Paeco, Inc. v. Applied Moldings, Inc.

70 F.R.D. 490, 189 U.S.P.Q. (BNA) 281, 1976 U.S. Dist. LEXIS 16777
CourtDistrict Court, E.D. Pennsylvania
DecidedFebruary 9, 1976
DocketCiv. A No. 71-1100
StatusPublished
Cited by2 cases

This text of 70 F.R.D. 490 (Paeco, Inc. v. Applied Moldings, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Paeco, Inc. v. Applied Moldings, Inc., 70 F.R.D. 490, 189 U.S.P.Q. (BNA) 281, 1976 U.S. Dist. LEXIS 16777 (E.D. Pa. 1976).

Opinion

MEMORANDUM AND ORDER

TROUTMAN, District Judge.

. This matter comes before the Court on defendants’ motions, pursuant to Rules 52 and 59, F.R.Civ.P., for reconsideration, amendment and augmentation of our memorandum and order dated September 24, 1975, in which we rendered our post-trial findings of fact and conclusions of law in this protracted patent litigation. In brief, we found that Claims 1, 2 and 3 of the United States Letters Patent No. 3,561,181 were invalid for various reasons, including obviousness and anticipation, and further found that plaintiff had not discharged its absolute duty of candor in prosecuting its patent application before the Patent Office. We have now had the benefit of extensive and able briefs as well as oral argument on the motions. For the reasons which follow, we have concluded that defendants’ motions must be granted in part and denied in part.

The Fraud Issue

Defendants disagree with our findings and conclusions as to the proper characterization of plaintiff’s conduct in connection with its patent application. Specifically, defendant argues that plaintiff’s conduct, which we held to be best characterized as “inequitable” and “unfair”, must be deemed “fraud” or “proscribed conduct” as that concept has been described in the Third Circuit. Consequently, they argue, the entire patent must be declared invalid on the ground of fraud alone, in addition to and apart from our findings of invalidity under 35 U.S.C. §§ 102 and 103.

The linchpin of defendants’ position is that plaintiff’s failure to apprise the Patent Examiner of the most pertinent prior art deprived the Examiner of the ability to fairly assess plaintiff’s application. Relying upon Monsanto Co. v. Rohm & Haas Co., 312 F.Supp. 778 (E.D.Pa.1970), aff’d. 456 F.2d 592 (3d Cir. 1972), cert. denied 407 U.S. 934, 92 S.Ct. 2463, 32 L.Ed.2d 817 (1974) and upon In Re Multidistrict Litigation Involving Frost Patent, 398 F.Supp. 1353 (D.Del.1975), defendants contend that the fail-' ure to disclose to the Patent Office relevant and material prior art of which plaintiff, and only plaintiff, had knowledge, mandates a decree of invalidity of the entire patent. We have already found that the plaintiff did not disclose facts concerning its own activities in connection with articles on which the claims, in part, were based. Since we have found that some of these same articles constituted prior art, we modify our prior holding on the issue of materiality. These articles were material and rele[492]*492vant to the statutory criteria of patentability.

On the other hand, we cannot agree with the defendants that they have proven clearly and convincingly the requisite element of intent on which a finding of “proscribed conduct” must be based. As .stated by Judge Wright in Frost:

* * * in this Circuit, a misrepresentation which makes it ‘impossible for the Patent Office fairly to assess [the] application against the prevailing statutory criteria’, Monsanto, 456 F.2d 592, 600, will, given the requisite intent, lead to a finding of invalidity.” [Footnote omitted] [Emphasis supplied]. 398 F.Supp. 1369.

This “requisite intent” was described as follows:

“While Monsanto can be read as allowing ‘innocent’ misrepresentation to suffice as grounds for holding a patent invalid, the majority’s opinion does not lend itself unequivocally to support of that view. In fact, the majority opinion, in addition to referring to ‘willful’ acts, expressly refers to the unclean hands doctrine as ‘preventpng] a wrongdoer from enjoying the fruits of his transgression.’ 456 F.2d 598, (emphasis added). This Court thus reads Monsanto as sanctioning only willful misrepresentations which contain an element of wrongfulness.” [Emphasis supplied]. Id. 1369.

In the footnote at 398 F.Supp. 1369, Judge Wright cited Xerox Corp. v. Dennison Mfg. Corp., 322 F.Supp. 963 (S.D.N.Y.) as a leading case on the subject of intent, in which

“Judge Mansfield convincingly rejects the notion that negligent material misstatements or negligent nondisclosures are sufficient to form the basis for the defense.” Id. fn. 32

It is our conclusion, as it was stated in our September 24, 1975 opinion, that defendants never proved clearly and convincingly, as it was their burden, that plaintiff’s conduct was the product of a deliberately calculated attempt to mislead the Patent Examiner, or a selective presentation of incomplete data which constituted misleading half-truths and untruths regarding matters essential to patentability. We are not justified, under the circumstances, of this case, in drawing an inference of willful, deliberate bad faith or even a reckless or wanton disregard of the facts in plaintiff’s prosecution of the patent. See e. g. Frost, supra. The mere failure to cite prior art references, without more, does not automatically convert a good faith effort to obtain a patent into a deliberate, intentional withholding or a conscious concealment consistent with an intent to mislead the patent office. See e. g. Xerox Corp. v. Dennison Mfg. Co., supra, Tokyo Shibaura Electric Co., Ltd. v. Zenith Radio Corp., 404 F.Supp. 547 (D.Del.1975); Becton, Dickinson & Co. v. Sherwood Medical Industries, 516 F.2d 514, 187 U.S.P.Q. 200 (5th Cir. 1975).

Defendants have cited cases decided on factual circumstances which are readily distinguishable and do not support the proposition that a finding of invalidity can be premised on an unintentional or inadvertent misstep. In Frost, for example, Judge Wright concluded that an inference of fraudulent intention was warranted where the applicants deliberately and intentionally distorted test results and misrepresented their own beliefs as to the efficacy of their own conclusions during a lengthy and complex patent prosecution which finally matured into a patent. In Monsanto, Judge Masterson similarly concluded that the applicant’s decision to exclude adverse tests results from an affidavit submitted to the Patent Examiner was:

“ * * * intentionally and deliberately made to mislead the Patent Office into believing that 3, 4 — DCPA had outstanding herbicidal value as compared to related compounds.” 312 F.Supp. 778, 786.

His opinion is replete with references to “incomplete data, carefully and intentionally chosen”, Id. 791; and the affidavit was “misleading, and was intended to [493]*493be misleading,” Id.; see also Fn. 11 at 791:

“ * * * there is sufficient evidence to prove that Monsanto intentionally omitted material facts and that it thereby intended to mislead the patent office.”

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70 F.R.D. 490, 189 U.S.P.Q. (BNA) 281, 1976 U.S. Dist. LEXIS 16777, Counsel Stack Legal Research, https://law.counselstack.com/opinion/paeco-inc-v-applied-moldings-inc-paed-1976.