Federal Circuit Finds Inequitable Conduct in False Rule 131 Declaration

17 October 2013 PharmaPatents Blog

In Intellect Wireless, Inc. v. HTC Corp., the Federal Circuit affirmed the district court decision holding Intellect’s patents unenforceable due to inequitable conduct. This is a rare case where the applicant was found to have submitted a false declaration, and did not cure that misrepresentation. 

The Patents at Issue

The patents at issue were Intellect’s U.S. Patent 7,266,186 and U.S. Patent 7,310,416, directed to technology for the wireless transmission of caller identification (caller ID) information.

The Declaration at Issue

The declaration at issue was a Rule 131 Declaration submitted to antedate a reference. As summarized by the Federal Circuit, the inventor attested that “the claimed invention was actually reduced to practice and was demonstrated at a meeting . . . in July of 1993.” However, the claimed subject matter never was actually reduced to practice. Thus, the declaration was false.

Intellect argued that it had cured the misrepresentation by submitting another declaration that relied on constructive reduction to practice rather than actual reduction to practice. The district court and Federal Circuit disagreed.

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Moore, and joined by Judge Prost and Judge O’Malley.

The Federal Circuit summarized the law of inequitable conduct as follows:

“To prove inequitable conduct, the challenger must show by clear and convincing evidence that the patent applicant
(1) misrepresented or omitted information material to patentability, and
(2) did so with specific intent to mislead or deceive” the U.S. Patent and Trade­mark Office (PTO). ….
“When the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material.”

With regard to the correction of false statements, the court noted:

When an applicant files a false declaration, we require that the applicant “expressly advise the PTO of [the misrepresentation’s] existence, stating specifically where­in it resides.” …. Further, “if the misrep­resentation is of one or more facts, the PTO [must] be advised what the actual facts are.” …. Finally, the applicant must “take the necessary action . . . openly. It does not suffice that one knowing of misrepresentations in an application or in its prosecution merely supplies the examiner with accurate facts without calling his attention to the untrue or misleading assertions sought to be over­come ….

Turning to the record before it, the Federal Circuit rejected Intellect’s arguments that the revised declaration cured the misrepresentation:

At best, the revised declaration obfuscated the truth. …. [T]he revised declaration did not cure the mis­conduct because it never expressly negated the false references to actual reduction to practice in the original declaration.

Further, the revised declaration included statements that could be read to refer to actual reduction to practice, and “nowhere expressly stated the actual facts, which are that ‘neither [the inventor] nor Intellect Wireless actually reduced [the inventions] to practice.’”

Nowhere did the declaration openly advise the PTO of [the inventor's misrepresentations], as our precedent clearly requires.

The Federal Circuit also found ample evidence of intent to deceive. First, the submission of a declaration with “fabricated examples of actual reduction to practice in order to overcome a prior art reference raises a strong inference of intent to deceive.” Further, the court found in the record that the inventor had “engaged in a pattern of deceit, which makes the inference stronger.” For example, in related patents, he “told the PTO that he built a device that could receive images via wireless transmission,” but the subject device “was, at best, a ‘simulation’—it contained only preloaded images and was not capable of wireless communication.” The court emphasized, however, that the uncorrected misrepresentation in the declaration was sufficient:

[T]he district court’s finding of intent could be affirmed based on the content of the two declarations. The completely false statements in a first declaration were followed by a replacement declaration that, rather than expressly admitting the earlier falsity, dances around the truth.

The court therefore affirmed the unenforceability holding.

Coming Clean

This decision lays out specific steps that must be taken if a deliberate or material misrepresentation is discovered during prosecution. An applicant cannot simply switch directions and attempt to distance its position from the misrepresentation, but must  admit and identify the misrepresentations on the open, public record.

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