Leviton Manufacturing Company, Inc. v. Universal Security Instruments, Inc. / Shanghai Meihao Electric Inc. v. Leviton Manufacturing Company, Inc. (CAFC 2009-1421) precedential

Bizarrely, Chief Judge Michel didn't bother to explain the litigation setup in Meihao v. Leviton. A relatively poorly written ruling from a man usually on the ball. And a wrong decision. Judge Michel was joined by the erratic Judge Moore. Judge Prost rightfully dissented.

Leviton filed 10/690,776 in October 2003, listing Franz Germain and five other co-inventors, and claiming priority to February 2003. "Greenberg Traurig attorneys Paul Sutton, Barry Magidoff, and Claude Narcisse filed and prosecuted the Germain application."

Six months later, Leviton filed 10/827,093, which matured to 6,864,766. '766 is a third-generation child to a 1999 parent, 6,246,558. Nicholas DiSalvo and William Ziegler are named inventors of '766 and '558.

The '766 patent and the Germain application have no common inventors, and neither claims priority to the other. The '766 patent's claimed 1999 priority date is three and a half years before Germain's claimed 2003 priority date. The '766 patent and Germain have many claims that are nearly identical.

During the prosecution of the '766 patent, Leviton did not disclose the Germain application or the fact that certain claims had been copied from Germain into the application for the '766 patent. Moreover, Leviton did not inform the PTO that it had previously submitted a sworn declaration in which other individuals (the Germain inventors) claimed to be inventors of subject matter very similar to that which was now recited in the application for the '766 patent.

In June 3, 2005, two months after the '766 patent issued, Leviton disclosed the '766 patent, the '558 patent, and thirty other references during the prosecution of the Germain application. In September 2005, having learned of the substantively identical claims, the PTO issued a double-patenting rejection of the Germain application in light of the '766 patent. Leviton cancelled the similar claims.

A reexamination of the '766 patent was requested on June 6, 2005. Leviton did not disclose the Germain application or the related litigation to the PTO during the seven months in which the examiner reconsidered the patentability of the '766 patent. On February 17, 2006, the examiner confirmed all claims of the '766 patent, and the reexamination requestor appealed. Leviton filed its appeal brief on June 16, 2006, but did not disclose the Germain application or related litigations to the PTO, though it had been aware of inequitable conduct allegations for over a year.

[Prosecutor] Narcisse first referenced the Germain application and asserted that it was not material information in a memo- randum to the PTO dated August 7, 2007. Although Narcisse titled his memorandum "Information Disclosure Statement" ("IDS"), it is not formally an IDS because it does not meet any of the requirements for an IDS. Nar- cisse also submitted several standard PTO forms titled "Information Disclosure Statement by Applicant" that comply with PTO rules, but these IDS forms did not list the Germain application.

"Meihao sought discovery of the facts related to the inequitable conduct defense," but was stymied.

During Narcisse's deposition, counsel made 96 privileged advice and work product objections, and over a third of the time explicitly instructed Narcisse not to answer.

Magidoff refused to answer similar questions, also on advice and objection by counsel. The district court found that these objections were baseless.

Leviton got a clue that developments were not exactly going its way.

On November 28, 2007, Leviton moved to dismiss the case. Leviton asserts that it dismissed the case because it succeeded in forcing Meihao to stop selling older-model, allegedly infringing products. Meihao alleges the real reason Leviton moved to dismiss its case was that it wanted to avoid a finding that the '766 patent is unenforceable. Leviton has more than 30 different issued patents and patent applications that relate to the '766 patent, and Leviton's counsel of record on the '766 patent was also counsel of record in the PTO on several hundred Leviton patents. The district court dismissed the case with prejudice on December 17, 2007 and gave Meihao leave to file a motion for fees and costs.

The district court magistrate judge "found that Leviton had committed inequitable conduct, had engaged in a strategy of vexatious litigation, and that an award of fees to Meihao was proper." $1 million.

Appeal.

The Patent Act provides, "The court in exceptional cases may award reasonable attorney fees to the prevailing party." 35 U.S.C. § 285. "The prevailing party may prove the existence of an exceptional case by showing: inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement." Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002). We review a district court's finding that a case is "exceptional" within the meaning of § 285 for clear error. Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1328 (Fed. Cir. 2003). Once a case is determined to be exceptional, we review the district court's decision to award attorney fees under an abuse of discretion standard. Id.

Inequitable Conduct

To prevail on inequitable conduct, an accused infringer must show that the applicant: "(1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO]." Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363 (Fed. Cir. 2007).

1. Materiality

Under our scattered precedents, information may be considered material if there is a "substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent." PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1321 (Fed. Cir. 2000); see also Digital Control, Inc. v. Charles Machine Works, 437 F.3d 1309, 1314 (Fed. Cir. 2006) (holding that omissions and misstatements are material if "a reasonable examiner would have considered such [information] important in deciding whether to allow the . . . application"). Information concealed from the PTO "may be material even though it would not invalidate the patent." Larson Mfg. Co. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1327 (Fed. Cir. 2009) (quoting Li Second Family Ltd. V. Toshiba Corp., 231 F.3d 1373, 1380 (Fed. Cir. 2000)). However, "a withheld otherwise material reference is not material if it is merely cumulative to, or less relevant than, information already considered by the examiner." Larson, 559 F.3d at 1327.

Whereupon the majority, longwindedly, created further scattering of precedent, but agreed with the district court that the Germain application was material.

2. Intent to Deceive

We next consider whether Leviton withheld the Germain application and related litigation with an intent to deceive the PTO. This Court has held that the intent to deceive must be "viewed in light of all the evidence . . . . Intent need not, and can rarely be, proven by direct evidence. Rather, intent to deceive is generally inferred from the facts and circumstances surrounding the applicant's overall conduct." Impax Labs., Inc. v. Aventis Pharmaceuticals, Inc., 468 F.3d 1366, 1374-75 (Fed. Cir. 2006); see also Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1364 (Fed. Cir. 2007) ("[B]ecause direct evidence of deceptive intent is rarely available, such intent can be inferred from indirect and circumstantial evidence."). Even if the nondisclosed information is of "relatively high materiality," however, inequitable conduct cannot be found where "[the patentee] offer[s] a plausible, good faith explanation for why [the nondisclosed information] was not cited to the PTO." Warner-Lambert Co. v. Teva Pharms. USA, Inc., 418 F.3d 1326, 1348 (Fed. Cir. 2005). Moreover, "[a]n accused infringer cannot carry its threshold burden simply by pointing to the absence of a credible good faith explanation." See Larson Mfg. Co. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1341 (Fed. Cir. 2009) (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1368 (Fed. Cir. 2008)). We rarely affirm a grant of summary judgment of inequitable con- duct, and in those cases where we have affirmed, the applicants did something other than fail to disclose a commonly owned application or related litigation. See, e.g., Paragon Podiatry Lab, Inc. v. KLM Labs. Inc., 984 F.2d 1182 (Fed. Cir. 1993) (affirming inference of intent to deceive "not simply from the materiality of the affidavits, but from the affirmative acts of submitting them, their misleading character, and the inability of the examiner to investigate the facts").

We hold that there are genuine issues of material fact which preclude summary judgment for inequitable conduct, and we remand for an evidentiary hearing. The district court inferred an intent to deceive based on Narcisse's failure to advise the PTO of the Germain application and related litigation, which is an omission, not an affirmative misrepresentation. We have not previously affirmed a grant of summary judgment based on a failure to disclose a commonly owned application or related litigation, and we decline to do so on the facts of this case. See, e.g., Paragon Podiatry, 984 F.2d 1182. While a district court may make inferences based on the evidence, the district court's inference was not the only reasonable one based on the record. See Star Scientific, 537 F.3d at 1366 ("Further, the inference must not only be based on sufficient evidence and be reasonable in light of that evidence, but it must also be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard.").

The vexatious litigation charge was also vacated and remanded.

Judge Prost, taking a page from Judge Newman's playbook, left no stone unturned. Below are just the bookends to the dissent.

I respectfully dissent because the majority, in my view, overlooks the compelling facts presented in this case and suggests legal standards contrary to our precedent. Although I am cognizant of this court's rightful hesitance to allow a finding of inequitable conduct on summary judgment and agree with our precedent establishing that such a finding is reserved for a rare case, I firmly believe that this is that rare case. See M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., Inc., 439 F.3d 1335, 1339 (Fed. Cir. 2006); Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1313 (Fed. Cir. 2006) ("Determining at summary judgment that a patent is unenforceable for inequitable conduct is permissible, but uncommon."); Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1190 (Fed. Cir. 1993) ("While our precedent urges caution in the grant of summary judgment respecting a defense of inequitable conduct, summary judgment is not foreclosed.").

The majority overlooks the disturbing facts of this case in which an experienced patent prosecutor withheld critical information with which he was intimately familiar, despite his awareness of reasons that the PTO would want to be made aware of the information and lack of a credible reason for the omissions. In overturning the district court's finding of deceptive intent on these facts, the majority's legal standards and reasoning take the burden to establish deceptive intent to an unprecedented level.

Leviton is presently suing Greenberg Traurig and the prosecutors involved "for legal malpractice and breach of fiduciary duty..., as well as state law claims." Claude R. Narcisse lives in New Jersey, a hotbed of moral rectitude.