Egregious Misconduct Claim Shot Down by District Court

As most patent reexaminations are conducted in parallel to a related litigation, it is important that the USPTO be informed of the progress of a parallel litigation. For this reason, MPEP 2282; 2686 permit the filing of litigation notices by any party to the proceeding, or even a member of the public. The simple failure to inform the USPTO of a parallel court proceeding had, prior to Therasense, been held to be per se material under the former “reasonable examiner” standard. Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223, 1234 (Fed. Cir. 2007)

But what about an arbitration proceeding, does the same duty apply? …and, does the heightened Therasense standard disturb the earlier Nilssen ruling?

These issues were recently explored in Kimberly-Clark Worldwide Inc., v First Quality Baby products et al. As part of the litigation dispute, plaintiff (KC) was subject to a confidential arbitration. In the arbitration, the Patentee and defendant (FQ) took similar positions with respect to that disputed before the USPTO in patent reexamination.

Although the defendant would typically be able to submit the arbitration material of their own accord  as notice of a concurrent proceeding in the patent reexamination (MPEP 2282; 2686), the arbitration materials were confidential. As KC did not submit the materials to the USPTO during the patent reexamination proceeding, the defendants argued the lack of disclosure to the USPTO of the arbitration materials constituted egregious misconduct under Therasense, consistent with the Nilssen case.

In rejecting the defendants inequitable conduct charge, the court explained: (here)

The information that KC failed to disclose to the PTO was nothing more than the opinions of third parties, which had no legal or binding effect. We find no basis to conclude that KC was obligated to disclose to the PTO the fact that these third parties disagreed with the arguments that KC advocated before the PTO. Hence, we are not persuaded that failure to make such disclosures constitutes egregious misconduct.

Nor do we agree with FQ’s assertion that, just as failure to disclose ongoing related litigation is inequitable conduct, see Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223, 1234 (Fed. Cir. 2007), so too must KC’s failure to disclose the arbitration be inequitable conduct. Non-binding arbitration is distinguishable from litigation, on the basis that it lacks binding legal effect. We conclude that FQ’s factual allegations fall short of showing egregious misconduct that is per se material, and therefore, FQ must establish materiality under the but-for standard.

In addition to distinguishing Nilssen on the facts, the Court went on to note that as FQ relied on a per se theory, they did not otherwise demonstrate but-for materiality. Whether or not the lack of disclosure of an ongoing  litigation, absent any other showing, is still per se material under Therasense was not explored by the Court.

While the mere lack of disclosure of arbitration materials may not be per se material under Therasense, that is not to say that a lack of disclosure can never form the basis of a valid inequitable conduct defense. For example, although such materials are not prior art, assuming conflicting positions were taken by the Patentee before the USPTO and the arbitrating body, a violation of 37 C.F.R. § 1.555 (b)(2) may evince a lack of candor akin to the actual facts of the Therasense case. (at least in the current form of Rule 555)

This case was brought to my attention by the great Docket Navigator.

USPTO Post Grant Consideration Precludes “But For” Materiality

The en banc CAFC decision in Therasense has recalibrated inequitable conduct jurisprudence. The decision effectively tightened the standard that is applied in judging materiality of information underlying an inequitable conduct defense. More specifically, the Court replaced the previous “reasonable examiner” standard with a new “but for” materiality analysis. The “but for” standard defines material information as any non-cumulative information which, had it been disclosed prior to patent issuance, would have prevented the patent from issuing.

As I discussed prior to the issuance of the Therasense decision, a “but for” materiality standard applies in Walker Process antitrust claims. Earlier this year, in U.S. Rubber Recycling, Inc. v. ECORE International Inc., et al.(CDCA), the California District Court considered whether or not prior art materials could satisfy a “but for” materiality standard where the USPTO had considered the very same information in a patent reissue proceeding, and had still reissued the patent. In deciding that this information could not be material as a matter of law, the Court explained that while a USPTO proceeding cannot cure fraudulent conduct, it can be dispositive of a “but for” materiality standard and that “[b]ecause the PTO reexamines re-issuance applications as if being presented for the first time, the fact that the PTO did re-issue Defendant’s patent even with the prior art precludes Plaintiff from plausibly pleading [Walker Process].

Since the court’s initial ruling on the Walker process claim, the Therasense decision issued.  Last week, the Court considered the applicability of the same art under an inequitable conduct theory. Not surprisingly, the court found that reissuance of the patent precluded a finding of “but for” materiality as a matter of law.

The Court explained (decision here):

Defendant argues that Plaintiff cannot prove “but-for” causation because the Examiner reviewed Plaintiff’s alleged prior art and still allowed the original claims to be reissued. (Mot. 6:7-19.) The Court agrees. Out of judicial economy, the Court refrains from repeating its analysis in its Order Denying Plaintiff’s Motion to Reconsider. In the July 8, 2011, Order, the Court explained that the “PTO undoubtedly considered most, if not all, of the alleged prior art.” (Order, July 8, 2011, at 6.) The Court listed the numerous prior art alleged by Plaintiff in its Complaint and systematically showed how each prior art is listed on the face of the RE41945 or was submitted in an IDS to the PTO. (See id.) Under the Federal Circuit’s recent en banc decision in Therasense, Plaintiff must show that “the PTO would not have allowed [the] claim[s] [of the ‘723 Patent] had it been aware of the undisclosed prior art.” 2011 WL 2028255, at *11. Because the PTO in the instant action allowed the claims after the disclosure of the alleged prior art, Plaintiff cannot prove “but-for materiality.” (Order, July 8, 2011, at 6-7.)

While the Therasense decision also provided that certain egregious conduct could qualify information as de facto material, such was not the case here.  (The USPTO has since attempted to codify the Therasense decision as proposed Rules 56 and 555 to provide a “but for plus” materiality standard). Going forward, it may be that USPTO post grant proceedings play a more prominent role in assessing the merits of an inequitable conduct charge.

New Therasense Guidelines to Invite Extrinsic Evidence Abuse?

As discussed yesterday, the USPTO has proposed to modify asepcts of Rule 1.56(b) and Rule 1.555(b) to comport to the materiality standard of the recent Therasense decision of the CAFC. In doing so, the Office has proposed a definition of “but for-plus” materiality standard defined by acts of omission (duty of disclosure) together with affirmative acts relating to willful false statements and misrepresentations (duty of candor and good faith).

Rule 56 is an ethical guidepost that pertains only to Patent Applicants. As such, aside from a rare protest under Rule 1.291 or 1.99, third parties do not submit prior art materials to the USPTO under this Rule (of course patent reform will provide more opportunities for pre-grant submissions). Instead, Rule 56 compliance is litigated as an element of an inequitable conduct defense to patent infringement. Charges of inequitable conduct are not substantively considered in patent reexamination as the Office is a less than ideal arbiter of questions of “intent.” 

Currently, the USPTO is proposing to define, by Rule, a materiality standard in terms of “bad acts.” Consequently, has the USPTO now undermined established practice (MPEP) by encouraging new 1.555(b)(2) submissions for consideration of such information in patent reexamination?

Section (c) of Rule 1.555 provides that:

The responsibility for compliance with this section rests upon the individuals designated in paragraph (a) of this section and no evaluation will be made by the Office in the reexamination proceeding as to compliance with this section. If questions of compliance with this section are raised by the patent owner or the third party requester during a reexamination proceeding, they will be noted as unresolved questions in accordance with § 1.552(c). (emphasis added)

In view of the language of 555(c), which remains unchanged by the proposal, it is clear that submissions by third parties in patent reexamination that address matters of compliance with Rule 555 cannot be considered in the reexamination proceeding. This section does not preclude retrospective compliance arguments relating to the original prosecution (Rule 56 compliance challenges).  

On the other hand, MPEP 2216 cautions that conduct of parties should not be included in a Request for reexamination as such will not be considered. Further, Rule 1.552(c), (mentioned above in 1.555 (c)) provides that issues outside of patents and printed publications will not be considered, but merely noted on the record in the next Office Action.

The problem with the proposed changes is that Rule 555(b)(2) defines a materiality determination in terms of an analysis of affirmative acts relating to willful false statements and misrepresentations. The proposed changes to Rule 555(b) also replace the previous language that helped refined patent reexamination materiality in terms of patents and printed publications–it is unclear why this language was removed.

Assuming the USPTO finalizes the current proposal, the Office may have a difficult time refusing extrinsic information in patent reexamination as to the “plus” aspect of the proposed materiality standard. That is to say, the proposed Rule provides a “but for-plus” standard in ascertaining materiality of a reference, but the “plus” component is essentially off limits to Third Parties in arguing materiality of a given reference before the Office. 

Can the Office rightfully refuse extrinsic evidence explaining previous misleading submissions to the Office? Would such information not provide “new light” as to the materiality of previously considered art under the Proposed Rules? 

A more manageable solution is to modify the proposal to add back in “patents and printed publications” to 555(b)(1) and to drop (b)(2) altogether. As written yesterday, safeguards against fraudulent conduct already exist, there is no need to muddy the waters of materiality.

With enhanced pre-grant submission rights being expanded by Patent Reform, and Inter Partes Review and Post Grant Review providing new, litigation style dispute formats, the USPTO could very well find themselves policing past conduct under the current proposal.

Rule 56

USPTO’s Rule 56 “But For-Plus” Proposal

Last week, the USPTO published proposed changes to the materiality standard of  37 CFR §§ 1.56 and 1.555 in response to the Federal Circuit en banc decision in Therasense, Inc. v. Becton, Dickinson & Co.

Impressively, the USPTO has managed to publish the proposed changes in just under two months (since the issuance of the Therasense decision). The initiative to craft such meaningful proposals in such a short time period, as well as the intention to help alleviate the significant duty of disclosure obligations is certainly greatly appreciated by all stakeholders.

In distilling the essence of Therasense down to succinct language for rule making purposes, the USPTO has promulgated a “but for-plus” test.

Is this test appropriate as currently presented, or does it require a bit more seasoning?  Continue Reading Mixing the Duty of Candor with the Duty of Disclosure

Therasense “But For” Standard Codified by USPTO

As mentioned yesterday, the USPTO has now issued a Notice of Proposed Rule Change in the Federal Register on Rule 56 and Rule 555. The proposal is for the Office to adopt the materiality decision of the recent Therasense decision of the CAFC. (Proposal here)

I will have more commentary on this proposal in the coming days.

Texas Court Likens Issuance of Continuation Patents During Litigation to Patent ReexaminationAs discussed yesterday, willful infringement exists where an accused infringer acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). In assessing the propriety of a post-filing willfulness allegation (i.e., after the  complaint is filed with the court) Seagate is oft cited for the proposition that a plaintiff must seek injunctive relief (i.e., preliminary injunction). However, court’s have refused to impose such a wooden rule. Instead, court’s look to the totality of the circumstances, including factors such as the existence of concluded patent reexaminations.In other words, where a patent survives patent reexamination, conduct of a defendant after issuance of the reexamination certificate may be deemed reckless. Ultratech Int’l, Inc. v. Aqua-Leisure Indus., Inc. v. Swimways Corp., No. 3:05-cv-134-J-25MCR, 2009 (M.D. Fla. Mar. 3, 2009); See also St. Clair Intellectual Property Consultants, Inc. v. Palm, Inc., 2009 U.S. Dist. LEXIS 49922, at *5-6 (D. Del. Jun. 10, 2009).Last week, in denying a defendant summary judgment motion of no willful infringement, Judge Ward of the Eastern District of Texas extended the patent reexamination rationale noted above to newly issued continuation patents. In essence, Judge Ward explained that the prior art applied in the litigation for invalidity purposes had already been laundered by the USPTO during prosecution of the continuation patent applications. In SynQor, Inc. v. Artesyn Technologies, Inc., et al. (EDTX), Judge Ward reasoned:In St. Clair, a patent holder’s post-filing willfulness allegation was permitted in spite of Seagate after the patent exited reexamination without substantially narrowed claims. SynQor’s position with the [newly issued continuation applications] is similar to St. Clair’s position with its reexamined patents. Prior to issuance of the [continuation applications as patents], SynQor had been engaged in litigation with defendants for 20 months. Any relevant prior art relied upon by Defendants must have been produced to SynQor approximately one year before the issuance of either patent. [by court order] SynQor, in turn, had a duty of candor to the USPTO to produce any prior art references material to patentability under 37 C.F.R. § 1.56(a) in its prosecution of the applications that issued as the [new patents]. Thus, at least as to art that was disclosed, Defendants’ invalidity defenses have been tested and found lacking by the PTO. The issuance of the [new patents] over Defendants’ asserted prior art creates an objectively high likelihood that the [new patents] are valid over that prior art, similar to the result of the reexamination in St. Clair. As a result, a preliminary injunction was not necessary for SynQor to assert post-filing willful infringement of the [newly issued patents]. Accordingly, Defendants’ motions for summary judgment of no willful infringement of [the newly issued patents] is DENIED.Interestingly both patents (7,558,803 & 7,564,702) subject to the Summary Judgment Motion are now being reexamined at the USPTO based in part, on art that was submitted during original prosecution. (inter partes patent reexamination Control Nos 95/001,405 and 95/001,406). However, it appears that the grant of these reexaminations was in October of 2010, perhaps too late for the summary judgment briefing. The patents issued in July of 2009, it is unclear why the defendants waited a year to initiate reexamination proceedings.This case was brought to my attention by the great Docket Navigator.

As discussed yesterday, willful infringement exists where an accused infringer acted “despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). In assessing the propriety of a post-filing willfulness allegation (i.e., after the  complaint is filed with the court) Seagate is oft cited for the proposition that a plaintiff must seek injunctive relief (i.e., preliminary injunction). However, court’s have refused to impose such a wooden rule. Instead, court’s look to the totality of the circumstances, including factors such as the existence of concluded patent reexaminations.

In other words, where a patent survives patent reexamination, conduct of a defendant after issuance of the reexamination certificate may be deemed reckless. Ultratech Int’l, Inc. v. Aqua-Leisure Indus., Inc. v. Swimways Corp., No. 3:05-cv-134-J-25MCR, 2009 (M.D. Fla. Mar. 3, 2009); See also St. Clair Intellectual Property Consultants, Inc. v. Palm, Inc., 2009 U.S. Dist. LEXIS 49922, at *5-6 (D. Del. Jun. 10, 2009).

Last week, in denying a defendant summary judgment motion of no willful infringement, Judge Ward of the Eastern District of Texas extended the patent reexamination rationale noted above to newly issued continuation patents. In essence, Judge Ward explained that the prior art applied in the litigation for invalidity purposes had already been laundered by the USPTO during prosecution of the continuation patent applications. 

In SynQor, Inc. v. Artesyn Technologies, Inc., et al. (EDTX), Judge Ward reasoned:

In St. Clair, a patent holder’s post-filing willfulness allegation was permitted in spite of Seagate after the patent exited reexamination without substantially narrowed claims. SynQor’s position with the [newly issued continuation applications] is similar to St. Clair’s position with its reexamined patents. Prior to issuance of the [continuation applications as patents], SynQor had been engaged in litigation with defendants for 20 months. Any relevant prior art relied upon by Defendants must have been produced to SynQor approximately one year before the issuance of either patent. [by court order] SynQor, in turn, had a duty of candor to the USPTO to produce any prior art references material to patentability under 37 C.F.R. § 1.56(a) in its prosecution of the applications that issued as the [new patents]. Thus, at least as to art that was disclosed, Defendants’ invalidity defenses have been tested and found lacking by the PTO. The issuance of the [new patents] over Defendants’ asserted prior art creates an objectively high likelihood that the [new patents] are valid over that prior art, similar to the result of the reexamination in St. Clair. As a result, a preliminary injunction was not necessary for SynQor to assert post-filing willful infringement of the [newly issued patents]. Accordingly, Defendants’ motions for summary judgment of no willful infringement of [the newly issued patents] is DENIED.

Interestingly both patents (7,558,803 & 7,564,702) subject to the Summary Judgment Motion are now being reexamined at the USPTO based in part, on art that was submitted during original prosecution. (inter partes patent reexamination Control Nos 95/001,405 and 95/001,406). However, it appears that the grant of these reexaminations was in October of 2010, perhaps too late for the summary judgment briefing. The patents issued in July of 2009, it is unclear why the defendants waited a year to initiate reexamination proceedings.

This case was brought to my attention by the great Docket Navigator.

Paperwork

The Fruit of the Poisonous Inequitable Conduct Tree= Mammoth IDS Filings

Last week, I commented on a recent ruling in Bendix Commercial Vehicle Systems LLC, et al v. Haldex Brake Products Corp., 1-09-cv-00176 (N.D.O.H) relating to patent resissue/recapture. In addition to the interesting recapture issues presented, this case also demonstrates why the USPTO must be continually burdened with mammoth IDS filings in post-grant proceedings.

Last week a further ruling was issued in this case on a summary judgment motion. Plaintiff Bendix requested summary judgment of NO inequitable conduct based on a multitude of defendant accusations relating to the plaintiff’s conduct during the patent reissue proceeding. Despite the plaintiff’s disclosure of litigation materials, expert reports etc, as well as the defendant filing their own carefully worded protest in the patent reissue proceeding, the defendant pointed to a single sentence of a deposition as being withheld from the USPTO….I couldn’t make this up. Continue Reading Large Patent Reissue/Reexamination IDS Filings Driven By Inequitable Conduct Plague

keyAs noted by USPTO reexamination statistics, the majority of recent patent reexaminations are also involved in concurrent litigation.  A recurring issue for litigants involved in such disputes is the fashioning of an appropriate protective order to adequately protect confidential materials. Such issues become particularly contentious in litigation between direct competitors.

Understandably, defendants typically seek protective orders providing  maximum protection of confidential materials, forbidding litigation counsel from using these materials in the prosecution of plaintiff’s patent applications. This prohibition known as a “patent prosecution bar,” is largely standard practice.  However, it is well established that patent reexamination does not involve “patent applications.” Thus, a thornier issue is presented when attempting to extend this bar to include barring participation by individuals with access to confidential information in ongoing reexamination proceedings.

Courts have taken divergent paths on the issue.  Some courts Continue Reading Protective Orders: Patent Reexamination & Concurrent Litigation in Delaware

Patent owners face a dilemma when they are involved in reexamination proceedings with concurrent patent litigation. They may become aware of potentially material information during litigation that is covered by a protective order. Yet they have a duty to the USPTO to disclose information known to be material regardless of the source of such information. To avoid violation of the protective order, the USPTO provides a mechanism for submission of protective order materials under seal pursuant to MPEP §§ 724.02 and 724.04(c) with a petition to expunge the submitted information. In accordance with MPEP guidelines, information subject to a protective order, must be filed in a sealed, clearly labeled, envelope or container. Each document or item must be clearly labeled as a document “Subject To Protective Order.” If the item or document is “Subject to Protective Order” the proceeding, including the tribunal, must be set forth on each document or item. The envelope or container, as well as each of the documents or items, must be labeled with complete identifying information for the file to which it is directed, including the Office or area to which the envelope or container is directed. Any materials, i.e., information, properly submitted under MPEP § 724.02 in a reexamination proceeding will be sealed from public view. The submitted information will be maintained separate from the reexamination file and will not be publicly available until a determination has been made as to whether or not the information is material to patentability. A petition to expunge (37 CFR 1.59) should accompany the submission of proprietary materials, and in any event, must be filed prior to, or shortly after (i.e., in time to be addressed before the reexamination proceeding enters the reexamination certificate printing process), the mailing of a Notice of Intent to Issue Reexamination Certificate (NIRC). If the petition to expunge is not filed in time to be addressed before the reexamination proceeding enters the reexamination certificate printing process, or the petition is filed, and denied/dismissed, then the materials submitted under MPEP § 724.02 will be released to the public with any other papers in the reexamination file. Prior to the mailing of a NIRC, the examiner will review the reexamination file and determine if a petition to expunge is in the reexamination file but not acted upon. The examiner, or other appropriate Office official who is responsible for considering the information, will make a determination as to whether or not any portion or all of the information submitted is material to patentability. If any portion or all of the submitted information is found to be material to patentability, the petition to expunge will be denied and the information will thereafter become a permanent part of the reexamination file and open to the public. Where a submission containing protected material is found to be material to patentability, it still may be possible to redact the submission to eliminate the protected material while retaining the important material (e.g., where a confidential identifying number, such as a serial number or social security number, is included, which is not needed for the context of the submission). If so, the redacted version may be submitted to the Office along with a petition under 37 CFR 1.182 requesting that the unredacted version be sealed and be replaced with the redacted version. If all of the submitted information is found not to be material to patentability, the petition to expunge will be granted and the information expunged. If a portion of the submitted information is found not to be material to patentability, and a portion is found to be material to patentability, the petition to expunge will be dismissed, and patent owner (or the requester, in limited instances where appropriate) provided with an opportunity to separate the material and non-material information, such that the non-material information can be expunged. It is preferable that the petition to expunge be submitted upon filing of the protective order information under seal. If a petition to expunge is not filed prior to, or shortly after (i.e., in time to be addressed before the reexamination proceeding enters the reexamination certificate printing process), the mailing of the NIRC, the materials submitted under MPEP § 724.02 will become a permanent part of the reexamination file and open to the public under 37 CFR 1.11(d). In the event materials have already been made of record by a party, and it is subsequently determined that the materials are protected, the proper petition to submit would be a petition to seal the protected material under 37 CFR 1.182, with the requisite fee. Finally, practitioners should keep in mind that when such protective order materials are voluminous, as is usually the case, the petitioned review of materiality at the time of NIRC can be time consuming for the Office. Therefore, to avoid delay in printing of the reexamination certificate practitioners should consider seeking a de-designation of such materials via court order, where feasible.

–Third Party Tactics in Reexamination —

Part II of our discussion on 2282/2686  Previously, we analyzed Patent Owner compliance with MPEP 2282/2686 in patent reexamination in the wake of Larson Manufacturing Co. of South Dakota, Inc. v. Aluminart Products (Fed. Cir. 2009).  Specifically, the previous post explored the Patent Owner’s duty to notify the Office of concurrent proceedings (2282 for ex parte, 2686 for inter partes).   In this installment, we explore MPEP 2282/2686 relative to the duty to notify the Office of external proceedings, such as a district court litigation involving the patent at issue.   For example, 2282 provides:  Ordinarily, no submissions of any kind by third parties filed after the date of the order are entered into the reexamination or patent file while the reexamination proceeding is pending. However, in order to ensure a complete file, with updated status information regarding prior or concurrent proceedings regarding the patent under reexamination, the Office will, at any time, accept from any parties, for entry into the reexamination file, copies of notices of suits and other proceedings involving the patent and copies of decisions or papers filed in the court from litigations or other proceedings involving the patent. (emphasis added) The lack of ability to participate in an ongoing ex parte reexamination is deemed a significant drawback Continue Reading The Evolution of MPEP 2282/2686