Federal Circuit Finds Inequitable Conduct Could Be Based Upon Failure to Disclose Later-Filed Related Applications

In Leviton Manufacturing Company, Inc., v. Universal Security Instruments, Inc., and USI Electric, Inc., 2010 U.S. App. LEXIS 10917 (Fed. Cir. 2010), appellant Leviton Manufacturing Company Inc. (Leviton) appeals a decision which gave attorney’s fees and costs to Shanghai Meihao Electric Inc. (Meihao) based on inequitable conduct and vexatious litigation.  This article only concerns the inequitable conduct part of the case.

Leviton filed patent No. 690,776 (Germain) on October 22, 2003.  Six months later, Leviton filed patent No. 827,093, now issued as 6,864,766 (766).  Both the 766 and the Germain have many nearly identical claims.

During the prosecution of 766, Leviton did not disclose the Germain application or the fact that certain claims had been copied from Germain into the 766 patent.  The PTO then issued a double patent rejection for substantively identical claims.  In a suit between Meihao and Leviton, judge found that Leviton had committed inequitable conduct, and awarded over a million dollars in fees in summary judgment.

Here, the Court of Appeals reviewed the district court’s decision to grant summary judgment for inequitable conduct.  Summary judgment may only be granted where there are no genuine issues of material fact. Anderson v. Liberty Lobby, Inc., 447 U.S. 242, 248 (1986).  Prevailing on inequitable conduct requires two perquisites: the infringer must have made an affirmative misrepresentation of material fact, failed to disclose material information or submitted false material information; and there was intent to deceive the PTO. Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363.

The first issue that the Court of Appeals debated was whether Leviton’s failure to disclose the Germain application was material.  Information is considered material if there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent. PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1312 (Fed. Circ. 2000).  Information concealed from the PTO may be material even though it would not invalidate the patent. Larson Mfg. Co. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1327.  However, a withheld otherwise material reference is not material if it is merely cumulative to, or less relevant than, information already considered by the examiner. Larson, 559 F.3d at 1327.

The Germain application was material to inventorship.  The court suspected that the copying of certain claims from the Germain application with one set of named inventors into the 766 patent application with another set of inventors suggested that the named inventors may not have, in fact invented the claimed subject matter.  Even if the examiner might have ultimately concluded that 776 was valid, the nearly identical claims raise substantial inventorship question.  Furthermore, the copying of claims is material to the issue of double patenting because the court would want to consider both applications.

The court noted that even though German application is not material to the written description requirement, a reasonable examiner would want to consider the Germain application with respect to inventorship and double patenting.

Nilssen v. Osram Sylvania Inc., 504 F.3d 1223,  1224 (Fed. Circ. 2007) held that the existence of earlier related litigation itself was material information.  Furthermore, the MPEP 2006c requires at a minimum, “for the application to make aware the existence and the nature of any allegations relating to validity and/or fraud or inequitable conduct relating to the original patent.” MPEP 2006c.  Leviton did not disclose the existence of cases relating to the parent patents of the 766 patent.  The Court found that this was another example of another failure of material disclosure.

The second issue was whether there was an intent to deceive by Leviton.  Generally, “because direct evidence of deceptive intent is so rarely available, such intent can be inferred from indirect and circumstantial evidence.” Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1364 (Fed. Circ. 2007).  During the deposition, one of the inventors of the 766 patent stated that he did not disclose the Germain application because “the Germain is not a prior art reference to the 766 application… the Germain was not prior art to the 766; therefore, the Germain application didn’t come into the picture at all,” The Court of Appeals stated that this failure to disclose was material, however, the court can not be in full agreement that this explanation was unreasonable as a matter of law.  The inference that the district court made of fraud, was not the only reasonable conclusion.

Thus, even though there are material issues omitted from the patent application, the issue of fraud doesn’t withstand the standard for summary judgment.  Thus, the district court’s holding of summary judgment for inequitable conduct is remanded for a bench trial.

Significance for Patent Applicants and Owners

Leviton Manufacturing is yet another in a recent trend of inequitable conduct cases in which the Federal Circuit is increasingly broadening the types of activities that can lead to rendering patents unenforceable.  In the instant case, the intent to deceive prong of the inequitable conduct test was not satisfied due to the inventor understanding that the related application is not considered prior art under 35 U.S.C. §102.  However, as noted by the Federal Circuit, materiality reaches other forms of invalidity, including inventorship and double patenting under 35 U.S.C. §101.  Thus, had the inventor’s deposition gone differently, the intent prong could easily have been met and the patent rendered unenforceable.  Therefore, applicants need to be aware of a continuing need to disclose related applications, even where those applications are not technically prior art under 35 U.S.C. §101.


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