Court Opinion

ID: 9457901
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:36:54.98328+00
Date Added: 2024-06-11T17:35:33.667731
License: Public Domain

KALODNER, Circuit Judge,
(dissenting).
I disagree with the majority’s determination that the District Court did not err when it held Monsanto’s Huffman patent unenforceable on the ground that it was fraudulently obtained.
I would reverse the District Court’s stated holding for these later developed reasons: not to disclose was motivated by nothing more than bad judgment as to the materiality of the information, the patent must still be rejected.”1 (emphasis supplied).
3. It is settled that a party charging fraudulent procurement of a patent must prove by “clear, unequivocal and convincing evidence” that the Patent Office would not have issued the patent except for the fraud, and here there was not a scintilla of evidence that the Patent Office was misled into issuing the patent by the conduct condemned by the District Court. Indeed, the District Court did not make any finding of fact that the Patent Office was misled.
1. The District Court committed prejudicial error when it applied an erroneous standard of proof, viz., that fraudulent procurement of a patent may be established by a “preponderance of the evidence.” The applicable standard of proof is “clear, unequivocal and convincing evidence.”
2. The District Court committed prejudicial error when it held that “a specific intent to deceive is not necessary to bar a patent when there is evidence of a deliberate withholding of material information,” and, “even if the decision
4. The District Court’s fact-findings that the undisclosed “material” was of critical dimension in the obtaining of the patent and that there was a “deliberate withholding” of the material, were “clearly erroneous” since they were not established by “clear, unequivocal and convincing evidence” but by application of an inapplicable “preponderance of the evidence” standard of proof.
First: as to the District Court’s erroneous application of a “preponderance of evidence” standard of proof in adjudicating Monsanto’s patent unenforceable *602on the ground that it was fraudulently-obtained :
These pertinent principles are well-settled :
“Fraud” is never presumed and a party alleging fraudulent procurement of a patent bears a heavy burden of proof. Edward Valves, Inc. v. Cameron Iron Works, Inc, 286 F.2d 933, 947 (5th Cir. 1961), cert. den. 368 U.S. 833,. 82 S.Ct. 55, 7 L.Ed.2d 34.2
“A finding that a patent was procured by fraud or unclean hands must be based on ‘clear, unequivocal and convincing’ evidence. United States v. American Bell Telephone Co, 167 U.S. 224, 251, 17 S.Ct. 809, 42 L.Ed. 144 (1897).” Scott Paper Company v. Fort Howard Paper Company, 432 F. 2d 1198, 1204 (7th Cir. 1970), cert. den. 401 U.S. 913, 91 S.Ct. 882, 27 L. Ed.2d 812 (1971). See too McCullough Tool Company v. Well Surveys, Inc, 343 F.2d 381, 394 (10th Cir. 1965), cert. den. 383 U.S. 933, 86 S.Ct. 1061, 15 L.Ed.2d 851 (1966), rehearing den. 384 U.S. 947, 86 S.Ct. 1452, 16 L.Ed.2d 545 (1966); Armour & Co. v. Wilson & Co, Inc, 274 F.2d 143, 148 (7th Cir. 1960); Baldwin-Lima-Hamilton Corporation v. Tatnall Measuring Systems Company, 169 F.Supp. 1, 25 (E.D.Pa. 1958), aff’d on other grounds, 268 F. 2d 395 (3rd Cir. 1959), cert. den. 361 U.S. 984, 80 S.Ct. 190, 4 L.Ed.2d 151.
“To successfully assert that intentional misrepresentations were made, the standard of proof to be met is not a preponderance of the evidence but the intentional misrepresentations must be proved to a reasonable degree of certainty, otherwise the defense of unclean hands cannot be upheld.” Corning. Glass Works v. Anchor Hocking Glass Corporation, 253 F.Supp. 461, 471 (D.Del.1966), modified on other grounds, 374 F.2d 473 (3rd Cir. 1967), cert. den. 389 U.S. 826, 88 S.Ct. 65, 19 L.Ed.2d 80 (emphasis supplied).
“Prejudicial error” is committed when a federal court applies a “preponderance of evidence” standard in making a factual determination with respect to allegations of fraudulent conduct. Barr Rubber Products Company v. Sun Rubber Company, 425 F.2d 1114, 1120-1121 (2nd Cir. 1970), cert. den. 400 U.S. 878, 91 S.Ct. 118, 27 L. Ed.2d 115.
That the District Court applied a “preponderance of evidence” test in making its fact-findings is evident from the following colloquy3 relating to the sweep of the burden of proof imposed on a party alleging fraud in the procurement of a patent:
“The Court: Look, if this were á criminal case, Mr. Leydig [Monsanto’s counsel], it is very possible as to the intention to deceive a jury might have a reasonable doubt under all of the evidence in the case.
“But it is not a criminal case. It is a civil case. The burden is the preponderance of the evidence, and I have found that it is more probable than not. “Mr. Leydig: It is more than that, Your Honor.
“The Court: That is all it is.” (emphasis supplied).
Second: as to the District Court’s holding that “. . .a specific intent to deceive is not necessary when there is evidence of a deliberate withholding of material information,” and that the patent must be rejected “even if the decision not to disclose was motivated by nothing more than bad judgment as to the materiality of the in*603formation . . .”4 (emphasis supplied) :
The stated holding is in plain disregard of the settled rule that in order to establish “fraudulent procurement” of a patent intentional fraud must be proved, and “an honest mistake,” made “in good faith,” does not attain the dimension of intentional fraud. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). See, too, Bendix Corporation v. Balex, Inc., 421 F.2d 809, 819 (7th Cir. 1970), cert. den. 399 U.S. 911, 90 S.Ct. 2203, 26 L.Ed. 2d 562.
It has been specifically held that enforcement of a patent should not be denied “merely because of an innocent or good faith non-disclosure”; “an applicant for a patent should be accorded the right to exercise good faith judgment in deciding what matters are and are not of sufficient relevance and materiality to require disclosure”; and that “[ojnly when he is guilty of fraud, willfulness or recklessness indicating a disregard for his duty of frankness should enforcement of the patent be barred.” Xerox Corporation v. Dennison Manufacturing Company, 322 F.Supp. 963, 968-969 (S.D. N.Y.1971).
Significantly relevant to the District Court’s holding here that a patent must be rejected “even if the decision not to disclose was motivated by nothing more than bad judgment” is the contrary holding in Tractor Supply Co. v. International Harvester Company, 155 U.S.P.Q. 420 (D.C.N.D.Ill.E.Div.) 1967. There the Court said (p. 433):
“An allegation of ‘innocent’ misrepresentation concerning the procurement of a patent, coupled with the lack of any proof that the patentee or his assignee acted fraudulently, intentionally, or willfully, is wholly inadequate to render a patent unenforceable in equity against an alleged infringer. To hold otherwise would work a forfeiture of the patentee’s property in the absence of unconscionable or morally reprehensible conduct, something which equity is always reluctant todo.” (emphasis supplied).
Third: as to the utter lack of evidence that the Patent Office would not have issued the patent but for the claimed fraudulent conduct:
Federal courts have time and again ruled that a party challenging enforcement of a patent on the ground that it was obtained by material misrepresentations or omissions in the patent application proceedings, must prove by “clear, unequivocal and convincing evidence” that the Patent Office would not have issued the patent but for the claimed misrepresentations or omissions.
*604In Waterman-Bic Pen Corporation v. W. A. Sheaffer Pen Company, Division of Textron, Inc., 267 F.Supp. 849 (D.Del. 1967), the Court said at page 856:
“A person attacking the validity of a patent for alleged fraudulent representations must prove that the representations were material — that the patent would not have issued but for the representations.” (emphasis supplied).
To the same effect, see SCM Corporation v. Radio Corporation of America, 318 F.Supp. 433, 448 (S.D.N.Y.1970); Corning Glass Works v. Anchor Hocking Glass Corporation, supra, at 253 F.Supp. 469.
It is of the utmost relevance that no specific evidence was adduced below on the critical issue as to whether the Patent Office was misled into granting the patent by virtue of any omissions in the Husted affidavit. The District Court’s conclusion that the Patent Office was thereby misled was based solely on “inference.” On that score, it has been squarely held that “inference” cannot be substituted for “clear and convincing proof” in determining whether the Patent Office has been misled by material misrepresentations or omissions. Nashua Corporation v. RCA Corporation, 307 F. Supp. 152 (D.N.H.1969), aff’d 431 F.2d 220 (1 Cir. 1970). There, the District Court, in rejecting a claim that the patent applicant withheld material information in an affidavit submitted to the Patent Office, said:
“There is no evidence as to how this affidavit was interpreted and understood by the Patent Examiner and there is no evidence as to what extent, if any, the Patent Examiner relied on it. This, perhaps, may be inferred, but an allegation of fraud requires clear and convincing proof and should not be based on inferences.” 307 F. Supp. 158. (emphasis supplied). Fourth: the District Court’s fact-findings that there was a “deliberate withholding” of “material” information, were clearly erroneous inasmuch as they were the fruit of an inapplicable “preponderance of the evidence” standard of proof:
The record below fails to disclose any evidence that the facts withheld from the Patent Office were “material” to the granting of the patent. That the District Court was aware of the vulnerability of its fact-finding that the withheld information was “material” is apparent from its statement in sub-section (c) of its Conclusions of Law No. 2:
“Even if the facts withheld from the patent office were not material, Monsanto has come into court with unclean hands.” 312 F.Supp. 798.
The record further contains no factual evidence that there was a “deliberate withholding” of information. There was, however, affirmative testimony by the then counsel for the patent applicant that the omitted data was not included in the Husted affidavit because in his opinion it was not material. This testimony was not challenged nor was it impeached.
It is pertinent to note that in Monsanto Company v. Dawson Chemical Company, 312 F.Supp. 452 (S.D.Tex.1970)5 the District Court, with knowledge of the Opinion in the instant case, rejected similar allegations of fraudulent procurement of the Monsanto Huffman patent, on its finding that they were not supported by “clear, unequivocal and convincing” evidence.
In that case, the District Court said in relevant part at page 462:
“The law is settled that the proof oi fraud must be clear, unequivocal, and convincing and a mere preponderance of the evidence which leaves the issue in doubt may not properly be a basis for a finding of fraud. Baldwin-Lima-Hamilton Corp. v. Tatnall Meas. Sys. Co., supra, 169 F.Supp. p. 25. When these guidelines are applied to the present case, the inescapable conclusion *605is that defendants have failed in their burden of proof. The only misinformation presented to the Patent Office is the degree of phytotoxicity of 3,4-DCPA on radishes. There is no evidence that this small corner of a broad picture presented to the patent examiner materially influenced the decision to grant the patent. The remaining contention on unclean hands relates not to what was said, but rather to what was not said. Defendants have not established that the withholding of this information was done with intent to deceive the Patent Office. They have similarly failed to prove the materiality of the information withheld, that the patent examiner would have rejected the application had he known of the matters said to be withheld as was true in Charles Pfizer & Co. v. FTC, supra. To overcome the initial rejection by the patent examiner, it was necessary for plaintiffs to convince her that 3,4-DCPA had properties neither predictable from, nor in fact possessed by, 3,4-DCAA. By the manner in which they went about this task, plaintiffs did nothing more than put their best foot forward. Defendants’ contentions on this point are therefore without merit.”
This, too, must be said with respect to the majority’s reliance on Precision Instrument Manufacturing Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 65 S.Ct. 993, 89 L.Ed. 1381 (1945). There the evidence conclusively established that the patent in suit had been obtained by fraud, intentionally concealed from the Patent Office with intent to deceive. Precision, accordingly, is inapposite on its facts.
The majority has found it necessary to reach only the misrepresentation issue. I have accordingly confined this dissent to that issue. It is meet that I should say that I would also reverse the District Court’s Judgment insofar as it is premised on its holdings that the Monsanto Huffman patent is invalid because it is “obvious” and “anticipated,” and unenforceable because of “laches.”

. 312 F.Supp. 799.

. ‘’Fraud is never presumed, and the burden is upon the defendant to show facts constituting fraud by clear, cogent, convincing and certain proof.” Equitable Life Assurance Soc. v. Dunn (C.C.A.) 61 F.2d 450, 452.” New York Life Ins. Co. v. Kwetkauskas, 63 F.2d 890, 891 (3rd Cir. 1933), cert. den. 289 U.S. 762-763, 53 S.Ct. 793, 77 L.Ed. 1505. To the same effect see McDonnell v. General News Bureau, Inc., 93 F.2d 898, 901 (3rd Cir. 1937).

. Page 26, transcript of proceedings of April 14, 1970, upon argument of counsel on Monsanto’s Motion for a Partial New Trial.

. The District Court, in its Supplemental Opinion denying Monsanto’s Motion for a Partial New Trial which was premised largely on the contention that the District Court had erroneously found that “omissions were intentionally and deliberately made” in the patent application proceeding, said:
“As to whether Rohm & Haas lias met its burden of proof, we have decided to let the record stand as it is. However, we are compelled to point out that even if we were persuaded to change our mind and find that although there were intentional omissions of fact, Monsanto did not intend to mislead the Patent Office, this would not lead us to a different conclusion with respect to the validity of a patent in light of such omissions. For the same policy considerations which underlie our February 17th Opinion (pages 792-794), ice hold that even if Monsanto did not intend to deceive the Patent Office, the fact that it intentionally withheld facts which were material to the decision whether it was entitled to a patent is sufficient to bar the issuance of a patent . . . even if the decision not to disclose was motivated by nothing more than bad judgment as to the materiality of the information, the patent must still be rejected. We hold that a specific intent to deceive is not necessary to bar a patent when there is evidence of a deliberate withholding of material information. Of course, if it is found that the facts withheld were not even marginally material to the issues before the Patent Office, then our decision on this precise issue would be different.” 312 F.Supp. 799. (emphasis supplied).

. Reversed and remanded, 443 F.2d 1035 5th Cir. 1971), in light of Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788, 1971. See n. 4, Majority Opinion, supra.