Bamboo Flooring Defendant Gets a Second Chance to State Fraud and Antitrust Defenses

Defendant Smith & Fong Company, a California provider of bamboo furniture and building products, including bamboo flooring under the name PLYBOO, was sued last December by Teragren, LLC for infringement of U.S. Patent No. 5,543,197, "Parallel Randomly Stranded Laminated Bamboo Boards and Beams." Smith & Fong denied infringement and counterclaimed for invalidity, inequitable conduct, and antitrust violations, among several other counterclaims and affirmative defenses. In total, Smith & Fong alleged six counterclaims and 20 affirmative defenses. At the core of their defense is an allegation that the '197 patent is invalid and that it was procured by a fraudulent misrepresentation as to inventorship. The counterclaims allege as follows:

[(The ‘197 patent)], allegedly exclusively licensed to Teragren, was obtained on inventions that not only had been widely known and publicized in the public domain well prior to the patent application date, but had been offered for sale in the public domain well prior to the patent application date. Most importantly, despite Teragren’s allegations, the bamboo stranded products offered in the US market do no infringe any of the claims of the ‘197 Patent.

***
The ‘197 Patent is, on information and belief, unenforceable because it was obtained through
misrepresentations and/or fraud on the United States Patent and Trademark Office. On information and belief, the putative inventor of the ‘197 Patent represented that he was the inventor with knowledge that subject matter of the claims of the ‘197 Patent was invented by another, and had previously been offered for sale by another in the United States.

In an order denying Teragren's motion to dismiss these allegations for failing to meet the minimum pleading requirements for inequitable conduct (fraud) in Rule 9(b), Judge Leighton (Tacoma) gave Smith & Fong a chance to amend their counterclaims to add specific facts supporting inequitable conduct, and to allege the requisite facts for an antitrust violation under the "sham litigation" exception to the Noerr-Pennington doctrine. With respect to the "sham litigation" claims, Judge Leighton states that Smith & Fong is required to allege that "1) the lawsuit [is] objectively meritless and 2) the baseless lawsuit conceals an attempt to interfere directly with the business relationship of [Smith &Fong]." With respect to claims for inequitable conduct, Smith & Fong is require to allege "precisely what conduct constituted fraud or how such conduct was a deliberate scheme to defraud the U.S. Patent Office."

Whether Smith & Fong can adequately make these allegations in an amended pleading consistent with its obligations under Rule 11 remains to be seen.
TaragrenOrderMDismiss.pdf