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Failure to Investigate On-Sale Activity During Prosecution Leads to Attorney Fees Award

October 09, 2001

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Last Month at the Federal Circuit - November 2001

Gajarsa (author), Clevenger, and Plager

In Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., No. 00-1194 (Fed. Cir. Oct. 9, 2001), the Federal Circuit affirmed a SJ declaring a case exceptional and awarding attorney fees against a patentee based on acts of inequitable conduct committed by the prosecuting patent attorneys and the inventors in not investigating and disclosing to the PTO details of invalidating on-sale activity.

In a prior ruling, the district court had invalidated the claims of U.S. Patent No. 5,306,285 (“the ‘285 patent”) under the on-sale bar based on the patentee’s purchase of a commercial quantity of surgical saw blades embodying the claimed invention. On remand from the Federal Circuit’s affirmance of that ruling, the accused infringer requested the district court to declare the case exceptional and award attorney fees and expenses incurred in defending the infringement suit under 35 U.S.C. § 285. The accused infringer asserted as the basis for finding the case exceptional that the prosecuting attorneys and inventors had failed to disclose to the PTO the invalidating on-sale activity. The patentee responded by arguing that the patent attorneys could not be faulted because the inventors did not disclose the sales activity to them and the inventors could not be faulted because they did not reasonably believe that the activity created an onsale bar. The district court and Federal Circuit rejected these arguments.

As the primary basis for its inequitable conduct charge, the accused infringer argued that the prosecuting patent attorneys had failed to meet the duty of candor they owed to the PTO by not adequately investigating the specifics of the on-sale activity while prosecuting the patent application. The limited facts known to the patent counsel of the existence of unspecified on-sale activity, argued the accused infringer, created a duty of inquiry that counsel failed to meet. Specifically, the supervising partner told the associate assigned to prepare the application to draft and file the application in three days to avoid an on-sale bar. Although the associate communicated with the inventors while preparing the application and during the subsequent prosecution of the application, the associate never asked the inventors about the details of the purported on-sale activity that prompted the deadline. The district court had found, and the Federal Circuit agreed, that the associate and supervising partner unreasonably failed to investigate the surrounding facts of the on-sale activity and, by their studied ignorance of those facts, intended to deceive the PTO.

Under the facts of this case, the urgency prompted by the three-day deadline to avoid a potential on-sale bar created a duty for the associate and/or the supervising partner to investigate the facts relating to that on-sale bar. Distinguishing this failure to investigate from a mere error in judgment, the Federal Circuit ruled that the failure to investigate the facts surrounding the on-sale activity, coupled with an absence of evidence of good faith, justified finding that the prosecuting patent attorneys intended to deceive the PTO. The Federal Circuit cautioned that attorneys must conduct meaningful inquiries when the surrounding factual circumstances would cause a reasonable attorney to understand that relevant and questionable material information should be assessed.

The Federal Circuit also agreed that the inventors had also committed inequitable conduct by not disclosing the details of the sale to the PTO or to their patent counsel. The inventors were highranking corporate officials with intimate knowledge of the specific on-sale activity. Noting that knowledge of the law is chargeable to the inventors, the Federal Circuit rejected the patentee’s argument that the inventors did not reasonably believe that the sale raised an on-sale bar. The Court also noted that it has reminded practitioners on several occasions that where the materiality of information is uncertain, disclosure is required.

Finally, the Federal Circuit refused the patentee’s request to reduce the fee award to cover only the fees incurred in proving the on-sale bar defense. Instead, the Federal Circuit ruled that the district court had properly awarded attorney fees incurred in pursuing all defenses because the Defendant would not have incurred any of the fees generated in defense of the suit had the patentee not filed suit based on a patent known to have been improperly obtained.