Subject: Day 11 Self Study Course:  

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summarized by Tatsuo Yabe

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Chapter 12:

Pages 597 to 638 (Skip pgs 606 to 615)

 

Proving Unenforceability

 

Unenforceability is different from a holding of invalidity although the result may be the same (the patentee cannot enforce his patent).  However, whether permanently unenforceable or for a period of time, or unenforceable against all infringers or against only the defendant depends upon the patenteefs action.

 

A.      Inequitable Conduct

 

37 CFR 1.56(a) -- Rule 56--

 

A patent by its very nature is affected with a public interest.  The public interest is best served, and the most effective patent examination occurs when, at the time an application is being examiner, the Office is aware of and evaluates the teachings of all information material to patentability.

 

Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section.  The duty to disclose information exists with respect to each pending claim until the claim is cancelled or withdrawn from consideration, or the application becomes abandoned. 

 

Information material to the patentability of a claim that is cancelled or withdrawn from consideration need not be submitted if the information is not material to the patentability of any claim remaining under consideration in the application.

 

There is no duty to submit information which is not material to the patentability of any existing claim. The duty to disclose all information known to be material to patentability is deemed to be satisfied if all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by the sections 1.97(b) to (d) and 1.98.

 

However, no patent will be granted on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct.

 

Inequitable conduct was originally called gfraud on the Officeh.

 

Inequitable conduct is a defense to an infringement charge.  To succeed, the accused infringer must prove that the patentee withheld (i) material information from the PTO during prosecution of the patent (ii) with an intent to deceive by clear and convincing evidence. 

 

If the accused infringer is successful in proving inequitable conduct, then the patent will be held unenforceable against all infringers permanently (it is not curable).

 

If the accused infringer has made a very strong showing of materiality, then less evidence of intent need to be established and vice versa.

 

Under Rule 56, the inventor, the patent agent or the patent attorney, and any other person who participates in the preparation of the application are all bound by the duty of candor to the PTO.

 

1.       Materiality

Molins PLC v. Textron, Inc. (Fed Cir 1995)

 

Molins PLC – patentee:

Textron – Accused Infringer:

 

Inventor: Dr. Williamson (Molinsf Research Director) ;

Invention: gSystem 24h – a fully automated machining system (1966)

Patents in questions:

-          USP4369563

-          USP4621410

 

Whitson (British Patent Agent for Molins from 1967 to 1981)

Ivan Hirsh (Manager of Molinsf patent department since 1981)

Smith (U.S. Patent Counsel to Molins since 1966) – 1/2 rights owner

 

1.       Whitsonfs Nondisclosure of Wagensei Reference during original prosecution:

Wagensei Reference was discovered during the pendency of the U.S. Patent Applications, Whitson abandoned all the foreign patent applications to the batch process, but decided not to abandon the pending U.S. application because it contained both batch process and system 24 related claims.

 

Molins asserts that Wagensei was reviewed by the examiner during the reexam of the 563 patent and during the examination of the 410 patent.

 

Information is ematerialf when there is a substantial likelihood that a reasonable examiner would have considered the information important in deciding whether to allow the application.  If that information is not as pertinent as that considered by the examiner or is merely cumulative to that considered by the examiner, then such information is not ematerialf.

 

Whether the reference is ematerialf is not whether the particular examiner of the application at issue considered the reference to be important.  Instead, it is that of a greasonable examinerh.

 

Thus, the fact that the examiner did not rely on Wagenseil to reject the claims under reexam or the e410 method claims is not conclusive as to whether the reference was material.

 

Although there is some risk in reliance on foreign patent prosecution, Whitson indicated during the foreign patent prosecution that Wagensei was the most relevant prior art and the evidence shows that patent examiners in several foreign countries considered Wagenseil material to the system 24 related claims.

 

2.       Whitsonfs and Smithfs Nondisclosure of the Lemelson Patents:

Whitson and Smith were aware of the Lemelson Patents that were highly material but did not disclose those patents of Lemelson during the pendency of the 563 patent prosecution.  However, those references were eventually searched and found by the examiner, thus it cannot be deemed to have been withheld from the examiner.  Orthopedic Equipment v. All Orthopedic Appliances (Fed Cir 1983).  Thus, Hirsh and Smithfs failure to cite these references to the PTO did not constitute inequitable conduct.

 

3.       Smithfs Nondisclosure of the Lemelson Application

 

During the time that the 563 patent was being prosecuted, Smith was also prosecuting an application that named Lemelson as inventor.  It was found out that the Lemelsonfs application was highly relevant to the Williamsonfs claim 160 (563 patent).

 

Here, Smith breached his duty as an attorney to his client by serving a party whose interest directly conflict with Molins. Thus, Smith is subject to discipline under Code of Professional Responsibility of the state he is a member of Bar.

 

However, as to Smithfs obligation to the PTO (which is an issue here), Textron failed to establish by clear and convincing evidence that inequitable conduct occurred in the nondisclosure of claim 11 of the Lemelson Application because it was cumulative to art already made of record during prosecution of the 563 patent.

 

Conclusion:

 

The judgment of the district court holding USP563 and USP410 unenforceable due to inequitable conduct is affirmed on the basis that Molinsf attorney Whitson intentionally withheld a material reference from the PTO.

 

Notes:  pgs 605 to 606

 

1.       Affidavits are always material:

In Refac v. Lotus Dev (Fed Cir 1996), the Court held that affidavits are inherently material even if they are cumulative.  Affiant Jones tried to prove that the disclosure was sufficient by submitting the Affidavit in order to overcome the 112(1) rejection.  Thus, no submission of the affidavits may render the patent unenforceable for inequitable conduct.

 

2.       Materiality

Withheld information was material even though it would not have rendered the claimed invention obvious.

 

3.       Fed Cirfs and PTOfs materiality Standards:

The Fed Cir applies the greasonable examiner standardh for assessing whether a reference is material.  Honeywell v. Universal Avionics Sys. (Fed Cir 2007). The PTO had used this standard until 1992, when the PTO adopted the present 37 CFR 1.56 (ga prima facie case of unpatentabilityh).

 

4.       Patenteefs Rebuttal Evidence: Reference is cumulative.  Scripps Clinic & Research Found v. Genentech (Fed Cir 1991).

 

 

2.       Intent

 

Kingsdown Med. Consultants v. Hollister Inc. (Fed Cir. 1998)

 

              Skip!

             

              Notes:

1.       What is inequitable conduct?

Failure to cite a reference to the PTO in an IDS is the most common example of inequitable conduct.  Others include: failing to disclose a possible public use or on-sale bar activity.  How about a submission of a 29 page untranslated Japanese patent application along with 1 page partial English translation that missed the most relevant portion of the disclosure?  See Semiconductor Energy Lab v. Samsung Elec (Fed Cir 2000)

 

2.       How do you prove intent?

No gsmoking gunh proof of intent to deceive is necessary.  Circumstantial evidence can satisfy the intent requirement.  Not enough that the patentee simply did not disclose a prior art reference. 

 

3.       It is not inequitable conduct forc

-          Attorneyfs argument regarding how to interpret a reference (even if it is incorrect) is usually not inequitable conduct.  Akzo N.V. v. U.S. Intfl Trade Commfn (Fed Cir 1986).

-          The applicant does not disclose a reference as long as the examiner discovers it herself.  Molins PLC v. Textron (Fed Cir 1995)

 

4.       Burying a reference

In Molins, a particular reference was buried in a disclosure statement that was 11 pages long with 23 US patents, 27 foreign patents and 44 publications.  This was held not to be inequitable conduct even though the IDS did not disclose the relevance of any of the references.  In 2-1 decision, the Fed Cir held that burying a reference could be probative of bad faith, but that it was not inequitable conduct in this case because thee examiner had initialed each reference which indicates that he had read the reference.

 

5.       Doctrine of Unclean Hands

In Consolidated Aluminium Corp v. Foseco Intfl (Fed Cir 1990), the Fed Cir held that a holding one of patents-in-suit will render a holding of other related patents-in-suit (continuations) were unenforceable.  Intentionally withholding the best mode in an earlier application rendered subsequent continuation applications unenforceable.

 

6. Patenteefs Rebuttable Evidence:

              Good Faith Defense:

Evidence of the patentee having acted in good faith in prosecution must be weighted in determination whether her conduct amounted to an inequitable conduct, however, it is not dispositive of the issue.

 

One example of sufficient evidence of good faith is that the employees had a good faith belief that a gpublic use (a field testing)h occurred under a confidentiality agreement and thus was not material prior art.  The court found that non-disclosure of g a public useh was not inequitable conduct.  In Norberg Inc. v. Telsmith (Fed Cir 1996)

 


 

B.     Patent Misuse

 

35 USC 271(d):

 

No patent owner otherwise entitled to relief for infringement or contributory infringement of a patent shall be denied relief or deemed guilty of misuse or illegal extension of the patent right by reason of his having done one or more of the following:

 

(1)     derived revenue from acts which if performed by another without his consent would constitute contributory infringement of the patent;

(2)     licensed or authorized another to perform acts which if performed without his consent would constitute contributory infringement of the patent;

(3)     sought to enforce his patent rights against infringement or contributory infringement;

(4)     refused to license or use any rights to the patent; or

(5)     conditioned the license of any rights to the patent or the sale of the patented product on the acquisition of a license to rights in another patent or purchase of a separated product,

 

unless, in view of the circumstances, the patent owner has market power in the relevant market for the patent or patented product on which the license or sale is conditioned.

 

This provision was drafted to address the type of conduct that is not considered patent misuse.

 

Patent misuse is an affirmative defense to a patent infringement charge. The accused infringer must prove by clear and convincing evidence that the patentee has impermissively broadened the physical or temporal scope of the patent grant with anticompetitive effects.  Windsurfing Intfl v. AMF Inc (Fed Cir 1986).

 

Patent misuse relates primarily to a patenteefs actions that affect competition in unpatented goods or that otherwise extend the economic effect beyond the scope of the patent grant.  Mallinckrodt, Inc. v. Medipart Inc. (Fed Cir 1992)

 

Patent misuse is a broader wrong than antitrust violation thus misuse may arise when the conditions of antitrust violation are not met.

 

In Bard Inc. v. M3 Sys. (Fed Cir 1998), the jury instruction on patent misuse focused primarily on the charge that Bard was attempting to enforce the patents against goods known not to be infringing.

 

-          A patent is unenforceable for misuse if the patentee attempts to exclude products from the marketplace which do not infringe the patent and the patentee has actual knowledge of non-infringement by the products.

-          A patent is also unenforceable for misuse when a patentee attempts to use the patent to exclude competitors from their marketplace with the knowledge that patent was invalid or unenforceable.

-          A patent will not be rendered unenforceable for misuse if the patentee has enforced the patent in the good faith belief that the accused products infringed the patent.

 

 

Braun Med. Inc. v. Abbott Labs (Fed Cir 1997)

 

Patentee – Braun

Patent in question: USP4,683,916, directed to a reflux valve that attaches to an intravenous (IV) line and allows a fluid injection with a needless syringe.

Accused Infringers – Abbott (also NP Medical who supplied an accused product to Abbott)

 

Abbott entered eKf with Braun for purchasing 536,000 valves with the restrictions that the purchased valve must not be used in certain listed products of Abbott.  Abbott was not happy with the restrictions and thus requested NP Medical to develop a substitute valve.  Abbott found out the Abbottfs deal with NP Medical and sued both Abbott and NP Medical for patent infringement.

 

District court found that the patent was not invalid and not infringed by the accused NP Medical.  The jury also found that the patent was misused by Braun based on the wrong jury instruction (patentee is not allowed to place any post-sale restrictions on customer and if found by a preponderance of the evidence, then the patentee is guilty of patent misuse).

 

Fed Cir found that the jury instruction was clearly erroneous because it essentially creates per se liability for any conditions that the patentee placed on its sales.

 

The restrictions placed upon the post-sale use of patented goods were well-summarized in the precedent in Mallinckrodt Inc. v. Medipart Inc. (Fed Cir 1992) where the express conditions that violate some law or equitable consideration are unenforceable, however, violation of valid conditions entitles the patentee to a remedy for either patent infringement or breach of eKf.  This is the general framework.

 

The key inquiry is whether the patentee, by imposing the restrictions, has gimpermissibly broadened the physical or temporal scopeh of the patent grant with anticompetitive effecth Windsurfing Intfl v. AMF Inc. (Fed Cir 1986).  On remand, the district court must first determine whether Braunfs restriction exceeds the scope of the patent grant.

 

On the basis of the patent misuse finding by the district court on remand, Abbott sought attorney fees and damages for Braunfs patent misuse. When the patent misuse is used successfully, this defense results in rendering the patent unenforceable until the misuse is purged.  It does not result in an award of damages to the accused infringer.

 

In this case, contrary to the district courtfs opinion, monetary damages may not be awarded gunder a declaratory judgment counterclaim based on patent misuse,h because patent misuse simply renders the patent unenforceable.  In other words, the defense of patent misuse may not be converted to an affirmative claim for damages simply by restyling it as a declaratory judgment counterclaim.

 

Although the district court has the power to entertain a hearing for damages (in reliance on 28 U.S.C. 2202), Fed Cir disagrees with Abbottfs argument that it is entitled to a new trial on the facts of the present case because Abbott failed to meet its burden of proof for the damages resulting from the Braunfs patent misuse.

 

 

Notes:

 

1.       Examples of patent misuse:

- Tying condition of sale under the patent on the purchase of a separate, non-patented, staple good.  The patentee must also have a market power.

- post-patent term royalties payments;

- Mandatory package licensing.

 

2.        Process if determining patent misuse:

(i)                   Determine if that practice is greasonable within the patent grant (within the scope of the patent claims)?

(ii)                 If the practice has the effect of extending the patenteefs statutory rights and does so with an anti-competitive effect, then that practice must then be analyzed according to the grule of reasonh;

(iii)                Under the rule of reason, the fact finder must decide whether the questionable practice imposes an unreasonable restraint on competition.

 

3.       Curing patent misuse:

A holding of patent misuse renders the patent unenforceable for the period of time during which the patent was misused. The patentee can cure the misuse by terminating the offending conduct.

 

4.       Market Power:

See pages 627.

 

5.       Doctrine of patent misuse v. Doctrine of Inequitable Conduct

While misconduct before the PTO renders the patent unenforceable by any party, the unclean hands doctrine (patent misuse) bars only the offending party.  In general, the patent misuse does not preclude the offending party from enforcement of the patent in a subsequent lawsuit, but only provides a bar to relief in the case at hand.  In Aptix Corp. v. Quickturn Design Systems (Fed Cir 2001)

 


 

C.     Antitrust Counterclaims

 

Nobelpharma AB v. Implant Innovations Inc.  (Fed Cir 1998)

 

Patentee: NP                      Nobelpharma AB and Nobelpharma USA

Accused Infringer:               3I -- Implant Innovations, Inc.

Patent in Question:              USPf891 Patent claiming priority from a Swedish patent application

that was filed in 1979.  The patent claims gan element intended for implantation into bone tissue, said element is placed directly into the jawbone where it acts as a tooth root substitute.  The implants described and claimed in the patent are preferably made of titanium and have a particularly sized & spaced gmicropitsh. 

Inventors:                            Dr. Branemark and Dr. Ekenstam

Swedish Patent Agent:         Barnieske

 

Branemark is one of the authors of the 1977 Book (eOsseointegrated Implants in the Treatment of Edentulous Jaw Experienced from a 10-Year Periodf), including a single page containing 4 scanning electron micrographs (SEMs) of titanium implants that exhibits micropits.  The micropits shown in the 1977 book have diameters within the range claimed in the e891 patent.

 

In the Swedish patent application, prepared by the inventor, Ekenstam, the 1977 Book was mentioned and briefed therein.  However, a Swedish Patent Agent, Barnieske, deleted all reference to the 1977 Book and filed a Swedish patent application and based on the Swedish patent application, U.S. Patent application was filed.

 

In 1991, NP brought the law suit against 3I for infringement of the USPf891 patent.  3I defended on the grounds of invalidity, unenforceability, and non-infringement, 3I also brought an antitrust counterclaim, alleging that when NP brought suit, NP was aware of the inventorsf intentional failure to disclose the 1977 Book to the PTO, which renders the e891 patent unenforceable.

 

After trial limited to the antitrust issue, the jury found in special verdicts, inter alia, that 3I had proven (i) the inventors or their agents or attorneys obtained the e891 patent through fraud; (ii) NP had knowledge that the e891 patent was obtained by fraud at the time this action was commenced against 3I; and (iii) NP brought this lawsuit against 3I knowing that the e891 patent was either invalid or unenforceable and with the intent of interfering directly with 3Ifs ability to compete in the market.  Thus, the jury found that NP violated the antitrust laws by bringing lawsuit against 3I, the court denied NPfs motion for JMOL. The jury awarded 3I about 3.3M in compensatory damages.

 

Applicable Laws: pg 632

 

-          For antitrust claim, CAFC is in the best position to create a uniform body of federal law, the antitrust laws is to be decided as a question of Federal Circuit Law.

-          For other issues involving other elements of antitrust laws, such as relevant market, market power, damages, that are not unique to patent law, CFAC will continue to apply the law of the appropriate regional circuit.

 

Antitrust Liability: pg 632

 

              A patentee who brings an infringement suit may be subject to antitrust liability for the anti-competitive effects of that suit if the alleged infringer (the antitrust plaintiff) proves:

              (i) that the asserted patent was obtained through knowing and willful fraud within the meaning of Walker Process Equipment (Sup Ct: 1965), or

              (ii) that the infringement suit was g a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitors, Eastern R. R. Presidents Conference v. Noerr Motor Freight Inc. (Sup Ct: 1961).

 

In Walker Process, the Sup Ct. held that in order to strip a patentee of its exemption from the antitrust laws, an antitrust plaintiff is first required to prove that the patentee obtained patent by knowingly and willfully misrepresenting facts to the PTO and then the plaintiff in the patent infringement suit must also have been aware of the fraud when bringing suit.

 

Inequitable Conduct v. Walker Process Fraud: pgs 633 to 634

 

gInequitable conducth is distinguishable from Walker Process fraud.  Inequitable conduct is a lesser offense than common law fraud and includes types of conduct less serious than gknowing and willful fraudh.

 

For finding a common law fraud, all of the following elements must be met:

 

(i)                   a representation of a material fact,

(ii)                 the falsity of that representation;

(iii)                the intent to deceive or at least a state of mind so reckless as to the consequences (equivalent to gscienterh);

(iv)                deceived partyfs reliance on the misrepresentation; and

(v)                  injury to the party deceived because of his reliance on the misrepresentation.

 

Failure of one (or another) element above may still find the inequitable conduct.

 

In sum, a finding of Walker Process fraud requires higher threshold showings of both intent and materiality than does a finding of inequitable conduct.  Moreover, the Walker Process fraud may not be based on an equitable balancing of lesser degrees of materiality and intent.  Furthermore, the Walker Process fraud must be based on independent and clear evidence of deceptive intent together with a clear showing of reliance (i.e., the patent would not have been issued but for the misrepresentation or omission).

 

Inequitable conduct is an equitable defense in a patent infringement action and serves as a shield, whereas finding of fraud may expose a patentee to antitrust liability and thus serves as a sword.

 

Antitrust liability can include treble damages whereas the remedies for inequitable conduct only include unenforceability of the affected patent (or possible attorneyfs fee at most).

 

Another cause for Antitrust Liability under E.R.R. President v. Noerr:

An antitrust claim can also be based on that a suit is baseless. An antitrust plaintiff must prove that the suit was both objectively baseless and subjectively motivated by a desire to impose collateral, anti-competitive injury rather than to obtain a justifiable legal remedy.  The Sup Ct says that the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.

 

APPLICATION OF LAWS TO THE SPECIFIC FACTS OF THE CASE:

As for the present case, CAFC concludes that there exists substantial evidence upon which a reasonable fact finder finds an antitrust liability in the acts of NP because (i) the 1977 Book was sufficiently material in the meaning of Walker Process as the examiner would not have granted if he had been aware of the 1977 Book (the examinerfs reliance); (ii) Branemark, one of the authors of the 1977 Book, through his Swedish patent agent, Barnieske, withheld the 1977 Book with the required intent to deceive the PTO; and (iii) the record indicates that NP brought suit against 3I with knowledge of the applicantsf fraud.

 

CONCLUSION:

CAFC concludes that the finding of Walker Process fraud was supported by substantial evidence and was based on a jury instruction that was not legally erroneous or prejudicial, thus NPfs motion for JMOL was denied and NP was properly deprived of its immunity from the antitrust laws under Walker Process.

 

 

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Inequitable Conduct

Fraud (PTO)

Common Law Fraud

Walker Process Fraud

Antitrust Liability

 

1)       Elements for I.C. for IDS Related

 

²         Intent to deceive PTO;

²         Materiality of the information deceived or concealed.

 

2)       Defense by accused Infringer;

 

3)       Proof needed by Clear and Convincing Evidence;

 

4)       Balancing Intent and Materiality Okay;

 

5)       Results:

If found I.C., Patent is unenforceable; But no damages recovery.

1)       Elements for Fraud for IDS related

 

²         Intent to deceive;

²         Materiality of the information deceived or concealed;

 

2)       Defense by accused infringer;

 

3)       Proof by C & C;

 

4)       No Balancing between Intent and Materiality; Threshold High!

 

5)       Results

If found Fraud, Patent is unenforceable, Possible recovery of damages;

1) Elements for CL Fraud:

 

²         Misrepresentation of Material Fact(s);

²         Intent to Deceive;

²         Reliance by Deceived Party;

²         Injury resulting from the reliance;

 

2) Proof by C & C evidence;

 

 

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1) Elements of W-P Fraud:

 

²         Misrepresentation of Material Fact(s);

²         Intent to Deceive PTO

²         PTOfs reliance on the misrepresentation;

 

²         Enforcement of the patent by gPh with the knowledge of the fraud committed against PTO and

 

²         Enforcement of said patent by gPh with the knowledge of unenforceability of the patent

 

2) Proof by C & C evidence;

 

3) Results:

 

Ø       Patent unenforceable;

Ø       Possible recovery of damages and attorneyfs fee;

Ø       Possible Treble Damages.

 

Maybe Invoked if W-P Fraud was found;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Results:

 

Ø       Patent unenforceable;

Ø       Possible recovery of damages and attorneyfs fee;

Ø       Possible Treble Damages.

 

In state of NY

 

Elements of fraud:

 

All the above elements;

Plus greasonablenessh

Of the reliance.

Patent Misuse

1)       Impermissibly broadened:

²         physical scope, or

²         temporal scope;

of the patent

 

Ex: Packaging sales or tying sales

 

2)       enforcement of patent w/knowledge (invalidity) or (unenforceability);

3)       Broader Wrong then antitrust violation;

 

4)       Results:

Patent is unenforceable but can be cured.

 

 

 

 

 

 

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Impact of Final Judgment - Pgs 844 to 855

 

Issue Preclusion - Collateral Estoppel

Claim Preclusion - Res Judicata

 

Claim preclusion prevents a party from relitigating the same claim against other parties where an issue preclusion prevents the relitigation of a particular issue although the case as a whole may be allowed to proceed.

 

The following case illustrates an example of eres judicataf.

 

Blonder-Tongue Lab. Inc. v. University of Illinois Foundation (Sup Ct: 1971)

 

Patent owner – Foundation

Patent in Question – USP3,210,767 (Isbell Patent) relates to a frequency independent unidirectional antennas, designed for transmission and reception of electromagnetic radio frequency signals used in many types of communications, such as broadcasting of radio and TV signals.  First infringement suit was brought by Foundation against Winegard Co in SD Iowa Court.  Chief Judge Stephenson held patent invalid because the patent was found obvious, University of Illinois Foundation v. Winegard (SD Iowa 1967).  On appeal, the Eighth Circuit Fed. Appeal Court affirmed the Judge Stephenson.  The Sup Ct denied the patenteefs petition for certiorari (1969). 

 

In 1966, before Judge Stephenson had ruled in Winegard case, the Foundation also filed suit in ND of Illinois against customers of B-T for the infringements.  Judge Hoffman held that the Foundationfs patents were valid.  B-T appealed and the Court of Appeal for the 7th Circuit affirmed, inter alia, that the Isbell patent was valid and infringed by B-Tfs products. B-T sought certiorari (review by the Sup Ct ) to resolve an apparent conflict between the 7th and 8th Circuits.

 

The Sup Ct granted the writ of certiorari and requested the parties to discuss the additional issues that were not raised by B-T:

 

1.       Should the holding of Triplett v. Lowell (Sup ct: 1936) that a determination of patent invalidity is not res judicata as against the patentee in subsequent litigation against a different defendant, be adhered to?

2.       If not, does the determination of invalidity in the Winegard litigation bind the respondents in this case?

 

In Triplett v. Lowell, the Sup Ct held:

 

              While the earlier decision may be comity be given great weight in a later litigation and thus persuade the court to render a like decree, it is not res adjudicate and may not be pleased as a defense.

 

The holding in Triplett has been gently criticized by some judges.

 

Triplett v. Lowell exemplified the judge-made doctrine of mutuality of estoppel (emutuality rulef), ordaining that unless both parties in a second action are bound by a judgment in a previous case, neither party in the second action may use the prior judgment as determinative of an issue in the second action.

 

The broader question is whether it is any longer sustainable to afford a litigant more than one full and fair opportunity for judicial resolution if the same issue.

 

Although neither judges, the parties, nor the adversary system performs perfectly in all cases, the requirement of determining whether the party against whom an estoppel is asserted had a full and fair opportunity to litigate is a most significant safeguard.

 

There are several components of the problem, first, we analyze the proposed termination or modification of the Triplett rule in terms of those considerations relevant to the patent system; second, we deal broadly with the economic costs of continued adherence to Triplett, and finally, we explore the nature of the burden, if any, that permitting patentees to relitigate patents once held invalid imposes on the federal courts.

 

The patentee-plaintiff must be permitted to demonstrate, if he can, that he did not have a fair opportunity procedurally, substantively, and evidentially to pursue is claim the first time. (Eisel v. Columbia Packing Mass. 1960)

 

We are not persuaded, therefore, that the Triplett rule, as it was formulated, is essential to effectuate the purpose of the patent system or is an indispensable or even an effective safeguard against faulty trials and judgments.

 

The expense of patent litigation has two principal consequences if the Triplett rule is maintained.  The patentee is expending funds on litigation to protect a patent which was already found invalid, these moneys could be more wisely spent such as further research and development.  The second major economic consideration is far more significant because the alleged infringer in the subsequent lawsuit must bear a huge financial burden to prove invalidity of the patent as each subsequent lawsuit, the patentee enjoys the statutory presumption of validity.

 

Lear (Lear Inc. v. Adkins Sup Ct 1969) obviates to some extent the concern that Triplett prompts alleged infringers to pay royalties on patents previously declared invalid rather than to engage in costly litigation when infringement suites are threatened.  Lear permits an accused infringer to accept a license, pay loyalties for a time, and cease paying when financially able to litigate validity, secure in the knowledge that invalidity may be urged when the patentee-licensor sues for unpaid royalties.

 

This has several economic consequences.  First, the alleged infringer who cannot afford to defend may absorb the royalty costs in order to compete with other manufacturers who won the litigation (holding of invalidity) and may need to cut the profitability of his business and maybe that he will never be in a financial position to challenge the validity of the patent that was invalidated previously.  Second, on the other hand, the manufacturer who secured a judicial holding (invalidity of patent) may be able to increase his market share without coming close to the price levels that would prevail in a competitive market because he is free from royalty payments.  Third, consumers will pay higher prices for goods covered by the invalid patent.

 

Beyond all of this, the rule of Triplett may permit invalid patent to serve almost as effectively as would valid patent as barriers to the entry of new firms (particularly small firms).

 

The availability of estoppel to one who charged with infringement of a patent previously held invalid will merely shift the focus of litigation from the merits of the dispute to the question whether the party to be estopped had a full and fair opportunity to litigate his claim in the first action.  Moore & Currier.

 

It is apparent that the uncritical acceptance of the principle of mutuality rule expressed in Triplett v. Lowell is today out of place. Thus, we (the Sup Ct ) overruled Triplett to the extent it forecloses a plea of estoppel by one facing a charge of infringement of a patent that has once been declared invalid.

 

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