Is Larson Manufacturing Co. v. Aluminart Products Ltd. the end of what has been, for some, the classic patent game of asserting inequitable conduct? In an effort to stop one of the favorite pastimes of some accused infringers, the Federal Circuit in Larson puts a pox on lower courts' use of loose evidentiary inferences when considering claims of deceptive intent. It's too soon, however, to shout "All fall down." The court's comments on the issue of deceptive intent were dicta, issued as "guidance" to the lower court on remand following a determination that the dismissal of the patent holder's infringement claims on inequitable grounds was not supported by material evidence. Further, the concurrence points out the flaws of the entire test used to decide inequitable conduct cases and calls for an en banc review and recasting of the same-leaving pocketfuls of unresolved questions when it comes to inequitable conduct.
The patents at issue in Larson covered a retractable screen door system. The alleged infringer claimed inequitable conduct during two patent reexaminations and in the infringement action brought by the patent holder. The district court dismissed the patent infringement claims on grounds of inequitable conduct because it found that the patent holder had intentionally withheld material information during one of the reexaminations. The Federal Circuit found that the district court was mistaken as to the materiality of some of the information at issue and that, therefore, its finding of inequitable conduct could not stand. Vacating the lower court's dismissal, the Federal Circuit offered some instructive guidance on how to address the issue of deceptive intent when reviewing the remaining two material nondisclosures on remand.
The court said "materiality does not presume intent and nondisclosure, by itself, cannot satisfy the deceptive intent element." Rather, the party alleging it bears the burden of proving intent with clear and convincing evidence. Courts should also consider any evidence of good faith which points away from deceptive intent. Only then, once a satisfactory threshold level of intent has been established, should courts engage in the final step, balancing materiality and intent, with a higher level of materiality permitting a lower level of intent and vice versa.
Larson makes clear that courts are not going to "spot" litigants' intent. Now, more than ever, proving inequitable conduct will require a fully developed record and litigants must plan on mustering sufficient evidence to make out intent. Relying on inferences alone won't work because the patent holder is sure to counter with evidence of good faith. Moreover, if an inference is to be used, not only must it be based on sufficient evidence and be reasonable in light of that evidence, it also must be the single most reasonable inference able to be drawn from the evidence to meet the clear and convincing standard. This sets the bar pretty high, and means that litigants need to come prepared to marshal all the facts and counter inferences helpful to the other side.
Our spin? Inequitable conduct claims have never been child's play, and with Larson they are now about as welcome as the plague. Unless and until another decision on the topic comes along, Larson may mean that any but the most egregious and material of such claims will quickly find there's little chance of remaining standing once the patent litigation music stops.
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