In the ongoing saga between two manufacturers of liners for prosthetic limbs, the US Court of Appeals for the Federal Circuit confirmed a finding of inequitable conduct committed by the patent owner while the patent at issue was being reviewed in an ex parte reexamination. The Ohio Willow Wood Company v. Alps South, LLC, Case Nos. 15-1132; -1133 (Fed. Cir., Feb. 19, 2016) (Bryson, J). This confirmation comes less than a year after the Federal Circuit vacated a patent owner verdict of willful infringement for a lack of standing.

Ohio Willow Wood (Willow) filed a lawsuit against Alps South (Alps) alleging infringement of its patent. Alps mounted a validity challenge in two successive ex parte reexamination proceedings while the district court remained stayed. In the first reexam, Willow managed to avoid the asserted prior art by amending its claims, limiting them to cover a prosthetic liner with gel only on the inside. In the second reexam, however, Alps submitted additional evidence of prior art showing that the added claim limitation was disclosed in the prior art.

In particular, Alps presented evidence in the form of an advertisement from a competitor in the field of prosthetics, Silipos, and declaration and deposition testimony from a Silipos employee attesting that Silipos had sold prosthetic liners with gel only on the inside before the effective filing date of the asserted patent. The patent examiner agreed with Alps and rejected the claims for obviousness. Willow appealed to the Patent Trial and Appeal Board (PTAB or Board).

To overcome the Silipos prior art, Willow argued that the Silipos employee’s testimony was unreliable because it was uncorroborated and that the witness was highly interested as a result of receiving royalty payments on the prior art product. The Board agreed and reversed the examiner’s rejection on the basis that the Silipos employee’s testimony was uncorroborated and that the witness was an interested third party.

After completion of the second reexam, the district court lifted the stay. Alps thereupon moved for summary judgment of invalidity of the asserted claims, and for summary judgment that Willow’s conduct before the US Patent and Trademark Office (PTO) during the reexams was inequitable. The district court granted Alps’s motion for summary judgment of invalidity but denied Alps’s motion on inequitable conduct, concluding there was a triable issue of fact regarding inequitable conduct on Willow’s part. Both parties appealed. The Federal Circuit affirmed summary judgment of invalidity but reversed and remanded the summary judgment ruling of no inequitable conduct.

On remand, the district court found that Willow, based on the conduct of Mr. Colvin, its director of research and development, was guilty of inequitable conduct during the second reexamination concerning the argument that the challenged testimony was uncorroborated. Willow used the same law firm for both the litigation and the reexamination proceedings. However, the firm established an ethical wall between the lawyers handling the reexamination and the lawyers handling the litigation. Mr. Colvin, as the overseer of both the reexamination proceedings and the litigation, was the link between Willow’s litigation and reexamination counsel.

The district court found that Mr. Colvin knew that Willow’s reexamination counsel had represented to the PTO that the Silipos testimony presented by Alps was uncorroborated, yet was aware of the corroborating letters and materials Willow had received from Silipos. He failed to correct the misrepresentation. Mr. Colvin did not deny being aware of the withheld materials but could not offer an explanation as to why he failed to correct counsel’s misrepresentation.

The district court found that Mr. Colvin was aware of Silipos’s letters, that the letters were material (because they corroborated the testimony presented to the Board that Willow’s counsel argued was uncorroborated), and that he failed to disclose the letters to correct the misrepresentation. The trial court found that the most reasonable inference to be drawn from the evidence was that Willow acted with deceptive intent in misrepresenting the existence of corroborating evidence, and the court consequently held the patent unenforceable. The district court awarded Alps attorneys’ fees for the period after the second reexamination. Willow appealed.

In reviewing the district court’s findings of fact on the issues of materiality and intent for clear error, and the district court’s ultimate finding of inequitable conduct based on those facts for abuse of discretion, the Federal Circuit considered whether Mr. Colvin made misrepresentations or omissions material to patentability, whether he did so with the specific intent to mislead or deceive the PTO, and whether the deceptive intent was the single most reasonable inference to be drawn from the evidence.

Like the district court, the Federal Circuit concluded that the Silipos letters were material because they corroborated the testimony that the Silipos prosthesis liners with gel only on the interior were prior art (since the Board’s decision turned on Willow’s representation that there was no evidence corroborating that testimony). On the issue of specific intent, the Court noted that inequitable conduct may be inferred from indirect and circumstantial evidence, but cautioned that deceptive intent must be “the single most reasonable inference.” Using that standard, the Federal Circuit concluded that the most reasonable inference behind Willow’s withholding of the Silipos materials was deceptive intent.

The Federal Circuit thus concluded that the district court did not abuse its discretion in finding that Willow’s failure to correct the misrepresentation by its counsel to the Board regarding the absence of corroborating evidence was an act of inequitable conduct.