Allegations of Inequitable Conduct Must Set Forth Particular Factual Bases to Satisfy Rule 9(b)
August 04, 2009
Last Month at the Federal Circuit - September 2009
Judges: Michel, Linn (author), St. Eve (District Judge sitting by designation)
[Appealed from: D. Mass., Judge Lindsay]
In Exergen Corp. v. Wal-Mart Stores, Inc., Nos. 06-1491, 07-1180 (Fed. Cir. Aug. 4, 2009), the Federal Circuit reversed the jury’s determination that Exergen Corporation’s (“Exergen”) U.S. Patent No. 6,047,205 (“the ’205 patent”) was not invalid; reversed the jury’s finding that S.A.A.T. Systems Application of Advanced Technology, Limited and Daiwa Products, Incorporated (collectively “SAAT”) willfully infringed Exergen’s U.S. Patent Nos. 5,012,813 (“the ’813 patent”) and 6,292,685 (“the ’685 patent”); and reversed the damages that had been awarded to Exergen. In addition, the Federal Circuit affirmed the district court’s denial of SAAT’s motion for leave to allege inequitable conduct.
Exergen’s patents relate to infrared radiation thermometers for measuring human body temperature from a surface of the human body, such as the eardrum or the forehead, to obtain the surface temperature, which is a function of both the internal body temperature and the air temperature. The thermometers calculate the internal body temperature based on equations provided in the patents and display the result in a digital readout. The claims of the ’813 and ’205 patents are directed to detecting radiation from “biological tissue,” whereas the ’685 patent claims a thermometer that detects radiation from the skin covering the temporal artery in the temple region. SAAT manufactures thermometers that detect radiation from the temple and that convert the measured surface reading to the individual’s oral temperature. Exergen sued SAAT for infringement of the ’813, ’205, and ’685 patents. SAAT sought leave pursuant to Fed. R. Civ. P. 15(a) to add inequitable conduct as an affirmative defense and counterclaim against the ’813 and ’685 patents. The district court denied SAAT’s motion because SAAT’s proposed pleading failed to allege inequitable conduct with particularity under Fed. R. Civ. P. 9(b).
The district court construed the term “biological surface tissue” to mean “a living layer of external human tissue having a temperature that can be measured” and “internal temperature” to mean “temperature of the region existing beneath the surface of the biological tissue targeted for measurement.” Slip op. at 3-4. The case proceeded to a jury trial on the theory of literal infringement only because Exergen waived any argument that SAAT infringed under the DOE. The jury found that SAAT directly infringed claim 7 of the ’813 patent and claims 1 and 3-5 of the ’205 patent, and that SAAT actively induced infringement of claims 1 and 27-30 of the ’685 patent. The jury also found that the patents were not invalid and that SAAT’s infringement was willful. The jury awarded Exergen lost profit damages totaling over $2.5 million. The district court denied SAAT’s motion for JMOL on the grounds of noninfringement, invalidity, and absence of lost profits, and Exergen’s motion to alter or amend judgment for enhanced damages and prejudgment interest.
SAAT appealed the denial of its motion for leave to amend its answer to allege inequitable conduct and its motion for JMOL, and Exergen cross-appealed the denial of its motion to alter or amend the awarded damages and interest.
SAAT challenged the jury’s finding that claims 1-5 of the ’205 patent were not anticipated by U.S. Patent No. 4,602,642 (“O’Hara”). At trial, Exergen’s expert admitted that O’Hara disclosed all limitations of claim 1 except the third step, namely, “electronically detecting the peak radiation from the multiple areas to obtain a peak temperature signal.” Id. at 6. On appeal, Exergen focused only on this step to distinguish O’Hara. Exergen first argued that O’Hara heats the probe unit to 98ºF and detected this radiation in addition to radiation detected from the patient. The Court rejected this argument, finding that the use of the term “comprising” in claim 1 of the ’205 patent did not require detection of radiation solely from the biological tissue. The Court held that O’Hara’s detection of radiation from the probe unit upon removal from the chopper unit after having been heated to 98ºF and from multiple areas of the biological tissue to obtain a peak temperature did not prevent O’Hara from anticipating.
The Federal Circuit also rejected Exergen’s contention that O’Hara detects radiation from a single spot and not “multiple areas.” The Court noted that Exergen’s expert admitted that O’Hara inherently discloses this limitation because the device necessarily detects radiation from the patient’s face, outer ear, and ear canal as the probe unit is moved into position in the ear canal. The Court also stated that the term “biological tissue” is not limited to “ear canal.” Because Exergen did not present a separate argument as to the validity of dependent claims 2-5, the Court held O’Hara anticipated claims 1-5 of the ’205 patent and reversed the jury’s finding that the claims of the ’205 patent are not invalid.
The Federal Circuit also reversed the jury’s decision that SAAT directly infringed the ’813 patent and actively induced infringement of the ’685 patent because SAAT did not directly infringe either patent. First, SAAT’s device did not possess “a display for providing an indication of the internal temperature,” as recited in claim 7 of the ’813 patent. The parties did not dispute that the meaning of “internal temperature” is “temperature of the region existing beneath the surface of the biological tissue targeted for measurement,” id. at 10, nor did they dispute that, with regard to SAAT’s device, the relevant “internal temperature” is the temperature of the temporal artery beneath the skin of the forehead. The Court found that the testimony of Exergen’s expert/coinventor made clear that the number shown on the display of the claimed device must be the value of the internal temperature and could not be some other value requiring further (mental) computation before arriving at the internal temperature. The Court held that SAAT’s device could not infringe claim 7 of the ’813 patent because it measured radiation from the user’s forehead and calculated and digitally displayed the user’s oral temperature, which did not constitute the “internal temperature” as construed by the district court.
The Federal Circuit also held that no reasonable jury could have found that a user of SAAT’s thermometers who followed the accompanying instructions would necessarily have performed the step of “laterally scanning a temperature detector across a forehead,” as required by claim 1 of the ’685 patent. The parties agreed that “laterally” means “horizontal relative to the human body.” Id. at 13. The instructions for the ThermoTek thermometer stated, “Scan with the thermometer around the temple area (marked as a dotted area in the drawing).” Id. at 14. The instructions for the CVS thermometer stated, “Place the thermometer’s soft touch tip just outside the eyebrow (in the temple region of the forehead) and slowly slide upwards to just below the hairline.” Id. Exergen argued that the instructions involved at least some horizontal component. But the Court stated that even if it agreed, Exergen’s argument ignored the claim language requiring the lateral scan to occur “across the forehead.” Id. The Federal Circuit also criticized Exergen for telling the jury “to essentially ignore this requirement” when it posited to the jury that scanning within one of the oval patterns in the temple region would achieve substantially the same result as scanning across the forehead. The Court noted that Exergen had expressly waived any argument under the DOE before trial.
The Federal Circuit then found that a customer using SAAT’s device would not have infringed claim 27 of the ’685 patent or its dependent claims 28-30 because SAAT’s device measured the surface temperature of the skin that covers the temporal artery and not the “temperature of the temporal artery through skin,” as required by those claims. Id. at 17. The ’685 patent expressly distinguished skin temperature from core temperature and provided an equation to calculate core temperature when skin and ambient temperatures were known. Since SAAT’s device converted the skin temperature measurement to oral temperature and not to the temporal artery temperature, a user of SAAT’s device could not infringe claims 27-30 of the ’685 patent.
The Federal Circuit then affirmed the denial of SAAT’s motion for leave to amend its answer to allege inequitable conduct because SAAT’s proposed pleading failed to allege inequitable conduct with particularity under Fed. R. Civ. P. 9(b). The Court held that “in pleading inequitable conduct in patent cases, Rule 9(b) requires identification of the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.” Id. at 22. Further, the Court held that while “knowledge” and “intent” may be averred generally, a pleading of inequitable conduct under Rule 9(b) must include “sufficient allegations of underlying facts from which a court may reasonably infer that a specific individual (1) knew of the withheld material information or of the falsity of the material misrepresentation, and (2) withheld or misrepresented this information with a specific intent to deceive the PTO.” Id. at 24-25.
The Federal Circuit agreed with the district court that SAAT’s allegations were deficient with respect to both the particularity of the facts alleged and the reasonableness of the inference of scienter. The Court noted three factual deficiencies. First, SAAT’s pleading referred generally to “Exergen, its agents and/or attorneys,” and failed to identify the “who” of the material omissions and misrepresentation. That is, the pleadings failed to name a specific individual associated with the filing or prosecution of the application who both knew of the material information and deliberately withheld or misrepresented it. Second, SAAT’s pleading failed to identify the “what” and “where” of the material omissions, namely, which claims, and which limitations in those claims, the withheld references were relevant to, and where in those references the material information was found. Third, SAAT’s pleading did not explain “why” the withheld information was material and not cumulative, and “how” an examiner would have used this information in assessing the patentability of the claims.
Further, the Federal Circuit found that the facts alleged in SAAT’s pleading—that Exergen became aware of the withheld references during the prosecution of its prior applications—did not give rise to a reasonable inference of scienter. SAAT provided no factual basis to infer that any specific individual who owed a duty of disclosure knew of the allegedly material information. The Court stated, “A reference may be many pages long, and its various teachings may be relevant to different applications for different reasons. Thus, one cannot assume that an individual, who generally knew that a reference existed, also knew of the specific material information contained in that reference.” Id. at 27. The Court also found that SAAT did not allege facts sufficient for one to reasonably infer that when the individual made the allegedly false statement to the PTO, that person was also aware of an allegedly contradictory statement on Exergen’s website.
As for deceptive intent, while pleading on “information and belief” is permitted under Rule 9(b) when essential information lies uniquely within another party’s control, the Court held that the pleading must set forth the specific facts upon which the belief is reasonably based. Here, the Court found that SAAT’s pleading provided neither the “information” on which it relied nor any plausible reasons for its “belief.” The mere fact that an applicant disclosed a reference during the prosecution of one application but did not disclose it during prosecution of a related application was insufficient to meet the threshold level of deceptive intent required to support an allegation of inequitable conduct. Therefore, SAAT’s pleading lacked specific allegations to show that the individual citing the patent during a related prosecution knew of the allegedly material information and deliberately withheld it from the examiner. Accordingly, the Court held that the district court did not abuse its discretion in denying SAAT’s motion for leave to add these allegations to SAAT’s original answer.
Summary authored by Mary R. Henninger, Ph.D., Esq.