On Jan. 11, 2024, New Jersey district court granted Plaintiff’s motion to dismiss counterclaim of inequitable conduct put forth by Defendants.

This is with respect to Hatch-Waxman litigation concerning Cannabidiol (Epidiolex) oral solution. It is indicated for the treatment of seizures associated with Lennox-Gastaut syndrome (LGS), Dravet syndrome (DS), or tuberous sclerosis complex (TSC) in patients 1 year of age and older. Various defendants filed ANDA and Jazz (Plaintiff) sued them for infringement of certain patents. Defendants counterclaimed that the Plaintiff engaged in “inequitable conduct” by telling the USPTO it was a “small entity,” when it was not. Because of this, the Defendants argue, certain patents cannot be enforced and the Defendants cannot be liable for infringing them. Plaintiff moved to dismiss the counterclaim.

Court said that the elements of inequitable conduct are materiality and intent. To plead inequitable conduct, Rule 9(b)’s standards must be met. Court said that Defendants argument on materiality is not persuasive. Defendants did not properly plead that the Plaintiff’s representations that it was a small entity were “unmistakably” false. An entity is “small” for these purposes if it has less than 500 employees and then it receives certain fee reductions. March 2017 is when the patent applications were filed. And therefore, relevant 1 year back period is from March 2016 to March 2017. As to this March 2016 to March 2017 period, the Defendants do not provide direct evidence as to “the average number of employees” more than 500. Average number of employees-per-month for the relevant period (March 2016 to early March 2017) was of approximately 492. Thus, Plaintiff did not make an “unmistakably” false statement before USPTO when it sought small entity status. Defendants other arguments regarding 2015 and 2016 applications are also not persuasive. The Counterclaim does not allege the 2015 and 2016 patents were “selected for full development” under 2007 agreement which Plaintiff made with large entity.

With respect to intent, court said that Defendants did not sufficiently plead intent, either. While the Counterclaim names the “specific individual[s] who allegedly filed the 2015 and 2016 Applications, it does not allege they knew about the 2007 Agreement. To remedy this, the Defendants say the 2007 Agreement was “widely publicized,” and argue that such information “would [have] be[en] available. However, the governing standard here is “knew,” not could-have-known. Moreover, even if one of the “specific . . individuals” in question knew about the 2007 Agreement from public sources, that does not mean that “individual” would have known about the particular passage in the Agreement that is said to be relevant here. Finally, the 2007 Agreement does not itself suggest that it concerns the patents that were the subjects of the 2015 and 2016 Applications. With respect to 2017 applications also, Defendants did not plead that those individuals knew how many employees the Plaintiff had.

Thus, the Counterclaim fails because it did not plead, as it had to, the “name [of] the specific individual associated with the filing or prosecution of the application issuing who both knew of the material information and deliberately withheld or misrepresented it.”