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Timestamp: 2018-02-25 07:50:35
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Matched Legal Cases: ['§ 271', '§271', '§ 271', '§ 271', 'art 1', 'art 2', '§ 706', '§ 706']

science | The Prince Firm, LLC
Posted on March 7, 2012 by Paulana	| 1 Comment
Posted on February 27, 2012 by Paulana
American Electric Power v. Connecticut: The Dog That Did Not Bark
So, it’s that time of year again, campers. It’s the time when all the law nerds gather ’round expectantly and philosophize over the Supreme Court’s final opinions of the term.
And it’s no different here at the Appellate Record. We yield to no one in our lack of a rich inner life.
Lately, the talking heads were all agog about the American Electric Power opinion, how these global warming lawsuits were dead without an “activist court.”
It is astounding how much is written and how little is decided in some opinions. It’s as if the court gasps an audible “whoops,” and side steps the big issue, only to leave a muddy footprint there on the carpet to nevertheless show where it has been.
The recent case of American Electric Power v. Connecticut is just such a case. Like the famous dog from the Sherlock Holmes mystery, The Silver Blaze, the opinion is notable for what the Court did not say. Indeed, what the Court could not say.
American Electric Power v. Connecticut was one of a number of disputes from around the country where plaintiffs sued select emitters of greenhouse gasses for despoiling the planet with their CO2. (Query if long winded counsel could be joined as potentially responsible parties.)
Recall the prior Appellate Record post about how the Fifth Circuit got itself tied in knots and could not even review the issue of whether such a case presented a justiciable question–that is, plaintiffs picking a few corporations from among the billions of CO2 emitters on the planet and suing them for the nuisance of a warming earth to be caused in the future by omitting more CO2.
(Did you like the way I masked my own personal slant on that subject? Journalistic standards.)
So bow-tie-wearing lawyers like me everywhere were all a-quiver wondering what the Supreme Court would do with the first case that came along. Whack it on the noggin? Or stretch justiciability and allow it to proceed?
Answer: none of the above. Because eight is an even number and eight is all the judges they had.
The Second Circuit had found the case to be justiciable, and the Supreme Court deadlocked at four to four because Sonja Sotomayor, late of the Second Circuit, was recused.
Lacking a majority either way, the justiciability ruling contained in the Second Circuit’s terse little 139 page opinion was affirmed by default. And the court moved onto the question of whether there was a federal common law nuisance action given the EPA‘s move to fill the gap and regulate greenhouse gasses.
But what about a state common law nuisance action?
Would it be preempted?
Who knows? That question was remanded.
Justiciable?
Maybe. Depending upon which circuit (or state court) you ask.
Maybe not if you bring an odd number of judges next time.
So is there such a thing as a global warming nuisance claim? Ask the dog that did not bark.
Many years and many dollars from now.
Personal Jurisdiction Lacking Despite Twenty Internet Users from Forum State Signing Up for Defendant’s Website
Considering whether a New Jersey website operator was subject to personal jurisdiction in Illinois, the U.S. Court of Appeals for the Seventh Circuit held that for personal jurisdiction to arise, a defendant must in some way target the forum state’s market in addition to operating an interactive website that is accessible from the forum state. be2 LLC v. Ivanov, Case No.10-2980 (7th Cir., Apr. 27, 2011) (Hamilton, J.)
The plaintiffs operated an international internet dating website at the domain name be2.com. The plaintiff’s U.S. affiliate was located in Delaware. Defendant Nikolay Ivanov, an individual alleged to be the co-founder of a competing internet dating website, was located in New Jersey. The plaintiffs brought a federal trademark infringement action against Ivanov in Illinois, based upon his operating of an internet dating website at the domain name be2.net. The district court entered default judgment against Ivanov after the defendant failed to answer the complaint and attend a scheduled status hearing. Ivanov appeared for the first time through counsel after the entry of default judgment against him, filing a motion to vacate the judgment as void for want of personal jurisdiction. Ivanov argued that he was not subject to personal jurisdiction in Illinois because, among other things, he was not the co-founder or CEO of the competing internet dating company and he had never set foot in Illinois. Ivanov’s sworn declaration, however, contained several unbelievable representations. For example, the defendant claimed that the website reference to him as “CEO” actually meant to communicate that he was the website’s “Centralized Expert Operator,” who merely translated content on the website from Bulgarian to English. The district court denied Ivanov’s motion, and he appealed.
Although the Seventh Circuit recognized that Ivanov’s declaration contained “preposterous” claims, the court nonetheless reversed the district court and remanded the case with instructions to vacate the judgment and dismiss the plaintiffs’ complaint for lack of personal jurisdiction. The court performed a “minimum contacts” analysis to determine whether personal jurisdiction was proper. Toward the “purposeful availment” factor, the court considered whether Ivanov had “purposely exploited the Illinois market” to determine if his contacts with the state were sufficient to confer personal jurisdiction. The plaintiffs had submitted evidence showing that 20 persons who listed Illinois addresses had at some point created free dating profiles on Ivanov’s website. Even assuming that those 20 individuals were active users of Ivanov’s website and were actually located in Illinois, the court determined that such contacts, without more, were attenuated contacts that did not subject the defendant to personal jurisdiction in Illinois. In so holding, the court noted that there was no evidence of any interactions between Ivanov and the 20 individuals. Further, the court reasoned that the evidence submitted showed that the 20 individuals may have created their dating profiles unilaterally by simply stumbling upon Ivanov’s website and clicking a button that automatically published their dating preferences online. Without additional evidence showing that the defendant targeted or exploited the Illinois market, the court could not find that Ivanov availed himself of the privilege of doing business in the state.
Posted on June 14, 2011 by Paulana
Joint (Direct) Infringement Still Requires Control … But Stay Tuned
A sharply divided panel of the U.S. Court of Appeals for the Federal Circuit, addressing the requirements for direct infringement if more than one party performs the steps of the patented method, ruled that the doctor-patient relationship was insufficient to show that the patient was acting under the direction or control of the doctor. McKesson Techs. Inc. v. Epic Sys. Corp., Case No. 10-1291 (Fed. Cir. Apr. 12, 2011) (Linn, J.) (Bryson, J. concurring) (Newman, J., dissenting).
McKesson’s patent is directed to a method of electronic communication between healthcare providers and patients involving personalized web pages for doctors and their patients. Epic’s MyChart software allows healthcare providers to associate medical records with a personalized web page. Epic did not directly use the software, but licensed MyChart to doctors who provided the software as an option for their patients’ use. McKesson sued Epic for inducement of infringement. Both McKesson and Epic agreed that the first step of McKesson’s method claim (“initiating a communication”) was performed by the patient, while the remaining steps were performed by doctors. McKesson alleged that this was sufficient to attribute the “initiating a communication” step to the doctors. The district court disagreed and granted summary judgment in favor of Epic. McKesson appealed.
The panel affirmed the district court’s ruling, stating that under BMC Resources v. Paymentech (see IP Update, Vol. 10, No. 10), Muniauction v. Thomson (see IP Update, Vol. 11, No. 7) and Akamai Techs. v. Limelight Networks (see IP Update Vol. 14, No. 1), which was vacated by an en banc order (see IP Update, this edition), there can only be joint infringement if there is an agency relationship between the parties who perform the method steps or when there is a contractual obligation on the part of one party to the other to perform the steps. The patients were not agents of the doctors, nor did the doctors require their patients to use the software; therefore, the panel rejected McKesson’s argument that the doctor-patient relationship gave the doctor effective control over the “initiating a communication” step.
Judge Newman, in dissent, attacked the entire line of precedent beginning with BMC Resources, arguing that the limitations on the finding of joint infringement announced in that case contradicted both prior Federal Circuit and Supreme Court precedent and holding that previous cases had taken the position that direct infringement could be performed by two parties acting in concert, regardless of whether there was any sort of agency or other relationship between the parties. Seemingly inviting a request for rehearing en banc, the dissent noted that these prior cases “never had an en banc reversal” and therefore should be considered the law of the circuit until an en banc panel found otherwise.
Judge Bryson’s concurrence also seemed to invite a request for rehearing en banc, noting that “the decision in this case is correct in light of this court’s decision in BMC Resources, Muniauction and Akamai Technologies. Whether those decisions are correct is another question, one that is close enough and important enough that it may warrant review by the en banc court in an appropriate case.”
As of the time of press, McKesson’s expedited consideration of a request for a rehearing en banc was granted and the Federal Circuit issued an en banc order identifying the following questions to be addressed:
1. If separate entities each perform separate steps of a method claim, under what circumstances, if any, would either entity or any third party be liable for inducing infringement or for contributory infringement? See Fromson v. Advance Offset Plate, Inc., 720 F.2d 1565 (Fed. Cir. 1983).
2. Does the nature of the relationship between the relevant actors—e.g., service provider/user; doc-tor/patient—affect the question of direct or indirect infringement liability?
On April 20, 2011, the Federal Circuit granted en banc review of its decision in Akamai (see IP Update, this edition) on essentially the same issue.
Posted on June 12, 2011 by Paulana
Supreme Court decides Stanford v. Roche – Clarifies Scope of Bayh-Dole Act
On June 6, 2011, the Supreme Court rejected Stanford’s arguments that provisions of the Bayh-Dole Act created university ownership rights to inventions made by university employees with federal funding. In effect, the Court held that an assignment in hand is worth (more than) two rights to elect under the Act. Stanford was trying to read the provisions of the Act that give universities the right to elect to retain title to inventions made with government funding to, in fact, vest title in the universities at the time the invention was made; essentially Stanford wanted the Court to read “retain” to mean “acquire or receive.” The Court rejected this interpretation, finding that “You cannot retain something unless you already have it” and, without an assignment from the inventor in hand, Stanford had nothing to retain. Any language in the Act relating to its superiority over other acts disposing of rights, the Court held, does not displace the basic principle that, in the first instance, an inventor owns the rights to his/her invention.
The Court felt that this disposition of rights was only fair since, otherwise, a university could assert rights to inventions conceived prior to the inventor’s employment, so long as reduction of practice used any amount of federal funding while the inventor was an employee. Also, a very small amount of federal funding, combined with funding from other sources, would permit the university to claim title to the entirety of the invention.
Universities and other non-profit research institutions must now be more careful than “usual” to obtain early assignments from their researcher-employees. In the past, many universities operated with “patent policies” requiring employees to assign inventions made with “university support”— e.g., on campus — to the university, but did not uniformly require employees to sign the policies before beginning employment, much less to sign blanket assignments of future inventions, like the one Roche/Cetus had in place for visitors/consultants. Rather, the university would wait until the filing of a patent application to obtain an assignment. Even with such early-assignment policies, it was not uncommon for prospective professor-hires to contract out of such policies, so that inventions conceived prior to their taking new positions would not be owned by their new employers. A lot of inventions were conceived while the professors were traveling from one university to another. Recently, I have been seeing invention disclosure forms that contain built-in assignments, so that when a professor submits the form to the tech transfer office, he/she is simultaneously assigning it. This is good practice IF the professor still has rights to assign.
Posted on June 9, 2011 by Paulana
The Bayh-Dole Act dates back to 1980 and is largely responsible for the vast increase in university licensing of the fruits of federally funded research. In the present case, the issue is raised as to whether the patent rights ownership provision of Bayh-Dole immediately vests ownership in a federally funded invention in the contractor, in this case Stanford University (See Cert Alert; IP Update, Vol. 13, No. 11). On June 6, the Supreme Court answered it does not. While Bayh-Dole clarifies the priority of allocation of rights as between the government and the contractor—all ownership rights stem initially from the inventor.
Stanford sued Roche for infringement of three patents that claim methods for using the polymerase chain reaction (PCR) to measure the amount of HIV in blood samples and using those measurements to infer the effectiveness of antiretroviral drugs.
The standing question arose because Mark Holodniy, one of the named inventors of the patents, “signed multiple contracts defining his obligations to assign his invention rights.” First, upon joining Stanford, Holodniy signed a Copyright and Patent Agreement (CPA) in which he agreed “to assign or confirm in writing to Stanford and/or Sponsors that right, title and interest in” any inventions he conceived of or first reduced to practice. At the behest of Stanford, however, Holodniy also visited Cetus Corp., a company collaborating with Stanford, to acquire background knowledge about PCR technology. In doing so, Holodniy signed a Visitor’s Confidentiality Agreement (VCA) with Cetus, which stated: “I will assign and do hereby assign to CETUS, my right, title, and interest in each of the ideas, inventions and improvements” (emphasis added).
In 1991 Roche purchased Cetus’s PCR business, including its agreements with Stanford and its researchers, and began making HIV detection kits. In 1992 Stanford filed the patent application to which the three patents-in-suit claim priority. After extensive negotiations between the two entities, Stanford filed suit against Roche in 2005. In its defense, Roche alleged, inter alia, that it possessed ownership rights in the patents-at-issue and, as a result, Stanford lacked standing. In response, Stanford argued that it was a bona fide purchaser and that the Bayh-Dole Act superseded any transfer of rights from Holodniy to Cetus.
The Federal Circuit found that Stanford did not possess standing to sue for infringement of the patents-in-suit because the CPA between Stanford and Holodniy was merely a promise to assign, while the VCA was a present transfer of Holodniy’s future inventions to Cetus. (IP Update, Vol. 12, No. 10). Thus, according to the Federal Circuit, “Cetus immediately gained equitable title to Holodniy’s inventions” and any subsequent assignment to Stanford was negated. The Federal Circuit also dismissed Stanford’s claim that it was a bona fide purchaser. Because “[a]n organization can be charged with notice of its employees’ assignments” the court found that “Stanford had at least constructive or inquiry notice of the VCA.” Therefore, Stanford did not qualify as a bona fide purchaser. Finally, the Federal Circuit rejected Stanford’s argument that “the Bayh-Dole Act negated Holodniy’s assignment to Cetus because it empowered Stanford to take complete title to the inventions.” Rather, the Federal Circuit concluded that while Bayh-Dole empowers the government to take title to certain inventions under specified circumstances, it neither “automatically void[s] ab initio the inventors’ rights in government-funded inventions” nor “voids prior contractual transfers of rights.” Similarly, “claiming title under Bayh-Dole does not override prior assignments.”
In affirming the Federal Circuit, Chief Justice Robert, writing for the majority, explained that since its genesis, U.S. patent laws have “operated on the premise that rights in an invention belong to the inventor” and that Bayh-Dole does not “displace” that norm and “automatically” vest title to federally funded inventions in federal contractors.
Specifically, the Supreme Court rebuffed the argument posed by Stanford (and supported by the United States as amicus curiae) that Bayh-Dole reorders the normal priority of rights in an invention conceived or first reduced to practice in the course of federally funded research by vesting title in such inventions to the federal contractor, i.e., the inventor’s employer. As concluded by the Supreme Court, “nowhere in the Act are inventors deprived of their interest in federally funded inventions. Instead the Act only provides that contractors may elect to retain title to any subjection invention” (emphasis added).
According to the provision of Bayh-Dole, granting a right to “elect” confirms that the act does not vest title. Rather, as explained by Chief Justice Roberts, at the time of conception, rights to an invention lie with the inventor.
Although much in intellectual property law has changed in the 220 years since the first Patent Act, the basic idea that inventors have the right to patent their inventions has not. Our precedents confirm the general rule that rights in an invention belong to the inventor. It is equally well established that an inventor can assign his rights in an invention to a third party. Thus, although others may acquire an interest in an invention, any such interest – as a general rule – must trace back to the inventor.
In accordance with these principles, we have recognized that unless there is an agreement to the contrary, an employer does not have rights in an invention ‘which is the original conception of the employee alone.’ Such an invention ‘remains the property of him who conceived it.’ In most circumstances, an inventor must expressly grant his rights in an invention to his employer if the employer is to obtain those rights.
Justice Breyer, joined by Justice Ginsburg, dissented. Quoting the order granting cert, Justice Breyer noted “the question presented is whether rights in inventions arising from federally funded research can be terminated unilaterally by an individual inventor through a separate agreement purporting to assign the inventor’s rights to a third party.”
In the view of the dissent, “the answer to this question is likely no. But because that answer turns on matters that have not been fully briefed (and are not resolved by the opinion of the Court) [Justice Breyer] would return this case to the Federal Circuit for further argument.”
The dissent explained that Congress enacted Bayh-Dole “against a background norm that often, but not always, denies individual inventors patent rights growing out of research for which the public has already paid. This legal norm reflects the fact that patents themselves have both benefits and costs.” Citing back to the letters of founding fathers Jefferson and Madison to the effect that patent monopoly was a “compensation” for the “community benefit” that a patent bestowed, Justice Breyer explained “the importance of assuring this community ‘benefit’ is reflected in legal rules that may deny or limit the award of patent rights where the public has already paid to produce an invention, lest the public bear the potential costs of patent protection where there is no offsetting need for such protection to elicit that invention. Why should the public have to pay twice for the same invention?”
Justice Sotomayor agreed with the majority because Stanford didn’t raise the issues raised in the dissent, but noted her understanding that “the majority opinion [would] permit consideration of these arguments in a future case.”
Posted on June 7, 2011 by Paulana
Turning a Blind Eye to Critical Facts leads to Induced Infringement Under 35 U.S.C. § 271(b)
A person who actively induces another person to infringe a patent is liable as an infringer. 35 U.S.C. §271(b). On Tuesday, May 31, 2011, the United States Supreme Court held that “willful blindness” to the existence of a patent can be sufficient evidence of knowledge of the patent to support a finding of induced infringement. Global-Tech Appliances, Inc. v. SEB S.A., 563 U.S. ___ (2011). The Court rejected a more lenient standard adopted by the Federal Circuit — deliberate indifference to a known risk that a patent exists. Nonetheless, the Supreme Court affirmed the Federal Circuit’s judgment by applying its new standard. Justice Alito wrote the majority opinion from which Justice Kennedy dissented.
SEB S.A. (“SEB”) is a French manufacturer of home appliances. It owns a patent that relates to deep fryers. Sunbeam Products, Inc. (“Sunbeam”) is a competitor of SEB in the United States. Pentalpha Enterprises, Ltd. is a Hong Kong manufacturer of home appliance and a wholly-owed subsidiary of Global-Tech Appliances, Inc. (collectively “Pentalpha”). Slip op. at 2–3.
Pentalpha developed a deep fryer for Sunbeam by copying all but the cosmetic features of a SEB deep fryer it purchased in Hong Kong. The SEB deep fryer had no U.S. patent markings because it was made for sale in a foreign market. Before selling the deep fryers to Sunbeam, Pentalpha retained an attorney to conduct a right-to-use study of the deep fryer it had developed for Sunbeam. Pentalpha refrained, however, from telling its attorney that it had copied SEB’s deep fryer to develop its deep fryer. Slip op. at 2.
After conducting a search that failed to locate the SEB patent, the attorney issued his opinion that the deep fryer developed by Pentalpha did not infringe any of the patents that he had found. Pentalpha immediately began selling its deep fryer. Slip op. at 2.
SEB sued Pentalpha for patent infringement alleging direct infringement under section 271(a) and induced infringement under section 271(b) by actively inducing Sunbeam and other retailers to sell Pentalpha’s deep fryer in violation of SEB’s patent rights. Slip op. at 3. After trial, the jury returned a verdict of direct infringement under section 271(a) and induced infringement under section 271(b) and found that Pentalpha’s infringement was willful. The district court entered judgment against Pentalpha. Slip op. at 3.
On appeal, Pentalpha argued the judgment of induced infringement had to be reversed because there was no direct evidence that Pentalpha knew of the SEB patent before it received notice of the Sunbeam lawsuit. The Federal Circuit held that section 271(b) requires that the patentee “’show that the accused infringer knew or should have known that his actions would induce actual infringement’ and that this showing requires proof that the accused infringer knew of the patent.” Slip op. at 3. The Federal Circuit found, however, sufficient evidence to support a finding that “’Pentalpha deliberately disregarded a known risk that SEB had a . . . patent.’” Id. According to the Federal Circuit, such disregard “’is not different from actual knowledge, but is a form of actual knowledge.’” Id.
Section 271(b) Requires Knowledge of the Patent that is Infringed
In 1952, Congress codified the principles of contributory infringement that had been part of the case law for about 80 years. See 35 U.S.C. § 271(b) & (c). Section 271(b) addresses conduct where a person actively induces infringement of a patent. 35 U.S.C. § 271(b). Section 271(c) addresses conduct where a person sells a component that is not itself patented, but may enable another party to make or use a patented machine. Neither the language of section 271(b) nor the pre-1952 cases provided an affirmative answer to the first question before the Court- is knowledge of the patent required to find induced infringement under section 271(b).
The Court found the answer in Aro Mfg. Co. v. Convertible Top Replacement Co. 377 U.S. 476 (1964). In Aro, the Supreme Court considered the issue of contributory infringement under section 271(c). A majority in Aro concluded that knowledge of the patent was needed to violate section 271(c). Id. at 8–9 (citing Aro, 277 U.S. at 488 n.8; id. at 415 (White, J., concurring); id. at 524–27 (Black, J., dissenting)). Since section 271(b) and (c) both were aspects of contributory infringement, the Court unanimously concluded that knowledge of the patent was likewise needed to find inducement in violation of section 271(b). Id.; Dissenting op. at 1.
The Court Adopts the Doctrine of Willful Blindness From Criminal Law to Find Knowledge of the Patent Infringed Under Section 271(b)
Lacking direct evidence that Pentalpha knew of the patent, the Court had to address whether the evidence was nonetheless sufficient to support a finding of knowledge. The Court rejected the standard applied by the Federal Circuit for two reasons. “First, it permits a finding of knowledge when there is merely a ‘known risk’ that the induced acts are infringing.” Slip op. at 14. “Second, in demanding only ‘deliberate indifference’ to that risk, the Federal Circuit’s test does not require active efforts by an inducer to avoid knowing about the infringing nature of the activities.” Id. Instead, the Court applied the doctrine of willful blindness, which had been widely adopted by federal courts in the area of criminal law, to support a finding of knowledge. Slip op. at 10–11.
The doctrine of willful blindness has two basic requirements: (1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact. The Court explained that these requirements “give willful blindness an appropriately limited scope that surpasses recklessness and negligence.” Id. Neither recklessness, i.e., merely knowing of a substantial and unjustified risk of such wrongdoing, nor negligence, i.e., should have know of a similar risk, but in fact did not, will suffice to prove that the accused infringer had knowledge of the patent. Accordingly, “a willfully blind defendant is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” Id.
Although the Court rejected the test applied by the Federal Circuit, it affirmed the judgment of the Federal Circuit “because the evidence in this case was plainly sufficient to support a finding of Pentalpha’s knowledge under the doctrine of willful blindness.” Slip op. at 10.
The affirmance in Global-Tech Appliance shows that in many cases, the result will be the same under the willful blindness test adopted by the Court as under the now rejected deliberate indifference test. Nonetheless, at the margin, proving inducement has been made more difficult where actual knowledge cannot be established.
On May 25th, the Federal Circuit, sitting en banc, issued a decision reversing and remanded the district court’s holding that the patent-in-suit was invalid due to inequitable conduct. The patent remained invalid as anticipated, but the bar has been substantially raised for accused infringers attempting to prove the inequitable conduct defense – the “atomic bomb” of patent law, as Chief Judge Rader described it. With respect to the element of intent, the accused infringer must prove by clear and convincing evidence that the patentee acted with specific intent to deceive the PTO.
“The accused infringer must prove…that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Intent can still be established by circumstantial evidence, but a high level of materiality cannot satisfy the burden to prove intent. Also, the evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances….The absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.”
The materiality element of inequitable conduct was adjusted by the majority as well. The court held that, except for a narrow exception for truly egregious acts of misconduct, like false Rule 132 affidavits, the materiality required is now but-for materiality. This but-for materiality is a stricter standard than that imposed by current Rule 56 and the accused infringer must now show that the claim would not have issued but for the omitted information. The court declined to give any deference to current Rule 56, finding that part 1 was deficient in not giving weight to rebuttal evidence of the prima facie case of obviousness established by the omitted art and that part 2 was deficient because, well, it was just too broad.
Interestingly, though not addressing the issue head-on, the court made it clear that inequitable conduct cannot be proven based on acts by patentee relating to claims they did not ultimately obtain:
“Because inequitable conduct renders an entire patent (or event a patent family) unenforceable, as a general rule, this doctrine should only be applied in instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim… After all, the patentee obtains no advantage from misconduct if the patent would have issued anyway….enforcement of an otherwise valid patent does not injure the public merely because of misconduct, lurking somewhere in patent prosecution, that was immaterial to the patent’s issuance.”
Not just pretty words! Still, it is hard to see how this decision will deter applicants from sending in paper snow drifts of prior art. The minority made it clear that they felt that, even under these standards, the patent should be found unenforceable. Hal Wegner has noted that, for the disclosure burden to lighten on both applicants and the PTO, the PTO must respond proactively to this decision.
Posted on May 30, 2011 by Paulana
Therasense Inc. v. Becton, Dickinson and Company—The Federal Circuit tightens the standards necessary to establish the inequitable conduct defense by requiring a “but-for” showing of materiality
In Therasense Inc. v. Becton, Dickinson and Co., Appeal No. 2008-1511(May 25, 2011), an en banc Federal Circuit issued a significant ruling on the elements necessary to establish an inequitable conduct defense. The stakes for a patent owner facing a charge of inequitable conduct are high: inequitable conduct renders the affected patent unenforceable and could support a finding that the case was exceptional, entitling the alleged infringer to attorneys fees. A party alleging inequitable conduct had to show that the patentee misrepresented or failed to disclose material information with an intent to deceive the Patent Office. The courts were then to engage in an equitable “balancing” of materiality and intent to determine whether the conduct justified finding the patents unenforceable.
While recent scholarship suggests that the defense was not particularly successful in cases that made their way to the Federal Circuit and that the Federal Circuit applied stricter standards as to the elements of the defense, the incentives to assert the defense were so great that patent litigators were alleging inequitable conduct as a matter of course. In fact, the defense of inequitable conduct was said to have been asserted in as many as 60 to 80 percent of patent infringement cases. Also, many believed that the standards for finding inequitable conduct elements had not been sufficiently articulated by the Federal Circuit.
In Therasense, a six-judge majority addressed those concerns by significantly tightening the standards to be used in assessing the materiality and intent elements. Most importantly, the majority held that in most circumstances the party asserting an inequitable conduct defense must establish that “but-for” the misrepresentation or omission, the patent would not have issued. Further, materiality and intent were held to be separate requirements and were no longer part of a sliding scale where a showing of greater materiality permitted a showing of lesser intent. The Federal Circuit did, however, recognize that in instances of egregious misconduct, a “but-for” showing would not be required.
The decision brings to a close an almost 30-year effort by the Federal Circuit to tighten up the standards for proving inequitable conduct which the Court had earlier described as “a plague” on the patent system. As a result, it was contributing to the massive citation of prior art to the PTO, which in turn contributed significantly to the backlog of patent applications. The use of the inequitable conduct defense was also said to haveFederal Circuit tightens the standards necessary to establish the inequitable conduct defense by requiring a “but-for” showing of materiality several other negative effects, such as the potential to destroy parts of patent portfolios/families, inhibit the possibility of settlement and cast a cloud over the reputations of inventors and patent prosecutors. Indeed, the Federal Circuit prefaced its holding by stating that it “now tightens the standards for finding both intent and materiality in order to redirect [the inequitable conduct] doctrine that has been overused to the detriment of the public.” Slip Op. at 24.
The Federal Circuit created an exception to the “but-for” materiality holding in the case of “affirmative egregious misconduct.” Id. at 29. One example of such egregious misconduct would be the filing of an unmistakably false affidavit. The Federal Circuit pointed out that the egregious misconduct exception provided a measure of flexibility to capture extraordinary circumstances.
In the Therasense case, the alleged misconduct had been the failure to disclose briefs that the patent applicant had submitted to the European Patent Office regarding the European counterpart of a related patent owned by the patent applicant. The District Court had found the patent unenforceable due to this failure to disclose. The Federal Circuit reversed and remanded and instructed the District Court to determine whether the PTO would not have granted the patent but for the failure to disclose the European Patent Office briefs. The Court also vacated the District Court finding of intent to deceive because it had decided this issue under the wrong standard. The District Court was instructed to determine whether there was clear and convincing evidence demonstrating that the patent applicant knew of the European Patent Office briefs, knew of their materiality and made the conscious decision not to disclose them in order to deceive the PTO.
The four judge dissent stressed that the “but-for” test of materiality departed from Federal Circuit precedent and was inconsistent with the PTO’s standard set forth in PTO Rule 56. The majority opinion’s response to the dissent was that the PTO’s Rule 56 standard was one of the major causes of the rampant use of the inequitable conduct defense.
The Patent and Trademark Office was quick to react to the decision. On May 26, 2011 it announced that it was “carefully studying the important en banc decision by the U.S. Court of Appeals for the Federal Circuit in the case of Therasense v. Becton, Dickinson to assess how it may impact agency practices and procedures.The agency also announced that it expects to soon issue guidance to applicants related to the prior art and information they must disclose to the Office in view of Therasense.” As the press release noted, the Therasense “decision resolves uncertainties in many aspects of how district courts must apply the inequitable conduct doctrine.”
Posted on May 27, 2011 by Paulana
Yesterday, in Therasense, Inc. v. Becton, Dickinson and Company (Fed. Cir. 2011) (en banc), the Federal Circuit handed down an historic and much needed update to the law of inequitable conduct. The en banc (6-1-4) decision markedly increased the requirement for proof of inequitable conduct: “This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.” The court rejected the “sliding scale” approach that previously allowed intent to deceive to be inferred from strong materiality. The new standard makes intent and materiality separate requirements, and forbids a court from inferring intent solely from a strong showing of materiality. Now, evidence of deceitful intent must be weighed separately from materiality, and proven by clear and convincing evidence. The clear and convincing standard requires that a finding of deceptive intent must be “single most reasonable inference able to be drawn from the evidence.”
In addition, the court raised the standards for proof of materiality, holding that “as a general matter, the materiality required to establish inequitable conduct is but-for materiality.” But-for materiality requires that the PTO would not have allowed a claim had it been aware of the undisclosed prior art.
The following passages from majority opinion in Therasense set forth the heart of the decision:
Intent and materiality are separate requirements. Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d 1354, 1359 (Fed. Cir. 2003). A district court should not use a “sliding scale,” where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. Moreover, a district court may not infer intent solely from materiality. Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive. See Star, 537 F.3d at 1366 (“the fact that information later found material was not disclosed cannot, by itself, satisfy the deceptive intent element of inequitable conduct”).
Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence. Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009). However, to meet the clear and convincing evidence standard, the specific intent to deceive must be “the single most reasonable inference able to be drawn from the evidence.” Star, 537 F.3d at 1366. Indeed, the evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances.” Kingsdown, 863 F.2d at 873 (emphasis added). Hence, when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found. See Scanner Techs. Corp. v. ICOS Vision Sys. Corp., 528 F.3d 1365, 1376 (Fed. Cir. 2008) (“Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference.”). This court reviews the district court’s factual findings regarding what reasonable inferences may be drawn from the evidence for clear error. See Star, 537 F.3d at 1365.
This court holds that, as a general matter, the materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction. See Manual of Patent Examining Procedure (“MPEP”) §§ 706, 2111 (8th ed. Rev. 8, July 2010). Often the patentability of a claim will be congruent with the validity determination—if a claim is properly invalidated in district court based on the deliberately withheld reference, then that reference is necessarily material because a finding of invalidity in a district court requires clear and convincing evidence, a higher evidentiary burden than that used in prosecution at the PTO. However, even if a district court does not invalidate a claim based on a deliberately withheld reference, the reference may be material if it would have blocked patent issuance under the PTO’s different evidentiary standards. See MPEP §§ 706 (preponderance of the evidence), 2111 (broadest reasonable construction).
As an equitable doctrine, inequitable conduct hinges on basic fairness. “[T]he remedy imposed by a court of equity should be commensurate with the violation.” Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 465 (1979). Because inequitable conduct renders an entire patent (or even a patent family) unenforceable, as a general rule, this doctrine should only be applied in instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim. See Star, 537 F.3d at 1366 (“[j]ust as it is inequitable to permit a patentee who obtained his patent through deliberate misrepresentations or omissions of material information to enforce the patent against others, it is also inequitable to strike down an entire patent where the patentee committed only minor missteps or acted with minimal culpability”). After all, the patentee obtains no advantage from misconduct if the patent would have issued anyway. See Keystone, 290 U.S. at 245 (“The equitable powers of the court can never be exerted in behalf of one . . . who by deceit or any unfair means has gained an advantage.”) (emphasis added) (internal citations omitted). Moreover, enforcement of an otherwise valid patent does not injure the public merely because of misconduct, lurking somewhere in patent prosecution, that was immaterial to the patent’s issuance.
Federal Circuit Ruling Tightens Standard For Inequitable Conduct
In patent litigation, a finding of inequitable conduct renders a patent unenforceable, exposes the patentee to an assessment of attorney’s fees, and has other significant consequences. The Federal Circuit has characterized the remedies from inequitable conduct as the “atomic bomb” of patent litigation. Therasense, Inc. v. Becton, Dickinson & Co., ___ F.3d ___, slip op. at 21 (Fed. Cir. May 25, 2011) (en banc). Yesterday, the Federal Circuit, sitting en banc, sought to limit the use of that weapon by tightening the standards for finding inequitable conduct. Under the new standard, to prevail on a claim for inequitable conduct, the alleged infringer must show “but-for” materiality and, by clear and convincing evidence, specific intent to deceive the United States Patent and Trademark Office (“PTO”).
The majority opinion was written by Chief Judge Rader and joined in full by Judges Newman, Lourie, Bryson, Linn, Moore, and Reyna; an opinion concurring in part and dissenting in part was rendered by Judge O’Malley; and a dissenting opinion was written by Judge Bryson and joined by Judges Gajarsa, Dyk, and Prost.
To establish intent to deceive for a failure to disclose a reference, “the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Slip op. at 24. Mere negligence, showing that the patentee “should have known” of the reference, is insufficient. Id. In most circumstances, where direct evidence if intent to deceive is lacking, “a district court may infer intent from indirect and circumstantial evidence.” The Federal Circuit clarified that materiality and intent are separate requirements and abandoned the “sliding scale” approach. Id. at 24–25. A court may not infer intent solely from materiality. Id. at 25. While the Court did not hold that materiality was irrelevant to intent, specific intent to deceive must be “the single most reasonable inference able to be drawn from the evidence.” Id.
The Court adopted a new standard for materiality required to establish inequitable conduct, “but-for materiality.” Slip op. at 27 (emphasis added). When prior art is withheld from the PTO, the prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. In other words, prior art that invalidates a claim and was withheld from the PTO is material. This is substantially narrower that the past practice of deciding whether the reference had to be disclosed under PTO Rule 56, which had previously been the standard.
The new materiality test does not mean the claims will necessarily be invalidated based upon the undisclosed prior art. A district court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed prior art. Slip Op. at 28. Unlike the clear and convincing standard required to invalidate a claim in litigation, to determine whether the PTO would have allowed the claim had it been aware of the undisclosed prior art, the district court “should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.” Id. Accordingly, there may be situations where the undisclosed prior art is insufficient to invalidate a claim during litigation, but it is otherwise “material” for purposes of inequitable conduct.
In addition to announcing a new standard for materiality, the Federal Circuit carved out an exception to the but-for materiality test. “When the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material.” Slip op. at 29.
The Federal Circuit expressly declined to adopt the definition of materiality set forth by the PTO in Rule 56. Slip op. at 32; but see Dissenting Op. at 3 (adopting Rule 56 definition of materiality). The Federal Circuit criticizes Rule 56 as too broad because inequitable conduct may be based on information that becomes irrelevant in view on subsequent arguments by the applicant to the PTO. Id. Nonetheless, as a practical matter, practitioners will continue to comply with the requirements of Rule 56 during prosecution.
The ruling will make it more difficult for an accused infringer to plead inequitable conduct with specificity as required by the Federal Rule of Civil Procedure 9(b). An accused infringer should now need to plead with specificity factual averments to show that the PTO would not have allowed a claim but-for non-disclosure of the prior art reference and that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.
The facts and history of the case are summarized in an earlier alert which you can review at this link: Federal Circuit Agrees To Review Standard For Inequitable Conduct.