## United States Court of Appeals for the Federal Circuit

04-1114, -1125 BRUNO INDEPENDENT LIVING AIDS, INC., Plaintiff-Appellant,

v. ACORN MOBILITY SERVICES LTD. and ACORN STAIRLIFTS, INC., Defendants-Cross Appellants.

Jeffrey A. McIntyre , Whyte Hirschboeck Dudek S.C., of Madison, Wisconsin, argued for plaintiff-appellant. Wi th him on the brief were Thomas M. Pyper and Cynthia L. Buchko . Also on the brief was C. Thomas Sylke , Sylke Law Offices LLC, of Milwaukee, Wisconsin. Michael E. Florey , Fish & Richardson P.C., P.A ., of Minneapolis, Minnesota, argued for defendants-cross appellants. With him on the brief were Chad A. Hanson , William R. Woodford , John A. Dragseth and Deanna J. Reichel

. Appealed from: United Stat es District Court for the We stern District of Wisconsin Judge Barbara B. Crabb

## United States Court of Appeals for the Federal Circuit

04-1114, -1125

BRUNO INDEPENDENT LIVING AIDS, INC., Plaintiff-Appellant,

v. ACORN MOBILITY SERVICES, LTD., and ACORN STAIRLIFTS, INC., Defendants-Cross Appellants.

________________________ DECIDED: January 11, 2005

________________________ Before LOURIE, GAJARSA, and LINN, Circuit Judges

. LOURIE, Circuit Judge

. DECISION Bruno Independent Living Aids, Inc. (“Bruno ”) appeals from the decision of the United States District Court fo r the Western District of Wisconsin awarding attorney fees to Acorn Mobility Services, Ltd. and Acorn Stai rlifts, Inc. (collectively “Acorn”) pursuant to 35 U.S.C. § 285 for an “exc eptional case,” predicated on a determination that Bruno engaged in inequitable conduct while prosecut ing United States Patent 5,230,405. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd. , 277 F. Supp. 2d 965 (W.D. Wis. 2003). In case we were to disturb the exceptional case finding, Acorn conditionally cross-appeals from the district court’s decisi on denying further discove ry on that issue.Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd. , No. 02-C-0391-C (W.D. Wis. June 9, 2003). We affirm. BACKGROUND Bruno manufactures and sells “stairlifts,” which are devices that allow persons with mobility impairments to a scend and descend stairways on a chair that travels along a rail. In November 1991, Bruno filed a patent application at the Un ited States Patent and Trademark Office (“PTO”) direct ed to a stairlift, which issued as the ’405 patent in July 1993. In July 2002, Bruno sued Acor n, a competitor, alleging in fringement of claims 5, 9, 10, and 15 of the ’405 patent. Duri ng discovery, Acorn produced numerous disclosures of prior art stairlifts that had not been considered by the patent examiner, and thereafter moved for summary judgment of noninfringement and invalidity. Admitting that the asserted claims were invalid in view of the pr ior art identified by Acorn, Bruno filed a reissue app lication at the PTO, the fate of which is immaterial to this appeal. In due course, the district court granted Acorn’s motion for summary judgment, 1 declaring claims 5, 9, 10, and 15 invalid. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd. , 286 F. Supp. 2d 1020 (W.D. Wis. 2003). Subsequently, Acorn accused Bruno of hav ing intentionally withheld invalidating prior art from the PTO, and asked the district court to declare the case “exceptional” for the purpose of awarding a ttorney fees under § 285. 2 Acorn also requested additional

1 In view of Bruno’s admission of inva lidity, the district court deemed the issue of infringement to be moot.

2 In a patent infringement suit, “[t]he court in ex ceptional cases may award reasonable attorney fees to the prev ailing party.” 35 U.S.C. § 285 (2000).

04-1114, -1125 2discovery to the extent the dist rict court required further evi dence to justify a fee award. Upon briefing by both parties, the district court declared the case exceptional after determining that Bruno had engaged in inequitable conduct while prosecuting the ’405 patent, and consequently denied Acorn’s motion for additional discovery. As the ground for its inequitable conduct det ermination, the district court found that Bruno had failed to disclose to the PTO information on several invalidating prior art stairlifts that Bruno had submitted to the Food and Drug Administration (“FDA”) in seeking approval to sell a stairlift covered by the ’405 patent. Observing that the disclosure to the FDA occurred concurrently with the prosecution of the ’405 patent, the district court—noting the absence of a credi ble, good faith explanat ion from Bruno for not disclosing the same information to t he PTO—inferred that the information had been withheld with deceptive intent. The distri ct court thereupon concluded that Bruno had engaged in inequitable conduct, which it deem ed sufficient to render the case exceptional for the purpose of imposing a fee award under § 285. Final judgment was entered in November 2003, in which Bruno was ordered to pay Acorn $399,459.32 in attorney fees. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd. , No. 02-C0391-C (W.D. Wis. Nov. 6, 2003). On appeal, Bruno challenges the district court’s determination of an exceptional case. In response, Acorn conditionally cr oss-appeals from the ruling denying additional discovery on that issue. We have jurisd iction pursuant to 28 U.S.C. § 1295(a)(1).

04-1114, -1125 3DISCUSSION Patent applicants 3 owe a “duty of candor and good fa ith” to the PTO. 37 C.F.R. § 1.56(a) (2004); see also Molins PLC v. Textron, Inc. , 48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty may constitute inequitable conduct, which can arise from a failure to disclose 4 information material to patentability, coupled with an intent to deceive or mislead the PTO. Molins , 48 F.3d at 1178. Materiality and intent must be established by clear and convincing evidence, Kingsdown Med. Consul tants, Ltd. v. Hollister, Inc. , 863 F.2d 867, 872 (Fed. Cir. 1988) , and then weighed “to determine whether the equities warrant a conclusi on that inequitable conduct occurred.” Molins , 48 F.3d at 1178. The ultimate determination of inequitable c onduct is therefore a matter “committed to the discretion of the trial cour t” and is reviewed for an abuse of discretion. Kingsdown , 863 F.2d at 876 ( en banc in relevant part). The underlying findings on materiality and intent are reviewed for clear error, and will not be disturbed on appeal in the absence of a “definite and firm convic tion” that a mistake has been made. Id. at 872. A. Knowledge of Prior Art In its inequitable conduct determination, the district court found that Bruno deliberately withheld from the PTO information on several invalidating prior art stairlifts,

3 In the context of an inequitable conduct determination, the “applicant” includes anyone under a duty to disclose material information to the PTO pursuant to 37 C.F.R. § 1.56, namely: the inventor, the prosecuting attorney or agent, and anyone associated with the inventor or the assi gnee who is substantively involved in the preparation or prosecuti on of the application. Molins PLC v. Textron, Inc. , 48 F.3d 1172, 1178 n.6 (Fed. Cir. 1995).

4 Because there is no general duty to c onduct a prior art search, there is no duty to disclose art of whic h an applicant is unaware. Am. Hoist & Derrick Co. v. Sowa & Sons, Inc. , 725 F.2d 1350, 1362 (Fed. Cir. 1984).

04-1114, -1125 4focusing its analysis on the “Wecolator” manufactured by The Cheney Company, among others. 5 While conceding awareness of the Wecolator’s existence during prosecution, Bruno contends that a duty to disclose did not ar ise because it had failed to appreciate the Wecolator’s materia lity at that time. We see no error in the distri ct court’s treatment of the Wecolator as prior art that was subject to the duty of discl osure. The record supports the district court’s finding that Bruno possessed actual knowledge of the Wecolator—and that it knew or should have known of its materiality. In an Ap ril 20, 1992 letter to the FDA, Bruno sought approval to sell its SRE-1500 stairlift, whic h was an embodiment covered by the thenpending application that matured into the ’405 patent. (J.A. 2198). In a paragraph labeled “Substantial Equivalence” in the FDA letter, William Belson, Bruno’s Director of Engineering, claimed that t he SRE-1500 stairlift was “simila r in design and function” to the units manufactured by “Cheney Manufacturing Inc.” Id. Product information on the “Weckalator” [sic] was listed as an enclosure with the FDA letter. (J.A. 2199). Bruno argues that its claim of “subst antial equivalence” between the SRE-1500 stairlift and the Wecolator was relevant onl y for the purpose of securing FDA approval, and that it had no bearing on whet her Bruno knew the Wecolator to be material prior art for purposes of patentability. Th is distinction is disingenuous in light of what the record reflects: the FDA submission was prepared by William Belson, who was also involved in

5 The Wecolator is one of three prior ar t stairlifts analyzed by the district court. Because the circumstances surroundi ng Bruno’s failure to disclose information on the Wecolator alone provide sufficient grounds for sustaining the inequitable conduct determination, we need not address the distri ct court’s treatment of the other two stairlifts—the American St air-Glide models 37 and 65. See GFI, Inc. v. Franklin Corp. , 265 F.3d 1268, 1275 (Fed. Cir. 2001).

04-1114, -1125 5the prosecution of the ’ 405 patent and had asked Bruno’s pat ent attorney to conduct a prior art search in preparation for filing t he patent application. (J.A. 2859-61). More importantly, Bruno’s distincti on is not persuasive because “ an applicant who knew of the art or information cannot intentionally avoid lear ning of its materiality . . . it may be found that the applicant ‘should have know n’ of that materiality.” FMC Corp. v. Manitowoc Co. , 835 F.2d 1411, 1415 (Fed. Cir. 1987) (footnote omitted). A ccordingly, we are not persuaded that the district court clearly e rred in charging Bruno with knowledge of the Wecolator’s materiality. B. Materiality Regardless whether it knew the Wecolator to be invalidating prior art, Bruno argues that the Wecolator is simply not ma terial, but rather is cumulative, to the information submitted to the PTO, such t hat its nondisclosure cannot provide a ground for finding inequitable conduct. We do not agree. In evaluating materiality, we have consis tently referred to the definition provided in 37 C.F.R. § 1.56, by which the PTO has promulgated the dut y of disclosure. See,
e.g. , Critikon, Inc. v. Becton Di ckinson Vascular Access, Inc. , 120 F.3d 1253, 1257 (Fed. Cir. 1997) (discussing the version of the rule in effect since 1992); J.P. Stevens & Co. v. Lex Tex Ltd. , 747 F.2d 1553, 1559 (Fed. Cir. 1984) (applying the pre-1992 version of the rule). In 1992, the definition of materia lity in 37 C.F.R. § 1.56 was revised. As defined in the current versi on of the rule, information is material to patentability when: [I]t is not cumulative to information al ready of record or being made of record in the application, and (1) It establishes, by itself or in combination with other information, a prima facie case of unpatent ability of a claim; or

04-1114, -1125 6(2) It refutes, or is inconsistent with , a position the applicant takes in: (i) Opposing an argument of unpatent ability relied on by the Office, or (ii) Asserting an argument of patentability

. 37 C.F.R. § 1.56(b) (2004) (e mphases added). According to the PTO’s notice of final rulemaking, the rule change applied to all applications pending or filed after March 16, 1992. Duty of Disclosure, 57 Fed. Reg. 2021 (Jan. 17, 1992). Thus, the new rule was applicable during the prosecution of the ’405 patent, and we evaluate the materiality of the Wecolator under the standard set forth in the applicable amended rule. In doing so, we give deference to the PTO’s formulati on at the time an application is being prosecuted before an examiner of the standard of conduct it expects to be followed in proceedings in the Office. In light of this def inition, we discern no error in the district court’s finding of materiality based on its assessment that the disclosure of the Wecolator to the PTO would have precl uded Bruno from advanci ng certain arguments in favor of patentability. Specifically, the prosecut ion history shows that Bruno amended the claim that eventually issued as claim 15 “to more clearly define the novel and nonobvious attributes,” (J.A. 911), by adding a limitation that r equired the stairlift’s swivel seat to have an off-center pivot that was proximate to the front edge of the seat. (J.A. 906). Claim 15, as issued, reads as follows: A chairlift device comprising: a) a rail; b) a carriage unit housing motor means operatively engaging said rail, said carriage unit moving between first and second terminal positions on said rail; c) a seat assembly mounted to said carriage unit, said seat assembly comprising: i) a seat bracket having a fr ont edge and a rear edge, a backrest being mounted at said rear edge of said bracket;

04-1114, -1125 7ii) a swivel tube fixed to the bottom of said seat bracket proximate to said front edge of said bracket ; iii) a swivel mounting bracket fixed to the top of said carriage unit and mounted to said carriage unit proximate to the front of said carriage unit ; iv) means for selectively locking said seat assembly in a preselected position; wherein said swivel tube coaxially fits within said swivel mounting bracket and further wherein said swivel tube is free to rotate axially within said swivel mounting bracket. ’405 patent, col. 11, l. 22 through col. 12, l. 15 (emphases added). In patentably distinguishing the amended claim over the prior art, Bruno argued to the PTO that: Claim [15] now calls for the swiv el tube and mounting bracket to be mounted proximate to the front edge of the carriage unit and seat assembly. This feature provides several advantages neither taught nor suggested by the references cited by the Examiner. . . . [H]aving a front offset pivot poi nt for the seat allows the rail and other components of the chai rlift to be mounted closer to the wall of the stairway than seats having center pivo t points as shown in the prior art. (J.A. 911-12). Had the examiner known about the Weco lator, however, Bruno could not have touted the front offset swivel as a point of novelty. According to the deposition testimony of Robert Bartelt, the sole named inventor on the ’405 patent, the Wecolator had an optional seat assembly with an off- center swivel that provided similar advantages over the prior ar t seats having center pivots. (J.A. 2532-33). The Wecolator, therefore, satisf ies the criteria for materia lity specified in 37 C.F.R. § 1.56(b)(2)(ii). Nevertheless, Bruno insists that the Wecolator was cumulative to the prior art of record in view of its submi ssion of United States Pa tent 4,913,264 (“Voves”) to the PTO. We disagree; unlike the Wecolator, the stairlift disclosed in Voves does not have a seat assembly with an offset swivel, but rather one that has a center pivot.

04-1114, -1125 8Thus, on the evidence presented, we do not consider the di strict court’s finding of materiality to be clearly erroneous. C. Intent Finally, Bruno ascribes error to the dist rict court’s reliance on so-called “negative inferences” to support its fi nding that Bruno acted with decept ive intent in failing to disclose the Wecolator to the PTO. Bruno also accuses the district court of misstating facts and according insufficient weight to certain evidence. Based on our review of the record, thes e contentions do not warrant reversal. While the district court indeed provided little exp licit support for its finding of intent, it is well established that, as an appellate tribunal , we review judgments, not opinions. See Black v. Cutter Labs. , 351 U.S. 292, 297 (1956); Stratoflex, Inc. v. Aeroquip Corp. , 713 F.2d 1530, 1540 (Fed. Cir. 1983). We therefore focus our review on whether there is sufficient evidence in the record to sustain the judgment of intent to deceive the PTO. Consol. Aluminum Corp. v. Foseco Int’l Ltd. , 910 F.2d 804, 814 (Fed. Cir. 1990) (“An appellate court need not close its eyes to the record where . . . there is a way clearly open to affirm the district court’s action.”). In the present case , we find sufficient evidence based upon which a fair in ference of deceptive intent ma y be drawn, in view of the high materiality of the Wecolator. See Brasseler, U.S.A. I, L. P. v. Stryker Sales Corp. , 267 F.3d 1370, 1381 (Fed. Cir. 2001) (“When balanced against high materiality, the showing of intent can be proportionally less.”). “Intent need not, and rarely can, be proven by direct evidence.” Merck & Co., Inc. v. Danbury Pharmacal, Inc. , 873 F.2d 1418, 1422 (Fed. Cir. 1989). Rather, in the absence of a credible explanation, intent to deceive is genera lly inferred from the facts

04-1114, -1125 9and circumstances surrounding a knowing failure to disclose material information. See Paragon Podiatry Lab., Inc. v. KLM Labs. Inc. , 984 F.2d 1182, 1193 (Fed. Cir. 1993). The particular facts and circumstances of the present case correspond in all relevant aspects to those cases in which we have uphel d inferential findings of deceptive intent on similar key evidence. See, e.g. , LaBounty Mfg., Inc., v. United States Int’l Trade Comm’n , 958 F.2d 1066, 1076 (Fed. Cir. 1992) (ruling that inferenc e of deceptive intent was supported by evidence of applicant ma king patentability argument s that could not have been made had the withheld prior art been disclosed); Merck , 873 F.2d at 1420-22 (ruling that inference of dec eptive intent was supported by “damning” evidence that included applicant having submitted mate rial information to the FDA while simultaneously withholding it from the PTO, and attempting to explain the disparity of its FDA and PTO submissions in a way that “strains credulity”). The fact that an official of Bruno, who was involved in both the FDA and PTO submissions, chose to disclose the Wecolator to the FDA, but not to the PT O, certainly supports a finding of deceptive intent to withhold the disclosure from the PTO. More importantly, Bruno has not pro ffered a credible explanation for the nondisclosure, and an inference of deceptive in tent may fairly be drawn in the absence of such an explanation. Cf. Dayco Prods., Inc. v. Total Containment, Inc. , 329 F.3d 1358, 1367 (Fed. Cir. 2003) (“Intent to deceive cannot be inferred simply from the decision to withhold the reference where t he reasons given for the withholding are plausible.”). Normally, it can be expected t hat an innocent party will be motivated to try to present convincing reasons for its actions or inaction. That did not occur here.

04-1114, -1125 10Accordingly, we cannot assign cl ear error to the district court’s inferential finding that Bruno intentionally withheld the Wecolator prio r art in an attempt to mislead the PTO. Because the district court’s findings on materiality and intent were not clearly erroneous, there was no abuse of discretion in its determinati on that Bruno procured the ’405 patent through inequitable conduct. Be cause inequitable conduct can be one of several bases sufficient to make a case exceptional for the pur pose of awarding attorney fees under § 285, see A.B. Chance Co. v. RTE Corp. , 854 F.2d 1307, 1312 (Fed. Cir. 1988), we do not find reversible e rror in the determinatio n of an exceptional

case. We have considered the parties’ other arguments and conclude that they are either unpersuasive or unnecessary for resolution of this appeal. CONCLUSION For the foregoing reasons, we conclude that the district court did not err in its determination of an exceptional case bas ed on its determination that Bruno committed inequitable conduct. Acorn’s cross-appeal for additional discovery has been accordingly rendered moot. Because Bruno’s appeal was not frivolous, we deny Acorn’s motion for an award of double costs and attorney fees under Fed. R. App. P. 38. AFFIRMED

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