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Court Finds No Inequitable Conduct Where Challenger Presented Evidence of Only Materiality

May 05, 2010

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Last Month at the Federal Circuit - June 2010

Judges: Newman (author), Mayer, Prost (concurring)

[Appealed from: W.D. Pa., Chief Judge Ambrose]

In Optium Corp. v. Emcore Corp., No. 09−1265 (Fed. Cir. May 5, 2010), the Federal Circuit affirmed the district court’s grant of SJ of no inequitable conduct, holding that Emcore Corporation (“Emcore”) did not commit inequitable conduct in obtaining U.S. Patent Nos. 6,282,003 (“the ’003 patent”) and 6,490,071 (“the ’071 patent”).

The ’003 and ’071 patents both concern improvements for an optical communication system, wherein a laser transmits a signal in the form of a light wave along an optical fiber.  The ’003 and ’071 patents use “two−tone phase modulation” to minimize interference from stimulated Brillouin scattering.

Optium Corporation (“Optium”) alleged inequitable conduct based on Emcore’s failure to cite to the patent examiner an article authored by an individual named Willems.  The Willems article described single−tone phase modulation but not two−tone phase modulation.  Emcore did not dispute that the inventors knew of the Willems article, and referred to it in their invention disclosure form to their employer.  But, Emcore’s patent attorneys did not cite the Willems article in an IDS during prosecution.  Although the examiner cited a patent discussing the Willems article in its background, the examiner did not otherwise cite the Willems article during prosecution.

Emcore filed suit against Optium in the district court, charging infringement of the ’003 and ’071 patents. After discovery, Optium filed a separate DJ action in the same court against Emcore, alleging inequitable conduct.  In the district court proceedings, neither the inventors nor the prosecuting attorneys could recall why the Willems article had not been submitted to the PTO.

On appeal, the Federal Circuit reviewed inequitable conduct on the standard of abuse of discretion, requiring proof by clear and convincing evidence of the threshold facts of both materiality and intent.  The Court explained that clear and convincing evidence must support at least a threshold level of each element, and once both materiality and intent have been established, the equities must be balanced to determine whether conduct in prosecuting a patent application was egregious enough to warrant holding the entire patent unenforceable.

The Court noted that despite some divergence, the great weight of its authority has applied the rule that the “intent” element of inequitable conduct is not simply intent to take the action or omission complained of, but intent to deceive or mislead the examiner into granting the patent.  The Court added that one must have intended to act inequitably, and in situations of nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.  The Court further explained that an intent to deceive cannot be inferred solely from the fact that information was not disclosed, and there must be a factual basis supporting a finding of deceptive intent.  The Court added that nondisclosure, by itself, cannot satisfy the deceptive intent element.

The Court rejected Optium’s argument that deceptive intent can be inferred if a reference is “highly material,” even with no evidence, direct or circumstantial, of intent to deceive.  The Court noted that consistent precedent has rejected the notion that the materiality of a reference alone can suffice to prove deceptive intent.  The Court also noted that intent is a separate and essential component of inequitable conduct, and that materiality does not presume intent.  The Court further explained that only when the challenger has met its threshold burden of showing intent does the burden of coming forward with evidence shift to the applicant.

The Court observed that Optium offered no evidence of intent but simply argued that the “high materiality” of the Willems reference relieved it of the burden to produce any affirmative evidence of intent, and instead required Emcore to provide a credible explanation for the nondisclosure.  The Court concluded that this proposed shift in the burdens is contrary to precedent. 

Though concurring in the result, Judge Prost wrote separately to express concern regarding what, in her view, is the majority’s limitation of evidence for determining deceptive intent.  Judge Prost noted that the majority opinion seemed to imply that a high level of materiality is entirely irrelevant to an inference of intent, which, in Judge Prost’s opinion, is contrary to Federal Circuit precedent and basic principles of evidence law.

Regarding concepts of relevancy for evidence, Judge Prost noted that if a reference is of very high materiality, and it is shown that the patentee knew of the reference, then it is more probable that the reference was withheld from the examiner with deceptive intent, as compared to a reference of low materiality.  Judge Prost added that as the materiality of a reference increases, it becomes more likely that an inference of deceptive intent is the single most reasonable inference that can be drawn from the evidence.  Judge Prost also noted that if it is shown that a patentee knew of a reference’s high level of materiality, and the patentee could offer no good−faith explanation as to why the reference was withheld, then a district court could find such circumstantial evidence to be enough to support a finding of intent to deceive.

Judge Prost observed that the district court found that the evidence of materiality and knowledge did not support an inference of intent in this case, and, thus, deceptive intent was not among the inferences that could be reasonably drawn in favor of Optium.  Judge Prost added that even accepting Optium’s contention that the withheld Willems reference was highly material, given the lack of other evidence of deceptive intent, the district court properly found that there was insufficient evidence of intent to survive SJ.  Judge Prost noted that even gross negligence does not of itself justify an inference of intent to deceive.

Judge Prost criticized the breadth of the legal rule articulated by the majority opinion, to the extent that the majority opinion characterized the level of materiality as per se irrelevant to the intent inquiry.  In Judge Prost’s opinion, an accurate description of this case would be that “Optium relies on a high level of materiality and no other evidence of intent.”  Prost Concurrence at 5−6.  Judge Prost added that a high level of materiality does not lower the threshold evidentiary burden for an inference of intent, but rather provides circumstantial evidence of intent that brings the challenger closer to satisfying the evidentiary burden.


Summary authored by Stephen L. Keefe, Esq.