California Costume Collections, Inc v. Pandaloon, LLC, No. 2:2021cv01323 - Document 35 (C.D. Cal. 2022)
Court Description: OPINION AND ORDER ON DEFENDANT'S MOTION TO DISMISS COUNT THREE OF PLAINTIFF'S COMPLAINT FOR FAILURE TO STATE A CLAIM [ECF No. 27] by Judge John W. Holcomb. For the foregoing reasons, the Court hereby ORDERS as follow s: Pandaloon's Motion is GRANTED. Count Three of CCC's Complaint is DISMISSED with leave to amend. CCC is DIRECTED to file an amended pleading, if at all, no later than April 22, 2022. If CCC chooses to file an amended pleading, t hen it is also DIRECTED to file contemporaneously therewith a Notice of Revisions to Complaint that provides the Court with a redline version that shows the amendments. If CCC fails to file its amended pleading by April 22, 2022, then the Court will DISMISS Count Three of CCCs Complaint with prejudice. Pandaloon is DIRECTED to file its response to CCC's operative pleading no later than May 13, 2022. IT IS SO ORDERED. (See document for further details) (yl)
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California Costume Collections, Inc v. Pandaloon, LLC Doc. 35 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 14 15 16 CALIFORNIA COSTUME COLLECTIONS, INC., Plaintiff, v. PANDALOON, LLC., Defendant. Case No. 2:21-cv-01323-JWH-JEMx MEMORANDUM OPINION AND ORDER ON DEFENDANT’S MOTION TO DISMISS COUNT THREE OF PLAINTIFF’S COMPLAINT FOR FAILURE TO STATE A CLAIM [ECF No. 27] 17 18 19 20 21 22 23 24 25 26 27 28 Dockets.Justia.com Before the Court is the motion of Defendant Pandaloon, LLC to dismiss 1 2 Count Three of the Complaint filed by Plaintiff California Costume Collections, 3 Inc. (“CCC”).1 The Court finds this matter appropriate for resolution without 4 a hearing. See Fed. R. Civ. P. 78; L.R. 7-15. After considering the papers filed in 5 support and in opposition,2 the Court GRANTS the Motion in part for the 6 reasons set forth below. I. BACKGROUND 7 8 A. Procedural Background In February 2021, CCC filed its Complaint, thereby commencing this 9 10 action. In its Complaint, CCC asserts claims against Pandaloon for declaratory 11 judgment of non-infringement, invalidity, and unenforceability of U.S. Design 12 Patent No. D806,325 (the “D325 Patent”) for a “Pet Costume.” Pandaloon is 13 the assignee of the D325 Patent,3 and Pandaloon has accused CCC of infringing 14 it.4 CCC also asserts related state law claims against Pandaloon under 15 Cal. Bus. & Prof. Code § 17200.5 16 In July 2021, Pandaloon filed the instant Motion to dismiss Count Three 17 of the Complaint—in which CCC alleges that the D325 Patent is unenforceable 18 due to inequitable conduct—on the ground that it fails to state a claim for relief 19 under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Pandaloon’s 20 Motion is fully briefed. 21 22 23 24 25 26 27 28 1 Def. Pandaloon’s Mot. to Dismiss Count Three for Failure to State a Claim (the “Motion”) [ECF No. 27]. 2 The Court considered the following papers and all attachments thereto: (1) Compl. (the “Complaint”) [ECF No. 1]; (2) the Motion; (3) Pl.’s Opp’n to the Motion (the “Opposition”) [ECF No. 29]; and (4) Def.’s Reply in Supp. of the Motion (the “Reply”) [ECF No. 31]. 3 See D325 Patent [ECF No. 1-1] 5. 4 See generally Complaint. 5 Id. -2- 1 B. Factual Background 2 1. Design Background 3 Eugenia Judy Chen is the named inventor on the D325 Patent,6 and, as 4 noted above, Pandaloon is the assignee. The application for the D325 Patent 5 was filed on June 4, 2017, and the patent issued on December 26, 2017.7 The 6 D325 Patent claims “the ornamental design for a pet costume, as shown and 7 described.”8 Figure 1 depicts “a front perspective view of a pet costume 8 showing [the] new design.”9 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 6 7 27 8 28 9 Id. Id. Id. Id. -3- 1 Figure 8 depicts “a top-front perspective view” of the costume,” shown as used 2 by a pet. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 2. Design Dispute 18 CCC has been selling pet costumes through brick-and-mortar and online 19 retailers since 2011.10 During 2011 and 2012, CCC developed and began selling a 20 series of pet costumes with faux front limbs and a body suit covering the pet’s 21 actual front limbs, which creates an illusion of a standing character featuring the 22 pet’s face.11 Since then, CCC has developed at least 10 styles of pet costumes 23 using this concept.12 CCC sells its pet costumes on Amazon.13 24 25 26 10 11 27 12 28 13 Id. at ¶¶ 16-18. Id. at ¶ 19. Id. at ¶ 20. Id. at ¶ 10. -4- After Pandaloon saw CCC’s pet costumes for sale, Pandaloon advised 1 2 Amazon that it believes that CCC’s costumes infringe the D325 Patent. 3 Amazon responded by deactivating CCC’s listings for those costumes.14 4 Pandaloon also transmitted a cease and desist letter to CCC.15 In its response to 5 Pandaloon’s letter, CCC denied that its costumes infringe the D325 Patent and 6 argued that the D325 Patent is invalid in view of several prior art pet costumes 7 that had been sold for years before the application for the D325 Patent was 8 filed.16 For example, CCC provided evidence of a Teddy Bear pet costume 9 (made by a company called Rubies) that has been on sale since February 2016.17 10 11 12 13 14 15 16 17 18 19 20 21 As another example, CCC asserted that it has been selling its Gingerbread Pup 22 costume since 2013.18 23 24 25 26 14 15 16 27 17 28 18 Id. at ¶¶ 9 & 10. Id. at ¶ 21; see also id., Ex. 1 (“Exhibit 1”) [ECF No. 1-1]. Id. at ¶¶ 24-26. Id. ¶ 26. See id., Ex. 2 (“Exhibit 2”) 2-3 [ECF No. 1-2]. -5- 1 2 3 4 5 6 7 8 9 10 11 12 13 Pandaloon did not reply to CCC’s response letter. In an effort to bring 14 the parties’ dispute to a head, CCC filed this declaratory relief action.19 CCC 15 alleges that its affected product listings have been delisted on Amazon since 16 August 2020, and, as a result, CCC’s product ranking and reputation have 17 suffered.20 II. LEGAL STANDARDS 18 19 A. Rule 12(b)(6) Pleading Sufficiency A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the 20 21 claims asserted in a complaint. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 22 2001). In ruling on a Rule 12(b)(6) motion, “[a]ll allegations of material fact are 23 taken as true and construed in the light most favorable to the nonmoving party.” 24 Am. Family Ass’n v. City & County of San Francisco, 277 F.3d 1114, 1120 (9th Cir. 25 2002). Although a complaint attacked through a Rule 12(b)(6) motion “does 26 27 19 28 20 Id. at ¶¶ 28-33. See id. -6- 1 not need detailed factual allegations,” a plaintiff must provide “more than labels 2 and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 3 To state a plausible claim for relief, the complaint “must contain 4 sufficient allegations of underlying facts” to support its legal conclusions. Starr 5 v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). “Factual allegations must be 6 enough to raise a right to relief above the speculative level on the assumption 7 that all the allegations in the complaint are true (even if doubtful in fact) . . . .” 8 Twombly, 550 U.S. at 555 (citations and footnote omitted). Accordingly, to 9 survive a motion to dismiss, a complaint “must contain sufficient factual matter, 10 accepted as true, to state a claim to relief that is plausible on its face,” which 11 means that a plaintiff must plead sufficient factual content to “allow[] the Court 12 to draw the reasonable inference that the defendant is liable for the misconduct 13 alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks 14 omitted). A complaint must contain “well-pleaded facts” from which the Court 15 can “infer more than the mere possibility of misconduct.” Id. at 679. 16 B. Inequitable Conduct 17 “Inequitable conduct is an equitable defense to patent infringement that, 18 if proved, bars enforcement of a patent.” Therasense, Inc. v. Becton, Dickinson & 19 Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011). Rule 9(b) governs inequitable 20 conduct claims. See Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1326 21 (Fed. Cir. 2009). “Rule 9(b) requires that in all averments of fraud or mistake, 22 the circumstances constituting fraud or mistake shall be stated with 23 particularity.” Id. (internal quotation marks and bracket omitted). To meet this 24 standard, like other circuits, the Federal Circuit requires the pleading party to 25 identify “the specific who, what, when, where, and how of the material 26 misrepresentation or omission committed before the PTO.” Id. at 1327. 27 Thus, a well-pleaded claim for inequitable conduct must allege facts 28 demonstrating that “(1) an individual associated with the filing and prosecution -7- 1 of a patent application made an affirmative misrepresentation of a material fact, 2 failed to disclose material information, or submitted false information; and 3 (2) the individual did so with a specific intent to deceive the PTO.” Id. at 1327 4 n.3. “A pleading that simply avers the substantive elements of inequitable 5 conduct, without setting forth the particularized factual bases for the allegation, 6 does not satisfy Rule 9(b).” Id. at 1326-27. With respect to materiality, “[w]here a patent applicant fails to disclose 7 8 prior art to the PTO, the prior art is but-for material if the PTO would not have 9 allowed a claim had it been aware of the undisclosed prior art.” Therasense, 649 10 F.3d at 1292. III. DISCUSSION 11 Pandaloon moves to dismiss Count Three of CCC’s Complaint, which 12 13 alleges unenforceability of the D325 Patent due to inequitable conduct. 14 Pandaloon seeks the dismissal of Count Three on the basis that it is facially 15 deficient because the two alleged prior art references fail to meet the required 16 “but-for” materiality standard and because CCC’s allegations fail to meet the 17 heightened pleading requirements of Rule 9(b). 18 A. But-For Materiality In Count Three of its Complaint, CCC alleges that the inventor—Chen— 19 20 and her attorney “knew that the Teddy Bear pet costume from Rubies, and 21 CCC’s Gingerbread Pup costume, were widely available for sale in the 22 marketplace.”21 CCC also alleges that the inventor and her attorney “knew that 23 the Teddy Bear and/or Gingerbread pet costumes were material to patentability 24 of the [D]325 Patent, and that the USPTO [i.e., the U.S. Patent and Trademark 25 26 27 28 21 Complaint ¶ 61. -8- 1 Office] would not have issued the [D]325 Patent had it been aware of either of 2 these prior art costumes.”22 3 1. Rubies Teddy Bear Costume 4 Pandaloon argues that the Rubies Teddy Bear costume cannot be but-for 5 material prior art as a matter of law because the PTO considered that costume 6 during prosecution.23 Pandaloon observes that the examiner cited the Rubies 7 Costume in a July 25, 2017, office action.24 The Rubies costume also appears as 8 a reference on the face of the D325 Patent.25 CCC does not contest that the examiner considered the Rubies Teddy 9 10 Bear costume, but it argues that neither the inventor nor her attorney disclosed 11 the costume “in Pandaloon’s Information Disclosure Statement at the time the 12 [D]325 Patent application was filed.”26 CCC provides no authority for the proposition that a prior art omission on 13 14 a disclosure statement can give rise to an inequitable conduct claim even when 15 the examiner ultimately considers that prior art.27 Indeed, the Federal Circuit 16 has ruled to the contrary: “An applicant cannot intentionally withhold a 17 reference actually considered by the PTO, even though the applicant may not 18 have disclosed the art.” Litton Sys. Inc. v. Honeywell, Inc., 87 F.3d 1559, 1571 19 20 21 22 23 24 25 26 27 28 22 Id. at ¶ 63. Motion 1:9-10, 1:20-22, & 2:8-12. 24 Id. at 8:6-10 (citing Ex. A, Office Action at 10 (Non-Patent Document X) [ECF No. 27-2]; 37 C.F.R. § 1.56 (“[u]nder this section, information is material to patentability when it is not cumulative to information already of record or being made of record in the application”). 25 See D325 Patent 2. 26 Opposition 6:15-17 (emphasis added). 27 Likely recognizing this principle, in another section of its Opposition CCC essentially concedes that the Rubies costume cannot be but-for material for inequitable conduct purposes. See Opposition 11:6-8 (arguing—without mentioning the Rubies costume—that “[t]he prior art Gingerbread Pup costume is but-for material to patentability of the [D]325 Patent for the reasons discussed above and Pandaloon admits that it was never disclosed to the PTO”). 23 -9- 1 (Fed. Cir. 1996) (concluding that no inequitable conduct existed where a 2 patentee had, in fact, intentionally withheld a reference, but that reference was 3 ultimately considered by the examiner), vacated on other grounds by Honeywell, 4 Inc. v. Litton Sys., Inc., 520 U.S. 1111 (1997). 5 Courts continue to apply this rule. See, e.g., Techshell, Inc. v. Max 6 Interactive, Inc., 2019 WL 4422682, at *3 (C.D. Cal. Aug. 5, 2019) (concluding 7 that when “[t]he patent examiner [is] well aware of [prior art], and indeed 8 reviewed [the prior art], [especially where] the examiner [initially] rejected the 9 proposed patent claims over it,” there can be no showing of “either but-for 10 materiality or a reasonable inference of an intent to deceive” regarding that prior 11 art); ParkerVision, Inc. v. Qualcomm Inc., 924 F. Supp. 2d 1314, 1319 (M.D. Fla. 12 2013) (“[T]he PTO was aware of the [prior art] reference, as evidenced by the 13 reference’s citation on the face of the patent, and still issued the patent. One 14 cannot assume that a PTO examiner is an ignorant rube who is easily misled by 15 attorney argument, hyperbole, or understatement.”). 16 Accordingly, because the examiner considered it, the Rubies Teddy Bear 17 costume cannot be but-for material for inequitable conduct purposes. 18 Construing the allegations in the light most favorable to CCC, however, to the 19 extent that the Rubies allegations may be relevant to CCC’s inequitable conduct 20 argument regarding the Gingerbread Pup costume (i.e., arguing that withholding 21 the Rubies Teddy Bear costume is circumstantial evidence supporting intent to 22 deceive concerning withholding the Gingerbread Pup costume, given CCC’s 23 invalidity arguments), the allegations are plausibly related to that theory. 24 2. Gingerbread Pup Costume 25 Pandaloon also argues that CCC’s Gingerbread Pup costume cannot be 26 but-for material prior art because it “does not remotely resemble the design of 27 the D[]325 patent, and thus cannot plausibly meet the ‘but-for’ materiality 28 -10- 1 standard.”28 Pandaloon asserts that “[o]ther than also being a pet costume, 2 there is no other point of similarity between the Gingerbread Costume and the 3 claimed design of the D[]325 patent.”29 To illustrate that point, Pandaloon 4 provides the following graphical comparison. 5 6 7 8 9 10 11 12 13 14 Pandaloon also contends that if the Gingerbread Pup costume were material, 15 then CCC would have raised it as part of the invalidity count (Count Two) in its 16 Complaint.30 CCC responds that the Gingerbread Pup costume is but-for material 17 18 because it “contains elements Pandaloon used to distinguish its design from the 19 prior art, and would have alone anticipated the [D]325 Patent claim, or at the 20 very least, would have rendered it obvious in combination with the Rubies’ 21 Teddy Bear costume.”31 CCC also argues that “Pandaloon’s [dissimilarity] 22 argument, which focuses on its own assessment of the merits, is improper at this 23 stage where CCC’s allegations must be taken as true.”32 Further, CCC notes 24 25 26 28 29 30 27 31 28 32 Motion 2:26-3:1. Id. at 9:5-8. Id. at 9:24-10:1. Opposition 6:19-23. Id. at 6:26-28. -11- 1 that the Complaint lists the Rubies Teddy Bear costume as one example of 2 invalidating prior art, but it also incorporates by reference Exhibit 2, detailing 3 how the Gingerbread Pup costume is invalidating.33 The Court declines Pandaloon’s request to make a finding at this stage 4 5 that the designs of the D325 Patent and Gingerbread Pup costume are so 6 dissimilar that CCC’s but-for materiality allegations fail as a matter of law. 7 Typically, design patent infringement is a question of fact, “unless the claimed 8 design and accused product are so plainly dissimilar that it is implausible that an 9 ordinary observer would confuse them.” Enerlites, Inc. v. Century Prod. Inc., 10 2018 WL 4859947, at *3 (C.D. Cal. Aug. 13, 2018). Likewise, determining 11 “[w]hich features would be significant to the ordinary observer is a question of 12 fact.” Dioptics Med. Prod., Inc. v. IdeaVillage Prod. Corp., 2010 WL 4393876, at 13 *2 (N.D. Cal. Oct. 29, 2010) (citing International Seaway Trading Corp. v. 14 Walgreens Corp., 589 F.3d 1233, 1241-42 (Fed. Cir. 2009)). Those infringement- 15 related factual questions also pertain to what the examiner would have 16 considered material (e.g., round head with pet-face cutout, faux limbs, 17 appearance of standing). The costumes are not so dissimilar that this question 18 can be resolved on a motion to dismiss.34 19 20 21 22 23 24 25 26 27 28 33 Id. at 7:10-15. The Court also declines to reach CCC’s arguments concerning Pandaloon’s response to the office action. Setting aside the fact that the response contains no discussion of design elements, those allegations are not in the Complaint. 34 -12- For the reasons stated above, the Court DENIES the motion with respect 1 2 to Pandaloon’s but-for materiality arguments. 3 B. Rule 9(b) Pleading Standard Pandaloon seeks dismissal of CCC’s inequitable conduct claim on the 4 5 additional ground that CCC fails to plead with particularity knowledge of prior 6 art, knowledge of the materiality of that prior art, and specific intent. First, 7 Pandaloon argues that the Complaint fails to allege that the inventor or her 8 attorney were aware of either the Rubies Teddy Bear or the CCC Gingerbread 9 Pup costume during prosecution, that either believed that the references were 10 material, and that either intentionally withheld them.35 Pandaloon asserts that 11 merely speculating about knowledge, where the prior art costumes were “widely 12 available in the marketplace,” is insufficient to plead subjective knowledge 13 under Rule 9(b).36 Second, Pandaloon argues that knowledge of materiality cannot be alleged 14 15 on information and belief alone and the Complaint contains no facts supporting 16 the conclusory allegation that Pandaloon “made a deliberate decision not to 17 disclose” the prior art.37 Finally, Pandaloon contends that the “inequitable conduct allegations fail 18 19 to show that an intent to deceive [is] the ‘single most reasonable inference’ for 20 not citing the Rubies or Gingerbread Costumes to the USPTO,” especially 21 when multiple reasonable inferences can be drawn, including that the inventor 22 and her attorney lacked knowledge of the costumes, believed that the costumes 23 were immaterial, or believed that the costumes were cumulative.38 24 25 26 35 36 27 37 28 38 Motion 3:9-14. Id. at 3:14-18 & 4:14-26; see also id. at 11:6-15 & 12:10-17. Id. at 5:13-16; see also id. at 13:25-14:8 & 15:4-6. Id. at 18:4-18. -13- CCC responds that Pandaloon misstates the standard for pleading 1 2 inequitable conduct, which does not require proving by clear and convincing 3 evidence that intent to deceive is the single most reasonable inference. Rather, 4 merely pleading such intent through plausible allegations is sufficient.39 5 Moreover, CCC maintains that its allegations are sufficient because it claims 6 that the inventor and her attorney “knew that the Teddy Bear pet costume from 7 Rubies, and CCC’s Gingerbread Pup costume, were widely available for sale in 8 the marketplace” and that a reasonable inference can be drawn that they “made 9 a deliberate decision not to disclose the Teddy Bear or Gingerbread pet 10 costumes to the patent examiner because they knew that Gingerbread Pup 11 costume, alone or in combination with the Rubies’ Teddy Bear costume, would 12 anticipate and/or render obvious Pandaloon’s claimed design.”40 Based upon 13 those facts, CCC asks the Court to “draw the reasonable inference that 14 Pandaloon withheld the Gingerbread Pup costume with an intent to deceive the 15 PTO.”41 To state a claim for inequitable conduct, a plaintiff must allege with 16 17 specificity: (1) knowledge of the uncited reference; (2) knowledge of the 18 reference’s materiality; and (3) the specific intent to deceive the PTO by 19 withholding that reference. See Therasense, 649 F.3d at 1289-90. “[A]lthough 20 ‘knowledge’ and ‘intent’ may be averred generally, a pleading of inequitable 21 conduct under Rule 9(b) must include sufficient allegations of underlying facts 22 from which a court may reasonably infer that a specific individual (1) knew of the 23 withheld material information or of the falsity of the material misrepresentation, 24 and (2) withheld or misrepresented this information with a specific intent to 25 deceive the PTO.” Exergen, 575 F.3d at 1328–29 (emphasis added). “A 26 39 27 40 28 41 Opposition 8:13-16. Id. at 9:19-23 (citing Complaint ¶¶ 27, 60, 61, & Exhibit 2). Id. at 9:26-28. -14- 1 reasonable inference is one that is plausible and that flows logically from the 2 facts alleged, including any objective indications of candor and good faith.” Id. 3 at 1329 n.5. 4 1. 5 To plead knowledge of the relevant prior art costumes, the Complaint 6 Knowledge of the References alleges only the following: 7 61. On June 4, 2017, when Eugenia Judy Chen and her attorney, 8 Stanton Braden from Mu Patents, filed the patent application that 9 later issued as the [D]325 Patent, they knew that the Teddy Bear pet 10 costume from Rubies, and CCC’s Gingerbread Pup costume, were 11 widely available for sale in the marketplace.42 12 In support of that allegation, in its Opposition CCC reiterates the “wide 13 availability” of the prior art costumes and concludes that “Pandaloon either 14 knew, or should have known, that the Gingerbread Pup costume would be but- 15 for material to the examiner.”43 Those allegations are insufficient to support a plausible claim of 16 17 knowledge for inequitable conduct purposes. In Therasense, the Federal Circuit 18 established that a “should have known” standard is insufficient. See Therasense, 19 649 F.3d at 1290 (“a ‘should have known’ standard does not satisfy th[e] intent 20 requirement” that “the applicant made a deliberate decision to withhold a known 21 material reference”) (emphasis in original); see also Frazier v. Roessell Cine Photo 22 Tech Inc., 417 F.3d 1230, 1238 (Fed. Cir. 2005) (“this court has repeatedly 23 reaffirmed the proposition that [a]s a general rule, there is no duty to conduct a 24 prior art search, and thus there is no duty to disclose art of which an applicant 25 could have been aware”) (quotation marks omitted). 26 27 42 28 43 Complaint ¶ 61. Opposition 10:11-12. -15- 1 Applying that rule, district courts have dismissed knowledge allegations 2 when those allegations are based only upon an allegation that information was 3 widely available. See, e.g., BlackBerry Ltd. v. Typo Prod. LLC, 2014 WL 1867009, 4 at *2 (N.D. Cal. May 8, 2014) (“All that [Defendant] has alleged is that a 5 material reference which was widely available was not disclosed to the PTO. 6 That is not sufficient to plead inequitable conduct.”); C.R. Bard, Inc. v. Med. 7 Components, Inc., 2019 WL 8137358, at *2 (D. Utah July 25, 2019) (“although 8 Defendant’s allegations may lend support to the argument that [Plaintiff] should 9 have known of specific undisclosed references and their materiality given that 10 they were widely available and even cited by [Plaintiff] in other documents,” 11 those allegations failed to plead knowledge) (quotation marks omitted, alteration 12 in original). Because the Complaint alleges inferred knowledge based only upon the 13 14 fact that the costumes were widely available, CCC has not pleaded its 15 inequitable conduct claim with the required particularity concerning prior art 16 knowledge. 17 2. 18 To plead knowledge of materiality of the relevant prior art, the Complaint 19 Knowledge of Materiality alleges only the following: 20 63. Upon information and belief, Ms. Chen and Mr. Braden knew 21 that the Teddy Bear and/or Gingerbread pet costumes were material 22 to patentability of the [D]325 Patent, and that the USPTO would not 23 have issued the [D]325 Patent had it been aware of either of these 24 prior art costumes.44 25 26 27 28 44 Complaint ¶ 63. -16- 1 CCC also attaches to the Complaint its patent-related correspondence with 2 Pandaloon, in which CCC explains to Pandaloon why it believes that the 3 costumes would have been material to the examiner.45 Although “[p]leading on ‘information and belief’ is permitted under 4 5 Rule 9(b) when essential information lies uniquely within another party’s 6 control,” it is permissible “only if the pleading sets forth the specific facts upon 7 which the belief is reasonably based.” Exergen, 575 F.3d at 1330; see also U.S., ex 8 rel. Carver v. Factor Nutrition Labs, LLC, 2010 WL 5071696, at *2 (N.D. Cal. 9 Dec. 7, 2010) (“[A]s to matters peculiarly within the opposing party’s 10 knowledge, allegations based on information and belief may satisfy Rule 9(b) if 11 they also state the facts upon which the belief is founded.”). The Complaint does not include any facts upon which CCC’s belief is 12 13 based. To allege knowledge of materiality sufficiently, a plaintiff must “explain 14 both ‘why’ the withheld information is material and not cumulative, and ‘how’ 15 an examiner would have used this information in assessing the patentability of 16 the claims.” Exergen, 575 F.3d at 1329-30. The attached correspondence does 17 not fill that void because it reflects CCC’s belief; even if the correspondence 18 could be construed to impart knowledge of the claimed materiality to the 19 inventor or her attorney, it post-dates the prosecution of the D325 Patent and 20 therefore cannot show knowledge of materiality at the relevant time. 21 Unlike knowledge of a prior art reference—which is measured 22 subjectively—knowledge of materiality of a reference can be measured 23 subjectively or objectively. See M. Eagles Tool Warehouse, Inc. v. Fisher Tooling 24 Co., 439 F.3d 1335, 1341 (Fed. Cir. 2006) (“In an inequitable conduct 25 determination based upon a nondisclosure, the applicant must know, or should 26 have known, of the materiality of the reference for an inference of intent.”). 27 28 45 See id. at Exhibit 2. -17- 1 The Complaint does not allege that the inventor and her attorney “should have 2 known” that the references were material, nor does it contain facts supporting 3 such a conclusion. 4 Because CCC fails to plead in its Complaint any underlying facts 5 supporting the information-and-belief allegation of knowledge of materiality, 6 CCC has not pleaded the inequitable conduct claim with the required 7 particularity concerning materiality knowledge. 8 3. Specific Intent to Deceive 9 To plead specific intent to deceive, the Complaint alleges only the 10 following: 11 64. 12 disclose the Teddy Bear or Gingerbread pet costumes to the patent 13 examiner and thus committed fraud upon the USPTO.46 Ms. Chen and Mr. Braden made a deliberate decision not to 14 In support of that allegation, CCC argues, “Given these well-ple[a]d[ed] facts, 15 the Court may draw the reasonable inference that Pandaloon withheld the 16 Gingerbread Pup costume with an intent to deceive the PTO.”47 But CCC has pleaded no facts, and thus has provided nothing, from which 17 18 such an inference may be drawn. “Intent to deceive can not be inferred solely 19 from the fact that information was not disclosed; there must be a factual basis for 20 a finding of deceptive intent.” Hebert v. Lisle Corp., 99 F.3d 1109, 1116 (Fed. 21 Cir. 1996). “A conclusory allegation of specific intent is insufficient.” 22 BlackBerry, 2014 WL 1867009, at *3 (complaint alleged that failure to disclose 23 prior art “was done with the specific intent to deceive the PTO,” but the 24 plaintiff did “not plead[] any facts from which [the court] can reasonably make 25 this inference”). Although the Court “may infer intent from indirect and 26 27 46 28 47 Complaint ¶ 64. Opposition 9:26-28. -18- 1 circumstantial evidence because direct evidence of intent is rare,” CCC has 2 provided no indirect or circumstantial factual allegations to support its 3 conclusory intent allegation. See TransWeb, LLC v. 3M Innovative Props. Co., 4 812 F.3d 1295, 1304 (Fed. Cir. 2016) (quotation marks omitted). Because the Complaint fails to plead any underlying facts supporting the 5 6 specific-intent-to-deceive allegation, the inequitable conduct claim has not been 7 pleaded with the required particularity concerning intent. The Court notes, however, that CCC is not required at the pleading stage 8 9 to allege facts supporting the conclusion that specific intent to deceive is the 10 single most reasonable inference to be drawn from the factual allegations. See, 11 e.g., Hangzhou Chic Intelligent Tech. Co. v. Razor USA LLC, 2016 WL 10518582, 12 at *2 (C.D. Cal. Dec. 19, 2016) (inequitable conduct need not be “the single 13 most reasonable inference” drawn from the alleged facts at the pleading stage); 14 Human Genome Sciences, Inc. v. Genentech, Inc., 2011 WL 7461786, at *3 15 (C.D. Cal. Dec. 9, 2011) (“[i]n deciding a motion to dismiss an inequitable 16 conduct claim, the level of scrutiny applied to the pleadings does not appear to 17 be so exacting” as to require clear and convincing evidence or meeting the 18 single-most-reasonable-inference burden, “a mere reasonable inference is quite 19 enough to survive”) (citing Exergen, 575 F.3d at 1326-27). 20 C. 21 Leave to Amend Leave to amend a claim “shall be freely granted when justice so requires.” 22 Fed. R. Civ. P. 15(a); see also Foman v. Davis, 371 U.S. 178, 182 (1962). In its 23 Opposition, CCC requests that “[i]f the Court finds that CCC has not 24 adequately ple[a]d[ed] any element of its inequitable conduct claim, the Court 25 26 27 28 -19- 1 should grant CCC leave to amend its Complaint.”48 In reply, Pandaloon argues 2 that leave to amend should be denied because any amendment would be futile.49 Although CCC did not suggest how it might cure any pleading 3 4 deficiencies that the Court may find, it did not have the benefit of the Court’s 5 ruling on the specific challenges that Pandaloon raised. Therefore, in the 6 interest of justice, and because Pandaloon will not be prejudiced if the Court 7 grants leave to file a first amended inequitable conduct claim, the Court will 8 allow CCC to amend its inequitable conduct claim, consistent with the analysis 9 and rulings set forth herein. IV. CONCLUSION 10 11 For the foregoing reasons, the Court hereby ORDERS as follows: 12 1. 13 Pandaloon’s Motion is GRANTED. Count Three of CCC’s Complaint is DISMISSED with leave to amend. 2. 14 CCC is DIRECTED to file an amended pleading, if at all, no later 15 than April 22, 2022. If CCC chooses to file an amended pleading, then it is also 16 DIRECTED to file contemporaneously therewith a Notice of Revisions to 17 Complaint that provides the Court with a redline version that shows the 18 amendments. 19 3. 20 If CCC fails to file its amended pleading by April 22, 2022, then the Court will DISMISS Count Three of CCC’s Complaint with prejudice. 4. 21 Pandaloon is DIRECTED to file its response to CCC’s operative 22 pleading no later than May 13, 2022. 23 IT IS SO ORDERED. 24 25 Dated: April 7, 2022 26 27 48 28 49 John W. Holcomb UNITED STATES DISTRICT JUDGE Opposition 11:8-10. See generally Reply 4:15-6:2. -20-
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