Incomplete Disclosures Lead to Unenforceable Patents: American Calcar, Inc. v. American Honda Motor Co.

On September 26, 2014, the United States Court of Appeals for the Federal Circuit affirmed a lower court’s findings that several patents asserted against Honda, were invalid as a result of inequitable conduct during prosecution. According to the Court’s findings, an eager inventor acted with intent to deceive the United States Patent and Trademark Office (USPTO) when he cited relevant prior art but failed to cite specific information concerning that cited prior art.

Briefly, the case was before the Appeals Court after several rounds of litigation between the parties, including a prior appeal, stemming from an infringement action initiated by American Calcar, Inc. (Calcar) against American Honda Motors, Inc. (Honda) for patent infringement of several patents. Specifically, Calcar claimed patent infringement of U.S. Patent Nos. 6,330,497 (“’497 patent”), 6,438,465 (“’465 patent”), and 6,542,795 (“’795 patent”).

As one of its defenses, Honda claimed inequitable conduct, and argued that the actions of Calcar’s founder evidenced that he intentionally withheld information material to patentability. The lower court found, and the Court of Appeals for the Federal Circuit agreed, that Mr. Obradovich not only withheld relevant information, but that he did so with the intent to deceive the USPTO. Some of the relevant facts outlined in the opinion include: that “among the three coinventors, Mr. Obradovich was the one primarily responsible for preparing the patent application… that while Mr. Obradovich disclosed the existence of [a] 1996 Acura RL (“96RL”) navigation system, he intentionally did not disclose additional information that would have led the [US]PTO to deny the patent as anticipated or rendered obvious by the system.” Furthermore, the evidence showed that “[d]uring the course of developing a QuickTips guide for the 96RL, Mr. Obradovich drove the car and operated the navigation system, and Calcar personnel took photographs of the navigation system and owner’s manual.”

Although during prosecution the application explicitly referred to the 96RL system as prior art, and Mr. Obradovich acknowledged that the system was used as the basis of Calcar’s inventions, it was discovered that Mr. Obradovich “knew that the owner’s manual and photographs were in Calcar’s possession and deliberately withheld them during prosecution.” More importantly, it appears that the very details that were omitted from the disclosures provided to the USPTO, were precisely those that were claimed in the patents at issue.

Materiality & Intent to Deceive the USPTO

The Appeals Court outlines the applicable rules regarding inequitable conduct, specifically citing Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc), and Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1344 (Fed. Cir. 2013): “Inequitable conduct is an equitable defense to patent infringement. Therasense, 649 F.3d at 1285. The defendant proves inequitable conduct “by clear and convincing evidence that the patent applicant (1) misrepresented or omitted information material to patentability, and (2) did so with specific intent to mislead or deceive the PTO.” Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1344 (Fed. Cir. 2013). Intent and materiality must be separately established. Therasense, 649 F.3d at 1290.

Furthermore, the court explained that the standard for materiality required for establishing inequitable conduct is but-for materiality,” using the preponderance of the evidence standard, giving claims their broadest reasonable construction. 649 F.3d at 1291. Moreover, intent to deceive the USPTO is also required. However, the court explained that “[b]ecause direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence,” provided that such intent is the single reasonable inference. Therasense, 649 F.3d at 1290-91.

Here, there was no doubt that the matter, which was not disclosed to the UPTO was material for patentability. More importantly, the actions of Calcar’s founder indicated that a reasonable inference showed an intent to deceive the USPTO.

The Appeals Court noted that the lower court had reviewed thousands of pages and testimony during the proceedings that showed Mr. Obradovich was not a believable witness. It also noted that the lower court’s analysis was thorough and “fully consistent with the standards and tests set forth” by the court. Hence, without evidence of clear error by the lower court, the decision that the ’497, ’465, and ’795 patents were obtained through inequitable conduct was affirmed, and thus unenforceable.

PRACTICE TIP: Disclose everything. It is best to go through a rigorous prosecution process than to spend considerable resources obtaining patents, and considerable resources enforcing those rights, only to have them invalidated for failure to properly disclose relevant information. Of course, it may very well be that pertinent information may prevent you from obtaining a patent; rather than deceiving the USPTO office however, speak with your attorney to discuss options available, or to help you consider if procurement is ultimately not worth your investment. Importantly, note that the court does not require direct evidence of intent to deceive, but allows a court to infer this intent from circumstantial evidence.

Saul Acherman