The opinion of the court was delivered by: GAWTHROP
Plaintiff, Total Containment, Inc. ("TCI"), filed this action on December 24, 1991, against defendants, Michael C. Webb and Environ Products, Inc. ("EPI") ("defendant" or "defendants"), for allegedly infringing U.S. Patent 5,040,408 (the '408 patent); U.S. Patent 5,060,509 (the '509 patent); and U.S. Design Patent 322,970 under 35 U.S.C. § 271(a)-(c) by manufacturing, selling, and/or using underground containment sumps. TCI has asserted that the defendants' infringement is willful, thus making this case exceptional within the meaning of 35 U.S.C. § 285, entitling TCI to treble damages and attorneys' fees. TCI has also alleged that Environ's corporate name infringes upon its federally registered trademark "ENVIROFLEX."
The defendants have raised several defenses and asserted several counterclaims. The defendants have alleged that the patents are invalid, void, unenforceable, and not infringed. Mr. Webb has counterclaimed for monetary damages for breach of contract. Environ has also contended that its corporate name does not infringe upon the plaintiff's registered trademark "ENVIROFLEX" because there is no likelihood of confusion.
A sixteen-day bench trial was held. Defendants dismissed with prejudice their counterclaim that the '408 and '509 patents are unenforceable, based on TCI's alleged fraudulent revival of United States Patent Application 07/245,021 after abandonment. Plaintiff, TCI, in turn, dismissed with prejudice its claim of infringement of the design patent. Numerous issues were raised at trial, including assignor estoppel, five reexamination requests, one claim canceled on reexamination, numerous claims added on reexamination, assertion of twenty claims against eight allegedly infringing embodiments, and mutual accusations of misconduct before the Patent Office. I shall undertake to treat them in turn.
Plaintiff, TCI, is a Delaware corporation with its principal place of business in Oaks, Montgomery County, Pennsylvania. Defendant, EPI, is a Delaware corporation with its principal place of business in Lionville, Chester County, Pennsylvania. Defendant Webb, the sole inventor of the '408 and '509 patents, was employed by TCI as President and General Manager from the early part of 1985 until January 15, 1990. He is now the President and a major stockholder in EPI.
Subterranean piping systems, such as those found at gasoline service stations, are installed and connected to fuel dispensing pumps. These systems pump fuel from storage tanks, generally below ground, to fuel dispensers ("gas pumps"), typically above ground. Leakage from these systems causes environmental pollution of the surrounding soil. Ground-water pollution, fires, and explosions can also be caused by leaking systems.
Both TCI and EPI are manufacturers of secondary containment systems for underground piping systems. Because federal and state environmental laws require retail gasoline stations to have secondary containment systems, this is a highly lucrative and competitive market. Environmental Protection Agency ("EPA") regulations will require all gasoline service stations to upgrade their underground containment systems by 1998. In 1988, the EPA estimated that the cost of complying with the regulations over the 30-year period ending in 2018 will be about $ 69 billion, including about $ 32 billion for component repair, replacements, and upgrades. By one estimate, about 700,000 of the approximately 1.6 million underground petroleum storage tanks and related piping systems subject to these regulations have yet to be upgraded. NT:6:175:5-12.
Underground secondary containment systems include a sealed secondary pipe system, which is installed around the primary pipelines, and a polyethylene containment sump. (See Figure 1. Figures immediately follow page 141 of this Opinion.)
The sump, which typically surrounds the dispensing pump, is an important part of the secondary containment system. It collects leaking product, provides access for servicing the pump and fittings, and acts as a riser to keep backfill away from the submersible pump and fittings. It is installed at a low point in the dispensing system so that any product that leaks from the system will flow through the secondary piping system and collect in the sump. The sump is sealed to prevent the entry of ground water and to prevent the escape of hazardous fluids and vapors.
On October 1, 1987, Webb filed United States Patent Application 07/103,206, entitled "Secondary Containment System." On October 6, 1988, Webb filed United States Patent Application Number 07/245,021, entitled "Secondary Containment System." This application was a continuation-in-part of United States Patent Application 07/103,206.
On May 8, 1989, Webb filed United States Patent Application 07/348,396 as a divisional application of United States Patent Application 07/254,021.
On July 1, 1989, a one-year employment agreement between Webb and TCI became effective. On January 15, 1990, Webb and Anthony Paladinetti, Jr., Vice President of Operations, left TCI. About January 31, 1990, TCI tendered Webb a proposed settlement agreement. On March 9, 1990, Webb entered into the post-termination settlement agreement (the "Settlement Agreement"). Webb assigned all rights in United States Patent Application 07/254,021 to TCI.
On April 16, 1990, at the request of Brancher, Webb loaned Aveda $ 60,000. The line of credit established for Aveda by TCI in 1989 was retired.
About May 20, 1990, TCI terminated its business relationship with Aveda. In May of 1990 TCI terminated Michael S. Gurnicz, its Vice-President of Marketing. On June 29, 1990, Brancher, Gurnicz, and Paladinetti advised TCI, though counsel, of the formation of Environ Products, Inc., which was to manufacture and sell tank sumps.
On July 24, 1990, TCI brought suit against Aveda, Environ, Brancher, Gurnicz, Paladinetti, and Webb in the United States District Court for the Eastern District of Pennsylvania (Civil Action 90-4788) alleging, among other things, breach of contract, theft of trade secrets, infringement of the '970 patent, and numerous RICO violations. Rescission of the settlement agreement with Webb was requested.
On July 25, 1990, Webb advised TCI, through counsel, that the action constituted a breach of the mutual release provisions contained in the settlement agreement, excusing Webb of any further obligation under the agreement.
On October 1, 1990, TCI brought suit against Aveda, Environ, Brancher, Gurnicz, Paladinetti, and Webb in the Chester County, Pennsylvania, Court of Common Pleas (Civil Action 90-08520) alleging, among other things, fraud and breach of contract. Rescission of the settlement agreement with Webb was sought.
On November 13, 1990, TCI filed United States Patent Application 07/611,435 as a divisional application of United States Patent Application 07/254,021.
On January 15, 1991, the Patent and Trademark Office ("PTO") granted TCI Trademark Registration 1,631,610, for "ENVIROFLEX," as a trademark for "plastic and rubber pipes for conveying gasoline, diesel fuel and chemicals."
On May 1, 1991, the federal action was dismissed without prejudice, conditioned upon TCI's paying the defendants' attorneys' fees. Total Containment, Inc. v. Aveda Manufacturing Corp., 1991 U.S. Dist. LEXIS 6006, 1991 WL 75192 (E.D. Pa. 1991).
On August 20, 1991, United States Patent Application 07/348,396 issued as United States Patent 5,040,408 (the '408 Patent). On October 29, 1991, United States Patent Application 07/611,435 issued as United States Patent 5,060,509 (the '509 patent). The '509 patent bears a terminal disclaimer disclaiming the portion of the patent term after August 20, 2008, the expiration date of the '408 patent. Except for the initial paragraph, which cross-references related applications, and the claims, the two patents are identical.
On December 24, 1991, this action was filed. On May 15, 1992, this court granted plaintiff's request for a preliminary injunction against the defendants. Total Containment Inc. v. Environ Products Inc., 1992 U.S. Dist. LEXIS 6788, 23 U.S.P.Q.2D (BNA) 1305 (E.D. Pa. 1992).
On July 15, 1993, EPI filed reexamination request 90/003,127, its second request for reexamination of the '408 patent. On March 10, 1994, EPI filed its third request for reexamination of the '408 patent, and its second request for reexamination of the '509 patent.
On April 19, 1994, the United States Patent Office issued Reexamination Certificate B1 5,040,408. Claim 1 was determined to be patentable as amended. Claim 2, dependent on amended claim 1, was determined to be patentable. The patentability of claims 3-12 was confirmed. New claims 13-19 were added and determined to be patentable.
On May 18, 1994, the PTO denied reexamination requests of March 10, 1994. PX 135.
On June 14, 1994, this court held that the doctrine of assignor estoppel prevented the defendants from attacking the '408 and '509 patents on the basis of prior art and obviousness. Total Containment Inc. v. Environ Products Inc., 1994 U.S. Dist. LEXIS 12151, 33 U.S.P.Q.2D (BNA) 1316 (E.D. Pa. 1994).
On September 7, 1994, TCI's counsel submitted additional information to the PTO for its consideration in reexamination of the '509 patent. PX 136(a). On September 20, 1994, the PTO issued Reexamination Certificate B1 5,060,509. Claims 1 and 10 were canceled. Claims 2, 5, 7 and 8 were determined to be patentable as amended. Claims 3, 4, 6, and 9, dependent on amended claims, were determined to be patentable. New claims 11-19 were added and determined to be patentable.
A. Jurisdiction and Venue
This court has jurisdiction over the patent infringement claim under 28 U.S.C. § 1338(a) and over the trademark claim under 15 U.S.C. § 1121(a). This court has pendent jurisdiction over the contract counterclaim under 28 U.S.C. § 1338(b). Kunkel v. Topmaster Int'l. Inc., 906 F.2d 693 (Fed. Cir. 1990). Venue is proper in this district under 28 U.S.C. § 1400(b).
1. Defendant's Allegations
Patent validity is not an issue in this case. In a memorandum dated June 14, 1994, this court held that the doctrine of assignor estoppel prevented the defendants from attacking the patents in suit on the basis of prior art and obviousness. Total Containment, 1991 U.S. Dist. LEXIS 6006, 33 U.S.P.Q.2D (BNA) at 1316. Thus, in this action the defendants cannot attack the validity of the asserted patents by claiming that the '021 application (filed Oct. 6, 1988) - the parent application of the applications that matured into the '408 and '509 patents - is not entitled to the filing date of the earlier '206 application (filed Oct. 1, 1987), and that on-sale activity that the defendants allege occurred before October 6, 1987, is a statutory bar to patentability under 35 U.S.C. § 102(b). Although barred from raising these issues to attack the validity of the asserted patents, they raise the same issues in a different context: inequitable conduct. Defendants allege that TCI engaged in inequitable conduct during reexamination of the '408 and '509 patents, based on the following facts. In May 1993, TCI's counsel received a copy of a document entitled "Secondary Containment for Underground Piping" (the "Bigbee Steel document"). The Bigbee Steel document (DX-203D) is a fax of a document that purports to be an undated TCI brochure describing and illustrating secondary containment systems. Page three of this document describes "Sump/Risers" and illustrates them with a drawing similar to Figure 3 of the '408 and '509 patents. One of the illustrations has a number of horizontal lines across the sump riser. Across the top of this document is a fax burn-in reading: "09/10/87 14:48 Bigbee Steel & Tank Co." EPI argues that this burn-in proclaims the date, time, and origin of the fax.
The PTO indicated that the claims that recite "score lines" (claim 12 of the '408 patent, claim 7 of the '509 patent, and various claims that were added during reexamination) were not entitled to a filing date of October 1, 1987, the filing date of the initial application, but only to a filing date October 6, 1988, the filing date of the continuation-in-part application.
EPI alleges that this document is evidence that sump risers containing score lines were offered for sale more than one year before October 6, 1988. Therefore, claims that recite score lines are barred by 35 U.S.C. § 102(b) (an "on-sale bar"). Defendant alleges that plaintiff's counsel committed inequitable conduct by not investigating this document and bringing it to the attention of the PTO during reexamination of the '408 and '509 patents.
In January, 1994, TCI filed a complaint for patent infringement against Buffalo Environmental Products in the Eastern District of Virginia. A trial was held in July, 1994 (the "Virginia trial"). EPI alleges that certain testimony by TCI's officers during this trial constituted an admission of on-sale activity during July and August, 1987. Defendant claims that TCI's counsel committed inequitable conduct by not bringing these alleged admissions to the attention of the PTO during reexamination of the '509 patent.
Applicants for patents have an "uncompromising duty" to prosecute patent applications in the PTO with candor and good faith. Precision Instrument Mfg. Co. v. Automotive Mach. Co., 324 U.S. 806, 818, 89 L. Ed. 1381, 65 S. Ct. 993 (1945). This duty extends to the applicant's representatives. FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 n.8 (Fed. Cir. 1987); Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty constitutes inequitable conduct.
If the applicant fails to observe its duty of candor in its dealings with the PTO, all claims of resulting patent are rendered unenforceable. Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988); LaBounty Mfg., Inc. v. United States Int'l. Trade Comm'n, 958 F.2d 1066, 1070 (Fed. Cir. 1992). Inequitable conduct in a second prosecution of the claims of an earlier-issued patent renders all the claims unenforceable. Hewlett-Packard Co. v. Bausch & Lomb, Inc., 882 F.2d 1556, 1563 (Fed. Cir. 1989).
Inequitable conduct includes an affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive. See J. P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1559 (Fed. Cir. 1984), cert. denied, 474 U.S. 822, 88 L. Ed. 2d 60, 106 S. Ct. 73 (1985). The party alleging inequitable conduct "must offer clear and convincing proof of the materiality of the prior art, knowledge chargeable to the applicant of the prior art and its materiality, and the applicant's failure to disclose the prior art, coupled with an intent to mislead the PTO." Molins, PLC, v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995); see also N.V. Akzo v. E.I. du Pont de Nemours & Co., 810 F.2d 1148 (Fed. Cir. 1987). A finding of inequitable conduct requires a finding of both materiality and intent to mislead.
Halliburton Co. v. Schlumberger Technology Corp., 925 F.2d 1435, 1439 (Fed. Cir. 1991) (internal citations omitted). Both intent and materiality must be proven by clear and convincing evidence. Braun, Inc. v. Dynamics Corp. of America, 975 F.2d 815, 822 (Fed. Cir. 1992).
Intent to deceive should be determined in light of the
realities of patent practice, and not as a matter of strict liability whatever the nature of the action before the PTO. A patentee's oversights are easily magnified out of proportion by one accused of infringement. Given the ease of which a relatively routine act of patent prosecution can be portrayed as intended to deceive, clear and convincing evidence of conduct sufficient to support an inference of culpable intent is required.
Northern Telecom, Inc. v. Datapoint Corp., 908 F.2d 931, 939 (Fed. Cir. 1990) (internal citations omitted).
3. The Bigbee Steel Document
As a threshold issue, the court must first consider whether the Bigbee Steel document is admissible evidence. Under the Federal Rules of Evidence, any written assertion offered to prove the truth of the matter asserted, other than one made by the declarant while testifying, is hearsay. Fed. R. Evid. 801(c). Hearsay is inadmissible unless it falls under an exception to the hearsay rule. Fed. R. Evid. 802. Federal Rule of Evidence 803, which sets forth the exceptions to the Hearsay Rule, provides that a "statement not specifically covered by any of the foregoing exceptions, but having equivalent circumstantial guarantees of trustworthiness, may under certain circumstances be admitted. . ." Fed. R. Evid. Rule 803(24).
As the proponents of this document, the defendants bear the burden of establishing its admissibility.
Defendants have not offered any circumstantial guarantees of trustworthiness for the fax burn-in. Neither the sender nor the recipient of the fax has been identified. No phone records - assuming this was a long-distance fax - that correlate with the alleged time and date of the fax have been introduced. Absent any such circumstantial guarantees, I conclude that the fax burn-in is insufficiently trustworthy, in and of itself, to be admissible to establish the date of this document. Compare Select Creations, Inc. v. Paliafito, Inc., 830 F. Supp. 1223, 1239 (E.D. Wis. 1993) (fax inadmissible where the proponent neither established the identity of the individual who allegedly sent the document nor offered evidence that the fax was the document allegedly received) with People v. Hagan, 145 Ill. 2d 287, 583 N.E.2d 494, 504, 164 Ill. Dec. 578 (Ill. 1991) (admission of fax was proper where there was testimony as to how the fax was sent and received, and the fax machine operator and addressee identified the fax). See also Tyson v. State, 873 S.W.2d 53, 61 (Tex. Ct. App. 1993) (a fax transmission is a "telephone conversation" and is authenticated as set forth in Tex. R. Crim. Evid. Rule 901(b)(6), which is identical with Fed. R. Evid. Rule 901(b)(6)).
4. The Alleged Admissions
EPI alleges that certain testimony by TCI's officers during the Virginia trial constituted admissions of on-sale activity occurring in July and August of 1987. It further claims that TCI's counsel committed inequitable conduct by not bringing these alleged admissions to the attention of the PTO during reexamination of the '509 patent.
The use of admissions in reexaminations is described in the Manual of Patent Examining Procedure ("MPEP"), which contains instructions examiners are required or authorized to follow in the normal examination of patent applications.
MPEP § 2216 (Rev. 14, Nov. 1992).
It is undisputed that TCI sold secondary containment systems before October 6, 1987. Whether these systems contained score lines and access lids, features of the patented invention, is a disputed question of fact. The defendants bear the burden of proving public use or sale by clear and convincing evidence. Dunlop Co. v. Kelsey-Hayes, 484 F.2d 407, 413 (6th Cir. 1973), cert. denied, 415 U.S. 917, 39 L. Ed. 2d 471, 94 S. Ct. 1414 (1974). The evidence consists of price lists, brochures, and the testimony of various witnesses testifying from memory as to what was being sold eight years ago. Many of the price lists and brochures are undated; frequently the detailed nature of the product cannot be determined from the description given in the document; and the witness are unsure as to exactly what was introduced when.
Defendant's witness, Michael Nolan, who was Vice-President of TCI from 1986 to 1989, and is now employed by a third party not involved in this action, explained the problem in his testimony. "This was eight years ago and when you are in a fast-moving business with new product development like we are in, you have to flush out what is irrelevant and as far as I'm concerned, [the date that a particular product was brought onto the market] was." NT-16:85:25-86:3. Striking a similar note, defendant's patent counsel testified that, "I think any organization would have difficulty in going back seven or eight or nine years and locating records."
The court finds that the defendants have not met their burden of proof. They have not offered clear and convincing evidence that public use or sale of sumps with features of the patented invention were made before October 6, 1987. Nor have they offered clear and convincing evidence that testimony at the Virginia trial constituted admissions that such sales were made.
Defendants' allegations also fail because the information was submitted to the PTO. On September 7, 1994, while the reexamination of the '509 patent was still pending, TCI's counsel submitted the Bigbee Steel document and the trial transcripts of the Virginia trial to the PTO. PX 136(a). On December 29, 1994, in the middle of this trial, the PTO returned the information to plaintiff's counsel. A cover letter headed "Decision Returning Improper Paper" and signed by Nicholas P. Godici, Director of Examining Group 2600 stated:
The paper with accompanying exhibits is an improper submission under 35 USC 301 and likewise under 37 CFR § 1.501 because it is not limited to the submission of prior art patents and printed publications and is being returned herewith. The comments and exhibits concerning litigation and the public use, on sale issue are clearly not explanations of the pertinency or the manner of applying any prior art to at least one claim of the patent. It is also noted that public use and on sale issues are not appropriate for reexamination.
The case at bar is readily distinguishable from Precision Instrument. In Precision Instrument evidence of false dates intended to antedate a reference came to counsel's attention during an interference proceeding involving an application that matured into the patent in suit. Precision Instrument, 324 U.S. at 808. In the case at bar plaintiff's counsel received information of alleged possible on-sale activity while a request for reexamination was pending.
In May, 1993, both the '408 and '509 patents were issued patents. EPI requested reexamination of both patents in April, 1993; the PTO granted the request in June, 1993. TCI's counsel received the Bigbee Steel document during an interference proceeding that did not involve an application that matured in either the '408 or '509 patents. The proceeding concerned an unrelated application, which matured in United States Patent 4,971,477, a patent not involved in this action.
As the party who alleges inequitable conduct arising from a failure to disclose information to the PTO, EPI must offer clear and convincing evidence of the materiality of the information. Molins, 48 F.3d at 1178; FMC, 835 F.2d at 1415. The information that the PTO may consider during reexamination is limited by statute to "prior art consisting of patents and printed publications."
35 U.S.C. §§ 301-302. The Rules of Practice state that in requesting reexamination "any person may cite to the Patent and Trademark Office in writing prior art consisting of patents or printed publications. . . ." 37 C.F.R. § 1.501. Patents "will be reexamined in the basis of patents and printed publications."
37 C.F.R. § 1.552(a). Other questions will not be resolved during reexamination proceedings. 37 C.F.R. § 1.552(c). The MPEP states that "rejections on prior art in reexamination proceedings may only be made on the basis of prior patents or printed publications." MPEP § 2258.
Rejections will not be based on matters other than patents or printed publications, such as public use or sale, inventorship. 35 U.S.C. 101, fraud, etc. A rejection on prior use or sale, insufficiency of disclosure, etc, cannot be made even if it relies upon a prior patent or printed publication.
Id. (internal citations omitted) (emphasis added). Because the PTO is prevented both by statute and by its own rules and regulations from considering evidence of on-sale activity, even if it relies on a patent or a printed publication, the Bigbee Steel document is not material to the reexamination of the '408 and '509 patents.
In Section 2216, the MPEP states that "an admission by the patent owner of record in the file or in a court record may be utilized in combination with a patent or printed publication". Defendants rely on this statement for the proposition that the PTO will consider admissions of prior sales during reexamination proceedings. Decisions by the Board of Patent Appeals and Interferences are not consistent with this interpretation. In Ex parte McGaughey, 6 U.S.P.Q.2D (BNA) 1334 (Bd. Pat. App. & Int. 1988), an expanded panel of the Board that included then-Commissioner Quigg held that an admission of prior art set forth in the patent undergoing reexamination could be considered during reexamination. In response to a dissent that argued that the Board had exceeded its statutory authority, the majority emphasized the limited scope of its holding:
This is not to say that the Office has been willing to open reexamination to any type of evidence that is available to the examiner during initial examination. The Commissioner has construed section 305 conservatively. Facts, including admissions which have already been established in the record, have been authorized for use in reexamination proceedings. The PTO has not authorized other types of evidence such as on-sale bars, public use issues or issues relating to fraud. Thus, the implication by the dissent that this decision will result in such issues being authorized in unfounded.
Ex parte McGaughey, 6 U.S.P.Q.2D (BNA) at 1338 (emphasis added) (internal citation omitted).
The Board has held that McGaughey is limited to prior art established in the patent record by unequivocal admissions. "The issue resolved in McGaughy was confined to whether prior art established in the patent record by an unequivocal admission may be relied upon to support a rejection during a reexamination proceeding involving that patent." Ex parte Natale, 11 U.S.P.Q.2D (BNA) 1222, 1224-1225 (Bd. Pat. App. & Int. 1989) (emphasis in original). Consequently, "the examiner has no authority to engage in a fact-finding endeavor to establish the existence of a public use under 35 U.S.C. § 102(b) during a reexamination proceeding." Id. at 1226.
In Natale the plaintiff vigorously denied that there was on-sale activity that constituted prior art under 35 U.S.C. § 102(b). The examiner attempted to piece together language extracted from litigation-related documents to establish prior art. The Board found that "by no stretch of the imagination can the evidence relied upon by the examiner be considered to establish prior art under 35 U.S.C. § 102(b) by an unequivocal admission." Id. at 1225.
Whether the holding of McGaughey should be extended "to permit reliance upon prior art established by admissions during a reexamination proceeding and prior art established by admissions in external court proceedings" was not addressed by the Board in Natale. Because the Board found that the evidence relied upon by the examiner was not an unequivocal admission, it did not have to address this issue. Id. at 1225.
But there is even stronger evidence available that the PTO will not consider the information that the defendants' claim was improperly withheld from the PTO. The information was submitted to the PTO, but the PTO rejected it with an unequivocal statement that "public use and on sale issues are not appropriate for reexamination."
The Patent Office is an administrative agency to which Congress has delegated its constitutionally granted power to issue patents. In the exercise of its duties, the PTO has made regulations and established procedures that carry out its mandate, under 35 U.S.C. §§ 301-302, that only "prior art consisting of patents and printed publications" may be considered during reexamination. Acting in accordance with these regulations and procedures, the PTO returned the plaintiff's submission with a statement that "public use and on sale issues are not appropriate for reexamination."
Simply put, the defendants' assertion - that the information returned to the plaintiff by the PTO is material to reexamination -is an assertion that the PTO's rules and regulations do not properly interpret the law. For this court to find that the plaintiff committed inequitable conduct, it would not only have to find that the PTO's rules and regulations do not properly interpret the law, but that the plaintiff was aware the PTO's interpretation was incorrect. Thus, the "uncompromising duty" of Precision Instrument required it to demand that the PTO consider the submitted information and perhaps even required it to bring suit against the PTO to compel it to do so. The court declines to hold that the "uncompromising duty" of Precision Instrument requires such actions.
"An agency's interpretation of its own regulations should be accepted by the courts unless it is shown to be unreasonable or inconsistent with statutory authority." Fairfax Nursing Center v. Califano, 590 F.2d 1297, 1301 (4th Cir. 1979).
The defendant has not provided any compelling reasons for finding that the PTO's regulations and procedures are unreasonable or inconsistent with statutory authority. I find that the information submitted by the plaintiff was properly rejected by the PTO as "inappropriate" and, therefore, is not material to the reexamination.
A finding of inequitable conduct requires a finding of both materiality and intent. Molins, 48 F.3d at 1178. "Absent materiality, inequitable conduct for failure to disclose cannot lie." Northern Telecom, 908 F.2d at 940. Because the court has found that none of the allegedly withheld information was material to the reexamination proceedings, consideration of the intent prong is unnecessary. However, in the interest of ultimate judicial economy the court will address this issue. Should it be determined on appeal that the allegedly withheld information was material to reexamination, there will be no need for a remand because the court has already addressed the question of intent.
Clear and convincing evidence is required to support an inference of culpable intent. Id. at 939. The information that the defendant alleges was withheld was submitted during reexamination of the '509 patent. Consequently, there was no intent to deceive the PTO by withholding this information.
That the plaintiff chose not to apply for reissue cannot be taken as evidence of intent to deceive. In a 1988 opinion written by then-Chief Judge Markey, the Federal Circuit forcefully rejected this argument:
[A] suggestion that patentees should abandon their suits, or disclaim or reissue, in response to every charge of inequitable conduct raised by an alleged infringer would be nothing short of ridiculous. The right of patentees to resist such charges must not be chilled to extinction by fear that a failure to disclaim or reissue will be used against them as evidence that their original intent was deceitful. . . . A requirement for disclaimer or reissue to avoid adverse inferences would merely encourage the present proliferation of inequitable conduct charges.
Kingsdown Medical, 863 F.2d at 875. This court finds that the defendant has failed to establish intent by clear and convincing evidence.
7. Defendant's Conduct During Reexamination
Although the plaintiff's counsel did not withhold material information from the PTO during reexamination of the '408 and '509 patents, the same cannot be said for the defendant. The facts are not in dispute. On April 14, 1993, EPI filed reexamination request 09/003,030 with the PTO for reexamination of the '509.
Exhibit 18 of this was an undated brochure entitled "Instructions for the Installation of Hofit Chambers" (the "Hofit brochure") published by Hofit, a kibbutz located in the Jordan Valley of Israel. Across the bottom of the brochure was printed "Hofit, Kvutsat Kinneret, Jordan Valley, Israel. Tel: 06-759530/1/2, Fax: 06-75918." Exhibit B of this submission was a declaration signed by one E. Friedler, export manager of Hofit Plastic Products, indicating that the attached brochure "was published and distributed by HOFIT in 1980 on a non-confidential basis without restriction as to redistribution." In its request, defendant made the following representation:
Another prior art document which is submitted herewith is a printed publication identified herein as the HOFIT PRINTED PUBLICATION. Enclosed herewith as EXHIBIT B is a Declaration by an employee of HOFIT which sets forth the circumstances authenticating the HOFIT PRINTED PUBLICATION as being available in 1980, which is one year earlier than the earliest date to which the '509 PATENT would be entitled.
Reexamination File history of U.S. Patent 5,040,509, at 4. The PTO granted the request for reexamination on June 7, 1993. Id. at 151. An office action was mailed on July 19, 1993, rejecting all claims the '408 patent. Id. at 220.
Plaintiff's attorney responded on August 4, 1993. Included in this response were translations from the 1990 and the 1993 editions of "Golden Pages Kibbutzim Directory," Israeli telephone directories which plaintiff's attorney had examined in the Library of Congress. These directories indicated that the telephone number on the brochure was Hofit's number in 1993, but that Hofit's telephone number was different in 1990. Id. at 50-52.
In an Office Action dated August 31, 1993, the PTO concluded that the Hofit brochure was not available as prior art under 35 U.S.C. § 102. Id. at 517.
While reexamination was pending, defendant received the following letter, dated October 29, 1993, from one Daniel Peremen, an EPI sales agent in Israel.
Further to your letter 10/14/1993, I visited yesterday the Hofit factory and met Mr. Friedler and Mr. Stein - sales manager.
The Hofit factory is located near the Sea of Galilea and belongs to a kibbutz - a cooperative commune, unique to Israel, in which the members share all the property and all the labor. Most of the workers are rotated every few years to other jobs in the kibbutz and therefore it is very difficult to reconstruct information related to 1980 or even 1986.
Mr. Friedler was very cooperative and spent a long time with me, searching through all the old files and records, but unfortunately all the records prior to 1987-1988 have been destroyed and it was impossible to find exact information on trade shows and correspondence with customers abroad, prior to those years.
It is impossible to identify the year in which the brochures were printed. However we can have some indication from the phone numbers specified in it. The phone numbers of Hofit were changed two times: Around 1986, the area code was changed from 067 to 06 (the 7 was added to the number) Therefore all brochures carrying phone number 067-56731/2 are prior to 1986/87. All brochures with 06-756731/2 were printed later. In 1993, the phone number was changed again to 06-759530/1/2.
[MISSING TEXT] PX 129.
None of the information contained in this letter was transmitted to the PTO.
On March 10, 1994, additional reexamination requests were submitted to the PTO. Copies of earlier Hofit brochures, some of which were in the files of the Association of Rotational Molders ("ARM"), a trade association located in Chicago, Illinois, were submitted to the PTO. Defendant made the following representation in this request: "Note specifically, the HOFIT PRINTED PUBLICATIONS that were received in June, 1985, by the Association of Rotational Molders (ARM) as shown by the date stamp on the Application by HOFIT." Reexamination request 90/003,355 at 3. "Several of the HOFIT PRINTED PUBLICATIONS bearing 067-56731-2 were received on or about June 21, 1985, sufficiently early to be an effective reference against the '509 PATENT and its critical date of October 1, 1987." Id. at 4. "The ARM file clearly documents the receipt by that organization of the HOFIT PRINTED PUBLICATIONS enclosed therein in June, 1985." Id. at 5. Because the defendant wanted to use the telephone numbers to establish the publication dates for these earlier brochures, a declaration signed by Peremen explaining the relevance of the telephone numbers was included in this submission. An affidavit from Friedler was also included.
At the time these representations were made to the PTO, EPI was aware of two facts that were not made known to the PTO: (1) ARM did not date-stamp its documents, so the date the documents had been received by ARM could not be determined, and (2) written authorization from Friedler had been required before ARM would release the Hofit file. NT-16:23:1-29:4. Thus, EPI knew there was nothing in the ARM file to support its representation that the ARM file clearly documented that ARM had received the brochures on or about June 1985. It was also aware that the brochures in the ARM file might not have been "publicly accessible" and thus might not qualify as printed publications under 35 U.S.C. § 102(b). Constant v. Advanced Micro-Devices, Inc., 848 F.2d 1560, 1568 (Fed. Cir. 1988), cert. denied, 488 U.S. 892, 102 L. Ed. 2d 218, 109 S. Ct. 228 (1988). These facts were not given to the PTO.
The publication date of a printed publication determines whether it is prior art to the claims undergoing reexamination. 35 U.S.C. § 102(b); Constant, 848 F.2d at 1568. Dissemination and public accessibility are the keys to the legal determination whether a prior art reference was "published." Id. Any information that would help to establish the publication date or the dissemination and public accessibility of an alleged printed publication is material to the reexamination. Thus, the withheld information was material to the reexamination proceedings.
Defendants' patent counsel conceded at trial that he had an "uncompromising duty" during the reexamination proceedings, and that he was aware of the withheld information. NT-15:89:20-23. This is a patent attorney with over thirty-five years experience in the preparation and prosecution of patent applications, who deals with the PTO "on a daily and weekly basis." NT-15:78:11-13. He was certified to this court an expert witness on inequitable conduct and testified extensively how those who have matters pending before the PTO have an "uncompromising duty" to submit all facts relevant to such matters to the PTO. He knew or should have known of the materiality of the withheld information.
Intent to mislead is rarely admitted or obvious. It must be inferred in most cases from surrounding circumstances. Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1191 (Fed. Cir. 1993). At the time of the defendant filed the reexamination requests, the '408 and '509 patents had been asserted against it in this action. Defendant's obvious objective was to have the PTO cancel the claims of the '408 and '509 patents, thus mooting this action.
Defendant's patent counsel stated at trial that he had relied on the Friedler declaration in making his representations to the PTO that ARM had received the Hofit brochures on or about June 21, 1985. Friedler is a resident of Israel. ARM is located in Chicago. There is no evidence that Friedler had personal knowledge of the ARM files. Friedler's declaration does not represent that the brochures had been received by ARM before Oct. 1, 1987.
Counsel also knew that ARM did not date-stamp its documents.
From these circumstances, intent to mislead can be inferred. Consequently, the court finds that during the reexamination proceedings the defendant withheld material information from the PTO, that the information was known to defendant, that defendant's counsel knew or should have known the information was material to the reexamination proceedings, and that the information was withheld with the intent to mislead the PTO.
A third-party reexamination requestor is apparently not expressly required to exercise candor and good faith in its dealing with the PTO. 37 C.F.R. § 1.555(a), which deals with information material to patentability in reexamination proceedings, only applies to the patent owner and those associated with it.
Although the defendant's conduct during the reexamination proceedings does not conform with the duty of candor and good faith, there appears to be no legal requirement that it do so.
However, the court cannot condone the defendants' conduct during reexamination. It is in the public interest that all parties involved in a reexamination make all information in their possession that is material to patentability available to the PTO.
A patent by its very nature is affected with a public interest. The public interest is best served, and the reexamination occurs when, at the time of reexamination proceeding is being conducted, the Office is aware of and evaluates the teachings of all information material to patentability in a reexamination proceeding.
Failure of a reexamination requestor who is not the patent owner to comply with the duty of candor and good faith can be especially detrimental to the patent system. When a patent owner fails to exercise candor and good faith during a reexamination proceeding, this fact will almost inevitably be brought out during later litigation. However, when a reexamination requester other than the patent owner fails to exercise candor and good faith during a reexamination proceeding, the fact might never be discovered. If, by withholding material information, the requestor is successful in having the claims of its opponent's patent canceled, any pending litigation would be dismissed. The patent owner would not have an opportunity to discover the withheld information in subsequent litigation.
Defendants bear the burden of establishing inequitable conduct by offering "clear and convincing proof of the materiality of the prior art, knowledge chargeable to the applicant of the prior art and its materiality, and the applicant's failure to disclose the prior art, coupled with an intent to mislead the PTO." Molins, 48 F.3d at 1178 (Fed. Cir. 1995). The court finds that the defendants have failed. The admissibility of the Bigbee steel document has not been established. They have not established that admissions of on-sale activity were made. They have not shown that the allegedly withheld information was material to reexamination. Intent to mislead the PTO has not been demonstrated. They have failed to establish that the information allegedly withheld during reexamination of the '509 patent was, if fact, withheld.
The court finds that during the reexamination proceedings the defendant knowingly withheld material information from the PTO with an intent to deceive.
C. Claims Added During Reexamination
1. Assignor Estoppel with Respect to the Claims Added During Reexamination
TCI has asserted twenty claims, ten of which were added during reexamination. The defendants assert that some of the claims added during reexamination are invalid because they violate 35 U.S.C. § 305. TCI argues that, in addition to preventing the defendant from attacking the validity of the original claims, assignor estoppel also prevents the defendant from attacking the validity of the claims added during reexamination.
35 U.S.C. § 305, entitled "Conduct of Reexamination Proceedings," states in relevant part that
in any reexamination proceeding under this chapter, the patent owner will be permitted to propose any amendment to his patent and a new claim or claims thereto, in order to distinguish the invention as claimed from the prior art cited under the provisions of section 301 of this title, or in response to a decision adverse to the patentability of a claim of a patent. No proposed amendment or new claim enlarging the scope of a claim of the patent will be permitted in a reexamination proceeding under this chapter.
Assignor estoppel prevents an assignor from attacking the validity of the patent.
Assignor estoppel is an equitable doctrine that prevents one who has assigned rights to a patent (or a patent application) from later contending that what was assigned is a nullity. The estoppel also operates to bar other parties in privity with the assignor, such as a corporation founded by the assignor. The estoppel historically has applied to invalidity challenges based on "novelty, utility, patentable invention, anticipatory matter, and state of the art."
Diamond Scientific Co. v. Ambico, Inc., 848 F.2d 1220, 1224 (Fed. Cir. 1988) (internal citation omitted). The doctrine prevents an injustice to the assignee.
It is the implicit representation by the assignor that the patent rights he is assigning (presumably for value) are not worthless that sets the assignor apart from the rest of the world and can deprive him of the ability to challenge the validity of the patent. To allow the assignor to make that representation at the time of the assignment (to his advantage) and later repudiate it (again to his advantage) could work an injustice against the assignee.
Id. "The primary consideration is now applying the doctrine is the measure of unfairness and injustice that would be suffered by the assignee if the assignor were allowed to raise the defenses of patent invalidity." Id. at 1225.
TCI, the assignee, alone is responsible for the claims added during reexamination. Mr. Webb assigned the application that eventually led to the '408 and '509 patents on March 9, 1990, well before the original patents issued; there is no evidence that he was involved in the prosecution after that date. In assigning the application to TCI, he made no representation that claims added during reexamination did not violate 35 U.S.C. § 305. Nor is he responsible for any of the actions taken during reexamination. He was not the patent owner during this period, and there is no evidence that he was involved in the prosecution that led to the added claims.
In asserting that the claims added during reexamination violate 35 U.S.C. § 305, Mr. Webb is not "contending that what he assigned is a nullity." He is not contradicting his declaration that he believed that he was the original, first, and sole inventor of the subject matter claimed in the application that he assigned to TCI. The claims carried over from the original patent are not being challenged. Only the claims added during reexamination are being challenged, and they are being challenged on a limited basis: violation of 35 U.S.C. § 305. No challenge on the basis of novelty, utility, patentable invention, anticipatory matter, or state of the art is being made; these issues do not enter into the inquiry.
The only thing that the assignee can lose are claims, obtained by its own actions, that violate 35 U.S.C. § 305. Allowing the defendant to challenge these claims on this limited basis would not be unfair or "an injustice to the assignee." I conclude that, when claims have been added or amended during a reexamination carried out after the patent or the patent application has been assigned, and when the assignor was not involved in obtaining the added or amended claims, assignor estoppel does not prevent the assignor from asserting that the claims added or amended during reexamination violate 35 U.S.C. § 305.
TCI has asserted claims 3, 5, 6, and 8-19 of the '408 patent. Claims 3, 5, 9, 17, 18, and 19 are independent claims. Claims 6 and 8 depend on claim 5. Claims 10-16 are dependent, directly or indirectly, upon claim 9. Claim 3 reads as follows:
a) a hollow sump base including side walls and an upper surface having an opening therein;
b) a generally cylindrical riser extension removable mounted on the upper surface of said sump base in surrounding relationship thereto and including side walls, a lower opening in communication with said opening in said sump base, and an upper opening;
c) an access cover, mounted on the top of said riser extension over said upper opening and including an aperture therein, for enabling access to the interior of said sump apparatus;
d) an access lid, mounted on said access cover over said aperture in said cover, for permitting observation of the interior of said sump apparatus;
e) the outer surface of the side walls of said riser extension include [sic] score lines therein for assisting in sizing the riser portion.
Claim 5, with bracketed material and paragraphing added, reads as follows:
A sump-riser apparatus for a pipeline system, said apparatus comprising[:]
[(a)] a hollow sump base including an upstanding annular portion disposed on an upper surface thereof in surrounding relationship to an opening formed in said surface;
[b)] a hollow detachable riser extension mounted on said sump base that, when said riser extension is inverted, said riser extension is receivable within said sump base;
[c)] and a cover for said riser extension;
said riser extension including an annular step portion at the base thereof which fits over and around said standard annular portion of said sump base and which is of a size and shape relative to said cover to enable receipt thereof of said cover.
Claim 9, with bracketed material added, reads as follows:
A sump-riser apparatus for a pipeline system, said apparatus comprising:
[a)] a hollow sump base including side walls and an upper annular wall portion extending inwardly from the top of said side walls to define an upper surface having a central opening therein;
[b)] a generally cylindrical riser extension removably mounted on the upper surface defined by the upper wall portion of said sump base in surrounding relationship to said central opening in said upper wall portion and including side walls, a lower opening in communication with said central opening and an upper opening;
[c)] an access cover, mounted on the top of said extension riser over said upper opening and including an aperture therein, for enabling access to the interior of said sump-riser apparatus; and
[d)] an access lid, mounted on said access cover over said aperture in said cover, for permitting observation of the interior of said sump apparatus.
Claim 17 is identical to claim 9 except that it also recites that the access lid is adapted to be positioned below a manhole cover. Claim 18 is identical to claim 9 except that it also recites that the upper surface and the side walls of the sump base are formed from one piece. Claim 19 is identical to claim 9 except that "exterior surface" is used in place of "upper surface" in a) and b).
TCI has asserted claims 1, 7, 11, 16, and 19 of the '509 patent. Claim 1 of the '509 patent was canceled during reexamination. This court has ruled that the doctrine of assignor estoppel does not apply to claims canceled during reexamination proceedings because an equitable doctrine may not circumvent the operation of a statute. Total Containment Inc. v. Environ Products Inc., 1995 U.S. Dist. LEXIS 2364, 34 U.S.P.Q.2D (BNA) 1254 (E.D. Pa. 1995). Claim 1 is without legal effect and cannot be asserted in this action.
In the reexamined patent, claims 7, 11, 16, and 19 are independent claims. Claim 7, as rewritten in independent form following cancellation of claim 1, reads as follows:
a) a hollow sump base having a bottom end and a top end including at least one side wall forming a substantially tubular housing extending between said bottom end and said top end;
b) a generally tubular hollow riser section located at the top end of said sump base and extending therefrom and having a hollow interior;
c) said riser section being generally smaller in width than said sump base;
d) a cover mounted over said riser section and having means for accessing the interior of said riser section and said hollow sump base;
e) said sump base including an opening in said at least one said side wall so that a conduit may ...