Tuesday, March 03, 2020

CAFC affirms inequitable conduct ruling in GS Cleantech; bad behavior of patent attorneys implicated

The outcome was affirmance of the district court finding of inequitable conduct:

The U.S. District Court for the Southern District of Indiana (“District Court”) found Appellants GS CleanTech
Corporation and Greenshift Corporation’s (together,
“CleanTech”) U.S. Patent Nos. 7,601,858 (“the ’858 patent”), 8,008,516 (“the ’516 patent”), 8,008,517 (“the ’517
patent”), and 8,283,484 (“the ’484 patent”) (together, “the
Patents-in-Suit”) unenforceable due to inequitable conduct. Corrected Memorandum Opinion & Order after
Bench Trial, In re: Method of Processing Ethanol Byproducts & Related Subsystems (’858) Patent Litig., No. 1:10-
ml-02181-LJM-DML (S.D. Ind. Sept. 15, 2016), ECF
No. 1653 (J.A. 236–313) (Opinion and Order); see J.A. 314–
15 (Judgment).

CleanTech appeals. We have jurisdiction pursuant to
28 U.S.C. § 1295(a)(1) (2012). We affirm.

Background law:

“Inequitable conduct is an equitable issue committed to
the discretion of the trial court and is, therefore, reviewed
by this court under an abuse of discretion standard.” Energy Heating, LLC v. Heat On-The-Fly, LLC, 889
F.3d 1291, 1299 (Fed. Cir. 2018) (citations omitted). We
leave undisturbed the trial court’s inequitable conduct decision unless the appellant establishes “that the ruling is
based upon clearly erroneous findings of fact or a misapplication or misinterpretation of applicable law or that the
ruling evidences a clear error of judgment on the part of the
[trial] court.” Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (citation omitted) (en banc in relevant part).
To prevail on a claim of inequitable conduct in a patent
case, the accused infringer must prove by clear and convincing evidence that the patentee:
(1) “knew of the reference” or prior commercial sale;
(2) “knew that it was
material”; and
(3) “made a deliberate decision to withhold
it.” See Therasense, Inc. v. Becton, Dickinson & Co., 649
F.3d 1276, 1290 (Fed. Cir. 2011) (en banc). “Proving that
the [patentee] knew of a reference, should have known of
its materiality, and decided not to submit it to the [US]PTO
does not prove specific intent to deceive.” Id. Instead, “the
specific intent to deceive must be the single most reasonable inference able to be drawn from the evidence.” Id. (internal quotation marks and citation omitted).

Of waiver:

Because we apply the law of the regional circuit as to procedural matters, see Info-Hold, Inc. v. Muzak LLC, 783
F.3d 1365, 1371 (Fed. Cir. 2015), here the Seventh Circuit,
we will not decide an issue for the first time on appeal, see
Scheurer v. Fromm Family Foods LLC, 863 F.3d 748, 755
(7th Cir. 2017) (“The well-established rule in th[e Seventh]
Circuit is that a plaintiff waives the right to argue an issue
on appeal if she fails to raise the issue before a lower court.”
(internal quotation marks and citation omitted)).

Deliberate decision to withhold information:

The District Court concluded that CleanTech knew of
the claimed invention’s offer for sale and reduction to practice in the summer of 2003, as well as that information’s
materiality. J.A. 303, 308. The District Court “conclude[d]
that the [I]nventors and the[ir] attorneys intentionally
withheld material information from the [US]PTO during
prosecution” of the Patents-in-Suit, thereby rendering the
Patents-in-Suit unenforceable due to inequitable conduct.
J.A. 312; see Therasense, 649 F.3d at 1290 (explaining that
inequitable conduct requires a showing of clear and convincing evidence that the patentee “knew of the reference,
knew that it was material, and made a deliberate decision
to withhold it”). CleanTech contends that that District
Court erred in its materiality and intent to deceive findings. Appellant’s Br. 104–05. We disagree with CleanTech.


the District Court found that the Inventors and
the attorneys at Cantor Colburn withheld evidence of successful testing in 2003 and made false representations by
implying that the invention was not reduced to practice until 2004. J.A. 302 (“[N]ot providing information regarding
the [I]nventors’ dealings with Agri-Energy or [Mr.] Barlage[’s] bench-top test raises an inference that the patentees intended to deceive the [US]PTO—it was pre-critical
date information that had a direct bearing on the ability of
the [I]nventors to prove that their claims were patentable.”). This finding is supported by the record. Cantor Colburn began representing CleanTech in March 2008 and, by
at least September 2008, were aware of Mr. Barlage’s testing in June and July 2003. J.A. 111075. Mr. Winsness informed Cantor Colburn that the “testing we did in
June 2003” showed that “a sequence of evaporation followed by centrifugation allows for oil recovery[.]”
J.A. 111075. Moreover, the Inventors informed Cantor
Colburn that, based on the summer 2003 testing, the Inventors “believe[d] [that] the process would work on a commercial scale.” J.A. 263 (internal quotation marks
omitted). Cantor Colburn was also in possession of the
Ethanol Oil Recovery System Diagram and the test reports
themselves. J.A. 301. Despite possessing this information,
Cantor Colburn did not provide it to the USPTO during the
prosecution of the Patents-in-Suit and referenced it only to
assert that the claimed invention predated Prevost.
J.A. 301–02, 304–06, 309. Moreover, in June 2009, Cantor
Colburn filed a letter with the USPTO stating that
feasibility testing occurred in May 2004, with no mention
of the documents dated a year earlier. J.A. 303. This letter
was filed in the prosecutions of each of the Patents-in-Suit.
J.A. 304–05. The District Court did not clearly err in its
finding that CleanTech and Cantor Colburn withheld material evidence from the USPTO.
See Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995) (“[Patentees]
who are not ‘up front’ with the [US]PTO run the risk that,
years later, a fact-finder might conclude they intended to
deceive. This is what appears to have happened here and
we must affirm the trial court.”); see also id. (“Applicants
for patents are required to prosecute patent applications in
the [US]PTO with candor, good faith, and honesty. . . . This
duty extends also to the applicant’s representatives.” (internal footnote and citations omitted)).

Third, the District Court determined that CleanTech
and Cantor Colburn “threatened” Agri-Energy to coerce its
regarding the critical date for the Patents-in-Suit,
after the July 2003 Proposal surfaced and during the pendency of the ’516 and ’517 patents. J.A. 308. Specifically,
in June 2009, Mr. Winsness traveled to Agri-Energy and
“offered Agri-Energy a royalty-free license in exchange for
Agri-Energy’s willingness to admit that the pending patents were valid.” J.A. 269. In July 2009, Cantor Colburn
sent Agri-Energy an email offering “a release of liability for
any prior use of an extraction system” and indemnification
“against any liability” in return “for cooperating with
[CleanTech] and for clarifying the use of the corn oil system
in 2004.” J.A. 110322. Moreover, Cantor Colburn requested a statement “confirming and clarifying” certain
facts relating to the offer. J.A. 110322–23. Agri-Energy’s
manager testified that he “did not accept the offer from
[Cantor Colburn and CleanTech] because the statements
were not true.” J.A. 271. Notably, Cantor Colburn “failed
to request that Agri-Energy provide any documents” regarding its interactions with the Inventors. J.A. 271.

See also the post at PatentlyO:


As background, from http://cdn.ca9.uscourts.gov/datastore/uploads/guides/stand_of_review/I_Definitions.html :

A district court’s findings of fact are reviewed under the clearly erroneous standard. See Fed. R. Civ. P. 52(a)(6); United States v. Cazares, 121 F.3d 1241, 1245 (9th Cir. 1997) (standard applied in both civil and criminal proceedings). “Findings of fact are made on the basis of evidentiary hearings and usually involve credibility determinations, which explains why they are reviewed deferentially under the clearly erroneous standard.” Rand v. Rowland, 154 F.3d 952, 957 n.4 (9th Cir. 1998) (en banc). Special deference is paid to a trial court’s credibility findings. See Anderson v. City of Bessemer, 470 U.S. 564, 573 (1985); McClure v. Thompson, 323 F.3d 1233, 1241 (9th Cir. 2003).

Review under the clearly erroneous standard is significantly deferential, requiring a “definite and firm conviction that a mistake has been committed.” See Easley v. Cromartie, 532 U.S. 234, 242 (2001); Fisher v. Tucson Unified Sch. Dist., 652 F.3d 1131, 1136 (9th Cir. 2011); United States v. Comprehensive Drug Testing, Inc., 621 F.3d 1162, 1175 (9th Cir. 2010) (en banc) (per curiam); see also Miller v. Thane Int’l, Inc., 519 F.3d 879, 888 (9th Cir. 2008) (concluding the district court clearly erred). If the district court’s account of the evidence is plausible in light of the entire record, the court of appeals may not reverse, even if it would have weighed the evidence differently. See Husain v. Olympic Airways, 316 F.3d 829, 835 (9th Cir. 2002); see also United States v. McCarty, 648 F.3d 820, 824 (9th Cir. 2011); Katie A., ex. Rel. Ludin v. Los Angeles County, 481 F.3d 1150, 1155 (9th Cir. 2007). “Where there are two permissible views of the evidence, the factfinder’s choice between them cannot be clearly erroneous.” United States v. Elliott, 322 F.3d 710, 715 (9th Cir. 2003); see also United States v. Stanley, 653 F.3d 946, 952 (9th Cir. 2011); United States v. Al Nasser, 555 F.3d 722, 727 (9th Cir. 2009).


Abuse of Discretion

“An abuse of discretion is a plain error, discretion exercised to an end not justified by the evidence, a judgment that is clearly against the logic and effect of the facts as are found.” Rabkin v. Oregon Health Sciences Univ., 350 F.3d 967, 977 (9th Cir. 2003) (citation and internal quotation marks omitted); see also In re Korean Air Lines Co., Ltd., 642 F.3d 685, 698 n.11 (9th Cir. 2011). Under the abuse of discretion standard, a reviewing court cannot reverse absent a definite and firm conviction that the district court committed a clear error of judgment in the conclusion it reached upon a weighing of relevant factors. See McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939, 953 (9th Cir. 2011); Valdivia v. Schwarzenegger, 599 F.3d 984, 988 (9th Cir. 2010) (citing SEC v. Coldicutt, 258 F.3d 939, 941 (9th Cir. 2001)); Harman v. Apfel, 211 F.3d 1172, 1175 (9th Cir. 2000) (noting reversal under abuse of discretion standard is possible only “when the appellate court is convinced firmly that the reviewed decision lies beyond the pale of reasonable justification under the circumstances”). The abuse of discretion standard requires an appellate court to uphold a district court determination that falls within a broad range of permissible conclusions. See Kode v. Carlson, 596 F.3d 608, 612-13 (9th Cir. 2010) (per curiam); Grant v. City of Long Beach, 315 F.3d 1081, 1091 (9th Cir. 2002), amended by 334 F.3d 795 (9th Cir. 2003) (order).

A district court abuses its discretion when:

· District court does not apply the correct law or rests its decision on a clearly erroneous finding of a material fact. See Jeff D. v. Otter, 643 f.3d 278 (9th Cir. 2011) (citing Casey v. Albertson’s Inc., 362 F.3d 1254, 1257 (9th Cir. 2004)).

· District court rules in an irrational manner. See Chang v. United States, 327 F.3d 911, 925 (9th Cir. 2003); see also Cachil Dehe Band of Wintun Indians of the Colusa Indian Cmty. v. California, 618 F.3d 1066, 1084 (9th Cir. 2010) (concluding district court did not rule in an irrational manner).

· District court makes an error of law. See Koon v. United States, 518 U.S. 81, 100 (1996); Strauss v. Comm’r of the Soc. Sec. Admin., 635 F.3d 1135, 1137 (9th Cir. 2011) (citing Koon); Forest Grove School Dist. v. T.A., 523 F.3d 1078, 1085 (9th Cir. 2008) (applying Koon); United States v. Martin, 278 F.3d 988, 1001 (9th Cir. 2002) (applying Koon). Thus, the court abuses its discretion by erroneously interpreting a law, United States v. Beltran‑Gutierrez, 19 F.3d 1287, 1289 (9th Cir. 1994), or by resting its decision on an inaccurate view of the law, Richard S. v. Dep’t of Dev. Servs., 317 F.3d 1080, 1085-86 (9th Cir. 2003). See also Fox v. Vice, 131 S. Ct. 2205, 2211 (2011) (recognizing trial court has wide discretion “but only when, it calls the game by the right rules”).

· Record contains no evidence to support district court’s decision. See Oregon Natural Res. Council v. Marsh, 52 F.3d 1485, 1492 (9th Cir. 1995).


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