Updated: January 20, 2022
Bottom Line: Inequitable conduct is an often raised defense but rarely successful. As such, the courts have been shifting the burden of providing inequitable conduct so that the courts can get to the merits of the case more often. The failure to disclose material information to the patent office (preferably through an information disclosure statement, also known as, an IDS) that may lead the examiner to reject a patent application during patent prosecution is one of the ways that inequitable conduct arises. the following is a discussion of the changing burden and how it plays out during litigation.
In 2011, the Federal Circuit significantly raised the bar to successfully win on a defense of inequitable conduct. Therasense (Fed. Cir. 2011). One of the reasons for raising the bar was that such claims were frequently alleged but rarely successful, causing the Court to expend a disproportionate amount of time to sort out the few successful claims that arose. Alleging inequitable conduct was also a way to paint the patent owner as a bad actor and thus distract the jury’s attention from the merits of the patent infringement case. In American Calcar, Inc. v. American Honda Co (Fed. Cir. 2014), Honda raised the defense of inequitable conduct against Calcar’s allegation of patent infringement. Despite the higher standard to prove inequitable conduct, the District Court affirmed Calcar’s patent was obtained through inequitable conduct and held that the patent was unenforceable. The Federal Circuit affirmed.
Calcar creates “Quick Tips” booklets for automobiles. To create these booklets, Calcar test drives automobiles, takes photographs of the car’s dashboards, and copies its manuals. Back in 1996, Calcar test drove an Acura RL with a navigation system. In these earlier models, automotive navigation systems were only used to provide navigational information (destinations, addresses, and directions). Calcar in preparing its booklets for the 1996 Acura RL conceived of an invention wherein the multimedia system of the car would access vehicle information and control vehicle functions over and above basic navigational information.
In prosecuting Calcar’s patent application, Calcar disclosed the existence of the 1996 Acura RL navigation system but did not disclose the operational details of the navigational system even though such information was in Calcar’s possession.
Under Therasense, the defendant must prove inequitable conduct by clear and convincing evidence showing that the patent applicant “(1) misrepresented or omitted information material to patentability, and (2) did so with the specific intent to mislead or deceive the PTO.” The materiality required to establish inequitable conduct is but-for materiality. Undisclosed prior art is but-for material if the PTO would not have allowed a claim had it been aware of it.
In deciding the materiality prong under Therasense, the Federal Circuit reviewed the District Court’s findings on the differences between the prior art and the claimed invention. The District Court found that the only difference was the nature of the information contained in the systems: navigational details (destination, addresses, directions) for the prior art versus vehicle information for the patent at issue. The District Court found the claimed invention to be obvious because the prior art and the patented invention perform the same function, i.e., delivery of information, in the same way, i.e., through an interactive display screen, to achieve the same result, namely providing information to the vehicle user.
This language is identical to the function-way-result test in analyzing the Doctrine of Equivalents for patent infringement which is not used by examiners in analyzing obviousness for patentability. Nonetheless, the Federal Circuit affirmed the logic of the District Court in using this type of analysis to prove that the undisclosed information was but-for material. The Federal Circuit noted that the District Court was merely using the function-way-result language to show that the differences between the prior art and the present invention were obvious. Hence, had Calcar disclosed the operational details of the 96RL, the patent office would not have allowed the patent. As such, the failure of Calcar to disclose the operational details of the 96RL navigation system was but-for material. Affirmation of the function-way-result language thus illustrates another way to show but-for materiality: but-for the patent owner’s failure to disclose some piece of information it had in its possession, the patent office would not have issued the patent.
On the issue of intent to deceive, the court affirmed the District Court’s decision that Calcar had an intent to deceive the patent office and found that it was the most reasonable inference from the evidence. In particular, the District Court found that the inventor possessed material information based on his own testimony about his personal knowledge of the prior art system, test drives of the automobile with the prior art systems, and use of the figures from the manuals of such automobiles in preparing the patent application. Based on these findings, the District Court concluded that the single most reasonable inference was that Calcar deliberately decided to withhold the information from the PTO. The inventor also acknowledged the importance of undisclosed information. As such, the Federal Circuit affirmed the District Court’s finding of intent to deceive, and also inequitable conduct.
As I read through this case, Calcar’s failure to disclose appears to be partly related to the difficulty of disclosing information that one observes in a competitor’s product when there is incomplete documentation produced by the manufacturer. An inventor may base his or her invention on an existing product. However, there may be incomplete documentation on one or more aspects of the existing product. Manufacturers do not document all aspects of the product. They may provide how-to manuals or installation manuals but the rest may be undocumented.
How does the inventor disclose information about the existing product without implicating, suggesting or making his or her own invention obvious? Typically, the inventor may provide a written description of what he or she observed in the competitor’s product. If the inventor discloses more than what he or she observed, then all of the inventor’s statements are considered as Applicant’s Admitted Prior Art which will be used against the inventor to show that the invention is obvious, and thus unpatentable. If the inventor discloses less than what he or she observed, then the inventor’s failure to disclose could be characterized as inequitable conduct, as in the instant case. There is no easy solution except to do your best at disclosing only what you know and nothing more, and if possible to obtain a more complete disclosure produced by the manufacturer.
I invite you to contact me with your patent questions at (949) 433-0900. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego, and surrounding cities.