Opinion ID: 377935
Heading Depth: 2
Heading Rank: 2

Heading: Fraud and Antitrust

Text: 76 The crux of Berkley's antitrust counterclaim was that DuPont knew, or in the exercise of due care should have known, of information that rendered its invention unpatentable but chose to fraudulently conceal that information from the examiner during prosecution of its patent application and further chose to ignore even more such information and enforce the patent, all in a scheme to maintain a monopoly in the fluorescent monofilament fishing line market in violation of Section 2 of the Sherman Act. 35 77 Because the jury returned its verdict for DuPont on Berkley's allegations of fraud and patent enforcement, the trial court immediately dismissed the counterclaim, finding the second part of the trial unnecessary. 78 On appeal, Berkley asks us to adopt its version of parts of the evidence. Having found the jury's verdict fully supported by the weight of all the evidence, and Berkley's versions unfounded, we decline that invitation. Berkley also charges the commission of errors allegedly necessitating reversal of the verdict or a new trial. We treat each issue, setting out the facts as they pertain to each. 36
79 Accusing DuPont of gross negligence in its investigation of facts allegedly placing it on notice that one or more claims of its patent might be invalid, Berkley charges error in the trial court's refusal to instruct and submit to the jury an interrogatory respecting DuPont's gross negligence prior to issuance and enforcement of its patent. The accusation rests on DuPont's conduct respecting the McCoy line, the Starlite line, and reports on underwater visibility of DuPont's fluorescent line product. 80 In 1964, two years after its patent issued, when DuPont learned of McCoy's Glo-Line product, its investigation of the McCoy story was immediate and thorough. Resulting information concerning the nature and timing of McCoy's use of fluorescent dye was decidedly vague and indefinite. McCoy's statements were inconsistent. No physical or documentary evidence establishing McCoy as a prior user of fluorescent monofilament fishing line ever appeared. 38 Every statement of McCoy about his chartreuse fishing line placed his first use after Keller's invention. McCoy's decision, made after the patent issued, to abandon his fluorescent line was inconsistent with his claim of prior use, notwithstanding his desire to be friends with DuPont and Berkley's inference that he must have been pressured. Keller concluded that McCoy was just another person who was claiming to have had a fluorescent fishing line prior to my invention, and yet had no evidence to back it up. In September, 1975, McCoy gave DuPont's representatives a December, 1964, invoice and a signed statement that it represented one of his first sales of fluorescent line. 81 Under all the circumstances, DuPont was not guilty of gross negligence in concluding that McCoy's original vague and inconsistent implication of a prior use was groundless. To require patentees to do more than was here done, when faced with such unsubstantiated allegations, would put them at the mercy of every crank and charlatan who suddenly remembers a prior use of the patentee's invention after the patent is issued. 82 In 1962, Sunset, the company manufacturing Starlite line, was a sales agent for DuPont fishing line. When DuPont's patent issued, a copy went to all sales agents. Sunset received its copy on December 14, 1962, and on December 18, its president Agnew wrote DuPont: 83 For your information we put illuminous powders in plastic four or five years ago and when we shine a black light on them, they actually made the line look like it was completely purple. 84 On January 4, 1963, Tyner of DuPont thought the Starlite line might affect validity of the DuPont patent. Consequently, in early 1963, Keller was sent to investigate Agnew's assertion. Agnew said the Starlite line was a phosphorescent fly line, charged up with a flashlight and used at night, to glow continuously for 10 or 15 minutes after the light was removed, above and under water. 85 Though DuPont might have tested the Starlite line for the presence or absence of fluorescent dye, 39 its investigation was more than sufficient to avoid a charge of gross negligence. It promptly investigated Agnew's assertion and could not be held grossly negligent for relying upon what Agnew told and showed Keller. Berkley's expert Stearns admitted that one looking at the Starlite line would be unable to distinguish any fluorescence in it from the phosphorescence. Keller's conclusion that Agnew's phosphorescent fly line had no relevance to DuPont's fluorescent fishing line was not grossly negligent. 86 At DuPont's direction, Dr. Johnson had completed his tests and a report on underwater visibility of DuPont's fluorescent line on March 14, 1962, several months before issuance of the DuPont patent. Johnson tested the line under a wide variety of conditions and concluded that it worked as described in the patent application and was useful. Berkley's expert Stearns said Johnson had prepared a very good scientific reliability report of which any scientific lab would be proud, and that Dr. Johnson's tests were all that was necessary to determine how the fishing line would work. 40 87 The report's suggestion that visibility of the line bore an inverse relationship to clarity of the water does not contradict or otherwise invalidate Johnson's conclusion. Nor was his conclusion contradicted by reports of Roberts and Lau to DuPont before suit. Roberts said only that the line did not completely disappear underwater and Lau's statement was based solely on observations made in crystal clear water and thus was not inconsistent with Johnson's report. Johnson's conclusions were corroborated by McNally, a scuba diver hired by DuPont to make underwater observations of its line. 88 In view of the extensive testing by DuPont, its tests having confirmed the presence of patentable utility, it cannot be said that DuPont was grossly negligent in determining whether its invention worked. 89 Citing no specific conduct by DuPont, Berkley adds this vague allegation: 90 No one knows which pieces of prior art formed the basis for the jury's determination of invalidity. However, it is very possible that the jury determined that the Keller patent was invalid on the basis of prior art which was admittedly known to duPont prior to the issuance or enforcement of the patent. If the jury concluded, on the basis of such facts, that the Keller patent was invalid, the jury may very well have concluded that duPont was grossly negligent in failing to make a similar determination prior to the issuance or enforcement of the patent. 91 The notion that DuPont could be found guilty of gross negligence for failure to anticipate a jury's verdict is meritless. Moreover, the jury's verdict may have rested on non-utility, with no basis in the prior art. None of the prior art or other information known to DuPont, in any event, so plainly rendered its invention unpatentable that DuPont could be held guilty of gross negligence in accepting its patent and exercising its right to seek legal enforcement in the courts. 92 There being no evidence warranting submission of a gross negligence issue to the jury, the trial court committed no error in refusing to give Berkley's requested instruction and interrogatory. 93
94 Focusing exclusively upon one paragraph of an 8 paragraph instruction (No. 21), Berkley maintains that the court erroneously permitted the jury to find fraud only if DuPont willfully withheld prior art from the PTO. The challenged paragraph describes Berkley's burden of proof and speaks only of withholding prior art. Thus, says Berkley, if the jury found that DuPont withheld scientific data, i. e., the Johnson report, but had not withheld prior art, it could have erred in finding DuPont not guilty of fraud. 95 Jury instructions must be viewed in their entireties and verdicts will not be overturned by picking and choosing words from an instruction without regard to the realities of the trial. Fields v. Chicago Rock Island and Pacific Railroad, 532 F.2d 1211, 1213-14 (8th Cir. 1976); Jiffy Markets, Inc. v. Vogel, 340 F.2d 495, 500 (8th Cir. 1965). 96 Instruction No. 21, read as a whole, emphasizes the requirement for (a) bsolute honesty and good faith disclosure, the prohibition of suppression of pertinent facts, and the rule of absolute candor with the Patent Office. It states that an omission of material facts may constitute fraud rendering a patent invalid even if the fraud pertains to only one claim. Thus the instruction as a whole clearly conveys the concept that the withholding of any relevant material, described in the instruction as prior art, facts, and information, may form the basis for a finding of fraud. Berkley at trial stressed the withholding of the Johnson report. There was no real possibility that the jury was misled into believing that it could not consider the withholding of the Johnson report in reaching its decision on fraud. 41 C. Interrogatories 2 and 3 42 97 Berkley contends that the court erred in phrasing Special Interrogatory 2 as Did plaintiff obtain the . . . (DuPont) patent from the patent office by fraud?, and Special Interrogatory 3 as Did plaintiff assert its patent against Berkley knowing that it was invalid? 98 Berkley sought interrogatories asking whether DuPont had obtained by fraud or enforced, knowing to be invalid, any one or more claims, arguing that fraudulent conduct respecting one claim renders the entire patent invalid, and that enforcement of one claim knowing it to be invalid renders the patentee liable under the antitrust laws even if the remaining claims asserted are valid. 43 99 The submission and form of interrogatories to the jury are matters within the sound discretion of the trial court, and review is confined to a determination of whether there was an abuse of discretion. Tights, Inc. v. Acme-McCrary Corp., 541 F.2d 1047, 1060 (4th Cir.), cert. denied, 429 U.S. 980, 97 S.Ct. 493, 50 L.Ed.2d 589 (1976); Dreiling v. General Electric Co., 511 F.2d 768, 774 (5th Cir. 1975); McDonnell v. Timmerman, 269 F.2d 54, 58 (8th Cir. 1959). Jury Instruction No. 21 included: 100 (A) fraud has been perpetrated on the Patent Office and the patent is rendered invalid even if the fraud pertains to only one claim. 101 Being so instructed, the jury, in giving its no answer to Interrogatory No. 2, had before it the concept that DuPont had to have procured every claim of its patent free of fraud. The contested issue having thus been adequately presented to the jury, it cannot be said that the court abused its discretion in phrasing Interrogatory 2. 44 102 Concerning Interrogatory No. 3, Berkley speculates that: 103 The evidence in this case disclosed test results and numerous pieces of prior art, of which duPont had knowledge, that may have invalidated one or more, but not all, of the claims of the Keller patent. . . . 104 . . . . 105 . . . (A) careful examination of each piece of prior art and each test result introduced into evidence at trial could arguably have been construed by the jury to invalidate one or more claims of the Keller patent, without invalidating all of the claims of the patent. Additionally, a jury could have concluded that even though a piece of prior art invalidated all of the claims of the Keller patent, duPont's actual knowledge was such that duPont was only aware that certain claims of said patent were invalid when it decided to file suit against Berkley. (Emphasis added.)Berkley was ultimately charged with infringement of only claims 2, 5, and 6. It has offered not even speculation as to how the jury might have concluded that DuPont enforced one or two but not all three of those claims believing them to be invalid. Though DuPont initially asserted claims 1 and 8, there is no evidence from which a jury could find that DuPont knew those claims were invalid when it filed its complaint. Because no charge of enforcement of any claim believing it to be invalid could properly lie, the interrogatory sought by Berkley could only have been prejudicial to DuPont. Hence, no abuse of discretion occurred in the phrasing of Interrogatory 3. D. Exclusion of Intent Evidence 106 Berkley contends that the court erred in excluding evidence allegedly demonstrating that DuPont enforced its patent with intent to destroy competition. 107 A trial judge can and should exclude evidence when convinced that it will create a danger of prejudice outweighing its probative value. 45 The judge has wide discretion in ruling on the admissibility of evidence and his decisions thereon will not be disturbed unless there be a clear and prejudicial abuse of discretion. Wright v. Hartford Accident & Indemnity Co., 580 F.2d 809, 810 (5th Cir. 1978); Rigby v. Beech Aircraft Co., 548 F.2d 288, 293 (10th Cir. 1977); Kilarjian v. Horvath, 379 F.2d 547, 548 (2d Cir. 1967); Great American Insurance Co. v. Horab, 309 F.2d 262, 265 (8th Cir. 1962). 108 Berkley offered the deposition of Hilberg, a DuPont patent attorney, to prove that DuPont asserted its patent against Scientific Anglers, a company that had been conducting fluorescent fly line demonstrations, thus admitting that its patent encompassed the prior art fly lines of Olson and Wood and was therefore invalid. 46 109 Hilberg's deposition was decidedly imprecise, uncertain, and seriously lacking in probative value. The two Hilberg sentences quoted by Berkley were contradicted by DuPont, which consistently maintained that it never asserted its patent against Scientific Anglers, and by Scientific Anglers itself when it told Berkley that DuPont had never asserted the patent against it. 110 The trial court excluded Hilberg's deposition, correctly finding it shakey at best, its probity and relevance dubious, and potential for prejudicing DuPont's case substantial. No abuse of discretion occurred in that exclusion. 47 111 Berkley offered three exhibits from the deposition of Harry Haon, a DuPont employee. D-7 was a pre-suit Haon memorandum stating that Berkley was infringing, comparing the potential loss from that infringement with the cost of litigation, recommending that a legal opinion be obtained on enforceability of the patent, and, if that opinion be favorable, that suit be filed before Berkley introduced its line at a trade show and became entrenched in its infringement. E-7 was a draft of a letter to the DuPont Executive Committee, about the proposal to sue Berkley, estimating the loss from infringement, referring to a legal opinion, and viewing the cost of suit, if lost, as justified by its impact on Berkley. F-7 was a DuPont press release announcing the suit against Berkley. 112 The exhibits contain no indication that DuPont believed its patent was invalid. Recognition that an infringement suit may not succeed simply reflects a realistic awareness of the historically low percentage of patents held valid in litigation. The potential for jury misconstruction of the Haon exhibits, which the trial court correctly described as reflecting the internal consideration of cost versus bringing suit, which is a legitimate consideration for any patentee to engage in, would have been unacceptably prejudicial. 48 113 By definition, every good faith effort to enforce a patent involves a legitimate anticompetitive intent. 49 The Haon exhibits indicate DuPont's consideration and recognition that a suit enforcing its patent might have adverse effects on Berkley's sales of its infringing line. There is, however, no legal obligation of patentees to withhold suit until an infringer is well along in its infringement. In all events, consideration of DuPont's anticompetitive intent is premature, absent threshold evidence that DuPont believed its patent was invalid. 50 The trial court, recognizing that distinction, correctly cited it as an additional reason for excluding the Haon exhibits: 114 . . . One reason for bifurcation was to avoid the effect of evidence relevant to one issue spilling over and coloring evidence in the other portion of the case. The Haon evidence was just such evidence. 115 The trial court did not abuse its discretion in excluding the Haon evidence under Fed.R.Evid. 403, on the ground that it was prejudicial and not sufficiently probative. E. Inequitable Conduct 116 Defining inequitable conduct as an intentional misrepresentation or non-disclosure to the PTO 51 that, although material, did not cause issuance of the patent, and fraud on the PTO as a misrepresentation or nondisclosure, absent which the patent would not have issued, Berkley requested an interrogatory on inequitable conduct, the jury's affirmative answer to be used as a basis for proceeding with proof of other elements of an antitrust violation. Berkley also requested an instruction that the jury could find the DuPont patent unenforceable if DuPont were guilty of inequitable conduct before the PTO. The trial court denied both requests. 117 Berkley's attempt to base its antitrust counterclaim on inequitable conduct has no basis in law. 52 In Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 174, 86 S.Ct. 347, 348, 15 L.Ed.2d 247 (1965), the Supreme Court ruled that enforcement of a patent procured by fraud on the PTO may violate § 2 of the Sherman Act if other elements necessary to a § 2 case are present. Admitting that Walker Process and its progeny speak only of fraud, and acknowledging that no court has recognized inequitable conduct as a basis for an action under Section 2 of the Sherman Act, Berkley nevertheless argues that it is as much a violation of the Act for a patent owner to enforce an 'unenforceable' patent against potential competitors as it is to enforce an 'invalid' patent. We disagree. 118 A patent procured by fraud by definition would not have issued but for the misrepresentation or non-disclosure. The patent is invalid as improperly issued and the patentee has illegally received exclusionary rights he would not otherwise have. In those circumstances, as the Supreme Court held in Walker Process, the severe sanctions of the Sherman Act may be warranted. 119 However, where the patent was not procured through non-disclosure, the patent would properly issue and the patentee would receive no exclusionary rights to which he was not legally entitled under the patent laws. Hence, no basis exists for a charge of illegal monopolization or attempt to monopolize. Refusal to enforce the patent has been considered adequate sanction. Mueller Brass Co. v. Reading Industries, Inc., 352 F.Supp. 1357, 1371 (E.D.Pa.1972), aff'd, 487 F.2d 1395 (3d Cir. 1973); SCM Corp. v. Radio Corporation of America, 318 F.Supp. 433, 472 (S.D.N.Y.1970); Corning Glass Works v. Anchor Hocking Glass Corp., supra note 52, at 470. 120 Berkley further argues, citing no authority, that if inequitable conduct standing alone is an insufficient basis for an antitrust cause of action, it is such a basis when combined with an anticompetitive intent in bringing suit on the patent. We disagree. Berkley cites excluded exhibits D-7, E-7, and F-7. But those exhibits focus exclusively on events occurring after issuance of the patent. They bear no relation to DuPont's conduct before the PTO and, if they had been admissible, they could not bootstrap that non-fraudulent conduct, not otherwise actionable under the antitrust laws, into the more egregious Walker Process type conduct. 121 The trial court gave no reasons for denying Berkley's requested instruction on inequitable conduct as a defense of non-enforceability. 53 Absent a ruling that the evidence was insufficient, or more prejudicial than probative, an instruction on that question would be proper. 122 DuPont's contention that Berkley never pled an inequitable conduct defense is without merit. Berkley's inequitable conduct theory differs from its expressly pled allegation of fraud only in the degree of materiality of the information allegedly withheld from the PTO. The pleadings placed DuPont on notice of the type of conduct that would be litigated, and that is all that is required. See Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). 123 This circuit has recognized that inequitable conduct short of fraud can be a defense in a patent infringement suit. Pfizer, Inc. v. International Rectifier Corp., 538 F.2d 180, 185 (8th Cir. 1976), cert. denied, 429 U.S. 1040, 97 S.Ct. 738, 50 L.Ed.2d 751 (1977). To make out a case of inequitable conduct Berkley must prove, by clear, unequivocal and convincing evidence, Pfizer, Inc. v. International Rectifier Corp., id. at 187, that DuPont's conduct made it impossible for the PTO to fairly assess the patent application against the prevailing statutory criteria, In re Multidistrict Litigation Involving Frost Patent, 540 F.2d 601, 604 n. 9 (3d Cir. 1976), and that it involved some element of wrongfulness, willfulness or bad faith. Pfizer, Inc. v. International Rectifier Corp., supra at 186. If the information be irrelevant, its innocent or negligent misrepresentation or non-disclosure, whether or not intentional, does not amount to inequitable conduct. Pfizer, Inc. v. International Rectifier Corp., supra, at 186; Corning Glass Works v. Anchor Hocking Glass Corp., supra note 52, at 471 n. 27. 124 A strong caveat was raised by this court in Pfizer, Inc. v. International Rectifier Corp., supra at 196: 125 An infringement defendant in complex litigation should not be permitted to sidestep these main issues by nit-picking the patent file in every minute respect with the effect of trying the patentee personally, rather than the patent. A patentee's oversights are easily magnified out of proportion by one accused of infringement seeking to escape the reach of the patent by hostilely combing the inventor's files in liberal pretrial discovery proceedings. Unjustified damage to professional and social reputations can result, as here, without fostering any corresponding public benefit in the form of inhibiting future improvident grants of patent monopolies. 126 Thus Berkley may face a heavy burden in establishing inequitable conduct on the evidence concerning non-disclosures to the PTO. Nonetheless, absent the trial court's determination that that evidence was legally inadequate, or more prejudicial than probative, Berkley had a right to jury determination of whether the information not disclosed was sufficiently relevant to meet the inequitable conduct standard of materiality but not sufficiently relevant to meet the fraud standard of materiality. 54 No useful purpose would be served by a review of that evidence here. 55 If the inequitable conduct defense be renewed at retrial, the trial court, with the above guidance, will determine in its discretion the admissibility of evidence presented. It is sufficient on this appeal to hold that the trial court erred in refusing, without explanation, to instruct the jury on the defense of inequitable conduct. Berkley may renew this defense against enforcement at retrial. F. Dismissal of the Antitrust Counterclaim 127 Berkley says it didn't get its day in court on its counterclaim. We disagree. 128 Berkley sought to prove two species of antitrust violation, one based on fraudulent conduct before the PTO, the other based on bringing suit with knowledge that the patent was invalid. Proof of one of those threshold allegations was essential to Berkley's antitrust cause of action. 129 The court gave Berkley a full and fair trial on both threshold questions and submitted them specially to the jury in Interrogatories 2 and 3. 56 When the jury answered no to both, establishing that DuPont did not obtain the patent by fraud and did not enforce the patent knowing it to be invalid, Berkley's antitrust counterclaim was necessarily stripped of all foundation and support. 130 As indicated supra, Berkley's allegations of gross negligence were unsupported by the evidence. Its allegations of inequitable conduct and anticompetitive intent will not support its antitrust counterclaim. 131 Berkley having had its day in court, the trial court properly dismissed its antitrust counterclaim.