The following is a guest post from Schwegman Lundberg & Woessner’s associate Ricardo Moran.
The issues on appeal were whether Travel Caddy, Inc. had committed inequitable conduct for: (i) not disclosing the existence of the litigation on U.S. Patent No. 6,823,992 (“the ‘992 patent”) during the prosecution of the application that matured into U.S. Patent No. 6,991,104 (“the ‘104 patent”; the ‘104 patent is a CON of the ‘992 patent; the ‘104 patent was filed shortly before the ‘992 patent issued); and paying small entity fees, even though Travel Caddy was not entitled to claim small entity status. (PDFs of both patents are available at the end of this post.)
Non-disclosure of the ‘992 patent litigation
To establish unenforceability based on inequitable conduct in the U.S. Patent and Trademark Office (PTO), it must be shown that (i) information material to patentability was withheld from the PTO, or material misinformation was provided to the PTO, with (ii) the intent to deceive or mislead the patent examiner into granting the patent. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290-92 (Fed. Cir. 2011) (en banc). Withholding of material information and intent to deceive or mislead must be established by clear and convincing evidence. Id. at 1287 (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008)).
The Federal Circuit in Outside the Box held that neither prong of the test for establishing inequitable conduct (i.e., materiality and intent) was established by clear and convincing evidence with regard to Travel Caddy’s withholding of the existence of the ‘992 patent litigation.
With regard to materiality, the District Court ruled that the non-disclosure itself was material to patentability, although there was no suggestion of how Travel Caddy may have benefitted from the non-disclosure. Outside the Box Innovations, LLC v. Travel Caddy, Inc., No. 2009-1171, slip op. at 8 (Fed. Cir. Sept. 21, 2012). (A copy is available at the end of this post.) The Federal Circuit, however, found that the existence of the ‘992 patent litigation was not material to the patentability of the claims in the’104 patent application because there was “no citation of prior art, nor any pleading of invalidity or unpatentability in the ’992 complaint as it existed during pendency of the ’104 patent application.” Id. at 7.
With regard to the intent prong, the Federal Circuit set aside the District Court’s finding of “an inference of deceptive intent” because there was no evidence on which to base such an inference. Id. The Federal Circuit then examined whether there was any clear and convincing evidence in the record supporting a finding that Travel Caddy had demonstrated “knowledge and deliberate action” with the purpose of defrauding the PTO with regard to the non-disclosure of the ‘992 patent litigation. Id. 7-8. The Federal Circuit did not find such evidence. Outside the Box Innovations, slip op. at 8. The Federal Circuit favored Travel Caddy’s argument that, to the extent notification of the existence of the ’992 suit were indeed required during prosecution of the ’104 application, “any omission was due to oversight or error or negligence, not deceptive intent. Negligence, however, even gross negligence, is not sufficient to establish deceptive intent.” Id.
Paying Small Entity Fees
With regard to the issue of materiality the Federal Circuit declined to decide whether false assertions of small entity status were per se material as is the filing of “unmistakably false affidavit[s].” Id. at 12. Instead, the Federal Circuit held that the requirements of Therasense were not met because “there was no clear and convincing evidence of intent to deceive the PTO.” Id. at 13. The Court Held that there was “no evidence that anyone involved in the patent prosecution knew that a patent license had been granted to a large entity [(i.e., Red Rooster)] and deliberately withheld that information in order to pay small entity fees.” Outside the Box Innovations, slip op. at 13. The Court felt that it was not unreasonable for Travel Caddy to “view the Rooster agreement as a distributorship of products made by Travel Caddy, with protection to Rooster to obtain alternative supply if Travel Caddy failed to provide the product.” Id.