Opinion ID: 474933
Heading Depth: 1
Heading Rank: 2

Heading: analysis

Text: 31 The precise issue is whether nondisclosure by an applicant during prosecution can be considered inequitable conduct sufficient to render the issued patent unenforceable where the nondisclosure was of known prior art references on which the examiner (after independently discovering the references) rejected claims previously allowed, most of which were then allowed after amendment. 32 Much has been written in this court about the duty of candor patent applicants and their counsel are required to maintain in their relationship with the PTO, the violation of which constitutes inequitable conduct resulting in unenforceability of a patent. Driscoll v. Cebalo, 731 F.2d 878, 884, 221 USPQ 745, 750 (Fed.Cir.1984). The district court here held that Burroughs had shown inequitable conduct by clear and convincing evidence of intent and materiality; and, unless its findings on intent and materiality are clearly erroneous, affirmance is indicated. Raytheon Co. v. Roper Corp., 724 F.2d 951, 956, 220 USPQ 592, 596 (Fed.Cir.1983), cert. denied, --- U.S. ----, 105 S.Ct. 127, 83 L.Ed.2d 69 (1984).A. Materiality 33 One of the standards identified by this court as appropriate to determine materiality is Rule 56(a), 37 C.F.R. Sec. 1.56(a). See In re Jerabek, 789 F.2d 886, 890, 229 USPQ 530, 533 (Fed.Cir.1986); American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362-63, 220 USPQ 763, 773 (Fed.Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 95, 83 L.Ed.2d 41 (1984). This rule states the duty of those who practice before the PTO to disclose to the Office information they are aware of which is material to the examination of the application. Known information is material where there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent. 37 C.F.R. Sec. 1.56(a). We are satisfied that the information not disclosed by Sweet and his patent attorney was material for purposes of Rule 56(a). 34 Dick argues that the Magarvey articles were immaterial because Sweet considered them irrelevant. The relevance of the Magarvey articles to Sweet's invention might once have been disputed. They did not disclose a recording function for the method and device which is an object of Sweet's invention. However, they describe induction charging of individual water drops (sometimes with blue dye added) produced at a vibrating nozzle and an electrode for electrostatically deflecting the charged drops as a function of the charge of the drops. As Sweet himself stated in 1963 to Burton, the most important part of the system is that portion that forms, charges, and projects the ink droplets. 35 Despite the possibility of good faith dispute on the aptness of the Magarvey articles as references, Sweet indisputably knew of the Magarvey articles throughout most, if not all, of the prosecution of his CIP application. He stated in 1964 that the M-B article described methods similar to those described by himself at that time. Moreover, the Magarvey articles describe a device and methodology very like the most important part of the system. The examiner confirmed the materiality of the Magarvey articles when, in 1970, he rejected fourteen claims allowed in 1967 before he independently discovered the Magarvey articles. 36 Dick also asserts that the Magarvey articles did not render unpatentable the claims earlier allowed but later rejected and that the previously allowed claims were patentable over Magarvey all along. However, the test for materiality is not whether there is anticipation or obviousness but, rather, what a reasonable examiner would consider ... important in deciding whether to allow the application to issue as a patent. 37 Dick invokes Kimberly-Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 223 USPQ 603 (Fed.Cir.1984), which it argues is an apt precedent for reversal in this case because it dealt ... with a lower court which had declared uncited references highly material without bothering to compare their disclosures with what was being claimed. Although Kimberly-Clark Corp., 745 F.2d at 1457, 223 USPQ at 616, and J.P. Stevens & Co. v. Lex Tex, Ltd., 747 F.2d 1553, 1562-63, 223 USPQ 1089, 1094-95 (Fed.Cir.1984), cert. denied, --- U.S. ----, 106 S.Ct. 73, 88 L.Ed.2d 60 (1985), indicate that a court will look to the reasonableness of a rejection in light of the references, such analysis is unnecessary and inappropriate where, as here, the applicant has stated that he considers the references relevant and important and where an examiner (not demonstrated by Sweet to have been unreasonable) has considered the references important enough to be used as a basis for rejections of previously allowed claims. 38 Kimberly-Clark Corp. bears no resemblance to this case except for the superficial similarity of the issue of the effect of nondisclosure on the court's determination of inequitable conduct. Notably dissimilar is the effect of nondisclosure on the claims in the application. In Kimberly-Clark Corp., the nondisclosure of prior art was material only to abandoned claims long since cancelled during prosecution after being rejected by the examiner as unpatentable for reasons not involving the uncited prior art. 745 F.2d at 1457, 223 USPQ at 616-17. In this case, Sweet's 1970 cancellation of claims 16 and 19 and the amendments to claims 1-4, 6-9, 17, 25, 30, and 31 (albeit these were later allowed) directly involved the uncited Magarvey articles. This is precisely the reality of which Judge Rich wrote in Kimberly-Clark Corp., 745 F.2d at 1457, 223 USPQ at 617. Equally inapplicable is Orthopedic Equipment Co. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383-84, 217 USPQ 1281, 1286-87 (Fed.Cir.1983). In that case, this court affirmed the district court's decisions that the alleged infringer had not demonstrated fraud clearly and convincingly and that the nondisclosed prior art was not material. 39 Although not directly on point, Driscoll v. Cebalo, supra, is more nearly analogous. Dick attempts to distinguish Driscoll on the basis that, in that case, the uncited prior art would have rendered the claims invalid; whereas, here many claims rejected on the withheld Magarvey articles were later allowed after amendment. Such a (hypothetically final) rejection is merely a difference in degree from a rejection of claims subsequently allowed after amendment. Both rejections similarly reflect an examiner's belief that a reference is material under Rule 56(a). In this case, as evidenced by the examiner's actions after discovery of the Magarvey articles, it is beyond peradventure that the examiner would have considered them important. Sweet cancelled two claims in response. That the claims may be patentable over the withheld prior art, as argued by Dick, is not relevant. What is relevant is that, as the district court found, a reasonable examiner considered such prior art material under Rule 56(a) in deciding whether to allow the application. See Driscoll, 731 F.2d at 884, 221 USPQ at 750. 6 40 We are unpersuaded by Dick's argument that the 1970 claim amendments by Flehr were, as Flehr stated in his response at the time, to more clearly bring out the novel features of applicant's invention. Language such as this is gratuitous and virtually meaningless, as an amendment for any other reason would lack purpose. Accordingly, we reject Dick's assertion that the district court had neither factual nor legal basis for its conclusion that the Magarvey prior art was highly material to those claims. B. Intent 41 A degree of materiality may be offset by a showing of subjective good faith on the part of the applicant. However, a determination of inequitable conduct will not be avoided if knowledge of materiality or gross negligence greatly outweighs the lack of deceptive intent. Argus Chemical Corp. v. Fibre Glass-Evercoat Co., 759 F.2d 10, 14-15, 225 USPQ 1100, 1103 (Fed.Cir.), cert. denied, --- U.S. ----, 106 S.Ct. 231, 88 L.Ed.2d 230 (1985). Where an applicant or his attorney knew or should have known that a reference was material (see Rule 56(a)), the failure to disclose the reference is sufficient to establish intent. Id.; J.P. Stevens & Co., 747 F.2d at 1560, 1564, 223 USPQ at 1092, 1096; Driscoll, 731 F.2d at 885, 221 USPQ at 751. 42 In this case, there is unrebutted evidence of record that the Sweet application would have issued in 1967 but for the intervening interference, after which the examiner rejected fourteen of the claims previously allowed on the basis of the Magarvey articles. During the interference, Sweet, through Flehr, submitted as exhibits and relied upon the 1964 Sweet report and 1965 Sweet article that cited the Magarvey articles to support his case. We are not persuaded that from this submission, which implied a relationship between the Magarvey articles and the Sweet application, the district court drew an unsupported inference that Sweet and Flehr knew or should have known that the articles were material. 43 Dick argues that the record shows that Sweet considered the Magarvey papers irrelevant to his invention, and nothing in the record suggests that Flehr felt otherwise. To support this statement, Dick points to the three federal court opinions, cited above (Sixth Circuit, S.D.Ohio, and N.D.Illinois), in which the Sweet patent had been held not invalid over the prior art. We disagree with the arguments. Sweet's own prior statements flatly contradict the first portion of the statement. With respect to Flehr's feelings, the three court opinions are based on different records, and the issue Dick points to them as having decided, validity, cannot serve as a defense to inequitable conduct. We note that Flehr obtained Sweet's report and article, which underscore the significance of the Magarvey articles, and proffered them during the interference. Dick's assertion that [n]ot a scintilla of evidence in this record suggests that Messrs. Sweet and Flehr had any conscious intent to do wrong fails under the rule of Argus Chemical Corp., stated supra. 44 Dick further argues that citing Waage and the Magarvey articles in Sweet's own 1964 Report and 1965 article (both brought to the attention of the Board of Interferences) rebuts the notion that Sweet concealed any prior art. However, we know of no support for the proposition that distribution to the technical libraries of this country more than two years before the Patent Office first acted on the Sweet application negates the existence of mens rea. If Sweet's citation of the articles supports any inference, it is the inference of the district court to the effect that Sweet understood their importance to his invention. 7 45 The district court relied on Sweet's conduct (i.e., Flehr's failure to bring to the attention of the examiner the Waage article 8 ) and his mischaracterization of the Winston patent to support its finding of intent underlying the holding of inequitable conduct. However, because we are satisfied that the finding of intent is otherwise well supported, we need not rely on these examples of Sweet's conduct. 46 Unlike the circumstances in Kimberly-Clark Corp., in which the essential elements of materiality of [the references] and the intent of the patent solicitor are both exceedingly weak, 745 F.2d at 1456, 223 USPQ at 615-16, in this case there is overwhelming evidence supporting the district court's findings on each of the essential elements. 47 C. Unfavorable Inferences from Failure to Testify 48 Twice in its opinion, the district court observed that neither Sweet nor his prosecution attorneys had testified at the trial, although Sweet was contractually committed to Dick (his assignee) to do so. 617 F.Supp. at 1393, 228 USPQ at 73, and 617 F.Supp. at 1396 n. 6, 228 USPQ at 75 n. 6. Dick also listed Sweet as a trial witness. 617 F.Supp. at 1396 n. 6, 228 USPQ at 75 n. 6. The court also stated that [i]f it were necessary (and it is not under the circumstances), that would provide added inferential evidence of the element of intent. Id. Dick argues that inferences thereby drawn by the judge were erroneous. However, the court explicitly stated that it was not necessary to, and that it did not, draw inferences from the failure of Sweet, Burton, and Flehr to testify. 9 Although Flehr was not subject to a subpoena to testify in Illinois, Dick does not assert that it requested Flehr to testify at trial or at a deposition. 10 49 In view of the foregoing, we are satisfied that the district court's holding of inequitable conduct by Sweet before the PTO is supported by clear and convincing evidence. 50 Accordingly, the decision of the district court in No. 86-562 that the Sweet patent claims are unenforceable is affirmed. The appeal in No. 86-645 is moot. 11 51 AFFIRMED.