Luv N’ Care, Ltd. and Nouri E. Hakim v. Lindsey Laurain and Eazy-PZ, LLC, Nos. 2022-1905, 2022-1970 (Fed. Cir. April 12, 2024) addressed several issues, including: (1) what evidence of litigation misconduct may support a finding of unclean hands, barring relief for related claims, (2) the appropriate legal analysis for finding a patent unenforceable due to inequitable conduct before the USPTO, (3) how to appropriately construe disputed facts underlying obviousness determinations at the summary judgment stage, and (4) the legal standard and timing for determinations of “prevailing party,” “exceptional case,” and “closeness” of the case, which underlie awards of attorney’s fees and costs.

Background and Procedural History

Eazy-PZ, LLC operated in the market for child-friendly dining mats, i.e., rubber mats wherein a bowl is embedded in the mat, thus making it more difficult for young children to make messes by overturning their bowl of food. At issue in this case is U.S. Design Patent No. D745,327 (the “D327 design patent”) and U.S. Patent No. 9,462,903 (the “’903 patent”), held by Eazy-PZ, LLC and Lindsey Laurain (collectively, “EZPZ”). One such mat from the ’903 patent is depicted here:

Luv N’ Care, Ltd. and Nouri E. Hakim (collectively, “LNC”) operated in the same market for child-friendly dining mats, and filed a complaint in the Western District of Louisiana (“WDLA”) alleging “acts of unfair competition” under the Lanham act and Louisiana’s Unfair Trade Practices and Consumer Protection Law (“LUTPA”). LNC also sought declaratory judgment that the D327 design patent and ’903 patent were invalid, unenforceable, and not infringed. EZPZ filed counterclaims for infringement of the D327 design patent and ’903 patent, for copyright, trademark, and trade dress infringement, for violation of LUTPA, and for unjust enrichment.

Following discovery, LNC moved for partial summary judgment based on invalidity of the ’903 patent. WDLA found that all claims of the ’903 patent were obvious based on prior art patents and patent publications Bass and Webb. Claims at issue in the ’903 patent were limited to using “rubberlike,” “nontoxic,” or “silicone” materials in a configuration wherein the mat forms a vacuum with the underlying surface, helping to secure the embedded bowl to the table. The Bass prior art reference disclosed an adhesive backing to securely affix a mat with embedded tableware to a surface. The Webb prior art reference disclosed using a vacuum between a rubberlike nontoxic mat and a surface to secure the mat to the surface, but unlike Bass’s mat, Webb’s mat had no embedded tableware. WDLA did not elaborate on any motivation to combine Bass with Webb, but found it would have been “common sense” to make the Bass device out of the materials from Webb. WDLA further found that obviousness of the ’903 patent was compelling enough to not require analysis of secondary considerations, even at the summary judgment stage. Thus, WDLA granted LNC’s motion and found the ’903 patent invalid as obvious.

For roughly 18 months after the summary judgment ruling, the parties litigated two requests for reconsideration of the summary judgment ruling, a bench trial, and a motion for amendment of the WDLA’s findings and judgment. In addition, EZPZ sought and received an ex parte reexam certificate confirming the patentability of the ’903 patent. The WDLA litigation centered around four issues: (1) whether EZPZ engaged in litigation misconduct, resulting in a bar to relief for EZPZ’s counterclaims based on EZPZ’s unclean hands, (2) whether the ’903 patent is unenforceable due to EZPZ’s inequitable conduct before the USPTO, (3) whether the ’903 patent was appropriately found invalid as obvious at the summary judgment stage, and (4) whether LNC was entitled to an award of attorney’s fees and costs

Regarding (1), i.e., EZPZ’s unclean hands, WDLA found that EZPZ engaged in litigation misconduct by failing to disclose patent applications during discovery, by attempting repeatedly to block LNC from obtaining EZPZs prior art searches, and by providing evasive and misleading testimony. WDLA found that this misconduct rose to the level of “unconscionable acts” and had a nexus to all of EZPZ counterclaims because EZPZ’s deceit and reprehensible conduct focused on gaining an unfair advantage in litigating its patent infringement counterclaims, and this conduct could not be “cordoned off” from its pursuit of the other counterclaims. Thus, WDLA held that EZPZs unclean hands barred relief on all of EZPZ’s counterclaims.

Regarding (2), i.e., EZPZ’s inequitable conduct in prosecuting the ’903 patent, WDLA found that EZPZ had misrepresented whether the Platinum Pets prior art reference had a claimed “self-sealing” functionality, and had also withheld certain other prior art. However, because Platinum Pets’ self-sealing functionality was not but-for material to the USPTO’s patentability determination, because the withheld prior art was cumulative of Platinum Pets, and because LNC did not demonstrate EZPZ had a specific intent to deceive, WDLA held that LNC did not meet its burden of proof as to inequitable conduct.

Regarding (3), i.e., reconsideration of WDLA’s finding that the ’903 patent is obvious at the summary judgment stage, WDLA reviewed the prosecution history added by the intervening ex parte reexam certificate as well as an additional prior art reference, the Tommee Tippee mat, but declined to amend its prior ruling that the ’903 patent was invalid as obvious in view of Bass and Webb.

Regarding (4), i.e., LNC’s motion for attorney’s fees and costs from EZPZ, WDLA found that the case failed the “exceptional case” standard, that LNC was not a “prevailing party,” and that “close and difficult legal issues were [present.]” As a result of these findings, WDLA denied LNC’s request for attorney’s fees and costs.

LNC appealed WDLA’s determinations as to (2) and (4), and EZPZ cross-appealed WDLA’s determinations as to (1) and (3).

Issues

1. Did WDLA err in determining that the doctrine of unclean hands barred EZPZ from obtaining relief on its counterclaims?
2. Did WDLA err in concluding that LNC failed to prove the ’903 patent was unenforceable due to EZPZ’s inequitable conduct before the USPTO in prosecuting the ’903 patent?
3. Did WDLA err in granting summary judgment that the claims of the ’903 patent were invalid as obvious?
4. Did WDLA err in denying LNC’s request for attorney’s fees and costs from EZPZ?

Analysis and Holdings (Stark, writing the opinion for Reyna, Hughes, and Stark)

1. WDLA did not err in determining that the doctrine of unclean hands barred EZPZ from obtaining relief on its counterclaims

The Federal Circuit reiterated what the law requires to bar relief under the doctrine of unclean hands: the litigation misconduct of a party must involve “violations of conscience” that “in some measure affect the equitable relations between the parties” and have “immediate and necessary relation to the equity that [the party] seeks in respect of the matter in litigation.” The Federal Circuit pointed to the evidence of EZPZ’s litigation misconduct that WDLA relied on in its unclean hands holding:

• EZPZ failed to disclose LNC patent applications related to the ’903 patent until well after close of discovery and dispositive motion practice.
• EZPZ failed to disclose prosecution history related to the ’903 patent that was relevant to the construction of a disputed claim term, until after the claim construction phase.
• EZPZ tried to block LNC’s efforts to discover EZPZ’s prior art searches by falsely claiming that no searches had been conducted and that all responsive documents had been produced.
• EZPZ witnesses, including EZPZ’s former outside counsel, repeatedly gave purposefully evasive testimony during deposition and in trial, including false testimony directly contradicted by other contemporaneous evidence.

Based on this evidence, the Federal Circuit found no clear error in WDLA’s finding that EZPZ’s conduct was “offensive to the integrity of the court, resulting in the district court’s loss of confidence in EZPZ’s candor.”

Regarding the nexus requirement, i.e., the requirement that the misconduct bear an “immediate and necessary relation” to the barred claims, the Federal Circuit pointed to the effect EZPZ’s misconduct had on the litigation of patent claims, e.g., not providing documents relevant to claim construction until after the claim construction phase.

As to EZPZ’s remaining counterclaims, e.g., for design patent and trade dress infringement, the Federal Circuit agreed with WDLA’s reasoning that EZPZ’s continuous misconduct as to the patent infringement claims “cannot be cordoned off” with respect to EZPZ’s other claims, which were pled from the outset.

The Federal Circuit found no clear error in WDLA’s holding that EZPZ’s litigation misconduct was sufficiently unconscionable and related to EZPZ’s counterclaims to bar relief under the doctrine of unclean hands. Thus, the Federal Circuit affirmed with respect to (1).

2. WDLA erred in concluding that LNC failed to prove the ’903 patent was unenforceable due to EZPZ’s inequitable conduct before the USPTO in prosecuting the ’903 patent

The Federal Circuit reviewed for clear error WDLA’s findings regarding the materiality and deceptive intent behind EZPZ’s alleged inequitable conduct before the USPTO. The Federal Circuit reviewed WDLA’s holding regarding inequitable conduct for abuse of discretion.

Regarding materiality, the Federal Circuit noted that, while affirmative egregious misconduct establishes materiality per se, WDLA muddled its analysis of affirmative egregious misconduct with its analysis of deceptive intent. Because materiality is a separate inquiry from deceptive intent, WDLA must analyze these issues separately on remand. If WDLA finds no affirmative egregious misconduct, then it must reassess its prior determinations that the misrepresentations were but-for material.

According to the Federal Circuit, the test for but-for materiality is “if the PTO would not have allowed a claim had it been aware of” the reference. WDLA had found lack of but-for materiality based on the fact that the misrepresented prior art Platinum Pets had been disclosed by EZPZ and considered by the USPTO. The Federal Circuit required WDLA to address on remand whether the USPTO’s patentability decision would have differed if EZPZ had described Platinum Pets accurately, i.e., as disclosing self-sealing functionality. Regarding the undisclosed prior art, the Federal Circuit required WDLA to address on remand whether the undisclosed prior art would still have been seen as cumulative by the USPTO if EZPZ had described Platinum Pets accurately.

For the deceptive intent requirement, the Federal Circuit took issue with WDLA’s failure to consider EZPZ’s overall conduct. WDLA had only looked at specific misrepresentations of EZPZ in isolation. The Federal Circuit reiterated case law: “When a person having a duty of candor and good faith has engaged in serial misconduct during the prosecution of [patents] it is not enough for a court to consider each individual act of misconduct without considering the collective whole. […] [I]ntent to deceive the PTO can be inferred from a person’s pattern of a lack of candor[.]” On remand, WDLA must reevaluate EZPZ’s multiple misrepresentations in the aggregate.

The Federal Circuit vacated WDLA’s finding of no inequitable conduct, and remanded for further proceedings on this issue as described above.

3. WDLA erred in granting summary judgment that the claims of the ’903 patent were invalid as obvious

The Federal Circuit found here that WDLA had failed to appropriately view the evidence and all factual inferences from that evidence in the light most favorable to the non-moving party, i.e., EZPZ. Specifically, viewing prior art Webb and Tommee Tippee references in a light most favorable to EZPZ, a reasonable fact finder could not have found that Webb disclosed self-sealing functionality.

Regarding Webb, the Federal Circuit pointed to EZPZ’s expert testimony and EZPZ’s intervening ex parte reexamination certificate, both showing that Webb did not teach self-sealing. Regarding Tommee Tippee, the Federal Circuit explained that, based on differences in the Webb and Tommee Tippee disclosures and on EZPZ’s expert testimony, a reasonable factfinder could have found that Tommee Tippee was not simply an embodiment of Webb, contrary to the WDLA’s findings.

In addition, the Federal Circuit criticized WDLA’s short analysis regarding motivation to combine and missing analysis regarding objective indicia of nonobviousness. WDLA had simply relied on “common sense” as a motivation to combine Bass with Webb, without further explanation. The Federal Circuit cites straightforward caselaw here: “On summary judgment, to invoke ‘common sense’ or any other basis for extrapolating from prior art to a conclusion of obviousness, a district court must articulate its reasoning with sufficient clarity for review.”

Regarding objective indicia of nonobviousness, the Federal Circuit acknowledged that these can be overlooked where combinations represent “no more than a predictable use of prior art elements according to their established functions.” However, the Federal Circuit clarified that, in this case, the numerous genuine issues of material fact described above, e.g., whether Webb disclosed self-sealing functionality, meant that WDLA erred in failing to consider objective indicia of nonobviousness.

The Federal Circuit vacated WDLA’s grant of summary judgment, and remanded for reconsideration of this issue in the light most favorable to non-movant EZPZ.

4. WDLA erred in denying LNC’s request for attorney’s fees and costs from EZPZ

Regarding attorney’s fees, the requesting party, i.e., LNC, must be the “prevailing party” and the case must be an “exceptional case.” The Federal Circuit reviews “prevailing party” determinations de novo, and “exceptional case” determinations for abuse of discretion.

In contradicting the WDLA’s rejection of LNC as a “prevailing party,” the Federal Circuit cited to LNC’s victory on issue (1), i.e., that EZPZ’s counterclaims are barred under the doctrine of unclean hands. The Federal Circuit explained that any permanent material alteration of the relationship with a counterparty is sufficient to deem a party as a “prevailing party,” and that a party is not required to prevail on all claims in order to qualify as a “prevailing party.”

In contradicting WDLA’s refusal to deem the case “exceptional,” the Federal Circuit noted that the case was far from over, citing the numerous issues discussed above that must be determined on remand. WDLA is required to reevaluate the “exceptional case” determination in view of the totality of the circumstances, and at the case’s conclusion.

Regarding an award of costs, WDLA denied LNC costs based on the “close and difficult legal issues presented in the case.” The Federal Circuit stressed that a district court denying cost awards to a prevailing party must articulate its justifications. Further, like with the exceptional case determination, much remains to be decided on remand. The Federal Circuit required WDLA to reevaluate the “closeness” of the case at the case’s conclusion.

The Federal circuit vacated WDLA’s orders denying awards of attorney’s fees and costs to LNC, and remanded these issues for reconsideration at the conclusion of the case.

Outcome

WDLA’s judgment on the doctrine of unclean hands is affirmed, WDLA’s judgments on the doctrine of inequitable conduct, invalidity via obviousness, and attorney’s fees and costs are vacated for reconsideration on remand.

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