Argus Chemical Corp. v. Fibre Glass-Evercoat Co., Inc.

• Decision Date: 04 April 1985
• Docket Number: GLASS-EVERCOAT,No. 84-1418,84-1418
• Citation: 759 F.2d 10,225 USPQ 1100
• Parties: ARGUS CHEMICAL CORPORATION, Appellee, v. FIBRECOMPANY, INC., Appellant. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 10

759 F.2d 10

225 U.S.P.Q. 1100

ARGUS CHEMICAL CORPORATION, Appellee, v. FIBRE GLASS-EVERCOAT COMPANY, INC., Appellant.

Appeal No. 84-1418.

United States Court of Appeals Federal Circuit.

April 4, 1985.

Mario A. Martella, Beehler, Pavitt, Siegemund, Jagger & Martella, Los Angeles, Cal., argued, for appellant.

George M. Schwab, Townsend & Townsend, San Francisco, Cal., argued, for appellee.

Before DAVIS, KASHIWA and NIES, Circuit Judges.

NIES, Circuit Judge.

This appeal involves a patent infringement suit tried in a bench trial before the district court of the Central District of California. Because we hold that the patents in suit, U.S. Patent Nos. 3,181,991 and 3,182,026, were procured by inequitable conduct, we reverse the judgment of the district court holding appellant liable for infringement.

I.

Argus Chemical Corporation is the owner of U.S. Patent No. 3,181,991 (the "Pigmentation Patent") and U.S. Patent No. 3,182,026 for homogeneous pigmented peroxide compositions (the "Homogeneous Patent"). The respective filing dates, the significance of which will become apparent, are August 7, 1961 and March 14, 1962. Both patents relate to a type of pigmented peroxide composition. The products are useful as a catalyst or "hardener" for polyester resin used as autobody putty.

In a suit filed in 1978, Argus charged Fibre Glass-Evercoat Company with infringement of claims 2-5 of the '991 Pigmentation Patent and claims 3-5 of the '026 Homogeneous Patent, all of which include water as an ingredient. ¹ The claims of the Pigmentation Patent as originally written read equally well on both "dry" and "wet" compositions of the product. Upon confirming that sales had been made of dry pigmented benzoyl peroxide compositions prior to August 7, 1960, so as to constitute an "on sale" time bar under 35 U.S.C. Sec. 102(b), the attorney handling the application amended the claims, before initial examination, to avoid reading directly on any of the dry products sold, and, thereafter, all claims to dry compositions were dropped. The examiner was never informed of the sales of any dry composition.

Additional sales prior to the March 14, 1961, critical date were not disclosed in connection with the Homogeneous Patent. ² Those sales involved pigmented benzoyl peroxide compositions which contained a stabilizing agent to avoid separation.

During the course of these proceedings, Fibre Glass sought to establish invalidity under Sec. 102(b) on the basis of the prior sales or under Sec. 103 on the basis of obviousness, inter alia, in view of the sold compositions. See In re Foster, 343 F.2d 980, 52 CCPA 1808, 145 USPQ 166 (1965), cert. denied, 383 U.S. 966, 86 S.Ct. 1270, 16 L.Ed.2d 307 (1966). In addition, Fibre Glass charged Argus with "fraud" (inequitable conduct) ³ in failing to disclose such sales to the PTO.

Prior to trial Argus returned to the PTO, under the now-defunct, no-fault reissue proceedings, for consideration of the sales and other additional prior art not previously considered by the PTO. It appears that the PTO continued to find the claims patentable under Secs. 102 and 103 despite the sales and additional reference. ⁴

Upon return to the district court, the court ultimately determined that lack of novelty and obviousness were not established by Fibre Glass, and that there was no breach of an applicant's duty of candor during examination under the standard of the early '60's by Argus's failure to disclose the subject sales.

II. Discussion

In this appeal we lay to rest any further argument that in the past the standard for disclosure of known prior art only required that a reference which fully anticipated the claimed invention, thereby destroying novelty under 35 U.S.C. Sec. 102, had to be disclosed to the PTO under an applicant's duty of candor.

In this case, Argus presented the following findings of fact, which the district court adopted:

32. Also, in the early 1960's, applicant's duty of disclosure to the Patent Office examiner was much different than it is today. At the time, it was generally accepted in the profession that the applicant need only disclose prior art which it knew to be an anticipation or near anticipation of the invention claimed--prior art that may be pertinent to a consideration of obviousness but which the applicant in good faith did not believe to be anticipating or near anticipating, was not disclosed to the Patent Office.

33. Because the prior sales were not the same as that claimed, i.e., were not considered to be an "anticipation" or near-anticipation, and were not considered pertinent to a consideration of "obviousness", they were not disclosed to the Patent Office. This lack of disclosure might not satisfy today's standards but was in accordance with accepted standards at the time of the events in question. [Emphasis added.]

Argus cites to us no precedent for this standard of acceptable conduct, but instead relies on an expert witness, an experienced patent attorney, who testified:

A. As far as disclosure was concerned, search was not always made, but when it was made and if a reference amounted to an anticipation, a full disclosure--here it is sort of referenced--or came so close to that that the claims would have only minor alterations, then we had a choice and we did either one of two things, disclose it or abandon the application.

Q. Thank you. Now, if the reference was not considered to be in anticipation or near anticipation, was a disclosure generally made?

A. No, it was not, except laying out background in the specification.

The question of the appropriate standard for determining inequitable conduct in procuring a patent is one of law. Thus, the testimony of an attorney on the practice which some attorneys followed is irrelevant. Moreover, even if, in some circuits, the standard were as stated by the witness, it was not the law in all circuits or in the Court of Customs and Patent Appeals or in the U.S. Court of Claims. We reject the view that one's duty to the PTO should be judged by the least common denominator.

The precedent of In re Clark, 522 F.2d 623, 187 USPQ 209 (CCPA 1975) is uniquely on point with respect to both the nature of the offense here and the time when it occurred. As stated therein:

While appellant may have believed that Stow et al. was not a relevant reference, the Patent and Trademark Office now has ample evidence from which to conclude that Stow et al. was known by Beckman to be highly relevant prior art. The duty to disclose relevant, material prior art under these circumstances, known to the applicant or his agents and not found by the examiner, is well established. The Strickler memorandum shows how relevant and material Beckman considered Stow et al. to be. If appellant considered his claims sufficiently narrow to be clear of the close Stow et al. reference, the examiner, and not he or "others skilled in this art," was the person to decide whether appellant's original claims had been amended sufficiently to be patentable over Stow et al. We do not agree that appellant could, under the state of the law in 1956 or now, amend claims expressly to avoid a Sec. 102 reference unknown to the examiner and justifiably consider there was no duty to bring that reference to the examiner's attention.

Id. at 627, 187 USPQ at 212-213. Accord, Driscoll v. Cebalo, 731 F.2d 878, 884-85, 221 USPQ 745, 750 (Fed.Cir.1984) (current

PTO regulations consistent with prior case law in federal courts). ⁵

Argus seeks to avoid a decision that inequitable conduct occurred in prosecution because the withheld information does not meet the high standard of materiality which the parties agreed was set forth in Norton v. Curtiss, 433 F.2d 779, 794, 57 CCPA 1384, 167 USPQ 532, 544 (1970):

In patent cases, "materiality" has generally been interpreted to mean that if the Patent Office had been aware of the complete or true facts, the challenged claims would not have been allowed.

Undoubtedly the statement appears in Norton v. Curtiss. We cannot see how acknowledging that it does binds Fibre Glass to that standard.

This court has rejected any single test for "materiality" in determining inequitable conduct. Most recently, the court stated in J.P. Stevens, 747 F.2d at 1559, 223 USPQ at 1092:

"Inequitable conduct" requires proof by clear and convincing evidence of a threshold degree of materiality of the nondisclosed or false information. It has been indicated that the threshold can be established by any of four tests: (1) objective "but for"; (2) subjective "but for"; (3) "but it may have been"; and (4) PTO Rule 1.56(a), i.e., whether there is a substantial likelihood that a reasonable examiner would have considered the...