Patent Law Blog (Patently-O)

Inequitable Conduct Based on Petition to Make Special

Scanner Technologies Corp. v. ICOS Vision Systems (Fed. Cir. 2008)

There are many companies that value quick prosecution and issuance. Yet, few have taken the PTO's offer of accelerated examination (AE). Potential applicants avoid the accelerated examination program for several reasons – most of which are associated with the AE requirements to (i) search for prior art; (ii) identify all claimed elements found in each relevant reference; and additionally (iii) prepare an explanation of why the claims are patentable over the references. These AE requirements are costly and potentially open the applicant to charges of inequitable conduct (as well as narrow claim scope).

In this case, Scanner saw ICOS products at a trade show and subsequently filed a petition to make special in the hopes that its patent would issue more quickly. The petition argued that the petition should be granted based on ICOS products. The petition was granted and the patent issued within the year.

After Scanner sued for infringement, the district court found the patent unenforceable due to inequitable conduct in filing the petition to make special. On appeal, the CAFC reversed – but in the process revived aspects of the inequitable conduct inquiry. The particular conduct at issue included statements in the petition that infringement was clear even though the accused product had not been fully inspected.

Broad Concept of Materiality: Although inequitable conduct issues often focus on whether the misconduct was "material to patentability." The CAFC began by quoting its own 1994 GE v. Samick opinions holding that a false statement in a petition to make special should be considered "material" if "it succeeds in prompting expedited consideration of the application." This broad consideration of materiality follows the Nilssen decision holding that misrepresenting an applicant's status as a small entity (in the payment of post issuance maintenance fees) may also be considered material.

"[W]e must reject Scanner's view that inequitable conduct cannot be shown absent a misrepresentation that bears on the patentability of the claims in the application. When the setting involves a petition to make special, as is the case here, we reaffirm that a false statement that succeeds in expediting the application is, as a matter of law, material for purposes of assessing the issue of inequitable conduct."

Reasonable Inferences Favor Patentee: Although the CAFC agreed that the type of conduct here could be inequitable conduct, this case did not present sufficient evidence. Because materiality and intent must both be proven with clear and convincing evidence, the appellate panel requires that all reasonable inferences be given weight:

"Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference."

Because the CAFC found potential reasonable explanations for the claims of infringement, it held that those statements could not be considered false or misleading, and thus not material.

By clearing the inequitable conduct charges, Scanner avoids paying ICOS attorney fees. However, the CAFC affirmed that all claims of the patents were invalid and not infringed.

Notes:

• Interesting statement: "We also affirm the district court's judgment invalidating all claims of the patents in suit given the stipulation between the parties that the case would be tried on a representative claim."

Tags: Accelerated+Examination, Petition+to+make+special

Patently-O Bits and Bytes No. 44: Deferred Examination

• Deferred Examination I: For the current state of PTO backlog, I am a strong believer in providing a mechanism to either (i) allowing the inventor pay to move to the front of the examination line if the patent needs to be obtained quickly or (ii) allowing the inventor to delay prosecution if it is unclear whether the invented technology will have any market value. There are some potential negative issues of allowing deferred prosecution — particularly the potential for submarining and shifting claim scope to encompass market changes. These problems would largely be limited through early publication of deferred applications as well as continued enforcement of the written description and enablement requirements.  In addition, the patent term should continue to run during deferment.
• Deferred Examination II: In its response to congressional queries, PTO Director Jon Dudas has come-out in favor of a system that allows for deferred examination. The PTO's tentatively proposed implementation scheme would move along a three-step process:
  • Allow a 14–month extendible period for responding to a notice to file missing parts.
  • Use a tiered payment structure that allows for delayed payment of the examination fee.
  • Empower Provisional Applications: Allow applicant to claim priority to a provisional application for up to five years.
• Deferred Examination III: For many, including the PTO, the hope with deferred examination is that "many inventions … would be recognized as obsolete [or otherwise worthless] before expiration of the five year period and therefore would not require examination resources."
• Rocket Docket Examination: In the past, the AIPLA and others have argued against having a rocket-docket examination based simply on the payment of a fee. Their argument is that it is somehow inequitable and un-American to line-jump based on the availability of funds. That argument is largely hog-wash.  Many of the richest companies in the US maintain tight controls over patent prosecution costs. I suspect those companies would only rarely pay an additional $5,000 in PTO fees for rapid examination. (If a rocket docket for patent prosecution is created, the fee should be high enough to ensure that it does not simply create an additional bottleneck.)
• Clear Channel Communications now owes $90 million to Grantley Patent Holdings. The Eastern District of Texas jury found the patent willfully infringed with damages of $66 million. Last week, the Judge awarded an additional $16 million in enhanced damages in addition to prejudgment interest and interim royalties due.

Two Hong Kong companies have been fighting over a coffee maker design patent.  Simatelex (who manufacturers for Sunbeam) has signed a consent decree admitting contributory infringement. The patentee's case against Sunbeam is still pending in the Southern District of New York. Wing Shing v. Simatelex.

A First Look at Who Files Provisional Patent Applications

As part of the 1995 patent law overhaul, the USPTO began allowing patent applicants to file provisional patent applications.  Over a decade later, these lower-cost provisional filings have taken hold.  According to PTO annual reports, over 132,000 provisional patent applications were filed in fiscal year 2007. In perspective, that number is over 30% of the number of the 439,000 non-provisional utility patents filed during the same period. This proportion has been slowly rising since 2002 when the provisional applications filing rate was about 27% of the non-provisional rate.[1] That year (2002), the PTO recorded just under 90,000 provisional applications and 332,000 non-provisional patent applications.

Interestingly, in my study of recently issued patents, only 21% reference a provisional application as a parent. (In the study, I look at approximately 15,000 utility patents issued in April and May 2008.) [2] 

National Tool: Over half of the recently issued patents that listed an assignee indicated that the assignee was a foreign (non-U.S.) corporation or agency.[4]  Although foreign entities are not prohibited from filing provisional applications, the provisional tool was designed to benefit U.S. entities. Thus, it is not a surprise that only 5% of the patents assigned to international applicants were associated with a provisional application while 30% of the patents assigned to a U.S. applicant were associated with a provisional application.  Two countries – Israel and Canada – stood out as filing the highest proportion of provisional parent claims. Both of these countries are known for having patent attorneys with a high level of familiarity with U.S. laws.  Only 2% of the Japanese & Korean patents included provisional parent claims. [Updated June 03 with Corrected Figure]

The provisional application provides a potential extra year of patent eligibility at the end of the term.  Thus, it is also not surprising that new drug inventions – where a potential year at the end of the term is most valuable – have the highest rate of association with a provisional application.[5]  Likewise, patents on electrical and electronic applications had the lowest rate of provisional filing even after excluding the international applications.

The provisional filings appeared to have almost no impact on the pendency time of a patent application as measured by the number of days from filing the nonprovisional to issuance.  This makes sense as no examination takes place until the nonprovisional application is filed.

The following table also provides some interesting comparisons of patent strategy.[6]

Type of Technology	Number of Utility Patents in the Sample	Number of Patents Referencing Provisional Parent		Assignee
Mechanical	24	1	4%	Ford
	25	13	52%	GM
Drugs & Medical	7	4	57%	Wyeth
	8	7	88%	Genentech
	11	1	9%	Boston Scientific Scimed
	21	10	48%	Medtronic
Computers & Communications	15	12	80%	InterDigital
	23	7	30%	Oracle
	31	11	35%	QUALCOMM
	44	25	57%	Broadcom
	114	16	14%	Microsoft
Chemical	6	6	100%	Bristol-Myers Squibb
	9	4	44%	Procter Gamble
	10	3	30%	3M Innovative Properties
	14	9	64%	EI du Pont de Nemours
	17	0	0%	General Electric[7]
	17	16	94%	Genentech

 

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[1] This information comes from PTO annual reports for FY 2006 and 2007.

[2] These patents were downloaded on May 30. I excluded the few patents filed prior to the 1995 introduction of provisional patent applications.

[3] In a follow-on study, I will look at published patent applications claiming priority to provisional applications to get some sense of how often folks abandon provisional patent applications.

[4] 6823 were assigned to foreign entity while 6457 were assigned to a U.S. entity. Another 1922 had no listed assignee.

[5] My study included 677 patents having a primary U.S. Classification in a “drug” field and also assigned to a U.S. entity. Of those, 48% were associated with a provisional application.

[6] Note, my assignee ‘scrubber’ is not yet perfect. Thus, it is likely that some patents associated with listed assignees are not included in the table.

[7] Some companies, such as GE hold patents in several different categories – this table looks only at those patents in the particular identified category.