Union Oil Co. of California v. Atlantic Richfield

• Decision Date: 31 August 1998
• Docket Number: No. CV-95-2379KMW (JRx).,CV-95-2379KMW (JRx).
• Citation: 34 F.Supp.2d 1208
• Court: U.S. District Court — Central District of California
• Parties: UNION OIL COMPANY OF CALIFORNIA, Counterclaim Plaintiff, v. ATLANTIC RICHFIELD COMPANY, Chevron U.S.A., Inc., Exxon Corporation, Mobil Oil Corporation, Shell Oil Products Company and Texaco Refining and Marketing, Inc. Defendants.

34 F.Supp.2d 1208

UNION OIL COMPANY OF CALIFORNIA, Counterclaim Plaintiff, v. ATLANTIC RICHFIELD COMPANY, Chevron U.S.A., Inc., Exxon Corporation, Mobil Oil Corporation, Shell Oil Products Company and Texaco Refining and Marketing, Inc. Defendants.

No. CV-95-2379KMW (JRx).

United States District Court, C.D. California.

August 31, 1998.

Barbara A. Reeves, Paul Hastings Janofsky & Walker, Los Angeles, CA, Carleton K. Montgomery, Fried Frank Harris Shriver & Jacobson, Los Angeles, CA, M. Laurence Popofsky, Heller Ehrman White & McAuliffe, San Francisco, CA, John A. Diaz, Harry C. Marcus Bartholomew Verdirame, Michael P. Dougherty, James Gould, Morgan & Finnegan, New York City, John W. Keker, Keker & Van Nest, San Francisco, CA, Richard C. Morse, Richard C. Morse Law Offices, Los Angeles, CA, Jennifer L. Colyer, Fried Frank Harris Shriver & Jacobson, New York City, for Atlantic Richfield Co.

Barbara A. Reeves, Paul Hastings Janofsky & Walker, Los Angeles, CA, Carleton K. Montgomery, Fried Frank Harris Shriver & Jacobson, Los Angeles, CA, Dana Cephas, Kirkland & Ellis, Los Angeles, CA, M. Laurence Popofsky, Heller Ehrman White & McAuliffe, San Francisco, CA, John A. Diaz, Harry C. Marcus Bartholomew Verdirame, Michael P. Dougherty, James Gould, Morgan & Finnegan, New York City, John W. Keker, Keker & Van Nest, San Francisco, CA, Richard C. Morse, Richard C. Morse Law Offices, Los Angeles, CA, Jennifer L. Colyer, Fried Frank Harris Shriver & Jacobson, New York City, for Chevron USA, Inc. Barbara A. Reeves, Paul Hastings Janofsky & Walker, Los Angeles, CA, Carleton K. Montgomery, Fried Frank Harris Shriver & Jacobson, Los Angeles, CA, Dana Cephas, Kirkland & Ellis, Los Angeles, CA, M. Laurence Popofsky, Heller Ehrman White & McAuliffe, San Francisco, CA, John A. Diaz, Harry C. Marcus Bartholomew Verdirame, Michael P. Dougherty, Arnold I. Rady, James Gould, Morgan & Finnegan, New York City, John W. Keker, Keker & Van Nest, San Francisco, CA, Richard C. Morse, Richard C. Morse Law Offices, Los Angeles, CA, Jennifer L. Colyer, Fried Frank Harris Shriver & Jacobson, New York City, for Exxon Corp., Mobil Oil Corp., Shell Oil Products Co., Texaco Refining and Marketing, Inc.

Laurence H. Pretty, Pretty Schroeder & Poplawski, Los Angeles, CA, Ernest I. Reveal, III, Robins Kaplan Miller & Ciresi, Costa Mesa, CA, Keith A. Newburry, Sheppard Mullin Richter & Hampton, Los Angeles, CA, David W. Beehler, Michael V. Ciresi, Allison A. Johnson, Martin R. Lueck, Linda S. Foreman, Julie L. Levi, David S. Evinger, William M. Lutz, Robins Kaplan Miller & Ciresi, Minneapolis, MN, Arnold I. Rady, Morgan & Finnegan, New York City, for Unocal Corp., Union Oil Co. of California.

PHASE III: MEMORANDUM OF DECISION SETTING FORTH THE COURT'S FACTUAL FINDINGS AND CONCLUSIONS OF LAW

WARDLAW, Circuit Judge.^*

The above-entitled action having come on for trial before the Court from December 16, 1997 through December 19, 1997, of the separate and independent affirmative defense of inequitable conduct, and it having been argued and submitted, the Court now renders its Findings of Fact and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52(a) in support of judgment for the Plaintiff:

Plaintiff Union Oil Company of California ("Union Oil") is the holder of United States Patent 5,288,393 ("'393 Patent"), dated February 22, 1994. The patent, entitled "Gasoline Fuel", claims compositions producing an unleaded automotive fuel to reduce polluting emissions. In prior phases of this trial, the Court construed the patent (Order dated May 19, 1997), and a jury found that it was valid and infringed by Defendants Atlantic Richfield Company, Chevron USA, Inc., Exxon Corporation, Mobil Oil Corporation, Shell Oil Products Company and Texaco Refining and Marketing, Inc. (collectively "Defendants"). The jury further awarded a reasonable royalty rate for a defined period of infringement. The issue now before the Court is whether Union Oil engaged in inequitable conduct before the Patent and Trademark Office ("PTO") so as to render the '393 Patent unenforceable. For the reasons explained below, the Court has concluded that Union Oil's conduct was not "so culpable that the patent should not be enforced." Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed.Cir.1995).

I. STANDARD FOR INEQUITABLE CONDUCT

An applicant for a patent owes a duty of candor and good faith to the PTO. 37 C.F.R. § 1.56. Inequitable conduct may be found when this duty is breached, Molins PLC, 48 F.3d at 1178, and, if found in relation to one or more claims,¹ renders the patent unenforceable. Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 874 (Fed.Cir.1988) (en banc), cert. denied, 490 U.S. 1067, 109 S.Ct. 2068, 104 L.Ed.2d 633 (1989). Inequitable conduct "includes affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive." Molins PLC, 48 F.3d at 1178. The inventors, the attorney who prepares or prosecutes the application, and all other individuals who are involved in the substantive preparation or prosecution of the application must disclose to the PTO all information known by them to be material to patentability. Novitas v. The Genlyte Group, 1995 U.S. Dist. LEXIS 21089, at *43-44 (C.D.Cal. March 9, 1995). The burden of proof as to the materiality of the information, the failure to submit it accurately, and the intent to deceive is clear and convincing evidence. Id. at *44-45. Materiality and intent must be proven separately.

A. Materiality

In determining the issue of inequitable conduct the Court must first decide whether the applicant withheld information satisfying a threshold level of materiality. Because the '393 patent was pending at the time of the 1992 revision to PTO Rule 56, Molins PLC, 48 F.3d at 1179 n. 8, the controlling standard of materiality to patentability is whether the information:

is not cumulative to information already of record or being made of record in the application, and (1)[i]t establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or (2)[i]t refutes, or is inconsistent with, a position the applicant takes in: (i)[o]pposing an argument of unpatentability relied on by the Office, or (ii)[a]sserting an argument of patentability.

37 C.F.R. § 1.56 (1992). A patentee "facing a high level of materiality and clear proof that it knew or should have known of that materiality can expect to find it difficult to establish `subjective good faith' sufficient to prevent the drawing of an inference of intent to mislead." Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1257 (Fed.Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 1511, ___ L.Ed.2d ___ (1998). In other words, given the materiality and failure to offer a good faith explanation of a pattern of nondisclosure, an intent to mislead may be inferred. Id. at 1259.

B. Intent to Deceive

The requisite intent is to be inferred from all the facts and circumstances. It is found when in light of all the evidence, the conduct indicates "sufficient culpability to require a finding of intent to deceive." Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1189 (Fed.Cir.1993). Intent need not be proven by direct evidence; it "generally must be inferred from the facts and circumstances surrounding the applicant's conduct." Molins PLC, 48 F.3d at 1180-81.

Intent to deceive should be determined in light of the realities of patent practice, and not as a matter of strict liability whatever the nature of the action before the PTO. `A patentee's oversights are easily magnified out of proportion by one accused of infringement. ...' Given the case with which a relatively routine act of patent prosecution can be portrayed as intended to mislead or deceive, clear and convincing evidence of conduct sufficient to support an inference of culpable intent is required.

Northern Telecom, Inc. v. Datapoint Corp., 908 F.2d 931, 939 (Fed.Cir.1990) (citation omitted).

While intent to deceive the PTO may be found as a matter of inference from circumstantial evidence, circumstantial evidence cannot indicate merely gross negligence. Molins PLC, 48 F.3d at 1181 (citing Kingsdown Medical Consultants, 863 F.2d at 876 ("[A] finding that particular conduct amounts to `gross negligence' does not of itself justify an inference of intent to deceive; the involved conduct, viewed in light of all the evidence, including evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive.")). Thus, the alleged conduct "must not amount merely to the improper performance of, or omission of, an act one ought to have performed. Rather, clear and convincing evidence must prove that an applicant had the specific intent to accomplish an act that the applicant ought not to have performed, viz, misleading or deceiving the PTO." Molins PLC, 48 F.3d at 1181.

An intent to mislead may also be inferred from the affirmative act of submitting misleading information under oath where the examiner has an inability to investigate the facts. Novitas, 1995 U.S. Dist LEXIS 21089 at *54 (citing Paragon, 984 F.2d at 1191).

1. Failure to Disclose

In a case involving nondisclosure of information, "clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference." Molins PLC, 48 F.3d at 1181 (emphasis added). A patentee has no duty to conduct a prior art search, and "thus there is no duty to disclose art of which an applicant could not have been aware." FMC Corp. v. Hennessy Industries, Inc., 836 F.2d 521, 526 n. 6 (Fed.Cir.1987). The threshold level of intent in cases alleging failure to disclose known information is high. See Molins PLC, 48 F.3d at 1182 ("Things can `fall through the floorboards' and not arise from...