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May 5, 2010


Emcore sued Optium for infringing laser-based optical fiber communication patents 6,282,003 and 6,490,071. Optium charged Emcore for inequitable conduct because Emcore failed to cite to the patent examiner a relevant article. Emcore did not dispute that the inventors knew of the prior art. At district court, a special master found the prior art material, though inequitable conduct not a summary judgment slam dunk.

Optium v. Emcore (CAFC 2009-1265) precedential

As to intent, the Special Master concluded that intent to deceive could not be inferred merely on the basis of "high materiality" of the reference and a lack of explanation for the nondisclosure. Optium had provided no evidence of an intent to deceive or mislead the examiner, and no basis for such an inference. The Special Master thus held that even assuming Willems was a material reference, in the absence of any evidence on which deceptive intent could be found or reasonably inferred, inequitable conduct could not lie. The district court adopted the Special Master's analysis, and entered judgment in Emcore's favor.

The bar to a finding for summary judgment requires "all reasonable factual inferences in favor of the non-movant."

The grant of summary judgment receives plenary review, applying the same standard as did the district court. Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1378 (Fed. Cir. 2008). Although the issue of inequitable conduct is reviewed on the standard of abuse of discretion, it requires proof by clear and convincing evidence of the threshold facts of both materiality and intent. Thus summary judgment may be granted when, drawing all reasonable factual inferences in favor of the non-movant, the evidence is such that the non-movant cannot prevail. ATD Corp. v. Lydall, Inc., 159 F.3d 534, 547 (Fed. Cir. 1998). When a party has failed to introduce evidence sufficient to establish the existence of an essential element of that party's case in accordance with the applicable standard of proof, summary judgment is properly granted against that party. Novartis Corp. v. Ben Venue Labs., Inc., 271 F.3d 1043, 1046 (Fed. Cir. 2001); see Astrazeneca Pharms. LP v. Teva Pharms. USA, Inc., 583 F.3d 766, 777 (Fed. Cir. 2009) (affirming summary judgment of no inequitable conduct, when the factual premises could not be established by clear and convincing evidence).

Inequitable conduct has two prongs distinct but related. The issue is how related to achieve "a threshold" of intent.

Inequitable conduct resides in failure to disclose material information, or submission of false material information, with an intent to mislead or deceive the examiner, and those two elements, materiality and intent, must be proven by clear and convincing evidence. Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1330-31 (Fed. Cir. 2004). Clear and convincing evidence must support "at least a threshold level of each element." Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008). When both materiality and intent have been established, the court must balance the equities and determine whether the applicant's conduct in prosecuting the patent application was egregious enough to warrant holding the entire patent unenforceable. Id.; see J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1560 (Fed. Cir. 1984) ("Once the thresholds of materiality and intent are established, the court must balance them and determine as a matter of law whether the scales tilt to a conclusion that inequitable conduct occurred."). Because the district court concluded that Optium made a sufficient showing of materiality to survive summary judgment, but concluded that the facts could not support a finding of intent under the relevant standard, the question of intent frames this appeal.

Optium's argument was that, since Willems, the prior art article in question, "was a "highly material" reference, deceptive intent can be presumed from high materiality absent contrary evidence from the applicants."

Emcore responds that even if Optium could ultimately succeed in proving high materiality--a point that Emcore has not conceded--no presumption or inference of deceptive intent is permissible in the absence of evidence that a person involved in obtaining the patent acted with the specific intent to mislead or deceive the patent examiner. Emcore contends that Optium improperly seeks to shift the burden to the applicants to explain why a reference was not submitted, in the absence of even threshold evidence of deceptive intent. The parties cite competing lines of authority from this court in support of their respective positions.

Case law on any issue generally offering the opportunity to throw mud pies in both directions, the CAFC majority opinion admits "some divergence."

Despite some divergence, the great weight of Federal Circuit authority has followed Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876-77 (Fed. Cir. 1988) (en banc), and applied the rule that the "intent" element of inequitable conduct is not simply intent to take the action or omission complained of, but intent to deceive or mislead the patent examiner into granting the patent. E.g., Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1367 (Fed. Cir. 2003) ("[I]nequitable conduct requires not intent to withhold, but rather intent to deceive."). That is, "one must have intended to act inequitably." Kingsdown, 863 F.2d at 872 (quoting FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 (Fed. Cir. 1987)). In situations of nondisclosure of information rather than affirmative misrepresentation, "clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference." Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995). Thus "[i]ntent 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." Herbert v. Lisle Corp., 99 F.3d 1109, 1116 (Fed. Cir. 1996). Extensive precedent continues to reinforce this standard. E.g., Larson Mfg. Co. of S.D. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009) ("[N]ondisclosure, by itself, cannot satisfy the deceptive intent element."); Star Scientific, 537 F.3d at 1366 (internal citation omitted) ("Thus, the fact that information later found material was not disclosed cannot, by itself, satisfy the deceptive intent element of inequitable conduct.").

Optium read too much into Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed. Cir. 2006), and Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1191 (Fed Cir. 1993) "(stating that intent to mislead cannot be inferred from "the mere failure to disclose known highly material information")."

The Paragon court explained that only when the challenger has met its threshold burden of showing intent does the burden of coming forward with evidence shift to the applicant. Idd.; see Star Scientific, 537 F.3d at 1368 ("The patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove a threshold level of intent to deceive by clear and convincing evidence.").

Optium offered no evidence to infer intent. Emcore offered no defense other than Optium hadn't met its burden. Rarely is silence golden in litigation. This time it was Emcore.

Optium offered no evidence, but simply argued that the "high materiality" of the Willems reference relieved it of the burden to produce any affirmative evidence of intent, and instead required Emcore to provide a credible explanation for the nondisclosure. However, this proposed shift in the burdens is contrary to precedent. See Larson, 559 F.3d at 1340-41 ("[J]ust as merely withholding a reference cannot support an inference of deceptive intent, so too an accused infringer cannot carry its threshold burden simply by pointing to the absence of a credible good faith explanation." (internal citation omitted)); M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., 439 F.3d 1335, 1341 (Fed.Cir.2006) ("[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.").


A concurring opinion by Judge Prost shed further light on the subject. The sense of "some divergence" continues. Prost argues that intent may be inferred if "the patentee knew of the reference and appreciated its high level of materiality," and could not explain why it withheld the reference.  The Prost concurrence is likely to be more often cited in the future than the majority opinion.

Although the majority correctly points out that a high level of materiality does not automatically presume intent, the language of the majority opinion seems to imply that a high level of materiality is entirely irrelevant to an inference of intent. See Majority Op. at 11-12. If my reading is correct, this implication is contrary to both Federal Circuit precedent and basic principles of evidence law.

There is no dispute that materiality and intent are separate prongs of the inequitable conduct analysis, both of which must be proven by clear and convincing evidence. See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 872 (Fed. Cir. 1988). After thresholds of materiality and intent are established, the court conducts a balancing test and determines whether the scales tilt to a conclusion that "inequitable conduct" occurred. Halliburton Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1440 (Fed. Cir. 1991). Within that balancing test, the more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct, and vice versa. Akzo N.V. v. United States Int'l Trade Comm'n, 808 F.2d 1471, 1481-82 (Fed. Cir. 1986). In the context of inequitable conduct, just as in all other areas of patent law, and all other areas of civil and criminal law, intent may be proven by circumstantial evidence. See, e.g., Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995); Moleculon Research Corp. v. CBS, Inc., 793 F.2d 1261, 1272 (Fed. Cir. 1986).

The definition of "relevant evidence" is evidence that tends to make the existence of any fact of consequence more or less probable. Fed. R. Evid. 401. If a reference is of very high materiality, and it is shown that the patentee knew of the reference, then it is more probable that the reference was withheld from the examiner with deceptive intent, as compared to a reference of low materiality. In other words, framed under our standard for deceptive intent, the more material the withheld reference, the more likely that an inference of deceptive intent is "the single most reasonable inference able to be drawn from the evidence." See Larson Mfg. Co. of S. Dakota, Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009) (quoting Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)). As such, this court has expressly considered the level of materiality of a withheld reference in determining whether an inference of deceptive intent is appropriate. See, e.g., Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1366-67 (Fed. Cir. 2007) (quoting Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1257 (Fed. Cir. 1997)) ("We have never held that materiality is irrelevant to the question of intent. To the contrary, we have recognized that 'a patentee facing a high level of materiality and clear proof that it knew or should have known of that materiality, can expect to find it difficult to establish "subjective good faith" sufficient to prevent the drawing of an inference of intent to mislead.'"); Purdue Pharma L.P. v. Endo Pharms. Inc., 438 F.3d 1123, 1134-35 (Fed. Cir. 2006) ("In a case such as this, when the materiality of the undisclosed information is relatively low, there is less basis for inferring intent from materiality alone."); see also Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1315-16 (Fed. Cir. 2008); Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181, 1190-91 (Fed. Cir. 2006); Critikon, Inc., 120 F.3d at 1256-57. Such consideration of materiality in determining intent does not mean that a high level of materiality alone presumes intent without other evidence as to the patentee's state of mind. See M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., 439 F.3d 1335, 1340 (Fed. Cir. 2006). It likewise does not conflate the two prongs of the inequitable conduct test for a district court to find that the same evidence of materiality is probative of both prongs.

Accordingly, if a reference is of very high materiality, and it is shown that the patentee knew of the reference and appreciated its high level of materiality, and the patentee can offer no good faith explanation as to why the reference was withheld, then a district court may find such circumstantial evidence to be enough to support a finding of intent to deceive. Ferring B.V., 437 F.3d at 1191; Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., 394 F.3d 1348, 1354 (Fed. Cir. 2005) ("[I]n the absence of a credible explanation, intent to deceive is generally inferred from the facts and circumstances surrounding a knowing failure to disclose material information."); Critikon, Inc., 120 F.3d at 1257. Depending on the facts of the case and the credibility of the witnesses, a district court might instead find that this circumstantial evidence is not sufficient to support a finding of intent to deceive. See Ferring, 437 F.3d at 1191 (declining "to lay down a general rule as to when intent may be or must be inferred from the withholding of material information by an applicant").

The behind-the-scenes facts are intriguing.

In his deposition, one of the inventors testified that he believed he gave a copy of the invention disclosure and the internal research report, which cited the Willems reference, to one of the prosecuting attorneys. Yet none of the prosecuting attorneys have any recollection of seeing the Willems reference. Without any evidence indicating a lack of credibility, this record suggests--at most--negligence on the part of the inventors and the prosecuting attorneys in failing to effectively collaborate to ensure that all material references were submitted to the PTO. Yet even "'gross negligence' does not of itself justify an inference of intent to deceive." Kingsdown Med. Consultants, Ltd., 863 F.2d at 876. Drawing all justifiable inferences in Optium's favor, an inference of deceptive intent on these facts would be unreasonable. As such, the district court properly concluded that Optium's evidence of intent was insufficient to survive summary judgment.

Posted by Patent Hawk at May 5, 2010 9:14 PM | Inequitable Conduct


Is this a warm up for the en banc Abbott v. Becton, Dickinson and Co. IC matter?

Posted by: Pedantic Pete at May 6, 2010 7:32 AM

I'm glad they didn't hold them over the fire for forgetting to submit something in an IDS.

Posted by: Patent Attorney at May 6, 2010 8:01 AM