eSpeed v. BrokerTec (Fed. Cir. 2007).
ESpeed is the software-wing of the Wall-Street brokerage Cantor Fitzgerald. Its patents relate to software for replacing the "open outcry" feel of the market floor.
Judge Jordan of Delaware found eSpeed's patents unenforceable, and on appeal, the CAFC affirmed.
Inequitable Conduct: A patent will be unenforceable if the patent was procured through inequitable conduct. Inequitable conduct does not require a showing of fraud, but it does require actions that materially affect the patentability of the invention coupled with an intent to deceive the PTO. "Once a district court has found a threshold level of both materiality and intent to deceive, the district court must balance the evidence to determine if equity should render the patent unenforceable."
Level of Review: Because of base in equity, inequitable conduct findings are reviewed for clear error.
Materiality: Initially, eSpeed initially failed to disclose its own prior "Super System." When eSpeed's counsel eventually learned of the system, they went overboard -- filing multiple declarations on behalf of the inventors regarding the prior art system as well as thousands of pages of documents. One declaration included a statement that certain features in the claimed invention were not found in its own prior system. Unfortunately for eSpeed, the court found that statement to be knowingly false and material.
Intent: Intent to deceive may be inferred, especially from direct statements by the patentee:
The applicants submitted the declarations at issue in an apparent attempt to purge possible inequitable conduct ... Instead of being candid, [one] declaration disingenuously states that the Super System did not include [the claimed element]. The district court was free to draw an inference that these declarations were “the chosen instrument of an intentional scheme to deceive the PTO” because “[t]he affirmative act of submitting an affidavit must be construed as being intended to be relied upon” Refac.
Unenforceability affirmed.
Notes:
- The language: "chosen instrument of an intentional scheme to deceive the PTO" comes from the 1983 CAFC decision Rohm & Haas Co. v. Crystal Chem. That case includes other choice language, including: “In contrast to cases where allegations of fraud are based on the withholding of prior art, there is no room to argue that submission of false affidavits is not material.”
