Two recent decisions from the Federal Circuit warn that misstatements in the background section of a patent application can constitute “misrepresentations of material fact” that can support a finding of inequitable conduct. These cases may have practitioners reviewing the background sections of pending applications and reconsidering the type of information included in the background sections of future applications.

Case 1: Ring Plus

The accused technology at issue in Ring Plus, Inc. v. Cingular Wireless Corp. was Cingular’s Answer Tones service. When a caller dials the phone number of a Cingular subscriber that uses the Answer Tones service, the caller hears a song instead of the usual ringing sound. The district court granted Cingular’s motion for summary judgment of non-infringement and also held the patent unenforceable for inequitable conduct. The Federal Circuit (Lourie, Gajarsa, Moore) affirmed on non-infringement, but reversed on inequitable conduct.

The Background Statement That Didn’t Ring True 

The background section of the Ring Plus patent (U.S. Patent 7,006,608) included a detailed discussion of the prior art. The passages at issue relate to the discussion of the Sleevi patent and the Streitzel application (emphasis added to highlight the statements at issue):

The concept of applying an advertising or promotional message to a telephone communication link has been proposed in U.S. Pat. No. 4,811,382 dated Mar. 7, 1989, to Neal Sleevi. The Sleevi patent, however, is specifically limited to a land based or so-called hard-wired network and does not include more modern forms of telecommunication which have become available since the time of the Sleevi patent. Moreover, Sleevi did not envision the selective selection of messages depending upon a particular caller and which selected message was designed to conform to or meet the purchasing information or other criteria of a particular customer. Thus, Sleevi was deficient in this regard, as well as in other areas.

U.S. patent application Publication No. US 2001/0051517 A1, published on Dec. 13, 2001, to Jonathan Streitzel identifies a telecommunications advertising system in which advertising or promotional data is not limited only to a land based system, but also includes a wireless or cellular communication system. However, the Streitzel publication based on U.S. patent application Ser. No. 09/753,415, filed Jan. 2, 2001, similarly suffers a number of disadvantages. Although Streitzel does provide for advertising and promotional messages used in a cellular communication, it does so with several limitations not necessarily overcome by the Sleevi patent.

* * * * *

In each of the aforesaid Sleevi patent, and aforesaid publication to Jonathan Streitzel, there is no algorithm or software proposed for operating the telephone system. Thus, Streitzel and Sleevi both propose hardware based systems, but no software to operate those systems. As indicated previously, inasmuch as all modern telephone systems are now computer or processor operated, it is necessary to employ software based processors or computers in conjunction with the substitution of, or the interposition of, a message during a ringing signal.

The district court determined that teachings in both Sleevi and Streitzel at least implicitly disclosed software, and that the skilled artisan would have understood both Sleevi and Streitzel to disclose software-based algorithms. Thus, the court determined that the background section contained misrepresentations.

The Federal Circuit acknowledged that neither reference “explicitly discloses software,” but did not disturb the district court’s finding that a skilled artisan “would have understood the references to disclose software-based algorithms.”

A Material Misstatement Cannot be Excused as Attorney Argument

Ring Plus argued that because the references were before the examiner (although apparently never cited in an Information Disclosure Statement), “the Background statement was merely attorney argument and cannot be a material misrepresentation.” The Federal Circuit soundly rejected this argument, drawing a sharp line between permissible vigorous arguments and “genuine misrepresentations of material fact.” Because the statement was a misrepresentation, it was “outside the bounds of permissible attorney argument.”

The Federal Circuit also rejected Ring Plus’ arguments that because the examiner had not cited Sleevi or Streitzel during prosecution, the characterization of those references was not “material.” The Federal Circuit noted that materiality is an objective standard that is assessed from the perspective of a hypothetical “reasonable examiner,” and is not based on the specific course of prosecution of the patent at hand.

Materiality Is Not Intent

Although the Federal Circuit upheld the district court’s finding of materiality, it found clear error in the court’s finding of intent. The district court understood the references to “unambiguously disclose software,” and so did not believe testimony from Ring Plus witnesses that they believed that the background section statements were accurate. Accordingly, the district court determined that the “most reasonable inference is that the applicants intended to deceive.”

The Federal Circuit did not agree that the references’ teachings were so clear, and gave more credit to testimony that they were understood to relate to hardware-based systems. The Federal Circuit held that because the inference of no deceptive intent was “as reasonable as the court’s inference of deceptive intent,” the district court had erred in finding clear and convincing evidence of deceptive intent.

Because inequitable conduct requires both materiality and intent, the Federal Circuit reversed the judgment of unenforceability due to inequitable conduct.

Case 2: Golden Hour

The patent at issue in Golden Hour Data Systems, Inc. v. emsCharts, Inc. claimed a computerized, integrated data management system for dispatching emergency medical teams, managing a clinical diagnosis and treatment, and billing the patient. The district court granted judgment as a matter of law (JMOL) that there was no joint infringement and held the patent unenforceable for inequitable conduct. The Federal Circuit (Newman, Freidman, Dyk) affirmed on JMOL, but vacated and remanded on inequitable conduct. Judge Newman dissented on both issues.

Fools Gold in the Background Section  

The Golden Hour patent (U.S. Patent 6,117,073) was filed in March 1998 with the following description of a prior art “AeroMed” system in the background section (emphasis added to highlight the statements at issue):

Although others have attempted to remedy this conflict, no fully integrated medical systems have been developed. For example, the Air Medical Software (Innovative Engineering of Lebanon, N.H.) provides computer software for dispatching emergency crews to accident scenes and managing flight information. However, it does not provide comprehensive integration of the flight information with a clinical diagnosis, billing system and administration system.

A few weeks after the application was filed, an inventor attended a conference where he obtained a brochure on the AeroMed system. He gave the brochure to his patent attorney, who submitted an Information Disclosure Statement (IDS) regarding the brochure, but did not submit a copy of the brochure itself. Instead, the attorney described the AeroMed system, using language from the front of the brochure. The IDS did not mention that the inside page of the brochure described the AeroMed system as an integrated system with a billing module.

 A Material Contradiction

The Federal Circuit cited 37 CFR § 1.56(b) for the proposition that “[t]he PTO rules clearly require the submission of known information that contradicts material information already submitted to the PTO.” The court stated further that “[i]f a misstatement or omission is material under the Rule 56 standard, it is material for the purposes of inequitable conduct.”

(This statement is interesting because, as Judge Newman points out in her disenting opinion, one of the specific questions presented for review in the pending en banc inequitable conduct case, Therasense, Inc. v. Becton, Dickinson & Co., is the role of the USPTO rules in defining materiality.)

The district court found that the brochure and undisclosed information in the brochure was “material” because “it contradicted the representations about the AeroMed system in the specification.” The Federal Circuit agreed. The Federal Circuit noted that the brochure was material even if it wasn’t prior art (which it might have been) because it “contradicted other representations to the PTO.” The Federal Circuit criticized Golden Hour for “not correcting the statement in the specification,” and continuing “to maintain its truth in direct contradiction to what is disclosed in the AeroMed brochure.”

Applying the “reasonable examiner” standard, the Federal Circuit stated that “[g]iven the importance of integrated billing to the patentability of the invention, information inconsistent with or contrary to the application’s representation of the capabilities of AeroMed’s billing system . . . would have been important to a reasonable examiner.”

Ignorance, But Not Willful Ignorance, Might Avoid Intent

Like the district court in Ring Plus, the district court in Golden Hour largely inferred an intent to deceive from the high materiality of the AeroBed brochure. This time, the Federal Circuit agreed that “prosecution counsel failed to provide any explanation for withholding the missing information.” That was not sufficient to find intent to deceive, however, because the district court had failed to make findings of fact on the crucial issue of whether the inventor or prosecution counsel “was aware of the inside contents of the brochure.” For example, prosecution counsel testified that he “probably just looked at the front,” although he “never testified definitively that he did not read the brochure in full.”

The Federal Circuit indicated that the facts on this point could be determinative:

If one or both [of the inventor or prosecution attorney] read the brochure and deliberately did not disclose the damaging information on the inside, their actions would give rise to an inference of intent to deceive. However, if they did not read the brochure (and did not do so to avoid learning of damaging information), those actions regarding the failure to disclose the information on the inside of the brochure would, at most, amount to gross negligence . . . . [which] is not inequitable conduct.

The Federal Circuit therefore remanded to the district court to make detailed factual findings on issues such as:

  • whether [the inventor or prosecution attorney] read the entire brochure
  • whether, knowing the information to be material, they deliberately withheld it
  • whether they deliberately refused to read the entire brochure in order to avoid learning damaging information.

(The Federal Circuit’s willingness to excuse a failure to read the entire brochure—as long as it wasn’t willful ignorance—is interesting. In a 2006 Federal Register notice announcing proposed changes to Information Disclosure practice that never were adopted, the USPTO stated its view that the “reasonable inquiry mandated by [37 CFR 11.18(b)(2)]  . . . requires that information in an IDS be reviewed” prior to submission.)

Why The Second Chance To Prove Intent?

In her dissenting opinion, Judge Newman criticizes the majority for remanding to the district court:

If deceptive intent was not established at the trial of the issue, by the party with the burden to do so, it is inappropriate for this court to remand for another shot at it.

Why All These Decisions on Inequitable Conduct?

Judge Newman also questions why the court continues to address inequitable conduct cases an en banc inequitable conduct case (Therasense) awaits argument and decision.  Judge Newman was not convinced of the materiality of the brochure, and believes that the inequitable conduct charge “was deemed viable only because of inconsistencies in the law” that have been presented for resolution in Therasense. Under these circumstances, Judge Newman would have reversed the finding of inequitable conduct, or at least stayed the appeal “until conflicting precedent is clarified . . . in Therasense.”

Running Background Checks

Both Ring Plus and Golden Hour faced inequitable conduct charges because of statements made in the background sections of their patent applications.  The practice of including a background section that discusses the prior art is encouraged by MPEP § 601:

The following order of arrangement is preferable in framing the specification. . . .

(F) Background of the invention. (See MPEP § 608.01(c)).

(1) Field of the invention.

(2) Description of related art including information disclosed under 37 CFR 1.97 and 37 CFR 1.98.

It is important to remember that such a description is not required by statute (35 USC § 111) or regulation (37 CFR § 1.51), which only require that the specification satisfy 35 USC § 112.

Still, some practitioners include a description of prior art to help frame the invention, develop the examiner’s understanding of the state of the art and the contribution of the invention, and/or facilitate prosecution in foreign countries (such as Europe) where brief statements summarizing the prior art can be helpful and even required.

The decisions in Ring Plus and Golden Hour warn that any discussion of prior art in a patent application must not be taken lightly, and should be written with the duty of candor in mind. Additionally, these cases indicate that if an applicant’s understanding of the prior art evolves or changes during prosecution, the applicant may find it advisable to review the background section and notify the examiner of any materially different interpretations.