81 F.3d 1576 (Fed. Cir. 1996), 95-1350, Refac Intern., Ltd. v. Lotus Development Corp.

Docket Nº:95-1350.
Citation:81 F.3d 1576
Party Name:38 U.S.P.Q.2d 1665 REFAC INTERNATIONAL, LTD. and Forward Reference Systems, Ltd., Plaintiffs-Appellants, v. LOTUS DEVELOPMENT CORPORATION, Defendant-Appellee.
Case Date:April 26, 1996
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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81 F.3d 1576 (Fed. Cir. 1996)

38 U.S.P.Q.2d 1665

REFAC INTERNATIONAL, LTD. and Forward Reference Systems,

Ltd., Plaintiffs-Appellants,



No. 95-1350.

United States Court of Appeals, Federal Circuit

April 26, 1996

Rehearing Denied; Suggestion for Rehearing In Banc Declined

July 8, 1996.

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Appealed from: United States District Court for the Southern District of New York, Judge Sotomayor.

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Kenneth J. Kelly, Epstein Becker & Green, P.C., New York City, argued for plaintiffs-appellants.

Henry B. Gutman, Baker & Botts, L.L.P., New York City, argued for defendant-appellee. With him on the brief were Kerry L. Konrad, Jeffrey E. Ostrow, and Lori E. Lesser.

Before ARCHER, Chief Judge, LOURIE, and CLEVENGER, Circuit Judges.

LOURIE, Circuit Judge.

Refac International, Ltd. and Forward Reference Systems, Ltd. ("FRS") appeal from the judgment of the United States District Court for the Southern District of New York holding that FRS's patent is unenforceable on the ground of inequitable conduct. REFAC Int'l, Ltd. v. Lotus Dev. Corp., 887 F.Supp. 539 (S.D.N.Y.1995). Because the district court did not make clearly erroneous factual findings or abuse its discretion in determining that the inventors, Rene K. Pardo and Remy Landau, engaged in inequitable conduct, we affirm.


The patent in suit, U.S. Patent 4,398,249, concerns a method of converting a software source code program to object code. During prosecution of the '249 patent, the examiner initially rejected the application, which was filed on August 12, 1970, under 35 U.S.C. § 112, p 1, on the ground of inadequate disclosure. In response, a Rule 132 affidavit by Pardo was submitted, averring that the application contained sufficient disclosure to enable any person skilled in the programming art to make and use the claimed invention. See 37 C.F.R. § 1.132 (1995) ("Affidavits or declarations traversing grounds of rejection."). In response, the examiner issued a final rejection, stating:

[T]he disclosure is not deemed of the level which would enable one with ordinary skill in the art to make and use the invention. The flow diagram which applicants represent in figure 2 is not of the detailed level which a programmer would need in order to write a program from. The general outline shown in figure 2 will still have to be broken down into fundamentals of what is necessary to write a program.

The examiner's comment on the Pardo affidavit was as follows:

It should be pointed out that an affidavit by applicant is self serving and therefore has very little probative value in a response to an objection that the specification is inadequately disclosed. By filing an application, applicants have indicated that it fulfills the statutory requirements set out in 35 U.S.C. 112, and an objection by the Examiner that the disclosure does not meet the conditions set out there, cannot be overcome by an affidavit by an applicant that it does.

A challenge by the Examiner should put an applicant to his proofs. A declaration by coapplicant is no more probative of the sufficiency of the disclosure than the specification as originally filed, which has been objected to.

The inventors' attorney, R. Gale Rhodes, Jr., proposed a strategy of filing affidavits from three people other than the inventors, with different experience and skill levels, attesting to the sufficiency of the disclosure. He requested that the inventors find three such people, and they recommended Peter H. Jones, a computer scientist or compiler writer; David H. Cikra, a computer programmer; and Robert F. Bullen, a supervisor of programmers. Affidavits from these three individuals were then filed, along with a Rule 116 amendment, which stated that "the present invention is directed to the computer scientist or compiler writer, not a mere programmer, and it is such compiler writer who is the man of 'ordinary skill in the art' who would practice the invention as defined by the claims." See 37 C.F.R. § 1.116 (1995) ("Amendments after final action.").

Each of the affidavits contained opinions or factual statements asserting the sufficiency of the application's disclosure. Bullen's affidavit stated that an average programmer could have written a computer program from the application's disclosure using programming techniques known before the application was filed. Cikra's affidavit stated that he had actually written a computer program

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solely from the disclosure and had sufficiently tested the program to verify its operability. Jones's affidavit contained the following statement:

[F]rom the written disclosures and flow chart shown in the drawing of such patent application, [I] could have produced as of August 12, 1970, and prior thereto, and using only programming techniques known on or prior to August 12, 1970, the necessary coding and could have written a detailed computer program therefrom.

In response to these affidavits, the examiner issued a notice of allowance. 1 Neither the inventors nor the affiants had disclosed to the U.S. Patent and Trademark Office ("PTO"), however, that each of the affiants had a prior association with the inventors' company, Lanpar, Ltd., or that they had pre-existing knowledge of a commercial embodiment of the invention, the LANPAR program.

After the '249 patent issued, the inventors assigned it to FRS, another company they controlled. FRS entered into an agreement with Refac, assigning it a five-percent interest in the '249 patent in exchange for Refac's obligation to sue at least two alleged infringers within one month. Refac and FRS agreed to split equally all proceeds from the litigation. On July 26, 1989, Refac sued six software publishers, including Lotus Development Corporation, alleging that their spreadsheet computer software programs infringed the '249 patent. After Refac amended its complaint to add FRS as a co-plaintiff, the action was dismissed against all defendants except Lotus. On July 29 and 30, 1993, the district court conducted a bench trial limited to Lotus's affirmative defense of inequitable conduct, and held that the patent was unenforceable on the ground of inequitable conduct, which occurred when the inventors submitted the Jones affidavit containing a material omission intended to mislead the PTO into granting the patent.

The district court carefully evaluated each of the three affidavits. The court found that the Bullen affidavit failed to disclose that Bullen had a prior association with Landau. In particular, when Bullen was a consultant with UNIVAC Canada, he had worked with Landau, who was at the time a programmer employed by Bell Canada. The court found that the Bullen affidavit also failed to disclose that Pardo and Landau had informed Bullen, before he executed his affidavit, that a computer program implementing the invention was in use at Bell Canada. The court concluded that the submission to the PTO of the Bullen affidavit with this omission did not constitute inequitable conduct. The court reasoned that Landau and Pardo had not understood that the need for an affidavit from a disinterested person might have precluded use of Bullen as an affiant, or that knowledge of Bullen's contact...

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