Up in Smoke

Star Scientific Inc. v. R.J. Reynolds Tobacco Co.

Death of lower court victories can be a side effect of appeals, so perhaps the accused patent infringer in Star Scientific Inc. v. R.J. Reynolds Tobacco Co. shouldn't have inhaled their district court win.  RJR, the accused infringer, obtained an order for summary judgment in the district court based on the inequitable conduct of patent holder Star Scientific.  On appeal, the Federal Circuit made RJR cough up that win.  It found that RJR had failed to meet the requisite burden of proof on intent to deceive and sent the case back to the district court for further consistent proceedings-a reversal and remand that surely had to burn.

In Star Scientific, the patents at issue covered a process for curing (drying) tobacco in a way that significantly reduced dangerous chemical by-products.  At the center of the dispute was a letter from a Star scientist conveying information that certain foreign tobacco already existed with lower levels of nitrites-the chemical by-product the patent claimed to eliminate.  RJR alleged that Star switched law firms in the middle of the patent prosecution in order to avoid disclosing the letter.  Star representatives testified that the change was motivated both by the death of a partner at its first firm and its observation of a poor performance by another attorney from that firm in an unrelated prosecution.

Rejecting the testimony as unbelievable, the district found that Star changed law firms in order to "quarantine" the letter from disclosure to the PTO-conduct, it believed, sufficient to demonstrate the requisite deceptive intent necessary to invalidate the patents on equitable grounds.  On appeal, the Federal Circuit strongly disagreed and snuffed out the entirety of the lower court's analysis, despite its nod to the district court's ability to make credibility determinations.

Instead, the Star Scientific court reasoned that since inequitable conduct can only be established by clear and convincing evidence and that the accused infringer bears the burden of proof, a patent holder's failure to offer a credible alternative explanation of fact is not enough to shift that burden.  Review of the record here showed that RJR had "failed to elicit any testimony or submit any other evidence" regarding a deceptive intent around the disputed letter-despite being specifically asked by the court to do so in supplemental briefing.  The record revealed that one key Star witness had never even seen the disputed letter until it was presented to him at his deposition and another was never asked any questions about it.  The Federal Circuit said that without any evidence supporting the requisite threshold level of intent, the district court simply did not have the discretion to exercise any equitable inquiry into the patent's enforceability.

And-at least according to Star Scientific -if intent can only be established by indirect or circumstantial evidence (as is often the case), the proffered explanation regarding deception must be the single most reasonable inference able to be drawn from that evidence or the requirements of the clear and convincing standard are not met.   Further, patent holders only need to offer rebuttal evidence regarding their good faith once the accused infringer has met its evidentiary burden.  Even then, the patent holder may have the right to argue for a "balancing of the equities" to determine whether the conduct alleged was egregious enough to warrant holding the entire patent unenforceable.

With Star Scientific -whose holding takes one of the most conservative recent approaches regarding deceptive intent-patent holders may have an easier time blowing away allegations that their conduct should be construed as intentionally deceptive.  We also wonder whether a deposition strategy that might have sought to avoid developing good facts for the other side may have proved fatal in this case.  Perhaps the inequitable conduct pack needs a new warning-one that informs accused infringers that their deceptive intent claims could very possibly end up in smoke.

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