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American Calcar v. Amer. Honda Motor Co. – Therasense Goes Out For a Test Drive

On Friday, in American Calcar v. Amer. Honda Motor Co., App. No. 2013-1061 (Fed. Cir., September 26, 2014) a divided Fed. Cir. panel affirmed the district court’s ruling, following remand, that three patents on a multimedia system for vehicle information and control were invalid due to inequitable conduct (IC) by Calcar’s founder, Mr. Obradovich. The patents were all part of one family and the “priority patent” is U.S. Pat. No. 6,009,355. The primary evidence of inequitable conduct was the failure by Obradovich to disclose the owner’s manual of an Acura model that Calcar used as the basis of its specification. (A copy of the decision can be found at the end of this post.)

The Fed. Cir. had reversed the court’s earlier finding of inequitable conduct for a number of reasons, including judicial error in relying on jury findings of IC rather than ruling from the bench on equitable grounds, applying the “reasonable examiner” standard instead of the “but for” Therasense standard to resolve materiality, and use of a “sliding scale” to find intent based on a strong showing of materiality.

On remand, the district court found that all three patents-in-suit were obtained through inequitable conduct. The court found the manual to be “but for” material to the prosecution and found that the only reasonable inference that could be drawn for Obradovich’s actions was that he had made a deliberate decision to withhold information that he knew was material.

Since IC is an equitable defense, the Fed. Cir. panel ignored the jury advisory opinion of no inequitable conduct. However, the jury had invalidated the priority patent as anticipated by the owner’s manual. Since this finding was based on clear and convincing evidence, a standard higher than the Therasense standard of “but for” materiality, the judge was justified in finding the manual was material. However, the court also ruled that the two later patents were obvious in view of the manual. The Fed. Cir. agreed with this ruling, and with the court’s specific finding of materiality of the two add-on patents.

While the earlier Fed. Cir. panel had stated that the lack of credibility of one inventor does not per se provide sufficient evidence of intent to deceive the PTO, the court made further findings to support its ruling of Obradovich’s specific intent to deceive the PTO, which the Fed. Cir. also upheld. In part, this was based on the selective disclosures that he made to the PTO that did not disclose all of the features disclosed in the manual.

Judge Newman wrote a lengthy well-reasoned dissent. She noted that the owner’s manual was presented to the PTO during reexamination of the ‘497 patent, and patentability was confirmed by the PTO. She felt that this finding was sufficient to negate a ruling that the materials were “but-for” material, and to “[end] the inequitable conduct inquiry.” She also felt that there was insufficient evidence of specific intent to deceive the PTO, particularly in view of the fact that the jury did not find deceptive intent. Judge Newman also faulted the majority’s finding of obviousness as only considering one element of the patent’s claim. She also felt that the majority had given too much weight to  Obradovich’s credibility (or lack thereof) in arriving at an inference of intent, and that there was no other direct evidence of intent to deceive.

This opinion strengthens my view that successful defenses against inequitable conduct often build on a “Keystone Cops” scenario, in which multiple actors are involved, preferably both inside and outside of the patentee’s venture, and having varying degrees of patent experience. Conversely, successful attacks on patent enforceability based on IC often focus on one bad actor, particularly one who has at least some exposure to patent law. Note that this strategy is aimed at negating “intent.” When we are talking “materiality,” McKesson still rules – send in every piece of art that crosses your already crowded desks.

13-1061.Opinion.9-23-2014.1

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