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Magistrate Judge Stark: assessing the adequacy of scienter when pleading fraud with particularity

In a recent trademark infringement and dilution case, Magistrate Judge Stark denied plaintiffs’ motion to dismiss defendants’ counterclaim seeking cancellation of plaintiffs’ trademark due to fraud on the Patent and Trademark Office. ING Bank v. the PNC Fin. Servs. Group, Inc., C.A. No. 08-514-GMS-LPS (D. Del. June 22, 2009). The basis of plaintiffs’ motion was that defendants failed to “state the facts and circumstances constituting fraud with particularity . . . .” Id. at 1. Among other things, plaintiffs’ argued that defendants failed to adequately allege scienter because they did not allege that the declarant, who made the statement-at-issue to the PTO, subjectively knew the statement was false when made. Magistrate Judge Stark rejected plaintiffs argument, however, because the declarant was clearing signing the statement to the PTO on behalf of the “applicant.” To assess the adequacy of scienter, the factfinder is “not limited to the subjective understanding of the corporate representative who made the statement . . . .” Id. at 5. Therefore, defendants adequately alleged scienter that “among those involved in the preparation of [the statement to the PTO] were those who knew or should have know that” plaintiffs were making a false statement. Id. at 7.

08-514

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