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Omission of Test Data Related to the Issue That Bedeviled the Examiner Is Evidence of an Intent to Deceive the PTO

February 14, 2007

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Last Month at the Federal Circuit - March 2007

Judges: Linn, Prost, Jordan (author, sitting by designation)

[Appealed from: D. Or., Judge Mosman]

In Cargill, Inc. v. Canbra Foods, Ltd., Nos. 06-1265, -1302 (Fed. Cir. Feb. 14, 2007), the Federal Circuit affirmed the district court’s judgment of invalidity and unenforceability in favor of Canbra Foods, Ltd., Dow Agrosciences, LLC, and Dow Agrosciences Canada, Inc. (collectively “Defendants”), thereby rendering the Defendants’ cross-appeal moot.

Cargill, Incorporated (“Cargill”) is the owner of U.S. Patent Nos. 5,969,169 (“the ’169 patent”), 6,201,145 (“the ’145 patent”), 6,270,828 (“the ’828 patent”), and 6,680,396 (“the ’396 patent”). The ’169 and ’145 patents are directed to nonhydrogenated canola oils useful for food applications that have a specified fatty acid content and possess superior oxidative and fry stability. The ’828 and ’396 patents relate to canola oil with low glucosinolate content and low α-linolenic acid content. The low glucosinolate content and low α-linolenic acid content result in low sulfur content, improved sensory characteristics, and greater oxidative stability. Two measures of oxidative stability are in terms of AOM (Active Oxygen Method) hours and in terms of peroxide and para-anisidine values.

Cargill filed suit against the Defendants for infringement of all four patents. On SJ, the district court held the ’828 and ’396 patents invalid under the on-sale bar of 35 U.S.C. § 102(b). The district court also held on SJ that Defendants infringed the ’169 and ’145 patents. However, several issues relating to the ’169 and ’145 patents remained for trial, and following the trial, the district court granted Defendants’ motion for judgment that the ’169 and ’145 patents are unenforceable due to inequitable conduct. Cargill appealed the invalidity and unenforceability holdings, and Defendants cross-appealed the claim construction and grant of SJ of infringement.

On appeal, the Federal Circuit affirmed the district court’s finding of inequitable conduct, holding that there was clear and convincing evidence that the withheld evidence was material and that intent to deceive existed. During prosecution, Cargill failed to disclose two documents that contained internal test data regarding oxidative stability of canola oils having fatty acid compositions reading on the claimed fatty acid content. While the data in the specification indicated a difference in oxidative stability for canola oils with very similar fatty acid contents, the undisclosed documents contained test data that showed similar oxidative stability in oils of similar fatty acid content. The Court reasoned that, even if applicant believes the data was irrelevant because it was flawed, materiality is determined from the viewpoint of a reasonable examiner, and a reasonable examiner would have wanted to review the undisclosed test data, taking applicant’s arguments into consideration.

The Federal Circuit also agreed with the district court’s finding of intent to deceive based on three factors: (1) repeated omission of the disclosure, (2) applicant’s motive to conceal, and (3) the high materiality of the undisclosed test data. The Court noted that the prosecution history shows that there were five rejections relating to the issue of whether the oxidative stability of applicant’s claimed oil was superior to that of oils with similar fatty acid content. The Court held that the applicant should have known that the information was material when the examiner repeatedly raised an issue to which the information relates. Thus, the repeated omission was evidence of intent to deceive.

In addressing motive, the Federal Circuit agreed with the district court’s reliance on the applicant’s need to show more than an incremental improvement over existing canola oils as evidence of motive to deceive. The omitted data did not support a new oil or more than an incremental improvement. In fact, the undisclosed oxidative stability data overlaps with the claimed range. And finally, the Federal Circuit also recognized the district court’s finding that the high degree of materiality of the omitted data is the strongest evidence of intent. “[T]he omitted test data was related to ‘the heart of the question that bedeviled the examiner . . . .’” Slip op. at 12.

Having found both materiality and intent, the Federal Circuit held that given the high materiality of the undisclosed information and the strong circumstantial evidence of intent to mislead, the district court did not abuse its discretion in weighing the findings and affirmed the district court’s decision that the ’169 and ’145 patents were unenforceable.

Turning to the invalidity of the ’396 and ’828 patents, the Federal Circuit affirmed the district court’s SJ holding of invalidity under the on-sale bar of 35 U.S.C. § 102(b). First, the Court held that there was no genuine dispute that there was an offer for sale. A letter between Cargill’s predecessor and Proctor & Gamble (“P&G”) was found to constitute an offer for sale of the claimed oil to P&G because it contained provisions for the amount of oil to be delivered, a specified unit price, and assignment of risks and responsibilities by “FOB,” free on board, by standard contract language. The Court agreed with the district court that this was powerful evidence of a sales transaction.

Second, the Federal Circuit held that the district court correctly concluded that the claimed oil was reduced to practice when it was composed or made. While Cargill asserted that the district court made an error of law because an invention is only reduced to practice when it is shown to work for its intended purpose, the Federal Circuit disagreed, explaining that if a claimed material is sold under circumstances in which no question exists that it is useful, it was reduced to practice. In this case, the Court found that evidence, a letter from Cargill’s predecessor to Du Pont speaking of the superiority and utility of the claimed oil, demonstrated that Cargill’s predecessor was aware of the utility of the claimed oil before offering to sell it to P&G. Although Cargill asserted that the transaction with P&G was for experimental purposes, the Court held that an offer to sell the oil for the purpose of continued testing does not prevent a finding that the oil had already been reduced to practice. Thus, because the oil claimed in the ’828 and ’396 patents was at least the subject of an offer for sale before the critical date and was already reduced to practice, the Federal Circuit affirmed the district court’s finding of invalidity of these two patents under 35 U.S.C. § 102(b).

In view of the Federal Circuit’s affirmation of the district court’s holdings of unenforceability and invalidity, Defendants’ cross-appeal was rendered moot.