IP Law Daily Intentionally withholding evidence of prior art from USPTO was inequitable conduct
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Thursday, February 20, 2020

Intentionally withholding evidence of prior art from USPTO was inequitable conduct

By John W. Scanlan, J.D.

Consortium of oil and gas companies accused of infringing a patent for a cap valve established that the inventor omitted material information with the specific intent to deceive the USPTO.

The owner of a patent for a cap valve could not enforce its claims against a consortium of oil and gas companies because the consortium proved by clear and convincing evidence that the inventor and his attorney had engaged in inequitable conduct in the filing of the patent application, the federal district court in Houston has ruled. The attorney intentionally withheld evidence of prior art from the USPTO, and the inventor filed a false statement that he had not assigned his interest in the patent (Deep Fix, LLC v. Marine Well Containment Company LLC, February 18, 2020, Atlas, N.).

Charles Adams received U.S. Patent No. 8,833,393 (the ’393 patent) for his invention of a cap valve. He filed a provisional patent application that was mailed on September 2, 2010, to the USPTO by Malcolm Woodward, a friend and non-lawyer who had a close working relationship with Adams. It was filed on September 3. In connection with this application, Adams also filed with the USPTO a Verified Statement stating that he had not assigned his rights in his invention despite having signed a document in May 2010 purporting to assign his interest in the invention to Commonwealth Investment Group (CIG), which was wholly owned by Woodward and his wife. A copy of the assignment was filed with the USPTO on September 10. In September 2011, he filed a non-provisional patent application and claimed priority based upon the 2010 provisional application. His attorney was Mary-Jacq Holroyd. He received the U.S. patent in 2014.

In September 2011, Adams (while being represented by Holroyd) also filed an international patent application under the Patent Cooperation Treaty (PCT) with the PCT’s United States Receiving Office (US/RO). In February 2012, while the U.S. patent application was still pending, the US/RO examiner issued an International Search Report (ISR) identifying 10 prior art references that were classified as Category Y documents because they were of particular relevance, and the US/RO issued a written opinion concluding that in light of the Category Y documents, none of the 20 claims in the PCT application claims were patentable because they lacked an inventive step and were obvious. Adams and Holroyd did not inform the USPTO of the US/RO examiner’s Category Y findings or the written opinion.

In 2018, Deep Fix, LLC—which owned the patent after a series of assignments—filed patent infringement claims against Marine Well Containment Company LLC (MWCC), a consortium of 10 oil and gas companies, alleging that three MWCC-manufactured well containment systems infringed the ’393 patent. After MWCC denied infringing and asserted the affirmative defense of inequitable conduct, which would bar Deep Fix from enforcing the patent against MWCC, Deep Fix conceded that it had no viable infringement claim. In considering MWCC’s defense based upon the failure to disclose the US/RO documents to the USPTO, the court found that it was undisputed that Holroyd knew of the documents and made a deliberate decision to withhold them; at issue was whether MWCC had proved that the information was material under a "but-for" standard and whether she knew it was material.

Materiality. The court found that revised claim 1 of the patent would have been rejected by the USPTO as obvious if Holroyd had not decided to withhold disclosure of at least one of the prior art references identified by the US/RO. Holroyd’s testimony indicated that she believed that the USPTO would reach the same result as the US/RO if she disclosed the Category Y documents to the USPTO, making her decision material to the obviousness issue. The court found persuasive the testimony and exhibits presented by a MWCC technical expert that the claims in the patent application were obvious. The court observed that the USPTO rejected all claims in the Adams patent application as obvious in its first and second Office Actions in July 2013 and May 2014, after which Adams (through Holroyd) filed an amended application canceling claim 2 and combining its elements into claim 1. The court found that clear and convincing evidence showed that the amended claim 1 would not have been allowed but for Holroyd’s decision not to disclose the Category Y documents and, thus, MWCC had established "but for" materiality.

Intent to deceive. The court also determined that the most reasonable inference from the record is that Holroyd knew the Category Y documents were material and intentionally withheld them with the intent to deceive the USPTO. The court found Holroyd’s testimony that she believed the information in the Category Y documents was irrelevant and cumulative to be not credible. Individuals associated with the filing of patent applications have a duty under the regulations to disclose to the USPTO all information known to them to be material to patentability, and USPTO’s Manual of Patent Examining Procedure (MPEP) specifies a duty to notify the USPTO of any material prior art or information in any related foreign application. The USPTO publishes Aids to Compliance with Duty of Disclosure to assist patent practitioners. Holroyd admitted that she was aware of these rules and guidelines but was unable to explain at trial the basis for her conclusion that the prior art references identified by the US/RO were irrelevant and/or cumulative. She testified that she did not want to disclose these references to the USPTO because she did not want to "bias" the USPTO’s decision into using the US/RO’s searches for prior art instead of making its own searches. Even in a light most favorable to Holroyd, the court found that her testimony showed that she intentionally hid the references from the USPTO to deceive the agency, noting that in approving the revised claim 1 the USPTO relied upon prior art references that differed from those identified by the US/RO. As a result, MWCC had established the intent to deceive element of its defense.

Verified statement. The court concluded that the Verified Statement filed by Adams and Woodward with his patent application stating that he had not assigned his interest in the cap valve was false because he had assigned it in May 2010 to CIG and the assignment remained valid as of the September 2, 2010 filing date of the Verified Statement. The filing of an unmistakably false affidavit is material by itself, the court instructed. Therefore, Adams had engaged in inequitable conduct by submitting the false statement.

This case is No. 4:18-cv-00948.

Attorneys: Amanda J. Taylor (Law Office of Stephen P. New, LC) and Darren Patrick Nicholson (Burns Charest LLP) for Deep Fix, LLC. Peter Charles Schechter (Osha Liang LLP) for Marine Well Containment Co. LLC.

Companies: Deep Fix, LLC; Marine Well Containment Co. LLC

MainStory: TopStory Patent TexasNews

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