Over Dissent, Federal Circuit Panel Allows Trial Court to Decide Inequitable Conduct Issue Without Any Jury Trial

Case: Agfa Corp v. Creo Products Inc.; No. 05-1079 (Fed. Cir. 6/26/06)

The One Sentence Summary: Over a dissent, the Federal Circuit panel held that the trial court could sever the issue of inequitable conduct and try it separately, and affirmed findings of patent invalidity due to inequitable conduct where the applicant had withheld prior art from the Patent Office.


What They Were Fighting About: Agfa had asserted various patents for computer-to-plate (CTP) systems that allow direct transfer of a computer image to a printing plate. The system had a machine that pulled various light sensitive printing plates from stacks in the machine in response to commands from a computer. Creo had defended patent infringement claims by contending that Agfa had improperly failed to disclose three prior art systems to the Patent Office. The District Court severed the inequitable conduct issue and conducted a bench trial of that issue. At the conclusion of the trial, the District Court declared all of Agfa's patents unenforceable due to inequitable conduct and awarded attorney's fees as an exceptional case under 35 U.S.C. section 285.

Federal Circuit Holdings:

• The District Court acted properly in deciding the inequitable conduct issue without a jury trial. The panel found the case indistinguishable from the earlier case of Gardco Manufacturing, Inc. v. Herst Lighting Co., 820 F.2d 1209 (Fed. Cir. 1987).
• The Supreme Court decision in Beacon Theaters, Inc. v. Westover, 359 U.S. 500 (1959) does not require a jury trial on inequitable conduct issues. Unlike Beacon Theater, there are no overlapping issues between the inequitable conduct claims and the jury questions of invalidity. Therefore, the trial court is free to first conduct the trial on inequitable conduct.
• The discussion in the decision of In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995) does not indicate that a jury trial was necessary on the inequitable conduct claims. The discussion in Lockwood of the similarity of the writ of scire facias to an inequitable conduct determination does not mean that there would have been a right to a jury trial under the 7th Amendment for inequitable conduct.
• With respect to claim construction, the trial court properly held that the word "stack" could include horizontal or vertical arrangements of plates. The court's reference to a dictionary in reaching this determination was permissible. The illustration of a single embodiment of a horizontal stack in the figures in the patent did not limit the term to that single embodiment.
• The trial court properly determined that the prior art withheld from the patent office was material. Had the prior art been disclosed, the applicant would not have been able to make statements to the Patent Office regarding what was different from conventional aspects of the prior art. This allowed a finding of materiality.
• The trial court properly found intent to deceive based upon the applicant's extensive knowledge of the prior art and its failure to cite that prior art to the Patent Office. Agfa's challenge to the claim construction of the term "stack" did not excuse its failure to disclose the prior art. The appellate court deferred to the trial court's credibility determinations that Agfa intended to deceive the patent office.
• The trial court properly held that a continuation patent was invalid upon a finding of inequitable conduct as to an earlier patent. The inequitable conduct as to the parent patent invalidated the continuation where the claims were similar.
• The trial court did not need to have explained its balancing of materiality and intent in light of its finding that both were high.
• The award of attorneys' fees for exceptional circumstances is justified in light of the trial court's findings that this was an exceptional case even among inequitable conduct cases.
• In a dissent, Circuit Judge Newman argued that a jury trial on common issues between the inequitable conduct and patent validity claims should have been held. Judge Newman also disagreed with the claim construction of the term "stack". In light of the descriptive text in the invention saying that it was directed to substantially horizontal plates, Judge Newman would have held that stack could not be construed to include the vertical alignment of the prior art.