Attorney cannot directly appeal finding of inequitable conduct absent formal sanctions
August 13, 2007

The Federal Circuit today addressed whether a prosecuting attorney who was found to have committed inequitable conduct during an infringement suit of the patent prosecuted may intervene to contest the finding. The court held that when an attorney is merely criticized by the court, not formally reprimanded, they have no standing to appeal. As a result, the court affirmed the district court's decision denying the prosecuting attorney's motion to intervene in the infringement action. More detail of Nisus Corp. v. Perma-Chink Sys., Inc. after the jump.

In response to a patent infringement suit brought by Nisus Corp. against Perma-Chink Systems, Inc., Perma-Chink raised the affirmative defense that the patent had been procured through two acts of inequitable conduct: (1) failure to disclose the existence of an earlier lawsuit involving related patents and (2) failure to disclose material documents that were at issue in that lawsuit. The district court held that inequitable conduct had occurred. Michael Teschner originally served as patent counsel to Nisus when prosecuting the patent-in-suit, but another attorney replaced him as the prosecuting attorney to finish the application. Mr. Teschner turned over all the relevant materials to the new attorney before the deadline for submitting pertinent materials to the USPTO. After the district court mentioned his actions in support of its inequitable conduct finding, Teschner attempted to intervene in the case, arguing in his motion to intervene that his duty of disclosure had been adequately satisfied because the new attorney had access to the material relevant to the USPTO. However, the district court denied the motion because Nisus and Perma-Chink had settled after the finding of inequitable conduct. Mr. Teschner appealed both the district court's finding that inequitable conduct had occurred and the denial of the motion to intervene. The Federal Circuit found that it did not have jurisdiction over the appeal of the inequitable conduct finding because Mr. Teschner was not a party to the matter and the district court had not formally reprimanded Mr. Teschner. In the court's words (internal citations omitted):

In the absence of some type of formal judicial action directed at [an attorney], such as an explicit reprimand or the issuance of some mandatory directive, a court's criticism of an attorney is simply commentary made in the course of an action to which the attorney is, legally speaking, a stranger.
Because the district court had not actually sanctioned Mr. Teschner, but simply made subsidiary comments about him, the Federal Circuit found that Mr. Teschner could not directly appeal the inequitable conduct finding. Moreover, the court stated that Mr. Teschner had other remedies, as he was free to petition for a writ of mandamus if he felt he was harmed by derogatory comments by the district court. The court also distinguished language from other cases that stated a "finding" with statements against an attorney in an opinion may be appealable by the attorney because the attorney in those cases and the misconduct at issue had been in the current proceedings before that court. The Court also went on to find that the district court did not err in denying the motion to intervene because Mr. Teschner lacked a "substantial legal interest in the underlying litigation." Moreover, even if Mr. Teschner had been allowed to intervene at the district court, he would still have lacked standing to appeal the inequitable conduct finding, as the issue of the district court's judgment dealt with Nisus and Perma-Chink's rights with respect to the patent-in-suit.

To read the full decision in Nisus Corp. v. Perma-Chink Sys., Inc., click here.
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