July 31, 2012
Law360
By Flora M. Amwayi
By Flora M. Amwayi, Elizabeth A. Laughton, and Michael R. McGurk
Failure to correctly name the inventor(s) of patented subject matter (i.e., the claimed invention) can result in the claims being held invalid or even a change in the ownership of the patent. Best practices, of course, dictate that counsel advise the patent owner to investigate and correct inventorship if necessary prior to asserting the patent. Such a prelitigation due diligence practice can help prevent “inventorship” issues from complicating and adding to the costs of litigation.
Nonetheless, parties frequently challenge the validity and enforceability of patents during litigation based on alleged inventorship errors. This article addresses the correction of inventorship errors during litigation and surveys the circumstances and mechanisms under which such correction may be made.
A party seeking to invalidate a patent during litigation based on failure to correctly name the inventive entity must prove any such alleged error in inventorship by clear and convincing evidence.1 However, even if the party challenging inventorship is ultimately successful in proving an incorrect inventorship, a patentee may still correct that error in inventorship during litigation pursuant to 35 U.S.C. § 256.
Notably, Section 256 was amended in a significant manner by the America Invents Act. The amendments to Section 256 apply to proceedings commenced on or after Sept. 16, 2012.2 Section 256, as amended by the AIA, provides as follows (material in [square brackets] was added by the AIA and material in {curved brackets} was deleted by the AIA:
[(a) Correction.-- ] Whenever through error a person is named in an issued patent as the inventor, or through error an inventor is not named in an issued patent {and such error arose without any deceptive intention on his part}, the Director may, on application of all the parties and assignees, with proof of the facts and such other requirements as may be imposed, issued a certificate correcting such error.
[(b) Patent valid if error corrected.--] The error of omitting inventors or naming persons who are not inventors shall not invalidate the patent in which such error occurred if it can be corrected as provided in this section. The court before which such matter is called in question may order correction of the patent on notice and hearing of all parties concerned and the Director shall issue a certificate accordingly.
While the courts have broadly interpreted 35 U.S.C. § 256 as a ‘savings provision’ to prevent invalidation of patents due to good faith inventorship errors, corrections under this provision can be barred in certain circumstances, including (1) where there is a showing of deceptive intent or inequitable conduct, or (2) where the correction is barred due to laches or equitable estoppel.
Litigants seeking to invalidate a patent have frequently asserted deceptive intent or inequitable conduct as a basis for finding that an inventorship error is “uncorrectable,” and that the patent is therefore invalid and/or unenforceable.3 This maneuver is typically two-pronged: (1) The challenger proves by clear and convincing evidence that the patent-in-suit contains an inventorship error, and then (2) asserts that the defect cannot be corrected under Section 256 due to deceptive intent or inequitable conduct.
Section 256 addresses two types of inventorship errors: misjoinder and nonjoinder. Under the pre-AIA statute, these two categories were treated differently. Pre-AIA Section 256 provides that in cases of nonjoinder, where the alleged error consists of failing to list an inventor, the error cannot be corrected if there is deceptive intent on the part of the unnamed inventor.4 In such cases, the patentee bears the burden of proving no deceptive intent.5
Yet, while the burden of proving “correctability” lies with the plaintiff, this burden is tempered by the presumption of good faith, absent a persuasive showing of deceptive intent. For proceedings commenced on or after Sept. 16, 2012, a patentee need no longer prove the absence of deceptive intent on the part of an unnamed inventor. This amendment significantly favors patentees by removing a former hurdle to correction.
Cases involving deceptive intent on the part of the named inventors (including cases involving misjoinder) fall under the rubric of inequitable conduct, and as such, the challenging party bears the burden of proving deceptive intent by clear and convincing evidence.
Where courts have found the conduct so egregious as to rise to the level of inequitable conduct, the patent can be rendered unenforceable, regardless of the good faith of unnamed inventors.6 Because nonjoined inventors may not have a duty of good faith and candor to the U.S. Patent and Trademark Office, it reasons that a nonjoined inventor may not be found to have committed inequitable conduct. Thus, it appears that when the AIA amendments to Section 256 come into effect, a nonjoined inventor’s intent, culpable or innocent, could be rendered immaterial to correction under some circumstances.
Challengers to a patent’s validity who assert incorrect inventorship as a defense sometimes persuade the allegedly missing inventor to intervene in the suit. In such situations, the ultimate goal can be either to attempt to invalidate the patent, or to license the patent from the allegedly omitted inventor.7
Patentees are not without recourse, as laches or equitable estoppel can operate to bar such allegedly omitted inventors from seeking to correct inventorship.8 Where laches or equitable estoppel bars the correction of inventorship claim, the court need not address the merits of the inventorship claim.
A patentee asserting a laches defense must show that (1) the inventorship correction claim was brought after unreasonable and unexcused delay, and (2) the patentee is likely to suffer evidentiary or economic prejudice as a result.9 Courts may find evidentiary prejudice where the patentee shows that the delay affects its ability to adequately defend against the claim, for instance, due to loss of records or death of a witness that prevents adequate investigation into the claim.10 Similarly, economic prejudice may exist where the patentee shows that the delay will result in the loss of monetary investments or that the patentee may incur damages that would likely have been prevented had the suit been brought earlier.11
The laches period is measured from when the claimant knew or should have known of the claim.12 A rebuttable presumption of laches is triggered if there is a delay of more than six years after the omitted inventor knew or should have known of the issuance of the patent. However, in the inventorship context, district courts have disagreed as to whether the laches period can only be triggered after the patent issues, or whether it can be triggered by actual or constructive knowledge of the inventorship error irrespective of whether the knowledge accrues prior to the issuance of the patent.
The Federal Circuit will be called upon to address this issue of first impression in Hor v. Chu, No. 2011-1540, which was argued before the Federal Circuit on July 10, 2012. In Hor v. Chu, where the inventorship of two patents was at issue, the allegedly omitted inventors filed the suit less than four years after the first patent-in-suit was issued, and immediately after the second patent-in-suit was issued.13 If the laches period were to be measured from the date of patent issuance, the plaintiffs’ lawsuit was filed well before the six-year mark.
However, the district court held that the laches period began when the allegedly omitted inventors knew or should have known “that the defendant filed a patent application covering [their] alleged inventive contributions and failed to name [them] as an inventor, regardless of whether such notice occurred prior to the patent’s issuance.” Thus, they were barred from correcting inventorship error since the court found that they knew or should have known of the filing of the patent almost twenty years before they brought their inventorship correction claims.
However, even if laches is found to apply, courts have recognized various excuses for any delay, including poverty as a mitigating factor, illness, reissue of the patent, war, and other litigation.14 On the other hand, courts have refused to accept certain excuses, including unfamiliarity with the U.S. patent system, inability a party to find counsel to file the suit, re-examination of the patent at issue, or efforts to enter into license agreements.15
Challengers may claim “unclean hands” in an attempt to preclude patentees from asserting a laches defense. Under the “unclean hands” doctrine, the challenger must prove that the patentee engaged in particularly egregious conduct, such as willfully taking steps to prevent an inventor from learning about a patent application, and that the misconduct was responsible for the delay in bringing the suit.16
Equitable estoppel can also be used by a patentee to bar a claimant from seeking to correct inventorship. A claim of equitable estoppel normally requires proof of three elements: (1) that the claimant, who had knowledge of the true facts, communicated (through words, conduct or silence) in a misleading manner to the patentee; (2) the patentee relied on the claimant’s action or inaction; and (3) the patentee would be materially harmed if the claimant were later allowed to assert a claim inconsistent with earlier conduct.17 Notably, the Federal Circuit has previously barred correction of inventorship due to equitable estoppel where the defense was based on events that happened prior to patent issuance.18
Finally, a patent with improper inventorship does not avoid invalidation simply because it could be corrected under Section 256. Rather, a patentee must affirmatively claim relief under Section 256 and the court must order the USPTO to issue a certificate of correction.
1 Hess v. Advanced Cardiovascular Sys. Inc., 106 F.3d 976, 980 (Fed. Cir. 1997).
2 America Invents Act, Pub. L. 112-29, § 20(f), (l), Sept. 16, 2011, 125 Stat. 334, 335.
3 See, e.g., Pannu v. Iolab Corp., 155 F.3d 1344, 1350 (Fed. Cir. 1998).
4 Stark v. Advanced Magnetics Inc., 119 F.3d 1551, 1556 (Fed. Cir. 1997).
5 Pannu, 155 F.3d at 1350, 1351 n.4.
6 Stark, 119 F.3d at 1556; see, e.g., PerSeptive Biosystems Inc. v. Pharmacia Biotech Inc., 225 F.3d 1315, 1318-23 (Fed. Cir. 2000).
7 See, e.g., Ethicon Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1459, 1467-68 (Fed. Cir. 1998).
8 See, e.g., Serdarevic v. Advanced Medical Optics Inc., 532 F.3d 1352, 1358 (Fed. Cir. 2008).
9 Advanced Cardiovascular Sys. Inc. v. SciMed Life Sys. Inc., 988 F.2d 1157, 1161 (Fed. Cir. 1993).
10 A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1032-33 (Fed. Cir. 1992).
11 Id.
12 Advanced Cardiovascular, 988 F.2d at 1161, 1163.
13 765 F. Supp. 2d 903, 916-17 (S.D. Tex. 2011); Corrected Reply Brief of Plaintiff-Appellant at 2-3, Hor v. Chu, No. 2011-1540, (Fed. Cir. argued July 10, 2012).
14 See, e.g., Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F.2d 870 (Fed. Cir. 1991).
15 See, e.g., Hall v. Aqua Queen Mfg.Inc., 93 F.3d 1548, 1554 (Fed. Cir. 1996).
16 See, e.g., Yeda Research And Development Co. Ltd. v. Imclone Systems Inc., 443 F. Supp. 2d 570, 630 (S.D.N.Y. 2006), appeal dismissed, 267 Fed. App’x 939 (Fed. Cir. 2008).
17 A.C. Aukerman, 960 F.2d at 1041.
18 See MCV Inc. v. King-Seeley Thermos Co., 870 F.2d 1568, 1573-74 (Fed. Cir. 1989).
Originally printed in Law360 (www.law360.com). Reprinted with permission. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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