Cabinet Vision v. Cabnetware

• Decision Date: 10 November 1997
• Docket Number: No. 96-1420,96-1420
• Citation: 129 F.3d 595
• Parties: , 44 U.S.P.Q.2d 1683 CABINET VISION and Larry Cornwell, Plaintiffs-Appellants, v. CABNETWARE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 595

129 F.3d 595

39 Fed.R.Serv.3d 168, 44 U.S.P.Q.2d 1683

CABINET VISION and Larry Cornwell, Plaintiffs-Appellants, v. CABNETWARE, Defendant-Appellee.

No. 96-1420.

United States Court of Appeals, Federal Circuit.

Nov. 10, 1997.

John Allcock, Gray, Cary, Ware & Freidenrich, San Diego, CA, argued for plaintiffs-appellants. Of counsel on the brief was Cathy Ann Bencivengo.

Chris Gibson, Boutin, Dentino, Gibson & Di Giusto, Sacramento, CA, argued for defendant-appellee. Of counsel on the brief was Mark P. Grajski. Of counsel was R. Michael West, Lothrop & West, Sacramento, CA.

Before MAYER, RADER, and BRYSON, Circuit Judges.

MAYER, Circuit Judge

Cabinet Vision and Larry Cornwell appeal the judgment of the United States District Court for the Southern District of California, 94-CV-62, holding unenforceable United States Patent No. 5,255,207 for inequitable conduct during prosecution of the patent before the Patent and Trademark Office. Because the district court erred in holding that the jury's factual findings on inequitable conduct were advisory, we vacate and remand.

Background

Larry Cornwell, president of Cabinet Vision, applied for a patent on a method for designing and detailing cabinets using an interactive computer system. The Patent and Trademark Office ("PTO") granted Cornwell United States Patent No. 5,255,207 (the '207 patent). Cornwell, in turn, granted Cabinet Vision an exclusive license to sell a cabinet design software program encompassing the invention claimed by the '207 patent. Cabinet Vision then filed suit against Cabnetware and its owners, Roy and David Bingham, alleging infringement of the '207 patent, copyright infringement and misappropriation of trade secrets. ¹ In its complaint, Cabinet Vision demanded a jury trial. Along with its answer, antitrust counterclaim, and jury demand, Cabnetware and the Binghams filed motions to dismiss the Binghams and to join Cornwell as an additional plaintiff and counter-defendant, which the district court granted. Cornwell and Cabinet Vision (collectively "Cabinet Vision") filed a second amended complaint, again demanding a jury trial. In its answer, Cabnetware alleged that it did not infringe the '207 patent, that the patent was invalid for anticipation or obviousness in light of prior art--including its own software--and for lack of enablement. Cabnetware also asserted the affirmative defense of inequitable conduct and a Walker Process ² antitrust counterclaim, for which it demanded a jury trial.

Cabinet Vision subsequently submitted a Memorandum of Contentions of Fact and Law, in which it argued that "[t]he decision respecting inequitable conduct is a discretionary decision to be made by the trial court on its own factual findings, there is no right to a jury trial respecting the factual element of culpable intent as part of the defense of inequitable conduct." Cabnetware agreed, arguing that there is no right to a jury trial on inequitable conduct because the defense is within the court's equitable authority. Cabnetware also requested that the judge decide all non-jury matters without the aid of an advisory jury. However, Cabnetware requested that the factual issues underlying all other issues, which appear to include the Walker Process antitrust counterclaim, be left to the jury. The district court incorporated Cabinet Vision's statement on inequitable conduct verbatim into its pretrial order, which both parties signed in approval of its form and content, and which states: "This case shall be tried by a jury."

Cabinet Vision then moved, in limine, to bar Cabnetware from arguing its inequitable conduct defense to the jury. Specifically, it argued:

There is no right to a jury trial respecting the factual element of culpable intent as part of the defense of inequitable conduct. As the court will make this determination, not the jury, Cabinet Vision requests the court exclude any argument before the jury on this defense. It is not the province of the jury to make findings on this question and argument stating Cornwell defrauded the PTO, or acted with culpable intent, would only be for purposes of creating unfair prejudice and to confuse the issues or mislead the jury.

(Citations omitted). Cabnetware responded:

Mr. Cornwell's fraud on the Patent Office is an element of Defendant's counterclaim against Plaintiffs for attempted monopolization. A counterclaim for treble damages under the antitrust laws is triable to a jury as of right. Plaintiffs in this action have demanded a jury trial. Therefore, Defendant has the right to argue to the jury that Mr. Cornwell practiced fraud on the Patent Office.

Because Defendant has the right to argue Mr. Cornwell's fraud as part of its antitrust counterclaim, excluding argument on the inequitable conduct defense would have little practical effect. After all, the jury will have already heard the evidence of Mr Cornwell's fraud. Furthermore, the jury may make findings on this defense for use by the court. Finally, when do plaintiffs propose that Defendant argue the inequitable conduct defense? In a separate argument before the court? That would be duplicative and an unnecessary use of the court's time.

(Citations omitted). The court denied Cabinet Vision's motion in limine, stating tentatively, "relative to [Cabnetware's] monopoly theory, ... I think that their position is sound, and ... I think [evidence and argument on inequitable conduct] will be received by the trier of fact." Three days into the trial, the court further explained how it intended to use the jury's verdict. "My preference would be to present all of the issues to this trier of fact. Those that are issues for the court, they can be advisory from this jury. Those that are binding are binding." However, at that time, the court did not specify which issues would be advisory and which would be binding.

Cabinet Vision and Cabnetware submitted joint jury instructions, which included the following:

To conclude that Larry Cornwell engaged in inequitable conduct, you must find that the following facts have been proved by clear and convincing evidence:

One, that Larry Cornwell knowingly made a misrepresentation to the Patent Office, directly or through his attorney, either by false statement or nondisclosure;

Two, that any such misrepresentation or omission was material; and

Three, that Larry Cornwell acted with an intent to mislead the Patent Office.

For the purposes of Cabnetware's antitrust counterclaim, the jury was instructed that it had to find, inter alia, that had the misrepresentation or omission been "known by the Patent Office, [it] would have resulted in the denial of the patent."

The jury was also provided a special verdict form, stipulated to and jointly submitted by Cabinet Vision and Cabnetware. This form was organized so that questions about infringement preceded questions addressing the various invalidity affirmative defenses, inequitable conduct before the PTO, the antitrust counterclaim, and damages. For inequitable conduct in particular, question 7 read: "Do you find that Cabnetware proved by clear and convincing evidence that Larry Cornwell engaged in inequitable conduct before the Patent and Trademark Office?" If the jury answered "no" to question 7, it was directed not to reach questions pertaining to the antitrust counterclaim, including question 10, which stated: "Do you find by clear and convincing evidence that Larry Cornwell intentionally withheld or deliberately falsified information that, had the Patent Office known about it, would have resulted in the Patent Office denying the patent to Larry Cornwell?"

After deliberating for three days, the jury reported that it could not reach a unanimous verdict on the enablement question, but that it had reached a unanimous verdict on the other questions. The jury found that Cabnetware infringed the three asserted claims of the '207 patent, infringement was not willful, claims from the '207 patent were not anticipated or obvious, and in response to question 7, that Cornwell had not engaged in inequitable conduct. The jury did not reach damages because it could not resolve the enablement question. After dismissing the jury and entering a partial verdict, the court held a status conference to discuss what further proceedings would be necessary to resolve the enablement and damages issues. At that conference, the court ordered the parties to brief the issue of whether the court was bound by the jury's factual finding on Cabnetware's affirmative defense of inequitable conduct.

Following briefing, the court stated: "A party cannot lose the right to a jury verdict merely because the district court hears the equitable claims first; rather, the jury's factual findings on the legal issue control the resolution of those same factual issues in equitable claims decided by the court." It nevertheless held that as a result of the sequence of questions in the special verdict form--in which the jury answered question 7, inequitable conduct, but never reached the antitrust counterclaim in questions 8 through 13--the court was not bound by the jury's fact findings for inequitable conduct.

If a potential Seventh Amendment problem existed from the sequence of the questions on the special verdict, it was avoided here because, first, the jury's finding on inequitable conduct was merely advisory, thus, the court is free to disregard it and the underlying factual determinations; and second, the jury did not reach the antitrust monopoly claim. The jury left the antitrust question blank. Thus, nothing the jury did binds this court's ability to find the facts as it sees them when resolving the inequitable defense claim.

The court then stated that, to the extent that treating the jury's fact finding as advisory could be considered error, Cabinet Vision had invited the error by failing to "advise the court on how to separate and manage those issues that were for the court and those that were...