'414 claims handling wastewater slurries. Vaughan had supplied pumps to LD for years, but their relationship soured when Vaughan became a competitor to LD over bidding for a tank for the city of Augusta, Georgia; the city famous as the home the annual Masters golf tournament.

Vaughan hired a sales engineer, Richard Behnke, that LD had just fired. Behnke had been "intimately involved" in the Augusta design and negotiations for LD. Behnke provided engineering drawings for Vaughan, which Vaughan then presented to Augusta, that LD claimed were copied from LD. Vaughan won the bid.

LD confronted Vaughan, alleging infringement. Vaughan consulted opinion counsel, and commissioned two studies of the fluid dynamics in its tanks. Using the studies, patent counsel rendered a non-infringement opinion. LD relied upon the same studies as evidence of both infringement and willfulness.

Considerable engineering analysis went into determining that Vaughan's design produced infringing flow patterns, with LD experts extrapolating from incomplete data provided by Vaughan, and one, Lueptow, supplementing with his own modeling of the computational fluid dynamics (CFD) using the same software that Vaughan had used for its own CFD studies.

During trial, Vaughan challenged Lueptow’s analysis maintaining that the plots simulated conditions just mere seconds after pump startup and that this could not be sufficient evidence of helical and rotational flow during steady-state flow. Lueptow, however, testified that his models were sufficient to determine that helical and rotational flow existed despite the fact that only 40 to 50 iterations were performed.

The issue of repeated infringement by Vaughan necessitated bridging an information gap because Vaughan did not maintain detailed records of its tanks.

A patentee may prove direct infringement or inducement of infringement by either direct or circumstantial evidence. Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986). There is no requirement that direct evidence be introduced, nor is a jury’s preference for circumstantial evidence over direct evidence unreasonable per se. See Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368, 1374 (Fed. Cir. 2005); Moleculon Research, 793 F.2d at 1272 (noting “it is hornbook law that direct evidence of a fact is not necessary”); see also Michalic v. Cleveland Tankers, Inc., 364 U.S. 325, 330 (1960) (“Circumstantial evidence is not only sufficient, but may also be more certain, satisfying and persuasive than direct evidence.”).

Both parties argue that the other should have submitted additional evidence regarding the tank parameters. Though it is LD’s burden to prove infringement, it chose to rely on circumstantial evidence for some installations. While direct evidence may have made LD’s case of infringement stronger, it does not render the case presented to the jury unreasonable as a matter of law. Indeed, the jury could have reasonably inferred from the evidence submitted that each of the tanks infringed the claims. Thus, we hold that there is substantial evidence that all 47 accused tanks met the structural limitations of the ‘414 patent.

Expert witness: Vaughan attacked the modeling parameters of LD's expert witness, Lueptow. The appeals court notes that the veracity of an expert is determined by an evaluation of "principles and methodology, not on the conclusions."

Vaughan’s challenges to expert testimony and scientific evidence are analyzed under the Supreme Court’s Daubert factors. See Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589 (1993). When faced with expert scientific testimony, a district court must first determine “whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact at issue.” Id. at 592. This requires an assessment of the reasoning and methodology underlying the testimony to determine whether it is scientifically valid. Id. In Daubert, the Supreme Court set forth four factors for district courts to consider when evaluating the validity and relevance of scientific evidence pursuant to Rule 702 of the Federal Rules of Evidence. Id. at 592-93. These factors include (1) whether the methodology can and has been tested, (2) whether the methodology is subject to peer review, (3) the potential rate of error, and (4) the general acceptance of the methodology. Id. at 593-94. The court further noted that the focus of a court’s inquiry into the relevance and reliability of scientific evidence “must be solely on principles and methodology, not on the conclusions that they generate.” Id. at 595.

Though subject to quibbling, the adversarial process in trial vets expert witness testimony, and in this case, the CAFC did "not contravene the province of the jury by reweighing Lueptow’s testimony."

“The identification of such flaws in generally reliable scientific evidence is precisely the role of cross-examination.” Id. at 1345; see also In re TMI Litig., 193 F.3d 613, 692 (3d Cir. 1999) (“‘So long as the expert’s testimony rests upon “good grounds,” it should be tested by the adversary process—competing expert testimony and active cross-examination—rather than excluded from jurors[’] scrutiny for fear that they will not grasp its complexities or satisfactory [sic] weigh its inadequacies.’” (quoting Ruiz-Troche v. Pepsi Cola of Puerto Rico Bottling Co., 161 F.3d 77, 85 (1st Cir. 1998))); Wilmington v. J.I. Case Co., 793 F.2d 909, 920 (8th Cir. 1986) (“Virtually all the inadequacies in the expert’s testimony urged here by [the defendant] were brought out forcefully at trial . . . . These matters go to the weight of the expert’s testimony rather than to its admissibility.”).

Vaughan attacked '414 as "invalid because the specification did not disclose the inventor’s best mode of practicing the invention and did not enable the claims."

As to best mode:

Inventors are required by 35 U.S.C. § 112, ¶ 1 to disclose the best mode for practicing their claimed inventions. A finding of patent invalidity based on best mode “requires clear and convincing evidence that the inventor both knew of and concealed a better mode of carrying out the claimed invention than that set forth in the specification.” Teleflex, 299 F.3d at 1330. This is a two-part factual test inquiring into (1) whether the inventor subjectively “considered a particular mode of practicing the invention to be superior to all other modes at the time of filing” the application and (2) whether the inventor adequately disclosed that superior mode. Id.; accord Eli Lilly & Co., 251 F.3d at 963. The best mode requirement does not require the disclosure of “routine details” that would be apparent to one of ordinary skill in the art practicing the invention. Teleflex, 299 F.3d at 1331-32. “Known ways of performing a known operation cannot be deemed intentionally concealed absent evidence of intent to deliberately withhold that information.” High Concrete Structures, Inc. v. New Enter. Stone & Lime Co., 377 F.3d 1379, 1384 (Fed. Cir. 2004).

In light of all the evidence presented on this issue, a reasonable jury could conclude that Vaughan failed to demonstrate by clear and convincing evidence that LD did not disclose the best mode.

With regard to enablement, the CAFC left the district court finding undisturbed, that '414 was enabled:

In order to enable the claims of a patent pursuant to § 112, the patent specification must teach those of ordinary skill in the art “how to make and use the full scope of the claimed invention without undue experimentation.” Bruning v. Hirose, 161 F.3d 681, 686 (Fed. Cir. 1998). Some experimentation is permissible although it cannot be unduly excessive. Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1384 (Fed. Cir. 1986). Enablement is a question of law which we ultimately review de novo, but it is based on factual findings that are reviewed for clear error. Bruning, 161 F.3d at 686. Here, because the underlying inquiry was inherently factual, “we look to whether a reasonable jury could have made the underlying factual findings necessary to provide substantial evidence in support of its conclusion.” BJ Servs. Co., 338 F.3d at 1371-72.

Willful infringement:

Vaughan also argues that there was not clear and convincing evidence to support the jury’s verdict of willful infringement. Vaughan’s only contentions are that there was no basis on which the jury could disregard Vaughan’s reliance on counsel’s opinion of non-infringement and that there was insufficient evidence that Vaughan copied the Augusta system.

A finding of willful infringement is made after considering the totality of the circumstances. See Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337, 1342-43 (Fed. Cir. 2004) (en banc). The evidence is weighed and evaluated by the trier of fact. Id. at 1343. “The drawing of inferences, particularly in respect of an intent-implicating question such as willfulness, is peculiarly within the province of the fact finder that observed the witnesses.” Rolls-Royce, Ltd. v. GTE Valeron Corp., 800 F.2d 1101, 1110 (Fed. Cir. 1986).

Courts consider several factors when determining whether an infringer has acted in bad faith and whether damages should be increased. They include: “(1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other’s patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; . . . (3) the infringer’s behavior as a party to the litigation;” (4) “defendant’s size and financial condition;” (5) “closeness of the case;” (6) “duration of defendant’s misconduct;” (7) “remedial action by the defendant;” (8) “defendant’s motivation for harm;” and (9) “whether defendant attempted to conceal its misconduct.” Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992) (superseded on other grounds as recognized in Hoechst Celanese Corp. v. BP Chems. Ltd., 78 F.3d 1575, 1578 (Fed. Cir. 1996)). Good faith may normally be shown by obtaining the advice of legal counsel as to infringement or patent validity. See id. at 828. If counsel’s opinion is found to be incompetent, however, a fact finder may discount its usefulness in determining a party’s good faith. See id. at 828-29; see also Goodwall Constr. Co. v. Beers Constr. Co., 991 F.2d 751, 758 (Fed. Cir. 1993) (holding that a jury could have concluded that the infringing party concealed incriminating evidence from its opinion counsel).

The Augusta job, where Vaughan used LD's former employee to mimic LD's system, was particularly damning.

Vaughan's non-infringement opinion was determined a sham because Vaughan had not provided a complete CFD analysis to its counsel.

Though Vaughan relies heavily on its opinion of counsel, LD presented flaws in that opinion’s factual basis. LD explains that patent counsel was not given the complete CFD analysis because he was not provided with the vertical vector plots of fluid flow. Patent counsel was advised that the vertical plots did not show anything of significance. In fact, the report on the Merced and generic 50-foot tanks explained that the vertical plots indicated vertical flow and secondary flow vortices. The jury could use such a concealment of evidence from the attorney to discount the opinion. See Goodwall Constr., 991 F.2d at 758.

Vaughan had argued inequitable conduct, because earlier tanks that were used as a springboard to the claimed invention were not disclosed to the patent office. Intent to deceive is essential to a finding of inequitable conduct. In this case, one of the inventors, James Crump was called on the carpet, but he said he did not intend to mislead.

Patent applicants are required to prosecute patents “with candor, good faith, and honesty.” See Bristol-Myers Squibb Co., 326 F.3d at 1233 (citation omitted). “A breach of this duty can take several forms: ‘affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information.’ Further, a breach of this duty, when coupled with an intent to deceive or mislead the PTO, constitutes inequitable conduct, which, when proven, renders the patent unenforceable.” Id. (citations omitted). In order to establish inequitable conduct, Vaughan must present clear and convincing evidence that the inventors “failed to disclose material information with an intent to mislead the PTO.” Id. at 1233-34.

Our inquiry into materiality is an objective one. “Materiality is not limited to prior art but embraces any information that a reasonable examiner would be substantially likely to consider important in deciding whether to allow an application to issue as a patent.” Bristol-Myers Squibb Co., 326 F.3d at 1234 (citation omitted). Here, the district court erred in its analysis of materiality. The court focused on whether the prior installations actually embody the invention, when the correct analysis asks whether a reasonable examiner would find it important. In this case, the inventors explain how they developed the invention and their use of the Plymouth and Indiana Packers tanks to do so. They certainly used the previous tanks to assist in developing the invention and the tanks were part of a sale, not an experiment. A reasonable patent examiner would find such information important to his consideration of the patent application.

However, Vaughan fails to establish that the inventors had the requisite intent to deceive. Intent is a subjective inquiry into whether the inventor knew the information was material and chose not to disclose it. See id. at 1239. Here, Vaughan asks us to reweigh the credibility of the evidence and testimony, something we cannot do. See LNP Eng’g Plastics, Inc. v. Miller Waste Mills, Inc., 275 F.3d 1347, 1361 (Fed. Cir. 2001). The trial court relied on the evidence that Crump did not believe the prior installations were necessary disclosures because they were not embodiments of the invention and were similar to other disclosures. Furthermore, Crump testified that he did inform the examiner of the prior tanks. We see no reversible error in the district court’s analysis of intent. Thus, the court’s finding of no inequitable conduct was not clearly erroneous.

The CAFC affirmed the district court ruling of a permanent injunction, and Vaughan's bank account being skimmed over $3 million for trebled infringement damages and $1.5 million for LD's attorneys fees.