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Lack of Explanation for Nondisclosure of Prior Art Device Does Not Establish Intent to Deceive

05-1224
February 27, 2006
Roscetti, Jennifer H.

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Last Month at the Federal Circuit - March 2006

Judges: Lourie (author), Rader, Bryson

In M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., Nos. 05-1224, -1228 (Fed. Cir. Feb. 27, 2006), the Federal Circuit reversed the district court’s grant of SJ of inequitable conduct and vacated related findings that were premised on the erroneous inequitable conduct determination.

Fisher Tooling Company, Inc., doing business as Astro Pneumatic Tool Company (“Astro”), owns U.S. Patent No. 5,259,914 (“the ’914 patent), which is directed to a combination of a pneumatic driver with an eraser wheel to remove decals from a motor vehicle. Irving Fisher, Astro’s founder and former president, filed the ’914 patent application and submitted a declaration stating that at the time of the filing, he was unaware of any relevant prior art and had not performed a novelty search. Six months later, Irving Fisher died and Stephen Fisher took over the prosecution. Subsequently, the examiner issued an Office Action specifically stating that claims 1-3 were allowable “because none of the art of record shows all of the detailed internal workings of the instant claims.”

Astro sent letters alleging infringement of the ’914 patent to M. Eagles Tool Warehouse, Inc., doing business as S&G Tool Aid Corporation (“S&G”), and to its distributors and suppliers. S&G responded by filing suit in the District of New Jersey seeking, among other things, a judgment that it did not infringe the ’914 patent.

Later, the district court denied S&G’s motion for SJ of invalidity but granted its motion for unenforceability due to inequitable conduct during prosecution of the ’914 patent before the PTO. The district court found the Model 220, a model die grinder that Astro had been selling for twenty years, was material prior art that Astro did not submit to the PTO. The district court used Astro’s nondisclosure of the Model 220 and lack of a good-faith explanation for its omission to infer that Astro intended to deceive the PTO. According to the district court, Astro must have known of the Model 220’s relevance when Astro was given notice by the examiner’s statement that he could not find some of the limitations in the prior art, given that the Model 220 contained anumber of these very limitations. The district court also granted SJ in favor of S&G on claims of Lanham Act violations, state unfair competition, and tortious interference, and awarded attorney fees and damages.

On appeal, Astro argued that the district court improperly found an intent to deceive solely from the fact that Astro failed to disclose the Model 220 to the PTO, without relying on any evidence that the applicant or attorney deliberately withheld information concerning the Model 220. The Federal Circuit agreed, concluding that “a failure to disclose a prior art device to the PTO, where the only evidence of intent is a lack of a good faith explanation for the nondisclosure, cannot constitute clear and convincing evidence sufficient to support a determination of culpable intent.” Slip op. at 11-12.

S&G, however, argued that there was additional evidence for inferring intent to deceive. Specifically, S&G pointed to the district court’s finding that Astro was aware of the relevancy of the Model 220 due to the examiner’s statement concerning allowance of the claims being based on his inability to find all of the limitations in the prior art. The Federal Circuit disagreed, noting that important differences between the Model 220 and claim 1 of the ’914 patent could lead a reasonable fact-finder to conclude that Astro would not have appreciated the relevance of the Model 220 from the examiner’s statement alone. Accordingly, the Court reversed the district court’s grant of SJ of inequitable conduct due to a lack of sufficient evidence to infer an intent to deceive the PTO. Further, the Federal Circuit vacated the holdings on the Lanham Act, state law unfair competition, tortious interference, and award of attorney fees because they were based on the erroneous inequitable conduct determination.