Citing Day-Old Federal Circuit Ruling in Therasense, Judge Rejects Inequitable Conduct Defense in Texas Infringement Suit

When the U.S. Court of Appeals for the Federal Circuit on Wednesday heightened standards for inequitable conduct findings against patent holders in Therasense Inc. v. Becton, Dickinson & Co., we knew the decision dealt a blow to defendants hoping to knock out infringement suits.

What we didn’t know was how quickly an alleged patent infringer would suffer a loss as a result of the ruling. On Thursday a federal magistrate in Marshall, Tx., extensively cited the day-old Federal Circuit decision in denying a motion by Menusoft Systems and its lawyers at Fulbright & Jaworski for a finding that Ameranth Inc.’s patents are unenforceable because of inequitable conduct.

The decision was one of several post-trial orders issued Thursday in an infringement suit Ameranth and its lawyers at Locke Lord Bissell & Liddell filed against Menusoft four years ago. In September 2010 a jury found Menusoft had not infringed seven asserted patent claims and declared them invalid. The patent concerned information technology used in restaurants.

Following trial, Fulbright filed the inequitable conduct motion, contending the patents were also unenforceable since the first named inventor, Keith McNally, had withheld information about earlier technology, or prior art, from the U.S. Patent and Trademark Office with the intent to deceive the agency.

In his decision denying the motion, Magistrate Charles Everingham IV relied heavily on the Therasense ruling, which he noted “‘tightened’ the standard for finding both intent and materiality.” Magistrate Everingham said the withheld prior art met the standard for materiality. But he said Menusoft had “failed to prove by clear and convincing evidence that Mr. McNally withheld the references with a specific intent to deceive the PTO.”

“Mr. McNally was at no time inconsistent regarding the sincerity of his belief that there was no material prior art – i.e., that he had uncovered a breakthrough invention,” Everingham wrote. “Considering Mr. McNally’s testimony in light of the evidence as a whole, the court concludes that specific intent to deceive is not the single most reasonable inference that must be drawn from the evidence.”

In separate orders, Everingham denied Ameranth’s motion for a new trial and denied its motion for a judgement as a matter of law that its patent was not anticipated, not obvious, and not invalid.

Ameranth counsel John Osborne of Locke Lord Bissell & Liddell did not respond to requests for comment. Ameranth has previously said it would appeal the September verdict if the court denied its post-trial motions. Menusoft counsel Marc Delflache of Fulbright was unavailable to comment on the ruling.

According to Nicholas Groombridge, an IP partner at Weil, Gotshal & Manges who’s not involved in the Ameranth case, there are likely to be many more decisions citing Therasense issued in the coming months. “I think a tidal wave is about to start,” Groombridge said.

This article originally appeared in The Am Law Litigation Daily.