Federal Circuit Upholds Inequitable Conduct Post Therasense For Withheld Information

02 October 2014 PharmaPatents Blog

In American Calcar, Inc. v. American Honda Motor Co., the Federal Circuit upheld the district court’s finding that three Calcar patents are unenforceable due to inequitable conduct. Both courts reached this decision of inequitable conduct post Therasense despite the fact that the validity of the patents over the information at issue had been upheld, and despite the lack of direct evidence of an intent to deceive. Judge Newman’s dissent raises additional questions regarding the basis of the decision.

The Patents At Issue

The patents at issue were Calcar’s U.S. Patents 6,330,497, 6,438,465, and 6,542,795, directed to “aspects of a multimedia system for use in a car to access vehicle information and control vehicle functions.” As noted in the Federal Circuit decision, the patents ”share a common specification and are derived from a priority application filed on January 28, 1997, which since issued as U.S. Patent No. 6,009,355.”

The Federal Circuit cited claim 1 of the ’465 patent as representative:

1. A system for use in a vehicle comprising:
a memory for storing a plurality of displays having predetermined contents, the plurality of displays being associated with a plurality of aspects of the vehicle;
an interface for entering a query to conduct a search concerning an aspect of the vehicle;
an input device for selecting a result of the search;
a processor responsive to the selected result for identifying at least one of the plurality of displays which is associated with the aspect of the vehicle; and
a display element for showing thereon the at least one display.

According to the Federal Circuit decision, the main novel feature of the invention lies in the ability to query the system for information “concerning an aspect of the vehicle” (e.g., climate control, radio, engine) where prior art systems were focused on navigational queries.

The Alleged Inequitable Conduct

The alleged inequitable conduct was based on the actions of Mr. Obradovich, a named inventor and cofounder of Calcar. According to the Federal Circuit decision, “Mr. Obradovich was the one primarily responsible for preparing the patent application.” Honda alleged that that he deliberately withheld material information from the USPTO when he ”disclosed the existence of the 1996 Acura RL (’96RL’) navigation system,” but “intentionally did not disclose additional information [about the system] that would have led the PTO to deny the patent as anticipated or rendered obvious by the system.”

As summarized by the Federal Circuit, the district court found that “the only difference [between the 96RL system and the claimed system] was ‘the nature of the information contained in the systems’: navigational details (destinations, addresses, directions) in the 96RL system and information about the vehicle itself in the ’465 and ’795 patents.”

The Federal Circuit Decision

The Federal Circuit decision was authored by Chief Judge Prost and joined by Judge Wallach. Judge Newman wrote a dissenting opinion.

Judge Prost began the analysis with this summary of the inequitable conduct defense under Therasense:

The defendant proves inequitable conduct “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 PTO.”

With regard to materiality, Judge Prost emphasized that the frame of reference is the USPTO standard for patentability, e.g., whether the information would have led to a rejection under “the preponderance of the evidence standard” when “giv[ing] claims their broadest reasonable construction.” As such,

[E]ven if a district court does not invalidate a claim based on a deliberately withheld reference, the reference may be material if it would have blocked patent issuance under the PTO’s different evidentiary standards. …. The jury’s verdict finding the patents at issue non-obvious thus does not weigh on the determination of materiality for inequitable conduct ….

Turning to the merits, Judge Prost noted the Federal Circuit’s earlier, pre-Therasense determination “that the prior art ’96RL search function is substantially similar to the system described in the ’465 and ’795 patents,’ and found no error in the district court’s determination that “the PTO would have not allowed the patents [over a full disclosure of the 96RL system] as ‘it would have been obvious to a person of ordinary skill in the art to include different information in the 96RL navigation system.’”

With regard to intent, Judge Prost framed the issue before the district court as “whether the single reasonable inference of the factual record would be that any of the inventors possessed undisclosed information about the 96RL system, knew it was material, and deliberately decided to withhold that information from the PTO.” Judge Prost found no clear error in the district court’s findings that Mr. Obradovich possessed material information and “knew the information was material,”  and also upheld the inference of deliberate intent to withhold the information. With regard to the latter finding, Judge Prost noted subsidiary findings regarding lack of credibility, inconsistent assertions, and lack of candor, and dismissed as irrelevant the advisory jury verdict of no inequitable conduct.

[I]nequitable conduct is “inequitable in nature,” and thus the “district court was in no way bound by the jury’s finding of no inequitable conduct in this case.”

Thus, the Federal Circuit upheld the factual findings of materiality and intent, and found no abuse of discretion in the holding of unenforceability due to inequitable conduct.

Judge Newman’s Dissent

Judge Newman wrote a dissenting opinion, disagreeing with the majority on the issues of materiality, intent, and inequitable conduct.

Judge Newman finds the decision on materiality contradicted by the USPTO decision to uphold the ’497 patent when it was reexamined in view of the withheld information.

If the USPTO itself upheld the claims in view of the information at issue, how could it be but-for material?

With regard to intent, Judge Newman takes the majority to task for not giving weight to the fact that the 96RL system was discussed in the patents, that the USPTO later upheld the ’497 patent over the omitted information, and that the jury had heard live testimony from Mr. Obradovich and found no inequitable conduct.  She also expresses dismay over the majority’s willingness to infer an intent to deceive based on alleged “lack of credibility,” where the credibility at issue appeared to relate to Mr. Obradovich’s ability to recall details from decades ago.

The briefs describe two areas in which credibility was attacked. First, there was uncertainty of recollection about who in the Calcar study team took the photographs of Acura’s navigation system in 1996, a dozen years before trial. The district court found that Mr. Obradovich knew of the photos, although his recollection was vague. Second, his recollection was vague regarding the extent to which he “played with” Acura’s navigation system during the test drive in 1996. The Honda briefs state that in 2005 Mr. Obradovich stated by deposition that he “played with” the Acura 96RL navigation system in 1996; at a 2007 deposition he did not remember whether he “operated” the Acura system in 1996; and at trial in 2008 he said that he thought he “played with” it in 1996. Whether or not this is an inconsistency of recollection, it is not clear and convincing evidence of intent to deceive the PTO.

How accurately could you describe something you did a 10 years ago?

Reviving Inequitable Conduct Defenses?

I think this is the first Federal Circuit decision upholding a finding of inequitable conduct post Therasense based on a failure to disclose prior art. This decision should be a wake-up call for any practitioners or stakeholders who have become complacent about the duty of disclosure, because the prior art at issue was at least brought to the USPTO’s attention during the original examination process, was fully disclosed during a reexamination proceeding, and was found not to invalidate the claims at trial.

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