## Facts

- MedioStream, Inc. sued Microsoft Corporation and other technology companies for alleged infringement of two patents concerning digital video processing and authoring to optical media.
- The actions were consolidated in the Eastern District of Texas.
- Defendants asserted inequitable conduct counterclaims and affirmative defenses, alleging MedioStream and/or its agents misled the U.S. Patent and Trademark Office during prosecution of the patents-in-suit.
- Defendants alleged, among other things, that MedioStream failed to disclose specific prior art and made material misrepresentations or omissions to the examiner, with intent to deceive the PTO.
- MedioStream moved to dismiss the inequitable conduct counterclaims under Rule 12(b)(6) and to strike the inequitable conduct affirmative defenses under Rule 12(f), arguing the allegations did not satisfy Rule 9(b) and were implausible under Twombly/Iqbal.
- MedioStream also sought dismissal of inequitable conduct counterclaims and defenses asserted by one defendant (Nero AG) on the same grounds.

## Issues

1. Whether inequitable conduct allegations must satisfy Rule 9(b)’s heightened pleading requirement and, if so, whether Defendants pleaded the “who, what, when, where, and how” with sufficient specificity.
2. Whether the inequitable conduct counterclaims stated a plausible claim for relief under Rule 12(b)(6) as applied through Twombly and Iqbal.
3. Whether the inequitable conduct affirmative defenses should be stricken under Rule 12(f) as insufficient or unduly prejudicial at the pleading stage.
4. Whether the same pleading analysis required dismissal of Nero AG’s inequitable conduct counterclaims and defenses.

## Decision

- The court denied MedioStream’s Rule 12(b)(6) motion to dismiss Defendants’ inequitable conduct counterclaims.
- The court denied MedioStream’s Rule 12(f) motion to strike Defendants’ inequitable conduct affirmative defenses.
- The court denied the request (to the extent presented) to dismiss or strike Nero AG’s inequitable conduct counterclaims and defenses.
- The case proceeded with inequitable conduct remaining as both counterclaims and defenses.

## Legal Principles

- Inequitable conduct allegations are subject to Rule 9(b) and must plead with particularity the “who, what, when, where, and how” of the alleged misconduct before the PTO.
- Materiality and intent to deceive must be alleged; while intent may be pleaded generally, the facts alleged must permit a reasonable inference of deceptive intent.
- Under Twombly/Iqbal, an inequitable conduct counterclaim must include enough factual matter to make the claim plausible, not merely conclusory.
- Rule 12(f) motions to strike defenses are generally disfavored and are not granted where the defenses relate to the controversy and are not clearly insufficient as a matter of law.

## Conclusion

The court held Defendants adequately pleaded inequitable conduct by identifying specific withheld or misstated information, the relevant prosecution context, and the individuals involved, with allegations supporting reasonable inferences of materiality and intent; it therefore refused to dismiss the counterclaims or strike the defenses at the pleading stage.


MedioStream, Inc. v. Microsoft Corp., 749 F. Supp. 2d 507 (E.D. Tex. 2010)