Ring Plus v. Cingular Wireless (CAFC 20091537) precedential

Inequitable Conduct

We have established a twopart test for determining whether a patent is rendered unenforceable for inequitable conduct. To successfully prove inequitable conduct, the accused infringer "must present evidence 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]." Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008) (citation omitted). The accused infringer must prove "at least a threshold level of each elementi.e., both materiality and intent to deceive . . . by clear and convincing evidence." Id. If the accused infringer meets this evidentiary burden with respect to both materiality and intent, "the district court must still balance the equities to determine whether the applicant's conduct before the PTO was egregious enough to warrant holding the entire patent unenforceable." Id.

Where a district court has made fact findings as to materiality and deceptive intent after a bench trial, we review those findings for clear error and the ultimate decision on inequitable conduct for abuse of discretion. Larson Mfg. Co. of S.D. v. Aluminart Prods., 559 F.3d 1317, 1327 (Fed. Cir. 2009).

The controversy swirled over two patent references that were disclosed in the background of '608, but which weren't formally cited in the applicant's IDS.

At trial, Cingular claimed that applicants misrepresented the substance of two references, U.S. Pub. No. 2001/0051517 (Strietzel) and U.S. Patent No. 4,811,382 (Sleevi).1 Cingular alleged that applicants misrepresented these references at two points: first, in the Background of the Invention of the '608 patent; and second, in an amendment submitted during prosecution (Amendment B). In the Background, applicants identified Strietzel and Sleevi as related art and stated that "[i]n each of the aforesaid [Strietzel and Sleevi references], there is no algorithm or software proposed for operating the telephone system. Thus, Streitzel [sic] and Sleevi both propose hardware based systems, but no software to operate those systems." '608 patent col.3 ll.2529 (emphasis added). In Amendment B, applicants asserted that they had "very carefully examined" Strietzel and Sleevi and noted that "one of the distinctions between the applicant's system and . . . any other reference known to the applicant is the fact that the applicant's system only generates [a] message when the phone line between the caller and the recipient is not busy." J.A. 10363. The court found that Strietzel and Sleevi disclose software-based algorithms and playing a sound presentation only when the recipient line is not busy. Therefore, the court found that applicants' statements in the Background and Amendment B were material misrepresentations.

To state, as the CAFC did, that the prior art references did not "explicitly" disclose software, breaks the back of the word "explicitly," to put it mildly.  Strietzel repeatedly references to a database. Sleevi is hardware oriented, but anyone familiar with telephone systems of the period knows that the engine of Sleevi's disclosed "telecommunications network" ticks over on software.

Neither Strietzel nor Sleevi explicitly discloses software for operating a telephone system. However, as the district court observed, both references describe components that are generally understood by persons of skill in the art to be associated with computers and software. The references also disclose methods for operating a telephone system. Although the disclosure of software is certainly not express in either Strietzel or Sleevi, we cannot say that the court clearly erred in finding that a person of skill in the art would have understood the references to disclose software-based algorithms. Therefore, the court did not clearly err in finding that applicants' Background statement was a misrepresentation.

Prosecutor's amendment statements were a continuation of the misrepresentation made in the application. The CAFC cut Ring Plus serious slack by not backing the district court.

However, we agree with Ring Plus that the district court clearly erred in finding that applicants' statement in Amendment B was a misrepresentation. The court found that both Striezel and Sleevi disclose playing a sound presentation only when a called line is not busy. Contrary to the court's finding, however, Strietzel states unambiguously that "the busy tone can be replaced by one or more advertisements." Para.[0064]. Sleevi is altogether silent as to whether the status of the recipient's line affects system operation. The court did not cite to any portion of Sleevi to support its finding, relying instead on conclusory testimony from witnesses who also failed to identify any support for their positions in Sleevi. Ring Plus, 637 F. Supp. 2d at 438. Cingular points to Sleevi's disclosure that "[i]f the called address is busy, the calling customer line is connected to a busy tone generator" as supporting the court's finding. Sleevi col.5 ll.7-9. However, this portion of Sleevi describes the general operation of a prior art telephone system; it does not disclose generating a message only if the line is not busy. See id. fig.1, col.10 ll.38-41, col.12 ll.42-44. Sleevi does not disclose a telephone system that only presents messages when the line is not busy. The court clearly erred in finding that Striezel and Sleevi disclose playing a sound presentation only when a called line is not busy and, therefore, clearly erred in finding that applicants' statement in Amendment B was a misrepresentation.

Ring Plus also argues that the district court clearly erred in finding that applicants' statements were material. Because we find that applicants' statement in Amendment B was not a misrepresentation, we need only address the materiality of the Background statement. Information is material when "a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent." Symantec Corp. v. Computer Assocs. Int'l, Inc., 522 F.3d 1279, 1297 (Fed. Cir. 2008). The district court found that the misrepresentation in the Background was not only material, but highly so. The court credited deposition testimony from Mr. Schaap that Strietzel and Sleevi were among the most relevant prior art references. The court also pointed to a patentability opinion in which Mr. Schaap informed applicants that he had found no prior art references "more pertinent" than Strietzel and Sleevi and that Sleevi, in particular, "fairly well precludes broad patent protection." J.A. 10423. In view of the evidence showing the particular relevance of Strietzel and Sleevi to the '608 patent, the court did not clearly err in finding that applicants' Background statement regarding the substance of those references was highly material.

The prosecutor did get an admonition: his "statement was outside the bounds of permissible attorney argument." Ouch.

Ring Plus argues that because Strietzel and Sleevi were before the examiner during prosecution, the Background statement was merely attorney argument and cannot be a material misrepresentation. Although an attorney is free to argue vigorously in favor of patentability without being subject to allegations of inequitable conduct, "the law prohibits genuine misrepresentations of material fact." Rothman v. Target Corp., 556 F.3d 1310, 1328 (Fed. Cir. 2009). Because we uphold the district court's finding that applicants' Background statement was a misrepresentation, this statement was outside the bounds of permissible attorney argument. Ring Plus also argues that the examiner did not consider Strietzel and Sleevi to be important because he did not cite them during prosecution. However, the materiality standard is an objective one: the issue is what a reasonable examiner would have found important, not whether the reference in question was specifically considered during prosecution. Therefore, we conclude that the court did not clearly err in determining that applicants' statement in the Background that Sleevi and Strietzel propose "no algorithm or software . . . for operating the telephone system" was a material misrepresentation.

With materiality established, though on shifted ground, the CAFC sang a different song on the intent prong than the district court.

Cingular, as the party seeking to establish inequitable conduct, bore the burden of establishing by clear and convincing evidence that applicants specifically intended to deceive the PTO in making the misrepresentation in the Background. Star Scientific, 537 F.3d at 1365; Larson Mfg., 559 F.3d at 1340. Although intent to deceive can be inferred from circumstantial evidence, the evidence must still be clear and convincing; "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); see also Kingsdown Med. Consultants v. Hollister, Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc in relevant part) (holding that even "'gross negligence' does not of itself justify an inference of intent to deceive"). Any inference of deceptive intent must 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.

The district court found that Cingular made a sufficient showing of deceptive intent. The court acknowledged that applicants' disclosure of Sleevi and Striezel "is inconsistent with an intent to hide those references." Ring Plus, 637 F. Supp. 2d at 439. The court went on to find, however, that the statement in the Background that "Streitzel and Sleevi both propose hardware based systems, but no software to operate those systems" was made with an intent to deceive. Mr. Schaap, the prosecuting attorney, testified that he believed the Background statement to be accurate because he viewed Strietzel and Sleevi as ambiguous and insufficiently detailed as to software. Id. at 439-40. The court found Mr. Schaap's belief "not credible" because he was a highly experienced patent prosecutor and because "even a cursory review" of Strietzel shows that the reference discloses software based algorithms. Id. at 440. Based on its view that the references clearly disclose software, the court found that applicants' purported belief in the truth of their representation was not plausible. From this evidence, the court concluded that "[t]he single most reasonable inference . . . is that the applicants intended to deceive." Id. at 440.

The CAFC panel of Judges Moore, Lourie and Gajarsa demonstrated that logical inference wasn't their strong suit. Not to mention self-contradiction in finding misrepresentation by the prosecutor, but then finding there was no intent. However sly in skirting, what should have been abundantly apparent wasn't. "Even though it looks like an polecat and smells like an polecat, it has not been unambiguously disclosed as a polecat." Please.

Ring Plus argues that the court clearly erred in finding that Cingular presented clear and convincing evidence of applicants' specific intent to deceive the PTO. We agree. The court premised its finding of intent almost entirely on its view that the references unambiguously disclose software. We disagree that the disclosure of software is so plain. Neither Strietzel nor Sleevi mentions software, and neither identifies any code or software mechanism for operating the disclosed systems. Moreover, there is no record evidence that one of skill in the art would consider the references to unambiguously disclose software. Although the references disclose isolated components that tend to be associated with computer operation, the references do not unambiguously disclose software for operating a telephone system.

Even the prosecutor, at deposition, paved the path to inequitable conduct.

Mr. Schaap testified that during prosecution he believed Strietzel and Sleevi related to hardware-based systems. In his view, Strietzel's "program processing means" could refer to hardware, and switching networks such as Sleevi's could be "programmed" mechanically or manually. Ring Plus, 637 F. Supp. 2d at 431. Though Mr. Schaap conceded at deposition that software-operated switches would, in practice, be used to implement the Strietzel and Sleevi inventions--primarily because mechanical switches "went out in the 1940s"--he nonetheless testified that neither reference discloses what the operating software is or how it might work. Id. at 437. For this reason, Mr. Schaap viewed his statement that "both [Strietzel and Sleevi] proposed hardware based systems, but no software to operate those systems" as accurate. Id. at 437 n.4. Cingular failed to present any evidence to rebut this testimony. "When examining intent to deceive, a court must weigh all the evidence, including evidence of good faith." Akron Polymer Container Corp. v. Exxel Container, 148 F.3d 1380, 1384 (Fed. Cir. 1998). "Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference." Scanner Techs. Corp. v. Icos Vision Sys. Corp. N.V., 528 F.3d 1365, 1376 (Fed. Cir. 2008).

Mr. Schaap's testimony gives rise to the inference that applicants believed that Strietzel and Sleevi did not disclose software for operating a telephone system. Based on the evidence of record, this inference is as reasonable as the court's inference of deceptive intent, particularly in view of the references' ambiguity as to operating software. Thus, the district court clearly erred in finding clear and convincing evidence of deceptive intent.

The CAFC ignores that was no evidence of good faith on the part of the prosecutor. Since when is "inference" "evidence"? This is scary, the CAFC turning the inequitable conduct standard on its head. "Any inference of deceptive intent must 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." The single most reasonable inference was that prosecutor Schaap thought that Strietzel and Sleevi were damning, and tried to sneak them by (mention in the background), but not call attention to them (by IDS citation), as required by law.

Cingular did try to connect the dots. The controversial prior art references should have been disclosed in an IDS. Certainly the prosecutor found them relevant, and so had a duty to disclose them (37 CFR Section 1.56). The "the single most reasonable inference" from the prosecutor not bringing them to the examiner's attention by IDS citation, but mention them in the background, is intent to downplay attention.

Cingular points to other evidence in the record, not cited by the district court, to establish intent. Cingular relies on applicants' statement in Amendment B that they examined Strietzel and Sleevi "very carefully." This statement is not indicative of intent. Reasonable minds could examine Strietzel and Sleevi and conclude, as applicants purportedly did, that the references do not disclose software for operating a telephone system. Cingular also relies on the prior art search report letter in which Mr. Schaap opined that Sleevi "fairly well precludes broad patent protection in the [relevant] field." J.A. 10423. Although this statement supports the finding that the references are material, it does not establish intent to deceive with regard to the statement in the Background of the Invention. The prior art search letter does not reflect that Mr. Schaap understood these references to disclose software, only that he thought they precluded broad patent protection. Cingular notes that the applicants prepared, but decided not to file, an IDS that listed both Strietzel and Sleevi. Again, this evidence relates to materiality, but not intent. While it may have been relevant if this was a nondisclosure case, it is not; Sleevi and Striezel were disclosed in the application itself. Failure to file an IDS says nothing about whether Mr. Schaap believed that the references disclose software. Finally, Cingular asserts that Ring Plus's failure to call Mr. Schaap or the inventor of the '608 patent at trial supports an inference of intent. Although it is true that "if [a] party chooses to not call [witnesses within his control to produce], the fact finder may draw the inference that the testimony would be unfavorable," see Brasseler, U.S.A. I., L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1385 n.7 (Fed. Cir. 2001), the district court drew no such inference here. We decline to do so in the first instance on appeal.

While not explicitly changing the bar for inequitable conduct, the bar was raised here.

Because the district court clearly erred in finding that Cingular introduced clear and convincing evidence of deceptive intent, we reverse the court's judgment of unenforceability for inequitable conduct. See Star Scientific, 537 F.3d at 1367 ("If a threshold level of intent to deceive . . . is not established by clear and convincing evidence, the district court does not have any discretion to exercise and cannot hold the patent unenforceable regard-less of the relative equities or how it might balance them.").

Inequitable conduct reversed.

Claim Construction

The claimed process steps necessarily being performed in order is unusual.

The district court determined that the plain language of claims 1 and 9 shows that the claimed steps must be performed in a certain order. The court held that the step of "determining whether the telephone line of the recipient telephone is busy" must be performed before the step of "terminating the telephone call and generating no sound presentation if the telephone line is busy and allowing for a sound presentation if the telephone line is not busy." Further, the court held that the step of "allowing for a sound presentation" must be performed before the step of "play[ing] the introduced message to the caller or the recipient or both." Because Cingular's Answer Tones service plays a sound presentation before it determines whether the recipient's line is busy, the court concluded that Answer Tones does not satisfy the required order of the steps. The court therefore granted Cingular's motion for summary judgment of noninfringement.

On appeal, Ring Plus challenges the court's claim constructions. Claim construction is a matter of law, and we review the court's claim construction without deference. Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1451 (Fed. Cir. 1998) (en banc). We read the claims "in view of the specification," which is "the single best guide to the meaning of a disputed term." Phillips v. AWH Corp., 415 F.3d 1303, 1315 (Fed. Cir. 2005) (en banc).

Ring Plus did not dispute "that the claim steps must be performed in order." The CAFC chided Cingular for making sure that point was driven home.

Ring Plus does not contest the court's conclusion that the claim steps must be performed in order, that step 1c must be performed prior to step 1d. Ring Plus Reply Br. at 26 ("Cingular unnecessarily presented argument about the order of the claim steps. Ring Plus did not appeal the order of the claim steps.").

Ring Plus argued a subtle twist on timing. So subtle it didn't make sense.

Ring Plus argues that the claimed algorithm and method only apply during the ring-back signal period and the ringing signal period. Ring Plus argues that if the claim is limited to that time period, then "it simply does not matter what Defendants do or do not do before that period of time." Ring Plus argues that Cingular's Answer Tones service can infringe even if it plays a sound presentation prior to determining whether the line is busy because, according to Ring Plus, that time period is not covered by the claims. To this end, Ring Plus argues that the district court erred in its construction of "allowing" and "sound presentation."

We conclude that the district court correctly construed these claim terms. The court construed "allowing" as "allow to begin." Ring Plus argues that the term should be construed as "allow to continue or to begin." Ring Plus's proposed construction conflicts with the required order of the claimed steps, which it does not appeal. The claimed algorithm (1c)) determines whether the line is busy, (1d)) allows a sound presentation if the line is not busy, and then (1e)) initiates the actions to play the message. The court held that the step of "allowing for" a sound presentation must be performed before the step of playing that presentation. Because a sound presentation cannot be "allowed to continue" before the presentation is first played, the required order of the steps necessarily indicates that "allowing" a sound presentation means allowing the presentation to begin. Indeed, if we construed "allowing" as Ring Plus proposes, the claims would recite the illogical sequence of allowing a sound presentation to continue before initiating the playing of that presentation. Step 1e) states "initiating those actions to play." If the sound presentation was playing in advance of or during the determination regarding whether the line is busy (step 1c)), then the "initiating those actions to play" required by 1e) would have already occurred. You cannot initiate the playing of the message as required by step 1e), if it has been playing all along. The court's construction is further supported by the specification, which consistently teaches that a sound presentation is not generated at all until after the algorithm determines that the recipient line is not busy. Id. col.6 l.62-col.7 l.2.

Thus, the court did not err in construing "allowing" as "allowing to begin."

Ring Plus also tried its luck to limit the claimed "sound presentation" to being "during the usual ring-back period." No takers on that.

Ring Plus fails to identify any portion of the specification that limits the claimed sound presentation to an audible communication played during a specific time period. The court did not err in construing "sound presentation" consistent with its plain meaning, "an audible communication."

Noninfringment affirmed.

Finally, the courts denied Ring Plus's attempts to disqualify Cingular's counsel by purported misconduct.