United States: Inequitable Conduct For The In-House Manager In The Middle

Unique challenges arise when an in-house attorney or patent manager is tasked with overseeing parallel litigation and reexamination proceedings. While these challenges can be successfully handled, they require considerable knowledge, diligence, and integrity. The recent case Ohio Willow Wood Co. v. Alps South, LLC, Nos. 2015-1132, -1133 (Fed. Cir. Feb. 19, 2016), illustrates the calamity that can result when one or more of these qualities is missing.

The case involved a patent owned by The Ohio Willow Wood Company (OWW), which claimed cushioning elements used in prosthetic devices. At the district court, OWW asserted the patent against Alps South, LLC. Alps responded by filing two successive ex parte reexaminations challenging the validity of the asserted claims. The first reexamination involved prior art in the form of advertisements for a device called the "Silosheath," made by Silipos, Inc. OWW prevailed in the reexamination by demonstrating the allegedly defective Silosheath device to the examiner. Alps then filed the second reexamination based on an advertisement depicting more detail on the Silosheath product line. For support, Alps also presented a declaration and deposition testimony from a Silipos employee, Mr. Jean-Paul Comtesse, who was knowledgeable about the Silosheath prior art. The examiner rejected the claims based on the advertising prior art and Mr. Comtesse's declaration.

On appeal to the Board of Patent Appeals and Interferences (Board), OWW argued that Mr. Comtesse's declaration was unreliable because he was receiving royalties based on the Silosheath product. OWW contended that, absent corroboration regarding the advertising prior art, the prior art was insufficient to sustain the rejection. The Board agreed with OWW, reversing the examiner's rejection and finding that Mr. Comtesse was indeed an interested witness whose testimony was unreliable.

Following a previous appeal to the Federal Circuit, Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333 (Fed. Cir. 2013), in which Alps' claim of inequitable conduct was remanded to the district court, the district court held a bench trial on the inequitable conduct issue. The district court found inequitable conduct in the second reexamination, but not in the first. According to the district court, the inequitable conduct arose from the conduct of OWW's Director of Research and Development, Mr. James Colvin, who was tasked with managing both the reexaminations and the parallel district court litigation for OWW. The law firm retained by OWW erected an ethical wall, dividing its lawyers working on the reexaminations and those working on the litigation. As the district court found, Mr. Colvin was the connection between the two sets of proceedings. According to the district court, Mr. Colvin was the decision maker for most issues involving both sets of proceedings. He was also found to have substantial experience with patent matters, both as a business person and as an inventor. The inequitable conduct arose, according to the district court, because Mr. Colvin was aware that the reexamination counsel argued that Mr. Comtesse's testimony was uncorroborated and yet was also aware of materials that did corroborate that testimony.

On appeal, OWW argued that the district court's inequitable conduct findings must be reversed. The Federal Circuit considered the three prongs required to show inequitable conduct, in accordance with Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc): (1) one with a duty of candor to the U.S. Patent and Trademark Office (USPTO) made misrepresentations or omissions material to patentability, (2) that they did so with the specific intent to mislead or deceive the USPTO, and (3) that deceptive intent was the single most reasonable inference to be drawn from the evidence.

As to the first factor, the Federal Circuit found that certain evidence known to, but withheld by, Mr. Colvin, was material to patentability in the second reexamination. In particular, while that evidence was not itself invalidating, it did corroborate the declaration testimony of Mr. Comtesse. Because OWW argued to the Board on appeal that Mr. Comtesse's declaration lacked corroboration and was unreliable, and this was the "dispositive issue" on appeal, this withheld information was material under the "but for" test of Therasense. Regarding intent, the Federal Circuit also found that the withheld evidence corroborating Mr. Comtesse's testimony supported an inference of intent to deceive. As to the third factor, because Mr. Colvin knew of the misrepresentations from OWW's reexamination counsel and failed to correct them, and OWW was unable to offer a reasonable explanation for Mr. Colvin's conduct, the most reasonable inference to be drawn was an intent to deceive the USPTO. Separately, the Federal Circuit rejected Alps' additional inequitable conduct argument in the second reexamination regarding other allegedly material information, since there was no clear and convincing evidence that Mr. Colvin knew of the other allegedly material information.

As Ohio Willow Wood illustrates, an in-house manager occupies a difficult position when he or she manages concurrent litigation and post-grant validity challenge proceedings. Although the case involved ex parte reexaminations, similar difficulties may arise with respect to inter partes review, covered business method review, and post-grant review proceedings. In addition to the numerous challenges associated with maintaining consistent legal and factual positions in both sets of proceedings—and seeking to simultaneously establish validity and infringement—the in-house employee must be keenly aware of the duties of candor and disclosure to the USPTO. When information material to patentability arises in the litigation, the in-house employee incurs a duty to have that information disclosed to the USPTO in the post-grant validity challenge. Further, when the veracity of a representation made to the USPTO is thrown into contradiction by newly discovered evidence, the in-house employee likewise must inform the USPTO. As Ohio Willow Wood demonstrates, allowing a misrepresentation to the USPTO to be made, and ultimately become a deciding factor on the issue of patentability, can subject the employee's company to a finding of inequitable conduct. In such circumstances, inaction by the in-house employee is not a defense.

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