wood iStock_000017413587_LargeIn the latest iteration of Ohio Willow Wood Company[1] (OWW), the Federal Circuit upheld a district court ruling of inequitable conduct against OWW despite the presence of a litigation screen. The Federal Circuit had affirmed summary judgment on invalidity, reversed a summary judgment ruling of no inequitable conduct, and remanded the case to the Southern District of Ohio to consider genuine issues of material fact on the issue of inequitable conduct. The district court then found inequitable conduct in the second of two reexaminations of a patent that OWW had asserted against Alps South.

At issue was whether OWW’s director of research and development, who was overseeing the patent infringement litigation and served as the connection between the litigation and reexamination counsel, made any material misrepresentations or omissions with the intent to mislead the USPTO, and whether such deceptive intent was the most reasonable inference to be made from the evidence. OWW had established an ethical wall between its litigators and its attorneys handling the two reexaminations. Alps South argued that, despite that ethical wall, OWW’s director of research and development had received material information from the litigation and withheld that information from the USPTO in the second reexamination.

In particular, OWW disputed the testimony of a competitor’s employee during the second reexamination. OWW alleged that the employee was a highly interested party whose testimony was uncorroborated and unreliable. The district court found that evidence from the litigation, however, corroborated the employee’s testimony and was material. Because OWW’s director of research and development was aware of that corroborating evidence despite the existing ethical wall, and because he did not correct OWW’s counsel’s argument that the employee’s testimony was uncorroborated, the district court found that OWW’s director of research and development intended to defraud the USPTO.

Finding the corroborating evidence dispositive, the Federal Circuit concluded that the district court’s finding of materiality was not clearly erroneous. In addition, the Federal Circuit concluded that there was sufficient evidence to support the district court’s finding that OWW’s director of research and development’s withholding of the corroborating evidence was the product of deceptive intent. The court reasoned that OWW’s director of research and development was in a position to correct misrepresentations regarding the corroborating evidence, regardless of whether he was supposed to see that evidence, but failed to intervene. Apparently because he had participated in the reexamination proceedings by attending hearings, functioned as a connection between OWW’s litigation and reexamination teams, and “was the ultimate decision maker with respect to some of OWW’s patent litigation matters, including this case,” the court found that he had a duty of candor under 37 C.F.R. § 1.555(a) and 37 C.F.R. § 1.56. The Federal Circuit confirmed that he had violated that duty of candor by withholding the corroborating evidence. And the Federal Circuit agreed with the district court that because OWW’s director of research and development provided no reasonable explanation for his withholding of the corroborating evidence, the most reasonable inference was that he intended to deceive. The Federal Circuit therefore affirmed the district court’s inequitable conduct decision regarding the second reexamination.

In addition, Alps South argued that the inequitable conduct ruling in the second reexamination meant that inequitable conduct should have also been found in the first reexamination. Because the Federal Circuit determined that the material misrepresentations in the second reexamination were not presented in the first reexamination, it affirmed the district court’s ruling that there was no inequitable conduct in the first reexamination.

Alps South also appealed the district court’s decision not to extend the unenforceability ruling of the patent in question to two related OWW patents. Because the related patents were not at issue in the litigation, and because Alps South never requested such relief in its counterclaims, the Federal Circuit decided that the inequitable conduct ruling would not extend to them.

In summary, OWW’s director of research and development had a duty of candor under 37 C.F.R. § 1.555(a) and 37 C.F.R. § 1.56 because of his participation on behalf of OWW in the reexamination proceedings. This case suggests that (1) in-house individuals who substantively participate in a USPTO proceeding on behalf of a patent owner may be held to the duty of candor even if a screen exists between the USPTO proceeding and litigation concerning the same patent, and (2) if from the litigation such individuals know facts contrary to arguments their counsel are presenting to the USPTO, they should advise their counsel of those facts to avoid a holding of inequitable conduct.

[1] Ohio Willow Wood Company v. Alps South, LLC, 2015-1132 (Fed. Cir. 2016).