Federal Circuit urges caution in making inequitable conduct determination at summary judgment stage

In M. Eagles Tool Warehouse, Inc. (d/b/a S&G Tool Aid Corp.) v. Fisher Tooling Company, Inc. (d/b/a Astro Pneumatic Tool Co.), the Federal Circuit reversed the district court's grant of S&G's motion for summary judgment of inequitable conduct. It determined that there was no convincing evidence of an intent to engage in inequitable conduct demonstrated by S&G. Additionally, the Federal Circuit vacated the district court's findings regarding tortious interference with prospective economic advantage, state law unfair competition, and the award of attorney fees because all were based on the erroneous inequitable conduct determination. At issue was an Astro patent (\''914\') which relates to a combination of a pneumatic driver with an eraser wheel to remove decals from a motor vehicle. Irving Fisher, Astro's founder and former president filed the patent application with a declaration stating that at the time of the filing, he was not aware of any relevant prior art, and did not perform a novelty search for the purpose of discovering any such prior art. After obtaining the patent, Astro marketed and sold its patented device, a pneumatic driver with an eraser wheel, and as separate components.S&G began selling rubber eraser pads which could be used with a pneumatic driver. Based on these sales of the rubber eraser pads, Astro accused S&G of inducing infringement and sent letters to a number of distributors and suppliers, many of which sold S&G wheels, stating that the use of the S&G wheel infringed Astro's patent. After receiving the letters, all the companies that previously sold S&G's wheels stopped their sales of the eraser wheels. S&G commenced a lawsuit against Astro claiming that Astro engaged in unfair competition, tortious interference with contractual relations, false marketing and violations of the Lanham Act and the New Jersey Fair Trade Act. S&G filed a motion for summary judgment on inequitable conduct. The district court granted S&G's motion finding there was clear and convincing evidence of materiality and intent to deceive the USPTO. As to materiality, the court found that a model die grinder that Astro had been selling for 20 years was material prior art that had not been submitted to the USPTO by Astro. The district court inferred solely from this nondisclosure that Astro intended to deceive the USPTO. The issue central to the Federal Circuit's disposition of this matter was whether a lack of a good faith explanation for a nondisclosure of prior art, when nondisclosure is the only evidence of intent, is sufficient to constitute clear and convincing evidence to support an inference of intent. The Federal Circuit held it was not. To satisfy the requirement of the intent to deceive element of inequitable conduct, intent is generally inferred from the facts and circumstances surrounding the applicant's overall conduct, especially where there is no good faith explanation for a nondisclosure. A factual basis must be present for a finding of intent. Because the Federal Circuit found that the district court solely relied upon Astro's failure to offer a good faith explanation of its nondisclosure, the Federal Circuit held the clear and convincing standard was not reached and did not warrant an inference of intent.To read the full text of the decision, log on to http://fedcir.gov/opinions/05-1224.pdf


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