Mcle Self-study Article
| Publication year | 2020 |
| Author | Rex Hwang |
Rex Hwang
Jeffer Mangels Butler & Mitchell LLP
Shenel Ozisik
Jeffer Mangels Butler & Mitchell LLP
(See end of this article for information on receiving 1.0 hour MCLE self-study credit in ethics. )
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Ethics plays an important role in patent law, which typically comes to the forefront when a patentee is accused of inequitable conduct during litigation. Inequitable conduct is a judicially-crafted doctrine that evolved from the "unclean hands" doctrine. As patent practitioners know (or should know), inequitable conduct embraces a relatively broad range of conduct, including not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts, but also the nondisclosure of information to the PTO. The doctrine is a powerful defense in a patent infringement lawsuit because inequitable conduct will render an entire patent unenforceable for all actions, not just the action where the issue was raised. Moreover, under the infectious unenforceability doctrine, inequitable conduct associated with one patent may render other related patents unenforceable if the inequitable conduct bears an "immediate and necessary relation" to the enforcement of the related patent.1 Because of its wide reach and devastating impact, the remedy for inequitable conduct has been described as the "atomic bomb" of patent law.2
Before 2011, almost every patent infringement case involved some allegations of inequitable conduct. Indeed, the Federal Circuit described the habit of charging inequitable conduct in almost every patent case as "an absolute plague."3 This, in turn, caused patent prosecutors to "bury PTO examiners with a deluge of prior art references, most of which have marginal value," to protect themselves from a claim of inequitable conduct. But that all seemingly changed after the Federal Circuit's en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011).
As explained in Therasense, "[w]hile honesty at the PTO is essential, low standards for intent and materiality have inadvertently led to many unintended consequences, among them, increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality."4 As such, the Therasense court expressly sought to "tighten[] the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public."5
In order to achieve its goal, the Therasense court held that to prevail on a claim of inequitable conduct, an accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.6 Gross negligence, and negligence under a "should have known" standard, are not enough to satisfy the intent requirement.7 Moreover, in a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.8 To meet the clear and convincing evidence standard, the specific intent to deceive must be the single most reasonable inference able to be drawn from the evidence.9 In addition, intent and materiality are separate requirements. In this regard, the Therasense court held that the materiality required to establish inequitable conduct is but-for materiality.10 Thus, when an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.
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Following Therasense, most litigants stopped asserting the defense of inequitable conduct as a matter of course. In fact, based on some feedback received by the authors, some patent practitioners apparently believed that the inequitable conduct defense was all but dead. But as demonstrated below, inequitable conduct is alive and well, and can still be a powerful defense in a patent infringement case given the right set of circumstances.
GS CleanTech Corp. v. Adkins Energy LLCIn this case, GS CleanTech Corp. and Greenshift Corporation (collectively, "CleanTech") filed a patent infringement lawsuit against Adkins Energy LLC ("Adkins") for allegedly infringing four related patents (the "patents-in-suit") directed to the recovery of oil from a dry mill ethanol plant's byproduct, called thin stillage.11
The inventors for the patents-in-suit are David Cantrell and David Winsness (collectively, the "Inventors").12 Cantrell founded a company called Vortex Dehydration Technology ("VDT") in 2000, and Winsness became the CTO of VDT in 2002.13 As of 2002, VDT designed oil recovery products using equipment from Alfa Laval AB. Greg Barlage was an Alfa Laval employee that that worked together with the Inventors.14
Relevant here, VDT had a business relationship with Agri-Energy LLC ("Agri-Energy"), which operated a dry-mill ethanol plant in Minnesota.15 In June 2003, Cantrell sent an email to Agri-Energy informing it that VDT's oil recovery system could be useful in ethanol plants.16 Based on that representation, VDT used Barlage to perform oil recovery tests on Agri-Energy samples later that month.17 Barlage wrote a report regarding those tests in June 2003 ("June 2003 Report").18 Barlage then performed more testing in July 2003 ("July 2003 Test").19 Around this time, a VDT employee was directed to prepare a drawing of the ethanol recovery system, which was completed by the end of July 2003 ("Ethanol Oil Recovery System Diagram").20 Notably, the VDT employee understood that the diagram was intended to become a sales drawing.21
On August 1, 2003, Cantrell emailed Agri-Energy ("August 2003 Email") a proposal for VDT's oil recovery system ("July 2003 Proposal").22 The July 2003 Proposal advised Agri-Energy about the system, how it would work, what it was comprised of, where it should be placed, what it would accomplish, and the cost of operation. The July 2003 Proposal also provided Agri-Enegy with a "no-risk trial," where Agri-Energy could use the system for sixty days for free, and then purchase the system thereafter if desired.23
On August 19, 2003, Cantrell presented the proposal to Agri-Energy's Board of Directors in person.24 In that meeting, Cantrell stated that his system "worked" and that it would generate additional income for Agri-Energy.25 On that same day, Winsness informed VDT shareholders about Cantrell's meeting, stating that the Inventors "expect to have an order in the near future."26 On August 27, 2003, Cantrell informed VDT's chairman that "we have made an offer to Agri-Energy."27 Agri-Energy did not accept the July 2003 Proposal.28 However, the parties continued to talk, and the VDT system was eventually installed in the Agri-Energy plant in May 2004.29
In February 2004, the Inventors contacted an attorney, Andrew Dorisio, about preparing a patent application for the VDT system.30 Dorisio informed the Inventors about the on-sale bar of 35 U.S.C. § 102(b), which required that the claimed invention not be sold or offered for sale more than one year before the application filing date, and asked if such an offer had been made.31 In response, the Inventors provided Dorisio with test results from June 2003 and described the July 2003 Tests.32 They, however, did not tell Dorisio about the July 2003 Proposal or the Ethanol Oil Recovery System Diagram.33
On August 17, 2004, Dorisio filed a provisional application covering the VDT system. This set the critical date for the on-sale bar at August 17, 2003.34 In May 2005, Dorisio filed a non-provisional application claiming priority to that provisional filing.35
In July 2005, Dorisio provided the Inventors with a draft clearance opinion, including his understanding that the Inventors had reduced their claimed invention to practice in June 2003.36 Dorisio intended to use this information to swear behind another relevant prior art reference that he was aware of. In 2006, the Inventors joined CleanTech, which acquired VDT's ethanol oil recovery method applications.37
In March 2008, Winsness retained a new law firm, Cantor Colburn LLP, to prosecute the patent applications.38 Around that time, Peter Hagerty, an attorney at Cantor Colburn, again notified the Inventors of the on-sale bar as well as the Inventors' obligation of candor toward the PTO.39 By September 2008, Cantor Colburn was aware of Barlage's June and July 2003 tests.40
In May 2009, a potential investor in CleanTech conducted due diligence and sought information about the company's patents, including information relevant to the on-sale bar.41
The Inventors denied having any relevant information.42 In this same month, Cantor Colburn informed the PTO about feasibility testing that occurred in May 2004, but failed to inform the PTO about Barlage's June and July 2003 testing, the June 2003 Report, the Ethanol Oil Recovery System Diagram, or the July 2003 Proposal.43 One of the patents-in-suit issued in October 2009.44
Starting in 2009 and continuing through 2014, CleanTech filed multiple patent infringement lawsuits against Adkins.45 These actions were subsequently combined into a multidistrict litigation case.
In March 2010, Winsness gave a signed copy of the July 2003 Proposal to Cantor Colburn.46 Approximately three months later, Hagerty submitted an Information Disclosure Statement ("IDS") to the PTO including the July 2003 Proposal.47 In the IDS, Hagarty claimed that the patented method was "never disclosed, carried out, or performed" more than one year before the filing date and that the July 2003 Proposal was irrelevant.48
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In May and June 2010, Winsness met with a company that stated that it had reason to believe that the patents-in-suit were invalid due to an offer in violation of the on-sale bar.49 Shortly thereafter, Winsness made an unannounced trip to Agri-Energy and offered to provide Agri-Energy with a royalty-free license for CleanTech's ethanol oil recovery system...
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