Therasense applied in 1st Media: inequitable conduct is hard to find
1ST MEDIA, LLC v. ELECTRONIC ARTS, INC. is an important case in inequitable conduct, illustrating points about the intent prong of Therasense.
From within the case:
With respect to the three references, both Lewis and Sawyer testified that they did not appreciate the materiality of any of them. Lewis testified under direct exami- nation by Appellees that nondisclosure of the Bush reference was “an oversight that got lost in the cracks at that time and wasn’t a conscious decision not to report [it].” Tr. of Inequitable Conduct Hr’g, Day One at 183, 1st Media (Feb. 25, 2010), ECF No. 267 (“Day One Tr.”). Although Sawyer testified that he could not recall why he did not disclose the Bush reference, Appellees pointed to his previous declaration in which he claimed that “the Bush publication itself never sparked an awareness or belief in my mind that Bush should be disclosed.” Tr. of Inequitable Conduct Hr’g, Day Two at 134, 1st Media (Feb. 26, 2010), ECF No. 270 (“Day Two Tr.”). Sawyer also testified that he generally considered patentability issues in a case only during what he termed “active prosecution,” or the time between the first office action and the notice of allowance. Id. at 149. During the time period that Saw- yer was prosecuting the ’946 Patent, he had newly set up a solo office out of his home and characterized his practice as being at times “very active.” Id. at 153 (Sawyer’s testimony that he was handling about 170 open prosecu- tion files by the end of 1995). As for the Baji and Hoarty references, Lewis and Sawyer each testified that the technology in the co-pending ’423 and ’001 Applications was so distinct from the ’946 Application that it did not occur to them to disclose Baji or Hoarty during prosecution of the ’946 Patent.
The district court was skeptical:
The district court found their explanations not credible. Findings of Fact and Conclusions of Law Following Trial on Inequitable Conduct at 4, 1st Media (Apr. 23, 2010), ECF No. 276 (“Findings”) (“Dr. Lewis and Mr. Sawyer offered explanations for their failure to disclose the material prior art . . . that were not credible. . . . Mr. Sawyer’s explanation, like Dr. Lewis’ . . . was neither factually nor legally sufficient to explain the failure to disclose the Bush Reference, which was highly material.”); id. at 4-5 (“As to Baji [and] Hoarty . . . Dr. Lewis and Mr. Sawyer suggested that they viewed the technology at issue in their co-pending applications as so distinct from that of the ’946 application . . . that ‘it did not occur to them’ to make any disclosures about Baji [or] Hoarty . . . . That explanation, which defied common sense in light of the extensive overlap in the applications and claims, was fully discredited at trial.”). The district court found that Lewis and Sawyer knew the references were material and concluded that because they failed to provide a credible good faith explanation for non- disclosure of the references, it was appropriate to infer that they intended to deceive the PTO during prosecution of the ’946 Patent. Id. The district court thus concluded that Lewis and Sawyer committed inequitable conduct. The court allowed Appellees to draft proposed findings of fact and conclusions of law. The court adopted those findings verbatim, granted Appellees’ requested declara- tory judgment of inequitable conduct, held the ’946 Patent unenforceable, and dismissed 1st Media’s complaint. 1st Media appealed and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
The CAFC observed the burden to overcome the decision:
Even when a party drafts proposed findings of fact and conclusions of law, “[o]nce adopted, the findings are those of the court and may be reversed only if clearly erroneous.” Mathis v. Spears, 857 F.2d 749, 754 (Fed. Cir. 1988); see also Anderson v. City of Bessemer City, 470 U.S. 564, 572 (1985). “A district court abuses its discretion when its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.” Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc).
The CAFC laid out Therasense:
This court’s recent opinion in Therasense changed the standard for proving inequitable conduct based on nondisclosure of a reference to the PTO. 649 F.3d at 1290-91. Under the Therasense standard, absent affirmative egre- gious misconduct, a defendant must prove by clear and convincing evidence both of the “separate requirements” that: (1) “the patentee acted with the specific intent to deceive the PTO”; and (2) the non-disclosed reference was but-for material. Id. Therasense explained that in order to show that the patentee acted with the specific intent to deceive the PTO, a defendant must prove “that the appli- cant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Id. at 1290 (emphasis added). A failure of proof on any element precludes a finding of inequitable conduct. See id. (“Prov- ing that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.” (em- phasis added)).
The arguments by 1st Media:
1st Media argues that the district court’s finding of in- equitable conduct cannot be sustained because the court did not find that either Lewis or Sawyer made a deliber- ate decision to withhold the three known material references from the PTO. 1st Media accuses Appellees of conflating the requirement to show intent to deceive with the requirement to show materiality and argues that Star Scientific’s single most reasonable inference standard cannot substitute for Therasense’s requirement that the defendant prove that the patentee made a deliberate decision to withhold a known material reference in order to deceive the PTO. Finally, 1st Media cites Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 512 (1984), to argue that the Appellees cannot satisfy their burden to show a deliberate decision to withhold references merely from the fact that the testimony of Lewis and Sawyer was discredited.
The absence of intent was going to be a problem:
Appellees admit that they have no direct evidence that Lewis or Sawyer intended to deceive the PTO. See Oral Arg. at 32:23, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2010-1435/all.
AND
As noted, supra, this court has now made clear that “[t]o prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.” Therasense, 649 F.3d at 1290. Moreover, “[a] finding that the misrepresenta- tion or omission amounts to gross negligence or negli- gence under a ‘should have known’ standard does not satisfy this intent requirement.” Id. (citing Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (1988)). “‘In a case involving nondisclosure of informa- tion, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.’” Id. (quoting Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (1995)). The district court’s “Intent To Deceive” analysis regarding Bush analyzed only “1. Knowledge of Materiality,” and “2. Lewis and Sawyer’s Explanations.” Findings at 15-18. Significantly, however, the district court, following pre-Therasense precedent, did not discuss or consider whether there was any deliberate decision on either Lewis’s or Sawyer’s part to withhold the Bush reference from the PTO.
AND
This court cannot sustain the district court’s decision. Knowledge of the reference and knowledge of materiality alone are insufficient after Therasense to show an intent to deceive. Moreover, it is not enough to argue careless- ness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, “clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.” Molins, 48 F.3d at 1181. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush. See Therasense, 649 F.3d at 1290. Lewis did not testify that he thought that Bush was relevant to the ’946 Patent’s prosecution in 1995; he only testified that he knew of “some rejections related to a patent in Europe, and it was the Bush patent.” Day One Tr. at 92. But the PCT Application was not rejected based on Bush until 1998. Lewis could not recall whether he had reviewed the EPO search report identifying Bush; he testified only that the report is something that he would have reviewed if Sawyer had sent it to him. Id. at 93. The record does not contain any letter from Sawyer to Lewis at that time informing Lewis of the EPO search report or Bush. Oral Arg. at 19:45-20:25. Lewis then testified that “given the details of the Bush [reference] that [he] know[s] now,” he now thinks that Bush was “relevant.” Id. at 100.
Something to note:
An applicant’s knowledge of a reference’s materiality, however, cannot by itself prove, let alone clearly and convincingly prove, that any subsequent non-disclosure was based on a deliberate decision. Otherwise, the third element in Therasense’s intent to deceive analysis would be satisfied in any case in which the second element was satisfied. This would effectively eviscerate Therasense’s test for mens rea and reinflict the plague of patent unenforceabil- ity based on the thinnest of speculation regarding the applicant’s putative mental state. See Therasense, 649 F.3d at 1290.
Separately:
Here, there is no evidence, such as the evidence of a selective disclosure that oc- curred in Aventis Pharma, suggesting that Lewis and Sawyer must have deliberately withheld Baji. 675 F.3d at 1336. That Lewis’s and Sawyer’s testimony was not credited by the district court does not overcome the short- comings in Appellees’ proof. And the fact that Baji was not mentioned in an argument dealing with a rejection based on five other references nearly a year and a half after Baji first came to Lewis’s and Sawyer’s attention does not in and of itself suggest that the single most reasonable inference is a deliberate decision to deceive. The district court’s contrary finding is clearly erroneous.
In conclusion:
Ultimately, for all of the references, the evidence sup- ports only that Lewis and Sawyer (1) knew of the refer- ences, (2) may have known they were material (which this court does not reach), and (3) did not inform the PTO of them. But that is not enough. As Therasense made clear, a defendant must prove that an applicant (1) “knew of the reference,” (2) “knew it was material,” and (3) “made a deliberate decision to withhold it.” 649 F.3d at 1290 (emphasis added). It is the last requirement that is missing from the record developed in this case.
And, at the end, a trap for the unwary is identified:
At oral argument, Appellees admitted that they took full discovery on inequitable conduct and informed this court that the record is complete. Oral Arg. at 19:20- 20:50. Because Appellees cannot prove on this record that either Lewis or Sawyer made a deliberate decision to withhold references from the PTO and because Appellees acknowledged that the record is complete, this court reverses. We need not decide whether any of the references were but-for material.
Attorneys for the (losing) appellees: ERIC A. BURESH, Erise IP, P.A., of Leawood, Kansas, argued for all defendants-appellees. With him on the brief for Sony Computer Entertainment America, Inc., was ABRAN J. KEAN. Of counsel was B. TRENT WEBB, Shook, Hardy & Bacon, L.L.P., of Kansas City, Missouri. On the brief for Electronic Arts, Inc., et al., were RICHARD F. ZIEGLER, Jenner & Block LLP, of New York, New York, and BENJAMIN J. BRADFORD, of Chicago, Illinois. Of coun- sel was JOHN JOSEF MOLENDA, of New York, New York.
Keyword: "Y reference"
Note text: this case is unlike that in Aventis Pharma S.A. v. Hospira, Inc., 675 F.3d 1324, 1335-36 (Fed. Cir. 2012), in which this court affirmed the district court’s inequitable conduct determination.
From within the case:
With respect to the three references, both Lewis and Sawyer testified that they did not appreciate the materiality of any of them. Lewis testified under direct exami- nation by Appellees that nondisclosure of the Bush reference was “an oversight that got lost in the cracks at that time and wasn’t a conscious decision not to report [it].” Tr. of Inequitable Conduct Hr’g, Day One at 183, 1st Media (Feb. 25, 2010), ECF No. 267 (“Day One Tr.”). Although Sawyer testified that he could not recall why he did not disclose the Bush reference, Appellees pointed to his previous declaration in which he claimed that “the Bush publication itself never sparked an awareness or belief in my mind that Bush should be disclosed.” Tr. of Inequitable Conduct Hr’g, Day Two at 134, 1st Media (Feb. 26, 2010), ECF No. 270 (“Day Two Tr.”). Sawyer also testified that he generally considered patentability issues in a case only during what he termed “active prosecution,” or the time between the first office action and the notice of allowance. Id. at 149. During the time period that Saw- yer was prosecuting the ’946 Patent, he had newly set up a solo office out of his home and characterized his practice as being at times “very active.” Id. at 153 (Sawyer’s testimony that he was handling about 170 open prosecu- tion files by the end of 1995). As for the Baji and Hoarty references, Lewis and Sawyer each testified that the technology in the co-pending ’423 and ’001 Applications was so distinct from the ’946 Application that it did not occur to them to disclose Baji or Hoarty during prosecution of the ’946 Patent.
The district court was skeptical:
The district court found their explanations not credible. Findings of Fact and Conclusions of Law Following Trial on Inequitable Conduct at 4, 1st Media (Apr. 23, 2010), ECF No. 276 (“Findings”) (“Dr. Lewis and Mr. Sawyer offered explanations for their failure to disclose the material prior art . . . that were not credible. . . . Mr. Sawyer’s explanation, like Dr. Lewis’ . . . was neither factually nor legally sufficient to explain the failure to disclose the Bush Reference, which was highly material.”); id. at 4-5 (“As to Baji [and] Hoarty . . . Dr. Lewis and Mr. Sawyer suggested that they viewed the technology at issue in their co-pending applications as so distinct from that of the ’946 application . . . that ‘it did not occur to them’ to make any disclosures about Baji [or] Hoarty . . . . That explanation, which defied common sense in light of the extensive overlap in the applications and claims, was fully discredited at trial.”). The district court found that Lewis and Sawyer knew the references were material and concluded that because they failed to provide a credible good faith explanation for non- disclosure of the references, it was appropriate to infer that they intended to deceive the PTO during prosecution of the ’946 Patent. Id. The district court thus concluded that Lewis and Sawyer committed inequitable conduct. The court allowed Appellees to draft proposed findings of fact and conclusions of law. The court adopted those findings verbatim, granted Appellees’ requested declara- tory judgment of inequitable conduct, held the ’946 Patent unenforceable, and dismissed 1st Media’s complaint. 1st Media appealed and we have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).
The CAFC observed the burden to overcome the decision:
Even when a party drafts proposed findings of fact and conclusions of law, “[o]nce adopted, the findings are those of the court and may be reversed only if clearly erroneous.” Mathis v. Spears, 857 F.2d 749, 754 (Fed. Cir. 1988); see also Anderson v. City of Bessemer City, 470 U.S. 564, 572 (1985). “A district court abuses its discretion when its decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary or fanciful.” Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed. Cir. 1998) (en banc).
The CAFC laid out Therasense:
This court’s recent opinion in Therasense changed the standard for proving inequitable conduct based on nondisclosure of a reference to the PTO. 649 F.3d at 1290-91. Under the Therasense standard, absent affirmative egre- gious misconduct, a defendant must prove by clear and convincing evidence both of the “separate requirements” that: (1) “the patentee acted with the specific intent to deceive the PTO”; and (2) the non-disclosed reference was but-for material. Id. Therasense explained that in order to show that the patentee acted with the specific intent to deceive the PTO, a defendant must prove “that the appli- cant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Id. at 1290 (emphasis added). A failure of proof on any element precludes a finding of inequitable conduct. See id. (“Prov- ing that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.” (em- phasis added)).
The arguments by 1st Media:
1st Media argues that the district court’s finding of in- equitable conduct cannot be sustained because the court did not find that either Lewis or Sawyer made a deliber- ate decision to withhold the three known material references from the PTO. 1st Media accuses Appellees of conflating the requirement to show intent to deceive with the requirement to show materiality and argues that Star Scientific’s single most reasonable inference standard cannot substitute for Therasense’s requirement that the defendant prove that the patentee made a deliberate decision to withhold a known material reference in order to deceive the PTO. Finally, 1st Media cites Bose Corp. v. Consumers Union of United States, Inc., 466 U.S. 485, 512 (1984), to argue that the Appellees cannot satisfy their burden to show a deliberate decision to withhold references merely from the fact that the testimony of Lewis and Sawyer was discredited.
The absence of intent was going to be a problem:
Appellees admit that they have no direct evidence that Lewis or Sawyer intended to deceive the PTO. See Oral Arg. at 32:23, available at http://www.cafc.uscourts.gov/oral-argument-recordings/2010-1435/all.
AND
As noted, supra, this court has now made clear that “[t]o prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.” Therasense, 649 F.3d at 1290. Moreover, “[a] finding that the misrepresenta- tion or omission amounts to gross negligence or negli- gence under a ‘should have known’ standard does not satisfy this intent requirement.” Id. (citing Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (1988)). “‘In a case involving nondisclosure of informa- tion, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.’” Id. (quoting Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (1995)). The district court’s “Intent To Deceive” analysis regarding Bush analyzed only “1. Knowledge of Materiality,” and “2. Lewis and Sawyer’s Explanations.” Findings at 15-18. Significantly, however, the district court, following pre-Therasense precedent, did not discuss or consider whether there was any deliberate decision on either Lewis’s or Sawyer’s part to withhold the Bush reference from the PTO.
AND
This court cannot sustain the district court’s decision. Knowledge of the reference and knowledge of materiality alone are insufficient after Therasense to show an intent to deceive. Moreover, it is not enough to argue careless- ness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, “clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.” Molins, 48 F.3d at 1181. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush. See Therasense, 649 F.3d at 1290. Lewis did not testify that he thought that Bush was relevant to the ’946 Patent’s prosecution in 1995; he only testified that he knew of “some rejections related to a patent in Europe, and it was the Bush patent.” Day One Tr. at 92. But the PCT Application was not rejected based on Bush until 1998. Lewis could not recall whether he had reviewed the EPO search report identifying Bush; he testified only that the report is something that he would have reviewed if Sawyer had sent it to him. Id. at 93. The record does not contain any letter from Sawyer to Lewis at that time informing Lewis of the EPO search report or Bush. Oral Arg. at 19:45-20:25. Lewis then testified that “given the details of the Bush [reference] that [he] know[s] now,” he now thinks that Bush was “relevant.” Id. at 100.
Something to note:
An applicant’s knowledge of a reference’s materiality, however, cannot by itself prove, let alone clearly and convincingly prove, that any subsequent non-disclosure was based on a deliberate decision. Otherwise, the third element in Therasense’s intent to deceive analysis would be satisfied in any case in which the second element was satisfied. This would effectively eviscerate Therasense’s test for mens rea and reinflict the plague of patent unenforceabil- ity based on the thinnest of speculation regarding the applicant’s putative mental state. See Therasense, 649 F.3d at 1290.
Separately:
Here, there is no evidence, such as the evidence of a selective disclosure that oc- curred in Aventis Pharma, suggesting that Lewis and Sawyer must have deliberately withheld Baji. 675 F.3d at 1336. That Lewis’s and Sawyer’s testimony was not credited by the district court does not overcome the short- comings in Appellees’ proof. And the fact that Baji was not mentioned in an argument dealing with a rejection based on five other references nearly a year and a half after Baji first came to Lewis’s and Sawyer’s attention does not in and of itself suggest that the single most reasonable inference is a deliberate decision to deceive. The district court’s contrary finding is clearly erroneous.
In conclusion:
Ultimately, for all of the references, the evidence sup- ports only that Lewis and Sawyer (1) knew of the refer- ences, (2) may have known they were material (which this court does not reach), and (3) did not inform the PTO of them. But that is not enough. As Therasense made clear, a defendant must prove that an applicant (1) “knew of the reference,” (2) “knew it was material,” and (3) “made a deliberate decision to withhold it.” 649 F.3d at 1290 (emphasis added). It is the last requirement that is missing from the record developed in this case.
And, at the end, a trap for the unwary is identified:
At oral argument, Appellees admitted that they took full discovery on inequitable conduct and informed this court that the record is complete. Oral Arg. at 19:20- 20:50. Because Appellees cannot prove on this record that either Lewis or Sawyer made a deliberate decision to withhold references from the PTO and because Appellees acknowledged that the record is complete, this court reverses. We need not decide whether any of the references were but-for material.
Attorneys for the (losing) appellees: ERIC A. BURESH, Erise IP, P.A., of Leawood, Kansas, argued for all defendants-appellees. With him on the brief for Sony Computer Entertainment America, Inc., was ABRAN J. KEAN. Of counsel was B. TRENT WEBB, Shook, Hardy & Bacon, L.L.P., of Kansas City, Missouri. On the brief for Electronic Arts, Inc., et al., were RICHARD F. ZIEGLER, Jenner & Block LLP, of New York, New York, and BENJAMIN J. BRADFORD, of Chicago, Illinois. Of coun- sel was JOHN JOSEF MOLENDA, of New York, New York.
Keyword: "Y reference"
Note text: this case is unlike that in Aventis Pharma S.A. v. Hospira, Inc., 675 F.3d 1324, 1335-36 (Fed. Cir. 2012), in which this court affirmed the district court’s inequitable conduct determination.
posted by Lawrence B. Ebert at 7:14 AM
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