Filewrapper-old

High materiality without explanation for nondisclosure leads to inference of intent to deceive
October 17, 2008

In a recent decision, the Federal Circuit affirmed a district court's finding of inequitable conduct for one patent but reversed on a second, affirmed a finding of no invalidity of the second patent, but vacated the finding of infringement after modifying the district court's claim construction of a claim term. The court also reversed the finding of indefiniteness of a third patent.

The court continued its recent discussions of when (if ever) an inference of intent to deceive is permissible to support an inequitable conduct finding where there is no independent evidence of such intent. Here, the majority affirmed the district court's inference of intent based on high materiality, proof of knowledge of the withheld art, and a lack of credible explanation for the nondisclosure. Judge Lourie dissented, arguing the majority conflated intent with materiality. Given the apparent disagreement on this issue, a case presenting the issue of when (or whether) such an inference is permissible seems to be a candidate for en banc review.

Praxair owns three patents that describe pressurized storage containers that limit potentially rapid accidental discharges of hazardous gasses that otherwise pose a serious threat to health and safety in the semiconductor industry. Praxair brought suit against ATMI, its lone competitor in the market for these tanks, for infringement of the three patents. Eventually, the district court adopted Praxair's proposed definitions for the disputed terms in two of the patents, "flow restrictor," "capillary," and "restrictor in the form of a restricted flow path." The court held the third patent invalid for indefiniteness, holding the term "port body" incapable of construction. A jury then held the remaining two patents not invalid and infringed, but the district court denied Praxair's request for an injunction because Praxair had not shown monetary damages to be insufficient. The district court then held a bench trial on ATMI's inequitable conduct defense. The inequitable conduct allegations were based upon three types of prior art, two of which the district court found to be material. The district court held the two patents the jury found were infringed to be unenforceable. The court held there was no showing of intent to deceive the PTO with respect to one prior art patent. However, other prior art devices, known as RFO devices, were material and known to Praxair and its patent attorney who prosecuted the applications. Based upon four comments in the prosecution history which could not have been asserted had the RFO art been before the Examiner, the court concluded that the lack of testimony explaining the failure to disclose the RFOs to the PTO supported an intent to deceive, and thus inequitable conduct. Praxair appealed.The Federal Circuit first considered the inequitable conduct issues. Inequitable conduct requires clear and convincing evidence the applicant (1) made an affirmative misrepresentation of material facts, failed to disclose material information, or submitted false material information, and (2) intended to deceive the PTO. Materiality and intent are separate issues, and a showing of materiality alone does not give rise to a presumption of intent to deceive. An inference of intent to deceive is appropriate, when (1) highly material information is withheld; (2) that applicant knew of the information and knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding of the information from the PTO. Once the threshold findings of materiality and intent are established, the trial court must weigh them to determine whether the equities warrant a conclusion that inequitable conduct occurred. The Federal Circuit concluded the district court's finding that the RFOs were material was not clearly erroneous, as there was widespread use of the RFOs prior to Praxair's inventions, and the use of capillaries in the patent was similar to the use of the small, flow restricting hole in the prior art RFO devices. Praxair offered no coherent argument as to why the RFOs were not highly material in view of statements made during prosecution, so the Federal Circuit agreed with the district court's finding of high materiality of the RFOs.Regarding intent, the prosecuting attorney and at least one inventor knew of the RFO information, and Praxair did not provide a good faith explanation for withholding the information. The explanation was simply the conclusory statement that nothing was knowingly withheld. Based on the findings that the RFO devices were highly material, the Applicants knew of them and at least should have known of their materiality, and the absence of any good faith explanation for their nondisclosure, the court affirmed it was proper to infer that the Applicants intended to deceive the PTO. As a result, the court affirmed the finding of inequitable conduct for the first patent.With regard to the second patent the district court held to be unenforceable, however, there were no statements made in the prosecution history that were inconsistent with the existence of the RFO devices, thus reducing their materiality. Therefore, the district court's conclusion of high materiality of the RFO art and the intent to deceive was improper, and the court reversed the finding of inequitable conduct with respect to the second patent.The court next turned to indefiniteness. The relevant claim term in the patent was "port body." While the district court concluded that the term was not described or coherently discussed in the patent, the Federal Circuit found discussion of the "port body" on at least seven occasions in the summary of the invention, although the discussion was not a "model of clarity." As a result, reading the claim in light of the specification, the claim term was capable of construction, and therefore not indefinite.With the finding of inequitable conduct reversed as to one of the two patents found to be not invalid and infringed, the court then turned to those questions. The terms at issue were "flow restrictor" and "capillary." The district court construed "flow restrictor" to require a structure that "serves to restrict the rate of flow." ATMI sought a construction that required a "severe" flow restriction. The Federal Circuit concluded that the district court's construction was incorrect, since it was not read in light of the specification's consistent emphasis on a fundamental feature of the invention. The court determined that "flow restrictor" should be construed as "a structure that serves to restrict the rate of flow sufficiently to prevent a hazardous situation," in accordance with a primary objective of the invention. The Federal Circuit affirmed the district court's construction of "capillary," however, as fully consistent with the specification. In view of the new claim construction of "flow restrictor," the court remanded the case for determination of infringement under the new claim construction.Judge Lourie concurred in part and dissented in part. In addition to disagreeing with the majority's decision to affirm the finding of inequitable conduct with respect to one of the patents, he expressed concern over the high burden the district court set regarding injunctions, noting that in eBay the Supreme Court did not rule out entitlement to a permanent injunction when one competitor in a two party market has been found to infringe a patent of the other. Rather, the Supreme Court only held that the traditional four-factor test for an injunction should be applied. In this case, the district court seemed to be impressed by the fact that both parties were large companies with substantial revenues and the infringing materials constitute a small portion of those revenues, thus implying that the patent owner would not be sufficiently harmed by the denial of the injunction. However, Judge Lourie argued it is important to recognize that a patent provides a right to exclude infringing competitors, regardless of the proportion that the infringing goods bear to a patentee's total business. Therefore, provided the four-factor test is met, the patentee should be able to exclude competitors who sell only a small amount of an infringing product or competitors whose sales of infringing product constitute only a small portion of its sales or of the patentee's sales. Otherwise, the patent right becomes devalued.To read the full opinion in Praxair, Inc. v. ATMI, Inc., click here.

Post has no comments.
Post a Comment




Captcha Image
Return to the Filewrapper Blog
  Newer Posts Older Posts  

Purpose

The attorneys of McKee, Voorhees & Sease, P.L.C. designed this blog as an informational and educational resource about intellectual property law for our clients, other attorneys, and the public as a whole. Our goal is to provide cutting-edge information about recent developments in intellectual property law, including relevant case law updates, proposed legislation, and intellectual property law in the news.

Disclaimer

McKee, Voorhees & Sease, P.L.C. provides this blog for general informational purposes only. By using this blog, you agree that the information on this blog does not constitute legal or other professional advice and no attorney-client or other relationship is created between you and McKee, Voorhees & Sease, P.L.C. Do not consider this blog to be a substitute for obtaining legal advice from a qualified, licensed attorney. While we try to revise this blog on a regular basis, it may not reflect the most current legal developments. We consciously refrain from expressing opinions on this blog and instead, offer it as a form of information and education, however if there appears an expression of opinion, realize that those views are indicative of the individual and not of the firm as a whole

Connect with MVS

Enter your name and email address to recieve the latest news and updates from us and our attorneys.

Subscribe to: MVS Newsletter

Subscribe to: Filewrapper® Blog Updates

  I have read and agree to the terms and conditions of McKee, Voorhees & Sease, P.L.C.

Captcha Image