Lazare Kaplan International v. Photoscribe Technologies and David Benderly and Gemological Institute of America (CAFC 2009-1251) precedential

The inequitable conduct finding at district court resulted in finding the case exceptional under 35 U.S.C. § 285, with an award of over $6 million in attorneys fees.

Lazare separately motioned for JMOL and new trials, which were denied. Mulligan review is based upon the instant circuit's precedent, but all generally go to the nebulous/flexible application of: miscarriage of justice, abuse of discretion, and what a reasonable jury would have done.

Because the denial of a motion for judgment as a matter of law or for a new trial is a procedural issue not unique to patent law, this court reviews such denials under the law of the regional circuit where the appeal from the district court would normally lie, in this case, the Second Circuit. Riverwood Int'l Corp. v. R.A. Jones & Co., Inc., 324 F.3d 1346, 1352 (Fed. Cir. 2003). The Second Circuit reviews for abuse of discretion the denial of a motion for new trial. SEC v. DiBella, 587 F.3d 553, 563 (2d Cir. 2009). "A motion for a new trial ordinarily should not be granted unless the trial court is convinced that the jury has reached a seriously erroneous result or that the verdict is a miscarriage of justice." Armstrong v. Brookdale Univ. Hosp. & Med. Ctr., 425 F.3d 126, 133 (2d Cir. 2005). The Second Circuit reviews de novo the denial of a motion for judgment as a matter of law, "applying the same standards that guided the district court's consideration of the issue." Nimely v. City of New York, 414 F.3d 381, 391 (2d Cir. 2005). The Second Circuit will grant a motion for judgment as a matter of law "only if 'a reasonable jury would not have a legally sufficient evidentiary basis to find for the [non-movant] on that issue.'" Cameron v. City of New York, 598 F.3d 50, 59 (2d Cir. 2010) (alteration in original) (citation omitted).

Claim Construction

This court reviews the district court's claim construction de novo. Cybor Corp. v. Fas Techs., Inc., 138 F.3d 1448, 1456 (Fed. Cir. 1998) (en banc). Claim language is generally given its "ordinary and customary meaning," that is, "the meaning that the [language] would have to a person of ordinary skill in the art in question at the time of the invention." Phillips v. AWH Corp., 415 F.3d 1303, 1312-13 (Fed. Cir. 2005) (en banc). When determining the meaning of disputed claim language, courts consider "those sources available to the public that show what a person of skill in the art would have understood [the] disputed claim language to mean." Id. at 1314 (quoting Innova/Pure Water, Inc. v. Safari Water Filtration Sys., Inc., 381 F.3d 1111, 1116 (Fed. Cir. 2004)). Such sources include "the words of the claims themselves, the remainder of the specification, the prosecution history, and extrinsic evidence concerning relevant scientific principles, the meaning of technical terms, and the state of the art." Id. (quoting Innova, 381 F.3d at 1116). Because the parties do not rely on extrinsic evidence, we confine our analysis to the claims, the specification, and the prosecution history.

The first disputed construction went to "controlling the directing," a movie-making studio paradigm taken to inscribing gems. The district court's adopted construction precluded manual control.

This court begins with the claims, as they usually give "substantial guidance as to the meaning of particular claim terms." Id. (citing Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582 (Fed. Cir. 1996)). Contrary to the Defendants' contentions, the language of the claims does not compel the construction of "controlling the directing" adopted by the district court. The claims are silent regarding when the imaging that the "controlling the directing" is in part based upon takes place or who or what generates this imaging. In particular, we note that nothing in the claims expressly precludes manually "imaging" before the laser burn process begins and then using the imaging to control the laser as it marks a gemstone.

This court turns next to the specification. "Claims must be read in view of the specification[] of which they are a part." Markman, 52 F.3d at 979. The specification "is always highly relevant to the claim construction analysis. Usually, it is dispositive; it is the single best guide to the meaning of a disputed term." Phillips, 415 F.3d at 1315 (quoting Vitronics, 90 F.3d at 1582). Here, the specification indicates that "controlling the directing . based on . . . the imaging" includes control based on . . both automated and manual feedback derived from optical images of a gemstone, either before or during the laser burn process. Throughout the patent, the term "imaging" is used in connection with an optical feedback process in which either a computer or a user can set up and manipulate an inscription.

After further considering prosecution history, the appeals panel broadened construction of the "term 'controlling the directing . . . based on . . . the imaging' to include control based on either automated or manual feedback derived from optical images of a gemstone, before or during the laser burn process."

The district court was frigid in reciting the construction for "rigid frame" to the jury, refusing Lazare's request to read the adopted construction, instead suggesting that the jury could consult a dictionary. "Neither party claims that the jury asked for, or was given, a dictionary during its deliberations." For that brouhaha, Lazare wanted a new trial.

The Defendants disagree and contend that Lazare waived these arguments by failing to object to the curative instruction. The Defendants assert that even if we conclude that Lazare did not waive these arguments, there is no reason to disturb the jury verdict because the instruction at issue is consistent with the court's construction of the "rigid frame" element and, moreover, Lazare has not established that it suffered any prejudice as a result of the instruction.

To that the CAFC agreed. Whining is encouraged: object early, object often.

Under Rule 51 of the Federal Rules of Civil Procedure, a party must timely object to a jury instruction "on the record, stating distinctly the matter objected to and the grounds for the objection." If a party fails to preserve its objection to a jury instruction, a court may nonetheless "consider a plain error in the instructions . . . if the error affects substantial rights." Fed. R. Civ. P. 51(d)(2).

Lazare acknowledges that it did not object after the district court gave the curative instruction, and this court is not persuaded that lodging an objection would have been futile.

At bottom, this court is not convinced that the instruction amounted to fundamental error.

Bottoms up to that, the defendants toasted.

Another claim construction dispute leading to noninfringement, over the term "positional accuracy of placement," pitted fact against legality. Lazare fought for the law and the facts won. Lazare argued claim scope on appeal, an argument ruled waived. Further, the facts were "supported by substantial evidence."

A dispute over "positional repeatability" was a repeat with regard to evidence base.

Invalidity

Herbert Gresser, co-inventor of the Gresser machine, testified in district court. That doomed the validity of claim 18 of '351. Lazare appealed on lack of corroboration.

Generally, "[c]orroboration is required of any witness whose testimony alone is asserted to invalidate a patent." TypeRight Keyboard Corp. v. Microsoft Corp., 374 F.3d 1151, 1159 (Fed. Cir. 2004) (citation omitted). This requirement stems from the suspect nature of oral testimony concerning invalidating events. As the Supreme Court noted more than a century ago, the "unsatisfactory character" of such testimony "aris[es] from the forgetfulness of witnesses, their liability to mistakes, their proneness to recollect things as the party calling them would have them recollect them, aside from the temptation to actual perjury . . . ." The Barbed Wire Patent, 143 U.S. 275, 284 (1892). Although oral testimony asserted to invalidate a patent must be corroborated, as we have explained in a similar context, this court has "not impose[d] an impossible standard of 'independence' on corroborative evidence by requiring that every point . . . be corroborated by evidence having a source totally independent of the [witness]." Knorr v. Pearson, 671 F.2d 1368, 1374 (CCPA 1982). Rather, this court applies a "rule of reason" analysis to determine whether the testimony introduced has been sufficiently corroborated. Lacks Indus., Inc. v. McKechnie Vehicle Components USA, Inc., 322 F.3d 1335, 1349 (Fed. Cir. 2003). Under this analysis, this court evaluates all of the pertinent evidence "so that a sound determination of the credibility of the [witness's] story may be reached." Price v. Symsek, 988 F.2d 1187, 1195 (Fed. Cir. 1993). When conducting a rule of reason analysis, this court generally considers the following eight factors:
(1) the relationship between the corroborating witness and the alleged prior user,
(2) the time period between the event and trial,
(3) the interest of the corroborating witness in the subject matter in suit,
(4) contradiction or impeachment of the witness' testimony,
(5) the extent and details of the corroborating testimony,
(6) the witness' familiarity with the subject matter of the patented invention and the prior use,
(7) probability that a prior use could occur considering the state of the art at the time,
(8) impact of the invention on the industry, and the commercial value of its practice.
Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1371 (Fed. Cir. 1998).

The CAFC was not convinced, as documented evidence, including a work contract, corroborated Gresser's testimony.

This documentary evidence, created around the time the machine was developed, provides strong support for Gresser's testimony. Cf. Sandt Tech., Ltd. v. Resco Metal & Plastics Corp., 264 F.3d 1344, 1350-51 (Fed. Cir. 2001) ("Documentary or physical evidence that is made contemporaneously with the inventive process provides the most reliable proof that the inventor's testimony has been corroborated.").

Inequitable Conduct

To prove inequitable conduct, an accused infringer must present clear and convincing 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) (quoting Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363 (Fed. Cir. 2007)). If a court concludes that a threshold level of both materiality and intent to deceive has been proven by clear and convincing evidence, the court must then "balance the equities to determine whether the applicant's conduct before the [PTO] was egregious enough to warrant holding the entire patent unenforceable." Id. (citation omitted). We review the underlying factual findings of materiality and intent to deceive for clear error, and we review the ultimate determination of inequitable conduct for abuse of discretion. Id. (citation omitted).

Not disclosing the Gresser machine killed '351 at district court. While highly relevant, the CAFC reversed, as the showing of intent to deceive was weak.

Counsel provided an explanation for not disclosing the machine, and there is nothing to suggest that the decision to withhold was an attempt to conceal. At best, the failure to disclose what was believed to be cumulative information was a mistake or exercise of poor judgment that does not support an inference of intent to deceive. See Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1354 (Fed. Cir. 2008) ("Mistake or negligence, even gross negligence, does not support a ruling of inequitable conduct.").

In '938 prosecution, a declaration for a relevant measurements chart was withheld. Lazare argued that the chart/declaration was cumulative.

This court again agrees with Lazare. Here, too, even if we assume that the declaration is highly material, the district court committed clear error when it found that Lazare intended to deceive the PTO by withholding the declaration. The court rejected the attorneys' explanation for withholding the declaration because the court believed that a reference that discloses a range that overlaps or includes, but is not coextensive with, a claimed range cannot teach the claimed range. This is simply incorrect; a prior art reference that discloses a range that encompasses or overlaps a claimed range generally is sufficient to establish a prima facie case of invalidity. See, e.g., In re Peterson, 315 F.3d 1325, 1330 (Fed. Cir. 2003) ("We therefore conclude that a prior art reference that discloses a range encompassing a somewhat narrower claimed range is sufficient to establish a prima facie case of obviousness."); Ormco Corp. v. Align Tech., Inc., 463 F.3d 1299, 1311 (Fed. Cir. 2006) ("Where a claimed range overlaps with a range disclosed in the prior art, there is a presumption of obviousness."). Although we give a court's credibility determinations considerable deference, a court cannot, as was done here, "cloak the application of an erroneous legal standard in the guise of a credibility determination, and thereby shield it from appellate review." Andreu ex rel. v. Sec'y of Health & Human Servs., 569 F.3d 1367, 1379 (Fed. Cir. 2009). When the attorneys' explanation for withholding the declaration is considered, it is clear that intent to deceive is not the single most reasonable inference that can be drawn from the evidence. Therefore, the court clearly erred when it determined that Lazare committed inequitable conduct with respect to the '938 Patent. See Scanner Techs. Corp. v. ICOS Vision Sys. Corp. N.V., 528 F.3d 1365, 1376 (Fed. Cir. 2008) ("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.").

Exceptional Case and Attorney's Fees

"Determining whether a case is exceptional and thus whether attorney fees should be granted under 35 U.S.C. § 285 is a two-step process." Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1370 (Fed. Cir. 1999). "The district court must first determine whether the case is exceptional, a factual determination that we review for clear error; if the case is found to be exceptional, the district court must then determine whether attorney fees should be awarded, a determination that we review for abuse of discretion." Id. Because the district court's exceptional case finding is based on its clearly erroneous inequitable conduct ruling and its award of attorneys' fees in turn rests on the exceptional case finding, we vacate both the exceptional case finding and the attorneys' fee award. See Research Corp. Techs. v. Microsoft Corp., 536 F.3d 1247, 1254 (Fed. Cir. 2008).

Conclusion

For the foregoing reasons, this court vacates the grant of summary judgment of no literal infringement and the verdict of non-infringement under the doctrine of equivalents of claims 1 and 7 of '351 Patent and remands for further proceedings. We affirm the verdict of invalidity and non-infringement of claim 18 of the '351 Patent. We also affirm the verdicts of non-infringement of claims 1, 24, 62, and 70 of the '938 patent. Finally, this court vacates the inequitable conduct findings, the exceptional case finding, and the award of attorneys' fees.

Affirmed-in-part, vacated-in-part, and remanded.