United States: Withholding Information Contradicting A Legal Argument Or Misrepresenting Information Supporting That Argument May Rise To Inequitable Conduct

In Ohio Willow Wood Co. v. Alps South, LLC, Nos. 12-1642, 13-1024 (Fed. Cir. Nov. 15, 2013), the Federal Circuit affirmed-in-part and reversed-in-part the district court's SJ decisions.  Specifically, the Court affirmed the district court's grant of SJ (1) that Ohio Willow Wood Company ("OWW") was collaterally estopped from challenging the invalidity of certain asserted claims of U.S. Patent No. 5,830,237 ("the '237 patent"); and (2) that other asserted claims of the '237 patent were invalid for obviousness.  The Court reversed the district court's grant of SJ of no inequitable conduct and remanded the issue for trial.

OWW is the owner of a family of related patents, including the '237 patent, directed to cushioning devices with a gel and fabric liner for covering the residual stumps of amputated limbs.  OWW sued Alps South, LLC ("Alps") for infringement of the '237 patent, but the district court stayed the litigation pending two consecutive ex parte reexamination proceedings at the PTO initiated by Alps. 

During the first reexamination proceeding, OWW overcame Alps's primary reference, a prior art gel liner manufactured by Silipos, Inc. ("Silipos"), by showing that the gel of the Silipos product bled through the fabric liner to the exterior surface and amending its claims to clarify that the gel coating of the invention remained only on the liner interior.  Six days after the reexamination certificate for the amended '237 patent claims issued, Alps initiated a second ex parte reexamination based on another Silipos product, the "Single Socket Gel Liner" ("SSGL").  Alps alleged that the SSGL product was made with a fabric that did not allow any gel to bleed through to the exterior surface.  To support its allegation, Alps provided testimony from Mr. Jean-Paul Comtesse, who had been affiliated with Silipos and involved in the development of both prior art Silipos products.  The examiner ultimately rejected the '237 patent claims as obvious in view of the SSGL product.  OWW appealed to the Board, arguing both in its brief and during oral argument that the examiner's reliance on Comtesse's uncorroborated testimony was legally improper as he was a highly interested party and the sole inventor of the SSGL device.  OWW also expressly denied the existence of any other evidence that would support Comtesse's testimony.  The Board reversed, finding that Comtesse was an interested third party and, thus, his uncorroborated and conclusory testimony was insufficient to sustain the examiner's rejection.  Consequently, a second reexamination certificate for the '237 patent issued.

While the litigation was stayed, OWW sued another entity for infringement of a related patent, U.S. Patent No. 7,291,182 ("the '182 patent").  In that litigation, the district court found the '182 patent claims invalid for obviousness on SJ, a decision affirmed on appeal.  Subsequently, the stay in the '237 patent litigation was lifted, and the parties filed motions for SJ.  The district court granted SJ to Alps on issues of invalidity, finding the asserted claims of the '237 patent invalid either due to the collateral estoppel effect of the '182 patent litigation or for obviousness.  The district court also granted OWW's motion for SJ of no inequitable conduct.  Both parties appealed.

"If OWW had simply withheld a single piece of information or made a single misrepresentation, this would be a different case.  However, OWW withheld various pieces of material information and had no reasonable explanation for the several misrepresentations it made to the PTO."  Slip op. at 30.

On appeal, the Federal Circuit affirmed the district court's grant of SJ that OWW was collaterally estopped from challenging the invalidity of certain asserted claims of the '237 patent.  The Court rejected OWW's argument that the existence of different language in the adjudicated '182 patent claims and the unadjudicated '237 patent claims was sufficient to overcome collateral estoppel, as "[o]ur precedent does not limit collateral estoppel to patent claims that are identical."  Slip op. at 11.  In this case, it was undisputed that the asserted '237 patent claims and the invalidated '182 patent claims are substantially similar, using slightly different language to describe substantially the same invention, and OWW had failed to explain how any alleged difference in claim scope altered the invalidity determination.  Accordingly, the Court held that SJ of invalidity on the basis of collateral estoppel was appropriate.

The Federal Circuit also affirmed the district court's grant of SJ of obviousness for dependent claims that placed numerical limits on certain claimed characteristics.  The Court held that the addition of the numerical limits was nothing more than the exercise of routine skill, as "[the] features were
well-known in the prior art and their use would have been predictable by one of ordinary skill in the art."  Id. at 14.  Moreover, the existence of prior art devices employing these features demonstrated a motivation to combine.  Finally, the Court held that because OWW's evidence of secondary indicia of nonobviousness applied equally to the prior art SSGL product, OWW had failed to show the requisite nexus with the patented invention, and thus had failed to overcome the conclusion that the claims were invalid for obviousness.

The Federal Circuit next held that genuine issues of material fact regarding OWW's conduct during the second reexamination proceeding precluded SJ of no inequitable conduct.  The Court reasoned that, because OWW overcame the examiner's rejection only by convincing the Board that Comtesse was a highly interested witness and that there was no evidence to corroborate his testimony, the materiality determination hinged on whether OWW withheld or misrepresented information that would have led the Board to credit Comtesse's testimony. 

Applying the "rule of reason" test, the Court first held that a reasonable fact-finder could conclude that OWW had withheld material evidence, i.e., evidence that sufficiently corroborated Comtesse's testimony that the SSGL product used a fabric that prevented gel bleed-through.  Specifically, the Court found that OWW was aware of, but did not disclose, (1) declarations from three independent prosthetists, all of whom asserted there was no gel bleed-through in the SSGL product; (2) an abandoned patent application that supported a conclusion that the SSGL product had gel only on the interior surface; and (3) actual SSGL product samples from the relevant time period that could have corroborated Comtesse's testimony.  The Court concluded that the cumulative weight of this evidence lent credibility to Comtesse's testimony, and thus there was a genuine issue of fact regarding whether OWW withheld material evidence from the PTO.

The Court also agreed with Alps that OWW misrepresented Comtesse to the Board.  Specifically, the Court determined that deposition testimony and other record evidence directly contradicted OWW's representations to the Board that Comtesse had a financial stake in the outcome of the litigation and was the sole inventor of the SSGL product.  The Federal Circuit also concluded that, because OWW's counsel was aware that Comtesse's level of interest was critical to convincing the Board to reverse the examiner's rejection, "OWW's misrepresentations to the [Board were] tantamount to the filing of an unmistakably false affidavit."  Id. at 28.  And, since the Court "recognize[s] such misconduct may be sufficient to satisfy the materiality prong of inequitable conduct, the identified misrepresentations further demonstrate the existence of genuine issues of material fact regarding materiality."  Id. at 28-29 (internal citation omitted).

Finally, the Federal Circuit held that the facts also precluded SJ on the issue of deceptive intent.  The Court first noted that there was no dispute that OWW's counsel knew that if the Board accepted Comtesse's testimony, the '237 patent would not have survived the second reexamination.  And, according to the Court, OWW's counsel sought to discredit Comtesse's testimony by making statements that were directly refuted by credible evidence that OWW did not disclose to the PTO, creating a genuine issue of material fact as to whether OWW's counsel's conduct was undertaken for the deliberate purpose of obtaining an otherwise unwarranted patent.  The Court also rejected OWW's subjective assertions of good faith, finding them unsupported by affidavits or declarations and insufficient to outweigh the evidence of deceptive intent on SJ.  Accordingly, the Federal Circuit reversed the grant of SJ of no inequitable conduct and remanded the issue to the district court for trial.

This article previously appeared in Last Month at the Federal Circuit, December 2013.

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