By David Hricik, Mercer Law School
Over on the main page, Dennis has written up GS CleanTech Corp. and Cantor Colburn LLP v. Adkins Energy LLC (Fed. Cir. 2020) [Fed Cir Decision][DCT Decision] (does Dennis ever sleep?), which affirms a holding of inequitable conduct.
That finding can ruin careers. Dennis examined the merits: I want to examine the procedure used on appeal. (I’ve taught civil procedure for decades now, and served as a clerk on the court a few years ago… this case is in need of correction by the full court or the panel on rehearing — whether it changes the outcome, or not, a point on which I have no view.) Whatever the merits, the panel mistates key issues of appellate review of inequitable conduct and contradicts prior panel decisions and even Therasense itself — and does so in a way that radically increases the scope of this equitable defense while, at the same time, failing to analyze the equities, oddly enough.
Specifically, first, the panel states the the standard of review of a fact finding of materiality underlying inequitable conduct is for abuse of discretion. That is just flat wrong. “[W]e review the district court’s findings of materiality… for clear error.” Am. Calcar, Inc. v. Am. Honda Motor Co., 768 F.3d 1185, 1189 (Fed. Cir. 2014). Accord, Regeneron Pharm., Inc. v. Merus N.V., 864 F.3d 1343, 1351 (Fed. Cir. 2017).
Worse, invalidity “under the on-sale bar is a question of law with underlying questions of fact.” Robotic Vision Sys., Inc. v. View Eng’g, Inc., 249 F.3d 1307, 1310 (Fed. Cir. 2001). Accord, The Medicines Co. v. Hospira, Inc., 881 F.3d 1347, 1350 (Fed. Cir. 2018). The panel examines for abuse of discretion of, not just the underlying factual questions, but the legal question. That is wrong. Indeed, it applied abuse of discretion to whether the invention was ready for patenting, which is also wrong.
As stated, reviewed the findings of intent to deceive for abuse of discretion: that’s wrong. “This court reviews the district court’s factual findings regarding what reasonable inferences may be drawn from the evidence for clear error.”
Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1291 (Fed. Cir. 2011)
And, third, the panel never (as the district court apparently failed to do) analyzed equitable balancing — given the circumstances should the entire patent be held unenforceable? I’ve often observed that nothing in Therasense changed the rule that, if the accused infringer meets its burden of showing both materiality and intent, “then the district court must weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable.” Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011).
The panel applied the standard of review on the ultimate issue — equitable relief — to fact findings and legal conclusions. It’s a slippery slope, and one with severe consequences to the boundaries created by Therasense: it allows district courts to make clear errors on factual findings and legal conclusions, but be affirmed on appeal so long as they do not abuse their discretion. Finally and in addition, lack of careful appellate review will lead to OED investigations into practitioners, as well as ruined businesses and scientific careers.
Thanks everyone for the excellent IC information, analysis, and viewpoints.
Talk about making a mountain out of a mole hill. With respect, Professor, you’ve taken down the rankings of Mercer just a little more with your post.
It is true that factual findings by a district court, whether in inequitable conduct proceedings or everywhere else, are reviewed on clear error. See Federal Rule of Civil Procedure 52(a)(6). But seriously, who cares!? The “clear error” and “abuse of discretion” standards are not meaningfully different in a context in which the underlying decision is based on factual findings, as is the case with inequitable conduct.
As the Supreme Court has long recognized, “a district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.” Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990). In other words, if you have a clearly erroneous factual finding, you would “necessarily” have an abuse of discretion. Or if you had applied the law incorrectly, you would also “necessarily” have an abuse of discretion. The “abuse of discretion” standard is thus triggered by either clearly erroneous factual findings or an error in application of the law.
It is absolutely not the case, as the Professor mistakenly states, that the abuse of discretion standard applied by the panel “allows district courts to make clear errors on factual findings and legal conclusions, but be affirmed on appeal so long as they do not abuse their discretion.” The Supreme Court has directly rejected that precise proposition. See Highmark Inc v. Allcare Health Management, 572 U.S. 559, 563 n.2 (2014) (“The abuse-of-discretion standard does not preclude an appellate court’s correction of a district court’s legal or factual error. A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence.”) (citations omitted). With respect, Professor, please learn your civil procedure, before you purport to teach it to others.
The panel here was imprecise in its articulation of the standard of review, but that error was harmless and not outcome changing.
I agree. The language in the opinion was imprecise, but it appears the panel in fact applied the correct standard of review:
Slip op. at 23: quoting Kingsdowne: “We leave undisturbed the trial court’s inequitable conduct decision unless the appellant establishes that the ruling is based upon clearly erroneous findings of fact or a misapplication or misinterpretation of applicable law or that the ruling evidences a clear error of judgment on the part of the [trial] court.”
Slip op. at 31: “CleanTech has not shown clear error in these factual findings and we reject the invitation to reweigh the evidence. Accordingly, the District Court did not abuse its discretion in its on-sale bar determination.”
Slip op. at 33: “The District Court did not clearly err in finding that CleanTech was aware of the on-sale bar and its requirements.”
Slip op. at 34: “The District Court did not clearly err in its finding that CleanTech and Cantor Colburn withheld material evidence from the USPTO.”
I have to disagree with you both. Read footnote 13. The court holds that it would not review the holding of the district court that there was an offer for sale, on summary judgment. The standard of review on facts is to review all facts in favor of the non-moving party and resolve all reasonable inferences in favor of the non-movant. On legal issues, it’s de novo. This court reviewed both for abuse of discretion.
There are so many things wrong with this opinion. Glaring and plainly incorrect conclusions which are then used to find multiple individuals deliberately lied to the USPTO. For example, repeatedly the opinion finds inequitable conduct because “CleanTech” or “Cantor Colburn” knew of information, knew of its materiality, or had an intent to deceive. That’s gross legal error: inequitable conduct focuses, solely, on an individual’s knowledge. It is reversible error to impute knowledge to find any aspect of inequitable conduct. But, I guess if we review for abuse of discretion, who cares?!
And it gets worse. It supports its conclusion of inequitable conduct because litigation counsel did not disclose something to the USPTO. Litigation counsel is under no duty of candor. Finding inequitable conduct based upon litigation counsel’s “failure to disclose” goes to the merits, and is wrong. But if you review for abuse of discretion, I guess it’s okay!?
But, to repeat what I said: I don’t know if the result is correct, but I do know this opinion needs to be withdrawn.
RE text: I have to disagree with you both. Read footnote 13. The court holds that it would not review the holding of the district court that there was an offer for sale, on summary judgment. The standard of review on facts is to review all facts in favor of the non-moving party and resolve all reasonable inferences in favor of the non-movant. On legal issues, it’s de novo. This court reviewed both for abuse of discretion.
Footnote 13 says: 13 In addition to the Patents-in-Suit, the District
Court addressed the ’037 patent, which was not included in
the subsequent inequitable conduct bench trial. J.A. 237–
38. The District Court determined that the ’037 patent was
obvious over Prevost and the Patents-in-Suit. J.A. 215–16;
see J.A. 214 (explaining that it was undisputed that the Patents-in-Suit served as prior art to the ’037 patent). Specifically, the District Court explained that Prevost and the
Patents-in-Suit teach the oil recovery method for concentrated thin stillage, which is used with evaporators, as is
disclosed by the ’037 patent. J.A. 215–16. Compare ’858
patent col. 5 ll. 28–30, with ’037 patent col. 10 ll. 56–67.
The District Court stated that a person having ordinary
skill in the art (“PHOSITA”) would have been “familiar
with the prior art ethanol plant processes,” like Prevost,
that “includ[e] evaporation of thin stillage to reduce the
moisture content before mixing it with wet distiller
grains[.]” J.A. 215. The District Court explained that the
Patents-in-Suit disclose dryer efficiencies that can be
achieved from the removal of oil from syrup prior to any
mixing with wet distiller grains. J.A. 215–16. Compare
’858 patent col. 4 ll. 54–56, col. 5 ll. 28–30, with ’037 patent
col. 10 ll. 61–67. Because Prevost and the Patents-in-Suit
disclose the drying of syrup after the oil extraction process
but before it is added back to the dried distiller wet grains,
we conclude that the District Court properly determined
that a PHOSITA would have been motivated to lower the
moisture content of the syrup, as disclosed in the ’037 patent. See Regents of Univ. of Cal. v. Broad Inst., Inc., 903
F.3d 1286, 1291 (Fed. Cir. 2018); see also 35 U.S.C.
§ 103(a).
As to standards of review by the CAFC on summary judgment, from
Kevin Casey, et al, Fed Cir B J,
Standards of Appellate Review in the Federal Circuit: Substance and Semantics
**
The Federal Circuit applies the same legal standard as that applied by the trial court in determining whether summary judgment was appropriate.236 In reviewing a denial of a motion for summary judgment, the Federal Circuit gives considerable deference to the trial court, and “will not disturb the trial court’s denial of summary judgment unless we find that the court has indeed abused its discretion.”237 Neither a denial of summary judgment nor a reversal of summary judgment on appeal are dispositive; these decisions merely remit the case for trial.238 On the other hand, the Federal Circuit undertakes plenary or de novo review of a grant of summary judgment, which does finally decide at least an issue if not the entire case.239
You’re quoting the standard of review of DENIAL of summary judgment. It’s totally different. It has zero to do with the case.
In quoting from the Casey article, I included text on both denial and grant [On the other hand, the Federal Circuit undertakes plenary or de novo review of a grant of summary judgment, which does finally decide at least an issue if not the entire case. ]
Your comment is a bit under-inclusive. Separately, the standard for a review of a grant is that of the relevant regional circuit [A district court’s grant of summary judgment is reviewed under the law of the regional circuit. Profectus Tech. LLC v. Huawei Techs. Co., 823 F.3d 1375, 1379 (Fed. Cir. 2016). ]
The standard of review is what I wrote long ago. All factual material must be viewed in the light most favorable to the non-moving party, and every reasonable inference must be, too. If there is, viewed in that light, some evidence from which a reasonable jury could find for the non-movant, summary judgment is inappropriate. On appeal, the appellate court applies that same standard de novo. The standard does not vary by Circuit. Tolan v. Cotton is the latest Supreme Court case trouncing all over appellate courts for not following this rubric.
Abuse of discretion is completely inappropriate for reviewing MSJ. It is not a de novo review — it by definition — gives discretion.
Thanks David.
So what I’m (also) wondering is whether or not Cantor — given the very bad position they’ve potentially been left in — has the legal right to file for a “standalone” panel / en banc rehearing . . . even if their client GS elects not to do so?
Seems like they should be able to.
The answer to your question here is probably “no.”
Because the district court judgment didn’t actually impose any separate sanction on Cantor (who was not a party to the case), the firm does not have a right to independently challenge the district court or the panel decision’s criticism of its conduct. See Nisus Corp. v. Perma-Chink Systems, Inc., 497 F.3d 1316, 1320 (Fed. Cir. 2007) (“We have taken the position that a court’s order that criticizes an attorney and that is intended to be ‘a formal judicial action’ in a disciplinary proceeding is an appealable decision, but that other kinds of judicial criticisms of lawyers’ actions are not reviewable.”).
There is a sliding scale on what constitutes “formal judicial action,” but just being criticized as part of the court’s reasoning isn’t enough. Under Nisus, which was also a case involving inequitable conduct, the firm would at a minimum have to have been the subject of a formal reprimand, public admonishment or censure, etc. Here it looks like Cantor was just the subject of criticism along the district court’s path to a finding of unenforceability. I don’t see anything in the district court’s opinion that would amount to a formal reprimand, even though I agree with you Pro Say, about the potential for real reputational damage from this decision.
… are you saying that the moment OED becomes involved the “intended to be ‘a formal judicial action’ in a disciplinary proceeding” may be implicated?
Not at all, anon. The panel decision here does not become “formal judicial action” because SOMEONE ELSE takes action based on it. Were the OED to initiate a disciplinary action against Cantor based on the decision, that would be a separate proceeding in which Cantor would be entitled to due process and could present its own defense and explain its conduct. OED would not be entitled to make its own findings about Cantor’s conduct independent of the Federal Circuit decision, and of course, Cantor could challenge any adverse OED decision since it would be directly impacting Cantor.
Wow typo. Meant to say that the OED __would__ be entitled to make its own findings about Cantor and wouldn’t be bound by the panel’s comments about Cantor.
Thanks LR
I don’t think so, Pro Say. Your question is controlled by Nisus v. Perma-Chink Systems, Inc., 497 F.3d 1316 (Fed. Cir. 2007), which directly addresses when a prosecuting attorney can separately challenge a district court finding of inequitable conduct based on criticism of the attorney’s conduct. The court ruled that only a “a formal judicial action” gives the attorney the right to challenge; at the very minimum, it has to be a formal reprimand.
I don’t see anything like that here; the district court criticized Cantor’s conduct but that seems to be part-and-parcel of its analysis of the inequitable conduct issue. I don’t see language in here amounting to a “formal reprimand.” Also, if Cantor didn’t make a challenge in the original appeal of the district court judgment (and it looks like they didn’t), they couldn’t make it now by rehearing either.
As a former clerk, you can move for panel re-hearing and then full en banc or do a combined petition (or at least that was how it worked in 2012-13). A panel rehearing would be good since here are multiple things in the opinion that are, at best, inconsistent with Therasense (i.e., imho contradict it).
Thank you, David, for your timely comments about the Cleantech case. I am particularly disturbed by the district court’s (and now Federal Circuit’s) apparent mixing and matching of the knowledge and intent of the inventors, on the one hand, with the knowledge and intent of Cantor Colburn’s prosecution counsel, on the other hand. The implication–more than just implication but necessary holding–is that prosecution counsel should have disbelieved the inventors/clients, including their declaration under penalty of perjury, and should have instead gone out and sought information to undermine their clients’ recollection under the guise of verifying or corroborating it. The end result, finding inequitable conduct based both on the conduct of the inventors and the conduct of prosecution counsel, seems to me more of post hoc rationalization based on a record that did not exist until the litigation process and trial. And, as you so correctly point out, the end result is that it potentially puts prosecution counsel at risk for inquiry from the Office of Enrollment and Discipline. That is particularly a shame in this case where the prosecution counsel is an esteemed member of the Patent Bar with an unblemished professional record and there is no plausible finding as to why prosecution counsel himself would have any motivation to mislead the PTO.
Thanks, Mike. I saw Dennis’ delve into the merits and haven’t yet read them closely, as you have, but your description makes it sound like the mistakes aren’t just legal, and the legal ones aren’t minor….
Right. The case has a long factual history. The invention occurred sometime in 2003 (although when it was invented was hotly contested), and there was some apparent attempt by the inventors to sell their invention in 2004 (although that too was contested, with the defendants arguing that the invention was ready for sale and was offered for sale in 2003 not 2004.
They hired different counsel (not Cantor Colburn), who filed an initial patent application in September 2005. Depending upon whether the invention was ready for patenting or not in 2004 was a major fact issue in the case, and the court decidedly rejected the inventors’ own testimony about whether they had reduced their invention to practice and it was ready for patenting more than one-year before the application was filed, and also whether the alleged offer for sale in 2003 counted as an on-sale bar (which itself required a finding that it was ready for patenting then). Very fact intensive.
Three years later, in 2008, the clients hire Cantor Colburn. The patent prosecutor from the CC Firm determined the PTO’s applied reference in the Office Action did not disclose or suggest a feature of the applied for claims. In response to a final office action, the patent attorney again distinguished the applied art and evidently relied on information provided by the inventors. This also occurred in 2008.
The case was allowed in 2009, and even then, Cantor Colburn withdrew the application from issue to file a new IDS. The Court dumped on the attorney for doing so, asserting that the information disclosed in the new IDS was “irrelevant.”
Years later, there was the trial. Cantor Colburn served as litigation counsel.
The court clearly hated one of the inventors–the judge made no bones about stating that the inventor who was communicating with prosecution counsel was not credible. There was some reference to the inventor having a sickness, although there was nothing in the opinions that explained what that was.
In any case, the court’s findings only occurred as a result of the extensive discovery and litigation process. There was no indication that at the time the prosecuting attorney himself disbelieved the inventors. But the Court, with the benefit of a record that only came about through a lengthy pretrial process followed by trial, saw things the way it did, disbelieved the inventors, and by extension concluded that the prosecuting attorney was also at fault for not doing a good enough job in determining whether there was actually an on-sale activity that should have been disclosed to the PTO during prosecution.
Even though the inventor submitted a declaration to explain the sale vs non-sale issue, the Court determined that the declaration was false and applied Rohm and Haas. A second declaration did not do a good “enough” job to correct the mistake in the first Declaration.
The Court found prosecution counsel’s trial testimony to be “implausible” about what prosecution counsel deemed, in his judgment, to be immaterial or cumulative information that did not need to be disclosed. Basically the Court found that prosecution counsel decided to look at what he wanted to look at and not adequately look at other information that the court suggested would have led to a different conclusion.
At the end, the court found that prosecuting counsel knowingly and purposefully withheld information that allegedly supported an earlier first sale date. However, the record on this, even as explained in the lengthy district court opinion, is less than crystal clear. What seems clear is that there was one, or possibly two, difficult inventors; they may or may not have lied to their counsel (the court believed they did); and prosecution counsel basically allowed himself to be lied to by allowing the inventors to submit a “false” declaration. This is where the “choosing advocacy over candor” line comes into play.
Per the district court as affirmed by the Federal Circuit, Cantor “purposefully evaded” disclosure or “failed to seek out relevant information” and on those grounds “participated in the inequitable conduct” of the inventors. Interesting. This is like an aiding and abetting theory. However, as i understand inequitable conduct defense, it is personal–and if one person is found to have committed inequitable conduct, then it has to be the knowledge and intent of that one person. And if two people did so, the court should have to find that both individuals has the requisite knowledge and intent. What the Court seemed to do is lump in everyone’s knowledge together–inventors and Cantor Colburn’s prosecuting attorney.
The Court here seems to ding the prosecuting attorney only after completely destroying the credibility of the inventors. The Court seems incredulous that the prosecuting attorney believed his clients, even though they swore to their version of truth, and instead had an affirmative duty to look behind what the client said or disbelieve the client.
That is a very easy thing for a court to say, after getting to sift through the witness testimony and evidence all teed up by lots of defendants. Maybe the Cantor Colburn attorney could have done things better or differently. But this seems more like a finding that since the Court found the inventors to be incredible, the prosecuting attorney should have done more and not have credited their word, even when stated under oath. In other words, it seems the court found that the prosecuting attorney had to have known that what the inventors were saying about when they reduced their invention to practice was B.S.
One of the justifications the Court had in finding intent to deceive was a letter that Cantor Colburn’s litigation counsel sent to a third-party that related to the critical date and was characterized by the court as a “threat.” The court didn’t find that the prosecuting attorney was involved in this particular communication–it was litigation counsel. And yet, it still found that this correspondence from litigation counsel proved “Cantor Colburn’s intent to deceive the USPTO.” But Cantor Colburn the firm had no disclosure duty. The court never explains why the firm’s letter proves one guy at the firm, the prosecuting attorney, intended to deceive the PTO.
Huh? I thought inequitable conduct was personal to those who have the duty of disclosure. But the court relies upon what someone else from the law firm did to establish, at least in part, the mens rea of the prosecuting attorney having a purported intent to deceive the PTO.
I was not there, so what do I know.
What I do know is that these issues are often, in the real world, easily explainable and without necessarily having to find that the prosecuting attorney is a liar as the single most reasonable inference to be drawn. An alternative inference was that the prosecuting attorney was also duped by the client, not that he intended to hide material information from the Patent Office. Still another possible explanation was that the inventors were very difficult clients. And still another possible explanation was that the inventors were mistaken and the firm simply relied upon that mistake.
What seems to be the biggest takeaway from this case is the care that must be taken when litigation and prosecution counsel are in the same firm and while litigation is ongoing there are family-related applications that are being prosecuted. It does seem that the information that the inventors had, coupled with the information that the litigators obtained, were all laid at the feet of prosecution counsel for purposes of finding inequitable conduct.
Mike
Mike, I’ve now read through the opinion and am going through the briefs. Good lord — the one thing that judges often do not get is that prosecution counsel can’t do what happens in litigation — scorch the earth, cross examine witnesses, and so on. They’ve got time and cost pressures. And see my reply above about some — some — of the substantive, plain errors that “support” affirmance under an abuse of discretion standard.
Ugh.
Never let the opportunity to reflect negatively on the practitioner corps go unheeded appears to be a mantra for some.
Not just here, Mr. McCabe, but on the new thread today over on the main blog in relation to Judge Lourie questioning IDS practice (and several typical antagonists joining in with comments in the comment section).
Thanks, Anon. So, fail to disclose and you are accused of fraud by omission. Disclose “too much” and you are accused of fraud by “burying the reference.” Lourie’s views notwithstanding, as between disclosing too much and too little, you are still better off disclosing too much. It is a much easier defense “sell” to a judge or jury that the inventor or counsel hid a reference by failing to disclose. It is more difficult, IMO, to “sell” a hiding the reference by over-disclosure argument, even though you could get the “burying” pushback.
Lourie’s pushback is directed to the wrong party. The PTO rules on disclosure, and best practices encourage disclosure. Lourie may not like the result in this case, but the blame should be placed at the PTO and frankly the courts for allowing such arguments to be advanced.
I have seen the situation where really good patent prosecutors did a thorough analysis of information that was highly complex but happened to be in this prosecutor’s technical wheelhouse. After a thorough analysis he concluded in a written opinion that the reference was less material than information already before the Office, and so a determination was made after considerable analysis that there was no duty to disclose. So, of course, the defense made the non-disclosed reference the centerpiece of their inequitable conduct defense, notwithstanding the expert prosecutors’ reasonable and good faith analysis on lack of materiality. A defendant will always be able to find a technical expert in litigation who is willing to opine that the withheld reference is not only material but the most important reference ever in the case.
Damned if you do and damned if you don’t.
Mike
Yes, mixing or confusion of the knowledge and intent of the inventors/clients versus their [often only prior] patent attorneys in IC decisions does seem to be a problem [along with confusions as to who should have pay any sanctions].
However, inventor/client declarations are of course normally written and presented to the PTO by their attorneys, not by the clients themselves. Preparing and filing a material declaration or affidavit in ex parte PTO prosecution is inherently legally risky and should have reasonable prior factual investigations for factual accuracy. It should be fully expected to be challenged in litigation. [E.g., I have yet to hear of a challenged Rule 131 declaration surviving litigation.]
Contemporaneous documentary evidence of such factual investigations can also serve to defend attorneys lied to by clients, if that was the case.
I would also wonder when a litigation firm sues on a patent obtained with a material declaration or affidavit why it would not seem highly advisable to do some pre-suit investigation of it on their own?
Likewise, once an unsavory bombshell defense is uncovered, is it really wise for a firm to proceed with a lawsuit all the way to a publicly embarrassing published decision?
Thanks Paul (no snark).
Paul, I haven’t checked yet but was Cantor Colburn litigation counsel? (No need to answer as I need to go look….). One thing I see is prosecution counsel getting blamed for litigation tactics, and that happened here. Even if the litigator is in the same firm as prosecution counsel, you can’t find intent or knowledge by Lawyer 1 based on years-later litigation done by Lawyer 2…..
Thanks Dave.
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