Holding: In GS Cleantech Corp. v. Adkins Energy LLC, 951 F.3d 1310 (Fed. Cir. 2020), the U.S. Court of Appeals for the Federal Circuit (Judges Reyna, Wallach, and Hughes) affirmed the District Court’s ruling that CleanTech’s Patents-in-Suit are unenforceable due to inequitable conduct by the inventors and CleanTech’s attorneys. CleanTech subsequently filed a petition at the Federal Circuit for rehearing en banc, but the petition was denied.
Background: Starting in 2009 and continuing through 2014, GS CleanTech Corporation and Greenshift Corporation (together, “CleanTech”) filed lawsuits against a number of parties, including Adkins Energy, LLC (Adkins), for infringing CleanTech’s patents covering an oil recovery system. The disputed patents include U.S. Patent No. 7,601,858, No. 8,008,516, No. 8,008,517, and No. 8,283,484 (together, “Patents-in-Suit”) and share a common specification. The Patents-in-Suit are directed to the recovery of oil from a dry mill ethanol plant’s byproduct, called thin stillage.
Multitudinous actions were subsequently combined into a multidistrict litigation case. In 2013, both CleanTech and Adkins moved for summary judgement, and in response, the District Court found that the Patents-in-Suit were invalid because of the on-sale bar. Following the summary judgment determinations, the District Court held an inequitable conduct bench trial. Subsequently, the District Court ruled that the Patents-in-Suits were unenforceable due to inequitable conduct of the inventors and CleanTech’s attorneys. CleanTech appealed the District Court’s decision to the Federal Circuit, and the Federal Circuit affirmed.
In 2002, the inventors of the Patents-in-Suit (Cantrell and Winsness) met Barlage, who later performed testing of the inventor’s oil recovery system. See GS Cleantech, 951 F.3d at 1316.
A factual timeline related to on-sale bar determination is as follows:
Factual Background related to On-Sale Bar Determination
June 2003: Barlage tested the invention covered by Patents-in-Suit and drafted a report (“June 2003 Report”).
July 2003: Barlage traveled to Agri-Energy and performed additional testing. A drawing of the ethanol oil recovery system (“Ethanol Oil Recovery System Diagram”) was prepared.
August 1, 2003: An inventor emailed (“August 2003 Email”) Agri-Energy a proposal dated July 31, 2003. (“July 2003 Proposal”), which Agri-Energy understood as an offer for purchase.
August 18, 2003: An inventor traveled to Agri-Energy to present the proposal to Agri-Energy’s board of directors.
August 17, 2004: Dorisio, a patent attorney for the inventors, filed a U.S. Provisional Patent Application, which set the on-sale bar date at August 17, 2003. That filing was more than one year later than all of the June, July, and August 1 events described above.May 2005: Dorisio filed a Non-Provisional Application.
The District Court granted summary judgment of invalidity due to an on-sale bar based on the facts set forth above in the timeline. Id. at 1321. In particular, the District Court found that the July 2003 Proposal, which was made before August 17, 2003, the critical date, was a commercial offer for sale; that Proposal contained the “major elements for a contract for the sale of a system that could perform the patented method . . . all items necessary to recover oil and the price.” Id. at 1322. In addition, the District Court found that the method described therein shows the invention had been “reduced to practice or/and there was sufficient description of the patented method.” Id. at 1321.
Following the summary judgment determinations, the District Court held an inequitable conduct bench trial to examine whether the pre-August 17, 2003 events noted above were material and whether CleanTech and/or CleanTech attorneys intentionally concealed from the USPTO the events they knew were material to an on-sale bar Id. at 1322.
During prosecution, CleanTech transferred its prosecution cases to the Cantor Colburn law firm. A relevant factual history during the prosecution of the Patents-in-Suit is as follows:
Factual Background related to Inequitable Conduct Determination
July 2005: Dorisio provided the Inventors with a draft clearance opinion to allow the inventors to swear behind Prevost, filed on July 15, 2003, based on his understanding that the Inventors had reduced the invention to practice in June 2003.
March 2008: the prosecution case is transferred from Dorisio to the law firm of Cantor Colburn LLP (“Cantor Colburn”).
May 2009: A potential investor in CleanTech conducted due diligence and sought information on the company’s pending patent application, including pre-filing offers for sale, but the Inventors denied having such information, notwithstanding that an inventor had retained a signed version of the July 2003 proposal in his home files.
March 2010: An inventor provided Cantor Colburn with a signed copy of the July 2003 Proposal.
June 2010: Cantor Colburn submitted an Information Disclosure Statement (“IDS”) to the USPTO, attaching the July 2003 Proposal, alleging that July 2003 Proposal was irrelevant because the patented method was “never disclosed, carried out, or performed” more than one year before the filing date.
June 2010: An inventor, made an “unannounced” trip to Agri-Energy and offered to provide them with a royalty-free license for CleanTech’s ethanol oil recovery system, which Agri-Energy refused. An employee at Agri-Energy testified that he felt that the royalty offer was a quid pro quo to get Agri-Energy to admit the patent was valid.
July 2010: Cantor Colburn sent Agri-Energy a letter, asking Agri-Energy to confirm certain facts, including that the diagrams for the proposed system in 2003 was for testing purposes. Agri-Energy refused to confirm because it believed most of the facts to be “untrue.”
November 2010: Cantor Colburn filed its First Declaration to the USPTO, attaching a copy of the July 2003 Proposal. The declaration explained that an applicant had hand delivered the July 2003 Proposal to Agri-Energy on August 18, 2003 and thus, the July 2003 Proposal did not violate the on-sale bar, as it occurred less than a year before the application filing date.July 2012: Cantor Colburn filed its Second Declaration to the USPTO, stating that an inventor had “forgotten about sending the August 2003 Email,” but failing to provide any retractions of the false information set forth in the First Declaration or any explanations of the significance of the August 2003 Email as it related to a pre-critical date offer for sale.
After conducting the inequitable conduct bench trial, the District Court determined that the Patents-in-Suit were unenforceable due to inequitable conduct. GS Cleantech Corp, 951 F.3d at 1323. Specifically, the District Court determined that “[the inventors] took affirmative steps to hide [the July/August 2003 offers] from their lawyers, then later from the USPTO when they learned that it would prevent them from profiting from the Patents-in-Suit.” Id.
The District Court additionally concluded that Cantor Colburn either purposefully evaded disclosing to the USPTO or failed to seek out relevant information to disclose to the USPTO and so participated in the inequitable conduct, “choosing advocacy over candor.” Id. The District Court explained that Cantor Colburn never asked the inventors key questions, and Cantor Colburn’s focus on “pre-critical date documents” was purposefully and improperly narrow, thereby ignoring “the red flags waving before them.” Id.
The Federal Circuit determined that the applicable review standard is abuse of discretion because “inequitable conduct is an equitable issue committed to the discretion of the trial court,” contrary to CleanTech’s argument that the Federal Circuit should conduct de novo review. GS Cleantech Corp, 951 F.3d at 1325. The Federal Circuit then reviewed the on-sale bar and the inequitable conduct issues in turn.
A patent is invalid under the on-sale bar of 35 U.S.C. § 102(b) if, before the critical date, the invention was: (a) the subject of a commercial sale or offer for sale; and (b) ready for patenting. See GS Cleantech, 951 F.3d at 1324 (citing Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 67 (1998)).
With respect to (a), the Federal Circuit determined that based on “contract law principles,” the District Court properly concluded that the July 2003 Proposal was an “offer for sale,” because the proposal provided an offer of “all items necessary to recover oil and the price.” Id. at 1326. And, the Inventors understood the offer to Agri-Energy was a “first sale” that would lead to additional sales. Id.
Also, with respect to (b), the Federal Circuit concluded that the District Court did not abuse its discretion in determining that the claimed invention was “ready for patenting” before the critical date. Id. The Federal Circuit noted that in June 2003, Barlage tested an ethanol syrup with a pH, moisture content, and temperature within the claimed ranges recited in the Patents-in-Suit. Id. at 1327. The Federal Circuit also noted the inventors themselves made statements contemporaneous to the June and July 2003 testing that the claimed invention had been reduced to practice. Id.
CleanTech contended that under Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336, 1352–53 (Fed. Cir. 2002), the June and July 2003 testing was “experimental” in nature because its claimed invention clearly needed experiments under actual conditions of use. Id. at 1327. The Federal Circuit, however, found the arguments were “meritless and misleading.” Id. It explained that the District Court considered Allen and concluded the testing was not for purposes of experimentation because “reduction to practice does not require a showing that the method would work acceptably in a plant environment.” Id. (citing In re Cygnus Telecomms. Tech., LLC, 536 F.3d 1343, 1355 (Fed. Cir. 2008)).
To prevail on a claim of inequitable conduct in a patent case, as set forth in Therasense, the accused infringer must prove by clear and convincing evidence that the patentee: (a) knew of the reference or prior commercial sale, (b) knew that it was material, and (c) made a deliberate decision to withhold it. Id. at 1324. (citing Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1290 (Fed. Cir. 2011) (en banc)).
The Federal Circuit explained five reasons that the District Court’s determination that CleanTech and Cantor Colburn committed inequitable conduct was correct.
Based on these reasons, the Federal Circuit concluded that the District Court did not abuse its discretion in concluding that the inventors and Cantor Colburn intended to deceive the USPTO. Id.
The Federal Circuit also addressed CleanTech’s counterarguments and found them unpersuasive. Id.
Therefore, the Federal Circuit affirmed the District Court’s judgments. Id.
Soon after the Federal Court made the decision on March 2, 2020, CleanTech filed a petition for en banc rehearing on April 15, 2020, in which it argued that the panel wrongly determined the Patents-in-Suits unenforceable due to inequitable conduct at the USPTO during prosecution by the inventors and their attorneys. On June 30, 2020, in a nonprecedential order, the Federal Circuit Per Curiam denied the petition rehearing en banc. It is possible that CleanTech will file a writ of certiorari to the Supreme Court.
Some thought that Therasense, the Federal Circuit decision in 2011, raised the bar for inequitable conduct, and that proving the defense would be difficult. GS CleanTech, however, shows that the inequitable conduct defense is alive and is to be avoided.
Particular care should be taken during prosecution to assess all facts presented and to avoid “choosing advocacy over candor.” And a false declaration must be avoided as “there is no room to argue that submission of false affidavits is not material.” Rohm & Haas Co, 722 F.2d at 1571. In fact, the en banc Federal Circuit in Therasense pointed to a false declaration as evidencing “affirmative egregious misconduct.” Therasense, 649 F.3d at 1293.
The duty of disclosure exists during prosecution and generally ends with the issuance of the patent. The duty, however, revives if prosecution is reopened, such as in post-grant proceedings such as ex parte reexamination, reissue applications, AIA inter partes review, AIA post-grant review, and supplemental examination.
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