December 11, 2014

Practitioner Guilty of Inequitable Conduct: Considerations and Takeaways From the American Calcar v. Honda Decision

Quick Summary

In its 2011 Therasense, Inc. v. Becton Dickinson & Co. decision, the Court of Appeals for the Federal Circuit set forth a more forgiving "but-for" causality standard for determining whether a patent is unenforceable due to inequitable conduct. But in its recent decision of Am. Calcar, Inc. v. Am. Honda Motor Co., the Federal Circuit upheld a district court's finding of patent unenforceability based on prosecution misconduct — the first time it has done so since setting the standard for inequitable conduct in Therasense.

Applying its Therasense standard in Calcar, the Court upheld a finding that the inventors had material information about prior art in their possession when filing the application and deliberately chose to withhold that information. The Court found that in addition to the documents the inventors submitted, the inventors also had personal knowledge of particular aspects of the prior art that should also have been submitted to the United States Patent and Trademark Office (USPTO). With that, the Court affirmed that the patents were obtained through inequitable conduct and thus unenforceable. A discussion of the decision and some useful practice tips are included below.

Background

The plaintiff in the case, American Calcar, had a business model that involved testing a car, reviewing the car owner's manual and comparing the manual to the car's features. Using the information from the test drive and user manual, the company would create a quick tips manual that was a condensed version of the owner's manual. Calcar would sell these booklets back to the car manufacturers who would include the booklets in their cars. Honda had previously purchased Calcar's quick tips manual to put in its cars. 

According to the district court, when the defendant, Honda, released the Acura 96RL with a new navigation system in 1996, Calcar took one out for a test drive, operated the navigation system and took pictures of the system in use. Calcar's president and founder, Michael Obradovich, personally test drove the car and operated the navigation system. Obradovich himself then drafted a patent application and gave it to a patent attorney to file for him. Obradovich also supplied the drawings. Obradovich and two other Calcar employees were listed as co-inventors.

Obradovich's application referenced the 96RL navigation system in its description; but, according to the district court findings, that description is almost word for word copied from the Acura manual (making it rather ironic that Calcar turned around and sued Honda). The Court pointed out that many of the drawings in Obradovich's application were also identical to the figures from the manual — some were the original figures from Honda with the word "Acura" whited out and the word "car" handwritten over it to make the Calcar feature generic to any vehicle. What the application did not include were the details of the 96RL system in use, especially the search function of the user interface, the display changes resulting from a user's selections, and other details that would not be found in the Acura manual. It also did not include pictures Calcar had taken of the user interface screen when the system was in use.

Obradovich testified that during the application process he had provided the patent attorney "waves" of information. Honda asserted those waves of information failed to include important details about the 96RL system or the pictures of the system in use, both of which Obradovich allegedly knew about. For example, the Calcar applications claim an interface system that allows a user to search for information from the car's computer and how that information is presented to the user. Honda argued that Calcar's written description is limited to general information about how a navigation system works rather than the details about the 96RL user interaction. Honda alleged that Obradovich knew about these details, but that he never disclosed them to his patent attorney or the patent office.

Calcar's application issued as the '355 patent in 1999. Subsequent continuations resulted in the '497, '465 and the '795 patents. The last patent was granted in 2003. Between 2004 and 2006, in a number of lawsuits, Calcar sued BMW for infringement of these four patents, among others. The two parties settled prior to trial. On April 4, 2006, Calcar sued Honda for infringement of the same family of patents. On July 7, 2006, the '497 patent was submitted for re-examination at the USPTO, which confirmed patentability.

Deceptive Intent at the Court of Appeals

The two-step Therasense test for misconduct requires clear and convincing evidence that the patent applicant omitted information material to patentability, and did so with intent to mislead or deceive the PTO. The district court found, and the Court of Appeals upheld, that Calcar's patented system performed the same function, in the same way, to achieve the same result as the prior art. The Court held that the only difference between Calcar's patents and the prior art was the nature of the information the system returned to the user. The Court concluded that the undisclosed operational details of the 96RL system, such as the user interaction with the navigation system and the search function, were material to the patentability of the patents.

When deciding deceptive intent, Obradovich's relationship to his company's business operations is ultimately what led to the district court finding him not credible. The district court did not believe Obradovich when he testified that he did not know the pictures existed until he himself found them in the Calcar office. Calcar asserted that Obradovich did not know a Calcar employee had taken photos of the 96RL, but the district court noted that Calcar's routine practice was to do just that, and as the company founder and president, Obradovich would have known it as well. The district court concluded that Obradovich's detailed involvement with the application process indicated that he had ample opportunity to turn over the pictures and known aspects of the 96RL system that were very closely related to his application and simply chose not to.

The Court of Appeals found the district court was in a perfectly good position to determine Obradovich's credibility, and did not abuse its discretion in making its determination. In the end, the Court of Appeals agreed with the district court's finding that Obradovich had known about and deliberately withheld material information from the PTO and that the '497, '465 and '795 were unenforceable due to inequitable conduct.

It is worth mentioning the patent attorney's involvement with the prosecution was hardly at issue, with the majority of the focus on Obradovich's behavior.

Takeaways

Although this case may be billed as creating a looser standard for inequitable conduct, it is more appropriately viewed as illustrating the importance of the level of detail contained in information submitted to the USPTO. With this in mind, practitioners may find the following considerations helpful.

  1. When deciding what information to disclose to the patent office, actively consider the level of detail requisite to sufficiently disclose the potential prior art.

  2. The ruling in this case is broadly in line with the new AIA supplemental re-examination rules and demonstrates how an applicant can use that procedure to scrub a patent of any suspicion. If information is known that might affect enforceability, an applicant should submit that patent for reexamination with the additional information before the patent is enforced through litigation. In the case described above, although one of the three patents Calcar was trying to enforce was reexamined, the remaining two were not, and were subsequently found unenforceable.

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