« Hang Up | Main | Tracking & Waiving »

August 9, 2010

Not A Golden Hour

Golden Hour Data Systems sued emsCharts and Softtech for infringing 6,117,073. '073 claims integration of medical dispatch, clinical services, and billing. Trial went Golden Hour's way, but the district court afterward held JMOL no joint infringement of claims, and found '073 unenforceable due to inequitable conduct. Golden Hour appealed. Herein, incredible case law developments: the inequitable conduct mulligan; and joint infringement only by proven puppeteering. And another case where "the single most reasonable inference" is hamstrung.

Golden Hour Data Systems v. emsCharts and Softtech (CAFC 2009-1306, 1396) precedential

The accused infringers are emsCharts and Softtech. emsCharts produces a web-based medical charting program called emsCharts. The emsCharts program charts patient information and provides integrated billing. Softtech produces computer-aided flight dispatch software called Flight Vector, which coordinates flight information, such as patient pickup and delivery, and flight tracking. The two companies formed a strategic partnership, enabled their two programs to work together, and collaborated to sell the two programs as a unit.

Joint Infringement

Where joint infringement occurs, one must be the puppet master, or so the majority of Judges DYK and Friedman held.

Where the combined actions of multiple parties are alleged to infringe process claims, the patent holder must prove that one party exercised "control or direction" over the entire process such that all steps of the process can be attributed to the controlling party, i.e., the "mastermind." Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008) (citing BMC Res., Inc. v. Paymentech, L.P., 498 F.3d 1373, 180-81 (Fed. Cir. 2007)). Here, the district court concluded that the evidence of control or direction was insufficient as a matter of law to uphold a finding of joint infringement. We agree with the district court that the evidence here was insufficient for jury to infer control or direction. We see no need for extended discussion of this issue and we affirm the district court's grant of JMOL as to the process claims the jury found to be jointly infringed (claims 15-22).

Queen Pauline had a different take. As usual, the right take.

The court rules that when two entities collaborate to infringe a patent, such that one performs some steps of the claim and the other performs the other steps, there cannot be any infringement, on any theory, unless one entity "controls or directs" the activity of the other. As the majority opinion reports, here the defendants "formed a strategic partnership, enabled their two programs to work together, and collaborated to sell the two programs as a unit." Maj. Op. at 8. The court now holds that such a relationship avoids all liability for infringement, even when the defendants collaborate to practice every limitation of the claims. That ruling is incorrect as a matter of law.

The evidence showed that emsCharts and Softtech integrated the functions of their software programs, and sold the ensuing system as a package.

A collaborative effort as here, a "strategic partnership" to sell the infringing system as a unit, is not immune from infringement simply because the participating entities have a separate corporate status... The panel majority acknowledges that the defendants in collaboration infringed the claims, but without discussion overturns the jury verdict.

The court now holds that such a relationship avoids all liability for infringement, even when the defendants collaborate to practice every limitation of the claims. That ruling is incorrect as a matter of law.

Inequitable Conduct

At the time of the filing of the application [that lead to '073], [patent co-inventor and Golden Hour CEO] Hutton believed that Air Medical Software ("the AeroMed system") was the system most similar to the subject matter of the application.

After filing the application, Hutton got a copy of an undated brochure describing the AeroMed system. Hutton gave the brochure to the prosecutor, who filed an IDS on it.

The IDS did not disclose the integrated billing system described in the brochure. At no time during prosecution of the application was the brochure or the billing system information provided to the examiner.

After the jury verdict in favor of Golden Hour, the district court held a bench trial to consider the issue of inequitable conduct. The brochure that the jury had found not to anticipate was a central feature of the inequitable conduct trial.

The court found that the information inside of the brochure "was inconsistent [with] the disclosure in the IDS, and inconsistent with how [Hutton and prosecution counsel] had described the AeroMed system in the original application." Id. at 10. Therefore because "Fuller selected that part of the brochure to disclose that did not threaten patentability" and "excluded . . . the entire teaching that would have been a serious obstacle to patentability," the district court found that "[t]here can be no question" that the withheld information is "highly material." Id. at 15.

With respect to intent, the court found that Golden Hour's nondisclosure of the brochure and selective disclosure of the contents of the brochure evidenced intent to deceive the PTO. The court concluded that Fuller must have been aware of the contents of the brochure. Id. at 12-13. The court reiterated that "Golden Hour and its counsel selected the one part of the AeroMed brochure to disclose [that] was consistent with how it had described AeroMed to the PTO" and found that "[s]uch selectivity is strong evidence of intent to mislead the patent office about the relevant prior art system as described by its competitor." Id. at 13. The court therefore concluded that "the single most reasonable inference to be drawn is that Golden Hour intended to deceive the patent office." Id. at 14. The court then balanced the high level of materiality with the evidence of deceptive intent and concluded that Golden Hour committed inequitable conduct, rendering the '073 patent unenforceable.

On appeal -

"A patent may be rendered unenforceable due to 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. Charles Mach. Works, 437 F.3d 1309, 1313 (Fed. Cir. 2006). The party seeking to render a patent unenforceable due to inequitable conduct must prove both materiality and intent by clear and convincing evidence. Id. The court must then weigh the levels of materiality and intent to determine whether the conduct at issue amounts to inequitable conduct. Id. We review the district court's factual findings as to materiality and deceptive intent for clear error and the ultimate decision on inequitable conduct for abuse of discretion. Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008); Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc in relevant part).

A. Materiality

"[W]e have held that information is material when a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent." Star Scientific, 537 F.3d at 1367 (citations omitted). The PTO Rules also aid in the definition of materiality. Rule 56 provides that an applicant has a duty to disclose information that is material to patentability and states that

(b) Under this section, information is material to patentability when it is not cumulative to information already of record or being made of record in the application, and
(1) It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or
(2) It refutes, or is inconsistent with, a position the applicant takes in:
(i) Opposing an argument of un-patentability relied on by the [PTO], or
(ii) Asserting an argument of pat-entability.

37 C.F.R. ยง 1.56(b). The PTO rules clearly require the submission of known information that contradicts material information already submitted to the PTO. See Monsanto Co. v. Bayer Bioscience N.V., 514 F.3d 1229, 1239-40 (Fed. Cir. 2008); Pharmacia Corp. v. Par Pharm., Inc., 417 F.3d 1369, 1373 (Fed. Cir. 2005). If a misstatement or omission is material under the Rule 56 standard, it is material for the purposes of inequitable conduct. Digital Control, 437 F.3d at 1316.

The majority found the brochure material, even if not prior art, which oddly remained an open question.

Further, our prior cases make clear that information may be material even if it does not qualify as prior art. As we held in Duro-Last, Inc. v. Custom Seal, Inc., 321 F.3d 1098, 1107 (Fed. Cir. 2003),

[t]his court has long held that whether a prior reference is material, i.e., whether there is a substantial likelihood that a reasonable examiner would have considered the reference important in deciding whether to allow the application to issue as a patent, is not controlled by whether that reference actually anticipates the claimed invention or would have rendered it obvious.

See also Digital Control, 437 F.3d at 1318 ("[A] misstatement or omission may be material even if disclosure of that misstatement or omission would not have rendered the invention unpatentable."); Li Second Family Ltd. P'ship v. Toshiba Corp., 231 F.3d 1373, 1380 (Fed. Cir. 2000). The information in the brochure here was clearly material.

First, the brochure may well have been prior art. While the district court made no finding as to the prior art status of the brochure, we note that there is substantial evidence in the record that the brochure is indeed prior art... A reasonable examiner would likely wish to inquire into the prior art status of the system disclosed in the brochure in light of the representations as to the system appearing in the specification. Indeed Golden Hour itself admits that an examiner "might have been curious about the brochure because it related to the same subject matter as the earlier recitation of prior art." Pl.-Appellant's Br. 25.

Second, the brochure and the information contained therein were material because they contradicted other representations to the PTO, even if the brochure was not itself prior art.

In the IDS, prosecution counsel stated that "[a]pplicants are aware of AeroMed Software" and listed the attributes of the software found on the front of the brochure, but did not disclose the integrated billing found on the inside of the brochure. J.A. 4944-45 (emphasis added). Given the significance of integrated billing to patentability, the failure to disclose the billing characteristics of the AeroMed system in the IDS was also highly material. The failure to disclose the integrated billing would lead one to believe that the AeroMed system did not provide comprehensive integration with billing. The brochure's recitation of integrated billing, which applicants failed to disclose, would undoubtedly have been material to a reasonable examiner.

Thus materiality was affirmed.

B. Intent

The intent element is a separate component of an inequitable conduct determination. Star Scientific, 537 F.3d at 1366. To prove intent, "the involved conduct, viewed in light of all the evidence, including evidence of good faith, must indicate sufficient culpability to require a finding of intent to deceive." Digital Control, 437 F.3d at 1319 (citations omitted). Intent need not be proven by direct evidence; it can be inferred from indirect and circumstantial evidence. Star Scientific, 537 F.3d at 1366 (citing Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1364 (Fed. Cir. 2007)); Merck & Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989). An inference of intent "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.

In sum, prosecution counsel failed to provide any explanation for withholding the missing information from the brochure, assuming he was aware of the brochure's contents.

The district court also did not err in finding that "[e]ven the most cursory of reviews would have revealed the description of AeroMed's billing and integration--the only thing described in the center column of the one page brochure," i.e., that it was inconsistent with the representations in the specification. See Inequitable Conduct Order, slip op. at 13.

The key question then is whether [prosecutor] Fuller and/or Hutton in fact read the brochure. Fuller testified that he did not remember the circumstances regarding the brochure and the preparation of the IDS... Fuller never testified definitively that he did not read the brochure in full.

The district court "discredited Fuller's testimony," and "found [Hutton's] testimony to be incredible."

But the district court did not actually find that either Fuller or Hutton was aware of the inside contents of the brochure. As findings of intent so often turn on a district court's credibility determinations, see, e.g., Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d 1253, 1263-64 (Fed. Cir. 2001), it is essential that the court provide detailed factual findings with respect to crucial facts--such as whether Fuller and/or Hutton read the entire brochure; whether, knowing the information to be material, they deliberately withheld it; or whether they deliberately refused to read the entire brochure in order to avoid learning damaging information.

Golden Hour argues that no remand is necessary because the record evidence could not, in any event, support a finding of intent. We disagree. Quite apart from the highly material nature of the withheld reference, the suspicious late production of the brochure, and the district court's findings as to witness credibility, there is ample evidence that could support finding that Fuller or Hutton or both actually read the brochure and determined to withhold its contents from the PTO, knowing it to be material. First, Hutton regarded AeroMed as his primary competitor.

During the preparation of the application, Hutton conveyed this knowledge of the AeroMed system to prosecution counsel and was "pretty involved in the process of drafting and prosecuting" the application. J.A. 4726. The imprecise nature of the earlier information received by Hutton might suggest that Hutton and/or Fuller would carefully review the Aero brochure.

Third, representations as to the AeroMed system were central to the claim of patentability in the original application. This centrality was demonstrated by the filing of an IDS based on the brochure. This again suggests that Fuller and/or Hutton would be interested in reading the brochure.

Fourth, it might seem unlikely that a patent practitioner would make representations as to the brochure in an IDS without reading the entire brochure and would not be interested in reading the entire brochure to determine whether there was anything in it that might disclose its prior art status.

For all that, what would "the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard"? Yet the CAFC majority found it plausible, though "Hutton regarded AeroMed as his primary competitor," that he did not read the brochure, nor that the prosecutor would have read the brochure. Some brushing up on human proclivities may be in order. Like some kind of obsessive-compulsive Sherlock Holmes gone beserk, the majority demanded "more data."

Therefore we must remand to the district court for it to make detailed factual findings in the first instance.

Queen Pauline had a different take. As usual, the right take, as a matter of law, however counter-intuitive to the evidence extant.

The charge of inequitable conduct carries high stakes for both the attorney, whose career it can threaten, and the applicant, who can lose a perfectly valid patent.

[I]f deceptive intent was not established at the trial of this issue, by the party with the burden to do so, it is inappropriate for this court to remand for another shot at it.

For the Golden Hour patent, the question of patentability in view of the AeroMed brochure was before the jury, and the jury verdict of validity despite the AeroMed brochure is not challenged. Since intent to deceive was not established before the trial judge, and materiality is reasonably disputed, there is no basis for a second-bite ruling of inequitable conduct. I would lay the matter to rest or, at a minimum, stay the proceedings until conflicting precedent is clarified in accordance with the pending en banc hearing of the Therasense appeal.

Put differently, the judge is not responsible for developing the record. That's counsel's role. The hand played is the hand to decide. If defense counsel put forth everything they could, all the cards are on the table. From there the court calls prevailing party. If defense counsel failed to draw or turn over all the cards they could have played, they have only themselves to blame.

Posted by Patent Hawk at August 9, 2010 9:14 PM | Infringement


Does anyone have a definition of "prior art?" The CAFC lexicography is all over the place.

Does it mean:
1. Every document ever published anywhere in the world that is in any way relevant to the invention (plenary relevance);

2. Every document ever published anywhere in the world that is in any way relevant to the claimed subject matter (claim relevance);

3. Every document having plenary relevancy published anywhere in the world prior to the filing date;

4. Every document having claim relevance published anywhere in the world prior to the filing date;

5. Only documents that could be applied in a 102/103 rejection. . .

I could probably think of at least 5 more if I had the time. It's like "elements" and "limitations" -- it seems to mean whatever the justice, judge, administrative judge, or examiner wants to make of it at the time.

A formal definition of "prior art" with authority would be splendid.

Posted by: Babel Boy at August 10, 2010 7:44 AM