United States: Court Can Infer Intent To Deceive PTO From Possession Of Undisclosed Material Information And Knowledge Of Its Materiality

In American Calcar, Inc. v. American Honda Motor Co., No. 13-1061 (Fed. Cir. Sept. 26, 2014), the Federal Circuit affirmed the district court's determination that American Calcar, Inc.'s ("Calcar") asserted patents were unenforceable due to inequitable conduct.

Calcar holds several patents relating to various aspects of a multimedia system for use in a car to access vehicle information and control vehicle functions.  The patents share a common specification and are derived from the same priority application.  Calcar sued American Honda Motor Co., Inc. and Honda of America Manufacturing, Inc. (collectively "Honda"), alleging infringement of fifteen of these patents based on navigation systems in Honda's vehicles.  Over the course of the proceedings, Calcar dropped certain patents from the suit.  Four patents went to trial, three of which—U.S. Patent Nos. 6,330,497 ("the '497 patent"); 6,438,465 ("the '465 patent"); and 6,542,795 ("the '795 patent") (collectively "the asserted patents")—remained at issue on appeal.  

Before trial, Honda moved for a finding of inequitable conduct based on the failure of Calcar's founder, Mr. Obradovich, to disclose an owner's manual and photographs of a 1996 Acura RL ("96RL") navigation system to the PTO during prosecution.  At trial, the jury rendered an advisory finding of no inequitable conduct as to the asserted patents.  Following the verdict, however, the district court ruled that the asserted patents were unenforceable based on Mr. Obradovich's actions.  Calcar appealed.  While Calcar's appeal was pending, the Federal Circuit established a revised test for inequitable conduct in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc).  In light of Therasense, the Federal Circuit affirmed the finding of materiality for the '497 patent, vacated the district court's determinations of materiality and intent for the '465 and '795 patents, and remanded for further findings by the district court.  On remand, the district court found that all three asserted patents were obtained through inequitable conduct.  Calcar filed a second appeal.

"'[B]ecause direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence,' provided that such intent is the single reasonable inference."  Slip op. at 9 (quoting Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290-91 (Fed. Cir. 2011) (en banc)).

On appeal, the Federal Circuit first considered whether the district court clearly erred in its finding of materiality with respect to the '465 and '795 patents.  The Court observed that the PTO and the district courts employ different evidentiary standards, and that a reference may be material even if the district court does not invalidate a patent based on the reference.  The Court rejected Calcar's argument that the district court failed to account for the differences between the 96RL navigation system and the claims.  The Court explained, however, that the district court addressed the differences when the district court found that the only difference between the claims and the 96RL navigation system was in the nature of the information contained in the systems.  The Court also observed that the district court determined that the PTO would not have allowed the claims based on this difference because "it would have been obvious to a person of ordinary skill in the art to include different information in the 96RL navigation system."  Slip op. at 8 (citation omitted).  The Court disagreed with Calcar that the district court's language regarding the "same function," "same way," and "same result" improperly applied a DOE analysis to the question of obviousness.  Id.  The Court explained that the district court's language merely summarized why the substitution of one kind of information for another "would [have been] an obvious, and thus unpatentable, invention."  Id.  Based on this finding, the Court affirmed the district court's determination that the undisclosed details of the 96RL navigation system were material to the patentability of the '465 and '795 patents.  The Court also noted that the previous appeal had affirmed the finding of materiality to the '497 patent.

Next, the Court considered whether Calcar acted with intent to deceive the PTO by withholding the material information.  The Court explained that partial disclosure of material information to the PTO "cannot absolve a patentee of intent if the disclosure is intentionally selective."  Id. at 9.  The Court noted that the district court found that Mr. Obradovich possessed material information and knew that the information was material based on his testimony and knowledge of the 96RL navigation system, and that Mr. Obradovich acknowledged the importance of the information he possessed.  The Court also considered the district court's finding that "the single reasonable inference based on the facts regarding Mr. Obradovich's role in developing the patent application was that Mr. Obradovich deliberately decided to withhold the information from the PTO."  Id. at 10.  The Court also noted that the district court had found that Mr. Obradovich's testimony about his knowledge and possession of the withheld documents lacked credibility.  Although the Court acknowledged the jury's advisory verdict finding no inequitable conduct, it explained that the district court was not bound by the jury's finding and that the district court's determination was based on evidence that the jury had not seen.  Based on these findings, the Court determined that the district court did not clearly err in its underlying factual findings of materiality and intent.  Accordingly, the Court held that the district court's analysis was consistent with the standards and tests set forth in Therasense, and that the district court did not abuse its discretion in finding the asserted patents unenforceable due to inequitable conduct.

The Court therefore affirmed the district court's judgment that the '497, '465, and '795 patents were obtained through inequitable conduct and are thus unenforceable.

Judge Newman dissented.  According to Judge Newman, the factual premises for finding inequitable conduct were not met in this case.  Judge Newman asserted that the majority incorrectly applied the Therasense standards, ignored the PTO reexamination, and cast aside the jury's findings of no inequitable conduct.

This article previously appeared in Last Month at the Federal Circuit, October 2014

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