By Kevin E. Noonan —

The
Federal Circuit’s inequitable conduct jurisprudence has appeared for
some time to be unduly fact- and panel-dependent, straying in the
opinion of at least Judge Rader from the principle enunciated in the
Court’s en banc decision in Kingsdown Medical Consultants, Ltd. v. Hollister, Inc.,
863 F.2d 867 (Fed. Cir. 1988), that a finding of inequitable conduct
should be rare and the evidentiary requirements satisfy a "high bar."
This trend continues in Praxair, Inc. v. ATMI, Inc., where the
Court affirmed a finding of inequitable conduct as to one
patent-in-suit, but reversed as to another, based on the same "highly
material" prior art.

The case involved U.S. Patents Nos. 6,007,609; 6,045,115; and 5,937,895,
directed to pressurized storage containers that prevent accidental
discharges of hazardous gases.  These containers were used to store
such hazardous gases under pressure and temperature conditions where
the compounds are in a mixture of gas and liquid phases.  Important
claim limitations were directed to "flow restrictors" comprising
capillary passages that prevented rapid discharge of the gas.

The
District Court found the ‘609 and ‘115 patents unenforceable due to
inequitable conduct (but otherwise not invalid and infringed); and the
asserted claims of the ‘895 patent invalid for indefiniteness.  The
inequitable conduct findings were based on the existence of "highly
material" prior art relating to the existence of restricted flow
orifice (RFO) art, known to the prosecuting attorney and at least one
of the inventors, coupled with the absence of any evidence of good
faith basis for withholding the uncited art, and in light of four
statements made during prosecution of the ‘115 patent that were
inconsistent with the teachings of the uncited art.

The Federal
Circuit, in an opinion by Judge Dyk joined by Judge Bryson, and over a
dissent on the inequitable conduct question by Judge Lourie, vacated
the District Court’s infringement decision on the ‘609 patent based on
a finding that the District Court’s claim construction was faulty, and
affirmed that defendant ATMI had not established that the ‘609 patent
was invalid by clear and convincing evidence.  The CAFC also reversed
the District Court’s determination that the ‘895 patent was invalid for
indefiniteness.  On the lower court’s inequitable conduct
determination, the Federal Circuit affirmed as to the ‘115 patent but
reversed as to the ‘609 patent.

Judge Dyk’s opinion affirmed the
District Court’s finding that the uncited prior art references were
highly material, in view of the following four statements made during
prosecution of the ‘115 patent:

(1) The prior art did not teach the claimed "extreme limitation in
flow" used "to provide a commercially practical container" that
prevents "the catastrophic discharge" of toxic contents;
(2) Existing safety measures were limited to "highly complex methods" and "elaborate systems;"
(3) There was no indication in the prior art to use "severe flow
restriction" to "overcome [ ] the problems of delivering highly toxic
fluids from portable containers;" and
(4) "[N]one of the prior art comes close to disclosing a restriction in
the flow path from a pressurized container that has a diameter that
does not exceed 0.2 mm.

The CAFC affirmed that the uncited art was contrary to these
statements, and thus that art was highly material because the patentees
could not have made these arguments if the uncited art had been before
the examiner during prosecution.

The Court also affirmed the
District Court’s finding that at least the prosecuting attorney and one
of the inventors had knowledge of the uncited art, based on trial
testimony (of the attorney) and deposition testimony (of the inventor)
introduced into the record.  The CAFC also agreed that neither the
prosecuting attorney nor the inventor provided any evidence that they
had a good faith basis for nondisclosure; the attorney’s testimony that
he had "never" intended to deceive the Patent Office at any time during
his career was deemed to be merely "conclusory" and to be given "no
weight."

Based on this evidence, the Court majority held that it
was not an abuse of discretion for the District Court to conclude that
the ‘115 patent was obtained through inequitable conduct and was
unenforceable.

The same was not true of the ‘609 patent.  There,
the evidence showed that the patentees did not make the "four
statements" during prosecution; indeed, the statements made during
prosecution of the ‘115 patent were made at a time after a Notice of
Allowability had been issued from the Patent Office for the ‘609
patent.  The Court said that there was no evidence that the prosecution
of the ‘115 patent had any relevance or influence on the prosecution of
the ‘609 patent.  Further, the Court held that the materiality of the
uncited references was high in the context of the four statements made
during prosecution of the ‘115 patent, and the absence of any
equivalent representations to the patent examiner during prosecution of
the ‘609 patent reduced the materiality of the uncited references
accordingly.

Judge Lourie (at right) dissented.  In his view, there was no
evidence of an intent deceive, which precluded a finding of inequitable
conduct.  In particular, he distinguished the precedent relied upon by
majority, Bruno Independent Living Aids, Inc. v. Acorn Mobility Services, Ltd.,
394 F.3d 1348 (Fed. Cir. 2005), as having "more egregious facts," such
as citing a reference to the FDA but not to the PTO.  The Court’s
finding of knowledge, without more, is not enough, according to Judge
Lourie.  "An inference of intent to deceive requires more than
knowledge of the existence of the nondisclosed art; it also requires a
finding that the applicant knew, or should have known, of the
materiality of that art."  Moreover, in Judge Lourie’s view, the
District Court did not balance intent and materiality.

The
majority’s decision, and Judge Lourie’s dissent, illustrate why
inequitable conduct law remains an uncertain threat to patentees.
Unlike the "high bar" Judge Rader believes is required by Kingsdown Medical,
numerous individual panel decisions appear willing to find inequitable
conduct under less stringent criteria.  Here, the majority believed
that the combination of the uncited art and the affirmative arguments
made during prosecution, in view of the contradictory nature of the art
and those arguments and the knowledge of persons under a Rule 56 duty
of disclosure, was enough to find inequitable conduct.  This approach
resembles a "totality of the circumstances" or subjective viewpoint,
approaching a standard of "knowing inequitable conduct when we see it,"
i.e., when a court has a basis for believing that a patentee has
acted inequitably.  Judge Lourie believes in a more rigorously
analytical approach, where the two components of inequitable conduct —
materiality and intent to deceive — are evaluated separately, and then
(and only then) balanced to make an inequitable conduct determination.
This is the framework of Kingsdown Medical, one that the
Federal Circuit has abandoned to varying degrees.  This has resulted in
a wider scope of behavior being held to constitute inequitable conduct,
an outcome that only further encourages accused infringers to raise the
defense.  This outcome is also contrary to the Federal Circuit’s
mandate to harmonize and bring a degree of certainty to U.S. patent
law.  Both S. 1145, the failed patent "reform" bill of the 110th
Congress, and Senator Kyl’s bill (S. 3600, certain to be reintroduced
in the 111th Congress next year) contain provisions to provide a
statutory basis for inequitable conduct.  It may be up to Congress to
finally resolve this unsettled area of patent law.

Praxair, Inc. v. ATMI, Inc. (Fed. Cir. 2008)
Panel: Circuit Judges Lourie, Bryson, and Dyk
Opinion by Circuit Judge Dyk; opinion concurring in part and dissenting in part by Circuit Judge Lourie