Cargill v. Canbra Foods (Fed. Cir. 2007).
Cargill owns several patents related to more-stable fry-grease made from canola oil and sued Canbra (and others) for infringement. The trial court found that two of the patents were invalid as on-sale before the priority date and that the other two were unenforceable due to inequitable conduct. Cargill appealed.
A. Inequitable Conduct: A holding of unenforceability due to inequitable conduct requires two findings: That the patentee “(1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the U.S. Patent and Trademark Office.”
Information is material if either (1) “there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent” or (2) the information falls within the scope of the current Rule 56. (Reprinted below). Intent is often inferred from the facts and circumstances surrounding the “bad” conduct.
A district court’s determination of materiality and intent are reviewed only for clear error.
Materiality: Here the applicant failed to disclose two sets of test data that suggested a similarity between the invention and a prior art formulation. The district court found them to be “unquestionably” material and the CAFC panel agreed. In particular, the panel refuted the Cargill’s good faith assertions about materiality — reaffirming that “materiality is determined from the viewpoint of a reasonable patent examiner, and not the subjective beliefs of the patentee.”
Intent: The court indicated that there were several instances when the applicant should have brought-forth the prior art — such as when the patentee argued on five occasions that the invention was a nonobvious change from the prior art (even though the test data showed that they were similar).
An applicant should know information is material when the examiner repeatedly raises an issue to which the information relates. . . . The repeated nature of that rejection demonstrates that the applicant should have been aware of the materiality of the omitted test data, and, therefore, the district court properly considered it as significant circumstantial evidence of an intent to deceive the PTO about the evidence relevant to the application.
The implication here: A large prosecution history increases the likelihood of an inequitable conduct finding. Finding of inequitable conduct affirmed.
Notes
- This decision was written by Judge Kent Jordan of the Third Circuit sitting by designation.
- 37 CFR 1.56 (Rule 56) reads as follows:
[I]nformation is material to patentability when it is not cumulative to information already of record or being made of record in the application, and (1) It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim, or (2) It refutes, or is inconsistent with, a position the applicant takes in: (i) Opposing an argument of unpatentability relied on by the Office, or (ii) Asserting an argument of patentability.
A prima facie case of unpatentability is established when the information compels a conclusion that a claim is unpatentable under the preponderance of evidence, burden-of-proof standard, giving each term in the claim its broadest reasonable construction consistent with the specification, and before any consideration is given to evidence which may be submitted in an attempt to establish a contrary conclusion of patentability.
I think it’s just silly to suggest that the patent attorney and inventor(s) should always err on the side of disclosing everything of which they are aware, but yet the number of references should be about 12. When we keep demanding that more refrences be disclosed, we end up with issued patents with 1000 cited references. But didn’t you all say that’s a bad thing too?
So I know. Really the rule now is that the attorney/inventor only needs to disclose one single reference, namely the one single reference that some court in 15 years will decide should have been disclosed and was withheld with an intent to deceive. Disclosing the other 999 references was just meaningless.
The Federal Circuit has so lost its mind that I am seriously looking for another line of work. There is no more future for patent practitioners.
The suggestion that patent attorneys would not disclose (under Rule 56 or otherwise) KNOWN “on sale” statutory bars to the claims [or would even file applications in such cases] is frankly, professionally offensive as well as illogical. In almost every case the key facts leading to a court’s conclusion that there was a statutory bar were never known or disclosed to the patent attorney or agent, they were only discoved in litigation long after the patent issued. Any patent attorney or agent so foolish as to deliberatly conceal material prior art from the USPTO in a pending patent application will be subject to USPTO formal Disciplinary Proceedings which could remove his or her license to practice and career.
From Europe, and observing with fascination the obsession with inequitable conduct, I humbly offer this comment (in the context of patent reform being on the agenda).
Thinking that Applicants “buy” a patent from the USPTO and the general maxim Caveat Emptor, does it not make sense to arrange matters so that buyers of deficient houses do so at their own risk. If the house falls down when the wind blows, the owner has nobody to blame but herself. Seems to me that the US system as it is now, with presumption of validity, clear and convincing evidence, etc, encourages people to make Nelsonian blind eye purchases. Why not arrange matters so that Applicants have an incentive to open both eyes, and then self-police their own behaviour. How about: if their issued patent has but one old or obvious claim (never mind the one they are asserting),owners can’t get relief from infringing acts till they have secured the favourable exercise of the court’s discretion, to excise the bad claim. You still have to talk equity, when deciding whether to allow excision, but the burden has flipped.
Mr, Kaluga says: “If there is that much prior art that is relevant to an invention, than I would expect the claim to be very narrow in such a crowded field.”
Am I misreading the two recent cases then? I thought under the “important” standard, it doesn’t matter that the claim was narrowed so as to be patentable over the so-called material prior art for deceptive intent to be inferred.
Anonymous points out:
“it seems that your approach of “relevancy is narrowly interpreted” could get you into trouble if there was some withheld art as good as or maybe even slightly less relevant than what has been cited.”
The test is relevant and material. I know some who very broadly consider relevancy. For example, if an invention is for a widget that fits onto a vehicle, some consider any prior art relating to a vehicle as being relevant. I consider relevancy to be prior art that discloses something a bit closer to what is being claimed. How close you want to get depends on how narrow you interpret relevancy. If there is that much prior art that is relevant to an invention, than I would expect the claim to be very narrow in such a crowded field.
Anonymous points out:
“I think you miss the point.”
The point I was trying to make is that Rule 56 requires voluntary compliance and during litigation, the court acts as the enforcer or police. As in many areas of life, voluntary compliance does not always work because there are always those who want to take advantage of the system. If you live in a utopian place where everyone is honest and always follows the rules, I am happy for you. I do not live in such a place, nor do I know of any such place.
My response was an attempt to clarify to — the difference between litigation and prosecution, and why prior sales info is easier found during litigation than during prosecution. I am not saying that Rule 56 is irrelevant. Many applicants comply with Rule 56 because the consequences for not can be severe. A conservative way of complying is to ensure that nothing is omitted from the submittal.
I agree with everything you say. But what I’m pointing out is that under this back to the old “important” standard, it seems that your approach of “relevancy is narrowly interpreted” could get you into trouble if there was some withheld art as good as or maybe even slightly less relevant than what has been cited.
Anonymous points out:
“My God! Under this standard, when is something NOT material and when is there good faith? Fraudulent state of mind is inferred.”
and then asks:
“How is a practitioner supposed to conduct himself/herself?”
Many prudent patent practitioners only look to see if prior art is relevant. If the prior art is relevant, then it is submitted to the PTO to let the examiner make the determination if it is material. For those clients with lots of known prior art, relevancy is narrowly interpreted or a lot of prior art is cited. See the recent Patently-O “Prosecution Data” post where several recent patents had over 1000 cited references. I cannot imagine that any invention legitimately has that much relevant prior art.
Mr. Kulaga-
I think you miss the point. The question, taking your speeding analogy, is: What is the speed limit? You are presuming (contrary to Purdue and other precedents) that R56 is irrelevant. BTW, where I live, it’s impossible to drive over the speed limit due to congestion, so maybe if you (as you admit) purposefully break the law everyday by breaking the speed limit, you may see it differently as being part of everyday life. I don’t see it, especially when the CAFC in Dippin Dots admits that there was cumulative art cited.
— naively asks about Rule 56 compliance.
I live on planet Earth. Where do you live? This has nothing to do with being an attorney. It just requires an understanding of human nature.
Where I live, not everyone plays by the rules. Many people and companies strive to get away with as much as possible. The difference between Rule 56 and litigation is comparable to the difference between a person voluntarily driving the speed limit and having the blue lights coming on behind the speeding car. Where I live almost everyone drives faster than the speed limit, but I have never heard of anyone voluntarily stopping at the police station to ask for a speeding ticket.
The PTO has no way of determining if there is an on-sale bar unless the applicant or a third party raises the issue. Absent such notice, the PTO does not consider prior sales in determining whether claims are allowable. The PTO relies upon the honesty of applicants, and we all know that everyone is always honest. NOT!
What’s most troubling about the last 2 IC cases including this one is that in the Dippin Dots case, the CAFC seems to say that there was cumulative prior art (in the form of cited references of pretty much the same strength as the withheld sales info) but that didn’t matter — no good faith. I thought info is not material if cumulative. Why does it matter whether it is a 102(b) printed publication or 102(b) sales in the US? So it seems that careers can be ruined even if withheld info is only marginally relevant (that there’s cited cumulative art is of no moment) and intent will be automatic. My God! Under this standard, when is something NOT material and when is there good faith? Fraudulent state of mind is inferred. Scary.
Also, I remember that in Purdue (released 2/2006 by Plager, Gajarsa and Linn), they said that CAFC consistently applied post-1992 R56 for materiality and they will do so in that case because the applications were filed post-1992. Yet, these latest cases (which have Linn on one case and Gajarsa on the other), say that materiality is assessed under the “important” standard, under which post-1992 becomes irrelevant. I urge all practitioners to read the Federal Register when the 1992 was put in place. Practitioners were given the impression at the time that this new rule would do away with the murky “important” standard, thus resulting in a more clear standard and eliminating uncertainty. If CAFC panels are confused/inconsistent on the standard to be applied (and sometimes by the same circuit judges on different cases), how can practitioners be subjected to these heinous charges that ruin their careers/livelihoods? How is a practitioner supposed to conduct himself/herself? Does anyone see any due process concerns? Ten years from now, I wouldn’t be surprised if the tide goes the other way and citing everything under the sun (which the courts seems to say one must do) will constitute IC for burying.
How convenient…rule 56 is viewed as voluntary and not specific. I don’t see how “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section.” is not specific to prior sales. Seems to me that prior sales more than a year would constitute “information material to patentability” …but then I’m not an attorney. So you are suggesting that in order to be specific, an examiner’s letter of rejection should start off with a sentence with an explicit request for all prior sales information. Interesting.
— asks:
“So why does the court’s subpoena have more power than rule 56 to get the “prior sales” out in the light? I just don’t get it.”
When prosecuting before the PTO, the applicants must voluntarily submit (Rule 56) any information that will prevent them from getting a patent. No one is asking the applicants for specific documents or information regarding prior sales.
During a lawsuit, the other side thoroughly investigates and can bring the full power of the court to persuade the applicants to provide the information necessary to invalidate the patent. It is not unusual for the other side to find out during their investigation or to just know because they are competing in the same marketplace that the applicants violated the on-sale bar. After the basic facts are discovered, the other side will typically request discovery from the applicants relating to the prior sale.
“Can someone tell me how this information about prior sales is found out in court?”
“During litigation, the patent holder will be required to turn over all documents and answer all questions relating to prior use and prior sales. This process is known as “discovery.” Third party information can also be compelled through the court’s subpoena power”
So why does the court’s subpoena have more power than rule 56 to get the “prior sales” out in the light? I just don’t get it.
JW: The sad thing is that prosecutors have no good options under the PTO’s proposed rules.
First, the prosecutors can submit all of their references and risk inequitable conduct allegations on their characterization of the references (which is mandatory when the total number of references exceeds 20 or when an individual reference is too large — 25 pages I think). Even if the inequitable conduct allegations do not materialize, the process of analyzing the references and explaining them in detail would be very expensive.
Second, prosecutors can whittle down the references to a total of 20 or fewer, and thus risk accusations of inequitable conduct. (Note: There is an additional built-in bad intent for this second option: the desire to keep costs down by avoiding having to explain all of the references.)
The upshot is that, if the PTO’s proposed IDS rules are adopted, prosecutors will adapt by conducting fewer prior art searches to avoid discovering any art that will push the total above 20. Consequently, the likelihood that prosecutors will draft novel claims at the outset will go down — thus increasing patent pendency. Moreover, patent quality will go down because the examiners will not benefit from the applicants’ own searches that often supplement the examiners’ searches. Finally, without the prior art searches, applicants will be less deterred from filing, thus increasing the USTPO’s workload.
I can’t understand why the USTPO thinks its proposed IDS rules will advance its goals of decreasing patent pendency and improving patent quality.
And remember that the PTO wants us to only submit the 10 or 15 most “material” documents. If the examiner is to make that call, how could we ever comply with what the PTO wants and still not risk the CAFC holding that our “withholding the other documents” was inequitable.
“drop rule 56. lets go the EPO way.”
Yeah let’s do just that so that life becomes easier for anon and all the other patent prosecutors. They can just say anything they want to a patent examiner to get the patent granted. And while we are at it, why not away with the requirement for nonobviousness?
The “plain error” standard is a pretty high bar on appeal. Given that, and the fact that intent can be shown by circumstantial evidence, it’s unclear why the appellants thought they had a case on appeal.
The CAFC is just all over the map lately. What happened to the “intent” prong? How does “several opportunities” translate into “an intent to deceive”? This is just crazy.
Don’t get me started on the Dippin’ Dots “comprising” business either.
I thought a specialized patent court of appeals was supposed to provide consistency, not rulings that seem to be arbitrary and approaching capricious.
Alan: The Examiner does have authority to request any information related to patentability (See, Star Fruits). If the applicant refuses to answer point-blank questions regarding prior use or prior sales, the Examiner may also refuse to allow an application.
What if the USPTO had resources and authority to compel discovery during examination hearings?
What if competitors actively monitored published pending applications, and had a viable avenue to submit third-party evidence of prior art before the patent issued?
drop rule 56. lets go the EPO way.
This seems to fall in line with Judge Gajarsa’s opinion in Dippin Dots.
“Can someone tell me how this information about prior sales is found out in court?”
During litigation, the patent holder will be required to turn over all documents and answer all questions relating to prior use and prior sales. This process is known as “discovery.” Third party information can also be compelled through the court’s subpoena power.
Can someone tell me how this information about prior sales is found out in court?
What database or resoures were used that the USPTO didn’t use?
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