W.D. Wis.: All Instances of Materiality Should Be Argued for Inequitable Conduct

Silicon Graphics v. ATI Technologies, Inc., W.D. Wis., 06-cv-611-bbc (August 1, 2008)

Silicon Graphics (SG) sued ATI for infringement of 3 patents. ATI counterclaimed that the patents were invalid and unenforceable. In pretrial rulings, Judge Crabb found no basis for infringement on 2 of the patents, and SG conceded at the final pretrial conference that the remaining patent was not infringed and agreed to dismiss the claims with prejudice. ATI pressed forward with the claims of invalidity and unenforceability, but was unsuccessful at trial.

As part of its inequitable conduct argument, ATI argued that a prior art reference ("the Baum patent") anticipated the claims of one of the patents-in-suit. The jury found that the Baum patent did not anticipate, and Judge Crabb dismissed the inequitable conduct case. ATI moved for a new trial, arguing that the issue the court needed to reach was not whether the Baum patent anticipated, which is what the jury decided, but rather whether the Baum patent
was material to the patent office. Judge Crabb denied the motion:

Defendants are correct when they argue that anticipation and materiality can be two different matters. The flaw in their argument is that they never advanced any other theory of materiality. Instead, in preparation for the inequitable conduct phase of trial, they talked of materiality only in terms of anticipation by the Baum patent. See Defendants’ Proposed Findings of Fact for Potential Non-Jury Issues, dkt. #459, at 46 (“The [Baum] patent anticipates at least claims 17 and 22 of the ‘327 patent”; “Because the [Baum] patent anticipates ‘327 patent claims, the [Baum] patent and application ‘establishes by itself or in combination with other information, a prima facie case of unpatentability of a claim,’ and is material art under 37 C.F.R. § 1.56.”). Once the jury determined that the Baum patent did not anticipate, defendants’ case of inequitable conduct could not go forward. Although defendants worked hard to convince the court that they should be allowed to argue additional reasons for a finding of inequitable conduct, their efforts failed. It was too late for them to go forward on a wholly new theory they had never disclosed to plaintiff.

Defendants suggest that their proposed finding of fact, #450, dkt. #459 at 65, was sufficient to give notice of their theory of inequitable conduct. A reading of the proposed finding dispenses with that argument. In full, the proposal reads: “The ‘450 patent and application are highly material prior art because they invalidate ‘327 patent claims and/or present a prima facie case of unpatentability.” This statement falls far short of being a sufficient factual proposal on which to base an inequitable conduct claim. Defendants do not say what other showing of materiality they could have made; if they are contending that they could have shown that Baum made the ‘327 patent obvious, they never raised this point at trial. I conclude that it was not error to dismiss defendants’ inequitable conduct claim without a trial.

Not surprisingly, each side requested attorney fees. Both sides were denied:

[35 U.S.C. § 285 and 28 U.S.C. § 1927] are aimed at exceptional cases in which the parties (or counsel, in the case of § 1927) have acted so outrageously as to be subject to sanctions. This is not one of those cases. Both sides prosecuted their cases vigorously and tenaciously. Both sides advanced and maintained positions that in hindsight they may regret. That is not exceptional or even unusual in litigation of this nature . . . This case would have been easier for counsel and the court to deal with had counsel for both sides confined their claims to those for which they had a stronger foundation, but determining which claims are the stronger ones is always easier at the end of the case than it is at the outset . . . Despite the more than 100 pages that the parties have devoted to the issue of defendants’ entitlement to fees and costs and the amount of such fees and costs, the resolution of the matter is straightforward. Fees and costs are awarded only to prevailing parties; in this suit neither side prevailed.

Read/download the opinion here (link).