Four Pillars Enterprise Co. v. Chang

662 F. Supp. 28, 1986 U.S. Dist. LEXIS 17788
CourtCourt of Appeals for the D.C. Circuit
DecidedNovember 12, 1986
DocketCiv. A. Nos. 85-0006, 85-0007
StatusPublished

This text of 662 F. Supp. 28 (Four Pillars Enterprise Co. v. Chang) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Four Pillars Enterprise Co. v. Chang, 662 F. Supp. 28, 1986 U.S. Dist. LEXIS 17788 (D.C. Cir. 1986).

Opinion

MEMORANDUM

GESELL, District Judge.

Plaintiffs by their identical complaints filed simultaneously1 allege that defendants Chang and Globe have engaged in unfair competition by using a fraudulently procured U.S. patent in an effort to hamper their export of tearable embossed adhesive tape from Taiwan to the United States. They seek only attorney fees in this case. After receiving oral and deposition testimony and numerous exhibits at a bench trial, aided by counsel’s briefs and arguments, the Court’s findings of fact and conclusions of law, follow.

Plaintiff corporations and defendant Globe are each Taiwanese corporations. Plaintiff Four Pillars manufactures teara-ble embossed adhesive tape in Taiwan and sells in that country and elsewhere directly or through the other plaintiff Asia Chemical. Defendant Globe also manufactures the same type of tape in Taiwan in competition with plaintiffs. When Globe obtained a U.S. patent for such tape in February, 1979 (No. 4,139,669, hereafter the ’669 patent), plaintiffs had already developed exports to the United States. Thereafter Globe publicized the existence of its U.S. patent both in Taiwan and the United States, all with a view to impeding plaintiffs’ importation of tape into this country.2 An attack list was developed of U.S. concerns, which set forth importers or potential importers of tape from Taiwan, and many of these companies were apprised of the ’669 patent by Globe.

Plaintiffs contend that Globe obtained the ’669 patent fraudulently (now more graciously labelled inequitable conduct) before the U.S. Patent and Trademark Office during the period from August 26, 1971, when an application for the tape patent was first filed, through various Patent Office actions until the patent issued in February, 1979. Globe’s prosecution of its U.S. patent was part of a larger strategy by which it sought the same or similar patent protection for variations of the same tape in other countries. The alleged inequitable conduct focuses on Globe’s failure to disclose Globe’s patent activities in various foreign countries and specifically upon its nondisclosure and affirmative concealment of the fact that by May, 1973, comparable patents constituting highly relevant prior art had issued to Globe both in Australia and Vietnam. Plaintiffs assert that because of this conduct the patent was unenforceable from the outset and Globe’s attempts to prevent plaintiffs from importing by publicizing the patent constituted unfair competition. Invalidity of the ’669 patent would state a basis for an unfair competition claim but since plaintiffs were unable to prove any commercial damage at trial, their unfair competition claim was reduced to one under 35 U.S.C. § 285 (1982) for attorney fees expended in this litigation.

“Inequitable conduct,” when considered in the context of patent law, derives from the clear duty of inventors and specifically all attorneys and agents to proceed before the Patent Office with complete candor and good faith, and specifically a duty to disclose any information material to a patent application of which they are aware. See 37 C.F.R. § 1.56(a) (1986). This duty is rigidly upheld, and gains significance from the fact that much Patent [30]*30Office practice is ex parte. Because failure to make full and complete disclosure carries serious implications for the professional standing of one who fails to make the required disclosure, proof of inequitable conduct requires “clear, unequivocal, and convincing evidence” of such conduct. Orthopedic Equipment Co. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383 (Fed.Cir.1983). See also Kimberly-Clark Corporation v. Johnson & Johnson, 745 F.2d 1437, 1454 (Fed.Cir.1984); Driscoll v. Cebalo, 731 F.2d 878, 884 (Fed.Cir.1984); Oetiker v. Jurid Werke GMBH., 671 F.2d 596, 600 (D.C.Cir.1982).

In a case involving information not disclosed to the Patent Office, a showing of inequitable conduct must include both proof of a “threshold degree of materiality of the nondisclosed ... information” and of “threshold intent” to withhold it. J.P. Stevens & Co. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1559-60 (Fed.Cir.1984). Materiality must be assessed with reference to the definition in the patent regulations, 37 C.F.R. 1.56(a) (1986), which states that “information is material where there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent.” See J.P. Stevens & Co., supra, at 1559.

Direct evidence of intent to withhold is not necessary. Intent “may be proven by showing acts the natural consequences of which are presumably intended by the actor.” “[G]ross negligence is sufficient” and “is present when the actor, judged as a reasonable person in his position, should have known of the materiality of a withheld reference.” However, “simple negligence, oversight, or an erroneous judgment made in good faith is insufficient” to establish the requisite intent. Once threshold proof of these matters is presented, “the court must balance them and determine as a matter of law whether the scales tilt to a conclusion that inequitable conduct occurred.” Id. at 1560 (citations omitted).

The proof established by a preponderance of the evidence that “inequitable conduct” had in fact occurred before the Patent Office during the prosecution of the ’669 patent. It is unnecessary to trace in detail the various steps followed before the Patent Office from the initial filing in 1971 until the ’669 patent issued in 1979. There was a failure to disclose from the outset. When the original application was filed, the inventor did not disclose, as required, applications filed earlier in 1971 in Taiwan and Japan and Chang, the inventor, affirmatively swore under oath there were none. This omission was never corrected.

In May, 1973, patents on a variation of the tape issued to Globe in Australia and Vietnam. The patents were more than a year old when a continuation was filed in September, but these patents were not disclosed nor had the applications been earlier disclosed.

Finally, when another continuation was filed in November, 1977, there was still no disclosure although the patent examiner had by then clearly indicated to Globe’s American counsel that he wished information about patent protection and patent developments which Globe had encountered abroad when seeking patents on the same or similar tape. In spite of the obvious materiality of the information which the examiner’s queries emphasized, disclosure of such information did not occur before the ’669 patent issued.

The events shown by this record underlying the failure to disclose will now be traced.

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662 F. Supp. 28, 1986 U.S. Dist. LEXIS 17788, Counsel Stack Legal Research, https://law.counselstack.com/opinion/four-pillars-enterprise-co-v-chang-cadc-1986.