Motion for Rule 11 Sanctions Granted Based on Finding that Inequitable Conduct Allegations were Frivolous

Chemfree Corp. v. J. Walter, Inc. et al., Case No. 1:04-cv-03711 (N.D. Ga. June 10, 2008) (Camp., J.) (Part I)

Judge Camp granted Plaintiff’s Motion for Partial Summary Judgment on the Defendants’ claims of inequitable conduct. Finding “clear evidence” that certain of the Defendants’ inequitable conduct allegations were frivolous, the Court also granted Plaintiff’s Motion for Rule 11 sanctions.

Inequitable Conduct: Defendants’ inequitable conduct claims were based on Plaintiff’s alleged failure to disclose (1) information about an inventorship dispute over the claimed technology, and (2) a number of prior art references.

• PTO was Aware of Inventorship Dispute: The dispute arose when one of the inventors named in a parent application refused to sign his declaration because he believed he was the sole inventor. At that time, Plaintiff filed a petition, which was granted by the PTO, to prosecute the parent application on behalf of the refusing inventor. During prosecution of the patents-in-suit, the refusing inventor participated in litigation over the rights to the claimed technology and filed his own patent application for the purpose of provoking an interference. The Court found no evidence that the Plaintiff intentionally withheld any relevant information, and no basis to infer an intent to deceive because there was evidence that the PTO was aware of the refusing inventor’s refusal to sign.
• PTO was Asked to Consider Prior Art: The Defendants also asserted that Plaintiff’s predecessor-in-interest failed to disclose 20 references during prosecution of one of the patents-in-suit (“the ‘226 patent”), which issued from a series of continuation applications. The predecessor did, however, disclose 15 of the references during prosecution of the priority applications and filed an information disclosure statement during prosecution of the ‘226 patent asking the PTO to consider all art of record in the prior applications. The Court held that the predecessor’s attempt to incorporate the prior art by reference negated an inference of intent to deceive.
• Prior Art was Admittedly Cumulative: In addition, the Defendants asserted that Plaintiff failed to disclose a particular foreign patent reference during prosecution of one of the patent-in-suit (“the ‘125 patent”). The Plaintiff did, however, disclose a related foreign patent reference during prosecution of each of the patents-in-suit. Further, the Defendant had admitted that the related foreign reference was cumulative of the allegedly withheld reference. On this basis, the Court held that the Defendants could not show an intent to deceive or the requisite materiality.

Rule 11: Plaintiff argued that the Defendants allegations of inequitable conduct were frivolous and warranted Rule 11 sanctions. The Court agreed with respect to several of the claims. Specifically, the Court concluded that no reasonable attorney, after learning that Plaintiff’s predecessor-in-interest attempted to incorporate the 15 references by reference during prosecution of the ‘226 patent, would continue to assert claims of inequitable conduct based on those 15 references. Further, the Court deemed it unreasonable to assert inequitable conduct based on the foreign reference known to Defendants’ counsel to be cumulative of prior art already cited to the PTO.

As a result, the Court directed Defendants’ counsel to pay (1) Plaintiff’s reasonable attorneys’ fees and costs incurred in defending against the claims of inequitable conduct based on the 15 references and the foreign reference and (2) a penalty of $3,000 into the registry of the Court.