Court Opinion

ID: 6959341
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:42:48.979881+00
Date Added: 2024-06-11T16:08:22.514205
License: Public Domain

PLAGE R, Circuit Judge,
concurring-in-part and dissenting-in-part.
I respectfully dissent from the majority’s effort to immunize patent law from the standards for antitrust liability established by the Supreme Court. There is no warrant in law for the new rule announced by the panel, and it is bad public policy. Antitrust liability exposure, carefully cabined as it is by Supreme Court doctrine, is no more onerous for patent plaintiffs than it is for other plaintiffs. To hold, as the majority does, that on the egregious facts of this ease the plaintiffs scheme to perpetrate a fraud on the U.S. Patent and Trademark Office (“PTO”) and on the courts does not reach the threshold needed for antitrust liability is in effect to hold that, in patent law, anything goes. I cannot subscribe to that conclusion.
I join the opinion of the majority in Part A, holding that the trial court did not err in finding the ’891 patent invalid as a matter of law. With regard to the antitrust counterclaim discussed in Part B, I join the majority’s determination that Walker Process and Professional Real Estate Investors {“PRE ”) provide independent bases on which patent owners who utilize the courts to enforce their patent rights may, in appropriate cases, be stripped of their immunity from antitrust law. I must, however, respectfully dissent from the majority’s conclusion in part B that, based on a heretofore unknown legal hurdle, no reasonable jury could have found NP liable for its conduct.
One of the inventors of the invention that was later sought to be patented published a 1977 Swedish textbook in which he essentially described and illustrated the invention. (The stated facts and factual conclusions are from the record on appeal, and in the ease of disputed facts are those established by the findings of the judge and jury. The majori*1476ty's attempt to reargue the facts on NP’s behalf — see slip op. at 1474-1475 is little more than an appellate court’s assertion that it is better at fact finding than the trial judge and jury.) Years later; when his co-inventor prepared a draft of the initial application for a Swedish patent, the co-inventor included the textbook as a prior art reference.
The patent attorney employed to handle the prosecution of the Swedish patent deleted the book references from the Swedish application. Later, the same attorney sent the incomplete Swedish filing to the U.S. patent attorneys who were to prosecute the U.S. application, and told them that he was “not aware of any prior art which is not mentioned in the application as filed.” At the time, the Swedish attorney, experienced in U.S. patent law, recognized that the inclusion of that material reference was statutorily required, that including the 1977 book would result in a denial of the application, and that any patent issued would be invalid. See 35 U.S.C. § 102(b) (1994) (“A person shall be entitled to a patent unless ... the invention was ... described in a printed publication in this or a foreign country ... more than one year prior to the date of the application.... ”).
Although the record before us does not indicate it, presumably the inventors signed the fraudulently prepared application. As the majority opinion acknowledges, at the time 37 C.F.R. § 1.65 required an applicant to aver, inter alia, that “the invention has not been ... described in any printed publication in any country before his invention or more than one year prior to his application.” See also 37 C.F.R. § 1.56 (1997) (imposing a duty to disclose information material to pat-entability upon anyone associated with the filing and prosecution of a patent application). The application was submitted to the PTO, and in due course the patent issued.
The patent was assigned to plaintiff NP. One of the co-inventors was a senior executive in NP. He and other officers of the company knew of the existence and nondisclosure of the 1977 book. When discussions were held about enforcing the patent, they were advised by company counsel that the patent was invalid and should not be used in litigation. Despite their knowledge, and in the face of that counsel, they proceeded to invoke the patent, and apparently were successful in two prior actions for patent infringement. Thinking they were safe in their scheme to defraud, they invoked it once again against defendant 31. The majority does not dispute the trial court’s conclusion that the actions of the inventors, the patent attorney, and the officers of NP are attributable as a matter of law to NP.
Unfortunately for plaintiff, 31 uncovered the fraud. As the majority itself describes it, albeit reluctantly, “there may have been substantial evidence to support a finding of ... withholding the 1977 Book with the intent to deceive the PTO.” Slip op. at 1473. The trial court submitted defendant’s counterclaim for antitrust damages to a jury. After a full trial, the jury , found, in response to specific interrogatories, that plaintiff had engaged in a course of conduct that constituted fraud, thus stripping plaintiff of the antitrust immunity otherwise applicable to those who seek redress in the government’s courts. This factual finding by the jury was affirmed by the trial judge in his denial of NP’s JMOL and motion for a new trial on 3I’s antitrust counterclaim, and is supported not simply by substantial evidence but by overwhelming proof in the record (which the majority does not deny). Despite this, and despite the majority’s own recognition of the egregiousness of NP’s conduct, the majority overturns the jury verdict on the grounds that this course of action constitutes a “mere omission,” and does not meet the requirements of either Walker Process or PRE.
I find this difficult to understand, and inconsistent with what is widely understood to constitute misrepresentation and fraud. If a federal official investigating undue influence and corruption by A were to ask a third-party witness, “With whom did you have dinner on the night in question,” and that person answered “With B and C,” when in fact the truth was that A was also there, would that be considered a “mere omission” for which no liability could attach?1 See *1477United States v. Mattox, 689 F.2d 531 (5th Cir.1982) (affirming defendant’s conviction under 18 U.S.C. § 1001 for making false statements when he had relevant information but put “N/A” or left blank some responses on a government form).
We need not decide whether the attorney for the inventors in this case may have committed a criminal offense under § 1001. It is enough to see that submitting a list of prior art references pursuant to PTO regulations while knowingly and intentionally withholding a reference which, but for the fraudulent concealment, would in all probability defeat the application for patent, constitutes deliberate fraud on the PTO. Even worse, to later invoke the patent in infringement litigation, knowing that it was most likely invalid, without disclosing the known facts to the court, is to perpetrate a fraud on the court.
The majority attempts to bolster its position by selectively quoting from the Supreme Court’s opinion in Walker Process. This was the case that first dealt with loss by a paten-tee of antitrust immunity as a result of fraudulently obtaining a patent.2 The majority reads the Supreme Court’s language as requiring that the patent be obtained by deliberate, affirmative misrepresentations, not “mere omissions.” But the majority’s quote leaves out the part in which the Court goes on to distinguish between intentional fraud, the issue in the case before it, and “technical fraud,” the latter resulting from acts in good faith involving honest mistakes. Walker Process, 382 U.S. at 176-77, 86 S.Ct. at 349-50.
The majority opinion’s definition of fraud seems to draw a distinction between the witness who testifies that “A was not there” and one who testifies “only B and C were there.” The former would be an “affirmative misrepresentation” whereas the latter would be only a “mere omission.” Nothing in Walker Process suggests such a distinction, and to find it in the language of Walker Process requires a crabbed reading indeed. Furthermore, such a purely verbal requirement ignores the fact that an intentional non-disclosure is both affirmative and a misrepresentation — a suppression of the truth.
The majority mischaracterizes my position as “premised on an omission coupled with a duty of disclosure.” Slip op. at 1474. Regrettably, that reflects a lack of understanding of the point. What occurred here was not a “mere omission,” as the majority would have it, but an affirmative act of deliberate misrepresentation. The majority would rewrite the facts to make this an innocent oversight. The judge and jury found the facts otherwise. Indeed, as the trial judge, after reviewing the facts in evidence in this case, stated in his opinion, “there was a sense of fraud in the air, which sense the jury later confirmed.”
In my view, NP’s actions define “knowing and willful fraud.” Their agent, by whose actions they are bound, affirmatively misrepresented the state of the prior art to the PTO; they continued the fraud by intentionally enforcing in court a patent .which they had every reason to believe was invalid. Overall, NP’s actions smack of a “deliberately planned and carefully executed scheme to defraud” both the PTO and the court. Argus Chem. Corp. v. Fibre Glass-Evercoat Co., 812 F.2d 1381 (Fed.Cir.1987) (quoting Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 245, 64 S.Ct. 997, 1000-01, 88 L.Ed. 1250 (1944)), To hold, as the majority does, that such a course of conduct is, as a matter of law, an insufficient basis for the jury’s finding of fraud is to grant to patentees carte blanche in their conduct in prosecuting and enforcing patents.
*1478The majority candidly admits that its concern is not with the particular facts of this case, but with the fear that, in the future, every time a patent is held unenforceable because of a failure by the applicant to cite a piece of material prior art, there will ensue a round of antitrust counterclaims and damage awards. (“Were we to hold that failure to cite prior art provides a basis for Walker Process antitrust liability, most patent infringement actions would be converted into antitrust cases.” Slip op. at 1473.) This is a classic “parading of the horribles,” and is purely speculative.
The position is also without foundation. The fact that the actions by NP could constitute inequitable conduct, an independent ground on which the patent might be held unenforceable, is of course not relevant and of no significance regarding the issue before us. To find inequitable conduct, a court exercising its equitable powers must balance materiality and intent, see Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed.Cir.1997), and ultimately decide whether, in light of the applicant’s conduct before the PTO, it would be inequitable to allow the patentee to enforce its patent rights. In contrast, for the purpose of determining whether a patentee is hable under the antitrust laws, a court must first find the predicate conditions for antitrust liability under the Sherman Act, including both possession of monopoly power (defined as the power to control prices or exclude competition) in the relevant market, and anticompetitive conduct to acquire or maintain such power. See 1 ABA Section of Antitrust Law, Antitrust Law Developments 229-51 (4th ed.1997). (The existence of those predicates is not contested in this appeal.)
Assuming the predicates for antitrust liability are found to exist, the question may then arise whether the antitrust defendant is immune from liability under the Noerr-Pennington doctrine, or whether such immunity has been lost under the terms of either Walker Process or PRE. Under Walker Process, the focus is on whether particular acts by the applieant/patentee, in the procurement and enforcement of a patent, constitute knowing fraud; no balancing of materiality and intent is required as it is in inequitable conduct. And of course, in inequitable conduct no predicate conditions, such as those in antitrust law, are necessary for a finding of liability.
In this case, the jury found that NP’s acts, viewed cumulatively, constituted fraud. This is not a ease in which the appellants acted with good faith or even with gross negligence. NP’s agent deliberately omitted an anticipating reference, then NP knowingly enforced its fraudulently procured patent. Such conduct is more than sufficient to strip NP of antitrust immunity under Walker Process.
With regard to the alternative basis for loss of immunity as set forth in PRE, it is not at all clear that that issue was properly preserved. Nevertheless, since the majority saw fit to discuss it, I will comment briefly. The majority concludes that the lawsuit in this case was not objectively baseless. They reach this conclusion on two grounds. First, the majority observes that both the antitrust issue and the doctrine of inequitable conduct involve “fraud” in the application process before the PTO. Since in order to determine “fraud” in the inequitable conduct cases there is a balancing of intent and materiality, the outcome in the antitrust cases cannot be known until a court decides how that balance is to be struck — that is whether there was inequitable conduct. The trial court in this case, having found the patent invalid, mooted the inequitable conduct issue; thus, it is not known whether the court would have found inequitable conduct on these facts. That being the case, it cannot be known whether there was fraud for antitrust purposes.
Of course, that analysis simply confuses two different meanings of the term “fraud.” The majority’s analysis blends enforcement of an invalid patent, the case here, with “fraud” as found in inequitable conduct cases, an issue not before us. There no doubt will be any number of situations in which inequitable conduct may be found to exist, the court having struck the proper balance, but in which the facts would not constitute the type of fraud that would lead to antitrust liability. In the one case, the question is simply whether the conduct of the applicant *1479who sought the patent makes it inequitable to enforce the patent against the alleged infringer. In the other case, the question involves whether the patentee is engaged in monopolistic activity, a separate inquiry; whether the patentee is using the patent in furtherance of that activity; and whether the patentee knew of the fraud in the procurement of the patent. These are distinct and different issues, as illustrated by the fact that one is entirely a matter for a judge to decide, whereas the other, being fact specific, is typically a jury question.
This distinction was articulated in a Federal Circuit opinion a decade ago. There it was pointed out that our cases reflect three standards for judging the misconduct by a paten-tee, dependent upon the nature of the relief which the opposing litigant seeks: (1) misconduct which makes a patent unenforceable (“inequitable conduct”); (2) misconduct which makes a case “exceptional” so as to warrant an award of attorney fees (see 35 U.S.C. § 285 (1994)); and (3) misconduct which rises to the level of fraud and which will support an antitrust claim. See Argus Chem. Corp. v. Fibre Glass-Evercoat Co., Inc., 812 F.2d 1381, 1386 (Fed.Cir.1987) (Nies, J., additional views). The majority’s apparent assumption that these standards are, or will necessarily become, confused, resulting in a torrent of unjustified antitrust claims against innocent patentees, is ill-founded. If nothing else, it gives trial courts less credit than they deserve for being able to recognize when a defendant frivolously cries antitrust.
The second ground which the majority finds persuasive in establishing that the lawsuit is not baseless is that NP succeeded in two prior lawsuits, and thus might reasonably have expected to get away with it again. That of course simply awards wrongdoers who are lucky or clever enough to get away with their wrongdoing. Successful wrongdoing cannot provide grounds upon which a “reasonable litigant could realistically expect success on the merits.” PRE, 508 U.S. at 60, 113 S.Ct. at 1928. What NP knew about the history of the ’891 patent, and with their own lawyer’s advice before them, makes clear that they knew that their lawsuit was baseless; no reasonable litigant could have thought otherwise. PRE preserves a litigant’s right to test the reach of the law, or even to seek an extension of established law; it does not protect knowing, but as yet undiscovered, fraud. See PRE, 508 U.S. at 64-65, 113 S.Ct. at 1930-31 (“Columbia’s copyright action was arguably ‘warranted by existing law5 or at the very least was based on an objectively ‘good faith argument for the extension, modification, or reversal of existing law.’ ” (quoting Fed.R.Civ.P. 11)). Once it is concluded that the lawsuit was objectively baseless, the first step in a PRE analysis, the second step, determining the litigant’s subjective motivation, would provide no hurdle in this case.
There is no basis in law for this court to overturn the jury’s verdict in favor of 31, and every reason both in law and policy not to. I would affirm the district court’s judgment denying NP’s motion for JMOL on 3I’s antitrust counterclaim, and thus I must respectfully dissent from the majority judgment to the contrary.

. See 18 U.S.C. § 1001 (1994), providing in relevant part:
*1477[W]hoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully — 1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; 2) makes any materially false, fictitious, or fraudulent statement or representation; ... shall be fined under this title or imprisoned not more than 5 years, or both.

. Walker Process arose in the context of an intentional misrepresentation before the PTO. The principle of the case — supplying fraudulent information to an administrative agency, thus threatening the fair and impartial functioning of the agency — has been extended to other agencies. See, e.g., Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1261-62 (9th Cir.1982).