Optium Corp. v. Emcore Corp.

603 F.3d 1313, 94 U.S.P.Q. 2d (BNA) 1925, 2010 U.S. App. LEXIS 9193, 2010 WL 1783240

• Court: Court of Appeals for the Federal Circuit
• Decided: May 5, 2010
• Docket: 2009-1265
• Status: Published

Opinions

Opinion for the court filed by Circuit Judge NEWMAN. Concurring in the result opinion filed by Circuit Judge PROST.

NEWMAN, Circuit Judge.

Optium Corporation appeals the summary judgment of the United States District Court for the Western District of Pennsylvania, holding that Emcore Corporation did not commit inequitable conduct in obtaining the patents in suit. The district court had accepted the premise, for summary judgment purposes, that Emcore did not disclose a material reference to the patent examiner. The court ruled that because Optium had not presented evidence upon which the court could find intent to deceive or mislead the examiner, summary judgment should be granted in favor of Emcore. We affirm the district court’s ruling.¹

BACKGROUND

The patented technology

The Emcore patents in suit, U.S. Patent Nos. 6,282,003 (“the '003 patent”) and 6,490,071 (“the '071 patent”), concern improvements in an optical communication system wherein a laser transmits a signal in the form of a light wave along an optical fiber. The two patents are related, and each is titled “Method and Apparatus for Optimizing SBS Performance in an Optical Communication System Using at Least Two Phase Modulation Tones.” The acronym “SBS” stands for “stimulated Brillouin scattering,” which is a kind of interference that limits the amount of power that can be transmitted over fiber-optic lines, and thereby limits the distance across which information is transmitted. Stimulated Brillouin scattering occurs when the energy from the laser causes so much excitation of the molecules within the optical fiber that a portion of the light energy is reflected backward toward the transmitter. Such interference can cause problems with optical communication systems such as cable television, in which signals must be transmitted across long distances. The '003 and '071 patents relate to the use of “two-tone phase modulation” to minimize this SBS interference.

The technique of phase modulation was known, and refers to the division of the optical signal into different frequency bands (known as “sidebands”) that are sufficiently separate to have independent power thresholds at which SBS interference occurs. This division occurs when a separate radio signal (or “tone”) is applied to the optical signal. By distributing the optical signal across several such sidebands, the bvetall power transmitted across the optical fiber can be increased without producing deleterious interference. Two-tone phase modulation refers to the known application' of two separate radio frequency signals with the effect of splitting the optical signal into an even greater number of sidebands. See '003 patent eol.l 11.36-38 (“[T]he utilization of two modulation tones, specifically 2 and 6 GHz tones, to achieve the desired phase modulation is admitted prior art.”).

The invention' described and claimed in the '003 and '071 patents is an improvement on this technology, optimizing SBS suppression by a method in which “an operational region of SBS suppression is established as a function of the phase modulation of the light such that the operational' region identifies combinations of first and second phase modulation levels at which optimum SBS suppression is achieved for the first and second tones.” '003 patent coll ll. 60-64. The “phase modulation levels” are the power levels at which each radio frequency tone is applied. Based on this operational region, “the first and second phase modulation levels are adjusted such that the system' operates with optimum SBS suppression.” Id. eol.l 11.65-67. The inventors’ key contribution is the determination of how to derive this function of two variables so that the performance of a given pair of tones used for phase modulation can be determined or predicted through mathematical relationships instead of empirical laboratory measurement. E.g., id. col.4 1.64—col.5 1.14.

The patents also describe how the operational region, after it is calculated, can be expressed in the form of a “contour map” as shown in Figure 2 of both patents, with each contour line representing an “SBS threshold level,” meaning the maximum power level at which the optical signal can be transmitted without encountering SBS interference:

[[Image here]]

In Figure 2, region 114 is a local peak on the contour map, and thus indicates an operating region at which the corresponding power levels for the two phase modulation tones result in relatively high SBS suppression. Peak 114 is quite narrow and steep, however, and thus a slight variation in the phase modulation power levels can result in a significant drop-off in the SBS threshold level. The contour map enables identification of other favorable regions with relatively high SBS suppression that are less susceptible to this problem, such as circular region 128, within the broader “plateau” region indicated by 116. Because region 128 is relatively flat the SBS threshold level is less susceptible to variation even if the phase modulation power levels vary slightly. See generally '003 patent col.4 1.31 — col.6 1.8. The patents state that “operating points centered within relatively broad features of the map will inherently be more tolerant to drift of the operating point, thus providing a more stable SBS threshold” and increasing the “operational stability” of the system. Id. col.5 l.53-60.

The '003 and '071 patents include both method and apparatus claims directed to optimizing SBS suppression using these contributions.

The Willems reference

Optium’s charge of inequitable conduct is based on Emcore’s failure to cite to the patent examiner an article by F.W. Willems, J.C. van der Plaats, and W. Muys, titled “Harmonic distortion caused by stimulated Brillouin scattering suppression in externally modulated lightwave AM-CATV systems,” published in Electronics Letters, Vol. 30, No. 4, 343 (1994) (herein “Willems”). Willems describes single-tone phase modulation, and discusses the kinds of intermodulation distortion that can be caused by the larger spectral width that results from the separation of the light signal into sidebands. Willems states that this distortion is virtually eliminated when single-tone phase modulation is applied at a frequency above twice the highest cable television subcarrier frequency. Willems does not discuss two-tone phase modulation, and does not show a contour map or the use of a contour map to identify optimal SBS suppression regions as described in the '003 and '071 patents.

Emcore does not dispute that the inventors knew of Willems, for the article was cited in the background section of an internal research report they prepared in February 1997, at endnote [1] referenced in the following passage:

While observations of SBS-induced noise enhancement and CSO [composite second-order] degradation have been reported previously [1], to our knowledge, no quantitative analysis of these effects has been reported. We believe that the observed intensity noise enhancement may originate from the random nature of the photon scattering from the forward-propagating wave into the back-scattered wave. The CSO degradation may be due to clipping of the optical waveform peaks at the onset of SBS that induces asymmetry, and hence, enhanced second-order distortion. However, both of these effects require more study to obtain a quantitative understanding and correlation with observations.

The inventors again referred to Willems in their invention disclosure form to their employer, in the section titled “Background information on the invention,” in response to the question:

C. What were the previous methods or apparatus that were used but failed to solve the problem? (Give source of previous information on the subject that is closest to your invention, such as known use, publication or patents.)

The inventors responded:

To achieve SBS suppression in fiber-optic transmission systems, frequency-modulation of the laser source, as well as phase modulation using a phase modulation section on an external modulator have been employed [1]. Since high-power semiconductor lasers are not typically optimized for high-frequency injection current modulation, phase modulation is the only approach available. However, it has not been previously apparent what the characteristics of the phase modulation signal are to achieve optimum performance.

While [1] is not referenced again within the invention disclosure form, which contains no endnotes, Emcore does not dispute that the notation was a reference to the same endnote in the inventors’ research report that contained the Willems citation.

During prosecution of the '003 patent, Emcore’s patent attorneys submitted an Information Disclosure Statement that mentioned several references, but did not list Willems. The examiner cited additional references, including U.S. Patent which discussed Willems in its section on the background art. See 'All patent col.2 11.26-36. During prosecution of the '071 patent, which was filed as a continuation of the earlier application, the examiner identified another patent, U.S. Patent No. 5,953,139, as a “reference of interest”; this reference, too, discussed Willems in the context of the background art. See '139 patent col.2 1.61—col.3 1.17. The examiner did not cite or mention Willems during prosecution of either the '003 or the '071 patent.

District court proceedings

In September 2006 Emcore filed suit against Optium in the Western District of Pennsylvania, charging infringement of the '003 and '071 patents. After discovery, in December 2007 Optium filed a separate declaratory judgment action against Em-core in the same court, requesting a declaration that the '003 and '071 patents are unenforceable for inequitable conduct. This declaratory action was referred to a Special Master, upon the parties’ cross-motions for summary judgment. The Special Master reviewed the testimonial and documentary evidence relating to the patent filing and prosecution, including the deposition testimony of the inventors and three of the four attorneys who prosecuted the patent applications, the research report and invention disclosure forms the inventors had prepared, and reports prepared by Optium’s expert, Dr. Katherine Hall, Ph.D. Neither the inventors nor the prosecuting attorneys could recall the precise details of the events that had occurred ten years earlier, and none provided an explanation why Willems, which had been cited as a background reference in the inventors’ research report and invention disclosure, had not been submitted to the Patent Office. Dr. Hall opined that Willems was material prior art, and that claims 1, 6, 7, 13, 14, 15, 21, 24, and 27 of the '003 patent, and claim 1 of the '071 patent, were prima facie obvious in view of a combination of references including Willems. Optium referred only to claim 24 of the '003 patent, however, in its briefing of the materiality issue in its motion for summary judgment.

The Special Master concluded that, on the criteria of summary judgment, Optium had raised a genuine issue of material fact as to whether Willems was material to patentability. As to intent, the Special Master concluded that intent to deceive could not be inferred merely on the basis of “high materiality” of the reference and a lack of explanation for the nondisclosure. Optium had provided no evidence of an intent to deceive or mislead the examiner, and no basis for such an inference. The Special Master thus held that even assuming Willems was a material reference, in the absence of any evidence on which deceptive intent could be found or reasonably inferred, inequitable conduct could not lie. The district court adopted the Special Master’s analysis, and entered judgment in Emcore’s favor. This appeal followed.

DISCUSSION

The grant of summary judgment receives plenary review, applying the same standard as did the district court. Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1378 (Fed.Cir.2008). Although the issue of inequitable conduct is reviewed on the standard of abuse of discretion, it requires proof by clear and convincing evidence of the threshold facts of both materiality and intent. Thus summary judgment may be granted when, drawing all reasonable factual inferences in favor of the non-movant, the evidence is such that the nonmovant cannot prevail. ATD Corp. v. Lydall, Inc., 159 F.3d 534, 547 (Fed.Cir.1998). When a party has failed to introduce evidence sufficient to establish the existence of an essential element of that party’s case in accordance with the applicable standard of proof, summary judgment is properly granted against that party. Novartis Corp. v. Ben Venue Labs., Inc., 271 F.3d 1043, 1046 (Fed.Cir.2001); see Astrazeneca Pharms. LP v. Teva Pharms. USA, Inc., 583 F.3d 766, 777 (Fed.Cir.2009) (affirming summary judgment of no inequitable conduct, when the factual premises could not be established by clear and convincing evidence).

Inequitable conduct resides in failure to disclose material information, or submission of false material information, with an intent to mislead or deceive the examiner, and those two elements, materiality and intent, must be proven by clear and convincing evidence. Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1330-31 (Fed.Cir.2004). Clear and convincing evidence must support “at least a threshold level of each element.” Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed.Cir.2008). When both materiality and intent have been established, the court must balance the equities and determine whether the applicant’s conduct in prosecuting the patent application was egregious enough to warrant holding the entire patent unenforceable. Id.; see J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553, 1560 (Fed.Cir.1984) (“Once the thresholds of materiality and intent are established, the court must balance them and determine as a matter of law whether the scales tilt to a conclusion that inequitable conduct occurred.”). Because the district court concluded that Optium made a sufficient showing of materiality to survive summary judgment, but concluded that the facts could not support a finding of intent under the relevant standard, the question of intent frames this appeal.

Optium argues that Emcore should have brought Willems specifically to the examiner’s attention, in view of the inventors’ own reference to this article as background art in their contemporaneous internal documents. Optium states that since Willems was a “highly material” reference, deceptive intent can be presumed from high materiality absent contrary evidence from the applicants. Emcore responds that even if Optium could ultimately succeed in proving high materiality — a point that Emcore has not conceded — no presumption or inference of deceptive intent is permissible in the absence of evidence that a person involved in obtaining the patent acted with the specific intent to mislead or deceive the patent examiner. Emcore contends that Optium improperly seeks to shift the burden to the applicants to explain why a reference was not submitted, in the absence of even threshold evidence of deceptive intent. The parties cite competing lines of authority from this court in support of their respective positions.

Despite some divergence, the great weight of Federal Circuit authority has followed Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876-77 (Fed.Cir.1988) (en banc), and applied the rule that the “intent” element of inequitable conduct is not simply intent to take the action or omission complained of, but intent to deceive or mislead the patent examiner into granting the patent. E.g., Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1367 (Fed.Cir.2003) (“[Unequitable conduct requires not intent to withhold, but rather intent to deceive.”). That is, “one must have intended to act inequitably.” Kingsdown, 863 F.2d at 872 (quoting FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 (Fed.Cir.1987)). In situations of nondisclosure of information rather than affirmative misrepresentation, “clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.” Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed.Cir.1995). Thus “[ijntent to deceive can not be inferred solely from the fact that information was not disclosed; there must be a factual basis for a finding of deceptive intent.” Hebert v. Lisle Corp., 99 F.3d 1109, 1116 (Fed.Cir.1996). Extensive precedent continues to reinforce this standard. E.g., Larson Mfg. Co. of S.D. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed.Cir. 2009) (“[Njondisclosure, by itself, cannot satisfy the deceptive intent element.”); Star Scientific, 537 F.3d at 1366 (internal citation omitted) (“Thus, the fact that information later found material was not disclosed cannot, by itself, satisfy the deceptive intent element of inequitable conduct”).

Optium points out that this court has recognized that direct evidence of deceptive intent is rarely available, and that intent may be inferred from circumstantial evidence. See Merck & Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1422 (Fed. Cir.1989). Optium argues that deceptive intent can be inferred if the reference is “highly material,” even with no evidence, direct or circumstantial, of intent to deceive. However, consistent precedent has rejected the notion that the materiality of a reference alone can suffice to prove deceptive intent. See, e.g., Astrazeneca, 583 F.3d at 770 (“Intent to deceive cannot be inferred from a high degree of materiality alone, but must be separately proved to establish unenforceability due to inequitable conduct.”); Ariad Pharms., Inc. v. Eli Lilly & Co., 560 F.3d 1366, 1380 (Fed.Cir. 2009) (“Lilly cannot prove deceptive intent by clear and convincing evidence simply by relying on the materiality of the errors.”), vacated pending reh’g en banc, 595 F.3d 1329 (Fed.Cir.2009), reinstated in relevant part, 598 F.3d 1336, 1358 (Fed.Cir.2010) {en banc); Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1356 (Fed.Cir.2008) (“Materiality is not evidence of intent, which must be established as a separate factual element of a discretionary ruling of inequitable conduct.”); Braun Inc. v. Dynamics Corp. of Am., 975 F.2d 815, 822 (Fed.Cir. 1992) (“[Mjateriality does not presume intent, which is a separate and essential component of inequitable conduct.”); Halliburton Co. v. Schlumberger Technology Corp., 925 F.2d 1435, 1443 (Fed.Cir.1991) (intent to deceive cannot be based on the materiality of a reference that was not submitted, even if gross negligence were shown); Allen Organ Co. v. Kimball Int’l, Inc., 839 F.2d 1556, 1567 (Fed.Cir.1988) (“[Materiality does not presume intent, which is a separate and essential component of inequitable conduct.”).

Optium argues that a divergent line of precedent places a lesser burden on the challenger, whereby deceptive intent is presumptively established when the evidence could support a finding of “high materiality,” at least in instances where the applicant has not provided a credible explanation for the nondisclosure. Optium argues that in such cases, unless the applicant has persuasively explained why the information was not provided to the examiner, it is appropriate to infer that the withholding was deliberate and intended to deceive. Optium states that Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed.Cir.2006), established this proposition. However, Ferring did not relieve the challenger of the burden of establishing a threshold level of deceptive intent; the court in Ferring recognized that intent is a “separate and essential component of inequitable conduct,” and that “[mjateriality does not presume intent.” 437 F.3d at 1190. The Ferring court found that the applicant had deliberately concealed the personal and professional interests of several affiants whose affidavits were provided to the examiner, and that this concealment, without credible explanation, constituted affirmative evidence of deceptive intent. Ferring did not establish a new rule for “inferring” intent from the mere nondisclosure of information. Nor did Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., also cited by Optium. See 984 F.2d 1182, 1191 (Fed.Cir.1993) (stating that intent to mislead cannot be inferred from “the mere failure to disclose known highly material information”). The Paragon court explained that only when the challenger has met its threshold burden of showing intent does the burden of coming forward with evidence shift to the applicant. Id.; see Star Scientific, 537 F.3d at 1368 (“The patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove a threshold level of intent to deceive by clear and convincing evidence.”).

Optium offered no evidence, but simply argued that the “high materiality” of the Willems reference relieved it of the burden to produce any affirmative evidence of intent, and instead required Em-core to provide a credible explanation for the nondisclosure. However, this proposed shift in the burdens is contrary to precedent. See Larson, 559 F.3d at 1340-41 (“[J]ust as merely withholding a reference cannot support an inference of deceptive intent, so too an accused infringer cannot carry its threshold burden simply by pointing to the absence of a credible good faith explanation.” (internal citation omitted)); M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., 439 F.3d 1335, 1341 (Fed.Cir.2006) (“[A] failure to disclose a prior art device to the PTO, where the only evidence of intent is a lack of a good faith explanation for the nondisclosure, cannot constitute clear and convincing evidence sufficient to support a determination of culpable intent.”).

The district court correctly ruled that on Optium’s version of the facts, and accepting the disputed premise that Willems was highly material, Optium had offered no evidence that could succeed in proving deceptive intent by clear and convincing evidence. We affirm the district court’s grant of summary judgment of no inequitable conduct.

AFFIRMED

1 . Optium Corp. v. Emcore Corp., No. 07-CV-1683 (W.D.Pa. Feb. 18, 2009).