Last week in Luv n’ Care, Ltd. v. Laurain, the Federal Circuit put the lower court in time out and probably made Eazy-PZ, LLC (EZPZ) cry just a little bit harder. In this precedential decision involving U.S. Patent No. 9.462,903, the appellate panel vacated a Western District of Louisiana judgment of no inequitable conduct and affirmed the lower court’s judgment of unclean hands. However, the panel also vacated the lower court’s grant of partial summary judgment of invalidity. The parties will now have to get back to the table (or bench) to find out whether the ʼ903 patent is unenforceable and/or valid, and whether EZPZ’s behavior will result in further punishment.
The Invention
The ʼ903 patent describes and claims a surface contact self-sealing integrated tableware and dining mat. As shown in FIG. 5 of the ʼ903 patent, the self-sealing integrated tableware and dining mat includes a rubber-like planar portion 20 surrounded by an outer edge 22. A receptable 32 lies on the upper surface 26 and has a raised perimeter 28 defining at least one concavity 30 (e.g., in FIG. 5, the receptable 32 includes an oval portion 32B and a pair of bowls 34). The mat has an undersurface 24 disposed for sealable contact with an underlying surface to prevent lateral displacement of the mat. In other words, a toddler can’t move or flip the mat over without peeling the undersurface 24 from the underlying surface starting first at the outer edge 22.
The Back Story
Almost eight years ago, Luv n’ care, Ltd. and Nouri E. Hakim (LNC) sued Lindsey Laurain and EZPZ in the District Court of the Western District of Louisiana under the Lanham Act (and Louisiana’s Unfair Trade Practices and Consumer Protection Law) based on what LNC alleged to be “acts of unfair competition” by EZPZ. LNC also sought declaratory judgment that U.S. Design Patent No. D745,327 is invalid, unenforceable, and not infringed. A few months later, when the ʼ903 patent was issued and assigned to EZPZ, LNC added the newly issued patent to its declaratory judgment claim. EZPZ counterclaimed against LNC for infringement of the ʼ327 and ʼ903 patents and also alleged copyright, trademark, and trade dress infringement, violation of LUTPA, and unjust enrichment.
LNC moved for partial summary judgment of invalidity of the ʼ903 patent, which the district court granted. In a bench trial, which involved only LNC’s allegations of inequitable conduct of the ʼ903 patent and unclean hands by EZPZ, the court found that LNC did not meet its burden with respect to unenforceability of the ʼ903 patent, but that EZPZ was barred from obtaining relief on any counterclaims remaining in the suit due to unclean hands based on litigation misconduct. Ouch.
The Appeal
The issues on appeal were numerous:
- Whether the district court erred in finding that the doctrine of unclean hands bars EZPZ from obtaining relief on its claims;
- Whether LNC failed to prove the ’903 patent is unenforceable due to inequitable conduct;
- Whether the claims of the ’903 patent are invalid as obvious; and
- Whether the district court erred in denying LNC attorney fees and costs.
To dispose of the most straightforward issue first (with respect to this specific appeal only), the lower court’s obviousness finding was vacated and remanded because, according to the appellate panel, genuine disputes of material fact are evident from the record. In other words, obviousness was not ripe for summary judgment.
Turning back to the first issue, the appellate panel found no error in the district court’s holding and affirmed. More specifically, the panel rejected EZPZ’s argument that that EZPZ’s litigation misconduct did not rise to the level of “unconscionable acts” or have the requisite nexus to the ’903 patent infringement claims. In this vein, EZPZ’s misconduct, which included, for example, (a) lack of disclosure of patent applications related to the ’903 patent (at least one of which involved claim construction relevant to a disputed claim term in the ʼ903 patent) until well after the close of fact discovery and dispositive motion practice, (b) attempts to block LNC’s efforts to discover the inventor’s prior art searches, and (c) repeated evasive testimony, was deemed by the panel to be directly relevant to the development of LNC’s litigation strategy.
On the second issue, LNC gets a second bite at the apple now that the appellate panel vacated the district court’s holding that LNC failed to meet its burden with respect to inequitable conduct and remanded for further proceedings. To set the stage for the reprimand from the panel, the opinion first reminded the lower court that 1) to prove inequitable conduct, a party must show by clear and convincing evidence that the patentee a) withheld material information from the PTO, and b) did so with the specific intent to deceive the PTO, and that a) and b) are separate requirements. The lower court was then instructed to determine whether the acts by the patentee during prosecution amounted to affirmative egregious misconduct and were, therefore, per se material (without need to prove its impact on the PTO’s patentability determination). If the lower court determines that the acts by the patentee do not amount to affirmative egregious misconduct, then it must evaluate whether the PTO’s patentability decision may have differed if the patentee had accurately described the prior art and disclosed the video showing certain features of the prior art. In addition, since the panel vacated the lower court’s finding that other prior art was cumulative and, thus, non-material, the lower court has to revisit that issue. Moreover, the lower court must reevaluate EZPZ’s deceptive intent based on misconduct in the aggregate. In this aspect, the panel explained that,
[w]hen a person having a duty of candor and good faith has engaged in serial misconduct during the prosecution of the same or related patents, it is not enough for a court to consider each individual act of misconduct without also considering the collective whole.
…
Here, the district court did not apply this legal standard and, thereby, abused its discretion. The district court considered each of Ms. Laurain’s and Mr. Williams’ individual acts of misconduct in isolation and failed to address the collective weight of the evidence regarding each person’s misconduct as a whole.
The lower court was also scolded for its finding that EZPZ’s misrepresentations during prosecution amounted only to gross negligence. Rather, as the panel chastised, “[s]uch purposeful omission or misrepresentation of key teachings of prior art references may, instead, be indicative of a specific intent to deceive the PTO.”
With respect to the final issue on appeal, the panel agreed with LNC that the court erred by not naming LNC as the prevailing party. This is highly relevant because, if a court deems a case exceptional, it may award attorneys’ fees to the prevailing party. As to LNC’s prevailing party status, the panel explained that LNC brought the case against EZPZ seeking a declaratory judgment of non-infringement, invalidity, and unenforceability of the ’903 patent. Since EZPZ came to the table without washing its hands, it became unable to enforce its’903 patent against LNC. As such, even though some of LNC’s claims were not successful (including its LUTPA claims) or dismissed without prejudice, and the unenforceability of the ʼ903 may change on remand, the inability for EZPZ to obtain relief from LNC for any alleged infringement of the ʼ903 patent, the ’327 design patent, and trade dress still puts LNC in the winning spot for the purposes of the prevailing party portion of the attorneys’ fees analysis. Since this prong is met, the attorneys’ fee award now hinges on whether the lower court on remand finds the case to be exceptional (at its conclusion and based on the totality of the circumstances).
Key Takeaways
The lower court has a lot of clean up to do on remand. On the other hand, EZPZ can do nothing to erase its acts and omissions during prosecution of the ʼ903 patent or during the litigation itself. Indeed, with respect to the inequitable conduct allegation, the panel seems to be strongly suggesting to the lower court that the bevy of acts and/or omissions during prosecution do constitute inequitable conduct.
And, with respect to attempting to predict the lower court’s ultimate finding on exceptionality, we can consult a few previous decisions from the Federal Circuit where exceptionality was found to be lacking. In this vein, an earlier post on OneSubsea, IP v. FMC Technologies, Inc., No. 22-1099 (Fed. Cir. May 23, 2023) teaches us that zealous advocacy alone is insufficient to make a case exceptional. In other words, an aggressive litigation strategy does not equate to the type of litigation misconduct typically required for a finding of exceptionality under 35 U.S.C. § 285. Litigation misconduct rising to the level of a finding of unclean hands as we have here feels quite different than an aggressive litigation strategy. In addition, unlike in United Cannabis, Corp. v. Pure Hemp Collective Inc., No. 22-1363 (Fed. Cir. May 8, 2023), where Pure Hemp argued exceptionality based on an inequitable conduct allegation that was eventually voluntarily dismissed by Pure Hemp, LNC’s arguments do not seem to be “extremely weak” or “unsupported” such that they will not be found to satisfy 35 U.S.C. § 285. Indeed, from these two cases (and providing that the lower court on remand finds inequitable conduct), it seems that EZPZ’s bad behavior may result in LNC getting its legal bills paid.