Monday, March 23, 2009

A-Cold Wind Blowing: Inequitable Conduct Part 1

. . . mistakes and omissions will inevitably occur, and that the courts will be asked to determine if there was inequitable conduct.

- Judge Prost, Tafas v. Doll (2008-1352)
Larson Manufacturing Co. v. Aluminart Products Ltd. (2008-1096) March 18, 2009

Larson filed a continuation application just prior to the grant of its patent. Larson sued Aluminart on the patent and Aluminart filed for a reexamination request. Aluminart additionally accused Luminart of inequitable conduct at the district court. The PTO granted the reexamination request, and the district court stayed the litigation. The reexamination proceeding was conducted by the PTO at the same time the continuation application was being prosecuted. During the reexamination proceeding, the continuation application underwent a series of four Office Actions.

For the reexaminations, Larson submitted an IDS containing 200 patents, including district court pleadings, along with the allegations of inequitable conduct. Larson also disclosed the co-pending application, the first two Office Actions, and additional references. However, Larson did not disclose the 3rd and the 4th Office Action, and missed 3 references applied in the Actions. Apparently missing this information, the PTO went on to issue a Reexamination certificate.

After the court resumed litigation, Aluminart again accused Larson of engaging in inequitable conduct during the reexamintion proceeding. Finding that the 2 Office Actions and 3 prior art references were material, and because Larson "did not provide any plausible excuse for witholding these materials from the PTO," the district court found Larson engaged in inequitable conduct.

On appeal, the CAFC considered each of the prior art references, and found that the features relied upon for materiality were already disclosed by other references that were considered by the reexamination panel. As such, the references were deemed cumulative, and the CAFC reversed the district court in this regard.

With regard to the 3rd and 4th Office Actions, Larson argued
[T]hat the examiner provided only summary rejections without meaningful analysis. According to Larson, in the Third and Fourth Office Actions, the examiner articulated rejections almost identical to the previous office actions; mostly discussed the Johnson patent, which had been thoroughly explained in previous office actions; and focused on claim limitations that were not at issue. In other words, Larson contends, because the Third and Fourth Office Actions did not contain examiner comments different from previous office actions and because Larson disclosed all of the material references discussed in those actions, the office actions themselves were not material.
However, relying on Dayco Products. the CAFC reiterated
[T]hat a contrary decision of another examiner reviewing a substantially similar claim” was material . . . because a “rejection of a substantially similar claim refutes, or is inconsistent with the position that those claims are patentable, [the] adverse decision by another examiner . . . meets the materiality standard.
Interestingly, while the CAFC noted inconsistencies in the arguments between the continuation and the reexamination, the court found it immaterial that both proceedings ultimately withdrew rejections with respect to the prior art at issue(the "Johnson patent"):
We acknowledge that the ’039 Continuation examiner later withdrew his rejection based upon the Johnson patent and came to the same ultimate conclusion as the Reexamination Panel—that the Johnson patent did not disclose the “extending into screen tracks” limitation. The ’039 Continuation examiner’s later view, however, does not change the fact that the Third Office Action contained valuable reasoning and rejections at the time when it was made. Importantly, during the time from when the Third Office Action issued to the time when the Fourth Office Action withdrew the pertinent rejection—more than a year—there was an adverse decision by another examiner that refuted, or was inconsistent with, the position that claim limitations of the ’998 patent were patentable over the Johnson patent. Accordingly, the Third Office Action was material.
With regard to the Fourth Office Action, the inconsistencies between the two proceedings with regard to a second prior art reference ("Kemp patent") was sufficient for materiality:
[T]he examiner explained in the Fourth Office Action that a [feature] was readily known in the prior art, and not just shown in the Kemp patent. Significantly, the Reexamination Panel, despite thoroughly analyzing the Kemp patent, as well as other prior art, failed to come to the same conclusion that the [feature] was disclosed in the Kemp patent or other prior art. Under these circumstances, the adverse decision of the examiner in the ’039 Continuation, based on a different explanation and interpretation of the Kemp patent and other prior art, was “clearly information that an examiner could consider important.”
Remanding the case back to the district court, the CAFC provided four points of guidance for determining the issue of deceptive intent.

(1) "it will not be necessary for the district court to accept additional evidence. Rather, the court should analyze all of the evidence of record, consistent with this opinion, and determine if Larson withheld the Third and Fourth Office actions with an intent to deceive the PTO."

(2) "materiality does not presume intent, and nondisclosure, by itself, cannot satisfy the deceptive intent element . . . While deceptive intent can be inferred from circumstantial evidence, the circumstantial evidence must still be clear and convincing . . . Further, 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 to meet the clear and convincing standard."

(3) "the district court should take into account any evidence of good faith, which militates against a finding of deceptive intent . . . However, while the court must consider any such evidence provided, the patentee is not required to offer evidence of good faith unless the accused infringer first meets its burden to prove—by clear and convincing evidence—the threshold level of deceptive intent."

(4) "If the district court satisfies itself—in light of all the evidence and consistent with our materiality findings—that Aluminart has established a threshold level of intent by clear and convincing evidence, it will then be required to balance the levels of materiality and intent to determine if a finding of inequitable conduct is warranted."

Read/download the opinion here (link)

I write separately, however, 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 . . . 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 . . . 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.

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