Post-Therasense: Inequitable Conduct Really Is a Higher Standard
In its first post-Therasense case (seeIP Update, Vol. 14, No. 6) addressing the issue of inequitable conduct, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s holding that an applicant who had intentionally failed to update a Petition to Make Special, in which it sough to expedite examination, did not commit inequitable conduct because the failure was not the type of action that would have prevented the patent from issuing under the heightened standard for inequitable conduct. Powell v. Home Depot, Inc., Case Nos. 10-1409, 1416 (Fed. Cir., Nov. 14, 2011) (Prost, J.).
Michael S. Powell presented a “saw guard” prototype to Home Depot to prevent employees from harm while cutting lumber for customers. After Home Depot ordered eight productions units for use and testing, Powell filed an application for a patent on his saw guard invention. Around the same time and unbeknownst to Powell, Home Depot contracted with another company, Industriaplex, to produce identical copies of Powell’s invention for approximately $700 less per unit. Mr. Powell continued to negotiate with Home Depot while prosecuting his patent, but eventually could not reach an agreement.
Powell brought suit against Home Depot, alleging that it infringed his patent, covering radial arm saw guards that are installed in every Home Depot store location throughout the United States. A jury determined that Home Depot infringed and awarded $15 million and damages (later enhanced by $3 million). Later, in a bench trial, the district court determined that Powell had not committed inequitable conduct. Among the issues on appeal to the Federal Circuit, Home Depot challenged the judge’s finding of no inequitable conduct.
The inequitable conduct issue focused on Powell’s filing of a Petition to Make Special during prosecution, which he filed to seek expedited review on the grounds that his ongoing negotiations with Home Depot obligated him to manufacture and supply saw guards embodying the claims. However, before the petition was granted, it became clear that Home Depot would not be contracting with Powell and would use another company to supply saw guards. Powell did not update his Petition to Make Special to show that he was no longer obligated, and the U.S. Patent and Trademark Office (USPTO) granted the petition.
The district court determined that Powell intentionally failed to inform the USPTO that he was not obligated to manufacture but that Home Depot had failed to prove by clear and convincing evidence that the patent should be unenforceable based on a balance of the equities.
The Federal Circuit, noting that its Therasense decision raised the bar for proving inequitable conduct, held that Powell had not committed inequitable conduct. Rather, the Federal Circuit panel held that Powell’s conduct failed the “but-for” materiality standard. Powell’s conduct was not the type of “unequivocal act” that was affirmatively egregious misconduct, false as filing an unmistakably false affidavit.
Practice Note: Post-Therasense, a patent applicant’s inequitable conduct will render a patent unenforceable only where the patent would not have issued “but for” the inequitable conduct. Even knowingly omitting information to the USPTO will not satisfy this standard absent “affirmatively egregious conduct.” For the earlier claim instruction portion of this case, see IP Update, Vol. 14, No. 7. .