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Nondisclosure of Prior Art Rejection from Copending Application Results in Finding of Inequitable Conduct

06-1517
May 18, 2007

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Last Month at the Federal Circuit - June 2007

Judges: Newman (dissenting), Clevenger

[Appealed from: E.D. Cal., Judge Damrell]

In McKesson Information Solutions, Inc. v. Bridge Medical, Inc., No. 06-1517 (Fed. Cir. May 18, 2007), the Federal Circuit upheld the district court’s finding that U.S. Patent No. 4,857,716 (“the ’716 patent”) was unenforceable due to inequitable conduct.

In 2002, McKesson Information Solutions, Inc. (“McKesson”) filed a patent infringement suit against Bridge Medical, Inc. (“Bridge Medical”). The district court bifurcated the trial, the first phase being a bench trial on the issue of inequitable conduct, followed, if necessary, by a jury trial on the remaining claims, counterclaims, and affirmative defenses.

The ’716 patent claims “a patient identification and verification system” that relates items with patients and ensures that an identified item corresponds to an identified patient. The only independent claim of the ’716 patent recites “three node communication” and “programmable unique identifier” limitations.

Following a bench trial, the district court held the ’716 patent to be unenforceable. Specifically, the district court found that in the course of prosecuting the ’716 patent, the prosecuting attorney, Schumann, failed to disclose to Examiner Trafton (1) the existence of U.S. Patent No. 4,456,793 to Baker (“the Baker patent”), which was cited in a rejection in another very similar application, U.S. Patent Application No. 06/862,149 (“the ’149 application”), that was being prosecuted by Schumann before a different examiner, Lev; (2) Examiner Lev’s rejection of the initially broad claims in the ’149 application; and (3) the allowance of the claims in another application prosecuted by Schumann before Examiner Trafton that recited a three-node communication feature, which issued as U.S. Patent No. 4,835,372 (“the ’372 patent”). The district court found these to be material omissions made with an intent to deceive.

On appeal, the Federal Circuit first addressed Schumann’s failure to disclose the Baker patent to Examiner Trafton during prosecution of the applications leading to the ’716 patent. The Court rejected McKesson’s argument that the Baker patent was cumulative and less relevant than another reference, the Hawkins patent, that was before Examiner Trafton. In rejecting this argument, the Court noted that one of Schumann’s primary arguments for the patentability of the claims of the ’716 patent was the use of three-node communication. The Court found no error in the district court’s conclusion that “Baker discloses three-node communication more clearly than Hawkins,” slip op. at 25, and that Baker therefore would have been important to a reasonable examiner.

Nor was the Federal Circuit persuaded by McKesson’s argument that Baker was cumulative of other prior art before Examiner Trafton that disclosed three-node systems. The Court noted that “the description of the preferred embodiment in Baker spans over eleven columns and provides a highly technical discussion of the implementation of the three-node communication system with unique addressing, whereas the same description in [the prior art patent before Examiner Trafton] is just under two columns and provides only cursory implementation details.” Id. at 25-26. The Court also found that the district court did not clearly err in concluding that the Baker patent undermined Schumann’s argument to Examiner Trafton that “none of the references [either singularly or in combination] teach the three node approach to communications as provided in the claimed invention.” Id. at 26 (alteration in original).

Regarding the intent-to-deceive prong, McKesson argued that there was no such deceptive intent because the features disclosed in Baker were already present in the art of record. The Court found this argument to be nothing more than an attempt to rehash the same argument made with respect to the materiality prong.

The Federal Circuit was also unconvinced by McKesson’s argument that Schumann did not know and should not have known of Baker’s materiality because Examiner Lev cited it for a “unique addressing” feature that was already before Examiner Trafton in the Hawkins patent. The Court explained that simply because Examiner Lev cited Baker for its unique addressing feature “did not release Schumann from the relevance of Baker’s other teachings,” id. at 31, especially considering the small size of the Baker patent, which put Schumann on notice of the content of the whole document.

McKesson further argued that the seventeen-day gap between Schumann’s assertion to Examiner Trafton that none of the prior art teaches three-node communication and Schumann’s interview with Examiner Lev regarding Baker could not be evidence of intent given that the assertion to Examiner Trafton was before the interview with Baker. The Federal Circuit rejected this argument, noting that Schumann’s duty to disclose material information to the PTO extended well beyond the interview with Examiner Lev. Moreover, the Court explained, “[t]he mere seventeen-day gap is important . . . because it bolsters the district court’s inferences that Schumann knew or should have known of Baker’s materiality to the [application leading to the ’716 patent], and that he intentionally withheld Baker from Examiner Trafton with deceptive intent.” Id. at 31-32.

With regard to the prosecuting attorney’s failure to disclose Examiner Lev’s rejections in the ’149 application, the Federal Circuit explained that it addressed the failure to disclose rejections in copending applications in Dayco Products, Inc. v. Total Containment, Inc., 329 F.3d 1358, 1368 (Fed. Cir. 2003). In that case, the Court held that a contrary decision of another examiner reviewing a “substantially similar” claim meets the “reasonable examiner” threshold materiality test. McKesson argued on appeal that the district court misapplied Dayco because it used a lesser “in some respects identical” test that failed to account for differences between the compared sets of claims.

The Federal Circuit rejected McKesson’s argument, explaining that a “showing of substantial similarity is sufficient to prove materiality. It does not necessarily follow, however, that a showing of substantial similarity is necessary to prove materiality.” Slip op. at 35 (emphases in original). Here, the district court correctly found under the accepted “reasonable examiner” standard that Examiner Lev’s rejection of certain ’149 application claims was in fact material to the prosecution of the application that led to the ’716 patent before Examiner Trafton.

The Federal Circuit also noted that the district court did compare the differences between the claims and explained the rationale for rejecting those differences as insufficient to undermine a finding of materiality. Moreover, the Court noted that Schumann’s response to Examiner Lev’s office action in the ’149 application was nearly identical to a response made to Examiner Trafton one month later about similar claims in the ’716 patent. In addition, Schumann’s cancellation of claims in response to Examiner Lev’s rejection was evidence that the rejections could not be easily overcome further evidence of materiality.

As to intent, McKesson argued, as evidence of good faith, that Schumann made two separate disclosures of the existence of the ’149 application to Examiner Trafton during prosecution of the ’716 patent. According to McKesson, given the state of the law in the mid-1980s, “there was no awareness” that the further disclosure of rejections in copending applications was necessary. The Federal Circuit, however, concluded that “the MPEP to which Schumann would have referred . . . leaves no doubt that material rejections in co-pending applications fall squarely within the duty of candor,” id. at 42, and, thus, the district court did not err in finding deceptive intent.

Finally, with regard to Schumann’s failure to notify Examiner Trafton of the allowance of the ’372 patent claims, the Federal Circuit found that “the district court’s stated basis for finding materiality the conceivability of a double patenting rejection is not incorrect because allowance of the three-node system of the ’372 patent claims plainly gives rise to a conceivable double patenting rejection, . . . .” Id. at 45 (emphasis in original). Further, the Federal Circuit dismissed McKesson’s argument that the district court allegedly failed to consider that Examiner Trafton was the examiner who allowed the ’372 patent claims, and that he did so within a few months of allowing the ’716 patent claims. The Court noted that the MPEP at the time explained that a prosecuting attorney should not assume that a PTO examiner retains details of every pending file in his mind when he is reviewing a particular application, and PTO regulations required all disclosures to be in writing. The Court thus held that Schumann was not entitled to assume that Examiner Trafton would recall his decision to grant the claims of the ’372 patent when he was examining the application that led to the ’716 patent in the absence of a written disclosure to that effect.  The Court thus affirmed the district court’s finding that the ’716 patent was unenforceable due to inequitable conduct before the PTO.

Writing in dissent, Judge Newman stated that there was not clear and convincing evidence of deceptive intent. “To avoid the inequity resulting from litigation-driven distortion of the complex procedures of patent prosecution,” she wrote, “precedent firmly requires that the intent element of inequitable conduct must be established by clear and convincing evidence of deceptive intent -- not of mistake, if there were such, but of culpable intent.” Newman Dissent at 1-2. She further warned that “[t]his court returns to the ‘plague’ of encouraging unwarranted charges of inequitable conduct, spawning the opportunistic litigation that here succeeded despite consistently contrary precedent.” Id. at 2.