In
Larson v. Aluminart, the Federal Circuit has effectively held that Applicants must disclose
all office actions in
all related cases from the USPTO to avoid inequitable conduct, even if the Applicants have notified the USPTO of the co-pending case(s), and even if the Applicants have disclosed other office actions from the co-pending case(s). This finding appears to be yet another lowering of the bar for finding inequitable conduct, and in contradiction to the Federal Circuit
en banc standard laid out over 20 years ago in
Kingsdown.
The ReexamIn
Larson, Larson's U.S. Patent No.
6,618,998 was thrown into reexam (ex parte) by Aluminart after Larson filed suit against Aluminart. Prior to the reexam, a co-pending family member to the '998 patent (child serial no 10/606,039) received a first office action issued, and this first office action was included in the reexamination request by Aluminart. During the reexam, three additional office actions issued in the '039 application.
Early in the reexam, Larson's patent attorney filed an IDS disclosing over 200 references, the court pleadings from the litigation, the existence of the '039 application, and the second office action in the '039 application. Larson's patent attorney did not disclose the third or fourth office actions, or one of the references cited in those office actions. The '998 patent later was allowed and a Reexamination Certificate issued confirming many of its claims.
The District CourtAfter the PTO issued the ’998 Reexamination Certificate, the district court lifted its stay of proceedings, amd Aluminart amended its pleadings to include a counterclaim alleging that Larson had engaged in inequitable conduct during the reexamination of the ’998 patent. Alluminart argued that Larson withheld several material references from the Reexamination Panel, including the the Third and Fourth Office Actions. According to Aluminart, notwithstanding its inability to provide direct evidence, Larson’s deceptive intent could be inferred by the number of withheld references and its failure to provide any plausible excuse for its non-disclosure.
In response, Larson argued that the Third and Fourth Office Actions, while these were not disclosed, every critical reference cited in them had been disclosed to the Reexamination Panel. Furthermore, Larson argued that there was no need to disclose the Third and Fourth Office Actions themselves because they both merely contained examiner analysis that was the same as that in previous office actions, which had already been disclosed to the Reexamination Panel. Addressing the issue of intent, Larson focused on the absence of direct evidence, arguing that merely withholding references, without more, could not constitute the requisite intent. Additionally, Larson argued that it had disclosed to the Reexamination Panel the parallel prosecution of the ’039 Continuation. This disclosure, it asserted, was evidence of good faith rather than an intent to deceive.
The district court found that Larson had engaged in inequitable conduct before the PTO, and held the ’998 patent unenforceable. The court found that the Third and Fourth Office Actions were material and not cumulative of prior art already before the Reexamination noting that, in addition to providing the examiner’s comments about the substantially similar claims of the ’039 Continuation, the Fourth Office Action also mentioned another piece of non-cited art.
The district court also ruled that Larson had withheld the above material with the requisite intent. The court agreed with Aluminart, finding that deceptive intent could be inferred from the circumstances. According to the court, Larson not only failed to disclose several material references, but it also did not provide any plausible excuse for withholding these materials from the PTO.
The Federal CircuitMaterialityOn appeal, the Federal Circuit held that the District Court erred in finding the reference cited in the Fourth Office Action to be material since the reference was merely cumulative. However, the Federal Circuit found the Third and Fourth office actions to be material.
"Because the Third and Fourth Office Actions contained another examiner’s adverse decisions about substantially similar claims, and because the Third and Fourth Office Actions are not cumulative to the First and Second Office Actions, the district court correctly found the withheld Office Actions material."
"Larson contended to the Reexamination Panel that the Johnson patent did not show a screen extending into tracks. We acknowledge that the ’039 Continuation examiner later withdrew his rejection based upon the Johnson patent and came to the same ultimate conclusion as the Reexamination Panel—that the Johnson patent did not disclose the “extending into screen tracks” limitation. The ’039 Continuation examiner’s later view, however, does not change the fact that the Third Office Action contained valuable reasoning and rejections at the time when it was made. Importantly, during the time from when the Third Office Action issued to the time when the Fourth Office Action withdrew the pertinent rejection—more than a year—there was an adverse decision by another examiner that refuted, or was inconsistent with, the position that claim limitations of the ’998 patent were patentable over the Johnson patent. Accordingly, the Third Office Action was material."
"The Fourth Office Action articulated a new rejection of the “extending into screen tracks” limitation in view of the Johnson and Kemp patents. Specifically, in the Fourth Office Action, the examiner found for the first time that the Kemp patent shows a “screen end member actually being located in a screen track.” Furthermore, the examiner explained in the Fourth Office Action that a “screen end member extending into the screen tracks” was readily known in the prior art, and not just shown in the Kemp patent. Significantly, the Reexamination Panel, despite thoroughly analyzing the Kemp patent, as well as other prior art, failed to come to the same conclusion that the “screen end member extending into the screen tracks” limitation was disclosed in the Kemp patent or other prior art. Under these circumstances, the adverse decision of the examiner in the ’039 Continuation, based on a different explanation and interpretation of the Kemp patent and other prior art, was “clearly information that an examiner could consider important.”"
IntentAlthough the Third and Fourth Office Actions were found to be material, other ones of the references found by the District Court were found to be immaterial. Thus, the Federal Circuit remanded the case to the District Court to determine whether "Larson withheld the only remaining material items—the Third and Fourth Office Actions—with a threshold level of deceptive intent and, if so, whether balancing that level of intent with the level of materiality warrants holding the ’998 patent unenforceable."
The Federal Circuit did provide guidance on intent:
First, on remand, it will not be necessary for the district court to accept additional evidence. Rather, the court should analyze all of the evidence of record, consistent with this opinion, and determine if Larson withheld the Third and Fourth Office actions with an intent to deceive the PTO.
Second, materiality does not presume intent, and nondisclosure, by itself, cannot satisfy the deceptive intent element. While deceptive intent can be inferred from circumstantial evidence, the circumstantial evidence must still be clear and convincing. Further, the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard. Relatedly, just as merely withholding a reference cannot support an inference of deceptive intent, so too an accused infringer cannot carry its threshold burden simply by pointing to the absence of a credible good faith explanation.
Third, on remand, the district court should take into account any evidence of good faith, which militates against a finding of deceptive intent. However, while the court must consider any such evidence provided, the patentee is not required to offer evidence of good faith unless the accused infringer first meets its burden to prove—by clear and convincing evidence—the threshold level of deceptive intent. In that regard, we note that, on remand, the district court should consider that Larson notified the Reexamination Panel of the simultaneous prosecution of the ’039 Continuation, and “thus put the PTO on notice of copendency.” The court also should consider the fact that Larson disclosed several pleadings from this lawsuit—including Aluminart’s initial allegations of inequitable conduct—and that there was a Second Office Action issued in the ’039 Continuation proceedings. Despite Larson’s failure to expressly notify the Reexamination Panel of the Third and Fourth Office Actions, the court should consider whether its disclosure to the Reexamination Panel of the parallel proceedings, nevertheless, points away from deceptive intent and must be given weight.
If the district court satisfies itself—in light of all the evidence and consistent with our materiality findings—that Aluminart has established a threshold level of intent by clear and convincing evidence, it will then be required to balance the levels of materiality and intent to determine if a finding of inequitable conduct is warranted. At that point, the court must balance the substance of those threshold levels—with a higher level of materiality permitting a lower level of intent, and vice versa.
Concurring OpinionIn an unusual move, Justice Linn wrote in a concurring opinion that the time has come for an
en banc hearing to review the jurisprudence behind inequitable conduct. In her opinion, Justice Linn referenced the 1988
Kingsdown case where an
en banc Federal Circuit declared inequitable conduct to be a plague, and that symptoms of this plague were apparent from this case.
"The patent-in-suit has undergone examination twice in the PTO, and the patentee has been accused of inequitable conduct on each occasion for allegedly withholding material information. During original prosecution, the PTO considered 143 references, 135 of which the patentee itself had submitted. When the patent was later asserted in litigation, the accused infringer responded by alleging inequitable conduct. It also initiated reexamination of the patent, which stayed the litigation. With all parties’ eyes on the reexamination, the patentee submitted an additional 210 references with its first information disclosure statement (“IDS”), including a copy of the competitor’s inequitable conduct allegations. The patentee then alerted the PTO to rejections in a co-pending application and submitted two more IDSs in the reexamination, each within approximately one month of the application’s Office Actions. The IDSs contained all references relied on in those rejections but did not include the Office Actions themselves. With full knowledge of the co-pending application, the PTO confirmed the patent, which survived reexamination without substantive change to the litigated claims. When the litigation resumed, the accused infringer again charged the patentee with inequitable conduct, this time based on conduct in the reexamination. This second inequitable conduct allegation was the sole issue at trial. Following remand today, the litigation will continue to focus on inequitable conduct, to the exclusion of the patentee’s infringement contentions.
The ease with which inequitable conduct can be pled, but not dismissed, is a problem of our own making. The Supreme Court’s three inequitable conduct cases involved overt fraud, not equivocal acts of omission. We clarified en banc [in
Kingsdown] that the “two elements, materiality and intent, must be proven by clear and convincing evidence,” and that “‘gross negligence’ does not of itself justify an inference of intent to deceive.” But in seeming contradiction with
Kingsdown, a standard even lower than “gross negligence” has propagated through our case law. This standard permits an inference of deceptive intent when “(1) highly material information is withheld; (2) ‘the applicant knew of the information [and] . . . knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding.’”
This test is problematic. First, the “high materiality” prong of the intent element simply repeats the materiality element. Conflating materiality and intent in this manner is inconsistent with the principle that “materiality does not presume intent, which is a separate and essential component of inequitable conduct.” The second, “should have known” prong sets forth a simple negligence standard, lower even than the “gross negligence” standard that was expressly rejected in
Kingsdown. I also question whether a fact-finder who has deemed information to be “highly material” would not also be compelled to conclude that a reasonable patentee “should have known of the materiality,” at least when the patentee “knew of the information,” as prong two requires. Third, the “credible explanation” prong effectively shifts the burden to the patentee to prove a negative: that it did not intend to deceive the PTO. But it is the “accused infringer”—not the patentee—who “must prove by clear and convincing evidence that the material information was withheld with the specific intent to deceive the PTO.” As to this third prong, we have also explained that “[t]he patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove a threshold level of intent to deceive by clear and convincing evidence.” As explained above, however, the first two prongs are not evidence of deceptive intent. The first is evidence of materiality; the second is evidence of negligence. These two prongs are therefore insufficient as a matter of law to establish a clear and convincing “threshold level” of deceptive intent before the third prong can ever properly come into play.
As it now stands, the test generally permits an inference of deceptive intent to be drawn whenever the three prongs are satisfied. This is in tension with the rule in Star Scientific that “the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence.” It cannot be said that deceptive intent is the “single most reasonable inference” when all that prong two shows is that the patentee “should have known” that the information was material. An equally reasonable inference under this test is that the patentee incorrectly believed that the information was not material, or that the patentee was negligent, or even grossly negligent. None of these gives rise to deceptive intent under
Kingsdown, nor is deceptive intent the “single most reasonable inference” under Star Scientific.
For the foregoing reasons, I respectfully submit that the test for inferring deceptive intent, as it currently exists, falls short of the standard “need[ed] to strictly enforce the burden of proof and elevated standard of proof in the inequitable conduct context.” The facts of this case suggest that the time has come for the court to review the issue en banc."
ImpactAs a patent prosecutor and reexamination specialist, this decision concerns me. It seems that, as suggested by Judge Linn, the test for inequitable conduct has fallen well below a gross negligence standard. I find it very hard to believe from the facts of this case that the patent owner intended to deceive the PTO -- they disclosed the existence of the co-pending case, as well as the first two office actions. At what point does it fall on the PTO to "do their job" and check out known, co-pending cases before they issue an allowance or reexamination certificate? Patent prosecutors should not be forced to "babysit" the Patent Office for fear of inequitable conduct.
