Tag Archives: Inequitable Conduct

Judge Linn Calls for En Banc Restatement of the Law of Inequitable Conduct

En Banc, Inequitable Conduct, Patent, Patent Cases 2009, ,

Larson Mfg. Co. v. Aluminart Products Ltd. (Fed. Cir. 2008)

Larson's patent covers a specially designed outside. The appeal focuses on inequitable conduct and the Federal Circuit vacated a district court judgment that the asserted patent was unenforceable. I will return to the decision in a later post, but wanted to focus attention on the concurring opinion by Judge Linn and his call for an en banc review of inequitable conduct jurisprudence. Linn's concerns could be addressed by the Supreme Court in Aventis Pharma v. Amphastar Pharmaceuticals, which is pending certiorari.

I write separately … to express my view that this precedent has significantly diverged from the Supreme Court's treatment of inequitable conduct and perpetuates what was once referred to as a "plague" that our en banc court sought to cure in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc). …

Symptoms of this plague are apparent from the facts of this case. The patent-in-suit has undergone examination twice in the PTO, and the patentee has been accused of inequitable conduct on each occasion for allegedly withholding material information. During original prosecution, the PTO considered 143 references, 135 of which the submitted two more IDSs in the reexamination, each within approximately one month of the application's Office Actions. The IDSs contained all references relied on in those rejections but did not include the Office Actions themselves. With full knowledge of the co-pending application, the PTO confirmed the patent, which survived reexamination without substantive change to the litigated claims. When the litigation resumed, the accused infringer again charged the patentee with inequitable conduct, this time based on conduct in the reexamination. This second inequitable conduct allegation was the sole issue at trial. Following remand today, the litigation will continue to focus on inequitable conduct, to the exclusion of the patentee's infringement contentions.

The ease with which inequitable conduct can be pled, but not dismissed, is a problem of our own making. The Supreme Court's three inequitable conduct cases involved overt fraud, not equivocal acts of omission. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809, 819 (1945) ("patent claims infected with fraud and perjury" where assignee knew that its employee "gave false dates as to the conception, disclosure, drawing, description and reduction to practice" during interference proceeding and then "secured the perjured . . . application and exacted promises from the other parties never to question the validity of any patent that might be issued on that application"); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 243 (1933) (false affidavits and deposition testimonies obtained "for valuable considerations" averring that the prior art use "was an abandoned experiment" and "to keep secret the details of the prior use"); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 240, 243 (1944) (false trade article procured from "an ostensibly disinterested expert" in exchange for $8,000 to gain patent issuance in spite of previously "insurmountable Patent Office opposition"), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976).

We clarified en banc that the "two elements, materiality and intent, must be proven by clear and convincing evidence," and that "'gross negligence' does not of itself justify an inference of intent to deceive." Kingsdown. But in seeming contradiction with Kingsdown, a standard even lower than "gross negligence" has propagated through our case law. This standard permits an inference of deceptive intent when "(1) highly material information is withheld; (2) 'the applicant knew of the information [and] . . . knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding.'" Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313-14 (Fed. Cir. 2008).

This test is problematic. First, the "high materiality" prong of the intent element simply repeats the materiality element. Conflating materiality and intent in this manner is inconsistent with the principle that "materiality does not presume intent, which is a separate and essential component of inequitable conduct." Manville Sales Corp. The second, "should have known" prong sets forth a simple negligence standard, lower even than the "gross negligence" standard that was expressly rejected in Kingsdown. I also question whether a fact-finder who has deemed information to be "highly material" would not also be compelled to conclude that a reasonable patentee "should have known of the materiality," at least when the patentee "knew of the information," as prong two requires. Third, the "credible explanation" prong effectively shifts the burden to the patentee to prove a negative: that it did not intend to deceive the PTO. But it is the "accused infringer"—not the patentee—who "must prove by clear and convincing evidence that the material information was withheld with the specific intent to deceive the PTO." Star Scientific, Inc. As to this third prong, we have also explained that "[t]he 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 by clear and convincing evidence." Id. As explained above, however, the first two prongs are not evidence of deceptive intent. The first is evidence of materiality; the second is evidence of negligence. These two prongs are therefore insufficient as a matter of law to establish a clear and convincing "threshold level" of deceptive intent before the third prong can ever properly come into play.

As it now stands, the test generally permits an inference of deceptive intent to be drawn whenever the three prongs are satisfied. This is in tension with the rule in Star Scientific that "the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence." Id. It cannot be said that deceptive intent is the "single most reasonable inference" when all that prong two shows is that the patentee "should have known" that the information was material. An equally reasonable inference under this test is that the patentee incorrectly believed that the information was not material, or that the patentee was negligent, or even grossly negligent. None of these gives rise to deceptive intent under Kingsdown, nor is deceptive intent the "single most reasonable inference" under Star Scientific.

For the foregoing reasons, I respectfully submit that the test for inferring deceptive intent, as it currently exists, falls short of the standard "need[ed] to strictly enforce the burden of proof and elevated standard of proof in the inequitable conduct context." Star Scientific. The facts of this case suggest that the time has come for the court to review the issue en banc.

Patent Reform Act of 2009

Damages, Patent, Patent Legislation, Reexamination, , , , , ,

Patent reform legislation has now been introduced in both the House and the Senate. The provisions call for major reforms and mirror much of the proposed legislation from 2008. If anything, this is not a consensus Bill. File Attachment: SenateBill.pdf (116 KB) File Attachment: HouseBill.pdf (180 KB)

Proposed changes in the Senate Bill include:

  • First to File: Moving to a first-to-file system that credits invention based on the filing date of the patent application rather than on the date of actual invention.   The provision eliminates the one-year grace period for most cases. Thus, any independent third-party publication prior to filing is considered prior art regardless of the date of invention. Likewise, secret prior art (102(e)) cannot be ‘sworn behind’ based on prior invention. This provision obviously hurts folks who delay in filing patent applications.
  • Damages: Must look to the invention’s “specific contribution over the prior art” to determine damages. There is an interesting provision that a reasonable royalty may be calculated as the price of licensing a “similar noninfringing substitute in the relative market.” In some cases, this could push damages to zero if the noninfringing substitute is in the public domain. The provision also codifies that treble damages are limited to instances where a judge finds that an adjudged infringer recklessly continued to infringe after receiving particularly specified written notice sufficient to create declaratory judgment jurisdiction and without relying on reasonable advice of counsel.
  • Expanded Reexamination Proceedings: Reexaminations may be requested based on published prior art, or evidence of prior public use or sale in the US. Inter partes reexaminations would begin to look more like court cases and would be heard by administrative patent judges. The Bill would clarify that parties would be estopped from filing inter partes reexamination requests after a district court judgment.
  • Additional Post Grant Review: Within 12 months of issuance, a third party can file a cancellation petition based on any ground of invalidity (rather than simply prior art). The post grant reviews would also be conducted by the administrative patent judges.
  • Pre-Issuance Submissions: Third parties can submit prior art during examination of the patent as well as a statement regarding the relevance of the art. The art should be submitted the latter of (1) six months after publication or (2) before the first office action on the merits.
  • Patent Litigation Venue: “A party shall not manufacture venue by assignment, incorporation, or otherwise to invoke the venue of a specific district court.” Venue is only proper were (a) defendant is incorporated; (b) defendant has its principle place of business; (c) where the defendant is permanently located and has committed substantial acts of infringement; or (d) where the plaintiff resides if the plaintiff is a nonprofit or individual inventor. The court should transfer venue to avoid evidentiary burdens when transfer can be accomplished without causing undue hardship to the plaintiff.”
  • Interlocutory Appeals: The Federal Circuit will have jurisdiction over interlocutory appeals of claim construction when approved by the lower court.
  • Administrative Patent Judges: The BPAI would become the Patent Trial and Appeal Board (PTAB). Interferences would be gone, however they would be replaced by derivation proceedings as well as reexamination and post-grant trials.
  • PTO Powers: The PTO has power to set its fees, including reducing fees.
  • Oath: Easing the rules to more easily allow rights-holders to file patent applications on behalf of the inventor.
  • Federal Circuit Judges: Making legal it for a Federal Circuit judge to reside more than 50 miles from DC.

As you can see, this is very much the type of reform that companies like Google would like to see. Google is regularly faced with charges of patent infringement and rarely sues for infringement. Some of these changes will benefit the system as a whole, but it is clear that this is not “balanced” reform. The damages provision will almost certainly reduce patent awards. And, perhaps equally important, the damages provision provides adjudged infringers a real cause to appeal jury awards if they did not directly follow the expert testimony.

I believe that the expanded use of reexaminations and post grant review and prior art submissions will be beneficial, and I have faith that the administrative patent judges will be able to handle their newfound responsibilities. That said, these provisions provide challengers with new ways to attack patent rights.

The plaintiff bar in the Eastern District of Texas is quite good, and defendants are doing what they can to escape from their grasp. The venue provision moves in that direction and would thus weaken the value of patents.

The trick with the first to file system is to realize that it is not about some mythical race to invent between competitors. Rather, it is about keying the priority on the date of filing the application rather than the date of invention or even one year prior to filing. This provision weakens patent rights because more materials will be considered prior art. It is possible to switch to a first-to-file system without eliminating the grace period so dramatically – this legislation does not, however meet that standard.

The Bill is sponsored by both Senators Leahy (D-VT) and Hatch (R-UT). Representative Conyers (D-Mich) introduced parallel legislation in the House, the legislation is largely similar, but does contain some differences. (I have not reviewed the House version in detail). Some opposition has already formed. Reps Manzullo (R-IL) an Michaud (D-ME) issued a joint press release titled “New patent bill encourages IP theft, destroys American jobs.” Their focus was on the damages provision.

There are some changes from the 2008 legislation.

  • The Bill does not require that all applications be published at 18 months.
  • Applicants would not be required to search prior art.
  • The 2009 Bill allows public use or sale in the US to be reasons for challenging patents.
  • CHECK 21 provisions are gone.
  • Fee Diversion is allowed in the 2009 Bill. (Oddly, Leahy explained that PTO Examiners perfer a system of fee diversion)
  • The 2009 Bill does not address inequitable conduct.

Links:

Accelerated Examination Case Study

Patent, ,

The quickest patent issued in 2008: U.S. Patent No. 7,408,364 is assigned to Advanced Sensor Technologies, Inc. (King of Prussia, PA). When ASTi filed its application on a sensor for measuring moisture and salinity in May 2008, it included an accelerated examination petition, a statement of pre-examination search, and a set of examination support documents. Three weeks later, the PTO granted ASTi’s petition for accelerated examination. On June 19, the Examiner began his examination, and issued a notice of allowance for the single claim on June 20. The patent issued on August 5, 2008 – 76 days after the application was originally filed. ASTi has filed multiple continuations – at least one of which has already issued. The patent was prosecuted by longtime patent attorney Mike Catania. The median pendency for the art unit (2831) during the past year was 2.2 years – more than ten-times longer than it took ASTi to get its patent. The median pendency for the primary examiner handling the case during the same period was 2.7 years.

ASTi’s examination support documents include a discussion of nine prior art references. Catania steps through each of the cited references and explains what claim elements are missing from the references. This discussion very much parallels what an attorney would have written in an office action response. The document also discusses nonobviousness and asserts that a prima facie case of obviousness cannot be made because several claim elements are not found in any of the cited prior art references. The document then goes through each claim element and points to particular disclosure in the specification that describes and/or enables the element.

Inequitable Conduct & Cost: The two knocks against the accelerated examination system are the potential for inequitable conduct and the cost of the procedure. I have heard patent attorneys say they would never use the process because of the inherent risk. Part of the vehement reaction is historic. Before the accelerated examination process was created in August 2006, it was much easier for an applicant to put an application on the accelerated examination track through the process then known only as a petition to make special.

Inequitable conduct fears are related to potential charges of failure to conduct a proper search or misrepresentation of the prior art. Both of those are legitimate. Here, however, Catania explained the exact search terms used and the databases searched. This organized and transparent approach coupled with a competent search is unlikely to create inequitable conduct. Regarding discussion of the prior art, Catania’s write-up looks like a response to an office action. Almost every case includes at least one response to an obviousness rejection. Most cases include multiple such responses. It is difficult to tell how this strategy is more problematic than the standard approach. In fact, by providing the opening volley, Catania seems to have set the stage in a way that reduced further need to respond. The cost is certainly more because it requires a well done prior art search, search report and a discussion of the references in relation to the claims. The search & report should run under $1,000 and the discussion should be about the same cost as responding to a well reasoned office action. Although, the attorney will not need to step through the sometimes painful process of amending claims. Almost certainly, prosecution of this case was cheaper than the typical case that is allowed after an RCE and amendment. Of course, the process has a learning curve   [Mike – can you tell us how much did this cost here, and who did the search?].

What’s the Benefit: The greatest benefit of accelerated examination practice is that the patent issues much more quickly. For some clients early issuance is strategically important. From anecdotal evidence – such as this case – it appears that the PTO is more willing to immediately allow cases rather than going through the rejection churn. I believe that the PTO is assigning accelerated examination cases to primary examiners who are already more likely to allow cases quickly, without amendment, and without the notice of allowance being withdrawn because of a second-pair-of-eyes review.

For some firms, there may also be a benefit of getting the work done and paid for up front when the client is excited about the technology and the inventor still works at the company – rather than three years later when the traditional response to an office action would be done.

Documents:

Patent Attorney Argument as Inequitable Conduct

Inequitable Conduct, Patent, Patent Cases 2009, ,

Rothman v. Target Corp. (Fed. Cir. 2009)

A New Jersey jury found Rothman’s patent invalid, not infringed, and unenforceable due to inequitable conduct. (Pat No. 6,855,029). On appeal, the Federal Circuit reversed the inequitable conduct holding, but otherwise affirmed.

Obviousness: The asserted patent covers a breastfeeding shirt that includes a concealed, but fully supportive nursing bra. The original prototype was built by Ms. Rothman by sewing a Jockey brand tank-top together with an Olga brand nursing bra and some additional fabric. Thus, here we have a situation where the inventor took off the shelf items and took a few hours (a day into the night) to form them into a new combination. The appellate panel recognized that the particular manner in which an invention is actually made does not negate patentability. However, the appellate panel did see the simple inventive process as evidence of “the predictability and expectations in this field of art.” Based on these facts, the court could find no reason to disturb the obviousness holding since a PHOSITA “would have been motivated to combine an existing tank top with an existing nursing bra to arrive at the claimed invention.”

Inequitable Conduct: The Federal Circuit reversed the jury’s finding of inequitable conduct. One point of interest involved the patent attorney argument that “nursing garments are highly specialized … as distinguished from maternity garments, [and] are not analogous prior art to women’s garments in general…. Therefore, it is improper to combine a prior art reference from nursing garments with a prior art reference from garments generally, with no connection to nursing garments.” It turned out that the patent attorney had no prior experience in nursing garment technology and did not consult any industry experts before making his claims regarding the ‘highly specialized’ nature of the art and the impropriety of combining prior art.

The Federal Circuit no problem with these attorney statements:

[The attorney’s] remarks show an effort to persuade that does not even approach an effort to deceive the PTO or abuse the prosecution process. …

Appellees find fault with the final sentence from the excerpt above. However, [the attorney’s] conclusion that it is “improper to combine a prior art reference from nursing garments with a prior art reference from garments generally, with no connection to nursing garments” is nothing more than attorney argument based on the foregoing facts … [derived] from his analysis that nursing garments are different from regular women’s wear. … In any event, this type of conclusory analysis betrays no intent to deceive the PTO and obtain a patent with objectively false information. Rather, it is an attempt to characterize the prior art in a manner favorable to the attorney’s client—far from deception. No reasonable jury could rely on Mr. Jacobson’s statements as clear and convincing proof of inequitable conduct.

While the law prohibits genuine misrepresentations of material fact, a prosecuting attorney is free to present argument in favor of patentability without fear of committing inequitable conduct. . . . This court has little basis to find deceptive intent in the routine back and forth between examiner and applicant. Moreover, this court recognizes that the Patent Act gives the examiner the discretion to reject or accept an applicant’s arguments based on the examiner’s own conclusions regarding the prosecution record.

Attorneys should take this decision with a grain of salt based on the fact that Judge Rader authored the opinion and Judge Friedman was on the panel. Judge Rader is well known for his opinion that inequitable conduct is too liberally adjudged.

Upcoming Events & New Blogs

Patent

Upcoming Events

  • January 30, 2009: Santa Clara Computer & High Tech Law Journal will host its conference on Shifting Strategies in Patent Law. Judge Rader will present the keynote address. I will be part of a panel on inequitable conduct and will specifically talk about the PTO's role in determining inequitable conduct issues. [LINK].
  • February 6, 2009: Texas IP Law Journal is hosting its 10th annual symposium at the University of Texas. The title of my talk is Evidence Based Prosecution: Empirical Results from the Prosecution Files of One Million Recently Issued Patents. [LINK]
  • February 6, 2009: Duke IP Law Symposium. Carl Horton (Chief IP Counsel for GE) will deliver the keynote at this great annual event. [LINK].
  • March 17-19, 2009: The IP Law Summit in Ponte Vedra, Florida at the Sawgrass Marriot will be a nice spot. [LINK].

New Blogs:

  • My law school classmate Jeremy Grushcow (along with Dani Peters) has begun the Cross Border Biotech blog that focuses on biotech law issues as they relate to US & Canadian biotech issues. http://crossborderbiotech.ca.
  • Clifford Hyra is now writing Patents 101: http://patents101.com.

Patently-O Bits and Bytes

Patent
  • Law School Hiring: This year has been dismal for law student hiring. There are many 2Ls and 3Ls who are hopeful patent attorneys, but do not have jobs lined up yet or even serious prospects. In past years, those students would have been already snapped up by the big players. Contact me (dcrouch@patentlyo.com) if you are interested in looking at some Mizzou law resumes.
  • Crocs: Helping keep the streets free of ugly shoes (as well as microscopic fungi), Sketchers has agreed to stop selling its molded footwear. Crocs had sued for design patent and trade dress infringement. Crocs, Inc. v. Skechers U.S.A., Inc., Case No: 1:08-cv-01450-RPM (D. Co 2008).
  • Wall Street Journal Patent News:
    • Medicis Pharmaceuticals (NYSE) climbed 2.26, or 20%, to 13.38, as the Scottsdale, Ariz., skin-products maker agreed to settle a yearlong patent dispute with Impax Laboratories over a generic version of Medicis’ acne drug Solodyn.
    • Falling 7.67, or 46%, to 8.95, Tessera Technologies, a San Jose, Calif., company specializing in semiconductor packaging, was handed a setback when an International Trade Commission judge said six big chip makers didn’t infringe its patents.
  • Future of the PTO: On December 11, 2008 in DC, Chris Katopis will moderate an historic panel of former PTO Leaders: Dickinson, Lehman, Mossinghoff, and Godici. Free Live or via Telephone. Details, RSVP, and call-in info from TLiszka@comptia.org.
  • Santa Clara Computer and High Technology Law Journal’s 25th Annual Symposium: January 30, 2009 in San Jose. I will be presenting some ideas on attorney ethics and inequitable conduct. Other topics include developments in non-practicing entity patent litigation and litigation before the ITC.

Patently-O Bits and Bytes

Patent
  • Law School Hiring: This year has been dismal for law student hiring. There are many 2Ls and 3Ls who are hopeful patent attorneys, but do not have jobs lined up yet or even serious prospects. In past years, those students would have been already snapped up by the big players. Contact me (dcrouch@patentlyo.com) if you are interested in looking at some Mizzou law resumes.
  • Crocs: Helping keep the streets free of ugly shoes (as well as microscopic fungi), Sketchers has agreed to stop selling its molded footwear. Crocs had sued for design patent and trade dress infringement. Crocs, Inc. v. Skechers U.S.A., Inc., Case No: 1:08-cv-01450-RPM (D. Co 2008).
  • Wall Street Journal Patent News:
    • Medicis Pharmaceuticals (NYSE) climbed 2.26, or 20%, to 13.38, as the Scottsdale, Ariz., skin-products maker agreed to settle a yearlong patent dispute with Impax Laboratories over a generic version of Medicis’ acne drug Solodyn.
    • Falling 7.67, or 46%, to 8.95, Tessera Technologies, a San Jose, Calif., company specializing in semiconductor packaging, was handed a setback when an International Trade Commission judge said six big chip makers didn’t infringe its patents.
  • Future of the PTO: On December 11, 2008 in DC, Chris Katopis will moderate an historic panel of former PTO Leaders: Dickinson, Lehman, Mossinghoff, and Godici. Free Live or via Telephone. Details, RSVP, and call-in info from TLiszka@comptia.org.
  • Santa Clara Computer and High Technology Law Journal’s 25th Annual Symposium: January 30, 2009 in San Jose. I will be presenting some ideas on attorney ethics and inequitable conduct. Other topics include developments in non-practicing entity patent litigation and litigation before the ITC.

Judge Posner on Inequitable Conduct

Inequitable Conduct, Patent, Patent Cases 2008

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.

“[A]ll expert reports in an ex parte proceeding before the Patent Office are procured by the patent owner or applicant, and it is customary to pay the experts for their time, as was done in this case. There is nothing in the reports of the two experts who didn’t say they had been retained to suggest they were charging no fee—no suggestion that they had been moved by altruism or a strong conviction of the rightness of the application to volunteer to submit an expert report gratis.”

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:

“I conclude that Klughart is not neutral and that his forgetfulness may be strategic. . . .

Cooper testified that when he submitted his report in August of 2001 he had forgotten his prior dealings with Klughart. I do not believe that testimony. . . .

I am also disturbed by the statement in Cooper’s brief that ‘Mr. Cooper didn’t think his past contact with Dr. Klughart was ‘material’ and that’s why he didn’t disclose it.’ That is an admission that Cooper lied in his declaration, though I imagine it is unintended.”

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:

“Clearly the fabrication was material. It bore centrally on the credibility of one of the expert reports. . . . Suppose Cooper had explained the circumstances to the patent examiner—that Klughart, a practitioner of modest means and prospects, had submitted to Cooper a $250,000 proposal that Klughart may at the time he prepared his expert report have thought he still had a chance of winning; Cooper had not responded to his proposal and Klughart was unaware that the project had been awarded to someone else. Klughart testified that the $250,000 proposal would have netted him about $200,000—a good deal more than a year’s income for him. . . .

Had these circumstances been disclosed to the patent examiner in Cooper’s declaration, Klughart’s report would have been rejected and perhaps the other reports as well, contaminated by the evidence of Cooper’s bad judgment in soliciting a report from Klughart.”

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.

“The making of a deliberate, material misrepresentation to a patent examiner is extremely serious misconduct because of the ex parte nature of most patent proceedings, including the reexamination proceeding at issue in this case. . . .

Because even material misrepresentations made to the Patent Office will usually not be detected, it is necessary to impose a severe sanction for such misrepresentations when they are detected, at least when as in this case they are deliberate. The appropriate sanction will normally be, and in this case I have decided that it should be, the cancellation of the patents.”

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.

“The suggestion is that since the expert reports pertained to only a fraction of the claims in the ‘780 patent, I should declare unenforceable just those claims. The Federal Circuit has repeatedly ruled that if inequitable conduct is proved, the entire patent is unenforceable and not just the claims affected by that conduct.”

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]

Patently-O Bits and Bytes: Partners, Events, and Jobs

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New Partners at the Patently-O Job Board:

  • Invention Analysis & Claiming Strategies Seminar. Register for Ron Slusky’s unique program for patent prosecutors and receive a $50 discount as a Patently-O reader. The conference offers 13 hours of accredited CLE. Discount code: PO50. The seminar presents principles that enable patent prosecutors to better identify the broad inventive concept and its fallback features and to develop a suite of claims that will maximize the patent’s value to the patent owner.
  • Expert Consultant and Analytical Services. Scitemex, a provider of technology and litigation support, is now a sponsor of the Patently-O Job Board.
  • Michael Heath is working one-on-one with Patently-O Job Board readers to help link employers and employees.
  • American Conference Institute (ACI) has an updated list of conferences. One recently added is a conference on High Tech Patent Prosecution.

Other upcoming events:

Recent Job Postings:

Federal Circuit Finds No Antitrust Liability for Hatch-Waxman Reverse Payment Settlements

Patent,

In re Ciprofloxacin Hydrochloride Antitrust Litigation (Fed. Cir. 2008)

Bayer’s patent on Cipro was challenged by Barr. However, the parties settled on the eve of trial. In all, Bayer paid $398 million to Barr to ensure that it didn’t receive a judgment of invalidity or unenforceability. Subsequently, Bayer filed for reexam to ensure that there would not be a later inequitable conduct problem. When other companies later challenged the patent, it was repeatedly found valid.

To many, the Barr settlement looked like a way to prop-up the drug price at the expense of consumers, health insurance companies. Various groups filed suit – arguing violations of Sections 1 and 2 of the Sherman Act and violations of state antitrust and consumer protection laws.

On summary judgment, the Federal District Court in New York applied a rule of reason to find no antitrust violations as follows:

  1. The relevant market is CIPRO and Bayer had market power in that market.
  2. However, any “adverse effects on competition” due to the settlement could not create antitrust violations because the settlement was “within the exclusionary zone of the ‘444 patent.”

In its holding, the district court rejected the notion that the “exclusionary zone” would be narrowed or altered by the potential invalidity of the patent. Furthermore, the district court held that unenforceability due to prosecution misconduct cannot be the subject to a Walker-Process antitrust violation – rather, the misconduct must be market-based misconduct. And, the Walker-Process argument failed because Bayer later successful litigation showed that its approach with Barr was not a ‘sham.’

On appeal, the Federal Circuit affirmed the summary judgment in favor of the pharmaceutical companies.

Per Se vs Rule of Reason: Some activities are considered so pernicious that they will be considered per se violations of the Sherman Act. Most actions, however, are judged under the rule of reason to determine if the particular activities had a potentially pro competitive impact. Here, the federal circuit could find no basis for “confidently predict[ing]” that such reverse-payment settlement agreements were unlawful – and consequently should be judged under the rule of reason.

Patents and Antitrust: Patents lead to anticompetitive behavior – that is the nature of the right to exclude. A patentee will not have antitrust liability for activity within the “zone of exclusion” of its patent. On appeal, the Federal Circuit agreed that the reverse payment was within the zone of exclusion.

Reverse Payments: In patents, a reverse payment is a payment by a patentee to an accused infringer to end litigation and perhaps to keep the infringer off the market. Remember, typically, it is the patentee who is looking for damages, not seeking to pay. The plaintiffs argued that such a reverse payment could not be considered within the ordinary scope of patentee behavior. The appellate court disagreed, finding that through the payment, Bayer was protecting its market share in its patented product and thus was well within its rights.

Pursuant to the Agreements, the generic defendants agreed not to market a generic version of Cipro until the ‘444 patent expired and not to challenge the validity of the ‘444 patent, and Bayer agreed to make payments and optionally supply Cipro for resale. Thus, the essence of the Agreements was to exclude the defendants from profiting from the patented invention. This is well within Bayer’s rights as the patentee. . . .

A settlement is not unlawful if it serves to protect that to which the patent holder is legally entitled—a monopoly over the manufacture and distribution of the patented invention.

In addition, the court found that settlements are favored even when anti-competitive.

Furthermore, there is a long-standing policy in the law in favor of settlements, and this policy extends to patent infringement litigation. Settlement of patent claims by agreement between the parties—including exchange of consideration—rather than by litigation is not precluded by the Sherman Act even though it may have some adverse effects on competition.

And, settlements normally include a promise not to challenge validity – something allowed under antitrust laws:

Settlements in patent cases, however, frequently provide that the alleged infringer will not challenge the validity of the patent. Thus, the mere fact that the Agreements insulated Bayer from patent validity challenges by the generic defendants was not in itself an antitrust violation.

Affirmed

Notes

  • On the panel were Circuit Judges Schall and Prost and Judge Ward from the Eastern District of Texas sitting by designation. The opinion was written by Judge Prost.
  • Expect petitions for en banc hearing and certiorari. The reverse payment issue has been brewing for some time.
  • During the post-9/11 anthrax scares, the Federal Government threatened to break the patent and begin manufacturing a generic version if sufficient supplies were not available. [Link]

Shifting Burden of Production Does Not Shift Burden of Proof; PTO Deference

Attorney Fees, Fee Shifting, Patent, , ,

Technology Licensing Corp v. Videotek (Fed. Cir. 2008)

The independent inventor J. Carl Cooper invented and patented technology separating a sync signal from a video signal to better ensure vertical and horizontal hold on a video screen. Cooper assigned his rights to TLC which sued Videotek for infringement. Videotek pulled-in its supplier Gennum for indemnification. Gennum now remains as the only defendant.

Priority Date: Cooper’s asserted patent claims priority to an earlier application filed in 1992. The district court found specifically that claim 33 could not claim priority all the way back because the claim included a limitation to an “other circuit” which was only disclosed in the subsequent continuation.

Burdens of Proof and Production: Although a defendant ultimately bears the burden of proving invalidity, the burden of producing evidence may shift back and forth during litigation. For instance, once a defendant provides evidence of anticipation, the patentee then has the “burden of going forward with evidence either that the prior art does not actually anticipate, or … that it is not prior art because the asserted claim is entitled to the benefit of a filing date prior to the alleged prior art.” Proving priority requires evidence of the priority claim and also evidence showing that “the written description in the earlier application supports the claim.” Here, the court required cooper to produce “sufficient evidence and argument to show that [the priority document] contains a written description that supports all the limitations of claim 33, the claim being asserted.” Once the evidence is on the table, the claim will only be invalid if the defendant’s proof remains is clear and convincing.

[B]ecause an issued patent is by statute presumed valid, a challenger has the burden of persuasion to show by clear and convincing evidence that the contrary is true. That ultimate burden never shifts, however much the burden of going forward may jump from one party to another as the issues in the case are raised and developed.

Here, the Federal Circuit agreed that the defendants had clearly proven that the original written description was insufficient – and thus that the patentee could not claim priority all the way back.

Deference To and Waiting For the PTO: The PTO issued Cooper’s patent and then, through a reissue, again allowed the challenged claim to issue even after considering the same prior art (the reissue issued while the appeal was pending). On appeal, the Federal Circuit distinguished Ralston v. Far-Mar-Co (Fed. Cir. 1985). In Ralston, the court deferred to the PTO’s determination of priority date. Here, however, there was no evidence that the PTO specifically considered the priority dates. However, the Federal Circuit refused to “add an additional deference-thumb to the scale, or, even more disruptive, our asking the trial court to reopen the entire invalidity question to reweigh the intangible worth of additional deference.”

This is not to say that the determinations made by the corps of examiners are not important, or should not be worthy of appropriate deference to their expertise in these technical matters, especially when we have the benefit of well-reasoned explications. It is to say that when dealing with the intangible worth to be accorded an administrative agency’s decision making, the judicial process cannot be held hostage to the timing of either the agency or the litigants who have invoked the agency’s further review. In some circumstances a party may be able to obtain a stay from the trial court while awaiting the sought-for agency action; absent that, and absent extenuating circumstances not here present, the case must be decided on the record the litigants present for appeal.

Inequitable Conduct:

There has never been an exception [requiring submission of] anticipatory cumulative references, and we are not inclined to create one now.

Definiteness of Means Plus Function Claim: A MPF claim must be supported by structural disclosure found in the patent specification – this requirement is akin to the written description requirement and focuses on actual disclosure rather than enablement.

The question is not whether one of skill in the art would be capable of implementing a structure to perform the function, but whether that person would understand the written description itself to disclose such a structure.

In electronic circuit cases the actual circuit disclosures are not necessarily required. Rather, generic “core logic” may be sufficient. Here, the defendants were unable to provide clear and convincing evidence of a lack of structure.

“Indefiniteness is a Matter of Claim Construction”

Indefinite, Patent, Patent Cases 2008,

Praxair v. ATMI (Fed. Cir. 2008)

Praxair’s patents cover pressurized storage containers for potentially hazardous gasses. The patents teach safety mechanisms to help prevent accidental rapid discharge. Of the three patents asserted against ATMI, the Delaware district court found two unenforceable due to inequitable conduct during prosecution. The asserted claims of the third patent were held invalid as indefinite under 35 U.S.C. §112¶2. On appeal, the Federal Circuit reversed-in-part.

Inequitable Conduct: Each patent applicant has a duty to act with “candor, good faith, and honesty” when prosecuting patent applications. Material breach of this duty can result in any resulting patents being held unenforceable due to inequitable conduct. Proof of inequitable conduct has been divided into two parts – requiring “clear and convincing 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].” Quoting Cargill v. Canbra Foods, Ltd., 476 F.3d 1359 (Fed. Cir. 2007).

Direct evidence is rarely available to prove intent to deceive the PTO when the patent applicant is accused of withholding material information. Rather, the intent element is typically inferred by the proof that the material withheld was highly material; that the applicant knew (or should have known) of the materiality; and that the applicant has no credible excuse for withholding information.

Highly Material Based on Statements in Prosecution: Looking at Praxair’s ‘115 patent, the court did not see the withheld prior art as highly material on its own. However, the reference became highly material based on Praxair’s statements during prosecution. Specifically, the reference became highly material when Praxair told the PTO that the prior art does not teach the elements found in the withheld art. Testimony of the inventors proved that they knew that those elements were, in fact, in the prior art.

Because those same prosecution statements were not submitted during prosecution of Praxair’s ‘609 patent, the Federal Circuit held that the withheld references could not be considered highly materiality.

“At the time the four statements discussed were made during the prosecution of the ‘115 patent, there had already been a notice of allowability indicating that all claims of the ‘609 patent would be issued. ATMI has not established, or even asserted, that the statements in the prosecution of the ‘115 patent somehow infected the prosecution of the ‘609 patent. Absent the four statements, the district court did not make any finding of intent with respect to the withholding of RFO art during the prosecution of the ‘609 patent.”

Thus, the Federal Circuit affirmed the unenforceability holding as to the ‘115 patent, but reversed as to the ‘609 patent. On remand, the lower court will reconsider infringement of the ‘609 patent based on a claim construction error.

Indefinite Claims:

“Indefiniteness is a matter of claim construction, and the same principles that generally govern claim construction are applicable to determining whether allegedly indefinite claim language is subject to construction. Datamize, LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1348 (Fed. Cir. 2005). Indefiniteness, like claim construction, is a question of law, and we review a district court’s entry of summary judgment on the issue of indefiniteness de novo.”

Claims are generally only found indefinite if they are “insolubly ambiguous, and no narrowing construction can properly be adopted.” Here, the district court found the claim term “port body” of the third patent to be indefinite because it was “not described, labeled, or coherently discussed in the patent.” On appeal, however, the Federal Circuit reversed that finding – holding instead that the patent’s specification was adequate although not eloquent.

“Although the discussion of the port body in the ‘895 patent’s specification may not be a model of clarity, the specification adequately explains that the port body is a housing that sealingly engages the outlet of the cylinder and defines the fluid discharge path.”

Extrinsic evidence: As with claim construction, the use of extrinsic evidence in determining definiteness is only secondary if applicable at all. In this case, the patentee’s expert was unable to point to any specific portion of the structure that could be considered the “port body.” On appeal, the Federal Circuit rejected that factual element as lacking impact on the legal question of indefiniteness.

“Even if we were to agree that Dr. Fronczak was unable to reach a single consistent construction of the port body, such extrinsic evidence would not prove the ‘895 patent invalid, since indefiniteness is a legal rather than a factual question.”

Indefiniteness holding reversed.

Dissenting in part, Judge Lourie saw no inequitable conduct with either patent. In particular, Judge Lourie noted that the evidence of intent to deceive the PTO was quite weak.

“While a smoking gun may not be needed to show an intent to deceive, more is needed than materiality of a reference. The district court did not find anything further here. In addition, the court did not engage in any balancing of materiality and intent as is required by our precedent.”

Erroneous Revival by PTO is not a Cognizable Defense in an Infringement Action

Invalidity, Patent, Patent Cases 2008,

Aristocrat Technologies Australia v. International Game Technologies (IGT) (Fed. Cir. 2008)

‘The district court concluded that the U.S. Patent and Trademark Office “improperly revived” U.S. Patent No. 7,056,215 after it was abandoned during prosecution, and therefore held it (and the continuation patent that followed it) invalid on summary judgment. We conclude that “improper revival” is not a cognizable defense in an action involving the validity or infringement of a patent. Thus, we reverse the district court’s grant of summary judgment and remand for proceedings consistent with this opinion.’

ATA missed its US national stage filing by one day. The PTO granted ATA’s petition to revive the application based on the applicant’s seemingly legitimate claim that the “entire delay” in filing the appropriate papers “was unintentional.” The district court, however, found the patent invalid based on the PTO’s “improper revival” of the application. In particular, the district court found that the PTO lacked authority to revive unintentionally late national stage applications.  Rather, according to the court, the PTO can only revive such applications when the cause of delay meets the much higher standard of being unavoidable. The Court found its statutory support from 35 USC 371, which requires the PTO to hold late national stage applications as abandoned unless “such failure to comply was unavoidable.”

On appeal, the Federal Circuit panel (Judges Newman, Bryson, and Linn) reversed – finding that “improper revival” is not a proper invalidity defense in a patent infringement action.

The court’s surprising conclusion is based on its interpretation of 35 U.S.C. §282. That statute lists the defenses available to charges of patent infringement. Those include:

(1) Noninfringement …,

(2) Invalidity of the patent or any claim in suit on any ground specified in part II of this title as a condition for patentability,

(3) Invalidity of the patent or any claim in suit for failure to comply with any requirement of sections 112 or 251 of this title.

(4) Any other fact or act made a defense by this title.

Conditions for Patentability: In the appeal, the Federal Circuit saw the term “condition for patentability” of ¶2 above as a term of art and gave it a narrow interpretation: “While there are most certainly other factors that bear on the validity or the enforceability of a patent, utility and eligibility, novelty, and nonobviousness are the only so-called conditions for patentability.” Thus, complying with the timing requirements is not a condition of patentability.

Made a Defense: Taking a similarly hard stand, the appellate panel found that ¶4 above would only apply when another act had explicitly been ‘made a defense’ by the words of the patent act.

“Congress made it clear in various provisions of the statute when it intended to create a defense of invalidity or noninfringement, but indicated no such intention in the statutes pertaining to revival of abandoned applications. For example, 35 U.S.C. § 273 is entitled “Defense to infringement based on earliest inventor” and expressly provides that the provision “shall be a defense to an action for infringement.”…

Because the proper revival of an abandoned application is neither a fact or act made a defense by title 35 nor a ground specified in part II of title 35 as a condition for patentability, we hold that improper revival may not be asserted as a defense in an action involving the validity or infringement of a patent.”

On several occasions, the court has allowed an invalidity finding when the cause of invalidity did not reach one of the Section 282 categories. In the 1995 Quantum case, for instance, the court invalidated a patent based on improperly expanding its scope during prosecution. Here, the court pushed Quantum aside finding it irrelevant or “inapposite.” On the policy side, the court noted that this case is a one-off and is unlikely to encourage bad applicant behavior.

What result: The result of this case is that an accused infringer has no recourse to invalidate a patent that was issued as a result of procedural lapses during prosecution. Absent proof of inequitable conduct, there may be no recourse at all. In this respect, the Federal Circuit quoted its own 1997 Magnivision decision:

“Procedural lapses during examination, should they occur, do not provide grounds of invalidity. Absent proof of inequitable conduct, the examiner’s or the applicant’s absolute compliance with the internal rules of patent examination becomes irrelevant after the patent has issued.”

Notes:

Law Review 2008: Ideas for Student Notes.

Patent, ,

Let me know if you use one of these. dcrouch@patentlyo.com.

The Clarified Law of Inequitable Conduct

Inequitable Conduct, Patent, Patent Cases 2008

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:

Important Inequitable Conduct Decision: Defendant Must Prove its Case

Inequitable Conduct, Patent, Patent Cases 2008

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.”

“The need to strictly enforce the burden of proof and elevated standard of proof in the inequitable conduct context is paramount because the penalty for inequitable conduct is so severe, the loss of the entire patent even where every claim clearly meets every requirement of patentability.

. . .

[C]ourts must ensure that an accused infringer asserting inequitable conduct has met his burden on materiality and deceptive intent with clear and convincing evidence before exercising its discretion on whether to render a patent unenforceable.

. . .

If a threshold level of intent to deceive or materiality is not established by clear and convincing evidence, the district court does not have any discretion to exercise and cannot hold the patent unenforceable regardless of the relative equities or how it might balance them.

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

“Rather, to prevail on the defense, the accused infringer must prove by clear and convincing evidence that the material information was withheld with the specific intent to deceive 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:

“[E]ven if Star’s explanations are not to be believed, it remained RJR’s burden to prove its allegation regarding the reason for the Sughrue firm’s dismissal. RJR cannot carry its burden simply because Star failed to prove a credible alternative explanation.”

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

“RJR failed to elicit any testimony or submit any other evidence indicating that Star knew what the Burton letter said prior to replacing the Sughrue firm, or that the letter was a reason for changing firms. RJR admitted at oral argument that it failed to even ask [Star’s] executives about these critical facts, and RJR failed to identify any testimony or other evidence when specifically asked by us to do so in supplemental briefing. Further, a review of the record shows that Williams actually testified, in response to a different question, that he had never seen the Burton letter prior to his deposition in the present litigation. This statement was never impeached, questioned, or explored by RJR’s counsel. RJR identified Perito, Star’s chairman, as the officer who made the decision to terminate the Sughrue firm, but Perito was never asked whether he had knowledge of the Burton letter or whether it played any role in his decision to change firms.

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.

No Inequitable Conduct if Examiner Finds Withheld Reference while Searching

Inequitable Conduct, Patent, Patent Cases 2008

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.”

Inequitable Conduct: Out of the Frying Pan?

Patent, , , ,

By Prof. Paul M. Janicke, HIPLA Professor of Law, University of Houston Law Center< ?xml:namespace prefix ="" o ns ="" "urn:schemas-microsoft-com:office:office" />

In the 1980s patent practitioners were being pressed by clients to keep costs down. At the same time they were seemingly presumed by courts to understand right away any prior-art reference that made its way into their offices, and how that reference might relate to patent applications they were writing or prosecuting. They were rather upset with the drift of the law on inequitable conduct. It seemed the courts were allowing something short of intentional deception to make out that defense and to ruin a client’s otherwise solid case for validity and infringement. Language like “gross negligence” had crept into some of the appellate decisions. With enough time and funding by the challenger, many non-cited things in a patent practitioner’s possession could be made years later to look important to patent prosecution, and explanations for non-citation always seemed at that late date a little lame. All the challenger needed to do is find one of those things and persuade the judge to label the non-citation as gross negligence.

Patent.Law129The Federal Circuit recognized the problem and in 1988 handed down Kingsdown Medical Consultants Ltd. v. Hollister Inc.,[1] wherein the court reiterated that intent to deceive the PTO had to be proved by clear and convincing evidence. In an in banc section of the opinion labeled “Resolution of Conflicting Precedent,” the court held that gross negligence could not alone suffice to make out inequitable conduct.[2] The profession breathed a little easier. They were perhaps out of the frying pan.

However, shortly after Kingsdown a number of other cases rightly pointed out that deceivers seldom come forth and say they acted with intent to deceive. “Such intent usually can only be found as a matter of inference from circumstantial evidence.”[3] Through the 1990s the Federal Circuit appreciated the continuing need to make an actual finding that a particular person acted to mislead the PTO in a particular way. It told us “a finding of intent to deceive the PTO is necessary to sustain a charge of inequitable conduct.”[4] In a withholding-type accusation, reaching that conclusion of course requires a subsidiary finding that the person appreciated the significance of the withheld item. Without that appreciation, he can hardly be trying to deceive the examiner about the item. 

In the last three years Federal Circuit panels have slipped back into “should have known” language to arrive at the conclusion of intent to deceive or mislead the PTO.[5] That is the language of simple negligence. Even more troublesome, they seem to have reached the “should have” finding by reference to the importance (materiality) of the item to the prosecution proceeding, the logic of which is somewhat elusive. In 2008 a number of cases have now explained how all this is consistent with Kingsdown. Negligence alone might not be enough, but when material information is found in the hands of persons connected to patent prosecution, they need to provide a “credible explanation” or suffer a finding of bad intent.[6]

The trouble with this approach is that it allows even simple negligence (“should have known”) to shift the burden of persuasion on intent to the patent owner. This shift will happen in just about every case, because the finding of materiality in a combative courtroom setting will nearly always generate the “should have known” prong, shifting the entire burden of credibly showing benign intent onto the patentee. In the dynamic of actual patent litigation years after the events in question, that burden is indeed a fearsome one. In life, consider how often we ask ourselves when bad situations arise: “Why did I do that? Why didn’t I see the connection?” Credible-sounding explanations are not that easy to come by, even when we know we are innocent. Explanations on the ground of human fallibility feel hollow, and this is especially so in the majestic setting of a court proceeding. The patent bar and their clients have gone out of the frying pan and into the fire.

Some rays of hope have appeared for rectifying the situation. Judge Newman dissented in Nilssen, the small-entity status case.[7] And Judge Rader has seen the problem in what I regard as its proper light. In May of this year two panel judges sitting with him upheld a district court’s finding of inequitable conduct in a withholding-of-information case. The two were unwilling to reverse the lower court’s conclusion that the explanation given for non-citation was not credible.[8] Dissenting, Judge Rader said: “[M]y reading of our case law restricts a finding of inequitable conduct to only the most extreme cases of fraud and deception. . . Although designed to facilitate USPTO examination, inequitable conduct has taken on a new life as a litigation tactic. The allegation of inequitable conduct opens new avenues of discovery; impugns the integrity of patentee, its counsel, and the patent itself; excludes the prosecuting attorney from trial participation (other than as a witness); and even offers the trial court a way to dispose of a case without the rigors of claim construction and other complex patent doctrines.”[9] Amen to that. This is not the place to try to rectify perceived weaknesses in the patent examination process or to make amends with district judges by according more weight to their rulings. Worthy and important goals those may well be, but shifting burdens on inequitable conduct is not the way.

Inequitable conduct burdens have in the past rightly been placed on the challenger. Establishing this defense has required a finding not about what a person should have known, but that the person involved actually did appreciate of the significance of the information to the prosecution process. Now the burden on the intent prong has de facto shifted. Hopefully it will return to where it was. I have always thought the relative importance of the item as seen years later has little to do with finding an intent to mislead. Most of the time it is just as easy in life to fail to connect important dots as unimportant ones.


[1] 863 F.2d 867 (Fed.Cir. 1988), cert. denied, 490 < ?xml:namespace prefix ="" st1 ns ="" "urn:schemas-microsoft-com:office:smarttags" />U.S. 1067 (1989).

[2] Id. at 876.

[3] Hewlett-Packard v. Bausch & Lomb, 882 F.2d 1556, 1562 (Fed. Cir. 1989).

[4] RCA Corp. v. Data General Corp., 887 F.2d 1056, 1065 (Fed. Cir. 1989), emphasis in original.

[5] See Ferring BV v. Barr Labs. Inc., 437 F.3d 1181, 1191-92 (Fed. Cir. 2006) (applicant should have known non-disclosed relationships of affiants to assignee company were important); Cargill Inc. v. Canbra Foods Ltd., 476 F.3d 1359, 1367-68 (Fed. Cir. 2007) (applicant should have known lab tests on a property were important); Bruno Indep. Living Aids Inc. v. Acorn Mobility Services Ltd., 394 F.3d 1348, 1351 (Fed. Cir. 2005) (from what was said to FDA, applicant should have known prior powered staircase was important to PTO).

[6] See Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1359-60 (Fed. Cir. 2008) (inequitable conduct finding upheld based on wrongful claiming of small entity status, where explanation testimony was not credible); Pfizer Inc. v. Teva Pharms. USA, 518 F.3d 1353, 1367 (Fed. Cir. 2008) (finding of no inequitable conduct in non-citation of reference showing similar structure affirmed where explanation was credible); Monsanto Co. v. Bayer Bioscience N.V., 514 F.3d 1229, 1241 (Fed. Cir. 2008) (inequitable conduct finding upheld where explanation for non-citation of meeting notes was not credible).

[7] Supra, note 6, 528 F.3d at 1362-65.

[8] Aventis Pharma S.A. v. Amphastar Pharm. Inc., 525 F.3d 1334, 1349 (Fed. Cir. 2008).

[9] Id. at 1349-50.

Judge Rader Again Defends Patentee Against Charges of Inequitable Conduct

Patent

AIPLATalk217Research Corporation Technologies v. Microsoft (Fed. Cir. 2008)

In the third of a trio of inequitabe conduct opinions by Judge Rader, the CAFC reversed the lower court’s ruling that RCT’s digital halftoning patents were unenforceable. Amazingly, the appellate panel found instead that it was storied district court judge Manny Real who was guilty of bad behavior. [Discussion of the district court case.]

The panel – Judges Newman, Rader, & Freeman – could not have been better for a patentee accused of inequitable conduct.  Here, the CAFC held that the lower court clearly erred by failing to establish the materiality of RCT’s actions during prosecution.

“The trial judge found inequitable conduct because the inventors did not disclose [the inventor’s] post-filing K factor tests to the USPTO. Because [the inventor’s] work occurred after she and Dr. Parker had filed the patent application, these K factor experiments were not material to their inventive activity. In the circumstances of this case, therefore, the inventors had no obligation to report their later tests to the USPTO.”

The next quote will be taken out of context and often used:

“Importantly, [the inventor] and her coauthors published the K factor tests to the scientific community. Publication is an act inconsistent with an intent to conceal data from the USPTO.”

 

Guest Editorial: Obama Put Forward Sound Priorities on Patents Last Year. McCain May (Finally) Get To It Soon.

Patent

Editorial by Arti Rai, Elvin R. Latty Professor of Law, Duke University

From the perspective of a candidate running for President, articulating a position on the subject of patent reform might appear a fool’s errand. For many (perhaps most) voters, the subject will be impossibly arcane. Within the small group that closely follows the highly divisive debate (e.g. patent litigators and prosecutors, stakeholders in the various industries most affected by patents), virtually any position a candidate takes will alienate a significant percentage.

Complicating the situation further is the reality that the patent system has so many moving parts. In particular, for better or for worse, a large chunk of patent policy is currently made through Federal Circuit decisions. For good reasons, the Constitution insulates Article III judges from direct Presidential control. But the result of this lack of control means that reform proposals that a President can readily implement, and that might appear sensible on first examination, can be undermined by judicial action. For example, requiring disclosure of prior art by applicants (who presumably know a lot about their area of invention) might seem sensible. But the reasoning behind the policy is undermined if the Federal Circuit decides to invoke a highly aggressive doctrine of inequitable conduct.

So ignoring the subject – as Senator John McCain has done, at least thus far, may be the politically expedient course. (We will see if the McCain technology plan, about which McCain advisor Michael Powell has been dropping hints and which is supposed to be unveiled formally soon, talks about patents.) But politically expedient behavior on an issue as important to innovation, and our country’s future, as sound patent policy is hardly what we want from our next President.

What is striking about Senator Barack Obama’s approach is that he has not only articulated a position, but that he did so back in November 2007, as the patent reform wars were raging in Congress. (Senator Obama’s position appears in the technology platform that he released at Google last November.)

Senator Obama’s approach reflects a nuanced understanding of the concerns of the various stakeholders. It also reflects an ability to rise above narrow interest group politics and suggest creative solutions not contemplated by the interest groups most active in the latest round of the Congressional reform wars.

For example, the Senator says that when "dubious patents are being asserted, the PTO could conduct low-cost, timely administrative proceedings to determine patent validity." Thus he comes out in favor of a "second window" for post-grant administrative review of patent validity at the time the patent is asserted. As IT firms that are faced with constant litigation threats have pointed out (and as other countries’ experience with post-grant review shows), this option could represent a real savings relative to expensive litigation over patent validity. Moreover, at least in the long term, the availability of this option might reduce the incentive to file dubious patent applications in the first instance (and hence might reduce the current backlog of over 700,000 patent applications).

At the same time, Senator Obama’s plan accommodates the interests of those firms (e.g. biotechnology and pharmaceutical firms) that have made reasonable arguments about their need for early certainty about patent validity. It provides for an option not contemplated in the Congressional debate – self-selection ex ante into "rigorous and public peer review that would produce a ‘gold-plated’ patent." Under default principles of administrative law, gold-plated patents would be much less subject to future administrative or judicial challenge.

Of course, much of the devil will be in the details. For example, as the GAO has recently pointed out, management and personnel practices at the PTO need to be improved substantially in order for the PTO to retain the qualified examiners necessary for implementing even existing procedures. New procedures will require even more attention to reform of internal PTO practices.

A Presidential candidate’s policy proposals cannot include all of the details he might contemplate. But Senator Obama’s willingness to stake out some clear reform positions early in his campaign, and at a time of great sensitivity over the issue, performs what economists call a signaling function. The Senator has sent a signal that he would take patents seriously, both in terms of substantive proposals and in terms of the people he would appoint to formulate and implement these proposals.