Bruno Independent Living v. Acorn Mobility

• Citation: 394 F.3d 1348
• Decision Date: 11 January 2005
• Docket Number: No. 04-1125.,No. 04-1114.,04-1114.,04-1125.
• Parties: BRUNO INDEPENDENT LIVING AIDS, INC., Plaintiff-Appellant, v. ACORN MOBILITY SERVICES, LTD., and Acorn Stairlifts, Inc., Defendants-Cross Appellants.
• Court: U.S. Court of Appeals — Federal Circuit

394 F.3d 1348

BRUNO INDEPENDENT LIVING AIDS, INC., Plaintiff-Appellant, v. ACORN MOBILITY SERVICES, LTD., and Acorn Stairlifts, Inc., Defendants-Cross Appellants.

No. 04-1114.

No. 04-1125.

United States Court of Appeals, Federal Circuit.

DECIDED: January 11, 2005.

Jeffrey A. McIntyre, Whyte Hirschboeck Dudek S.C., of Madison, Wisconsin, argued for plaintiff-appellant. With him on the brief were Thomas M. Pyper and Cynthia L. Buchko. Also on the brief was C. Thomas Sylke, Sylke Law Offices LLC, of Milwaukee, Wisconsin.

Michael E. Florey, Fish & Richardson P.C., P.A., of Minneapolis, Minnesota, argued for defendants-cross appellants. With him on the brief were Chad A. Hanson William R. Woodford, John A. Dragseth and Deanna J. Reichel.

Before LOURIE, GAJARSA, and LINN, Circuit Judges.

DECISION

LOURIE, Circuit Judge.

Bruno Independent Living Aids, Inc. ("Bruno") appeals from the decision of the United States District Court for the Western District of Wisconsin awarding attorney fees to Acorn Mobility Services, Ltd. and Acorn Stairlifts, Inc. (collectively "Acorn") pursuant to 35 U.S.C. § 285 for an "exceptional case," predicated on a determination that Bruno engaged in inequitable conduct while prosecuting United States Patent 5,230,405. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 277 F.Supp.2d 965 (W.D.Wis.2003). In case we were to disturb the exceptional case finding, Acorn conditionally cross-appeals from the district court's decision denying further discovery on that issue. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., No. 02-C-0391-C (W.D.Wis. June 9, 2003). We affirm.

BACKGROUND

Bruno manufactures and sells "stairlifts," which are devices that allow persons with mobility impairments to ascend and descend stairways on a chair that travels along a rail. In November 1991, Bruno filed a patent application at the United States Patent and Trademark Office ("PTO") directed to a stairlift, which issued as the '405 patent in July 1993.

In July 2002, Bruno sued Acorn, a competitor, alleging infringement of claims 5, 9, 10, and 15 of the '405 patent. During discovery, Acorn produced numerous disclosures of prior art stairlifts that had not been considered by the patent examiner, and thereafter moved for summary judgment of noninfringement and invalidity. Admitting that the asserted claims were invalid in view of the prior art identified by Acorn, Bruno filed a reissue application at the PTO, the fate of which is immaterial to this appeal. In due course, the district court granted Acorn's motion for summary judgment,¹ declaring claims 5, 9, 10, and 15 invalid. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 286 F.Supp.2d 1020 (W.D.Wis.2003).

Subsequently, Acorn accused Bruno of having intentionally withheld invalidating prior art from the PTO, and asked the district court to declare the case "exceptional" for the purpose of awarding attorney fees under § 285.² Acorn also requested additional discovery to the extent the district court required further evidence to justify a fee award. Upon briefing by both parties, the district court declared the case exceptional after determining that Bruno had engaged in inequitable conduct while prosecuting the '405 patent, and consequently denied Acorn's motion for additional discovery.

As the ground for its inequitable conduct determination, the district court found that Bruno had failed to disclose to the PTO information on several invalidating prior art stairlifts that Bruno had submitted to the Food and Drug Administration ("FDA") in seeking approval to sell a stairlift covered by the '405 patent. Observing that the disclosure to the FDA occurred concurrently with the prosecution of the '405 patent, the district court—noting the absence of a credible, good faith explanation from Bruno for not disclosing the same information to the PTO — inferred that the information had been withheld with deceptive intent. The district court thereupon concluded that Bruno had engaged in inequitable conduct, which it deemed sufficient to render the case exceptional for the purpose of imposing a fee award under § 285. Final judgment was entered in November 2003, in which Bruno was ordered to pay Acorn $399,459.32 in attorney fees. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., No. 02-C-0391-C, 2003 WL 23095743 (W.D.Wis. Nov. 6, 2003).

On appeal, Bruno challenges the district court's determination of an exceptional case. In response, Acorn conditionally cross-appeals from the ruling denying additional discovery on that issue. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

Patent applicants³ owe a "duty of candor and good faith" to the PTO. 37 C.F.R. § 1.56(a) (2004); see also Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed.Cir.1995). A breach of this duty may constitute inequitable conduct, which can arise from a failure to disclose⁴ information material to patentability, coupled with an intent to deceive or mislead the PTO. Molins, 48 F.3d at 1178. Materiality and intent must be established by clear and convincing evidence, Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed.Cir.1988), and then weighed "to determine whether the equities warrant a conclusion that inequitable conduct occurred." Molins, 48 F.3d at 1178. The ultimate determination of inequitable conduct is therefore a matter "committed to the discretion of the trial court" and is reviewed for an abuse of discretion. Kingsdown, 863 F.2d at 876 (en banc in relevant part). The underlying findings on materiality and intent are reviewed for clear error, and will not be disturbed on appeal in the absence of a "definite and firm conviction" that a mistake has been made. Id. at 872.

A. Knowledge of Prior Art

In its inequitable conduct determination, the district court found that Bruno deliberately withheld from the PTO information on several invalidating prior art stairlifts, focusing its analysis on the "Wecolator" manufactured by The Cheney Company, among others.⁵ While conceding awareness of the Wecolator's existence during prosecution, Bruno contends that a duty to disclose did not arise because it had failed to appreciate the Wecolator's materiality at that time.

We see no error in the district court's treatment of the Wecolator as prior art that was subject to the duty of disclosure. The record supports the district court's finding that Bruno possessed actual knowledge of the Wecolator—and that it knew or should have known of its materiality. In an April 20, 1992 letter to the FDA, Bruno sought approval to sell its SRE-1500 stairlift, which was an embodiment covered by the then-pending application that matured into the '405 patent. (J.A. 2198). In a paragraph labeled "Substantial Equivalence" in the FDA letter, William Belson, Bruno's Director of Engineering, claimed that the SRE-1500 stairlift was "similar in design and function" to the units manufactured by "Cheney Manufacturing Inc." Id. Product information on the "Weckalator" [sic] was listed as an enclosure with the FDA letter. (J.A. 2199).

Bruno argues that its claim of "substantial equivalence" between the SRE-1500 stairlift and the Wecolator was relevant only for the purpose of securing FDA approval, and that it had no bearing on whether Bruno knew the Wecolator to be material prior art for purposes of patentability. This distinction is disingenuous in light of what the record reflects: the FDA submission was prepared by William Belson, who was also involved in the prosecution of the '405 patent and had asked Bruno's patent attorney to conduct a prior art search in preparation for filing the patent application. (J.A. 2859-61). More importantly, Bruno's distinction is not persuasive because "an applicant who knew of the art or information cannot intentionally avoid learning of its materiality ... it may be found that the applicant `should have known' of that materiality." FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 (Fed.Cir.1987) (footnote omitted). Accordingly, we are not persuaded that the district court clearly erred in charging Bruno with knowledge of the Wecolator's materiality.

B. Materiality

Regardless whether it knew the Wecolator to be invalidating prior art, Bruno argues that the Wecolator is simply not material, but rather is cumulative, to the information submitted to the PTO, such that its nondisclosure cannot provide a ground for finding inequitable conduct. We do not agree.

In evaluating materiality, we have consistently referred to the definition provided in 37 C.F.R. § 1.56, by which the PTO has promulgated the duty of disclosure. See, e.g., Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1257 (Fed.Cir.1997) (discussing the version of the rule in effect since 1992); J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1559 (Fed.Cir.1984) (applying the pre-1992 version of the rule). In 1992, the definition of materiality in 37 C.F.R. § 1.56 was revised. As defined in the current version of the rule, information is material to patentability when:

[I]t is not cumulative to information already of record or being made of record in the application, and

(1) It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or

(2) It refutes, or is inconsistent with, a position the applicant takes in:

(i) Opposing an argument of unpatentability relied on by the Office, or

(ii) Asserting an argument of patentability.

37 C.F.R. § 1.56(b) (2004) (emphases added). According to the PTO's notice of final rulemaking, the rule change applied to all applications pending or filed after March 16, 1992. Duty of Disclosure, 57 Fed. Reg. 2021 (Jan. 17, 1992). Thus, the new rule was applicable during the prosecution of the '405 patent, and we evaluate the materiality of the Wecolator under the standard set forth in the applicable amended rule. In doing so, we...