Lee Wright | February 28, 2013
Caron and Spellbinders Paper Arts Company, LLC vs. QuicKutz, Inc.
United States District Court for the District Of Arizona
November 13, 2012, Decided
In Therasense, Inc. v. Becton, Dickinson & Company, 649 F.3d 1276 (Fed. Cir. 2011) the CAFC ruled that District Courts must find intent and materiality separately, i.e., weighing the evidence of intent to deceive independently from analysis of materiality.
Here, in one of the few cases since Therasense, a District Court applies separate analyses for each of intent and materiality. In addition, the District Court applied the exception to the but-for materiality requirement in cases of affirmative egregious misconduct.
Knowingly not naming the inventors was held to be inequitable conduct.
Declarations by persons not skilled in the art were held to be inequitable conduct.
Declarations that did not disclose financial relationships with the inventors were held to be inequitable conduct.
A Declaration where the Declarant, when he made the declaration, did not know whether the statements in the declaration were true or not was held to be inequitable conduct.
Plaintiffs (Caron and Spellbinders) sued QuicKutz for patent infringement.
QuicKutz answered and filed a counterclaim seeking declaratory judgment that the Patent is unenforceable for inequitable conduct.
I. The Law on Inequitable Conduct
“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. . . .” 37 C.F.R. § 1.56(a).
The inequitable conduct doctrine provides Courts with discretion to hold an entire patent unenforceable for misconduct before the PTO. Therasense, Inc. v. Becton, Dickinson & Company, 649 F.3d 1276, 1287 (Fed. Cir. 2011). District Courts must find intent and materiality separately, i.e., weighing the evidence of intent to deceive independently from analysis of materiality. Id. at 1290.
To prevail on a claim of inequitable conduct, the accused infringer must prove by clear and convincing evidence that the patentee acted with the specific intent to deceive the PTO, i.e., the patentee made a deliberate decision to withhold known material information. Id. A district Court may infer intent from indirect and circumstantial evidence, but the specific intent to deceive must be the only reasonable inference that can be inferred. Id. “[W]hen there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.” Id. at 1290-91.
To prevail on a claim of inequitable conduct, the accused infringer also must prove but-for materiality by clear and convincing evidence. Id. at 1291-92. (But-for materiality: “the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”)
The Federal Circuit recognizes an exception to the but-for materiality requirement in cases of affirmative egregious misconduct. Id. at 1292-93.
Although a false affidavit or declaration is per se material, the accused infringer still must prove intent to deceive the PTO by clear and convincing evidence to invoke the inequitable conduct doctrine.
A. Misrepresentations Regarding Dywan’s Status as Inventor
During prosecution, Plaintiffs filed with the PTO an executed “Declaration and Power of Attorney,” identifying Caron as the “First Joint Inventor” and Dywan as the “Second Joint Inventor.”
Later, Plaintiffs represented that Dywan “was credited with co-inventor status” “in exchange for his promised financial support of Spellbinders.” Caron testified he did not think Dywan invented anything.
Inventorship Is Material.
As a critical requirement for obtaining a patent, inventorship is material.
Even if the inventorship of a patent as issued is correct, intentional falsehoods and omissions regarding inventorship may render the patent unenforceable for inequitable conduct.
Plaintiffs Intended to Deceive the PTO on Inventorship
Plaintiffs did not provide the PTO with a full and accurate disclosure of information related to inventorship. Clear and convincing evidence establishes that Plaintiffs intentionally identified Dywan as a joint inventor of the ‘634 Patent primarily to obtain his financial support even though Caron did not believe Dywan invented anything.
The Court concluded that Plaintiffs intended to deceive the PTO by submitting inventorship information that suited their current interests without regard for its truthfulness. Whether Dywan is a joint inventor of the ‘634 Patent is material. It is not necessary to find but-for materiality because clear and convincing evidence establishes that Plaintiffs engaged in an affirmative act of egregious misconduct.
B. Declarations of Financially Motivated and/or Un-qualified Individuals
QuicKutz contends that five of the seven declarations filed during Ex parte Reexamination constitute “unmistakably false affidavits” because:
Plaintiffs concealed from the PTO their financial relationships with three of the declarants (Krupsky, Blackwelder, McGuffee); and
Plaintiffs misrepresented that two declarants (Comaduran and Warkentin) had experience in the scrapbooking industry.
The PTO issued a Notice of Intent to Issue Ex Parte Reexamination Certificate regarding the ‘634 Patent, which relied on the Declarations from the Patent Owner
Plaintiffs Misled the PTO Regarding Experience in the Relevant Industry.
Plaintiffs represented to the PTO that the declarations were from individuals with “experience in the arts and crafts and scrapbooking industry that are familiar in some way with the Spellbinders’ combination dies.”
Declarant 1 had no professional experience in the “arts and crafts and scrapbooking industry.”
Declarant 2 had professional experience in the “arts and crafts” industry, but not the part of the “arts and crafts” industry that uses Spellbinders’ dies.
Both provided opinions using technical language that implied professional experience in the relevant industry rather than merely experience as a customer.
The Court concluded that had the PTO have known that Comaduran and Warkentin did not have professional experience in the relevant industry, it would have given little or no weight to their opinions, particularly regarding the novelty of Spellbinders’ dies.
Declarants’ Financial Relationships with Spell-binders Are Material.
“Given the ex parte nature of proceedings before the PTO, it is especially important that the examiner has all the information needed to determine whether and to what extent he should rely on declarations presented by the applicant.”
At least where the objectivity of the Declarant is an issue in the prosecution, the inventor must disclose the known relationships and affiliations of the declarants so that those interests can be considered in weighing the declarations.” Ferring B.V. v. Barr Laboratories, Inc., 437 F.3d 1181, 1195 (Fed. Cir. 2006). Failure to disclose a declarant’s prior relationships with a patent applicant may constitute inequitable conduct.
Declarants 3-5 each had a financial relationship with Spellbinders. Although Plaintiffs contend that the compensation each received was minimal, the evidence shows a basis for possible bias by each Declarant. Clear and convincing evidence shows each Declarant had motivation to provide an opinion favorable to Plaintiffs’ patent application. The PTO was deprived of evidence that it needed to determine the weight it should give to the declarations by the three declarants.
The PTO Relied on the Declarations.
The PTO expressly relied on the declarants’ assertions regarding non-obviousness. It previously had rejected Plaintiffs’ claims as being obvious, but later found them patentable for two reasons.
First, Plaintiffs had provided new evidence related to commercial success.
Second, Plaintiffs had “submitted evidence from multiple declarants as to the desirable characteristics of the claimed invention” and to novelty.
The PTO concluded that “the evidence of secondary considerations outweighs the evidence of obviousness.”
Clear and convincing evidence establishes that Plaintiffs misled the PTO regarding the qualifications of Declarants 1 and 2; Plaintiffs failed to disclose the financial relationships between Declarants 3-5; and the PTO reversed its rejection based on obviousness because of the declarations.
Intent to Deceive the PTO.
The declarations were so similar to each other that the Court concluded all of the declarations submitted to the PTO were drafted in large part by Plaintiffs and not the Declarant.
Plaintiffs affirmatively told the PTO that the declarations were from individuals with experience in the arts and the invention.
Declarants 1 and 2 did not disclose that they did not have professional experience in the relevant industry. In fact, they implied the opposite.
Declarants 305 describe their lengthy experience in the arts and crafts and scrapbooking industry, but fail to disclose their financial relationships with Spellbinders.
Moreover, Plaintiffs submitted the declarations to overcome obviousness objections, and the PTO specifically found the declarations to be evidence outweighing the evidence of obviousness. The Court concluded that the specific intent to deceive the PTO is the only reasonable inference that can be inferred from this evidence.
The Court held, by clear and convincing evidence, Plaintiffs acted with the specific intent to deceive the PTO by submitting the declarations of Declarants 1-5.
C. The Caron 2011 Declaration
Caron executed a declaration to traverse an art rejection. However, during deposition, Caron could not or would not substantiate his statements in the Declaration. The Court found that the evidence submitted establishes that he did not know those things to be true when he made the declaration and may not even know now (at the time of the deposition).
The Court concluded that Caron’s Declaration is an affirmative act of egregious misconduct. The Court held that Caron’s Declaration satisfies the exception to the but-for materiality requirement because it is an “unmistakably false affidavit,” constituting an affirmative act of egregious misconduct because the declaration was submitted to the PTO with the misrepresentation that the Declarant had firsthand knowledge about the subject of the declaration and the misrepresentation that Declarant thought the information was true.
The Court held, on its face, the Caron 2011 Declaration establishes that the specific intent to deceive is the only reasonable inference that can be inferred.
III. Weight of the Equities
Under the inequitable conduct doctrine, when an accused infringer meets its burden of proving the applicant’s intent to deceive and materiality by clear and convincing evidence, the district Court must weigh the equities to decide whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable. Therasense, 649 F.3d at 1287.
Plaintiff’s basically argued there was no harm from the declarations and inventorship did no harm.
The Court concluded, having found by clear and convincing evidence that Plaintiffs’ misconduct was material and that they intended to deceive the PTO, the ‘634 Patent is held unenforceable under the inequitable conduct doctrine and Motion for Summary Judgment of Unenforceability Due to Inequitable Conduct will be granted.
Inventorship is still important. Inventorship is not for sale.
Declarant must participate in the statements on a declaration.
The Declarant that signs the declaration must have personal knowledge of the statements in the Declaration.
The Declarant must read and understand the declaration. No one should sign a declaration if they do not understand the declaration or if they do not agree with the declaration.
Be honest in the declaration.
Declarations should be by one skilled in the art.
Declarations should contain accurate information about the Declarant’s qualifications.
Declarations should disclose any working or personal, present or past, relationship with the inventor(s) or assignee(s).
Disclose any fees paid for signing a declaration. Being paid is not bad conduct, not disclosing it may be. Expert witnesses are often paid.
New AIA Declaration language: I hereby acknowledge that any willful false statement made in this declaration is punishable under 18 U.S.C. 1001 by fine or imprisonment of not more than five (5) years, or both.