False Declarations: The Chosen Instrument of an Intentional Scheme to Deceive the PTO

eSpeed v. BrokerTec (Fed. Cir. 2007).

ESpeed is the software-wing of the Wall-Street brokerage Cantor Fitzgerald. Its patents relate to software for replacing the “open outcry” feel of the market floor.

Judge Jordan of Delaware found eSpeed’s patents unenforceable, and on appeal, the CAFC affirmed.

Inequitable Conduct: A patent will be unenforceable if the patent was procured through inequitable conduct. Inequitable conduct does not require a showing of fraud, but it does require actions that materially affect the patentability of the invention coupled with an intent to deceive the PTO. “Once a district court has found a threshold level of both materiality and intent to deceive, the district court must balance the evidence to determine if equity should render the patent unenforceable.”

Level of Review: Because of base in equity, inequitable conduct findings are reviewed for clear error.

Materiality: Initially, eSpeed initially failed to disclose its own prior “Super System.”  When eSpeed’s counsel eventually learned of the system, they went overboard — filing multiple declarations on behalf of the inventors regarding the prior art system as well as thousands of pages of documents. One declaration included a statement that certain features in the claimed invention were not found in its own prior system. Unfortunately for eSpeed, the court found that statement to be knowingly false and material.

Intent: Intent to deceive may be inferred, especially from direct statements by the patentee:

The applicants submitted the declarations at issue in an apparent attempt to purge possible inequitable conduct … Instead of being candid, [one] declaration disingenuously states that the Super System did not include [the claimed element]. The district court was free to draw an inference that these declarations were “the chosen instrument of an intentional scheme to deceive the PTO” because “[t]he affirmative act of submitting an affidavit must be construed as being intended to be relied upon” Refac.

Unenforceability affirmed.

Notes:

  • The language: “chosen instrument of an intentional scheme to deceive the PTO” comes from the 1983 CAFC decision Rohm & Haas Co. v. Crystal Chem. That case includes other choice language, including: “In contrast to cases where allegations of fraud are based on the withholding of prior art, there is no room to argue that submission of false affidavits is not material.”

15 thoughts on “False Declarations: The Chosen Instrument of an Intentional Scheme to Deceive the PTO

  1. How about patent examiners who make material false and misleading statements in thier basis for rejection of claims. Anyone out there ever prosecuted an examiner for this act? Collected damages or attorney fees for having to respond to obviouse examiner false statements? Any case histories or war story?

  2. Well, I’m not a number cruncher. But mostly the patents that get litigated are the important ones. Granted, there aren’t that many of those. I see you’re suggesting that in business-as-usual circumstances fraud will not out, that most patents lead humdrum lives behind a mossy stone and expire unnoticed, and that a little moofky-poofky with the facts to gain allowance will most likely go undetected. I don’t agree, but I can’t say I have any basis other than gut feelings and personal experience. Maybe Dennis will do a study someday and crunch those numbers…

  3. “Not only is it ethically wrong (which is enough for me), but if the case ever got litigated the fishy smell would out (which should be enough for ones client).”

    Here’s a few relevant questions:

    1) What fractions of allowed patents get litigated versus merely sold or licensed?

    2) What fraction of patent prosecutors lose their registration for violations of Rule 56 each year?

    Please recognize that I am not condoning unethical behavior. Rather, I am explaining why those who engage in such behavior do so, and will continue to do so unless one of the risk factors is adjusted.

  4. It’s possible to make a mistake, isn’t it? Or hammer really hard on a weak piece of evidence? Maybe that begs the question of fraudulent intent, but occasionally in a complex case mistatements happen with no malintent. Scientists and patent attorneys may misunderstand each other, attorneys may misread a technical paper, and so on.
    I’ve certainly never been instructed by anyone in authority to make a false statement, nor would I do so if I were. It’s a losing proposition. Not only is it ethically wrong (which is enough for me), but if the case ever got litigated the fishy smell would out (which should be enough for ones client). There’s just no point, even if it gained you allowance.

  5. “Do some practitioners submit questionable evidence and/or arguments? I’m sure it happens. Do attorneys “do it all the time”? I doubt it.”

    Maybe “every day” would be more palatable for some.

  6. ” In my eight years of practice, I have never filed anything with the PTO that I knew, or had reason to know, was false and/or misleading.”

    I am glad to hear it.

  7. Malcolm, you are funny. Despite what many who post here say.

    I must be a total square, or somebody who just doesn’t get it. In my eight years of practice, I have never filed anything with the PTO that I knew, or had reason to know, was false and/or misleading. Maybe it was all that Catholic guilt that was poured into my brain as a child, but I actually believe in the truth of all the evidence and arguments that I submit.

    Do some practitioners submit questionable evidence and/or arguments? I’m sure it happens. Do attorneys “do it all the time”? I doubt it.

  8. “Seriously, attorneys *do* try to snowball Examiners with lengthy, self-serving declarations all the time. That’s a simple fact.”

    *Is* it a simple fact? Since when are “self-serving” and “lengthy” synonymous? You file a declaration during prosecution to help bring about allowance, so in that sense *all* declarations are self-serving. But the best declarations I’ve seen in file histories are the *short* ones – the ones that say just enough to make the point that needs to be made to gain allowance. Those minimize the chances for both mis-statements (and ultimately a finding of inequitable conduct, as happened here) and file wrapper estoppel.

  9. Forgive another intrusion from Europe, from one who spends much of his time getting EPO patents for US patent attorneys. Faced with an EPO prior art objection to the claim, based on D1, I am told “No, do not write what D1 discloses. Instead tell the Examiner that D1 does not disclose claim feature X” One looks at D1, straight away sees X, and mutters “Excuse me” . One is professionally embarrassed to sign a letter to the EPO that recites what one is instructed to write. One knows that presenting it will hinder progress, not help it. One wonders about professional ethics in USA and the public record of the EPO file wrapper. One phones one’s US client. With this domestic US Decision, I look forward to different instructions from USA, from now on. But, come to think of it, what are US attorneys going to write now to the USPTO, now you have good reason NOT to write to the Examiner stating “D1 does not disclose X”?

  10. …Personally, I’d rather get a final OA than potentially be sued for malpractice based on inequitable conduct…

  11. Examiner A says “Attorneys do this all the time. That’s why I have to keep writing final rejections.”

    OK, I agree that some attorneys do this. But, I was unaware that examiners had the resources and time to detect fraudulent statements in declarations. I always thought that was done by litigators with lots of discovery and time and resources and . . .

  12. “Nice broad brush accusation against the patent bar. Guess that’s why you’re an examiner.”

    Such soft sensitive skin! Guess that’s why you’re a hand model.

    Seriously, attorneys *do* try to snowball Examiners with lengthy, self-serving declarations all the time. That’s a simple fact.

    Sometimes the attorneys get caught. But not always. That’s why these cases keep coming up. Sometimes folks decide that it’s worth the risk. Sometimes they are right.

  13. Nice broad brush accusation against the patent bar. Guess that’s why you’re an examiner.

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