Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_03-cv-01431/USCOURTS-cand-4_03-cv-01431-35/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

---

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 1

Daniel J. Furniss (State Bar No. 73531) djfurniss@townsend.com 

TOWNSEND AND TOWNSEND AND CREW LLP 

379 Lytton Avenue 

Palo Alto, California 94301 

Telephone: (650) 326-2400 

Facsimile: (650) 326-2422 

Michael J. Abernathy (pro hac vice) mabernathy@bellboyd.com 

Alan L. Barry (pro hac vice) abarry@bellboyd.com 

Thomas L. Gemmell (pro hac vice) tgemmell@bellboyd.com 

Sanjay K. Murthy (pro hac vice) smurthy@bellboyd.com 

Bell, Boyd & Lloyd LLC 

70 West Madison Street, Suite 3100 

Chicago, IL 60602 

Telephone: (312) 372-1121 

Facsimile: (312) 827-8000 

Patrick J. Kelleher (pro hac vice) pkelleher@gcd.com 

GARDNER CARTON & DOUGLAS LLP 

191 North Wacker Drive, Suite 3700 

Chicago, Illinois 60606 

Telephone: (312) 569-1000 

Facsimile: (312) 569-3000 

Joseph P. Reagen (pro hac vice) joseph_reagen@baxter.com 

BAXTER HEALTHCARE CORPORATION 

One Baxter Parkway 

Deerfield, Illinois 60015 

Attorneys for Defendants/Counter-Plaintiffs 

BAXTER INTERNATIONAL INC. and 

BAXTER HEALTHCARE CORPORATION 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

FRESENIUS USA, INC., a Massachusetts 

corporation; and FRESENIUS MEDICAL 

CARE HOLDINGS, INC., a New York 

corporation, 

Plaintiffs/Counter-Defendants,

v. 

BAXTER INTERNATIONAL INC., a 

Delaware corporation; and BAXTER 

HEALTHCARE CORPORATION, a Delaware 

corporation, 

Defendants/Counter-Plaintiffs.

Case No. C-03-1431 SBA (EDL) 

 

FINDINGS OF FACT AND 

CONCLUSIONS OF LAW 

RELATING TO FRESENIUS’ 

INEQUITABLE CONDUCT 

DEFENSE 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 1 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 2

1. Plaintiffs/Counter-defendants in this litigation, Fresenius Medical Care Holdings 

Corp. and Fresenius USA, Inc. (collectively “Fresenius”) have alleged in their counterclaims against 

Defendants/Counterclaimants Baxter International, Inc. and Baxter Healthcare Corp. (collectively 

“Baxter”) that United States Patent Nos. 5,247,434 (‘434 Patent) and 6,284,131 (‘131 Patent) are 

unenforceable by reason of inequitable conduct. 

2. Regarding the ‘434 Patent, Fresenius contends that the prosecuting attorney, Donald 

Stephens, violated his duty of candor to the Patent and Trademark Office (PTO) by not bringing 

United States Patent No. 4,370,983 (“the Lichtenstein ‘983 Patent” or “Lichtenstein”) [Trial Ex. 75] 

to the Examiner’s attention before the September 21, 1993 issuance of the ‘434 Patent. 

3. Regarding the ‘131 Patent, Fresenius alleges that Baxter made false statements to the 

PTO during the prosecution of U.S. Patent Application 09/067,922 (“the ‘922 Application”). 

4. Trial commenced in this matter on June 19, 2006. On June 30, 2006, the jury, sitting 

as an advisory jury under Fed.R.Civ.P. 39(c), returned advisory verdicts in the form of Special 

Interrogatories [Dkt. # 828] in favor of Baxter on both theories of inequitable conduct. 

5. Pursuant to Fed.R.Civ.P. 52, the Court makes the following Findings of Fact and 

Conclusions of law. (To the extent any finding of fact, as stated, could be more properly considered 

a conclusion of law, and vice versa, it shall be so deemed.) Based on the evidence presented by the 

parties during the trial, this Court’s weighing of that evidence as to its persuasiveness in light of the 

applicable burdens of proof, this Court’s ability to observe the witnesses and make credibility 

determinations, the jury’s advisory answers to the Special Interrogatories, and the arguments of 

counsel, this Court both rejects Fresenius’ inequitable conduct defense and affirms the enforceability 

of the ‘434 and ‘131 Patents. The Court will enter judgment in favor of Baxter on that defense. 

FINDINGS OF FACTS

I. Allegations Concerning Lichtenstein

6. On April 19, 1991, Althin Medical Inc. (Baxter’s predecessor-in-interest) filed United 

States Patent Application No. 07/688,174 (“the ‘174 Application”). On March 23, 1993, the PTO 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 2 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 3

issued a Notice of Allowance for the claims of the ‘174 Application. On September 21, 1993, the 

‘174 Application issued as United States Patent No. 5,247,434. [Trial Ex. 1]. 

7. During pendency of the ‘174 Application, Althin filed a second application: United 

States Patent Application No. 07/975,523 (“the ‘523 Application”). On May 4, 1993, the Examiner 

rejected certain claims of the ‘523 Application as unpatentable over other references in combination 

with the Lichtenstein ‘983 Patent. [Trial Ex. 4]. 

8. In a September 23, 1993 response, Mr. Stephens successfully distinguished the 

Lichtenstein ‘983 Patent from the claims of the ‘523 Application. In fact, the examiner adopted Mr. 

Stephens’ reasoning as the basis for allowance. On July 9, 1994, the ‘523 Application issued as the 

‘476 Patent. [Trial Ex. 3]. 

9. The ‘434 Patent is the parent of the ‘476 Patent. At the time of the May 4, 1993 

Office Action, the claims of the ‘174 Application were allowed, but had not issued. Thus, Fresenius 

contends that the Lichtenstein ‘983 Patent was material to the co-pending ‘174 Application — a fact 

allegedly brought to Mr. Stephens’ attention by the May 1993 Office Action. In failing to raise the 

Lichtenstein ‘983 Patent before the ‘434 Patent issued, Fresenius alleges that Mr. Stephens violated 

his duty of candor to the PTO. 

Intent to Deceive the PTO

 10. Mr. Stephen Kunin was Fresenius’ only witness on this topic. He admitted that he 

was not offering any testimony concerning Mr. Stephens’ knowledge. [June 23, 2006 Tr. 621:6-10 

(“what was going on in Mr. Stephens’ mind”); see also June 23, 2006 Tr. 662:24—663:16]. Further, 

he confessed (by pre-trial deposition read to him at trial) that “I have no evidence of intent or intent 

to deceive.” [June 23, 2006 Tr. 659:5-6]. 

 11. At best, Mr. Kunin testified simply that the May 1993 Office Action in the 

application that led to the ’476 patent was mailed to Mr. Stephens along with the Lichtenstein ’983 

patent. [June 23, 2006 Tr. 633:12-19]. 

 12. That Lichtenstein was placed in the mail in May 1993, two months after the PTO 

issued a March 1993 Notice of Allowability in the ’434 application, falls far short of Fresenius’ 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 3 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 4

burden to prove by clear and convincing evidence that Mr. Stephens believed Lichtenstein to be 

material to the ’434 application but deliberately decided not to disclose it in an attempt to deceive 

the PTO.1 

13. Fresenius failed to offer clear and convincing evidence that Mr. Stephens knew, or 

should have know, Lichtenstein was applicable to the ‘174 Application.2 Fresenius has failed to 

offer proof of when Mr. Stephens became aware of the Lichtenstein reference and has failed to offer 

any evidence that Mr. Stephens ever read the portions of the Lichtenstein that Fresenius alleges are 

material to the patentability of the ‘434 patent. In the absence of such evidence, the Court cannot 

find that Mr. Stephens knew of material information that was not disclosed, that he ever considered 

whether Lichtenstein bore on the patentability of the ‘434 patent (for which a Notice of Allowability 

had issued before Lichtenstein was cited in the ‘523 application), or that the reason Lichtenstein was 

not cited is that Mr. Stephens intended to deceive the PTO. 

Materiality

14. Additionally, Fresenius has not proven Lichtenstein to be material. Mr. Kunin was 

qualified as an expert witness on the topic of “patent law, patent examination, policy, practice, and 

procedure.” [June 23, 2006 Tr. 617:5-6]. He did not purport to be an expert in the relevant art who 

could opine whether Lichtenstein truly was material. Although Mr. Kunin attempted to identify 

passages in Lichtenstein supposedly inconsistent with Mr. Stephens’ arguments, Mr. Kunin is not 

qualified to render expert testimony on what Lichtenstein actually teaches. Rather, he expressly 

testified that he relied upon the opinion of Mr. Causey to support his opinion concerning inequitable 

conduct as to the ‘434 patent.. [June 23, 2006 Tr. 619:25 — 620:5]. 

 

1

 Fresenius could have called Mr. Stephens to the stand, but did not. On Thursday morning, June 

22, Fresenius told Baxter that it would play designated portions of Mr. Stephens’ deposition. 

Then, on Thursday afternoon, Fresenius advised that it would not present Mr. Stephens’ 

testimony. 

2

 At the time of the May 4, 1993 Office Action for the CIP ‘523 application that referenced 

Lichtenstein, the duty of candor and good faith owed to the PTO applied to all information 

“known to that individual to be material to patentability.” See 37 U.S.C. § 1.56 (1993) 

(emphasis added). 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 4 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 5

15. But, when specifically asked, Mr. Causey was unable to identify any teaching in 

Lichtenstein that was not already taught in either the Rubalcaba or Kerns patents that were before the 

PTO during prosecution of the PTO. The following occurred during the direct examination of Mr. 

Causey: 

Q. Do you have an expert opinion as to whether the Lichtenstein patent 

would have been material to the patentability of the asserted ‘434 patent claims? 

MR. ABERNATHY: Objection, your Honor, beyond foundation and 

scope of the tendered expertise, calling for a legal conclusion. 

* * * 

[Sidebar held.] 

* * * 

THE COURT: So you’re withdrawing the last question? 

MR. SAMUEL: Withdraw the prior question. 

THE COURT: Okay. 

* * * 

Q. Can you tell the ladies and gentlemen of the jury what, if anything is 

disclosed in Lichtenstein that is not disclosed in either the Kerns or Rubalcaba 

patents. 

A. I don’t think there is anything. 

MR. ABERNATHY: I’m sorry? 

THE WITNESS: I can’t recall what is — what’s different at this point. 

MR. SAMUEL: No further questions. 

THE COURT: Okay. 

MR. SAMUEL: Actually, may I have a minute? 

THE COURT: Yes 

(Pause in the proceedings.) 

MR. SAMUEL: No further questions. 

THE COURT: Okay. Thank you. 

I just want to clarify the last answer, if I may, ‘cause the court reporter 

wrote the first answer was “I don’t think there is anything,” and then when 

counsel said he didn’t hear, the answer was “I can’t recall what is different at this 

time.” 

Which is your answer? 

THE WITNESS: I can’t recall which is different. 

THE COURT: Okay. Thank you. 

[June 26, 2006 Tr. 854:3-8; 856:24 — 857:1; 857:12—858:8 (emphasis added)]. 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 5 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 6

16. Based on this testimony, Fresenius has not shown that Lichtenstein was not 

cumulative of the Kerns and Rubalcaba references before the PTO. Accordingly, there was no 

opinion of Mr. Causey for Mr. Kunin to rely upon. The Court finds that there was a failure of proof 

on the issue of materiality. To the extent there was any substantive evidence offered on the 

materiality of Lichtenstein, the Court finds it unpersuasive and insufficient to carry the clear-andconvincing burden of proof. Accordingly, the Court cannot agree with the Advisory Jury’s answer 

to the Special Interrogatory on this element. 

II. Allegations Concerning “Extensive Innovation” Remark

17. On May 29, 1998, Althin filed United States Patent Application No. 09/067922 (“the 

‘922 Application”). On June 6, 1999, the Examiner allowed Claim 36 of the ‘922 Application. 

While Baxter subsequently filed Claim 36 as part of United States Patent Application No. 

09/689503, the remaining claims of the ‘922 Application were abandoned. On September 4, 2001, 

Claim 36 issued as Claim 1 of United States Patent No. 6,284,131. [Trial Ex. 7].

18. During prosecution of the ‘922 Application, Mr. Stephens made the following 

argument: 

Neither Lichtenstein nor Weiss provides any teaching or suggestion 

whatsoever as to why a touch screen would be beneficial or desirable in a 

hemodialysis machine, how a touch screen could be incorporated with a 

hemodialysis machine, what operating parameters of the hemodialysis 

machine could be controlled using the a touch screen, or how data 

concerning and operating parameters of such a machine could be 

displayed and/or changed using an touch screen. Providing a 

hemodialysis machine with a touch screen is not the same as simply 

adding a different style gauge to, or changing the arrangement of manual 

controls on the front panel of the machine. Rather, providing a 

hemodialysis machine with a touch screen requires extensive innovation in 

hardware and software. 

[Trial Ex. 13]. 

19. Fresenius alleges that Mr. Stephens violated his duty of candor by arguing, 

“providing a hemodialysis machine with a touch screen requires extensive innovation in hardware 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 6 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 7

and software.” Fresenius contends that it is untrue that “extensive innovations” occurred in the 

inventions-in-suit. 

Intent to Deceive the PTO

 20. Fresenius’ “extensive innovation” theory faces the same fatal flaws as Fresenius’ 

Lichtenstein allegations. Fresenius presented no evidence, let alone clear and convincing evidence, 

that Mr. Stephens (1) personally believed the “extensive innovation” statement was false, or 

(2) personally intended to deceive the PTO by making a false statement. Indeed, Mr. Kunin 

confessed that he “do[es]n’t know” whether Mr. Stephens was speaking about the entire integration 

of the patented hemodialysis system, as opposed to simply plugging in a touch screen. [June 23, 

2006 Tr. 665:17-19]. 

 21. In the absence of evidence that Mr. Stephens did not believe his “extensive 

innovation” remark, Fresenius cannot prevail. Even if the “extensive innovation” statement were 

untrue (which Fresenius has not proven), this failure of proof on the essential elements of knowledge 

and intent dooms Fresenius’ defense. 

Materiality

 22. Once again, Fresenius also failed to prove that this kind of attorney argument to the 

PTO was material. The Court notes that the advisory jury also reached this conclusion. Examiners 

are “free to accept or reject” this type of attorney argument. Life Techs. Inc. v. Clontech Labs. Inc., 

224 F.3d 1320, 1326 (Fed.Cir. 2000). Furthermore, Fresenius’ assertion of untruth is integrally tied 

to Fresenius’ repeated mischaracterization of the inventions-in-suit as involving nothing but 

plugging a touch screen into a hemodialysis machine. That description does not accurately describe 

the scope of the claims-in-suit, and thus the inventions. Without tackling what the inventions-in-suit 

really are, Fresenius has not even undertaken its burden (let alone carried it) to prove that the 

“extensive innovations” remark was a material misstatement. 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 7 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 8

CONCLUSION OF LAW

23. Under 37 C.F.R. § 1.56, “[e]ach individual associated with the filing and prosecution 

of a patent application owes has a duty of candor and good faith in dealing with the Office, which 

includes a duty to disclose to the Office all information known to that individual to be material to 

patentability . . . ” In general, the duty of candor extends to each inventor named in the application, 

each attorney or agent that prepares of prosecutes the application and “every other person who is 

substantially involved in the preparation or prosecution of the application.” 

24. Information is material when it is not cumulative to information already before the 

Office and either establishes a prima facie case of unpatentability or opposes an argument of 

patentability relied upon by the office 

25. The defense of inequitable conduct arises in situations where the duty of good faith is 

breached by intentionally misleading the Patent Office with respect to material information. 

Demaco Corp. v. F. Von Langsdorff Licensing, Ltd., 851 F.2d 1387, 1394 (Fed. Cir. 1988). 

Culpable acts of inequitable conduct may include a misrepresentation, a misleading statement, or an 

omission. 

26. A holding of inequitable conduct requires a showing of two elements: (1) materiality, 

and (2) intent to mislead or deceive the patent examiner. Manville Sales Corp. v. Paramount Sys., 

Inc., 917 F.2d 544, 551 (Fed.Cir.1990). Each of these elements must be shown by clear and 

convincing evidence. Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 872 

(Fed.Cir. 1988); Ajinomoto Co., Inc. v. Archer-Daniels-Midland Co., 228 F.3d 1338, 1344-45 

(Fed.Cir. 2001). 

27. If either materiality or intent is not found, then no further analysis need be performed 

and unenforceability must be denied. Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 

F.3d 1253, 1256 (Fed.Cir.1997). See Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d 1253, 1261 

(Fed.Cir. 2001) (failure to show either materiality or deceptive intent ends the analysis—there is no 

inequitable conduct). 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 8 of 9
1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

[PROPOSED] FINDINGS OF FACT AND CONCLUSIONS OF LAW 

REGARDING FRESENIUS’ INEQUITABLE CONDUCT DEFENSE 

CASE NO. C 03-1431 SBA (EDL) 

 9

28. If the threshold requirements of materiality and intent are establised, “those fact 

findings are balanced to make the determiation whether ‘the scales tilt to a conclusion that 

inequitable conduct occurred.’” Manville, 917 F.2d at 551 (internal citation omitted). “[T]he more 

material the omission or the misrepresentation, the lower the level of intent required to establish 

inequitable conduct, and vica versa.” Critikon, 120 F.3d at 1256 

29. “Materiality of an undisclosed reference does not presume an intent to deceive.” 

Halliburton Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1442 (Fed.Cir. 1991). Nor does gross 

negligence alone justify an inference of intent to deceive. Id.; Ajinomoto, 228 F.3d at 1344-45; 

Kingsdown, 863 F.2d at 876; FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 n.9 (Fed.Cir. 

1987) (same); Baxter Int’l, Inc. v. Mcgaw, Inc., 149 F.3d 1321, 1329 (Fed.Cir. 1998)]. Instead, “[a]n 

applicant's conduct in its entirety must ‘manifest a sufficiently culpable state of mind to warrant a 

determination that it was inequitable.’” Id. at 1443 (quoting Consol. Aluminum Corp. v. Foseco Int’l 

Ltd., 910 F.2d 804, 809 (Fed.Cir. 1990)). “In determining whether [misstatements are] intentional, 

‘the involved conduct, viewed in light of all the evidence, including evidence of good faith, must 

indicate sufficient culpability to require a finding of intent to deceive.” 

30. After considering all of the evidence presented at trial, the Court finds that Fresenius 

has failed to carry its burden to prove by clear and convincing evidence that inequitable conduct 

occurred. Juicy Whip Inc. v. Orange Bang Inc., 292 F.3d 728, 744-745 (Fed.Cir. 2002) (infringer 

could not prevail “because Orange Bang failed to present any evidence that the Strattons knew or 

considered the Bowers declaration to contain anything untrue”). 

31. The ‘434 and ‘131 Patents are not unenforceable. 

32. On this defense, judgment shall issue in favor of Defendants/Counterclaimants Baxter 

and against Plaintiffs/Counter-defendants Fresenius. 

IT IS SO ORDERED: 

DATED: 7/31/06 ____________________________________ 

 SAUNDRA BROWN ARMSTRONG 

 United States District Court Judge 

CH01/ 12480478.3 

Case 4:03-cv-01431-PJH Document 850 Filed 07/31/06 Page 9 of 9