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Rule 56 Is Not the Exclusive Test for “Materiality”

February 08, 2006
Mulcahy, John M.

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Last Month at the Federal Circuit - March 2006

Judges: Michel, Clevenger (author), Schall

In Digital Control, Inc. v. Charles Machine Works, No. 05-1128 (Fed. Cir. Feb. 8, 2006), the Federal Circuit affirmed the district court’s partial grant of SJ based on the materiality of misstatements in a Rule 131 declaration, reversed the grant of partial SJ based on the materiality of an uncited patent, and vacated the district court’s determination that the patents-in-suit were unenforceable due to inequitable conduct.

Digital Control, Inc. and Merlin Technology, Inc. (collectively “DCI”) asserted patents directed to methods for monitoring the orientation of a drilling apparatus underground. During prosecution, the inventor submitted a declaration under Rule 131 to establish that he had reduced his invention to practice by demonstrating it to a colleague prior to the effective date of the reference used in a rejection. The inventor’s statements were corroborated in a separate declaration by his colleague. Based on these declarations, the examiner allowed the claims. However, litigation revealed that the inventor had not demonstrated the complete system underground before the critical date. In light of the inventor’s material misstatements in his declaration and because DCI also failed to cite a prior art reference known to the inventor, The Charles Machine Works (“CMW”) alleged that the patents were unenforceable.

The district court found that there was no genuine issue of fact with respect to the materiality of the false declaration or to the materiality of the uncited reference. Because two acts of material misstatement or omission regarding the same three patents were presented, the district court concluded that the applicant had acted with the requisite intent to deceive the PTO, and therefore held the patents unenforceable on SJ.

On appeal, the Federal Circuit first addressed the proper standard for determining whether a statement or omission is “material to patentability.” The district court had applied the “reasonable examiner” standard set forth in the original version of Rule 56. However, in 1992, the PTO amended Rule 56 to define an arguably more narrow standard for materiality. The Court clarified that, just as the original version of Rule 56 did not supplant then-existing case law, new Rule 56 does not define the exclusive test for materiality. The Court noted that there is no reason to be bound by any single standard. In determining whether a misstatement or omission renders a patent unenforceable, the district court must balance the defendant’s showings on the issues of materiality and intent to deceive, “to the extent that one standard requires a higher showing of materiality than another standard, the requisite finding of intent may be lower.” Slip op. at 12.

Applying the “reasonable examiner” standard, as adopted by the district court, the Federal Circuit agreed that the misstatements in the declaration “unquestionably” met the threshold requirement for materiality. However, the Court noted that a reference that is merely cumulative of references cited during prosecution is not material. Because “the scope and content of prior art and what the prior art teaches are questions of fact,” id. at 17, the Court held that the materiality of the uncited reference was not properly decided on SJ. Thus, even though it found the false declaration material, the Federal Circuit vacated the district court’s grant of SJ of unenforceability because the district court’s holding that the applicant had acted with intent to deceive the PTO was based, in part, on its erroneous determination that the uncited reference was material.