Akron Polymer Container Corp. v. Exxel Container, Inc.

• Decision Date: 20 July 1998
• Docket Number: No. 97-1438,97-1438
• Parties: AKRON POLYMER CONTAINER CORPORATION, Plaintiff-Appellee, and Robert Winer, Counterdefendant, v. EXXEL CONTAINER, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1380

148 F.3d 1380

47 U.S.P.Q.2d 1533

AKRON POLYMER CONTAINER CORPORATION, Plaintiff-Appellee and Robert Winer, Counterdefendant, v. EXXEL CONTAINER, INC., Defendant-Appellant.

No. 97-1438.

United States Court of Appeals Federal Circuit.

July 20, 1998.

Rehearing Denied; Suggestion for Rehearing In Banc

Declined Aug. 26, 1998.

Kenneth A. Godlewski, Oldham & Oldham Co., L.P.A., Akron, Ohio, argued for plaintiff-appellee. With him on the brief was Bruce H. Wilson.

Thomas G. Carulli, Cooper & Dunham LLP, New York City, argued for defendant-appellant. With him on the brief were Robert D. Katz and Wendy E. Miller.

Before NEWMAN, MICHEL, and CLEVENGER, Circuit Judges.

CLEVENGER, Circuit Judge.

Exxel Container, Inc. ("Exxel") appeals from the May 1, 1997, final judgments of the United States District Court for the Northern District of Ohio in Akron Polymer Container Corp. v. Exxel Container, Inc., No. 92-CV-0561. One judgment held that Exxel is responsible for inequitable conduct before the United States Patent and Trademark Office ("PTO") in the prosecution of the application which led to U.S. Patent No. 4,423,829 ("the '829 patent"). That holding renders the '829 patent unenforceable against the world, and consequently defeats Exxel's counterclaim against Akron Polymer Container Corporation ("Akron Polymer") for infringement of the claims in the '829 patent. The second judgment held that Exxel's inequitable conduct causes the suit to be an "exceptional case[ ]" within the meaning of 35 U.S.C. § 285 (1994), entitling Akron Polymer to an award of its attorney fees, in an amount to be determined at the conclusion of this appeal.

In a nutshell, Exxel submits that the district court erred in its decision that the facts prove that Exxel's predecessor-in-interest intended to deceive the PTO during prosecution of the '829 patent. Exxel also argues that the district court erred in finding this case "exceptional" under section 285, for purposes of awarding attorney fees to Akron Polymer. Because we agree with Exxel, we reverse the judgments of the district court and remand for further proceedings.

I

Akron Polymer filed suit against Exxel in March 1992, seeking a declaratory judgment that Akron Polymer's nonaerosol dispenser product does not infringe claim 39 of the '829 patent. Exxel filed a counterclaim, asserting infringement of claim 39. On cross motions for summary judgment on the issue of infringement, the district court held that claim 39 reads on the accused product. The district court then granted Akron Polymer's motion for leave to amend its complaint to raise the allegation that the '829 patent is unenforceable for having been obtained by inequitable conduct.

The basis for Akron Polymer's allegation of inequitable conduct is as follows. The application that became the '829 patent (the "Katz application") was filed on August 23, 1980. Another application covering quite similar subject matter (the "Venus application") was filed on December 16, 1980. Both applications were assigned to Container Industries, Inc. ("Container"), Exxel's predecessor-in-interest. United States Patent No. 4,387,833 ("the '833 patent") issued out of the Venus application before the '829 patent issued out of the Katz application. Both applications were prosecuted before different examiners in the PTO by the same law firm, the responsible lawyers in which were fully aware of the existence and details of both applications. Although the law firm disclosed the existence of the Katz application to the Venus application examiner, the existence of the Venus application was not disclosed to the Katz application examiner until after the PTO had issued a notice of allowance for the Katz application. Akron Polymer argued that the Venus application is material information to the Katz application, and that Container's failure to disclose the Venus application proved Container's deceitful intent in prosecution of the Katz application.

The district court conducted a two-day bench trial on the issue of inequitable conduct, at the end of which the court concluded that the Venus application was not material, because it was not prior art to the Katz application, and therefore could not form a predicate for a judgment of inequitable conduct. The district court also determined that the evidence of record failed to support a finding of culpable intent on the part of Exxel.

With regard to the element of intent, the district court recited the facts alleged by Akron Polymer as to the knowing joint prosecution of the two applications by the same attorneys. The court also noted that a possible motive for the alleged misconduct could have been the applicant's desire to "extend its monopoly over the basic invention (the Katz '829 patent) longer than the monopoly over the improvement (the Venus '833 patent)." Against that "sinister interpretation" of the facts, the district court balanced the fact that Container's attorney "did disclose the Katz Application to the Venus examiner, albeit somewhat late in the game." In conclusion, the district court found that only inferences of deceitful intent could be drawn from the joint prosecution of both applications by the same attorneys. Against those inferences stood the fact that copendency of the two applications had been disclosed at least to the examiner of the Venus application.

Citing our decision in FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1417, 5 U.S.P.Q.2d 1112, 1117 (Fed.Cir.1987), in which we stated that "[a]n inference can and often must be drawn from established facts and direct proof of wrongful intent is not required, but drawing an inference on an inference on an inference is not the role of the fact finder," the district court ruled that Akron Polymer had failed to produce clear and convincing evidence that Container had any intent to deceive in failing to disclose the Venus application to the Katz application examiner.

On appeal to this court, we affirmed the judgment of infringement. See Akron Polymer Container Corp. v. Exxel Container, Inc., Nos. 95-1023, -1035, 1995 WL 620148, at * 6, 40 U.S.P.Q.2d 1265, 1269-70 (Fed.Cir. Oct.20, 1995) (nonprecedential) (reported in table format at 69 F.3d 554). With regard to the issue of inequitable conduct, we noted that "[b]oth the parties and the district court appear to have assumed, quite incorrectly, that only prior art can be a material reference." Id. at * 5, 40 U.S.P.Q.2d at 1269. Materiality instead embraces "any information that a reasonable examiner would substantially likely consider important in deciding whether to allow an application to issue as a patent." Id. at * 5, 40 U.S.P.Q.2d at 1269. In the light of the considerable overlapping content in the specifications and claims of the two applications, we concluded that the Venus application was highly material to the prosecution of the '829 patent, because it could have conceivably served as the basis of a double patenting rejection. We therefore vacated the judgment of no unenforceability and remanded the case for further proceedings on the issue of inequitable conduct. See id. at * 1, 40 U.S.P.Q.2d at 1266.

II

On October 17, 1996, the district court on remand conducted a further one-day bench trial on Akron Polymer's defense of inequitable conduct. As a result of that trial, the record was further amplified in two respects. First, certain memoranda from the files of the prosecuting attorneys were put in evidence. For the most part, those memoranda provided further evidence of the knowledge of the attorneys of the joint prosecution, and the commonality of the subject matter of the two applications. The second respect in which the record was amplified was through the testimony of two witnesses, Messrs. Robert Bregman and Richard Ruhe, neither of whom had any knowledge concerning prosecution of the Katz or Venus applications.

The governing law, as recited by the district court, is summarized in our decision in Halliburton Co. v. Schlumberger Technology Corp., 925 F.2d 1435, 17 U.S.P.Q.2d 1834 (Fed.Cir.19...