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Failure to consider evidence of good faith leads to reversal of inequitable conduct finding
June 25, 2008

In a decision last week, the Federal Circuit affirmed a district court's finding of no infringement and invalidity for obviousness, and reversed the district court's finding of unenforceability due to inequitable conduct.The Federal Circuit, citing KSR, noted that an obviousness analysis can take account the inferences and creative steps that a person of ordinary skill in the art would employ, and held that there was a only small logical gap between the prior art and the claim at issue that could be closed by a person of ordinary skill in the art pursuing known options within his or her technical grasp and therefore the claim was obvious. Regarding inequitable conduct, the court reaffirmed that intentionally misleading or false statements made in a petition to make special can lead to a finding of unenforceability, even if the statements do not relate to the patentability of the invention, as long as the false statement succeeds in obtaining expedited review of the application. Here, however, the evidence was just as susceptible to the inference that intentional misrepresentations occurred as to the inference that the statements were either innocent, not misleading, or both. As stated by the court:

Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference. All reasonable inferences must be drawn from the evidence, and a judgment then rendered on the evidence as informed by the range of reasonable inferences.
Here, the district court clearly erred because it failed to give due weight to evidence of good faith that would call for inferences contrary to a finding of deceit. As a result, the finding of inequitable conduct was reversed. The district court also affirmed the finding of noninfringement.More detail of Scanner Tech. Corp. v. ICOS Vision Sys. Corp. after the jump.The plaintiff, Scanner Technologies (Scanner), sued the defendant, ICOS Vision Systems (ICOS), for infringement of two patents relating to semiconductors, specifically processes to inspect electronic components including ball array devices, ball grid arrays, chip scale packages and bump on wafers (collectively BGAs). The array of solder balls must be positioned precisely at the same height or else the BGA and thus the device is useless. ICOS denied infringement and counterclaimed seeking a declaratory judgment of non-infringement, invalidity, and unenforceability.The following is a timeline of relevant events:
  • 1996: ICOS's "Projector" product enters the market
  • Mid-1997: Inventors conceive the apparatus and method of the patents in suit
  • January 1998: Inventors file the parent application for the apparatus and method
  • July 1998: Semicon West trade show; Scanner first publicly displays product embodying claimed invention
  • December 1998: Semicon Japan trade show; Scanner again publicly displays product embodying claimed invention
  • January 1999: ICOS announces its new product, CyberSTEREO
  • February 1999: Scanner learns of CyberSTEREO and files petition to make special
  • May 28, 1999: Scanner files divisional applications that became the patents in suit
  • May 16, 2000: Patents-in-suit issue
  • July 7, 2000: Scanner files suit
ICOS representatives attended the Semicon West and Japan trade shows and interacted with Scanner representatives. ICOS expressed an interest in licensing Scanner's BGA technology, but abandoned it in favor of developing its own BGA inspection system. In January 1999, ICOS announced its own BGA inspection product called CyberSTEREO which was an outgrowing and replacement for ICOS's earlier BGA inspection product, the ICOS Projector, which had been on the market since 1996. In February 1999, Scanner learned that ICOS had launched the CyberSTEREO inspection product. In Scanner's view, the CyberSTEREO product infringed claims of Scanner's currently-pending patent applications. Scanner submitted a petition to make special to accelerate review of the application. The USPTO granted the petition, and after two divisional applications were filed, the patents-in-suit issued on May 16, 2000. Scanner filed suit against ICOS on July 7, 2000. While the suit was pending, the parties stipulated that the case would "stand or fall" on claim 1 of the '756 patent. The district court found no infringement because the Scanner patent required use of triangulation calculations while the ICOS products relied on bilinear interpolation, a process of transferring the location of a ball from the 3D camera into a 2D camera and then computing a translation offset, which the court noted was different than triangulation. The district court further found that the patents were invalid due to obviousness in light of ICOS's Projector system because one skilled in the art would have found it obvious at the time of the Scanner invention to employ the elements of the claims to alter the Projector system by removing the structured light source and employing triangulation calculations to locate the three-dimensional position of balls.The district court also found inequitable conduct with Scanner's petition to make special based on claims the court held to be false made by Scanner's attorney (Leone) and one of the inventors. Specifically, the district court held Leone's statement that he had made a "rigid comparison" between the claims and the CyberSTEREO device was false, and that Beaty's statement regarding the manner of display of its product embodying the claims was intended to mislead the USPTO into thinking ICOS had copied Scanner's invention. The district court held the patents unenforceable due to the inequitable conduct, and further found the inequitable conduct made the case exceptional warranting an award of attorneys' fees and costs. Based on these findings (and the parties' agreement regarding the case hinging on a single claim), the district court entered final judgment that all claims of both patents in suit were invalid and unenforceable.The Federal Circuit affirmed the obviousness and noninfringement findings, but reversed the finding of inequitable conduct and vacated the related award of attorney fees. The Federal Circuit reversed the district court's finding of unenforceability due to inequitable conduct. In examining the evidence, the district court found that "only inferences of deceitful intent can be drawn." The Federal Circuit found clear error because the district court failed to give due weight to evidence of good faith that would call for inferences contrary to a finding of deceit. As stated by the court:
Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference. All reasonable inferences must be drawn from the evidence, and a judgment then rendered on the evidence as informed by the range of reasonable inferences.
Here, because the district court did not take into account the possible alternative influences, the conclusion of inequitable conduct was an abuse of discretion. The court also vacated the finding of attorneys' fees, as that award was tied to the inequitable conduct ruling.Regarding the finding of invalidity for obviousness, the Federal Circuit noted that an obviousness analysis need not seek out precise teachings directed to the specific subject matter of the challenged claim, for a court can take account of the inferences and creative steps that a person of ordinary skill in the art would employ. The court stated that the testimony demonstrated a relatively small logical gap between the prior art and the claim that would be closed by a person of ordinary skill in the art pursuing known options within his or her technical grasp. Therefore, the court affirmed the finding of invalidity of claim 1 of the '756 patent and, because Scanner and ICOS had stipulated prior to trial that the case would stand or fall on that single claim, that the other claims of the patents in suit were invalid despite ICOS presenting no evidence to invalidate them. The court also affirmed the noninfringement ruling, finding no basis to disturb the district court's factual findings, which were largely based on crediting the defendant's expert testimony.To read the full decision in Scanner Tech. Corp. v. ICOS Vision Sys. Corp., click here.
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