a specific
Keystone person knew that Keystone was withholding material
information from the PTO, or giving false information to the PTO
about, CND’s prior art, and whether CND’s factual allegations,
if accepted as true for purposes of this motion, are sufficient
to lead a reasonable person to infer that the same individual
had the specific intent to deceive the PTO when withholding or
17

misrepresenting the material information, taking into account
any objective indications of candor and good faith disclosed in
the pleadings and documents referenced therein.
d. Lack of Deceptive Intent
CND has not pled facts leading to a reasonable inference
that Keystone and the ‘147 patent inventors had a specific
intent to deceive.8 The Court need not accept CND’s legal
conclusion that “[d]uring the prosecution of the application for
the ‘147 patent, at least the named inventor and others involved
with the prosecution of the application knowingly and with
deceptive intent withheld material prior art from the PTO . . .
.” (CND Answer ¶ 30.) CND has not pled sufficient facts to
permit a reasonable inference that a specific individual,
whether an inventor or others involved in prosecuting the patent
application, acted both knowingly and with specific intent to
deceive, taking into account objective indications of candor and
good faith reflected in the pleading and documents that may
permissibly be considered in a Rule 12(b)(6) motion.
As an initial matter, there are objective indications of
Keystone’s candor and good faith. During the ‘147 Patent
prosecution process, Keystone disclosed U.S. Patent No.
8

Because CND has not sufficiently pled the deceptive intent
requirement, the Court need not analyze whether CND has
sufficiently pled the other inequitable conduct requirements.
18

5,523,076 (“the ‘076 patent”), which lists Schoon as the
inventor and CND as the assignee, and a “Primer Basics Article,”
which Schoon authored.9 [Docket Item 73-7 at 3-4.] These
objective indications of candor impede any reasonable inference
that Keystone intended to deceive the PTO.
CND argues that Steffier’s disclosure of the ‘076 patent is
irrelevant because Steffier “fail[ed] to disclose to the PTO
CND’s commercial RADICAL product” and “[t]his information
regarding commercial sales of a material prior art composition .
. . goes beyond the corners of the patent application that Mr.
Schoon discussed [in Irvine], was significant, and should have
been disclosed to the PTO.” (CND Opp’n at 13.) CND argues that
“concealment of public sales information from the PTO is
considered more egregious in the context of inequitable conduct
than withholding a material patent reference.” (CND Opp’n at
13.) But CND’s pleading does not specify the commercial sales
information that Keystone should have disclosed. CND has not
satisfied the Federal Circuit’s requirement of pleading “the
specific who, what, when, where, and how of the material
9

The Court can reference the ‘147 patent application because it
was relied upon in CND’s counterclaim against Keystone. See In
re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d
Cir. 1997) (“a district court ruling on a motion to dismiss may
not consider matters extraneous to the pleadings . . . .
However, an exception to the general rule is that a document
integral to or explicitly relied upon in the complaint may be
considered” (citations omitted)).
19

misrepresentation or omission committed before the PTO.”
Exergen, 575 F.3d at 1327.
CND’s pleading also does not identify the patent
application that was pending and that was described at the
Irvine meeting. In 1993, Keystone was told of CND’s pending
patent application, although CND did not show the actual
application to Keystone. In 1996, the ‘076 patent was issued. In
1997, Keystone applied for the ‘147 patent and disclosed the
‘076 patent in its application. If the patent application
described at the Irvine meeting was eventually issued as the
‘076 patent, then Keystone disclosed the patent and that
disclosure is not compatible with intent to deceive. If the
pending patent application was not issued as the ‘076 patent,
then CND’s pleading lacks specificity in terms of explaining how
Keystone acted with intent to deceive. The Therasense court
reminded district courts that the inequitable conduct doctrine
originated from cases where patent holders manufactured
evidence, suppressed evidence, committed perjury, or engaged in
bribery. CND’s present allegations do not rise to the level of
inequitable conduct described in Therasense.
CND argues that the ‘076 patent’s claims “are directed to
different aspects of a nail composition than the improved
adhesion properties highlighted by Mr. Schoon to Mr. Steffier”
20

at the Irvine meeting and that “simply disclosing the ‘076
patent to the PTO is not equivalent to disclosing everything
that was conveyed by Mr. Schoon to Mr. Steffier and Keystone.”
(CND Opp’n at 14.) Assuming this assertion is true and that
disclosing the ‘076 patent did not disclose all the information
that was conveyed at the Irvine meeting, CND still has not
sufficiently pled a specific factual basis giving rise to a
reasonable inference that Keystone had a specific intent to
deceive. CND must plead intent to deceive independently of the
materiality of any allegedly withheld information.
CND also argues that its pleadings show that Keystone
failed to disclose CND’s use of HEMA, that the two parties had a
“competitive relationship,” and that CND refused to conduct
business with Keystone. (CND Opp’n at 17.)10 CND argues that
“[t]hese facts, when considered in view of Mr. Steffier’s
knowledge of the materiality of the information withheld by
Keystone, are more than enough for a Court to reasonably infer
that at least the named inventor, Mr. Steffier, acted with a
10

CND claims that paragraphs 23 and 26 of its answer “set[]
forth specific facts regarding the competitive relationship
between the two parties . . . .” (CND Opp’n at 17.) These two
paragraphs describe Keystone’s alleged request to become a
second source supplier for CND’s products and CND’s decision not
to do business with Keystone, but they do not reference a
competitive relationship. (CND Answer ¶¶ 23, 26.) If CND relies
upon a competitive relationship as one of the facts
demonstrating specific intent to deceive, its pleading must set
forth the allegation with particularity.
21

specific intent to deceive the PTO.” (CND Opp’n at 17.) CND’s
argument is essentially that the materiality of the allegedly
withheld information and CND’s refusal to conduct business with
Keystone are sufficient to show Keystone’s intent to deceive.
But the Therasense court emphasized that “[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
. . . .” Therasense, 649 F.3d at 1290. After Therasense, it is
clear that “a court must weigh the evidence of intent to deceive
independent of its analysis of materiality.” Id. In other words,
CND must plead specific intent to deceive with factual
particularity, regardless of materiality. Even if the withheld
information was material and even if Keystone and CND had a
competitive dynamic, CND simply has not pled facts creating a
reasonable inference that Keystone had specific intent to
deceive the PTO.11

11

CND argues that Keystone deceived the PTO by distinguishing
prior art on the basis that the prior art involved the use of
polymers, even though CND’s products used monomers. Keystone
argues that when it distinguished the prior art, it was
distinguishing the two specific references that the Patent
Examiner had cited, not all prior art. Keystone’s distinguishing
statements about polymers, when coupled with Keystone’s
disclosures of the ‘076 patent and Schoon’s article, again do
not give rise to a reasonable inference that Keystone
intentionally sought to hide the fact that CND’s products used
monomers.
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CND also argues that Keystone disclosed the ‘076 patent
“among 18 other less material prior art references.” (CND Opp’n
at 14.) CND claims that “[b]urying a material reference in a
prior art statement containing a multiplicity of other
references is probative of bad faith.” (CND Opp’n at 14.) But
Keystone’s citation of the ‘076 patent among 18 other references
is not indicative of bad faith. CND cites eSpeed, Inc. v.
Brokertec USA, L.L.C., 417 F. Supp. 2d 580 (D. Del. 2006),
aff'd, 480 F.3d 1129 (Fed. Cir. 2007), to support its argument.
In eSpeed, however, “the declarations and exhibits amounted to
over two thousand pages” and the court described the disclosures
as a “blizzard of paper,” which was “more consistent with an
intent to hide than to disclose.” Id. at 598. In this case,
Keystone’s disclosure statement was two pages long with 19
references, two of which were the ‘076 patent and Schoon’s
article. This disclosure statement is not a blizzard of paper
indicating an intent to hide, rather than disclose.
Because CND has not pled the deceptive intent requirement
and because deceptive intent must be pled with factual
particularity independently of materiality, and because the
objective indications of Keystone’s candor and good faith
militate against an inference of deceptive intent based on the
presently overly-generalized allegations, CND’s inequitable
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conduct counterclaim will be dismissed. The Court need not
address Keystone’s other arguments. CND’s inequitable conduct
counterclaim will be dismissed without prejudice because, while
CND has not pled facts sufficient to support an inference of
deceptive intent, there is no indication at this time that a
motion to amend would be futile. A proposed amended pleading
that cures the defects mentioned above would suffice. The
heightened standard for pleading inequitable conduct is
factually demanding but it is perhaps not unattainable in this
case.
e. Motion To Strike Affirmative Defense
The Court “may strike from a pleading an insufficient
defense . . . .” Fed. R. Civ. P. 12(f). “An affirmative defense
is insufficient as a matter of law if it cannot succeed under
any circumstances.” In re Gabapentin Patent Litig., 649 F. Supp.
2d 340, 346 (D.N.J. 2009). Striking an affirmative defense “is a
drastic remedy, to be resorted to only when required for the
purposes of justice . . . . Courts have, however, recognized
that such motions may serve to hasten resolution of cases by
eliminating the need for discovery which in turn saves time and
litigation expenses.” Id. (citations omitted). Motions to strike
“will, therefore, be granted when a defense is legally

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insufficient under any set of facts which may be inferred from
the allegations of the pleading.” Id. (citation omitted).
As explained above, CND has not alleged a plausible
inequitable conduct claim; its allegations cannot support an
inequitable conduct affirmative defense for the same reasons.
The Court will strike CND’s Ninth Affirmative Defense without
prejudice. If CND chooses to file a motion to amend, CND may
also replead its inequitable conduct affirmative defense.

IV.

CONCLUSION

CND failed to pled facts supporting a reasonable inference
that Keystone had intent to deceive the PTO. CND’s inequitable
conduct counterclaim and affirmative defense will be dismissed
without prejudice and with leave to file a motion to amend its
pleading within 14 days.

June 24, 2013
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
Chief U.S. District Judge

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