Guest Post: A Cautionary Tale Relating to Use of Declarations Under 37 C.F.R. § 1.132

[Guest Post by Tracey Harrach, a registered patent attorney at Maschoff Gilmore & Israelsen. Tracey's practice includes all aspects of trademark and patent prosecution. She practices in a variety of technology areas, including: chemical formulations, processes, and syntheses; semiconductor processing and fabrication; biotechnology; and material science.]

Takeaway:  In a post-Therasense decision, a district court granted summary judgment on inequitable conduct stemming from declarations submitted in a reexamination proceeding (Reexam Control No. 90/010,874). Therefore, before submitting a declaration to the PTO, ensure: (1) any past or present financial relationships between the declarant and the patentee are fully disclosed, (2) declarations are provided only by individuals having skill in the relevant art, and (3) representations relating to distinctions over prior art are based on the personal knowledge of the declarant. (Caron et al. v. QuicKutz, Inc., 2:09-cv-02600-NVW (D.Ariz. Nov. 13, 2012.)

Details:

Declarations can provide an expeditious way to advance prosecution; however, declarations may also be fertile ground for charges of inequitable conduct.  While Therasense has significantly raised the bar for a party asserting inequitable conduct based on the patentee’s failure to submit a prior art reference, Therasense recognizes an exception to the “but-for” standard of materiality in connection with the filing of a “false affidavit.”  Therasense, Inc. v. Becton, Dickinson & Company, 649 F.3d 1276, 1292-93 (Fed. Cir. 2011).

A scathing opinion entered by the District Court in Arizona provides a reminder of the dangers associated with the use of declarations in practice before the PTO.  In Caron et al. v. QuicKutz, Inc., Case No. 2:09-cv-02600-NVW, the Court granted summary judgment of unenforceability due to inequitable conduct relating to U.S. Patent No. 7,469,634.  The Court identified three separate acts of inequitable conduct involving declarations submitted to the PTO by the plaintiffs. 

First, the Court found that plaintiffs committed inequitable conduct by submitting three declarations under 37 C.F.R. § 1.132 by individuals who had undisclosed prior financial relationships with the plaintiffs.  Order, at page 15.  See Declarations under 37 C.F.R. § 1.132 submitted on July 5, 2011 in Reexam. Control No. 90/010,874 (available on Public PAIR).  These declarations were submitted by the plaintiffs in order to establish that the plaintiffs’ products were unique in the marketplace.  Specifically, the plaintiffs argued to the PTO that “each declarant identifies that these die features and benefits are novel in their opinion and have never been commercialized in the scrapbooking industry before Spellbinders introduced this invention.”  See Office Action Response dated July 5, 2011, submitted in Reexam. 90/010,874.

The Court cited Ferring B.V. v. Barr Laboratories, Inc. for the proposition that “the inventor must disclose the known relationships and affiliations of the declarants so that those interests can be considered in weighing the declarations.”  437 F.3d 1181, 1187 (Fed. Cir. 2006).  The Court rejected the plaintiffs’ arguments that the prior relationships were minimal, and accordingly, did not need to be disclosed.  Specifically, the Court found:

Although Plaintiffs contend that the compensation each received was minimal, the evidence shows a basis for possible bias by each declarant. Clear and convincing evidence shows each declarant had motivation to provide an opinion favorable to Plaintiffs’ patent application. The PTO was deprived of evidence that it needed to determine the weight it should give to the declarations….
Order, at page 15.

This issue can be avoided by directly communicating to a declarant the importance of full disclosure of prior and current relationships and ensuring that those relationships are clearly recited in the declaration.  The PTO does not prohibit submission of declarations by declarants with relationships with the patentee.  On the contrary, the Federal Circuit explained in Ferring:

In coming to this conclusion, we fully recognize that inventors often consult their colleagues or other persons skilled in the art whom they have met during the course of their professional life. Accordingly, when an inventor is asked to provide supportive declarations to the PTO, it may be completely natural for the inventor to recommend, and even contact, his own colleagues or people who are, or who have been, affiliated with his employer and to submit declarations from such people. Nothing in this opinion should be read as discouraging such practice. Rather, at least where the objectivity of the declarant is an issue in the prosecution, the inventor must disclose the known relationships and affiliations of the declarants so that those interests can be considered in weighing the declarations.
437 F.3d at 1194-95.

Second, the Court found that the plaintiffs committed inequitable conduct by submitting declarations from two individuals who based their declarations solely on experience with the plaintiffs’ product as end users.  Order, at pages 14-15.  The Court found “[h]ad the PTO known that [the declarants] did not have professional experience in the relevant industry, it would have given little or no weight to their opinions, particularly regarding the novelty of Spellbinders’ dies.”  Id., at page 15.  In reaching this conclusion, the Court noted the plaintiffs’ representation that the declarations were provided by individuals with “experience in the arts and crafts and scrapbooking industry that are familiar in some way with the [plaintiffs’ products].”  Id., at page 14.  The Court found that the two individuals “[b]oth provided opinions using technical language that implied professional experience in the relevant industry rather than merely experience as a customer….”  Id. 

A practical way to avoid this issue is to have a declarant prepare his or her own declaration and to include in the declaration a description of the declarant’s relevant experience. This approach ensures that the language used by the declarant is commensurate with the declarant’s experience.  Further, by relying on the declarant to describe his or her qualifications, the PTO will have relevant information available to gauge the declarant’s competence to reach the conclusions recited in the declaration.

Third, the Court found that the submission of a declaration by the inventor and one of the plaintiffs, Jeff Caron, constituted “an affirmative act of egregious misconduct” due to unfounded and unsupported characterizations in the declaration of the prior art reference upon which the PTO relied.  Id., at page 21.  The declaration in question was filed by the Plaintiffs on October 24, 2011, in Reexam. 90/010,874, and purported to describe the teachings of International Publication No. WO 03/016035. The Court found that the declarant lacked personal knowledge relating to the assertions made in his affidavit.

The Court’s finding that the declaration constituted “an affirmative act of egregious misconduct” was based upon a finding that the declaration “misrepresented that it conveyed information that the declarant knew to be true and was submitted to the PTO with the misrepresentation that the declarant had firsthand knowledge about the subject of the declaration.”  Id.  The Court also found that Mr. Caron’s deposition testimony was inconsistent with his declaration.  According to the Court, “his deposition testimony was more than evasive; it was false or misleading. If his deposition testimony was true and responsive, then his 2011 representations to the PTO are, at the least, misleading.”  Id., at page 20.

A similar scenario could plausibly occur when an attorney, and not the declarant, formulates the content of the declaration and presents the finished declaration to a declarant for signature.  In such a scenario, the declarant may not take the time to fully understand an argument prepared by the attorney, believing that the attorney’s understanding is sufficient.  As noted by the Court, however, declarations must be based on declarant’s personal knowledge.  In other words, it may not be sufficient to merely have sound technical arguments.  Rather, the arguments must be sound and the arguments must be based on personal knowledge of the declarant.  Again, this issue may be avoided by having a declarant prepare his or her own declaration. 

Larson v. Aluminart on remand: Yes to deceptive intent but No to inequitable conduct

Takeaway: We all know that inequitable conduct requires materiality and intent. But I think sometimes we forget that in the end, it comes down to balancing the equities – materiality vs. intent – so finding a little of each isn't always enough. The recent district court opinion in the remanded Larson v. Aluminart case is a good example of this. The district court "found that Larson intentionally and materially deceived the Reexam Panel," and yet went on to conclude there was no inequitable conduct. "Balancing the diminished materiality of the omitted information and Larson's intent, the Court finds that Larson's conduct was not so egregious as to warrant holding its patent unenforceable." Larson Mfg. Co. of S.D., Inc. v. Aluminart Products Ltd., 2010 WL 2990648 (D.S.D. Jul 29, 2010) (NO. CIV 03-4244).

Details: The Federal Circuit ruled on the inequitable issued earlier this year in Larson Mfg. Co. of South Dakota, Inc. v. Aluminart Products Ltd., 559 F.3d 1317, 1341 (Fed. Cir. 2009). At issue was a failure to disclose five items: two office actions from a co-pending continuation application as well as three prior art references.

The lower court found materiality and intent with respect to each of the five items, and found inequitable conduct after balancing the equities. On appeal, the Federal Circuit found partial error in the lower court's findings: the three undisclosed items of prior art were cumulative, not material, but the office actions were material. The Federal Circuit then remanded back to the lower court with instructions to determine whether the patentee withheld the two office actions with deceptive intent. The lower court was also instructed to take into account that the German patent DE `478 was cumulative when considering the materiality of the Fourth office action.

On remand (Larson Mfg. Co. of S.D., Inc. v. Aluminart Products Ltd., 2010 WL 2990648 (D.S.D. Jul 29, 2010)), the district court found materiality once again:

The Court believes that the Fourth Office Action is less material after the Federal Circuit's holding that the German patent DE `478 is cumulative of the Kissinger patent and thus not material. The Fourth Office Action still is material, however, because it was an adverse decision based on a different explanation and interpretation of the Kemp patent and other prior art, and thus it was "clearly information that an examiner could consider important.

The district court also found deceptive intent once again:

The Court still believes intent to deceive the Patent Office is inferred by Larson's failure to disclose Examiner Johnson's adverse September 21, 2005 and June 23, 2006 Office Actions in the `039 Continuation. ... The inference of deceptive intent is the most reasonable inference able to be drawn from the evidence ...
After all of the briefing that has been done in this case, the Court is still left without an explanation for a knowing failure to disclose, and this supports an inference that Larson intended to mislead the Reexam Panel.

However, the patentee's conduct was not egregious when the equities were balanced:

   "Under the balancing test, `[t]he more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct, and vice versa.'" Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1364 (Fed.Cir. 2007) (quoting Critikon, 120 F.3d at 1256).
   Having found that Larson intentionally and materially deceived the Reexam Panel, the Court proceeds to balance the equities. After careful consideration, the Court still finds the Third Office Action to be highly material but the materiality of the Fourth Office Action has been diminished by the appellate determination that the DE `478 patent information is not material. Balancing the diminished materiality of the omitted information and Larson's intent, the Court finds that Larson's conduct was not so egregious as to warrant holding its patent unenforceable.

My two cents: "The Court is still left without an explanation for a knowing failure to disclose." Wow.  Maybe I'm reading too much into this single sentence. But I read that as not simply no credible explanation, but no explanation whatsoever, not even "I don't remember." I'd say in this situation, deceptive intent really is the "single most reasonable inference able to be drawn from the evidence."

But deceptive intent isn't enough. The patentee came out okay because the two office actions were of "diminished materiality."

I wonder how often this fact pattern shows up: Yes to deceptive intent; No to Inequitable Conduct.

Accused infringer attempts to find inequitable conduct in date within invention disclosure

Takeaway: In an attempt to render a patent unenforceable for inequitable conduct, an accused infringer looked to the Invention Disclosure Form for another patent owned by the patentee. The infringer argued that the patentee should have informed the PTO about the other patent because the Invention Disclosure Form showed that the other invention was publicly disclosed before the patent-in-suit, thus making it prior art. The district court found no inequitable conduct because the Invention Disclosure Form clearly described the disclosure date as an expected date of disclosure, and the infringer presented no evidence that an actual disclosure occurred before the filing of the patent-in-suit. Power Integrations, Inc. v. Fairchild Semiconductor Inter., 578 F.Supp.2d 698 (D.Del. 2008).

Details:
Power Integrations, Inc. v. Fairchild Semiconductor Inter., 578 F.Supp.2d 698 (D.Del. 2008)

Power Integrations sued Fairchild for patent infringement. A jury found several claims valid and willfully infringed. A bench trial was held on the issue of inequitable conduct for several of the patents-in-suit. 

With respect to one of the patents-in-suit, the '876 patent, Fairchild argued that Power Integrations failed to disclose to the PTO another Power Integrations patent by the same inventors, the '851 patent. Fairchild asserted that the '851 invention was publicly disclosed before the filing date of the '876 patent-in-suit, thus making it prior art under § 102(a) "known by others"

As evidence of a public disclosure date for the '851 invention, Fairchild pointed to a March 1998 date listed in the patentee's Invention Disclosure Form. Power Integrations countered this March 1998 date was merely an expected public disclosure date, and that public disclosure of the '851 invention did not actually occur until February 1999, after the application for the '876 patent-in-suit was filed.

The court found that March 1998 date relied on by Fairchild was clearly marked on the Invention Disclosure Form as "Expected Date of First Public Disclosure (Ex. Article, Customer Presentation, etc.)". The inventor signing the form testified that the date in question "is an expected date that the inventor or inventors enter as an earliest possible date that would be disclosed, just to give an indication to the attorney on the urgency of the patent ... It doesn't necessarily mean that it was disclosed at that date." The court found no evidence of an actual public disclosure of the '851 invention before the filing date of the '876 patent-in-suit, and thus granted the defendant's motion for Judgment of No Equitable Conduct for the '876 patent-in-suit.

The infringer raised another argument for why the '851 invention should have been considered prior art. The infringer argued that the the Invention Disclosure Form of the '876 patent-in-suit included Fig. 1 of the '851 patent in, and that the Form also described that figure as "prior art." This same figure was included in the patent application for the '876 patent-in-suit -- but was not labeled as "prior art." This inclusion, said the infringer, was an attempt to deceive the PTO, rather than acknowledging the '851 as prior art to the '876 patent-in-suit. The opinion contained no discussion of this issue.


My two cents: The case isn't interesting for it's outcome: the court reached the right result. But as with many other cases, I find the arguments raised by the parties to be of interest. Here, the infringer tried to make something of the dates on the Invention Disclosure Form. It was critical here that the Form clearly indicated Expected Date. I should think that would be enough, such that the inventor's testimony as to the meaning of "Expected Date" was just icing on the cake. But I wonder if the outcome could have been different if the label used on the form said something other than "Expected".

And what about the figure from the '851 patent showing up with the description "prior art" in the the Invention Disclosure Form of the '876 patent-in-suit? The court didn't comment on this. I say this should not be considered an admission of prior art, because "prior art" is a legal term and inventors throw it around without appreciating the significance of the term.

On the other hand, what if an inhouse patent attorney signed the Form too? The inhouse attorney knows the term has significance. So does that extra fact turn it into an admission?

Reference may be material if even not prior art

Takeaway: A reminder from a district court: even when the filing date of a reference is after the effective filing date of the application being prosecuted, that reference may nonetheless be material and thus implicated in the Rule 56 duty of disclosure.

This issue came up in Leviton Mfg Co., Inc. v. Shangai Mehaio Elec., 613 F.Supp.2d 670 (D. Md. 2009), a typical patent infringement suit with an inequitable conduct counterclaim. The trial judge did find inequitable conduct, and given the judge's findings of fact, I'm not surprised. The prosecuting attorney failed to disclose another patent application  — one with different inventors yet nearly identical claims. The trial court found that such a scenario raised questions about (1) the inventorship of the '766 patent; (2) whether the specification of the '766 patent supported its claims; and (3) the possibility of double patenting.

All this sounds like sketchy behavior which might indeed merit a charge of inequitable conduct. But more important was the point made by the court when the patentee tried to argue that the other application wasn't material because it wasn't prior art. The court in Leviton pointed out that Federal Circuit case law makes it clear that information may be material under Rule 56 even when it's not prior art, because a prior art rejection isn't the only relevant issue during prosecution. Other issues such as inventorship, double patenting, and enablement must be considered when determining whether or not a particular piece of information triggers the Rule 56 duty of disclosure. 

What if the bad Leviton facts (same claims, different inventors) weren't present? What if the only question on duty to disclose was "could the reference be used as prior art?" A simple analysis might be: "Since the effective filing date of my app predates the effective filing date of the reference, the reference is not prior art, so no need to disclose."

The Leviton court seemed to suggest that this is the wrong analysis. The court noted that the MPEP directs the Examiner to look at the actual filing date of an application-in-prosecution, not its effective filing date:

Plainly, the Germain application is material even though it was filed subsequent to the effective filing date of the '766 Patent. Patent examiners are required to "search all applications based on the actual U.S. filing date of the application rather than on the filing date of any parent U.S. application for which benefit is claimed. Examiners should cite of interest all material prior art having an effective filing date after the filing date of the U.S. parent application but before the actual filing date of the application being examined." Manual of Patent Examination Procedure § 707.05, Examiner Note (emphasis added). The '766 application's effective filing date is August 20, 1999 because it claims priority to its parent application's filing date. The '766 application was actually filed on April 19, 2004, after the Germain application was filed. The Germain application was material prior art because its effective filing date is after the filing date of the '766's parent application but before the '766's actual filing date.
(Leviton, 613 F.Supp.2d 670, 682, emphasis in original.)

I didn't find any other inequitable conduct cases in which the court suggested that the actual filing date of the application-in-prosecution should be used to make the is-prior-art determination. Even so, it may be worth considering this next time you're looking at filing an IDS.