Taltech Ltd. v. Esquel Enter.S Ltd.
| Decision Date | 28 July 2010 |
| Docket Number | No. 2009-1344.,2009-1344. |
| Citation | 604 F.3d 1324 |
| Parties | TALTECH LIMITED and TAL Apparel Limited, Plaintiffs-Appellants,v.ESQUEL ENTERPRISES LIMITED and Esquel Apparel, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Federal Circuit |
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William K. West, Jr., Howrey LLP, of Washington, DC, argued for plaintiffs-appellants. With him on the brief was Pamela S. Kane; Duane Mathiowetz and Farah S. Anthony, of San Francisco, CA.
Ronald L. Grudziecki, Drinker Biddle & Reath LLP, of Washington, DC, argued for defendants-appellees. With him on the brief were Gary J. Rinkerman and Jeffrey G. Killian. Of counsel was Michael J. McManus.
Before MAYER, FRIEDMAN, and GAJARSA, Circuit Judges.
Opinion for the court filed by Circuit Jusge MAYER. Dissenting opinion filed by Circuit Judge GAJARSA.
Taltech Limited and TAL Apparel Limited (collectively “TAL”) appeal the supplemental judgment of the United States District Court for the Western District of Washington reinstating its July 13, 2007, judgment, awarding attorney fees and costs under 35 U.S.C. § 285, and post-judgment interest at the rate allowable at the time of the earlier judgment. Taltech Ltd. v. Esquel Enters. Ltd., 609 F.Supp.2d 1195, 1211 (W.D.Wash.2009) ( Taltech ). We affirm the award of attorney fees and costs, and reverse the post-judgment interest rate.
Taltech Limited owns United States Patent No. 5,568,779 (“'779 patent”) which is drawn to seams including thermal adhesive to reduce pucker. TAL Apparel Limited, licensee of the '779 patent, manufactures and sells garments, including dress shirts. On April 29, 2004, defendant Esquel Enterprises, Ltd. (“Esquel”), an apparel manufacturer and TAL competitor, filed a complaint seeking a declaratory judgment of non-infringement, and TAL counterclaimed, alleging infringement.
Following a bench trial, the district court concluded that Taltech inventor John Wong engaged in inequitable conduct during prosecution of the '779 patent before the United States Patent and Trademark Office (“PTO”) when he did not disclose a raincoat seam that included heat-fusible adhesive tape (undisclosed raincoat seam, “URS”), and when he misrepresented a raincoat seam previously made and sold by TAL (“double top-stitch seam”). Based on these inequitable conduct findings, and a finding of litigation misconduct, the court declared the case exceptional under 35 U.S.C. § 285. The July 13, 2007, final judgment awarded Esquel attorney fees and costs based on the exceptional case finding. TAL appealed.
This court vacated the inequitable conduct determination. TALtech Ltd. v. Esquel Apparel, Inc., 279 Fed.Appx. 974 (Fed.Cir.2008). The attorney fees and costs were also vacated because the exceptional case finding was based, at least in part, on TAL's inequitable conduct in failing to disclose the URS. The case was remanded for the district court to determine if the URS was cumulative to German Patent No. 1 104 802 (“Robers”). Id. at 977.
On remand, the district court set out its previously presented reasons as three separate and independent bases to support its finding of exceptional case: (1) inequitable conduct in failing to disclose the URS; (2) inequitable conduct in misrepresenting the double top-stitch seam; and (3) abusive litigation tactics. Taltech, 609 F.Supp.2d at 1211. On these bases, the court entered a supplemental final judgment which also imposed interest from the date of the earlier July 13, 2007, judgment. TAL moved under Rule 60(a) of the Federal Rules of Civil Procedure that the judgment specify an interest rate under 28 U.S.C. § 1961 from the date of the new judgment. The motion was denied. TAL appeals both the exceptional case finding and the judgment interest rate. This court has jurisdiction under 28 U.S.C. § 1295(a).
District courts may award reasonable attorney fees to a prevailing party “in exceptional cases.” 35 U.S.C. § 285. “ ‘[T]he types of conduct which can form a basis for finding a case exceptional [include] ... inequitable conduct before the P.T.O., [and] misconduct during litigation.’ ” Hoffmann-La Roche, Inc. v. Invamed, Inc., 213 F.3d 1359, 1365 (Fed.Cir.2000) (quoting Beckman Instruments, Inc. v. LKB Produkter AB, 892 F.2d 1547, 1551 (Fed.Cir.1989)). To establish inequitable conduct the accused infringer must prove by clear and convincing evidence that the patentee withheld material information with intent to deceive the PTO. Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 872 (Fed.Cir.1988) (). Materiality and intent are questions of fact that we review for clear error. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1273 (Fed.Cir.2001). If the materiality and intent requirements are met, the court must then determine whether the cited conduct amounts to inequitable conduct by balancing the levels of materiality and intent; a greater showing of one allows a lesser showing of the other. Larson Mfg. Co. of S.D. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1327 (Fed.Cir.2009) (citing Digital Control, Inc. v. Charles Machine Works, 437 F.3d 1309, 1313 (Fed.Cir.2006)); Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed.Cir.2008) (). “Thus, even if a threshold level of both materiality and intent to deceive are proven by clear and convincing evidence, the court may still decline to render the patent unenforceable.” Star Scientific, 537 F.3d at 1365.
We review the district court's ultimate determination of inequitable conduct for an abuse of discretion. Larson Mfg., 559 F.3d at 1327 (citing Digital Control, 437 F.3d at 1313). “An abuse of discretion occurs ‘when [the district court's] decision is based on clearly erroneous findings of fact, is based on erroneous interpretations of the law, or is clearly unreasonable, arbitrary, or fanciful.’ ” Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1357 (Fed.Cir.2008) (quoting Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1460 (Fed.Cir.1998) (en banc)).
We review a finding that a case is exceptional within the meaning of 35 U.S.C. § 285 for clear error. Nilssen, 528 F.3d at 1357. “Once a case is determined to be exceptional, we review a district court's decision to award attorney fees under an abuse of discretion standard.” Id. (citing Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1328 (Fed.Cir.2003)). “The trial judge's discretion in the award of attorney fees permits the judge to weigh intangible as well as tangible factors: the degree of culpability of the infringer, the closeness of the question, litigation behavior, and any other factors whereby fee shifting may serve as an instrument of justice.” Nat'l Presto Indus., Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed.Cir.1996). “Litigation misconduct and unprofessional behavior are relevant to the award of attorney fees, and may suffice to make a case exceptional.” Sensonics, Inc. v. Aerosonic Corp., 81 F.3d 1566, 1574 (Fed.Cir.1996).
The district court's first independent ground for finding the case exceptional is TAL's inequitable conduct in not disclosing the URS. The court concluded that the URS met “the most stringent of the materiality standards,” and also found that the patentee's “culpability ... is high.” Taltech, 609 F.Supp.2d at 1209. A cumulative reference, however, is not material see 37 C.F.R. § 1.56(b) (2008), and TAL argues that the URS is cumulative to Robers.
The district court found the URS not cumulative to Robers because: (1) TAL's translation was inadequate to inform a patent examiner that Robers was material to patentability; (2) the URS had an armhole seam relevant to dependent claims 6, 7, 24, and 25 of TAL's application, while Robers only described a closure seam; and (3) the URS incorporated Vilene SL33, the adjudicated withheld best mode for the '779 patent, while Robers only disclosed a generic thermoplastic component. Taltech, 609 F.Supp.2d at 1203, 1204, 1207.
TAL responds to the translation finding by alleging the court erred in striking its comparison of the URS and Robers to the '779 patent claims, and that this comparison demonstrates Robers' disclosure of more claim elements than the URS. The district court noted two “crucial exceptions,” not “minor,” as the dissent would have it, where TAL's translation (using “closure” and “seam,” respectively) and Esquel's translation (using “assembly” and “ribbon,” respectively) employ words with different meanings. Id. at 1203-04. By the use of “closure” instead of “assembly,” the court reasoned that TAL's “translation limits ... the Robers Patent to seams associated with fastenings, for example, buttonholes, which are specifically discussed therein.” Id. at 1204. Regarding TAL's use of “seam” instead of “ribbon,” the court said that using “seam” was “nonsensical” because it resulted in a “joint [that] is then itself sewn into a joint between two pieces.” Id. Therefore it concluded that TAL's submission was so inadequate that “the patent examiner would not have understood the Robers Patent to teach anything material to patentability of the ‘smooth seam’ method and product claims at issue.” Id.
TAL cites Dayco Products, Inc. v. Total Containment, Inc., 329 F.3d 1358, 1367 (Fed.Cir.2003), and Halliburton Co. v. Schlumberger Technology Corp., 925 F.2d 1435, 1441 (Fed.Cir.1991), as support for admitting its URS-Robers comparison. These cases state the accepted idea that when determining if uncited prior art is cumulative to art before the examiner the trial court must compare both to the claims of the patent-in-suit, but neither involves the adequacy of a translation. Similarly, the...
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