Powell v. Home Depot – False Petition Not “Egregious Misconduct”

In Therasense, the Fed. Cir. held that inequitable conduct can be based on non-prior art misconduct, which was characterized as an exception to the “but-for” rule of materiality set out in the decision. This seemed to me to be a warning to applicants that “[t]here is no room to argue that submission of false affidavits is not material” (Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556 (Fed. Cir. 1983). However, in Powell v. Home Depot, App. No. 2010-1409, -1416 (Fed. Cir. Nov. 14, 2011), the court found that a statement in a petition to make special, that was known by applicant to be false before the petition was granted, was not conduct egregious enough to find that applicant had committed inequitable conduct. In other words, some petitions/declarations are more weighty when it comes to tipping the equities in favor of the defendant.

Powell’s attorney filed a petition to make special under MPEP 708.02(I), “prospective manufacture”, averring that he was obligated to manufacture infringing saw guards for Home Depot. However, during the pendency of the petition, Home Depot switched suppliers. Powell did not update the petition. (The district court noted that he could have truthfully alleged actual infringement under 708.02(II)).

Apparently following Rohm & Haas, the district court found materiality and intent to deceive, but found no inequitable conduct upon balancing the equities. The Fed. Cir. noted that the IC standards had changed post-Therasense, and went on to find no inequitable conduct based on the lack of “but-for” materiality – a prior art standard – and insufficiently egregious misconduct on the part of Powell’s attorney. The Fed. Cir. seemed to almost be splitting the hair that the petition was true when it was filed and so the conduct “did not involve the filing of an unmistakably false affidavit” that would rise to the level of “affirmative egregious misconduct.” [Emphasis supplied]. So this decision still leaves patent attorneys to guess how egregious misconduct has to be to trigger the “atomic bomb of patent law.”

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2 Responses to “Powell v. Home Depot – False Petition Not “Egregious Misconduct””

  1. Lynn Tyler says:

    Interesting. In Scanner Technologies Corp. v. Icos Vision Systems Corp. N.V., 528 F.3d 1365, 1375 (Fed. Cir. 2008), there were false statements in a petition to make special and the Federal Circuit wrote: “We reaffirm that a false statement that succeeds in expediting the application is, as a matter of law, material for purposes of assessing the issue of inequitable conduct.” I’ll have to read the case to see all the facts to decide if I think the decision was right or not given that apparently the statement was true when made.

  2. Lynn Tyler says:

    Although it is only one panel and thus too early to tell, it would seem patent owners should welcome this case because it shows TheraSense has some teeth. In contrast to the prior law as reflected in Scanner Tech., and quoted above, the statements in the Petition to Make Special in this case were essentially irrelevant. They may have affected how soon the PTO granted the patent, but not whether it did so and thus were not “but-for” material under TheraSense. Because they were supposedly true when made, there was no “affirmative egregious misconduct” in failing to correct them once they became false.

    Actually, given the facts recited in the Federal Circuit’s opinion, I wonder if Home Depot would have been better off to argue that they were not even true when made. As I understand it, the statements were that Powell was obligated to supply the patented invention at a time there was no contract with Home Depot. The statements appear to have been based on an expectation arising out of an existing relationship, not a contract.