Litigation Screen Fails to Avoid Inequitable Conduct (But Almost Succeeded)

Ohio Willow Wood Company v. Alps South (Fed. Cir. 2016)

Professor Rantanen wrote about the 2013 Federal Circuit OWW v. Alps decision that, inter alia, reversed the lower court’s determination of no inequitable conduct by the patentee OWW.  (U.S. Patent No. 5,830,237, covering a gel-cushion used for prosthetics).  The setup involves two ex parte reexaminations initiated by Alps.  On remand, the district court found no inequitable conduct during the first reexamination but that OWW did commit inequitable conduct during the second reexamination. On appeal, the Federal Circuit affirmed both findings.

Starting from the end, the aforementioned second reexamination was based upon a competitor’s prior art advertisement for a different product along with testimony from the competitor’s engineer (Comtesse) who explained in his submitted testimony how the product worked (in the same way as OWW’s claimed invention).  However, the Board found Comtesse’s testimony unreliable based upon OWW’s statements that he was a “highly interested” and receiving royalties from the competing product. During the reexamination, OWW also told the USPTO that there was  “no other evidence of any sort” corroborating Comtesse’s statements.  Following these arguments, the USPTO Board confirmed patentability of the claims.  It turns out that OWWs statements were untrue and that at least one person involved in the reexamination for OWW (Colvin) was aware of evidence from the parallel litigation that corroborated Comtesse’s statements.

The court found (1) that Mr. Colvin was aware that OWW’s reexamination counsel had represented to the Board that Mr. Comtesse’s testimony was entirely uncorroborated; (2) that Mr. Colvin was aware of materials that corroborated Mr. Comtesse’s testimony; and (3) that Mr. Colvin failed to correct his counsel’s misrepresentations.

All these conclusions came together to confirm a finding that Colvin had intent-to-defraud the USPTO.

Faulty Screen: The key to all of this here was that information from the litigation seeped into the reexamination prosecution.  Interestingly, it was the same law firm handling both litigation and the reexamination. However, the firm had established an “ethical screen to separate the attorney handling OWW’s reexamination proceedings from the attorneys handling OWW’s litigation matters.”  The Federal Circuit seemingly found no inequitable conduct problem with use of a screen that results in keeping relevant documents from the hands of patent prosecutors.  Rather the problem for OWW occurred because one of OWW’s employees was deeply involved with both the litigation and the reexamination prosecution.

Attorney Fees and Mootness: Although the courts had already found the patents unenforceable due to inequitable conduct in the second reexamination, ALPS asked that the Federal Circuit find them doubly unenforceable based upon misconduct in the first reexamination.  That seems like a moot point – unenforceable is unenforceable.  However, the Federal Circuit chose to rule on the issue (ultimately finding no inequitable conduct) because of the potential fee award under 35 U.S.C. 285.

A judgment of unenforceability based on both the first and second reexaminations would expose OWW to a larger attorney fee award than a judgment based on the second reexamination alone. It was therefore proper for Alps to press its argument as to the first reexamination by way of a cross-appeal.

This is a fairly substantial ruling and may end up offering additional power to defendants who wish to continue to pursue non-infringement and invalidity claims even after winning the case.  If broadly applied in this manner, then the ruling is also probably wrong.

 

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

38 thoughts on “Litigation Screen Fails to Avoid Inequitable Conduct (But Almost Succeeded)

  1. I am not seeing the reason why the “headline” contains the teaser “But Almost Succeeded

    The person here found guilty of inequitable conduct was the employee of Ohio Willow Wood Company, not of the law firm.

      1. Sure, it makes sense that screens can apply to in-house persons as well, but I am still not seeing the reason for the 570-590 nm wavelength parenthetical in the headline.

                1. PatentBob,

                  While the verb tense is off, there are factual statements made by many celebrities that they would in fact engage in that behavior.

                  Thus, your addition is less yellow than the sensationalism that I noted in the parenthetical.

                  A scooby snack:

                  htt
                  ps://ww
                  w.you
                  tube.com/watch?v=wTTxDWZcbxI

                  (direct link is prevented by the filter – just concatenate the URL)

  2. Reexaminations by statute are exclusively based upon patents and printed publications precisely to avoid the submission of evidence which cannot be tested by cross-examination. But that is what happened here, and to the extent that the patent office permits this from petitioners, they are doing tremendous harm to the patent system.

    1. Ned, ex parte patent reexaminations have no participation whatsoever by the adverse party once initiated. [Not even cross-examinations, unlike IPRs.] The discovery of this IC had to be from discovery in the parallel D.C. litigation, not the reexamination.
      The in-house person in charge of their O.C. should not have approved this affirmative representation to the PTO by their O.C. And, should have known that false affirmative representations are far more IC dangerous than omissions as treated by the Fed. Cir. And, should have known that affirmative representations in any PTO proceeding can be tested for accuracy and used against them whenever they sue on their subject patents.

        1. Ned, where does the statute prohibit evidence like was submitted? The statute says only that the request must be a request for reexamination “on the basis” of any prior art [document]. Note that section 301 explicitly makes any “explanation” by the submitter part of the record. I don’t see why the PTO is prohibited from considering it.

          1. Does not the explanation have to portend to the allowable evidence?

            From your take, why would there be any limits whatsoever?

            (not that such affects where the IC occurred – as noted by Paul, this appears related to the court case rather than the actions in the Office alone, but I have not followed that reasoning all that closely)

            1. From your take, why would there be any limits whatsoever?

              Ah, yes, your old standby, the hasty generalization. Just for your general background information, a suggestion that a particular limitation does not exist doesn’t mean that there are no limits whatsoever. In this case, we’re talking about an affidavit attesting to the operation of a product described in a prior art reference, so yes, the explanation here “portends” to the prior art reference. (I don’t think you’re using that word correctly.)

              (not that such affects where the IC occurred – as noted by Paul, this appears related to the court case rather than the actions in the Office alone, but I have not followed that reasoning all that closely)

              So, in your haste to pick an argument with me, you didn’t even bother to try to figure out we’re talking about? “This,” as in the inequitable conduct, is related to the actions in the Office alone. The patent owner knowingly submitted false statements in the reexamination proceeding, and didn’t correct them.

              1. My old standby….?

                Hey – I was just following up with your comment. If you wanted your comment not to apply so “gen eralized,” you should have been more specific.

                There was NO “attempt to pick an argument with you.”

                Lighten up Francis.

                1. (kind of reminds me of how quickly you got all whiny when Random was not playing nice with you…

                  …and you don’t usually even attempt to to engage in the usual Echo crowd to see the full force of what makes you so whiny)

    2. Ned, was your point that the statement by the Engineer really is more of a 102(g) prior art because the “publication” within its four corners did not disclose the claim?

      It’s that murky in-between – a POSITA saying what the publication means versus impermissible extra-statutory (in the context of reexam) prior art being considered (proof of prior invention under 102(g)).

      I’m not sure of a good rule to cleave the two domains. Not a bad argument to make though (but I also feel like the PTAB wouldn’t want to hear it).

      1. drop by, the engineer was testifying to facts that were pertinent to a public use or prior invention prior art. He was not testifying as an expert, but as fact witness.

        Such evidence must be tested in court and that is one of the reasons congress has provided in all post grant proceedings like reexaminations, IPRs, CBMs, that the evidence must consist of patents and printed publications, not public use or prior invention or anything that inherently is unreliable and that needs corroboration before it can be accepted.

        As to the PTAB — well we know who they are now. It behooves all of us to stop reexaminations, IPRs and even CBMs. Patent owners are being run over by the proverbial bus.

        1. Ned It behooves all of us to stop reexaminations, IPRs and even CBMs.

          That’s ridiculous.

          the evidence must consist of patents and printed publications

          Well, there’s also this: In reexaminations ordered under 35 U.S.C. 304, any rejection must be based upon the prior art patents or printed publications as explained by the affidavits or declarations or other written evidence. The rejection in such circumstances cannot be based on the affidavits or declarations or other written evidence as such, but must be based on the prior art patents or printed publications.

          Note that the PTAB in the first instance found that the printed publication plus the “uncorroborated” testimony explaining what the printed publication disclosed to one of ordinary skill wasn’t sufficient to prove the obviousness of the claim. The lack of corroboration was key and OWW made the unfortunate decision to take a position on corroboration that was completely contradicted by facts known to it.

          Lastly, I’ll note just for completeness (not relevant to this case) that admissions of the patent owner regarding claim scope, or the scope of the prior art, or public use/on sale issues are also accepted as evidence in ex parte re-exam proceedings (patentee admissions submitted by the patentee can come from any source; those submitted by third parties can come from the file history or court proceedings).

        2. This is a major flaw in the reexamination system. Consider the NTP v. RIMM scenario:
          a. Graduate student thesis (DOC-X -102 ref) found in obscure university library file;
          b. Declaration from librarian – document indexed, searchable, etc – necessary to establish – ‘printed publication’ status.
          c. Declaration and DOC X submitted in reexamination as printed publication prior art.
          d. DOC-X-102 ref – turns out to be fraud – document created after critical date – and back dated to be 102 prior art.
          My point: Printed publications – that are not ‘self authenticating’ – are very problematic in ex parte reexamination (inter party too?). The procedures at PTO are just not able to cope with ‘barbed wire’ issues.

          1. Iwasthere, agreed.

            But my point is also that the testimony was not about the publication but about the product.

            “…testimony from the competitor’s engineer (Comtesse) who explained in his submitted testimony how the product worked.”

            What the evidence was about was a public use. The literature itself was not sufficient to describe the product in any detail, or enough detail to invalidate the claim.

            This slight of had seems to occur quite a bit in reexaminations and other post grant proceedings from my experience. Petitioners are literally getting away with m*rder, and patent owners are apparently allowing them to do it by not challenging the evidence.

    3. No, it was not the ex parte reexamination prior art evidence being tested, it was the affirmative miss-representation made to avoid that prior art by the patent owner being tested for this IC, in the patent litigation.

      One problem is that ex parte practitioners are used to their ex parte application prosecution arguments almost never being adversely tested, because the odds of any normal ex parte application prosecution being challenged in litigation are less than one in 1000 under the average odds of an issued patent being sued on and not quickly settled. But in most post-grant patent prosecution those odds drastically increase to more than likely than not.

      1. No, it was not the ex parte reexamination prior art evidence being tested, it was the affirmative miss-representation made to avoid that prior art by the patent owner being tested for this IC, in the patent litigation.

        Well, yes, but you’re missing Ned’s point. The misrepresentations involved attacks by the patentee on testimony submitted by the challenger in the reexamination. Ned is arguing that this evidence shouldn’t have been considered by the PTO in the first place.

        1. DanH: Ned is arguing that this evidence shouldn’t have been considered by the PTO in the first place.

          And the PTAB did, in fact, reject that evidence on appeal specifially because it was uncorroborated — an argument that was put forward by the patentee. Unfortunately the patentee chose to stretch the truth.

          It almost seems here that Alps predicted that they could likely induce the patentee to make a false, deceptive and f@tal statement in the course of the second re-exam, even if the false statement related to an issue that could have been resolved in some other manner (i.e., with legal argument).

          1. I think that you are still standing on the slippery portion of the slope that Ned would say is evidence expressly not allowed in the proceedings.

            You are looking not at the printed material, nor directly at the explanations of the printed material, but instead looking for evidence of veracity of a reply to the explanations of the printed material.

            To that extent, DanH’s statement of “Ned is arguing that this evidence shouldn’t have been considered by the PTO in the first place.” might very well still apply. ( I will leave it to you, Ned and DanH to thrash out among yourselves)

  3. DC: The Federal Circuit seemingly found no inequitable conduct problem with use of a screen that results in keeping relevant documents from the hands of patent prosecutors. Rather the problem for OWW occurred because one of OWW’s employees was deeply involved with both the litigation and the reexamination prosecution.

    Just trying to makes sure I understand this (having not read the case …. yet).

    I get that law firms can set up a “screen” to separate prosecuting attorneys working for a client from litigation attorneys working for that same client. That makes sense.

    But the troublesome conduct in this case is unrelated to the fact that one employee of the client (Colvin?) was “deeply involved” in both litigation and re-exam prosecution. The problem is that the client corporation was aware of material positions taken by the client corporation in litigation that contradicted positions taken in the re-exam. My understanding is that corporations are treated as unitary entities and the knowledge of employees, including in-house counsel, is imputed to the corporation. In other words, a corporation can’t “ethically screen” its own employees from itself, whether it’s for the purpose of avoiding knowledge or to permit the corportation to assert contradictory facts in different venues.

    1. MM – you do understand this correctly. However, corporate entities have fought hard against the notion that the knowledge of an employee (even fairly senior officials) should be deemed to have been known by the corporation.

    2. MM, protective orders keep infringer confidential information from being disclosed to the inside counsel and management of patent owners. This makes certain invalidity information private to the one defendant. It also prevents patent owners from bringing the information to the attention of the PTO in reexaminations and the like.

      Personally, I think it is these protective orders that are problem. Invalidity information has to be made public if the infringer is going to rely on it.

    3. The same monster corporations that are destroying patents are also setting up the untouchable corporation MM. You should be proud. Own it.

      1. One of Malcolm’s greatest points of dichotomy (which he never addresses, let alone even acknowledge) in his anti-software windmill chase is that that form of innovation is the form most accessible to the common person, to the NON-“monster corporattion” and those that he would paint as onepercent G-g-g-grifters.

        He is soooo quick to want to play the role of the person standing at the edge of the field of rye protecting against “monied interests,” that he fails to even realize the nature of what he is attacking based solely on his feelings/philosophies/opinions.

  4. “If broadly applied in this manner, then the ruling is also probably wrong.”

    As in, under the attorney fee’s provision (shouldn’t award more money) or as a matter of encouraging moot litigation (in the sense that liability is conclusively determined to not exist (for a defendant), therefore no further relief could be granted by the court)?

      1. Yes, but with the exception of a patent owner unilaterally granting a free license late in baseless litigation to avoid attorney fee sanctions. That will not fly.

      2. I think Paul has a point here – there are other instances as well in which a particular case may be mooted, but there may be a strong policy reason for continuing (patent validity, for example, where a gen erous payment by the patent holder moots a case, but the patent validity was well questioned)

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