Friday, August 07, 2009

NLJ story mangles analysis of Exergen case?

In a story titled Federal Circuit Clamps Down on Patent Attorney Misconduct Claims, Sheri Qualters writes in the National Law Journal (NLJ):

Exergen's 11-and-a-half page discussion about misconduct claims tied its pleading standards directly to the Federal Rules of Civil Procedure's fraud pleading standards. "The pleading must identify the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO," stated the ruling.

As noted in the Exergen opinion, the text concerning "who, what, when, where, and how" comes from the Seventh Circuit Court of Appeals, not from the Federal Rules of Civil Procedure:

As the Seventh Circuit has held, the “circumstances” in Rule 9(b) must be set forth with “particularity,” i.e., they “must be
pleaded in detail”—“[t]his means the who, what, when, where, and how” of the alleged fraud. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990). "

The legal question which was answered by the Federal Circuit was about leave to amend an answer. The CAFC concluded:

Because the district court correctly held that SAAT’s proposed allegations of
inequitable conduct were deficient under Rule 9(b), the court did not abuse its discretion
in denying SAAT’s motion for leave to add these allegations to SAAT’s original answer.

The question becomes "when" the patent challenger might move to amend, and suggests that this decision might patent cases MORE complicated, not LESS complicated. The article itself noted:

Midgley said that, as a result of the opinion, lawyers will need to claim that the attorney whom they're accusing of misconduct knew about specific relevant information in existing technology references never submitted to the PTO, Midgley said. "That's going to be difficult to show without the benefit of discovery that a particular individual was aware of specific information like that," he said.

The ruling also creates an incentive for parties facing patent infringement cases to take an early deposition of the patent filer or their lawyer before the deadline to amend the pleadings, said Dana Herberholz, a Zarian Midgley associate who worked with Midgley on the case.

As the text "patent filer or their lawyer" indicates, this is not JUST about attorney misconduct, contrary to the title of the NLJ article, and the following text:

A recent U.S. Court of Appeals for the Federal Circuit decision puts the patent bar on notice that vague claims of another lawyer's intent to mislead or withhold data from the U.S. Patent and Trademark Office will no longer fly.

The precedent-setting Tuesday ruling in Exergen Corp. v. Wal-Mart Stores Inc. makes it harder for patent lawyers to prove that another attorney intentionally deceived the PTO when presenting a patent application.

The article is separately erroneous about the consequences of "inequitable conduct":

Lawyers defending patent infringement cases frequently accuse the other side of such misconduct -- referred to as inequitable misconduct -- which can disqualify a patent or some of its claims

A finding of inequitable conduct renders the PATENT UNENFORCEABLE. That means "all" of its claims, not "some" as stated in the article.

Additionally, the NLJ article noted "On the same day as the Federal Circuit ruling, the American Bar Association (ABA) approved of resolutions favoring restrictions on such misconduct claims."

As to Gordon T. Arnold, the article stated: "Arnold said changes are necessary because misconduct claims boost litigation costs. He also said patent attorneys are inundating the PTO with unnecessary supporting documents to fend off future misconduct claims." The first point is about LITIGATION, and is negated by the comments of Herberholz. This Exergen case will INCREASE the number of depositions, taken early in the case, including those taken of prosecuting patent attorneys and patent agents, as well as inventors. The second point of Arnold is about PROSECUTION, and presumably relates to disclosure of relevant prior art in PTO-1449 forms. There is no (present) requirement that patent applicants perform a literature search, but they do have to identify the most relevant art that they know to patent claims . While some people may overreact, this is not really burdensome, and something that a decent scientist/inventor should know. What is the stuff most related to what you are doing? Further, some patent applicants present much art to bury the significant references. That's an offensive use, not a defensive use of the 1449 form.

The relevant text of the NLJ's link to the ABA action includes:

Another set of IP resolutions adopted by the House of Delegates aims to improve the way in which claims of inequitable conduct are handled in court. The argument that the patent holder engaged in inequitable conduct before the U.S. Patent Office and that the resulting patent is thus unenforceable is a common defense in infringement cases. The ABA resolution calls for the defense to be restricted but not eliminated. (Such evenhandedness is not surprising given that lawyers in the IP bar often represent both defendants and plaintiffs.)

"People assert inequitable conduct almost too freely. What it does is clog up the courts, and it unfairly punishes people for conduct in which they could be completely uninvolved,” Lindfjeld said. “It has been used as a Draconian weapon by defendants in patent litigation.”

**And, finally, no, Qualters did NOT mention footnote 2 of the Exergen case, which WAS about attorney misconduct.

See also

Exergen on inequitable conduct: the right direction for the CAFC?

***As one footnote to this post, note that the National Law Journal placed Fish & Richardson, the losing party on validity and infringement in Exergen, as one of the biggest winners in the past decade. From the FR website:

Our litigation victories have consistently been named to the National Law Journal's biggest winners list for more than a decade. And Managing Intellectual Property magazine named us the top patent litigation firm in the country.

The FR website notes the win in Exergen at the trial level. There is no mention of the contents of footnote 2.


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