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June 11, 2010


Advanced Magnetic Closures ("AMC") sued Rome Fastener ("Romag") for clasping 5,572,773, claiming "a magnetic snap fastener commonly used in women's handbags." Undisputed claim construction showed asserted "claim 1 only covers fasteners with rivet holes that increase magnetic attraction, but not rivet holes that do not increase magnetic attraction." "In an attempt to prove its claims, AMC submitted re-constructed evidence, presented contradictory testimony, and engaged in evasive litigation tactics." AMC's suit came unfastened as Romag found putting the stink on AMC a snap.

Advanced Magnetic Closures v. Rome Fastener (CAFC 2009-1102, -1118) precedential

AMC's expert "purportedly performed a magnetic finite element analysis" to base his conclusion, but "failed to disclose in his report that he had not performed the finite element analysis." The expert identified a consultant as having performed the analysis; the same consultant who sent a memo that "directly contradicted the expert's report." Oops.

The snap hit the fan over unclean hands. Romag asserted that AMC president Irving Bauer, supposed sole inventor, "had misrepresented to the PTO that he was the only inventor of the '773 patent's fastener."

Mr. Bauer testified that he was able to design around the '294 patent through a series of magnetic strength experiments, such as comparing the magnetic attraction of solid magnets to magnets with holes, id. at *7-8. In one of his more "difficult-to-follow" strength experiments, he claimed that a nail through which he drilled a hole adhered to a magnetic plate, allowing the nail to carry more weight than another nail without a hole.

Although Mr. Bauer is the named inventor, both he and his former employee, Robert Riceman, claim to have invented the '773 patent's fastener.

Contrary to Mr. Bauer's version of events, Mr. Riceman testified that he invented the magnetic snap fastener described by the '773 patent.

Having an ownership interest in two magnetic snap fastener patents, Mr. Bauer waited approximately three years after conceiving of his magnetic snap fastener to file the '773 patent application.

Although Mr. Riceman believed his status of inventor would strip RRNY [AMC predecessor] of its claim to the '773 patent invention, he wrote a letter dated July 22, 1994, to the attorney prosecuting the '773 patent. See AMC III, 2007 WL 1552395, at *2. In that letter, Mr. Riceman advised the prosecuting attorney that he, not Mr. Bauer, should be listed as the inventor. Id. Shortly thereafter, however, Mssrs. Bauer and Riceman jointly wrote the prosecuting attorney, directing him to list Mr. Bauer as the sole inventor. Id. Mr. Riceman testified that he signed the joint letter under duress because RRNY threatened to terminate his employment if he claimed to be the inventor.

In response to Romag's claim that Mr. Riceman was the '773 patent inventor, AMC submitted two documents in an attempt to corroborate Mr. Bauer's claim of inven-torship. First, AMC submitted a 1993 invoice from a machine parts manufacturer that demanded payment for several magnetic snap fastener prototypes. AMC IV, 2008 WL 2787981, at *9. After Romag challenged the authen-ticity of the manufacturer's invoice, Mr. Bauer admitted at trial that this invoice was not the original, but one that he personally drafted and reconstructed. Id. Second, AMC submitted an invoice from a law firm for patent prosecution services of the '773 patent. Id. AMC later conceded that this invoice was also reconstructed, but "only after Romag identified the [proferred] document's defect in its summary judgment reply brief." Id. Despite this dispute over inventorship and falsified evidence, the district court deferred ruling on AMC's motion for sum-mary judgment on inventorship and allowed the case to proceed to trial.

At trial, AMC submitted more "reconstructed" evidence to demonstrate that Mr. Bauer was the inventor. AMC submitted some "very poor, essentially illegible" copies of sketches that Mr. Bauer allegedly made of the invention for Mr. Fischer in 1992. Id. at *8. Unfortunately, Mr. Bauer's notations on the sketch were illegible. To clarify these notations, AMC submitted "a copy of the copy of the original sketch on which additional notations were made, most of them apparently restating, in clearer block letters, the original notations." Id. Although AMC never submitted the original sketch, "[Mr.] Bauer testified [at trial] that he created the enhanced, legible copy in 2004 after the original was partially destroyed in a flood." Id.

No word as to whether Mr. Bauer saw Noah float by in his ark during the flood.

Mr. Bauer's notation, however, conflicted with his testimony.

AMC chose not to bring the charade to a close. And so the court hastened to fasten AMC's fate.

At trial, AMC also sought to establish patent infringement without the testimony of its discredited expert witness. As part of its case in chief, AMC presented three pieces of circumstantial evidence: (1) the '126 patent summary of invention, (2) a Romag advertisement, and (3) some of the '126 patent prosecution history. At the completion of AMC's case in chief, the court granted Romag's Rule 50(a) motion for JMOL because AMC failed to present any evidence on which a reasonable jury could conclude that Romag's fastener's had a rivet hole that increased magnetic attraction. Romag moved for attorney's fees under 35 U.S.C. § 285 based on litigation misconduct and inequitable conduct for fraudulently listing Mr. Bauer as the '773 patent inventor.

After briefing and a hearing, the district court granted Romag's motion for attorney's fees on both grounds. Id. at *2-19. Moreover, the district court held that the '773 patent was unenforceable for inequitable conduct and required AMC, [and AMC attorneys] Abelman, and Mr. Jaroslawicz to pay Romag's attorney's fees plus interest in the amounts of $1,509,976.16; $1,000,160.74; and $454,197.36, respectively.

Appeal upheld everything but "the district court's 28 U.S.C. § 1927 sanction against Mr. Jaroslawicz."

It was a zip for the CAFC to affirm "the district court's finding that the '773 patent is unenforceable based on inequitable conduct" based upon AMC's "broad and scattered challenge."

We have held that when named inventors deliberately conceal a true inventor's involvement, the applicants have committed inequitable conduct and the patent is unenforceable even as to an innocent co-inventor. Frank's Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd., 292 F.3d 1363, 1376-77 (Fed. Cir. 2002). In Frank's Casing, this court held that the named inventors committed inequitable conduct by deliberately excluding an innocent co-inventor from their patent application. Id. at 1376. The court explained that "'if unenforceable due to inequitable conduct, a patent may not be enforced even by "innocent" co-inventors. One bad apple spoils the entire barrel. Misdeeds of co-inventors, or even a patent attorney, can affect the property rights of an otherwise innocent individual.'" Id. at 1337 (quoting Stark v. Advanced Magnetic, Inc., 119 F.3d 1551, 1556 (Fed. Cir. 1997)). Accordingly, this court sustained the district court's holding of unenforceability. Id. The court, however, remanded the case "for the limited purpose of determining the correct inventorship" because an action under 35 U.S.C. § 256 did not "prevent[] a court from correcting the inventorship of an unenforceable patent." Id. at 1377 (alteration added).

As in Frank's Casing, the district court here had no obligation to resolve inventorship for the purposes of holding the patent unenforceable. If Mr. Bauer--as the sole named inventor--deliberately misrepresented that he invented the '773 patent's fastener to the PTO, his deceit would "spoil[] the entire barrel," leaving the '773 patent unenforceable. Stark, 119 F.3d at 1556 (alteration added). The only substantive difference between this case and Frank's Casing is that we have no reason here to remand to the district to resolve inventorship as no party has sought to correct inventorship under 35 U.S.C. § 256. Accordingly, the district court did not err by addressing inequitable conduct and unenforceability without resolving inventorship.

AMC also challenges the merits of the district court's inequitable conduct finding. According to AMC, the district court erred by relying on Mr. Riceman's "uncorroborated and hearsay testimony" to infer Mr. Bauer's intent to deceive. Appellant AMC's Br. 45.

Patent applicants "have a duty to prosecute patent applications in the [PTO] with candor, good faith, and honesty." Honeywell Int'l Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 999 (Fed. Cir. 2007) (alteration added); see also 37 C.F.R. § 1.56(a) (2009). A party assert-ing inequitable conduct must prove by clear and convincing evidence that a patent applicant breached that duty by (1) "fail[ing] to disclose material information or submit[ting] materially false information to the PTO" with (2) "intent to mislead or deceive the examiner." McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 913 (Fed. Cir. 2007) (internal quotation marks omitted) (alterations added). "The required showings of material-ity and intent are separate, and a showing of materiality alone does not give rise to a presumption of intent to deceive." Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313 (Fed. Cir. 2008).

Under the materiality prong, information is material when a reasonable examiner would "likely consider [the information] important in deciding whether to allow an application to issue as a patent." McKesson, 487 F.3d at 913 (internal quotation marks omitted) (alteration added); see also Symantec Corp. v. Computer Assocs. Int'l, Inc., 522 F.3d 1279, 1297 (Fed. Cir. 2008).

Under the intent prong, a party can prove intent to deceive the PTO based on direct evidence or on circumstantial evidence "with the collection of inferences permit-ting a confident judgment that deceit has occurred." McKesson, 487 F.3d at 913 (internal quotation marks omitted); see also Merck & Co., Inc. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989) ("Intent need not, and rarely can, be proven by direct evidence."). In evaluating intent, the district court must consider evidence that the patent applicants withheld information from the PTO in good faith. See Purdue Pharma L.P. v. Endo Pharm. Inc., 438 F.3d 1123, 1134 (Fed. Cir. 2006). A district court may not draw an inference of bad faith when a party has plausible reasons for withholding information: mere intent to withhold does not support an inference of intent to deceive. McKesson, 487 F.3d at 913. In short, a court should only infer intent to deceive when the evidence is clear and convincing. "[T]he inference [of intent to deceive] 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." Star Scientific, 537 F.3d at 1366 (alterations added).

After the accused infringer has made this threshold showing of materiality and intent to deceive, "the district court must balance the substance of those now-proven facts and all the equities of the case to determine whether the severe penalty of unenforceability should be imposed." Id. at 1367. If the court finds on the balance that the applicants committed inequitable conduct, the patent is unenforceable. Monsanto, 514 F.3d at 1242.

"As a critical requirement for obtaining a patent, inventorship is material." PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315, 1321 (Fed. Cir. 2000).... [W]e cannot fault the court for finding that Mr. Bauer's testimony "bore clear indicia of fabrication." Id. at *8. Especially when Mr. Bauer fabricated evidence to support his claim of inventorship, we find it difficult to fault a district court in finding that "the single most reasonable inference able to be drawn from the evidence" is that Mr. Bauer intended to deceive the PTO. Star Scientific, 537 F.3d at 1366.

On legal technicality of oversight by the district court, the attorneys managed to elude 28 U.S.C. § 1927.

A district court can require an attorney to pay the opposing party's reasonable costs, expenses, and attorney's fees when that attorney "so multiplies the proceedings in any case unreasonably and vexatiously." 28 U.S.C. § 1927 (2006).

Under the Second Circuit's strict standard, the district court abused its discretion by sanctioning Mr. Jaroslawicz under 28 U.S.C. § 1927. The district court may have had good reason to sanction Mr. Jaroslawicz, but it failed to find that Mr. Jaroslawicz acted in bad faith.

Because the district court failed to identify with specificity the bad-faith standard and used language suggesting an objective standard, we are not convinced that the district court found Mr. Jaroslawicz acted in bad faith. The district court thus did not satisfy the Second Circuit's requirement for "a high degree of specificity in the factual findings." Dow Chem., 782 F.2d at 344.

Judge Rader separately concurred, only "to express my view that, absent extreme facts such as those found in the present case, this court should refrain from resolving inequitable conduct cases until it addresses the issue en banc. See Therasense, Inc. v. Becton, Dickinson & Co., Nos. 2008-1511, -1512, -1513, -1514, -1595, 2010 WL 1655391 (Fed. Cir. April 26, 2010) (granting rehearing en banc)."

A little case law to tuck in on slack appeal motions practice -

This court has consistently held that a party waives an argument not raised in its opening brief. SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed. Cir. 2006); Becton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 800 (Fed. Cir. 1990). However, the court maintains discretion to address an argument not properly raised in the opening brief if disregarding the argument would result in an unfair procedure. SmithKline Beecham, 439 F.3d at 1320 n.9; Becton Dickinson, 922 F.2d at 800.

Posted by Patent Hawk at June 11, 2010 1:15 PM | Inequitable Conduct


At the completion of AMC's case in chief, the court granted Romag's Rule motion for ugg because AMC failed to present any evidence on which a reasonable jury could conclude that Romag's fastener's had ugg boots a rivet hole that increased magnetic attraction.

Posted by: ugg at September 28, 2010 7:54 PM