Court Affirms Inequitable Conduct for Inventor’s Failure to Submit Prior Art

American Calcar v. American Honda (Fed. Cir. 2014)

Back-Link: Jason Rantanen previously discussed the court’s first decision in the case here: Calcar v. Honda: CAFC’s First Post-Therasense Inequitable Conduct Opinion (2011).

EvidentiaryStandardsIn a split opinion, the Federal Circuit has affirmed the district court’s determination that Calcar’s three asserted patents are unenforceable due to inequitable conduct during prosecution.  The case teaches about “but-for materiality” and holds that the withholding of information can be the but-for cause of a patent issuance even if that information is insufficient to render any of the patent claims invalid in court. See also Therasense. The court winds this tale by noting the evidentiary difference: PTO only requires a preponderance of evidence of nonpatentability while invalidation in court requires clear and convincing evidence.

Duty of Disclosure, Candor, and Good Faith Dealing: Although lawyers always bear certain good faith obligations, those practicing before the before the PTO bear a more significant duty of disclosure, candor, and good faith dealing.  Failure to meet this high standard has a number of potential repercussions — for patent owners, the greatest issue is the potential that resulting patents may be held undenforceable due to inequitable conduct in proceedings before the USPTO.  Importantly, for any particular patent case, the duty of disclosure extends to all “individuals associated with the filing or prosecution.” 37 C.F.R. 1.56. This certainly includes named inventors as well as “every other person who is substantively involved” with the application.  Id.

Therasense En Banc: In Therasense (Fed. Cir. 2011) (en banc), the court made it a bit more difficult to render a patent unenforceable by requiring (a) proof of a ‘bad’ act that is a but-for cause of the patent issuing as well as (2) particular intent that the act was intended to deceive the PTO.  Conventional wisdom is that Therasense (as well as Excergen) has dampened many claims of unenforceability — especially those where the allegation is merely a failure to fully disclose to the USPTO all information related to patentability of the case in question.

large-luxury-carFailure to Disclose Photos Taken of Prior Art: This case involves a family of three patents directed to a multimedia system used to access vehicle information and control vehicle functions.  The district court found that Calcar’s founder and named inventor Michael Obradovich had particular information about a prior Acura 96RL navigation system that he failed to submit to the PTO.  In particular, prior to starting work on his invention, Obradovich had driven the Acura, operated its navigation system, and taken photographs as well written a “QuickTips” guide.  Although the application identified the 96RL system as prior art, Obradovich did not write a summary of his experiences or submit the photographs or the owner’s manual.  The district court found this failure to be material to patentability and also that the “only reasonable inference from the evidence” was that Obradovich withheld the information with “specific intent to deceive the PTO.”  On appeal, the Federal Circuit affirms.

But For Materiality: An interesting aspect of this case comes from the fact that the jury considered the non-submitted prior art but found that it failed to render any of the patent claims invalid. Yet, the courts here hold that the non-submitted prior art can still be considered a but-for cause of the patent issuing in the first place.  The reasoning for this discrepancy is that that the PTO’s evidentiary standard for refusing to issue a patent is only a preponderance of evidence – a much lower standard that the clear and convincing evidence required to invalidate an issued patent.  Here, the finding is that the USPTO would have found at least one of the claims obvious if it had seen the non-submitted prior art.

But Obviousness is a Question of Law: Under Graham and KSR, obviousness is a question of law that relies upon an underpinning of factual determinations. Although the court ignores the Graham inquiry in its analysis here, it appears that the only disputed issue is the ultimate legal question of obviousness and not the factual underpinning.  The fact that we’re talking about a question of law is important because questions of law are not governed by evidentiary standards but rather both the PTO and Courts must approach that ultimate question with the same framework of simply correctly determining the law based upon the evidence presented.

The majority opinion was written by Chief Judge Prost and joined by Judge Wallach. Judge Newman wrote in dissent.

Judge Newman focuses on an interesting issue. She argues that, rather than speculating about what the PTO might do, lets look at what it actually did when it saw the references.  Namely, the ‘497 patent (invalidated by the jury and not at issue here) was reexamined by the PTO during the course of the litigation and the examiners reviewed the previously non-submitted prior art and then confirmed all of the claims as patentable.  However, Judge Newman’s arguments appear more appropriately addressed to the earlier court opinion in this case.

Nonetheless, my colleagues rule that the patents are unenforceable based on the initial failure to send the Owner’s Manual and photographs to the PTO. The inequitable conduct with which Mr. Obradovich is charged is that he “did not tell Mr. Yip [his patent attorney] about his experience with the 96RL, nor did he provide Mr. Yip with the Owner’s Manual or the photos of the navigation system display screens.” Dist. Ct. Op. at 11. However, the PTO established, on reexamination of the ’497 patent, that the purportedly withheld information was not material to patentability. In accordance with Therasense this ended the inequitable conduct inquiry, for the PTO sustained patentability in view of this information.

In addition, there was no evidence of intent to deceive the PTO. The panel majority impugns Mr. Obradovich’s credibility, although they do not say what is disbelieved. The jury heard and saw Mr. Obradovich, on examination and cross-examination, and did not find deceptive intent. My colleagues “infer” clear and convincing evidence of deceptive intent from Mr. Obradovich’s initial failure to send his patent attorney the Owner’s Manual and the photographs of the Acura display. They postulate that a savvy inventor and businessman such as Mr. Obradovich
would have known the information was material to patentability and would therefore withhold it in order to deceive the PTO. However, a more likely inference is that a savvy inventor and businessman would know that a patent obtained through concealment of a material reference is not a reliable commercial asset.

 

19 thoughts on “Court Affirms Inequitable Conduct for Inventor’s Failure to Submit Prior Art

  1. The “plague” is back…looks like we’re back to having scientists’ and engineers’ reputations being unjustly damaged by dubious accusations. Well, Therasense (as intended) was nice while it lasted.

    I was afraid that Rader’s “single most reasonable inference” standard was too subjective to be abuse-proof.

    (BTW, I actually don’t think this patent was valid…I just don’t think people’s integrity should be fair game to attack without *real* evidence of wrongdoing.)

  2. > While the appeal was pending, this court established a revised and narrower test for inequitable conduct in
    Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc).

    Doesn’t ex post facto mean anything anymore?

  3. Do you think all this would have been a non-issue if Calcar’s patent attorney had considered the withheld art and in good faith deemed it not material? Maybe wrote a one line memo to his file that he did so?

  4. Once I was shown an apparatus, inside a company, that was “material” to an application I was prosecuting then prosecuting. The people at the company told me that the product had been sold.

    Immediately upon returning to the office, I filed an IDS describing who, what, where and when. I then directed subsequent prosecution away from this apparatus as being part of the invention. The claims as issued were issued on other points of novelty than the features of this apparatus.

    Based on the facts of the present case, I think there was a clear intent to withhold — but to deceive?. But, as others pointed out, the issue of materiality does not appear to have been decided given the reexam where something else in the claim was deemed to be the reason for allowance.

    All this goes to show is that what is material in a claim can change.

  5. For those keeping track, American Calcar (with the help of its attorneys at the esteemed law firm of Baker Botts) filed first in the Eastern District of Texas. The case was transferred out.

    Anyone know if American Calcar is an NPE created and/or run by a lawyer? Seems to safe to assume the answer is “yes”.

    Here’s the ridiculous representative claim:

    1. A system for use in a vehicle comprising:

    a memory for storing a plurality of displays having predetermined contents, the plurality of displays being associated with a plurality of aspects of the vehicle;

    an interface for entering a query to conduct a search concerning an aspect of the vehicle; an input device for selecting a result of the search;

    a processor responsive to the selected result for identifying at least one of the plurality of displays which is associated with the aspect of th vehicle;

    and a display element for showing thereon the at least one display.

    The bold text is the only admitted difference between the art and the “innovation.” Try to believe that this was ever granted, much less asserted in court. How many millions of dollars to Honda have to spend to defend itself against this nonsense?

    The other good news in this opinion is that more and more district courts (outside of Eastern Texas anyway) and the Federal Circuit seem to be on its way to understand how a certain class of applicants relies on differently labeled “information” (and heads plunged deeply into the sand) to squeak invalid patents out of the PTO:

    Calcar argues that the search for information regarding such aspects of the vehicle is a non-obvious invention that was merely based on the 96RL system. The district court did address the differences between the 96RL system and what Calcar actually claimed. It found that the only difference was “the nature of the information contained in the systems”: navigational details (destinations, addresses, directions) in the 96RL system and information about the vehicl itself in the ’465 and ’795 patents. Calcar III, at *8. The district court found that the PTO would have not allowed the patents as “it would have been obvious to a person of ordinary skill in the art to include different information in the 96RL navigation system.” Id. As the district court stated, the 96RL and Calcar’s patented system “perform the same function, i.e., delivery of
    information, in the same way, i.e., through an interactive display screen, to achieve the same result, namely providing
    information to the vehicle user.”
    Id. Calcar argues
    that by using the language “same function” “same way” “same result,” the district court improperly applied a doctrine of equivalents analysis to the question of obviousness. [<— seriously? talk about a hail mary]. We find this argument unavailing. That sentence just summarizes why the mere substitution of one kind of information as the object of the search … would be an obvious, and thus unpatentable, invention.

    This claim could also have been tanked as ineligible, saving the court and everyone else a lot of time of money. Honda either didn’t see the argument or chose not to make it given the Federal Circuit’s previous inclination to treat 101 as a matter of form, not substance.

    It would be appropriate here to see the patentee forced to pay a substantial portion of the defendant’s costs, given that this patent was just a prop in an absurdly expensive farce.

  6. Egads, forget the inequitable conduct issue, the sole point of novelty is the phrase “an interface for entering a query to conduct a search concerning an aspect of the vehicle;”

    The prior art could search and query and display results. How is it that whatever that search returned not “an aspect of the vehicle?” Clearly the memory and bits of data are stored in the vehicle. The contents of that memory would certainly be an aspect of the vehicle.

    What’s more they found every other bit in a single reference. The idea that you could add other aspects of the vehicle seems pretty obvious since all of that data is already there and already reportable via known interfaces (onboard diagnostics were very well known in the art at the time, for example).

    Also, seeing as this contained all but that one element, how was it that this was not a material reference?

    1. Didn’t you know? Everything computerized is new again when it’s applied to a new field of use.

      And just so there’s no confusion: self-driving cars are indeed completely different from ordinary cars, of course, just like portable or hand-held devices are completely different from larger devices that require bigger hands or more strength to move around.

      Also using information to determine how to customize and manufacture an article for personal use without employing a 3-D printer is completely different — no similarity whatsoever! — from the use of the same information to customize and manufacture the same article without a 3-D printer.

      So it goes in our broken patent system.

      1. Correction: Also using information to determine how to customize and manufacture an article with a 3-D printer is completely different — no similarity whatsoever! — from the use of the same information to customize and manufacture the same article without a 3-D printer.

        Need more coffee.

  7. Newman’s dissent: [The majority] postulate that a savvy inventor and businessman such as Mr. Obradovich would have known the information was material to patentability and would therefore withhold it in order to deceive the PTO. However, a more likely inference is that a savvy inventor and businessman would know that a patent obtained through concealment of a material reference is not a reliable commercial asset.

    An even more likely inference is that a savvy wannabe “innovator” and businessman would know that the punishment for inequitable conduct is, under some circ umstances, vastly outweighed by the potential for substantial profits based on the improvidently granted patent.

    There may be some “unreliability” when a patent is obtained through chicanery but such a patent is infinitely more “reliable” than nothing at all.

    If the courts (including the Federal Circuit) were more inclined to sanction patentees wielding invalid patents and/or making non-credible arguments in court, then Newman’s reasoning might hold more water. Until then …

  8. Shouldn’t the defendant have to show by clear and convincing evidence that the PTO would have found the claims obvious by preponderance of the evidence?

      1. From Therasense:

        The accused infringer must prove both elements — intent and materiality — by clear and convincing evidence. . . . When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.

        1. That part of Therasense seems to be self-contradictory. Is the court supposed to ascertain whether the PTO would have found the claims unpatentable? Or is the court supposed to ascertain for themselves whether the claims are unpatentable? Those are two different questions, and it seems like the majority in this case went with the latter (i.e., making the patentability determination de novo without even mentioning the re-exam), while Newman went with the former (treating the re-exam result as heavily weighted evidence that the PTO believed the claims to be patentable even after considering the withheld information).

          1. potu: the majority in this case went with the latter (i.e., making the patentability determination de novo without even mentioning the re-exam), while Newman went with the former (treating the re-exam result as heavily weighted evidence that the PTO believed the claims to be patentable

            The jury made the patentability determination with respect to the ‘497 patent. Somehow the dust kicked into their eyes prevented them from doing the same with the other patents. Neither the district court judge nor the Federal Circuit was so easily confused.

            The problem with the “the PTO liked it” “evidence” that Newman relies on is that the claims in question (the claims of the ‘497 patent) were found invalid by a jury applying a higher evidentiary standard than that applied by the PTO. Clearly, in the juries’ collective mind, the PTO did not know what it was doing when it examined these claims (caveat: the jury is almost certainly even more clueless). The proper question has to be “Would a competent, reasonable Examiner following the law consider the withheld art relevant to patentability”, not “would the specific Examiner in question have cared”.

            1. The problem with the “the PTO liked it” “evidence” that Newman relies on is that the claims in question (the claims of the ‘497 patent) were found invalid by a jury applying a higher evidentiary standard than that applied by the PTO.

              You are correct if the jury invalidated the ‘497 patent based on only the withheld material. Do you know whether that is the case?

    1. A difficult showing since, as Newman pointed out, the PTO did not in fact make that finding in the reexam.

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