Larson Mfg. Co. v. Aluminart Products Ltd. (Fed. Cir. 2009)

In an earlier post, I discussed the concurring opinion in this case where Judge Linn argued for a restatement of the law of inequitable conduct that makes it more difficult to allege inequitable conduct absent evidence of fraud. This post covers the majority opinion.

Larson sued Aluminart for infringement of two claims of its patent covering a storm door with a moving glass panel. Without reaching the merits of the infringement argument, the district court found the patent unenforceable due to inequitable conduct during prosecution. The district court found that the patentee had improperly withheld documents from the examiners during reexamination of the patent. (The reexamination had been requested by Aluminart). The Federal Circuit provided the following description of the lower court holding:

The [district] court found that Larson failed to disclose to the Reexamination Panel three items of prior art and two office actions issued in the prosecution of a continuation application that grew out of the application that resulted in the ’998 patent [the patent being reexamined]. The court rejected Larson’s argument that the three items of prior art were cumulative of prior art which already was before the Reexamination Panel and therefore were not material, as well as its argument that the office actions were not material because all of the critical references noted in them already had been disclosed to the Reexamination Panel. After finding that Larson intended to deceive the Reexamination Panel, the court balanced its findings of materiality and intent and found inequitable conduct.

On appeal, the Federal Circuit vacated the holding and remanded for a potential new trial on inequitable conduct.

The inequitable conduct charges stem from the PTO's parallel examination of both the reexam of the patent in suit and a continuation application. During the reexam, Larson's patent attorney submitted hundreds of references, district court proceedings, and disclosed the co-pending continuation. However, the patent attorney did not cross-cite two office action rejections from the continuation or one of the prior art references from the continuation (although every other reference from the continuation was cited). In addition, the attorney did not cite two marketing configuration sheets that were later uncovered during discovery.

Law of Inequitable Conduct: Inequitable Conduct requires clear and convincing evidence of at least a threshold level of evidence that the applicant both (1) "made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information" and (2) by that act "intended to deceive the PTO." The materiality of the action is determined based on a reasonable examiner standard – what would a reasonable examiner "consider important in deciding whether to allow the application to issue as a patent?" If an unsubmitted reference is cumulative to information already on hand, then it will not be seen as material. Proof of intent to withhold a reference is not sufficient. Rather, the evidence must show intent to deceive the PTO. That said, intent may be proven by circumstantial evidence. After finding both threshold materiality and intent, the court must determine if the proof is sufficient to find inequitable conduct and consequently hold the patent unenforceable.

What is Cumulative?: After reviewing the submitted and unsubmitted prior art references in detail, the Federal Circuit found that the lower court had clearly erred in finding the art non-cumulative. Notably, the only features found in the non-submitted art that were not in the submitted art were "irrelevant to the claim limitations at issue and therefore could not support a finding of materiality and non-cumulativeness." Although the unsubmitted prior art included a different embodiment than the submitted reference, that difference was not important because the claims were broadly drafted in a way that cover both embodiments.

Disclosure of Office Actions in Related Cases: The examiner of the co-pending continuation filed four office action rejections. The first was used as the basis for the reexamination request. The second was used as a basis for an initial rejection in the reexamination. However, the patentee did not submit the third or fourth office action for consideration. The Federal Circuit agreed with the lower court that the office actions should have been submitted because the rejections contained "adverse decisions about substantially similar claims" that were "not cumulative" to materials already submitted to the examiner.

Because the Third and Fourth Office Actions contained another examiner’s adverse decisions about substantially similar claims, and because the Third and Fourth Office Actions are not cumulative to the First and Second Office Actions, the district court correctly found the withheld Office Actions material.

In its analysis, the Federal Circuit reviewed Dayco Products where it found the patentee had wrongly withheld rejections from co-pending applications.

In Dayco Products, the patentee failed to disclose rejections in a copending application of claims “that were substantially similar in content and scope to claims pending in the applications that issued as the patents-in-suit.” 329 F.3d at 1367. We held “that a contrary decision of another examiner reviewing a substantially similar claim” was material. Id. at 1368. We further explained that, because a “rejection of a substantially similar claim refutes, or is inconsistent with the position that those claims are patentable, [the] adverse decision by another examiner . . . meets the materiality standard.” Id.   

Thus, on remand, the district court must determine whether the patentee failure to submit the two office actions was done with sufficient intent to deceive the PTO. Although seemingly dicta, the Federal Circuit provided four points of explicit guidance to the lower court. First, the district court need not accept any additional evidence; Second, the court should remember that "material does not presume intent, and nondisclosure, by itself, cannot satisfy the deceptive intent element." Rather, if intent is inferred, it must be "the single most reasonable inference able to be drawn from the evidence." Further, intent cannot be inferred based on a decision to withhold if the patentee has plausible legitimate reasons for withholding. Third, good faith on behalf of the applicant must be considered as it "militates against a finding of deceptive intent." One element of good faith here, may be that the patentee notified the examiners of the co-pending application. Finally, although the Federal Circuit agreed that the office actions were material, the court did not opine on how material. Thus, if the lower court does find clear and convincing evidence of a threshold intent to deceive, the court must again determine whether the combined intent and materiality are sufficient to warrant a holding of inequitable conduct.

Notes:

• This case is rather silly because the defendant Aluminart was closely following the reexamination. I can almost guarantee that Aluminart realized that the documents had not been submitted even before the reexamination certificate was issued. Certainly, the company could have brought the omission Larson's attention if it truly was material.

New Medium (J. Carl Cooper) v. Barco N.V. (N.D. Ill. 2008) (J. Posner)

Sitting by designation, Seventh Circuit Judge Richard Posner recently found New Medium’s asserted patent unenforceable due to inequitable conduct during ex parte reexamination of the patents. This case is important as one of the first decisions to consider inequitable conduct in the wake of Star Scientific.

Barco presented two theories of inequitable conduct: (1) that New Medium had misled the PTO by failing to disclose that its expert declarants had been ‘retained’ and paid; and (2) that inventor/owner Carl Cooper made false statements to the PTO regarding his association with the experts. Judge Posner rejected the first theory, but agreed with the second.

Disclosing Payment to Declarants: All four of New Medium’s experts were retained and paid by the company. However, only two of the experts disclosed their relationship to the PTO. Judge Posner found the lack of disclosure to be “not misleading.” As a default, the PTO should expect that the patent applicant retained and paid its experts.

This pragmatic default rule makes some sense. If the failure to disclose the payment was not misleading, it could not be material to patentability or lead to a finding of inequitable conduct.

False Statements About Cooperation: In his declaration to the PTO, Mr. Cooper stated that he had “never met or talked with any of these experts” before contacting them to submit reports. Judge Posner found that statement “false.” Cooper had solicited and paid for a bid from one of the experts (Klughart) seven years prior. (Klughart is also a patent attorney). Judge Posner also found that Cooper and Klughart’s testimony about forgetfulness difficult to believe:

Judge Posner had no problem finding intent to deceive the PTO. The second question then is whether the deception was material to patentability. Several prior opinions have held that failure to disclose relationships can be material. See Ferring v. Barr (Fed. Cir. 2006); Nilssen v. Osram (N.D. Ill. 2006). Here, Judge Posner also found materiality:

The question of whether deception was material to patentability is an issue of predictive fiction. Here Judge Posner recognized that the reexamination might have had the same result even with full disclosure. However, he implicitly applied the rules of equity to block New Media from such an argument, Quoting Refac, “an inventor cannot submit a misleading affidavit among a plurality of affidavits and later argue that it was the nonmisleading affidavit that resulted in allowance, thus effectively curing the defective affidavit.”

Inequitable conduct: After finding both intent and materiality, the court next determines whether their combined harm is sufficient for a finding of inequitable conduct. Here, Judge Posner found that the intentional submission of false statements tipped the scales.

Claim by Claim: The expert reports focused only on a few claims. Cooper argued that the court should only hold those claims unenforceable. Following precedent, Judge Posner rejected that approach.

Holding: Asserted patents are unenforceable.

Notes:

• Posner also suggested that the PTO take some action in this case – noting that it “might warrant discipline by the Patent Office (Cooper, as a registered patent agent, is subject to such discipline).”
• Hat Tip to David Donoghue for originally noting the case [Link]

Although not new writing law, in Star Scientific, Chief Judge Michel does a nice job of clearly breaking down inequitable conduct analysis into simple two steps. The case clarifies that threshold levels of materiality and intent must each be proven by clear and convincing evidence.

Inequitable Conduct Two Step Analysis:

1. Whether the accused infringer proven threshold levels of (a) intent to deceive the PTO and (b) materiality, both with clear and convincing evidence. Although the intent element may be proven by circumstantial evidence. The clear and convincing standard requires that the evidence must be strong enough to point to “intent to deceive” as the “single most reasonable inference able to be drawn from the evidence.”
2. If both elements are proven by clear and convincing evidence, the court should “look to the equities” to determine whether the evidence warrants a finding of inequitable conduct and thus unenforceability. It is only at this second stage when the court may balance the relative weight of proof. In particular, “[t]he more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct, and vice versa.” (Quoting Critikon, 120 F.3d 1253 (Fed. Cir. 1997)(J. Rich)).

Still unclear is the meaning of “threshold.” Presumably proving a “threshold level of intent” should be easier than simply proving “intent.”

Documents:

• Read Star Scientific
• Read the Patently-O review of Star Scientific [Part I]

Star Scientific v. R.J. Reynolds Tobacco (Fed. Cir. 2008)

After a bench trial, the district court held that Star’s tobacco curing patents were unenforceable due to inequitable conduct during prosecution and invalid as indefinite. This post will discuss the inequitable conduct issues.

The Star patents are directed at a method of making healthier tobacco (same nicotine, but fewer nitrites and other chemicals). Higher end organic or green tobacco is perhaps the only growth market in the lagging US market. The inequitable conduct issues in this case revolve primarily around a letter received by the prosecuting attorneys from a Star scientist indicating that Chinese tobacco already had lower levels of nitrites due to “their use of old [radiant heat] flue-curing techniques.” Neither the letter nor a set of similar data were ever disclosed to the PTO.

An accused infringer can defang a patent by showing the patentee guilty of inequitable conduct during prosecution. To successfully prove inequitable conduct, the accused infringer must present “evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO].” An issued patent is presumed valid and enforceable – thus, the “burden of proving inequitable conduct lies with the accused infringer. The patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove a threshold level of intent to deceive [and materiality] by clear and convincing evidence.” Further, “[e]ven if a threshold level of both materiality and intent to deceive are proven by clear and convincing evidence, the court may still decline to render the patent unenforceable.”

Specific Intent: As the CAFC held the 1995 Molins case, the intent requirement is “specific intent to . . . mislead[] or deceiv[e] the PTO.”

When circumstantial evidence is used to prove intent, that evidence “must still be clear and convincing” and intent to deceive the PTO must be “the single most reasonable inference able to be drawn from the evidence.” As a flat rule, information is not material if it is cumulative to that already disclosed.

In this case, prosecution was begun at the Sughrue Mion firm and then moved to the Banner Witcoff firm. RJR’s theory of intent was that the firm switch was necessary to avoid disclosing the letter. Star’s witness stated that the “reasons behind the replacement of the Sughrue firm were that a key partner passed away and that [the witness] observed a Sughrue attorney perform unsatisfactorily in an unrelated prosecution.” The district court, however, rejected that testimony as unbelievable. On appeal, however, the CAFC reversed:

Here, the court found that RJR had simply not proven its case:

In the end, the court concluded, that RJR had simply failed to provide sufficient facts to support an inference of intent to deceive. Reversed and Remanded.

Notes:

• The decision gave Star’s stock (STSI) a nice bump:

Of course, there is no “legal” impact, but I query the importance of the fact that both prosecution firms (Sughrue Mion and Banner Witcoff) are well known and well respected in the legal communities.

Teva Pharm. Indus. v. Apotex, 2008 U.S. Dist. LEXIS 60418 (D.N.J. 2008)

In 2007, Teva sued Apotex infringing its carvedilol patents. Apotex counterclaimed with charges of inequitable conduct – alleging that Teva had failed to disclose “any of the English language counterparts” of a submitted prior art reference.

The examiner actually found the withheld references in his search, and Teva argued no harm, no foul, no materiality. Apotex disagreed and argued that the examiner’s serendipity “does not, as a matter of law, absolve an applicant from a charge of inequitable conduct.”

New Jersey District Court Judge Brown agreed with the patentee Teva – holding that a reference cannot be considered “withheld from the examiner” if it is actually before the examiner.

“In Scripps Clinic & Res. Found. v. Genentech, Inc., 927 F.2d 1565, 1582 (Fed. Cir. 1991), the Federal Circuit stated that “[w]hen a reference was before the examiner, whether through the examiner’s search or the applicant’s disclosure, it can not be deemed to have been withheld from the examiner.”

. . .

The duty to disclose all information known to be material to patentability is deemed to be satisfied if, all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by §§ 1.97(b) -(d) and 1.98.

. . .

It is undisputed that the document allegedly withheld by Teva was found by the examiner. Therefore, in light of the fact that the alleged failure to disclose the English language counterparts of EP 0 127 099 is the only basis for Apotex’s inequitable conduct counterclaim, the Court concludes that Apotex’s inequitable conduct counterclaim should be dismissed with prejudice.”