'156 was filed on March 6, 1989. Originally rejected via §102(b) over Canadian Patent No. 964,921 (Aref), Dippin' filed a continuation, adding a "serving" step (step 6, claim 1). Then the examiner rejected it for obviousness, §103(a).

DDI then submitted a declaration pursuant to 37 C.F.R. § 1.132 in which it submitted evidence of the significant commercial success of its method. It argued that its commercial success should weigh against a finding of obviousness. See Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966) (noting that commercial success is one of the "secondary considerations" that may serve as "indicia of . . . nonobviousness"). The examiner agreed and the ’156 patent issued in June 1992.

Here's claim 1 -

Dippin' sold some ice cream more than year earlier than filing, implicating an on-sale bar to patenting. Dippin' told the patent office that the initial sales were in March 1988.

Much of the debate in this case centers on the import of sales made at the Festival Market mall in Lexington, Kentucky, more than a year before DDI filed its patent application. Sales made more than one year before the patent’s priority date implicate the on-sale bar of 35 U.S.C. § 102(b). For the ’156 patent, this critical date is March 6, 1988. Starting on July 24, 1987, Jones sold cryogenically-prepared, largely beaded ice cream at the Festival Market. During Jones’s time at Festival Market, which lasted at least until July 29th, over 800 customers purchased his beaded ice cream and others received free samples. The customers were permitted to leave with the product and were not restricted by any kind of confidentiality agreement. Jones later testified that his main goal at the Festival Market was to "get . . . test-marketing information" and not to further develop technical aspects of his product such as particular temperature ranges for storage and service.

It is undisputed that the Festival Market sales were never disclosed to the Patent and Trademark Office ("PTO") during prosecution of the ’156 patent. The declaration of commercial success which ultimately persuaded the examiner to grant the patent contained a sworn statement by Jones that "[t]he initial sales were in March of 1988," which was on or after the critical date.

Jones testified that at Festival Market he only practiced the first three steps of the claimed method, not the storing, bringing, or serving steps. He testified that he considered the evidence of what had happened at Festival Market to be irrelevant to patentability. The attorney who prosecuted the ’156 patent, Warren Schickli, testified that he considered the sales to have been experimental since the process as practiced at Festival Market could not be feasibly commercially exploited. He also testified that the Festival Market ice cream was not sold for "direct consumption" under the meaning of Claim 1, because the ice cream was too cold to eat comfortably when initially given to the consumer.

Antitrust was among the counterclaims, along with invalidity and inequitable conduct.

The defendants counterclaimed for violation of § 2 of the Sherman Act due to DDI’s allegation of patent infringement based on a fraudulently acquired patent. This type of antitrust claim has become known as a "Walker Process" claim, named for the Supreme Court’s decision in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 177 (1965).

The various suits consolidated, snaking through jurisdictions to end up at a jury trial in the Northern District of Texas on invalidity, unenforceability, antitrust violation, and inequitable conduct. There had been an earlier summary judgment of non-infringement, both literally and under the doctrine of equivalents, based upon claim construction.

By special verdict, the jury found that the sales by Jones prior to March 1988 could be asserted against the patent as prior art and that all claims of the ’156 patent were invalid as obvious. The jury also found that both Jones and Schickli had, with intent to deceive, made material misrepresentations or omissions in violation of the duty of candor to the PTO. It also determined that defendants Mini Melts, Inc. and Frosty Bites Distribution had proven all required elements of their antitrust counterclaim, including the requisite fraud on the PTO... The district court then weighed that same evidence of intent and materiality itself and found the patent unenforceable due to inequitable conduct before the PTO.

 Claim Construction

The district court had construed "beads" to mean “small frozen droplets . . . which have a smooth, spherical (round or ball shaped) appearance.”

The district court’s construction also excluded processes which produce any "irregular or odd shaped particles such as ‘popcorn.’" The district court correctly found that the claim steps mentioning "beads" were limited to covering processes that produce beads and only beads. The accused process produces both spheres and irregular particles, so under this construction, the defendants do not infringe.

As to the definition of "beads," the district court correctly noted that the written description specifically describes “beads” as having a “smooth, spherical appearance.” ’156 patent col.5 ll.22-23. Indeed, DDI argued to the Special Master before whom the construction issue was originally presented that a “bead” was “a small round ball or round drop.” There is no error in the district court’s definition of this term.

"Comprising" is usually construed broadly, more broadly than, say, "including". But there's a limit.

As to DDI’s second argument, we acknowledge that the term "comprising" raises a presumption that the list of elements is nonexclusive. See Genentech, Inc. v. Chiron Corp., 112 F.3d 495, 501 (Fed. Cir. 1997). However, "‘[c]omprising’ is not a weasel word with which to abrogate claim limitations." Spectrum Int’l, Inc. v. Sterilite Corp., 164 F.3d 1372, 1380 (Fed. Cir. 1998). "Comprising" appears at the beginning of the claim—"comprising the steps of"—and indicates here that an infringing process could practice other steps in addition to the ones mentioned. Those six enumerated steps must, however, all be practiced as recited in the claim for a process to infringe. The presumption raised by the term "comprising" does not reach into each of the six steps to render every word and phrase therein open-ended—especially where, as here, the patentee has narrowly defined the claim term it now seeks to have broadened. The district court’s limitation of the claim scope to exclude processes that produce some irregularly shaped particles is correct.

Invalidity

Here's the CAFC's latest definition of obviousness.

Our precedent requires that the party urging obviousness demonstrate a teaching, suggestion, or motivation to combine references. C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1351 (Fed. Cir. 1998). This test is a flexible one which may find motivation to combine in the knowledge of one skilled in the art or in the nature of the problem to be solved. Alza Corp. v. Mylan Labs., Inc., 464 F.3d 1286, 1291 (Fed. Cir. 2006). Secondary indicia of nonobviousness, such as commercial success, long-felt need, or failure of others are also relevant. Graham, 383 U.S. at 17-18.

The Festival Market sales were succesfully used for an obviousness argument. The appeals court figured that Dippin' downed its own patent via the one-year on-sale bar, even if the ice cream sold wasn't made exactly as claimed. The CAFC further deduces that "the experimental use exception does not include market testing where the inventor is attempting to gauge consumer demand for his claimed invention." And commercial success isn't a secondary factor if the prior art sales were from an obviously similar product process.

To find obviousness in light of the Festival Market sales requires two conclusions: first, those sales must have been in the prior art; second, the process practiced at Festival Market combined with any other relevant prior art must render the claims of the ’156 patent obvious. Substantial evidence existed for the jury to find the facts necessary to support both conclusions.

DDI argues that the sales at Festival Market were experimental in nature and therefore avoid the on-sale bar. In light of Jones’s testimony that his purpose was to determine the marketability of his ice cream product and not to improve it technically, the jury could have found facts supporting a conclusion that the sales were not experimental. See In re Smith, 714 Paragon Podiatry Lab., Inc. v. KLM Labs. Inc., 984 F.2d 1182, 1193 (Fed. Cir. 1993). The Festival Market sales are therefore prior art citable against the patent claims for obviousness purposes. F.2d 1127, 1135 (Fed. Cir. 1983) ("The experimental use exception . . . does not include market testing where the inventor is attempting to gauge consumer demand for his claimed invention."); see also Paragon Podiatry Lab., Inc. v. KLM Labs. Inc., 984 F.2d 1182, 1193 (Fed. Cir. 1993). The Festival Market sales are therefore prior art citable against the patent claims for obviousness purposes.

The jury could reasonably have found that the secondary factor of commercial success advanced by Jones to obtain the ’156 patent was obviated by the Festival Market sales. If the factors that led to DDI’s later commercial success were largely present at Festival Market, later changes to the process encompassed by the ’156 patent could reasonably be seen as not improving the prior art’s commercial appeal much, if at all. See J.T. Eaton & Co. v. Atlantic Paste & Glue Co., 106 F.3d 1563, 1571 (Fed. Cir. 1997) ("the asserted commercial success of the product must be due to the merits of the claimed invention beyond what was readily available in the prior art.").

Inequitable Conduct

The two-prong test of inequitable conduct is met. The Festival Market sales provide materiality. As to intent, the CAFC couldn't find error with the district court decision, though it considered it a close call, that the failure to mention the Festival Market sales wasn't mere oversight, especially considering Dippin' using commercial success to bully the patent to allowance. It doesn't take a smoking gun.

We have stated that "[a] patent may be rendered unenforceable for inequitable conduct if an applicant, with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution." Digital Control Inc. v. The Charles Mach. Works, 437 F.3d 1309, 1313 (Fed. Cir. 2006). The party urging unenforceability must show by clear and convincing evidence that the applicant met "thresholds of both materiality and intent." Molins PLC v. Textron, 48 F.3d 1172, 1178 (Fed. Cir. 1995). Where, as here, those factual findings were made by the district court, we review them for clear error. Id. The ultimate determination of inequitable conduct is committed to the sound discretion of the trial court. We review for abuse of that discretion. Union Pac. Res. Co. v. Chesapeake Energy Corp., 236 F.3d 684, 693-94 (Fed. Cir. 2001).

The question of deceptive intent is a more difficult one, but we find no clear error in the district court’s determination on this point. “‘Smoking gun’ evidence is not required in order to establish an intent to deceive . . . . Rather, this element of inequitable conduct[] must generally be inferred from the facts and circumstances surrounding the applicant’s overall conduct.” Paragon Podiatry Lab., Inc. v. KLM Labs. Inc., 984 F.2d 1182, 1189 (Fed. Cir. 1993).

While DDI wholly neglected to disclose the Festival Market sales to the PTO, it enthusiastically touted sales made after the critical date as evidence of the commercial appeal of its process. That combination of action and omission permits an inference of the minimum, threshold level of intent required for inequitable conduct.

Antitrust

There is a higher threshold standard for antitrust violation than inequitable conduct, having to do with deceptive intent. While the patent office probably wouldn't have granted '156 had it known of the Festival Market sales, it's not clear that the omission was intentionally deceptive.

The defendants in this case counterclaimed against DDI for violation of § 2 of the Sherman Act, and the same jury that found the patent obvious found DDI liable on that counterclaim. Proof that a patentee has “obtained the patent by knowingly and willfully misrepresenting facts to the Patent Office . . . [is] sufficient to strip [the patentee] of its exemption from the antitrust laws.” Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965). A party who asserts such a fraudulently obtained patent may be subject to an antitrust claim. If a patentee asserts a patent claim and the defendant can demonstrate the required fraud on the PTO, as well as show that “the other elements necessary to a § 2 case are present,” the defendant-counterclaimant is entitled to treble damages under the antitrust laws. Id. at 175.

A finding of inequitable conduct does not by itself suffice to support a finding of Walker Process fraud, because "inequitable conduct is a broader, more inclusive concept than the common law fraud needed to support a Walker Process counterclaim." Nobelpharma, 141 F.3d at 1069. To demonstrate Walker Process fraud, a claimant must make higher threshold showings of both materiality and intent than are required to show inequitable conduct. Id. at 1070-71; C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1364 (Fed. Cir. 1998) (Walker Process claimant "must make a greater showing of scienter and materiality than when seeking unenforceability based on conduct before the Patent Office"). Furthermore, a finding of Walker Process fraud cannot result from an equitable balancing between the two factors; a strong showing of one cannot make up for a deficiency in the other. Nobelpharma, 141 F.3d at 1071. The difference in breadth between inequitable conduct and Walker Process fraud admits the possibility of a close case whose facts reach the level of inequitable conduct, but not of fraud before the PTO. This is such a case.

The heightened standard of materiality in a Walker Process case requires that the patent would not have issued but for the patent examiner’s justifiable reliance on the patentee’s misrepresentation or omission. C.R. Bard, 157 F.3d at 1364. The defendants have established materiality even under this strict threshold, since the evidence supports a finding that the patent would not have issued if DDI had disclosed the Festival Market sales to the PTO. The difficulty comes in establishing that the omission of those sales was done with fraudulent intent. DDI did make certain statements to the PTO that would have been more completely accurate had it included information about the Festival Market sales. For instance, it suggested that its method was "the first method to allow serving of a completely free flowing frozen alimentary dairy product for direct consumption by consumers." That statement would have been more helpful to the PTO if it had also disclosed that the first free-flowing sales had arguably happened at Festival Market, but the statement was not actually false. Likewise, DDI argued against obviousness by pointing out that none of the cited references taught free-flowing service. Again, this statement would have better informed the PTO if it had clarified that elsewhere in the prior art, such service arguably existed, but again, the statement was true. The problem was not with its falsity but with its incompleteness.

Ultimately, the defendants’ fraud case here is built only upon DDI’s omission of the Festival Market sales from the prosecution record. While Walker Process intent may be inferred from the facts and circumstances of a case, "[a] mere failure to cite a reference to the PTO will not suffice." Nobelpharma, 141 F.3d at 1071. This is not to say that an omission always reduces to "mere failure to cite." We acknowledged in Nobelpharma "that omissions, as well as misrepresentations, may in limited circumstances support a finding of Walker Process fraud . . . because a fraudulent omission can be just as reprehensible as a fraudulent misrepresentation." 141 F.3d at 1070. We believe, though, that to find a prosecution omission fraudulent there must be evidence of intent separable from the simple fact of the omission. A false or clearly misleading prosecution statement may permit an inference that the statement was made with deceptive intent. For instance, evidence may establish that a patent applicant knew one fact and presented another, thus allowing the factfinder to conclude that the applicant intended by the misrepresentation to deceive the examiner. That is not the case with an omission, which could happen for any number of nonfraudulent reasons—the applicant could have had a good-faith belief that disclosure was not necessary, or simply have forgotten to make the required disclosure. In this case, DDI argues that it did not disclose the Festival Market sales to the PTO because it believed that the product there was made without practicing the "storing," "bringing," or "serving" steps of the claim within the specified temperature ranges, and that therefore the Festival Market sales were merely cumulative to other prior art references which also lacked those three steps. The jury was of course allowed to disbelieve or discount evidence tending to support this claim. However, the defendants submitted no evidence of their own—aside from the absence of the Festival Market sales from the prosecution record—which affirmatively shows DDI’s fraudulent intent. That intent cannot be shown merely from the absence of evidence which would come about from the jury’s discounting DDI’s explanation.

There is no similarly strong evidence that the omission in this case was fraudulent. It might be argued that because the omitted reference was so important to patentability, DDI must have known of its importance and must have made a conscious decision not to disclose it. That argument has some force, but to take it too far would be to allow the high materiality of the omission to be balanced against a lesser showing of deceptive intent by the patentee. Weighing intent and materiality together is appropriate when assessing whether the patentee’s prosecution conduct was inequitable. Molins, 48 F.3d at 1178. However, when Walker Process claimants wield that conduct as a "sword" to obtain antitrust damages rather than as a mere "shield" against enforcement of the patent, Nobelpharma, 141 F.3d at 1070, they must prove deceptive intent independently. The defendants have not done so here to the extent necessary for a reasonable jury to find Walker Process fraud. The finding of fraud on the PTO is therefore reversed.

The wrap-up:

We affirm the findings of noninfringement, obviousness, and unenforceability due to inequitable conduct. We reverse the district court’s denial of JMOL as to the antitrust counterclaim, vacate the grants of attorneys’ fees under the Clayton Act, and remand for the district court to consider whether an additional fee award under the patent statute is available.

Affirmed-in-part, reversed-in-part, vacated-in-part, and remanded.