Nisus Corp. v. Perma-Chink Sys. v. Michael Teschner (Fed. Cir. 2007).
Nisus Corp’s patent relates to a method of putting Boron in a tree to kill termites and prevent forest fires. After a bench trial, the patent was found unenforceable due to inequitable conduct. Apparently, Nisus had failed to disclose material documents from a prior lawsuit involving closely related patents. The court specifically mentioned Nisus’s former patent attorney, Michael Teschner, as one cause of the inequitable conduct.
Teschner sued to intervene in the case and clear his name, but the district court denied him the opportunity. On appeal, the CAFC likewise found Teschner without standing.
Appeal by Nonparty: Usually, a nonparty has no standing to appeal. However, an attorney that is formally reprimanded may appeal to the CAFC. However, other (informal) “judicial criticisms of lawyers’ actions are not reviewable.” The court’s comments regarding Teschner here do not rise to a formal reprimand, and thus offer no standing for appeal.
To allow appeals by attorneys, or others concerned about their professional or public reputations, merely because a court criticized them or characterized their conduct in an unfavorable way would invite an appeal by any nonparty who feels aggrieved by some critical statement made by the court in an opinion or from the bench. Treating such critical comments by a court as final decisions in collateral proceedings would not only stretch the concept of collateral proceedings into unrecognizable form, but would potentially result in a multiplicity of appeals from attorneys, witnesses, and others whose conduct may have been relevant to the court’s disposition of the case but who were not parties to the underlying dispute. Nor would it be appropriate to limit such appeals to attorneys, while forbidding others from appealing from critical court comments, as such a limitation would smack of special treatment for members of the bar and would be difficult to justify as a matter of principle.
Thus, a finding of inequitable conduct does not create any standing for an aggrieved prosecuting attorney to appeal.
Postscript: Mr. Teschner declined my offer for an interview, noting that the matter is still pending at the PTO. His lone statement is that he is “glad that the Federal Circuit found merit in [his] argument.”
It seems that inequitable conduct is raised in almost every case these days… unfortunately, the litigators are not always patent attorneys and are therefore not subject to discipline before the USPTO. I wonder if the USPTO investigates patent attorneys/litigators who claim inequitable conduct but it is not found by the court; seems like an equal protection issue.
Never underestimate the nuttiness of the commenters here.
I just read the District Court case – Nisus Corp. v. Perma-Chink Systems, Inc., 421 F.Supp.2d 1084 (E.D.Tenn. 03/16/2006)
I am definitely not worried about inequitable conduct. The complaining attorney was a litigator and the initial prosecutor for the patent. He admitted on the witness stand in the litigation that he withheld disclosure because he hoped to file another lawsuit. Before the patent issued he handed off the prosecution to another lawyer, who also took over the litigation. The second attorney also held back information and the patent issued.
The complaining attorney is crying because he was caught with his hand in the cookie jar.
“some of you folks are serious, aren’t you?”
You ain’t seen nothing yet, Andrew! The truly bizarre comments usually come on Fridays. Pour yourself a tall one, sit back, and enjoy!
Initially, I thought the expressed interest in having patent prosecutors sue trial courts on some kind of defamation theory was a joke. But some of you folks are serious, aren’t you?
I don’t know where to begin.
There is something extremely unsettling about this case, given the frequency and ease with which inequitable conduct charges are made.
I do not agree that this is just some collateral proceeding that will open the door to other collateral proceedings or that this is just a minor criticism of Mr. Teschner’s conduct. The court is remarkably flip about accusing a prosecuting attorney of inequitable conduct, especially when he cannot defend the charge. The court needs to be held accountable, either by a writ or by suit in tort.
I think there is a great law review article in this topic, one I would pay money to read.
KCB, I think you make some strong points regarding the vagaries of the “reasonable examiner” test. The point I was trying to make is that you can’t draw an analogy between “reasonable woman” and “reasonable examiner” because the CAFC has spoken repeatedly as to what the “reasonable examiner” would find material (whether in doubt or not, file it), and this information is accessible to practitioners. A single test enunciated by the court is not required.
I said what I mean and I mean what I said.
“I am just contending that bright line tests must be provided”
Are you saying that standards (as opposed to rules) violate the Due Process Clause?
Yes Mr. Mooney:
“Yes, change can and will affect folks who are unprepared for the changes in a negative way.”
Just ask Mr. Padilla. Or the people sitting in Gitmo. Look. I am just contending that bright line tests must be provided. However, this government we have is adverse to bright line tests. It is afraid it will hem-in its ability to do what it wants. Look at IRS rulings, another executive agency. You see, these executive agencies don’t want to provide Due Process Notice, because with the same what one is exepcted to do is made clear and that is the last thing they desire, because it detracts from their ability to act.
I just reived the Digital Control Incorporated Test. In view of that decision no decision has been made. It appears that the Court wanted to find inequitable conduct and it said, ya know what, we don’t care what standard you use to define material information, if any test fits then just invalidate the patent based upon that test. Again, I have yet to read an inequitable conduct case that was not couched in result-oriented reasoning. The Digital Control Incorporate case is no precedent at all. It is time like this when the teachings of great Americans like Teddy Roosevelt must be heeded. He suggested national plebiscites to remove case law precedent from the U.S. Supreme Court. I contend that the same should be extended to any precedential opinion.
“Mr. Teschner should consider a suit for intentional interference with prospective economic advantage, if the tribunal’s statement has cost him loss of clients or prosecution business.”
I assume you mean against the patent infringement defendants, not against the district judge…?
Mr. Teschner should consider a suit for intentional interference with prospective economic advantage, if the tribunal’s statement has cost him loss of clients or prosecution business. He has to prove that the interference has caused a third person not to enter into a representation for prosecution and that that the interference was improper. To prove the latter he can show that a fraudulent misrepresentation has been made. A representation is fraudulent if the actor made it knowing it to be false or with reckless disregard of whether it was true or false. If Mr. Teschner has not been heard on the facts of the charge of inequitable conduct, then the actor may have acted with reckless disregard.
I too have wondered what recourse I would have if I were a target of inequitable conduct allegations.
Maybe some litigators out there can answer… is it permissible to bring in character witnesses to vouch for the fact that I am not the type of person that would ever intend to decieve the Examiner? Are defamation/slander/libel suits a realistic option?
This is becoming a serious concern as I see cases in which the Federal Circuit finds inequitable conduct for failure to submit types of information that has never traditionally been submitted (e.g. notices of allowances from related cases (McKesson), copies of office actions from related cases (Dayco))
As a sidenote, my firm has responded to those cases by submitting all of the things those cases say that the PTO wants to see. The PTO hates it. The disconnect between what the Fed. Circuit thinks the PTO wants to see, and what the PTO actually wants to see, is growing ever wider.
Example, we sent in an IDS that listed related cases whose claims may be substantially similar to the claims of the current case (the Fed. Circuit thinks that Examiners want to know this so that they can determine whether there is a double patenting problem, and so that Examiners can look up the office actions in those cases to see if they say anything that would be relevant to the current case). In response, a Supervisory Examiner sent the IDS back with big X marks through it, with remarks indicating that they will not consider it and that it is not the kind of thing they want in an IDS.
See also
link to uspto.gov
“people’s lives are being ruined by this bureaucracy run amock”
Yes, change can and will affect folks who are unprepared for the changes in a negative way.
But let’s try to keep a sense of perspective about this. In the list of debacles wrought by the current administration, mismanaging the PTO pales in comparison.
KCB writes: “You are incorrect in your assessment that the PTO exam tests what is required to have the knowledge of a reasonable examiner.”
I wish you’d explain why. The “reasonable examiner” afaik, doesn’t require a patent prosecutor to know anything that he can’t know. A “reasonable examiner,” under the test, only needs to know the substantive law.
KCB writes: “With respect to your second point, if the rules mean reasonable person, they must state so. Moreover, and without jest, I doubt that any reasonable person would know anything about most patent applications.”
I said a reasonable person who knows substantive patent law. I don’t think it’s a misrepresentation of the rule to say that.
KCB writes: “The fact remains that the reasonable examiner standard is another example of an unconstitutional test applied in order to facilitate the operations of the USPTO. This is what I am most concerned about. This must end.”
That’s not a fact. It’s an unsupported conclusion. Give me an example (even a hypothetical one) of how this notice problem might exist in practice. Please.
KCB writes: “In response to defector, I have never seen a test espoused by a court that defines Reasonable Examiner. Therefore how can we said to have been put on notice of the requirements.”
This is just absurd. Cases help, but they’re not absolutely necessary. If you’re correct, then every law on the books is unconstitutional until it’s litigated.
Also, on the reasonable examiner standard, see this case:
link to fedcir.gov
and see this:
link to frwebgate.access.gpo.gov
The “reasonable examiner” language was taken out of the regulations in 2000 on the duty to disclose and replaced with a more concrete standard of materiality.
KCB, I don’t think “clamoring” would be the right word, but there are quite a few judges who enjoy patent cases. You’ll find many of them in the N.D.Cal. and E.D. Tex. There is a bill in Congress that would alter the case assignment process to allow some judges to take on more patent cases.
Anonymous, in response to your points:
To be a competent patent prosecutor, you need to know the administrative procedures of the office (which is what the PTO exam tests) . You are incorrect in your assessment that the PTO exam tests what is required to have the knowledge of a reasonable examiner. There are many procedures that now exist and are kept from the public, much less afforded an opportunity to test. Moreover, I am not tested upon the searching criteria that an examiner undergoes in the examiner academy. Think you would like your statement to be true. However, the facts and current operating conditions of the USPTO makes it virtually impossible for any person of the public to know the inner workings of the same.
With respect to your second point, if the rules mean reasonable person, they must state so. Moreover, and without jest, I doubt that any reasonable person would know anything about most patent applications. A more appropriate standard, which the USPTO would dare not espouse, is a reasonable person of ordinary skill in the art. The problem with this is it would exonerate the patent prosecutor from most if not all responsibility, because we are not charged with being individuals of ordinary skill in the art.
With respect to your remaining points, if you are correct, the public need to maintain statistical information concerning the disposition of cases by Federal Judges to determine when impeachment or some other censure is warranted.
The fact remains that the reasonable examiner standard is another example of an unconstitutional test applied in order to facilitate the operations of the USPTO. This is what I am most concerned about. This must end.
In response to defector, I have never seen a test espoused by a court that defines Reasonable Examiner. Therefore how can we said to have been put on notice of the requirements. It is just two words that some low leve bureaucrat created out of thin air. Now people’s lives are being ruined by this bureaucracy run amock.
With respect to George, the determination of materiality is based upon the eyes viewing it. We need to know the eyes. For example, were it the reasonalbe new born standard . . . nothing would be material.
As a practical matter I’m not sure whether calling the standard “reasonable examiner” or “reasonable person” is going to make a difference. If one is aware of prior art which is material to patentablilty, one has an ethical obligation to disclose it.
Only three patent cases turned up in a Lexis search having the phrases “reasonable examiner” “prior art” and “fifth (or 5th) amendment”; two of these cases are district court opinions (N.D. Ill. and MA) and the other is an ITC case. None of these cases address your argument.
I think a major distinction between “reasonable examiner” and “reasonable woman” standards is that the skilled professionals, such as ourselves, are expected to review caselaw and have an understanding of the court’s interpretation of “reasonable examiner” whereas the “reasonable woman” standard was supposed to be interpreted by your average middle-manager type. The notice requirement is satisfied by our ability to review caselaw and read Patently-O.
KCB, in response to your points:
(1) to be a competent patent prosecutor, you need to know the administrative procedures of the office (which is what the PTO exam tests), and the substantive law of patentability. The “reasonable examiner” standard, afaik, means nothing more than “a reasonable person applying the substantive law of patentability to the patent who knows how to do so”. I don’t see the notice problem. The “reasonable examiner” standard doesn’t require patent agents to know secret internal PTO policy or anything like that.
(2) The fact that patent examiners don’t use prior art you submit in support of a rejection shouldn’t be surprising. They have more resources to search prior art than you do, though their time is admittedly limited. Maybe this is a decent argument to the effect that patentees shouldn’t be required to submit prior art at all, but the current law is that they do. The inequitable conduct standard, properly applied, is supposed to get at patentees who have strong prior art and deliberately don’t disclose it. If you’ve never come across silver bullet invalidating prior art for your clients’ patents, then it’s not surprising that PTO examiners have rarely cited prior art you submit in support of a rejection.
(3) If a judge finds inequitable conduct, he usually has less work to do after that than if he finds no inequitable conduct and has to go on to address the other issues in the case. Judges concerned about their workload therefore have a built-in incentive to find inequitable conduct early in the case. But the same is true of ANY other law where holding one way kicks the plaintiff out of court early and holding another way means doing more work. Some areas of the law are more prone to this than others. In ERISA denial of medical benefits cases, some judges have complained that the arbitrary-and-capricious standard of review is misused by judges to clear difficult cases from the docket. See Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 975 (9th Cir. 2006) (en banc) (Kleinfeld, J., concurring) (“‘Discretion’ is not just a means by which courts can easily get rid of complicated ERISA cases.”).
I don’t think inequitable conduct works this way, though. First, finding inequitable conduct on summary judgment is heavily disfavored (notwithstanding Ferring v. Barr), and judges will therefore usually have to look at the issue after a full-blown trial. Second, inequitable conduct is often intertwined with the merits (in the usual case of alleged deliberate failure to submit material prior art, in the sense of whether the prior art is “material”), so it often doesn’t save the judge all that much work if he finds inequitable conduct.
Laws that are difficult to apply and that have harsh results will always subject the judges who apply them to charges that their decisions are result-oriented or otherwise agenda-driven. Inequitable conduct is difficult to apply and has harsh results sometimes, but I don’t think that it’s particularly susceptible to being applied dishonestly.
Here are a couple of issues that I believe need to be addressed.
Firstly, the reasonable examiner standard for determining whether prior art should be submitted. The is blatantly unconsistitution due to notice problems under the 5th Amendment. I am not an examiner. I have never been trained as an examiner. The bar exam for the PTO does not require one to learn the ways of the examiners. Therefore, I have never been required nor provided, an opportunity to understand what an examiner understands. This is why the reasonable woman standard failed in sexual harrassment analysis. Only a reasonable person standard passes constitutional scrutiny. Does any one know of whether this has been litigated. I have found a dearth of information on this topic.
Secondly, my experience with examiners is that as a matter of course they never cite in support of a rejection any information that I provide to them. Therefore, unless I have a glaring 102 reference from the same examiner on an identical claim it is my experience that any prior art I provide is prima facie immaterial to a patent examiner. I think it is time to commission professor Kayton to provide a statistical analysis of prior art filed in issued cases versus prior art applied by an examiner in support of a rejection on non-continuation cases.
In short, I reiterate the following, is it not possible that there may be times when inequitable conduct is used as a means for invalidating (pun intended) patents when political and/or personal agendas desire the same. I am not sayting that this occurred in this instance.
I do leave with the following observations: How many here have ever heard of a District Court Judge clamoring to have more patent cases on the docket? I never have. As far as I know patent infringement cases for a judge are about as desired as a landlord-tenant dispute brought under diversity jurisdiction (which is about as welcomed as a root-canal)
bjhbach wrote, “If I were a prosecuting attorney accused of inequitable conduct causing a patent to be invalidated, I would be be more concerned about the impact of such a collateral decision on my former client’s impending malpractice claim than merely clearing my good name and I would certainly want the opportunity to respond. At least the attorney in McKesson was afforded such an opportunity. Apparently, he wasn’t very good as a witness.”
He was not a very good witness because he *was* concerned about malpractice and thus refused to admit any negligence in failing to submit the allegedly material information. See my Jun 07, 2007 at 09:17 PM comment at link to patentlyo.com
In some cases, you have to be willing to admit some minor negligence (e.g., failing to correctly assess materiality or letting something fall through the cracks) to save your credibility with respect to deceptive intent.
One issue that no one has mentioned is the effect of such judicial characterizations on a malpractice claim against the drafting attorney by the holder of the now invalidated patent. The recent McKesson v. Bridge Medical decision in which the prosecuting attorney was called out by name multiple times in both the district court opinion and the Federal Circuit opinion similarly concerned me. If I were a prosecuting attorney accused of inequitable conduct causing a patent to be invalidated, I would be be more concerned about the impact of such a collateral decision on my former client’s impending malpractice claim than merely clearing my good name and I would certainly want the opportunity to respond. At least the attorney in McKesson was afforded such an opportunity. Apparently, he wasn’t very good as a witness.
I agree with SF. Attorneys are self regulated professionals. Unionizing would not help since (unlike typical unions) there is no opposing party with which to bargain, and there is no threat (like going on strike) that we could use to our collective advantage. The only way we can make changes is by stepping out from behind the veil of anonymity, join a group such as ABA, AIPLA, or NAPP, and make some noise.
I also agree with Paul Morgan. Prosecutors get a raw deal. The term “inequitable conduct” is highly prejudicial and in many ways inaccurate. The standard for “inequitable” has become much stricter of late. As a result, conduct which, at the time is was made, would not have been considered “inequitable” is now labeled as such. See, e.g., [https://patentlyo.com/patent/2007/05/what_a_mess_ine.html] Furthermore, there may be a good faith assessment of non-materiality of the supposed prior art, which the court, taking a hard-line, disagreed with, despite evidence that the supposed prior art would not have changed the result. See, e.g., [https://patentlyo.com/patent/2007/02/cargill_v_canbr.html].
Nisus Corp. v. Perma-Chink Sys. v. Michael Teschner (Fed. Cir, 2007): This is not the first time* in which a patent attorney has been professionally slandered for life by name in a District Court published decision as having committed inequitable conduct, with no indication of whether or not that attorney was ever allowed to even testify in his or her own behalf, and was denied any right to any representation, defense, intervention, or published correction, and presumably will also obtain no relief from any bar or judicial association. [Other than the silent absence of any disciplinary action if the charges are not actually sustainable, since the PTO reads and follows-up on these D.C. patent attorney misconduct accusations.]
*[The first was the patent-MCLE-course-famous Prof. K., who went on a public letter writing campaign defending himself it after he found out about the D.C. decision. In his case, he was apparently never even notified by either trial counsel that his long-prior alleged conduct was even in issue for alleged inequitable conduct. (I think THAT should be the subject of both judicial sanctions and attorney disciplinary actions). ]
Couldn’t he file a suit against the justices on the CAFC for defamation?
“In short, should we unionize?”
No. First, unions’ typical activities are likely not consistent with patent practitioners’ fiduciary duties. Second, patent practitioners have very little leverage because they are easily replaced (their non-union replacements may be found anywhere, not just from a local pool of talent). Third, many patent practitioners already have sufficient leverage (because they do quality work) and will see no need to join a union.
Moreover we would have a more, shall we say, influential voice when multibillion companies want us to draft $4,500.00 patent applications when the potential liability for the same. In short, should we unionize?
Dear Collegues:
I have often thought about this and now I pose the questions. Should we not commence with a insurance and defense collective (IADC) for patent practitioners? It seems that in every patent infringement case we are a third party with a vested interest and must be represented separate and apart from the plaintiff and defendant. For example, in this instant matter, the IADC would move to investigate if an official letter of reprimand against the judge is appropriate while moving forward with the funding of an appeal fo this aggrieved attorney.
What really concerns me is that some of the invalidation of patents may be based upon political/economic grounds and patent practitioners may be just a scapegoat to that end. Any thoughts on this?
I believe that the proper venue for redress would be to the group that is responsible for judicial misconduct. If the judge was out of line, it is up to his colleagues to censure him. We must maintain an indepedent judiciary. However, in my opinion, prejudicial comments concerning a non-party by a sitting judge casts opprobrium upon the bench. It might very well be a serious transgression for which appropriate formal action should be taken.
“You could accurately say the cert. petition would be quite a long shot, but then again, you could say the same thing about his CAFC appeal.”
I would say the same thing about both. This appeal should never have been filed.
Also this language from the opinion is pretty helpful to Mr. Teschner:
—–
Moreover, to the extent that Mr. Teschner is concerned about the collateral effects of the court’s findings in the underlying case, we note that for the very reason that he was a stranger to the proceedings before the district court in this case, he has not had a full and fair opportunity to respond to the court’s characterizations of his conduct. Particularly in this case, in which Mr. Teschner vigorously contests the findings against him, and
***in which there appears to be some force to his argument on the merits,***
we would expect that he would be accorded an opportunity to make his case before any sanctions were imposed on him based on the comments made by the district court.
—–
He may still get his chance.
If I’m not mistaken, the USPTO investigates all cases where inequitable conduct is found in court against a patent attorney.
If the PTO holds against him, he has a court appeal at that point.
anonymous, I agree that this case is not really part of the split. It’s distinguishable from all of the cases in that the attorney here was not trial counsel and was not being reprimanded for litigation-related conduct.
Still, there is a split, and Mr. Teschner seems pretty determined to clear what he thinks has been done to his good name. That’s why I wonder if he’ll file the cert. petition. You could accurately say the cert. petition would be quite a long shot, but then again, you could say the same thing about his CAFC appeal.
The title is a bit misleading.
Mr. Dhuey, Justice Alito said recently that what the Justices want in a “circuit split” case that they take on cert is a showing from the petitioner that his case would be decided differently in different circuits. Unless you disagree with what the panel says about the issue at page 8 (particularly the last line quoted below), this is probably the end of the case.
—begin quote:
There is an important difference between this case and many of the cases in
which courts have held that an attorney may appeal from a court’s formal or informal sanctions against the attorney. In those cases, including Precision Metals, the attorney was before the court as a participant in the underlying litigation, and the court’s action was directed at regulating proceedings before the court or over which the court had supervisory authority. In this case, by contrast, Mr. Teschner was not a participant in
the district court proceedings other than as a witness, and the conduct at issue was not his conduct before the court or in the course of the itigation—it was conduct that occurred long before the litigation. Mr. Teschner’s pre-litigation conduct was plainly outside the scope of the court’s authority to impose disciplinary sanctions, and the court’s criticism of Mr. Teschner cannot reasonably be characterized as the imposition of a disciplinary sanction against him. For this reason, those cases in which courts have struggled with the issue of the appealability of an order of a court critical of an attorney’s conduct in the very proceedings that are before the court are not directly applicable here. See, e.g., Bowers, 475 F.3d at 544; Butler, 348 F.3d at 1165-66; Walker, 129 F.3d at 831-32.
—-end quote.
Tell me about it…it used to be that certain well-known patent attorneys wore a charge of inequitable conduct like a badge of honor…but I won’t name names
Boy, attorneys are whiners!
I wonder if he’ll file a cert. petition. The CAFC opinion showed a very well-developed split in the circuits on this issue.
The irony of course is that most of us would never have associated Michael Teschner with inequitable conduct. Now he’s immortalized in the case law.
Well played, Mr. Teschner. Well played.
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