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An Inference of an Intent to Deceive and an Equally Reasonable Inference Finding No Intent to Deceive Fails the Clear and Convincing Evidence Standard for Establishing Inequitable Conduct

August 06, 2010

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Last Month at The Federal Circuit - September 2010

Judges: Lourie, Gajarsa, Moore (author)

[Appealed from: E.D. Tex., Judge Folsom]

In Ring Plus, Inc. v. Cingular Wireless Corp., No. 09-1537 (Fed. Cir. Aug. 6, 2010), the Federal Circuit affirmed the district court’s findings in all respects except for one.  Specifically, the Court affirmed the district court’s grant of Cingular Wireless Corp., Cingular Wireless II LLC, Cingular Wireless LLC, and AT&T Wireless Services, Inc.’s (collectively “Cingular”) SJ of noninfringement of U.S. Patent No. 7,006,608 (“the ’608 patent”) and the denial of Ring Plus, Inc.’s (“Ring Plus”) motion to disqualify counsel.  The Court, however, reversed the finding of unenforceability of the ’608 patent due to Ring Plus’s alleged intent to deceive the PTO.

Ring Plus is the owner of the ’608 patent, which is directed to a software-based algorithm for operation of a telephone for generating and delivering messages over a phone line during a “ringing signal” period. 

Ring Plus filed a complaint with the Eastern District of Texas alleging that Cingular’s Answer Tones service infringed various claims of the ’608 patent, and also filed a motion to disqualify Cingular’s counsel for allegedly improper ex parte communications with a Ring Plus Director.  In response, Cingular filed various defenses, including noninfringement and unenforceability of the ’608 patent due to inequitable conduct.  In its claim construction analysis, the district court determined that the steps of the asserted claims must be performed in a specific order, where step 1(c), “determining whether the telephone line of the recipient telephone is busy,” must be performed before step 1(d), “allowing for a sound presentation” if the recipient line is not busy, and terminating the call without a sound presentation if the line is busy.  Because Cingular’s Answer Tones plays a presentation before it determines whether the recipient’s telephone line is busy, the Court found no literal infringement.  The Court also found no infringement under the DOE due to prosecution history estoppel, and thus, the Court granted Cingular’s SJ of noninfringement.  The Court then denied Ring Plus’s motion to disqualify Cingular’s counsel and held a bench trial on the issue of inequitable conduct and found the ’608 patent to be unenforceable due to two material misrepresentations made during prosecution regarding two prior art references.

On appeal, the Federal Circuit first considered Ring Plus’s argument that the district court abused its discretion in holding the ’608 patent unenforceable.  The Court noted the two-prong test for successfully proving inequitable conduct, requiring that the accused infringer present evidence that the applicant 
(1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information; and (2) the applicant intended to deceive the PTO.  The Court agreed with the district court’s finding that Ring Plus had misrepresented two references (“Strietzel” and “Sleevi”) in the Background of the Invention of the ’608 patent, but disagreed with the finding that an amendment submitted during prosecution constituted a misrepresentation.  In the amendment submitted during prosecution, applicants stated that they had “very carefully examined” Strietzel and Sleevi, and noted that “one of the distinctions between the applicant’s system and . . . any other reference known to the applicant is the fact that the applicant’s system only generates [a] message when the phone line between the caller and the recipient is not busy.  Slip op. at 6 (alterations in original) (citation omitted).  In agreeing with Ring Plus’s argument on appeal—that the statements made in the Background and the amendment are not misrepresentations because they are not false—the Court determined that neither Strietzel nor Sleevi disclosed playing a sound presentation only when a called line is not busy.  In particular, the Court found that Strietzel clearly states that “the busy tone can be replaced by one or more advertisements,” and that Sleevi fails to disclose any indication that the status of the recipient’s line affects system operation.  Id. at 8. 

Finding that the statement made in the amendment was not a misrepresentation, the Court only analyzed the statement made in the Background for materiality, which the district court found to be highly material.  Ring Plus argued that the Background statement was merely attorney argument and therefore could not be a material misrepresentation.  They also argued that the examiner did not cite to Strietzel and Sleevi during prosecution, thus finding those references to not be material.  The Court disagreed, noting that the issue relates to what a reasonable examiner would have found important, and not whether the reference in question was specifically considered during prosecution.  Therefore, the Court found that the district court did not clearly err in determining that applicants’ statements in the Background were a material misrepresentation.

With respect to the second prong for establishing inequitable conduct—establishing intent—the Court noted that Cingular carries the burden of demonstrating clear and convincing evidence that applicants specifically intended to deceive the PTO in making the misrepresentation in the Background statement.  The Court disagreed with the district court’s finding that Cingular had established clear and convincing evidence of Ring Plus’s deceptive intent.  Although the district court acknowledged that Ring Plus had disclosed Strietzel and Sleevi, they still found that the statement made in the Background that “Streitzel and Sleevi both propose hardware based systems, but no software to operate those systems” was made with an intent to deceive.  In addition, the district court dismissed prosecution attorney testimonial that Strietzel and Sleevi ambiguously and insufficiently detailed software. 

The Federal Circuit agreed with Ring Plus’s argument that the district court erred in finding that Cingular had provided clear and convincing evidence of applicants’ specific intent to deceive the PTO.  Specifically, the Court disagreed with the district court’s finding, which was premised solely on the view that Strietzel and Sleevi clearly disclosed software.  In contrast, the Court found that Strietzel and Sleevi did not clearly disclose software.  Specifically, the Court considered that neither reference mentioned software nor identified any code or software mechanism for the operating system.  Moreover, the Court reasoned that there was no evidence showing that one of skill in the art would consider the references to unambiguously disclose software.  Finally, the Court stated that Cingular provided no evidence to rebut the prosecution attorney’s testimonial, which they found gave rise to the inference that applicants believed that Strietzel and Sleevi did not disclose software for operating a telephone system.  The Court held that the lack of explicit disclosure of software in the Strietzel and Sleevi references in addition to the prosecution attorney’s testimonial provided as reasonable an inference as the district court’s inference of deceptive intent.  Noting the holding in Scanner Technologies Corp. v. Icos Vision Systems Corp. N.V., 528 F.3d 1365, 1376 (Fed. Cir. 2008), that “a district court clearly errs in overlooking one inference in favor of another equally reasonable inference,” the Court concluded that the district court clearly erred in finding clear and convincing evidence of applicants’ deceptive intent. 

The Federal Circuit next considered the grant of SJ of noninfringement to Cingular.  The Court disagreed with Ring Plus’s claim that the district court erred in construing the claims and that the entry of SJ for noninfringement must be reversed under the correct claim construction.  Ring Plus argued that Cingular could infringe even if the Answer Tones service plays a sound presentation prior to determining whether the line is busy because that time period is not covered by the claims, and that the district court misconstrued the definition of “allowing” and “sound presentation.”  The Court disagreed with Ring Plus’s assertion, stating that Ring Plus’s proposed construction conflicts with the required order of the claimed steps, which requires first determining whether the line is busy and then allowing a sound presentation if the line is not busy.  The Court concluded that because a sound presentation cannot be allowed to continue before the presentation is first played, the required order of the steps necessarily indicates that “allowing” a sound presentation means allowing the sound presentation to begin.  Therefore, the Court affirmed the district court’s finding of noninfringement. 

Finally, the Federal Circuit considered Ring Plus’s motion for disqualification of Cingular’s counsel for allegedly improper ex parte party communications.  On April 12, 2007, a man named Tom Garretson, representing himself as having been involved with Ring Plus’s ’608 patent development, contacted several Cingular attorneys to divulge information regarding legal strategy, the ’608 patent strengths and weaknesses, claim defense strategy, etc.  After Cingular attorney Doug Kubehl contacted Ring Plus to inquire into Tom Garretson’s affiliation with Ring Plus, Ring Plus lead counsel denied Mr. Garretson’s relationship with Ring Plus, and then later denied that the conversation with Doug Kubehl had ever happened.  The district court found that Cingular’s counsel had no actual knowledge that Mr. Garretson was affiliated with Ring Plus, and that Cingular’s conduct did not violate applicable rules of professional conduct.  On appeal, the Federal Circuit agreed with the district court, noting that the fact that Mr. Garretson was offering information adverse to Ring Plus would suggest that he was not affiliated with Ring Plus.  Thus, the Court affirmed the district court’s denial of Ring Plus’s motion to disqualify counsel.


Summary authored by Kimberly D. Braslow, Ph.D., student associate at Finnegan.