The CAFC reviewed inequitable conduct case law. Two elements: materiality and intent.

Patent applicants and those substantively involved in the preparation or prosecution of a patent application owe a “duty of candor and good faith” to the PTO. 37 C.F.R. § 1.56(a) (2004); see also Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty may constitute inequitable conduct, which can arise from a failure to disclose information material to patentability, coupled with an intent to deceive the PTO. Molins, 48 F.3d at 1178. Both of these elements, intent and materiality, must be proven by clear and convincing evidence. J.P. Stevens & Co., Inc. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1559 (Fed. Cir. 1984). “[M]ateriality does not presume intent, which is a separate and essential component of inequitable conduct.” Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 552 (Fed. Cir. 1990). “Intent to deceive can not be inferred solely from the fact that information was not disclosed; there must be a factual basis for a finding of deceptive intent.” Hebert v. Lisle Corp., 99 F.3d 1109, 1116 (Fed. Cir. 1996). Although it is not impermissible to grant summary judgment of inequitable conduct, this court “urges caution” in making an inequitable conduct determination at the summary judgment stage. Paragon Podiatry Lab, Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1190 (Fed. Cir. 1993).

To this specific case of how the district court came to its judgment -

As to materiality, the court found that a model die grinder that Astro had been selling for twenty years, the Model 220, was material prior art that had not been submitted to the PTO. According to the court, the Model 220 contained many of the same components that were present in the pneumatic driver of the ’914 patent. The court observed that the examiner allowed present claims 1-3 of the patent expressly because he could not find prior art that disclosed all of the limitations of the claims. Because the Model 220 contained some of those elements, the court found it “clear that the Model 220 would have been material to the examiner’s analysis.” The court also noted that the Model 220 was not cumulative of other prior art before the examiner because it had elements that were not found in other prior art references.

The district court inferred that Astro intended to deceive the PTO solely from its nondisclosure of the Model 220. The court observed that “it is undisputed that Irving Fisher and Stephen Fisher were familiar with the critical features of both the driver in the ’914 Patent and the Model 220 driver.” According to the court, because the examiner notified Astro that he could not find many of the limitations of the claims in the prior art, and the Model 220 possessed some of them, Astro must have known of the Model 220’s relevance. Moreover, because Astro did not disclose to the PTO the Model 220 even after receiving the examiner’s statement and did not offer a good faith explanation for its omission, the district court found that Astro intended to deceive the examiner. After stating that it weighed the materiality of the omission and Astro’s intent, the court concluded that the patent should be held to be unenforceable.

Some other legal mud-slinging went S&G's way, some didn't, but here we focus on the inequitable conduct charge, as did the appeals court, as it was the root of the supposed evil.

On appeal, Astro asserts that the district court erred in finding the ’914 patent to be unenforceable for inequitable conduct because there was no evidence of intent to deceive the PTO.3 Astro argues that the court improperly found intent to deceive solely from the fact that Astro failed to disclose the Model 220 to the PTO, without relying on any evidence, direct or circumstantial, that the applicant or attorney deliberately withheld information concerning the Model 220. Astro also contends that it did not know of the alleged relevance of the Model 220 and, without knowing of its importance, it could not have purposefully omitted the disclosure. Although the district court found that Astro must have known of the Model 220’s importance from the examiner’s statement, Astro asserts that there are differences between the claims and the Model 220 that prohibit such an assumption. Moreover, Astro asserts that even if the failure to disclose the Model 220 constituted gross negligence, that cannot be the sole basis for finding an intent to deceive. Without any evidence of intent to deceive, Astro contends that the court improperly used a theory of strict liability to find that the failure to disclose the Model 220 constituted inequitable conduct.

The issue central to the disposition of this case is 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. We agree with Astro and conclude that a failure to disclose a prior art device to the PTO, where the only evidence of intent is a lack of a good faith explanation for the nondisclosure, cannot constitute clear and convincing evidence sufficient to support a determination of culpable intent.

To satisfy the requirement of the intent to deceive element of inequitable conduct, “the involved conduct, viewed in light of all the evidence, including evidence of good faith, must indicate sufficient culpability to require a finding of intent to deceive.” See Paragon Podiatry Lab. v. KLM Lab., 984 F.2d 1182, 1189 (Fed. Cir. 1993) (quoting Kingsdown Med. Consultants Ltd. v. Hollister, Inc., 863 F.2d 867, 876 (Fed. Cir. 1988)). Intent need not be proven by direct evidence. See Merck & Co., Inc. v. Danbury Pharm. Inc., 873 F.2d 1418 (Fed. Cir. 1989). 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. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 394 F.3d 1348, 1354 (Fed. Cir. 2005). There still must be a factual basis, however, for a finding of intent. Hebert, 99 F.3d at 1116. The only evidence that the district court relied upon in its determination that Astro intended to deceive the PTO was Astro’s failure to offer a good faith explanation of its nondisclosure of the Model 220. To be sure, just as a good faith explanation can be presented as evidence to refute an inference of intent, and usually is so presented, the absence of such an explanation can constitute evidence to support a finding of intent. When the absence of a good faith explanation is the only evidence of intent, however, that evidence alone does not constitute clear and convincing evidence warranting an inference of intent.

In light of all the facts and circumstances surrounding the applicant’s conduct, we conclude that Astro’s acts do not demonstrate on summary judgment that Astro had a culpable intent during prosecution. “Intent to deceive should be determined in light of the realities of patent practice, and not as a matter of strict liability whatever the nature of the action before the PTO.” Northern Telecom, Inc. v. Datapoint Corp., 908 F.2d 931, 939 (Fed. Cir. 1990). The district court’s finding of inequitable conduct based on the nondisclosure of the Model 220 essentially amounted to a finding of strict liability for nondisclosure. Such is not the law. Even if there were evidence of gross negligence in nondisclosure, which was not found, that would not necessarily constitute inequitable conduct. Kingsdown Med. Consultants Ltd. v. Hollister, Inc., 863 F.2d 867, 873 (Fed. Cir. 1988).

Remanded.