Federal Circuit Finds Inequitable Conduct Where Statements in Prosecution Provide Evidence That Prior Art Devices Were Highly Material

In Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), Praxair brought suit against ATMI, alleging infringement of three Praxair owned patents: U.S. Patent No’s:  6,045,115 (the ‘115 patent); 6,007,609 (the ‘609 patent); and 5,937,895 (the ‘895 patent).  All three patents involve pressurized storage containers, used in the semiconductor industry, limiting the rapid discharge of hazardous gasses.  The ‘115 and ‘609 patents focus on capillary flow restrictors, while the ‘895 patent concerns a release valve.  Both Praxair and ATMI produce pressurized gas cylinders used to store the hazardous gasses used in the semiconductor industry.

Praxair filed suit on December 22, 2003 in the U.S. District Court for the District of Delaware, asserting that several claims of each of the above-noted patents are infringed by ATMI.  ATMI responded by asserting an affirmative defense of invalidity of the Praxair patents and asserted counterclaims for a declaratory judgment of noninfringement and invalidity with regards to the ‘115, ‘609 and ‘895 patents.

Additionally, ATMI filed an amended answer adding the affirmative defense of unenforceability due to inequitable conduct as per the three Praxair patents.  For the inequitable conduct affirmative defense argument, ATMI alleged that applicants for the above three patents withheld information from the United States Patent and Trademark Office (USPTO).  The purportedly withheld references were U.S. Patent No. 5,409,526 (the Zheng patent) and information on restricted flow orifices (RFOs) as existing devices in the prior art.

The District Court, in a bench trial, first analyzed whether such information was material to Praxair’s patents.  As per the ‘115 and ‘609 patents, the District Court determined that the Zheng patent and the RFOs were material to the ‘115 and ‘609 patents.  The District Court also ruled that the attorney who prosecuted the ‘115 and ‘609 patents, John Tolomei, had knowledge of the Zheng patent and the RFOs, but credited Tolomei’s claim that he had a good faith basis for not disclosing the Zheng patent.  Thus, there was no intent to deceive the USPTO as per not disclosing the Zheng patent.

However, as per the RFOs, the District Court found that Tolomei knew about the RFOs, which were widely used in the art prior to the application for the ‘115 and the ‘609 patent.  In particular, the District Court relied upon four statements, made by the patent applicants in the prosecution of the  ‘115 and ‘609 patents, that the District Court believed could not have been made had the material prior art been in front of the USPTO.  Additionally, with a lack of testimony explaining why there was a failure to disclose the prior art, the District Court found that “the level of materiality of the RFO art is sufficiently high so at to support an ultimate finding of inequitable conduct.”  Additionally, the court stated that conclusory statement effectively stating that the applicant had no intention to deceive the USPTO did not merit consideration.

On appeal, the Federal Circuit reiterated the standard set forth in 37 C.F.R. §1.56(a) in regards to the duty of disclosure as follows: “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the [PTO], which includes a duty to disclose to the [PTO] all information known to that individual to be material to patentability…”  Furthermore, the Federal Circuit found that a breach of the above duty can be shown by:

“clear and convincing evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO].”  Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363 (Fed. Cir. 2007).

The Federal Circuit noted that showings of materiality and intent are distinct and thus, showing materiality itself does not result in showing of intent.  However, intent to deceive can be inferred when “(1) highly material information is withheld; (2) the 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,” citing Ferring B.V. v. Barr Labs, Inc., 437 F.3d 1181, 1191 (Fed. Cir. 2006).

Materiality

With respect to the ‘115 patent, the Federal Circuit affirmed the District Court’s finding that RFOs are material such that the first prong of the test was satisfied.  Specifically, the Federal Circuit dismissed Praxair’s counterargument that RFOs were cumulative because other references in front of the examiner disclosed devices similar to RFOs.  In dismissing the argument, the Federal Circuit acknowledged that when information is considered to be cumulative, it specifically is not material.

However, because Praxair failed to raise the cumulative argument before the District Court, the Federal Circuit held that the argument is waived on appeal.

Intent to Deceive Inferred Based Upon Statements in Prosecution History

With respect to intent to deceive and the ‘115 patent, the Federal Circuit, citing Pfizer, Inc. v. Teva Pharms USA, Inc., 518 F.3d 1353, 1367, stated that where evidence of intent is not available and the prior art is highly material, intent can be inferred from three findings:

(1) that the art was highly material;

(2) that applicants knew of RFO art and knew or should have known of its materiality; and

(3) that patentee failed to produce a credible good faith explanation of why there was a failure to disclose information to the PTO.

The District Court found the RFOs to be highly material not based upon the RFOs themselves.  Instead, the District Court found the high degree of materiality based upon four statements made during prosecution of the ‘115 patent.  The Federal Circuit sustained this ruling because Praxair offered no coherent argument as to why the RFOs were not highly material in the context of the statements made in the ‘115 prosecution.  Thus, for purposes of inferring intent, the RFOs were highly material.

With regards to the knowledge element for inferring intent, the District Court found that Tolomei, the prosecuting attorney, and LeFebre, an inventor, knew of the RFO art that was not disclosed to the USPTO.  This finding was based upon testimony that Tolomei and LeFebre provided during the bench trial.  Praxair doesn’t dispute the testimony, but argues that testimony provided by a Praxair employee, Furhop, was relied upon improperly by the District Court in proving Tolomei’s and LeFebre’s knowledge.  However, the Federal Circuit noted that the District Court recognized that there was no allegation of inequitable conduct on the part of a Praxair employee, and as such only used Furhop’s testimony to show widespread commercial use of RFOs.  As such, the Federal Circuit sustained the District Court’s findings of knowledge for purpose of inferring intent, stating that “there is no question that Tolomei and LeFebre “knew of information” withheld from the USPTO.

The Federal Circuit sustained the District Court decision that no good faith explanation was proffered by those who knew of the information withheld from the USPTO for the failure to disclose known material information.  Furthermore, the Federal Circuit stated that conclusory statements, such as Tolomei’s claim that he never intentionally misled the USPTO, garner no weight as per an explanation. Tolomei additionally testified that unspecified references before the USPTO were cumulative of the RFO art.  The Federal Circuit stated that such testimony fails to provide a good faith explanation for three reasons:

(1) the testimony does not suggest that Tolomei believed that disclosure of the RFO would have been cumulative at the time of the ‘115 prosecution;

(2) Tolomei did not say that cumulativeness was the reason he did not disclose the RFO art to the PTO; and

(3) Tolomei failed to identify a particular reference making the RFOs cumulative.

As such, the Federal Circuit stated that:

“Hindsight construction of reasons why a reference might have been withheld cannot suffice as a credible explanation of why, at the time, the reference was not submitted to the USPTO.”

Therefore, for the three reasons discussed above, the Federal Circuit found that the District Court properly inferred intent to deceive the USPTO on the part of the applicants in failing to disclose the RFO art to the USPTO.  As such, the Federal Circuit affirmed the District Court’s ruling that the failure to disclose the existence of RFO prior art devices rendered the ‘115 patent unenforceable due to inequitable conduct.

In discussing the ‘609 patent, the Federal Circuit found that the District Court was correct to find the existence of RFO devices in the prior art to be material to the ‘609 patent, but the District Court was incorrect in inferring an intent to deceive on the part of the applicants.  The Federal Circuit noted that statements, on the part of the applicants, used to show the materiality of RFOs, were made with respect to the prosecution of the ‘115 patent and were not made in the prosecution of the ‘609 patent.  In fact, the statements made in the ‘115 prosecution were made at a time when the ‘609 patent had a notice of allowability for all claims to be issued.  For this reason, the Federal Circuit reversed the District Court’s finding of inequitable conduct as per the ‘609 patent.  However, the Federal Circuit remanded for reconsideration of the issue of infringement of the ‘609 patent in view of revised findings of claim interpretation.

As per the remaining ‘895 patent, the District Court found to be invalid for indefiniteness.  The Federal Circuit reversed the District Court’s finding that a specific term in the ‘895 patent, “port body,” is indefinite.  Specifically, the Federal Circuit found that a port body was disclosed in a Summary of the Invention, and is also depicted in a drawing.  Thus, the Federal Circuit found that, while the specification “may not be a model of clarity, the specification adequately explains that the port body is a housing that sealingly engages the outlet of the cylinder and defines the fluid discharge path” for purposes of 35 U.S.C. §112.  Issues regarding the ‘895 patent were thus remanded to the District Court.

Significance to Patent Applicants

Praxair is of interest to the extent that the evidence of intent was not based upon anything in the prior art itself, but was instead inferred from arguments which the Federal Circuit believed made the prior art highly material.  Moreover, the Federal Circuit required the patent attorney who made the statement to provide a credible explanation as to why information was not submitted in light of the arguments, and would not accept that the information was cumulative since such explanation was not in the context of the time during which the arguments were made.   Significantly, the patent owner failed to argue that the unsubmitted information was cumulative in the context of the extent of materiality, which likely would have affected the outcome.  In either case, Praxair reminds applicants to be brief in their arguments since statements made during prosecution can be used not only to limit the scope of a claimed invention, but can also establish the materiality of prior art for purposes of inferring intent and finding inequitable conduct.

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