APaTS : Intent

Patent-'Round-the-Rosy

admin — Wed, 15 Apr 2009 21:08:00 GMT

Is Larson Manufacturing Co. v. Aluminart Products Ltd. the end of what has been, for some, the classic patent game of asserting inequitable conduct? In an effort to stop one of the favorite pastimes of some accused infringers, the Federal Circuit in Larson puts a pox on lower courts' use of loose evidentiary inferences when considering claims of deceptive intent. It's too soon, however, to shout "All fall down." The court's comments on the issue of deceptive intent were dicta, issued as "guidance" to the lower court on remand following a determination that the dismissal of the patent holder's infringement claims on inequitable grounds was not supported by material evidence. Further, the concurrence points out the flaws of the entire test used to decide inequitable conduct cases and calls for an en banc review and recasting of the same-leaving pocketfuls of unresolved questions when it comes to inequitable conduct.

The patents at issue in Larson covered a retractable screen door system. The alleged infringer claimed inequitable conduct during two patent reexaminations and in the infringement action brought by the patent holder. The district court dismissed the patent infringement claims on grounds of inequitable conduct because it found that the patent holder had intentionally withheld material information during one of the reexaminations. The Federal Circuit found that the district court was mistaken as to the materiality of some of the information at issue and that, therefore, its finding of inequitable conduct could not stand. Vacating the lower court's dismissal, the Federal Circuit offered some instructive guidance on how to address the issue of deceptive intent when reviewing the remaining two material nondisclosures on remand.

The court said "materiality does not presume intent and nondisclosure, by itself, cannot satisfy the deceptive intent element." Rather, the party alleging it bears the burden of proving intent with clear and convincing evidence. Courts should also consider any evidence of good faith which points away from deceptive intent. Only then, once a satisfactory threshold level of intent has been established, should courts engage in the final step, balancing materiality and intent, with a higher level of materiality permitting a lower level of intent and vice versa.

Larson makes clear that courts are not going to "spot" litigants' intent. Now, more than ever, proving inequitable conduct will require a fully developed record and litigants must plan on mustering sufficient evidence to make out intent. Relying on inferences alone won't work because the patent holder is sure to counter with evidence of good faith. Moreover, if an inference is to be used, not only must it be based on sufficient evidence and be reasonable in light of that evidence, it also must be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard. This sets the bar pretty high, and means that litigants need to come prepared to marshal all the facts and counter inferences helpful to the other side.

Our spin? Inequitable conduct claims have never been child's play, and with Larson they are now about as welcome as the plague. Unless and until another decision on the topic comes along, Larson may mean that any but the most egregious and material of such claims will quickly find there's little chance of remaining standing once the patent litigation music stops.

Up in Smoke

admin — Mon, 29 Sep 2008 16:22:00 GMT

Death of lower court victories can be a side effect of appeals, so perhaps the accused patent infringer in Star Scientific Inc. v. R.J. Reynolds Tobacco Co. shouldn't have inhaled their district court win. RJR, the accused infringer, obtained an order for summary judgment in the district court based on the inequitable conduct of patent holder Star Scientific. On appeal, the Federal Circuit made RJR cough up that win. It found that RJR had failed to meet the requisite burden of proof on intent to deceive and sent the case back to the district court for further consistent proceedings-a reversal and remand that surely had to burn.

In Star Scientific, the patents at issue covered a process for curing (drying) tobacco in a way that significantly reduced dangerous chemical by-products. At the center of the dispute was a letter from a Star scientist conveying information that certain foreign tobacco already existed with lower levels of nitrites-the chemical by-product the patent claimed to eliminate. RJR alleged that Star switched law firms in the middle of the patent prosecution in order to avoid disclosing the letter. Star representatives testified that the change was motivated both by the death of a partner at its first firm and its observation of a poor performance by another attorney from that firm in an unrelated prosecution.

Rejecting the testimony as unbelievable, the district found that Star changed law firms in order to "quarantine" the letter from disclosure to the PTO-conduct, it believed, sufficient to demonstrate the requisite deceptive intent necessary to invalidate the patents on equitable grounds. On appeal, the Federal Circuit strongly disagreed and snuffed out the entirety of the lower court's analysis, despite its nod to the district court's ability to make credibility determinations.

Instead, the Star Scientific court reasoned that since inequitable conduct can only be established by clear and convincing evidence and that the accused infringer bears the burden of proof, a patent holder's failure to offer a credible alternative explanation of fact is not enough to shift that burden. Review of the record here showed that RJR had "failed to elicit any testimony or submit any other evidence" regarding a deceptive intent around the disputed letter-despite being specifically asked by the court to do so in supplemental briefing. The record revealed that one key Star witness had never even seen the disputed letter until it was presented to him at his deposition and another was never asked any questions about it. The Federal Circuit said that without any evidence supporting the requisite threshold level of intent, the district court simply did not have the discretion to exercise any equitable inquiry into the patent's enforceability.

And-at least according to Star Scientific -if intent can only be established by indirect or circumstantial evidence (as is often the case), the proffered explanation regarding deception must be the single most reasonable inference able to be drawn from that evidence or the requirements of the clear and convincing standard are not met. Further, patent holders only need to offer rebuttal evidence regarding their good faith once the accused infringer has met its evidentiary burden. Even then, the patent holder may have the right to argue for a "balancing of the equities" to determine whether the conduct alleged was egregious enough to warrant holding the entire patent unenforceable.

With Star Scientific -whose holding takes one of the most conservative recent approaches regarding deceptive intent-patent holders may have an easier time blowing away allegations that their conduct should be construed as intentionally deceptive. We also wonder whether a deposition strategy that might have sought to avoid developing good facts for the other side may have proved fatal in this case. Perhaps the inequitable conduct pack needs a new warning-one that informs accused infringers that their deceptive intent claims could very possibly end up in smoke.

That's Incredible!

admin — Fri, 08 Jun 2007 19:36:00 GMT

McKesson Information Solutions, Inc. v. Bridge Medical, Inc....(read more)