United States District Court, D. Delaware
LEONARD P. STARK, District Judge.
1. Defendants Philips Electronic North American Corporation and Philips Medizin Systeme Boblingen GMBH (collectively, "Philips" or "Defendants") move, pursuant to Federal Rule of Civil Procedure 15(a), for leave to amend their answer to add a defense and counterclaim asserting that PlaintiffMasimo Corporation's ("Masimo" or "Plaintiff') U.S. Patent No. 7, 215, 984 (''the '984 patent") is unenforceable due to Masimo's alleged recent inequitable conduct during the ex parte reexamination of the '984 patent. (D.I. 805) PlaintiffMasimo opposes the motion on the grounds it is futile and unduly prejudicial. The Court heard oral argument on the motion at the pre-trial conference on August 28, 2014. (See Transcript) ("Tr.")
2. Pursuant to Federal Rule of Civil Procedure 15, courts generally grant motions to amend absent a showing of undue delay, bad faith, or dilatory motive on the part of the movant, undue prejudice to the opposing party, or futility of the amendment. See Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir. 1990).
3. An amendment is futile if it fails to satisfy the standards of legal sufficiency under 12(b)(6) of the Federal Rules of Civil Procedure. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). When reviewing a motion to dismiss for failure to state a claim on which relief may be granted, the Court must accept as true all material allegations of the complaint. See Fed.R.Civ.P. 12(b)(6); Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." In re Burlington Coat Factory, 114 F.3d at 1420 (internal quotation marks omitted). Thus, the Court may grant such a motion to dismiss only if, after "accepting all well-pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief" Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000) (internal quotation marks omitted).
4. The substantive elements of inequitable conduct require: "(l) 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 Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 n.3 (Fed. Cir. 2009). "[I]n pleading inequitable conduct in patent 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. Generally, the materiality required to establish inequitable conduct is "but-for materiality." Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1291 (Fed. Cir. 2011). As for the intent prong, Rule 9(b) states that "[m]alice, intent, knowledge, and other conditions of mind of a person may be averred generally." The relevant "conditions of mind" for inequitable conduct include: "(l) 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.
5. Having reviewed the parties' submissions (D.I. 806, 807, 811) and considered the arguments made during the hearing, the Court concludes that the amended allegations adequately plead inequitable conduct such that Philips' claim is not futile.
6. In its amended answer, Philips alleges specific Masimo representatives - John Grover, Stephen Jensen, Joe Kiani, and Jarom Kesler - each failed on several occasions to inform the PTO that the interpretation of the asserted claims of the '984 patent Masimo urged the PTO to adopt had been rejected by this Court, including: (i) when Magistrate Judge Thynge issued her Report & Recommendation ("R&R") regarding summary judgment, (ii) when the PTO issued its Notice of Intent to Issue Reexamination Certificate ("NIRC") based on that rejected construction, and (iii) when the undersigned District Judge issued his Summary Judgment Opinion and Order ("SJ Order") adopting the magistrate's R&R. (See, e.g., D.I. 806 Exhs. 1-2 at ¶¶ 388, 408-10, 413, 416-19, 432-34, and 438) Philips provides sufficient factual support for these allegations to support materiality as well as an intent to deceive.
7. Independent claim 1 of the '984 patent requires, in pertinent part:
a first calculator capable of utilizing a first calculation technique to determine at least a first ratio representative of at least one physiological characteristic of the pulsing blood based on at least one of the one or more intensity signals generated from said detection of said light as said at least first and second wavelengths, [and]
a second calculator capable of utilizing a second calculation technique different from the first calculation technique, to determine at least a second ratio representative of the at least one physiological characteristic based on at least one of the one or more intensity signals generated from said detection of said light at said at least first and second wavelengths....
(D.I. 1-10) ('984 patent col. 66:31-45) (emphasis added)
8. In connection with its motion for summary judgment of invalidity, Philips argued to Judge Thynge that "[w]hile the signal processing device must include two calculators, each calculator is only required to be capable of performing a calculation technique - the claim does not require that both calculators actually calculate a physiological characteristic every time a calculation is performed." (D.I. 806 at 3) (citing D.I. 395 at 6-10) (emphasis in original) Hence, Philips took the position that the claims of the '984 patent do not require that a first and second calculator actually determine a calculation.
9. In response to Philips' motion for summary judgment, Masimo (in a brief it filed in September 2012) argued that "[t]he claims require that a first calculator 'determine at least a first ratio, ' and a second calculator 'determine at least a second ratio."' ( Id. ) (citing D.I. 515 at 5) (emphasis in original) Hence, Masimo took the position that the claims of the '984 patent do require that a first and second calculator actually determine a calculation.
10. At about the same time, in March 2013, Masimo (as part of the ongoing ex parte reexamination of the '984 patent) responded to an office action advocating before the PTO the same claim construction it was pressing on Magistrate Judge Thynge, i.e., that both the first and second calculators ...