APPEAL No UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT. Billy Bonka s Candy Emporium. Hershley Flow Controllers

Transcription

1 APPEAL No UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT Billy Bonka s Candy Emporium Plaintiff - Appellee v. Hershley Flow Controllers Defendant - Appellant APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH TAKOMA BRIEF OF DEFENDANT - APPELLANT Christopher Ricciuti Teagan S. Henwood Counsel for Defendant - Appellant Dated: January 28, 2011

2 UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT Billy Bonka s Candy Emporium v. Hershley Flow Controllers Case No Certificate of Interest Counsel for Defendant Appellant Hershley Flow Controller s certifies the following: 1. The full name of every party represented by me is: Hershley Flow Controllers 2. The name of the real party in interest represented by me is: Hershley Flow Controllers 3. Counsel is not aware of any parent corporations or any publicly held companies that own 10% or more of the stock of the parties represented by me. 4. The names of the law firms and the partners or associates that appeared for the parties represented by me in the trial court or are expected to appear in this Court are: Christopher Ricciuti Teagan S. Henwood January 28, 2011 Respectfully submitted, Christopher Ricciuti Teagan S. Henwood Counsel for the Defendant-Appellant Hershley Flow Controllers

3 TABLE OF CONTENTS CERTIFICATE OF INTEREST... i TABLE OF CONTENTS... ii TABLE OF AUTHORITIES... iv STATEMENT OF RELATED CASES... 1 JURISDICTIONAL STATEMENT... 1 STATEMENT OF THE ISSUES... 1 STATEMENT OF THE CASE... 1 STATEMENT OF THE FACTS... 2 SUMMARY OF THE ARGUMENT... 6 STANDARD OF REVIEW... 8 ARGUMENT... 8 I. THE DISTRICT COURT COMMITTED REVERSIBLE ERROR IN FINDING CLAIM 1 OF THE 645 PATENT NOT INVALID UNDER 35 U.S.C. 101 BECAUSE THE CLAIM IS DIRECTED TO A MERE MATHEMATICAL ABSTRACTION A. Claim 1 of the 645 patent does not recite patentable subject matter because it is directed to a mere abstraction The determining step of Claim 1 is merely datagathering and should not be given patentable weight The storing and sending steps of Claim 1 represent insignificant post-solution activity insufficient to render the claim patentable B. Claim 1 of the 645 patent does not recite patentable subject matter because it fails the MOT Test ii

4 1. Claim 1 fails to meet the machine prong of the MOT Test Claim 1 also fails to meet the transformation prong of the MOT Test II. THE DISTRICT COURT COMMITTED REVERSIBLE ERROR WHEN IT IMPROPERLY DETERMINED THAT THE 645 PATENT WAS NOT UNENFORCEABLE DUE TO INEQUITABLE CONDUCT BECAUSE APPELLEE INTENTIONALLY WITHHELD MATERIAL PRIOR ART FROM THE PTO A. The District Court properly held that the MacGalver episode constituted material prior art A reasonable examiner would find the MacGalver episode material prior art Contrary to Appellee s assertions, the MacGalver episode was not cumulative of previously disclosed prior art B. The District Court committed clear error in finding no intent to deceive the PTO after Appellee deliberately withheld the MacGalver episode from the patent examiner CONCLUSION AND RELIEF SOUGHT iii

5 TABLE OF AUTHORITIES Supreme Court Cases Bilski v. Kappos, 561 U.S., 130 S.Ct (2010)... 9 Diamond v. Chakrabarty, 447 U.S. 303 (1980)... 2, 8, 9 Diamond v. Diehr, 450 U.S. 175 (1981)... 9, 12, 17 Gottschalk v. Benson, 409 U.S. 63 (1972)... 9, 11 Parker v. Flook, 437 U.S. 584 (1978)... 9, 11, 14, 15 Federal Courts of Appeals Cases Arrhythmia Research Tech., Inc. v. Corazonix Corp., 958 F.2d 1053 (Fed. Cir. 1992) Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253 (Fed. Cir. 2007) Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358 (Fed. Cir. 2003)... 21, 26 Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006)... 8, 19, 21, 25 Fox Indus., Inc. v. Structural Preservation Sys., Inc., 922 F.2d 801 (Fed. Cir. 1990) In re Abele, 684 F.2d 902 (C.C.P.A. 1982) In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)... 8, 16 In re Grams, 888 F.2d 835 (Fed. Cir. 1989)... 11, 13, 14 In re Jerabek, 789 F.2d 886 (Fed. Cir. 1986) In re Sarkar, 588 F.2d 1330 (C.C.P.A. 1979) In re Schrader, 22 F.3d 290 (Fed. Cir. 1994)... 18, 19 In re Taner, 681 F.2d 787 (C.C.P.A. 1982) J.P. Stevens & Co. v. Lex Tex, Ltd., 747 F.2d 1553 (Fed. Cir. 1984) King Pharma., Inc. v. Eon Labs, Inc., 616 F.3d 1267 (Fed. Cir. 2010) Kingsdown Med. Consultants v. Hollister, Inc., iv

6 863 F.2d 867 (Fed. Cir. 1988)... 26, 28, 30 Li Second Family Ltd. v. Toshiba Corp., 231 F.3d 1373 (Fed. Cir. 2000) McKesson Info. Solutions, Inc., v. Bridge Med., Inc., 487 F.3d 897 (Fed. Cir. 2007) Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995)... 24, 25, 27 Prometheus Labs., Inc. v. Mayo Collaborative Servs., No , 2010 WL (Fed. Cir. Dec. 17, 2010) Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008)... 19, 22, 23, 28 SiRF Tech., Inc. v. Int l Trade Comm n, 601 F.3d 1319 (Fed. Cir. 2010)... 16, 17 Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008)... 20, 26 Symbol Tech., Inc. v. Opticon, Inc., 935 F.2d 1569 (Fed. Cir. 1991) Tegal Corp. v. Tokyo Electron Am. Inc., 257 F.3d 1331 (Fed. Cir. 2001) Statutory Provisions 28 U.S.C. 1295(a)(1) (2006) U.S.C (2006) U.S.C. 1338(a) (2006) U.S.C. 100(b) (2006) U.S.C. 101 (2006) U.S.C. 103 (2006) C.F.R. 1.56(a) (1991) C.F.R. 1.56(a) (2006) v

7 Other References Ex Parte Foulger, 2010 WL (Bd. Pat. App. & Int. Dec. 22, 2010) MPEP (8th Ed. Rev. 8, July 2010) vi

8 STATEMENT OF RELATED CASES Appellant knows of no related cases in trial, on appeal, pending review or previously before this Court. JURISDICTIONAL STATEMENT The District Court had subject matter jurisdiction over this patent infringement action under 28 U.S.C and 1338(a), entering judgment in favor of Billy Bonka s Candy Emporium ( Bonka ). Hershley Flow Controllers ( Hershley ) timely filed a Notice of Appeal that was docketed as Appeal No This Court has subject matter jurisdiction over this appeal under 28 U.S.C. 1295(a)(1). STATEMENT OF THE ISSUES I. Whether the District Court erred in holding that Appellee s claim, which is directed to a mathematical procedure for changing one form of numerical representation to another, is not invalid under 35 U.S.C II. Whether the District Court committed clear error in holding that although the MacGalver episode was material prior art, Appellee lacked the intent required to prove inequitable conduct. STATEMENT OF THE CASE Appellee is the owner by assignment of U.S. Patent No. 9,428,645 ( the 645 patent ). Appellee filed suit against Hershley in the United States District Court for the District of

9 North Takoma ( District Court ) alleging infringement of Claim 1 of the 645 patent. During trial, Hershley stipulated to infringement, but asserted that Claim 1 is invalid as being directed to unpatentable subject matter, and unenforceable due to inequitable conduct in its procurement. (R. at 1.) The District Court held that Claim 1 of the 645 patent was not invalid as patentable subject matter, citing Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980), because the claimed invention was the result of Dr. Parry s creativity, and was a distinctive use of chicle. (R. 42.) Further, despite finding that the MacGalver episode was a material reference, the court concluded that the 645 patent was not unenforceable because Dr. Parry ( Parry ), the named inventor of the 645 patent, lacked the requisite intent to deceive the Patent and Trademark Office ( PTO ) and that Mr. Que ( Que ), Appellee s patent attorney, fulfilled his duty of candor. (R. 46, 47.) Judgment was entered for Appellee and it is from that final order and judgment that Hershley appeals to this Court. STATEMENT OF THE FACTS Both Hershley and Appellee are in the business of producing chocolate and other candies. (R. 1, 30.) During chocolate production, pipeline systems are used to transport liquid chocolate throughout the manufacturing plant. (R. 2.) From , Parry worked for Appellee designing various fluid 2

10 transport systems that ranged from a series of fire hoses to a system of heavy pipes, walls and false floors. (R. 2-5.) Following a catastrophic failure of this complex system, caused in part by the inability to locate and seal leaks in the pipeline, Parry began developing a new chocolate transport system. (R. 7, 9.) The result was an idea to create a pipeline system wherein a non-toxic sealant could be directly injected into a leaking pipe without stopping production. (R. 17, 26.) However, the idea was not novel. An episode of the hit 90 s television show MacGalver disclosed to the public that a nontoxic mixture of bubble gum and starch will harden when exposed to air and when injected into a leaking pipeline, will seal the system. (R. 12, 13.) Despite the shows fictional nature, the creators of MacGalver actually tested the sealant years earlier and found that it worked. (R. 13.) Thus, all of the MacGalver footage of the pipe being sealed was in fact, real. (Id.) The creators of the show never discussed the results or pursued their ideas any further. (Id.) Inspired by this episode, Parry determined that chicle (the main ingredient in bubble gum) could be used along with a starch base to seal leaking pipes in Appellee s plant. (R. 16.) Parry determined that an effective amount of chicle-starch sealant could be calculated by solving the following equation: A = F 1 /F 2 * (.4 kg chicle). (R. 24.) A represents an effective amount 3

11 of sealant having an approximate 1:1 ratio of chicle and starch by weight, F 1 is the flow-rate of chocolate at a given pipeline position and F 2 is the flow-rate of chocolate at a given downstream position. (Id.) Claim 1 of the 645 patent requires performance of the following three steps: first, flow-rate measurements for F 1 and F 2 are gathered; second, the disclosed equation is solved; and third, the solution is saved and sent via to a user. (R. 24.) 1 During prosecution of the 645 patent application, Parry worked with Appellee s patent attorney, Que. (R. 19.) Parry disclosed to Que that he reviewed U.S. Patent No. 8,064,578 ( the 578 patent ) describing chicle as a glue substitute for 1 Claim 1 of the 645 Patent recites: A computer-implemented method for notifying a user of a leak in a pipeline, the method comprising the steps of: (1) determining whether a pipeline has a leak, comprising: receiving flow-rate data taken at intervals from two flow-rate sensors, S1 and S2, coupled to the pipeline; comparing with a processor a flow-rate data measurement F1 and a flowrate data measurement F2; based on the comparison, determining that there is a leak between S1 and S2 if F1 is greater than F2; wherein F1 is taken from flow-rate sensor S1 and F2 is taken from flowrate sensor S2; (2) calculating an approximate effective amount (A) of a chicle-starch mixture, the mixture having an approximate 1:1 ratio of chicle and starch by weight, to be used to plug the leak, and having the following formula: A = F 1 /F 2 * (.4 kg chicle) wherein F1 and F2 are measured in liters per second; (3) storing the results of the calculation performed on a nontransitory computer-readable medium; and (4) automatically sending a user an indication by an electronic mail message of the amount of chicle-starch mixture necessary to plug the leak. 4

12 mending broken metal and ceramics and that his idea was inspired by a television show; however, he never mentioned MacGalver. (R. 19.) Dr. Parry also failed to disclose the MacGalver episode directly to the PTO despite his belief that if it weren t for MacGalver, [he] would have never solved this problem. (R. 20, 29.) On July 26, 2005, the 645 patent issued, and since then Appellee has licensed the patent to other companies. (R. 23, 28.) In 2008, Hershley began designing and installing computer flow control systems in food processing plants. (R. 30.) Appellee filed suit against Hershley for infringement of Claim 1. (Id.) In response, Hershley stipulated to infringement, but asserted that Claim 1 is invalid as unpatentable subject matter and unenforceable due to inequitable conduct. (R. 31.) Hershley contends that both Parry and Que had a duty to disclose the MacGalver episode to the PTO. (Id.) Hershley asserted that Parry knew of the MacGalver episode s materiality. (R. 31.) During discovery, an was produced from Parry to Billy Bonka acknowledging that MacGalver should get some credit for [discovering] the composition, if he were to succeed in obtaining a patent for discovering how much to apply. (R. 32.) At trial, Parry also stated that although he did not intend to defraud the PTO, he did intend to withhold the MacGalver episode from the patent examiner. (R. 33, 34.) 5

13 With respect to Que, an avid MacGalver fan who owned a copy of the inspirational episode, Hershley asserted that he had a duty to inquire about Parry s inspiration and, in addition, that he had an independent duty to disclose the episode to the PTO. (R. 21, 31.) At trial, Que admitted that during the final examiner interview he was reminded of the exact moment in MacGalver where bubble gum, starch, and a solvent were used to strengthen a pipe. (R. 36.) However, Que testified that because MacGalver is a fictional television show, he summarily dismissed the episode as not material, and chose not to disclose it to the PTO. (Id.) SUMMARY OF THE ARGUMENT The District Court committed reversible error in ruling Claim 1 of the 645 patent not invalid under 101 and not unenforceable due to inequitable conduct. The District Court erroneously determined that a process recites statutory subject matter if it is the result of human ingenuity having a distinctive name, character and use. This statement was never intended to govern the subject matter eligibility of a claimed process. In addition, the District Court committed clear error in holding the 645 patent not unenforceable due to inequitable conduct, because Hershley had proved by clear and convincing evidence that Appellee intended to deceive the PTO when it withheld material prior art from the examiner. 6

14 Claim 1 of the 645 patent fails to recite patentable subject matter for at least two reasons. First, claim 1 does not recite patentable subject matter because the claimed process discloses nothing more than the abstract idea of determining the existence of a leak in a pipeline and subsequently correlating that information into an effective amount of sealant required to plug the leak. An abstract concept such as this cannot be patented because doing so would entirely preempt use of the disclosed idea. Second, as the District Court recognized, Claim 1 does not satisfy the MOT Test. Claim 1 is not tied to a particular machine because it recites only the use of a general purpose computer, and further, nothing in Claim 1 is transformed. Numerical values are simply manipulated, in a series of mathematical procedures, from claim limitation to claim limitation. Furthermore, the 645 patent should be held unenforceable because Hershley demonstrated by clear and convincing evidence both elements of materiality and intent to deceive required to prove inequitable conduct. As the District Court correctly held, the MacGalver episode constituted material, non-cumulative prior art, because a reasonable examiner would have considered the episode to be important to the issuance of the patent. However, because Parry and Que proffered no good faith explanation for 7

15 choosing to withhold the MacGalver episode, despite the fact that they knew or should have known of its materiality, the totality of the circumstances overwhelmingly supports the conclusion of an intent to deceive. STANDARD OF REVIEW Review of a patent claim s validity under 101 is conducted de novo. See In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008)(en banc), aff d sub nom. Bilski v. Kappos, 130 S.Ct (2010). This Court reviews the District Court s decision of the ultimate issue of inequitable conduct for an abuse of discretion, reviewing any factual findings for clear error. Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1313 (Fed. Cir. 2006). ARGUMENT I. THE DISTRICT COURT COMMITTED REVERSIBLE ERROR IN FINDING CLAIM 1 OF THE 645 PATENT NOT INVALID UNDER 35 U.S.C. 101 BECAUSE THE CLAIM IS DIRECTED TO A MERE MATHEMATICAL ABSTRACTION. In finding Claim 1 of the 645 patent not invalid under 101, the District Court erroneously determined that because Claim 1 was the result of Parry s creativity and had a distinctive use, it was a patentable process. The court based its conclusion on dicta from the Supreme Court s decision in Diamond v. Chakrabarty, 447 U.S. 303 (1980), which found a genetically engineered microorganism patentable, in part, 8

16 because it was the result of human ingenuity having a distinctive name, character [and] use. Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). The Supreme Court never intended this statement to govern the subject matter eligibility of a claimed process under 101. See Bilski v. Kappos, 561 U.S., 130 S.Ct. 3218, 3231 (2010). Following Bilski, the question of whether a claimed process recites statutory subject matter must be resolved by comparing the challenged claim to the statutory definition of a process 2 and the guideposts articulated in Gottschalk v. Benson, 409 U.S. 63 (1972), Parker v. Flook, 437 U.S. 584 (1978) and Diamond v. Diehr, 450 U.S. 175 (1981). When read together, it is evident that a mere abstraction, such as a law of nature, physical phenomena or mathematical algorithm cannot be patented. See Biski, 130 S.Ct. at However, a particular practical application of one of these three judicially created exceptions is patentable. Id. Application of this Court s MOT Test may inform the analysis of whether an abstract idea has been practically applied in a claimed process, but it can no longer be relied upon as the sole test. Id. at In this case, application of the correct patentability standard leads to one conclusion: that Claim 1 of the The Patent Act defines a process as a process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material. 35 U.S.C. 100(b). 9

17 patent is directed to a mere abstraction, and thus non-statutory subject matter. Claim 1 discloses no more than the abstract idea of determining the existence of a leak in a pipeline and then notifying a user of the existence of that leak. Upholding the District Court s decision would effectively grant Appellee a monopoly over the abstract correlation between fluid flow-rate and an effective amount of sealant required to plug a leaking pipeline - a result foreclosed by the Benson-Flook-Diehr preemption doctrine. Furthermore, application of the MOT Test does not remedy Claim 1 s deficiencies because the claim is tied only to an un-programmed general purpose computer and performance of the claimed process does not result in a transformation. Because Claim 1 of the 645 patent is not tailored to a particular application of the disclosed mathematical formula, it does not recite patentable subject matter. The District Court s judgment finding Claim 1 not invalid should be reversed. A. Claim 1 of the 645 patent does not recite patentable subject matter because it is directed to a mere abstraction. In order to determine whether an abstract idea such as a mathematical algorithm or fundamental principle has been claimed, the critical question, [w]hat did the applicant invent must be asked first. See Prometheus Labs., Inc. v. Mayo Collaborative Servs., No , 2010 WL , at *7 10

18 (Fed. Cir. Dec. 17, 2010)(citing In re Grams, 888 F.2d 835, 839 (Fed. Cir. 1989)). As noted above, resolution of this question requires a careful analysis of the Supreme Court s Benson, Flook and Diehr precedents. In Benson, the patentee claimed a method for converting binary-coded decimal numerals into pure binary code. Benson, 409 U.S. at 64. Because the only practical application of the disclosed algorithm was in connection with programming a general purpose computer to solve the disclosed mathematical procedure, the claims were found unpatentable. Id. at In Flook, the patentee claimed a computerized method for updating an alarm limit, such as temperature, during a catalytic chemical conversion process. Flook, 437 U.S. at 585. Claim 1 is illustrative of the disclosed process and recites three steps: an initial step which merely measures the present value of the process variable (e.g. the temperature); an intermediate step which uses an algorithm to calculate an updated alarm-limit; and a final step in which the actual alarm limit is adjusted to the updated value. Id. at 585. Because the claim recited nothing more than an improved method of calculation, it was found unpatentable under 101. Id. at 595 n.18. The Diehr case, on the other hand, exemplifies a claim that goes beyond simply disclosing an unpatentable mathematical procedure. In Diehr, the patentee claimed the use of a digital 11

19 computer and the Arrhenius equation to improve the process for molding synthetic rubber. Diehr, 450 U.S. at The Court found that the claim was not an attempt to patent the Arrhenius equation because use of the equation was foreclosed only in conjunction with all of the remaining physical steps of the claimed process. Id. at 187, When viewed in toto, Claim 1 consists of the same three steps found unpatentable in Flook. First, flow-rate measurements are taken and compared to determine if the pipeline system is leaking. Second, an effective amount of sealant is calculated using the disclosed equation. Third, the output of the second step, a numerical value, is stored and sent to a user. Just as the claims in Flook recited an abstract method for calculating an alarm limit, Claim 1 of the 645 patent recites an abstract method for calculating an amount of sealant. The two claims differ in no meaningful way. Furthermore, the Diehr claims were found patentable because each claim also recited a process for curing synthetic rubber, i.e., a transformation. Diehr, 450 U.S. at 187. Here, in contrast, the remaining steps of Claim 1 recite neither a transformation or any other patentable process, but represent only data-gathering and insignificant post-solution activity. Both are insufficient to render an otherwise unpatentable claim patentable. Therefore, Claim 1 fails to recite statutory subject matter. 12

20 1. The determining step of Claim 1 is merely datagathering and should not be given patentable weight. The determining step of Claim 1, although describing a procedure for determining the existence of pipeline leaks, merely gathers data to be used in the claimed algorithm and, therefore, does not render Claim 1 patentable. Because mathematical equation[s] can[not] be used, as a practical matter, without establishing and substituting values for the variables expressed therein, antecedent data-gathering steps are given no weight in a 101 analysis. See Grams, 888 F.2d at 839. In In re Sarkar, the Court of Customs and Patent Appeals ( CCPA ) found unpatentable a claimed method remarkably similar to Claim 1 of the 645 patent. There, the applicant claimed a technique for mathematically modeling an open channel, such as a natural stream. In re Sarkar, 588 F.2d 1330, 1331 (C.C.P.A. 1979). The claims at issue were held unpatentable under 101 despite reciting various measurement steps because Sarkar s claimed invention as a whole consist[ed] of a mathematical exercise, and every mathematical exercise requires some form of numerical gathering. Id. at Here, the determining step of Claim 1 requires flow-rate data measurements to be taken solely for the purpose of solving the claimed algorithm and, per the explicit holding in Sarkar, 13

21 does not render an otherwise nonstatutory claim statutory. The result in this case is not different because Appellee s determining step recites a specific data-gathering approach. If the applicant s invention is, in essence, a mathematical algorithm, then a detailed data-gathering step cannot be used to change an unpatentable claim into a patentable one. To hold otherwise would create a per se rule that every mathematical equation, formula, or algorithm having any practical use would be subject to patenting as a process, a result that this Court in Grams specifically warned against. See Grams, 888 F.2d at 839. Claim 1 of the 645 patent cannot be turned into a patentable invention by reciting detailed data-gathering steps. 2. The storing and sending steps of Claim 1 represent insignificant post-solution activity insufficient to render the claim patentable. Just as data-gathering steps are insufficient to turn an unpatentable invention into a patentable one, trivial postsolution activity cannot transform an unpatentable principle into a patentable process. In Flook, the Supreme Court held that a claim for an improved method of calculation, even when tied to a specific end use, is unpatentable subject matter under 101. Flook, 437 U.S. at 595 n.18. The Court s holding was a recognition of the fact that the Pythagorean theorem would not have been patentable, or partially patentable, because a patent application contained a final step indicating that the formula, 14

22 when solved, could be usefully applied to existing surveying techniques. Id. at 590. In this case, the Supreme Court s reasoning in Flook is highly persuasive and may be dispositive of the present issue. Claim 1 of the 645 patent discloses a procedure for solving a formula that correlates fluid flow-rate to an effective amount of sealant. (R. 18.) The final two steps of the claimed process dictate that the output of the equation is saved to computer readable media and provided via to a user. (R. 24.) This post-solution activity does no more than recognize that the output of an equation can be communicated. To allow a patent draftsman to turn an unpatentable abstraction into a patentable process by simply stating this fact would exalt form over substance and, therefore, this Court should find Claim 1 of the 645 patent invalid under 101. B. Claim 1 of the 645 patent does not recite patentable subject matter because it fails the MOT Test. The decision of the District Court finding Claim 1 of the 645 not invalid should be reversed because, as the District Court correctly recognized, the claim does not satisfy the MOT Test. Failure to satisfy the MOT Test is highly persuasive evidence, although not conclusive, that a claim is directed to a mere abstraction and, therefore, unpatentable. See King Pharma., Inc. v. Eon Labs, Inc., 616 F.3d 1267, 1278 (Fed. Cir. 2010) 15

23 (noting that the Supreme Court rejected the exclusive nature of the MOT Test, but not necessarily the wisdom behind it ). In order for a claimed process to be patentable under the MOT Test it must be: (1) tied to a particular machine or apparatus; or (2) transform a particular article into a different state or thing. See In re Bilski, 545 F.3d at In accordance with the Benson-Flook-Diehr preemption doctrine, a recited machine or transformation must do more than gather data or simply represent insignificant extra-solution activity. Id. 1. Claim 1 fails to meet the machine prong of the MOT Test. Claim 1 of the 645 patent only refers, in the preamble, to a general purpose computer, and to a processor in the comparing limitation. Thus, it fails to recite a particular machine sufficient to render the claim patentable. Recently, this Court stated that: [i]n order for the addition of a machine to impose a meaningful limit on the scope of a claim, it must play a significant part in permitting the claimed method to be performed, rather than function solely as an obvious mechanism for permitting a solution to be achieved more quickly, i.e., through the utilization of a computer for performing calculations. SiRF Tech., Inc. v. Int l Trade Comm n, 601 F.3d 1319, 1333 (Fed. Cir. 2010). Moreover, the Board of Patent Appeals and Interferences consistently holds that claiming a general purpose computer, processor or unspecified network is insufficient to 16

24 render a process patentable under the MOT Test. See e.g. Ex Parte Foulger, 2010 WL , at *3 (Bd. Pat. App. & Int. Dec. 22, 2010). Here, the recitation of a general purpose computer or a processor imposes no meaningful limit on the scope of Claim 1. It simply permits the claim to be performed more quickly. See SiRF, 601 F.3d at Both the determining and calculating step of Claim 1 can be performed by utilizing a paper and pencil to record flow-rate measurements and then to solve the disclosed formula. Allowing a mathematical procedure such as this to be patented because the patent draftsman required performance on a digital computer would allow a field-of-use limitation to change an otherwise ineligible abstraction into a patentable process. See Diehr, 450 U.S. at Similarly, the presence of flowrate sensors, storage medium and an system in Claim 1 does render the claim statutory because even if these articles represent machines under the MOT Test, their inclusion in the claim represents mere data-gathering and insignificant extrasolution activity as previously described. 2. Claim 1 also fails to meet the transformation prong of the MOT Test. In order for a claimed transformation to impart meaningfully limits on a claim s scope, this Court has held that the claims must involve a physical change, effect or result upon 17

25 subject matter representative of or constituting physical activity or objects. In re Schrader, 22 F.3d 290, 294 (Fed. Cir. 1994)(emphasis in original). In Schrader, the Court summarized three earlier decisions that found data transformation sufficient to confer patent eligibility under 101. The common denominator underlying each decision is that the mere mathematical manipulation of data was insufficient to find a statutorily protected transformation. See Arrhythmia Research Tech., Inc. v. Corazonix Corp., 958 F.2d 1053, 1059 (Fed. Cir. 1992)(transformation of electrocardiograph signals into an output representative of the patient s heart activity); In re Abele, 684 F.2d 902, (C.C.P.A. 1982)(transformation of X-ray attenuation data into an improved CAT-scan image of a physical object); In re Taner, 681 F.2d 787, 790 (C.C.P.A. 1982)(transformation of the earth s sub-surface response to spherical seismic signals into a form representative of the sub-surface response to cylindrical or plane waves). Here, flow-rate data, the subject matter of the claimed process, is manipulated through mathematical procedures to produce a numerical output, but the data is not transformed. Unlike the methods claimed in Arrhythmia, Abele and Taner, the numerical output resulting from the claimed calculating step is only a solution to a mathematical problem and does not represent a physical change, effect, or result to the 18

26 underlying flow-rate data. See Schrader, 22 F.3d at 294. Following the calculating step of Claim 1, the measured flowrate data continues to represents the same thing; i.e. the volumetric flow of fluid through a pipeline it has not been changed. Because Claim 1 of the 645 patent simply recites a mathematical procedure for calculating an effective amount of sealant, it fails to transform an article into a different state or thing and, therefore, is directed to nonstatutory subject matter. Consequently, the decision of the District Court finding Claim 1 of the 645 patent not invalid should be reversed. II. THE DISTRICT COURT COMMITTED REVERSIBLE ERROR WHEN IT IMPROPERLY DETERMINED THAT THE 645 PATENT WAS NOT UNENFORCEABLE DUE TO INEQUITABLE CONDUCT BECAUSE APPELLEE INTENTIONALLY WITHHELD MATERIAL PRIOR ART FROM THE PTO. The far-reaching social and economic ramifications inherent in the issuance of a patent create a vested interest in ensuring that applicants obtain them fairly. Digital Control, Inc. v. Charles Mach. Works, Inc., 437 F.3d 1309, 1313 (Fed. Cir. 2006). Therefore, applicants for patents owe a duty of candor and good faith to the PTO to disclose all information known to be material to patentability. 37 C.F.R. 1.56(a)(2006); see also Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313 (Fed. Cir. 2008). A patent may be found unenforceable by inequitable conduct in breach this duty, if it can be established by clear and convincing evidence that the applicant: (1) made an 19

27 affirmative misrepresentation of material fact, failed to disclose information, or submitted materially false information; and (2) intended to deceive the PTO. Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008)(citation omitted). The burden of proving inequitable conduct falls upon the alleged infringer. Id. At least a threshold level of both intent and materiality must be met. Id. 3 The loss of a patent is the most severe penalty in patent infringement litigation, with damaging economic and professional consequences for the patentee. Star Scientific, 573 F.3d at However, such a penalty is warranted in this case. The egregious conduct of the Appellee in failing to disclose the MacGalver episode should render the 645 patent unenforceable because: (1) the MacGalver episode was material, non-cumulative, prior art; and (2) Parry and Que deliberately concealed the existence of the episode in an effort to deceive the PTO. 3 Even if the threshold level of both materiality and intent are proven by clear and convincing evidence, a district court must next balance the equities to determine whether the applicant's conduct before the PTO was egregious enough to warrant holding the patent unenforceable. Star Scientific, 537 F.3d at It is this phase of the analysis that is reviewed for abuse of discretion on appeal. Id. In this case, because the District Court held that intent was never proven, the court did not apply the balancing of the equities test. As a result, on review, this Court need only analyze whether the District Court committed clear error in its analysis of the materiality and intent elements of inequitable conduct. 20

28 A. The District Court properly held that the MacGalver episode constituted material prior art. In an inequitable conduct determination, information is material when a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent. Digital Control, 437 F.3d at 1314; see also 37 C.F.R. 1.56(a)(1991). 4 Information concealed from the PTO may be material even though it would not invalidate the patent. Li Second Family Ltd. v. Toshiba Corp., 231 F.3d 1373, 1380 (Fed. Cir. 2000). However, a withheld reference is not material if it is merely cumulative to, or less relevant than, information already considered by the examiner. McKesson Info. Solutions, Inc., v. Bridge Med., Inc., 487 F.3d 897, 913 (Fed. Cir. 2007)(citation omitted). Materiality is not analyzed in a vacuum. It is not dependent on a single element in isolation. Rather, it is judged 4 This Court has applied at least four different standards for determining materiality in the context of inequitable conduct. Digital Control, 437 F.3d at In this case, the District Court properly applied the dominant reasonable examiner standard established in Rule 56 by the PTO in Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1363 (Fed. Cir. 2003); 37 C.F.R. 1.56(a)(1991). The reasonable examiner standard is generally considered to be the broadest test for materiality, encompassing all of the others. Digital Control, 437 F.3d at Despite the existence of these competing standards, this Court has declined to address which standard for materiality prevails, but none of the tests supplant another. Id. To the extent that one standard may require a higher showing of materiality than another, the requisite finding of intent may be lower. Id. In this case, the MacGalver episode met the threshold requirements for materiality under the reasonable examiner standard. Nevertheless, because the materiality of the MacGalver episode is so high, Appellant contends that it would meet any of the narrower standards for materiality. 21

29 based upon the overall degree of similarity between the omitted reference and the claimed invention in light of the other prior art before the examiner. Praxair, 543 F.3d at 1315 (citation omitted). Here, a reasonable examiner would have found the MacGalver episode material due to the striking similarities between the 645 patent and the events depicted in the MacGalver episode. Furthermore, the contents of the MacGalver episode could not be considered merely cumulative because the show taught features of the claimed invention not present in the 578 patent. As a result, the District Court properly found the MacGalver episode to be material. 1. A reasonable examiner would find the MacGalver episode material prior art. The finding of the District Court that the MacGalver episode was material should only be disturbed if, after reviewing the totality of the evidence, this court is left with the firm conviction that a mistake has been made. See Tegal Corp. v. Tokyo Electron Am. Inc., 257 F.3d 1331, (Fed. Cir. 2001). A reasonable examiner would consider the MacGalver episode, which was the sole inspiration behind the 645 patent, to be material because the episode depicted a method for plugging pipeline leaks that was nearly identical to Parry s invention. The MacGalver show s fictitious premise does not negate or undermine this finding of materiality. 22

30 Tellingly, the 645 patent is entitled Method for Plugging Pipeline Leaks and the events in the MacGalver episode specifically depict MacGalver employing a method for plugging a pipeline leak. (R. 12, 22, 24.) Although Parry did not attempt to claim the bubble gum and starch sealant MacGalver used on the show, Parry incorporates the use of that same mixture in Claim 1 of the 645 patent. (R. 12, 15, 27.) On the show, MacGalver injected the sealant into the pipeline, and the episode teaches that once the sealant came into contact with air from a leak, it would harden and dry, sealing the crack. (R. 12.) Claim 1 of the 645 patent calculates an effective amount of chicle-starch mixture to seal a leaking pipeline based upon the exact process disclosed in the MacGalver episode. (R. 16.) Admittedly, as Parry testified, the MacGalver episode did not include the equation and flow-rate sensors used at the Bonka factory. (R. 24, 33.) However, these additions do not amount to a finding of immateriality because a material reference need not disclose every claim limitation not found in the prior art of record. See Praxair, 543 F.3d at [A] non-enabling reference may [also] qualify as prior art for the purpose of determining obviousness under 35 U.S.C Symbol Tech., Inc. v. Opticon, Inc., 935 F.2d 1569, 1578 (Fed. Cir. 1991); MPEP (8th Ed. Rev. 8, July 2010). The essence of what the MacGalver show teaches and Parry s patent are exactly the 23

31 same that bubble gum and starch can be injected into a cracked pipeline to seal it. A reasonable examiner would have deemed this information particularly important during prosecution despite minor difference in the scope of Claim 1 as compared to MacGalver s disclosure. Further, Appellee s weak contention that the MacGalver episode is somehow not material because it was a fictitious television show does not undermine the high materiality of the episode s content. (R. 36.) The MacGalver show was enormously popular throughout the country, even peaking at number 2 in the Nielson ratings. (R. 11.) The content of the episode was not merely prophetic, for it contained an enabling reference, which any viewer, let alone a budding engineer, could replicate. All someone would have to do was watch the show and conduct the same simplistic experiment to discover that it would work exactly as disclosed. This is the very essence of a material reference. 2. Contrary to Appellee s assertions, the MacGalver episode was not cumulative of previously disclosed prior art. Withheld references are highly material and not cumulative when no single piece of prior art teaches a combination of elements present in the claimed invention. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1180 (Fed. Cir. 1995); In re Jerabek, 789 F.2d 886, 890 (Fed. Cir. 1986). In Molins, this Court reasoned that a non-disclosed patent was not cumulative 24

32 because, not only did it display more relevant features to the patent in question than the cited references, it was also the most relevant prior art by comparison to those references. Id. In its application, Appellee disclosed the 578 patent, which described chicle as a tacky substance that could be used like a glue to mend broken metal and ceramics. (R. 19.) This disclosure in no way supports Appellee s erroneous assertion that the MacGalver episode was not material because it was cumulative to the 578 patent. Appellee did not claim the actual gum substance in the 645 patent. (R. 27.) Therefore, not only did the MacGalver episode teach relevant features not contained in the 578 patent, it disclosed the most relevant elements contained in the 645 patent. See Molins, 48 F.3d at These critical features include injecting the substance into a pipeline system containing some kind of liquid, coming into contact with air, hardening, and then sealing the leak from within. (R. 12, 16.) As this Court has previously noted, the scope and content of prior art and what the prior art teaches are questions of fact. Digital Control, 437 F.3d at Consequently, the clear and convincing evidence demonstrates that the District Court did not commit clear error in holding that the MacGalver episode was material prior art. A reasonable examiner would find that the nearly identical disclosures of the 645 patent and the 25

33 MacGalver episode would have been important in considering whether Claim 1 should issue as a patent. B. The District Court committed clear error in finding no intent to deceive the PTO after Appellee deliberately withheld the MacGalver episode from the patent examiner. Direct evidence of intent or proof of deliberate scheming is rarely available in instances of inequitable conduct, but intent may be inferred from the surrounding circumstances. Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997)(quoting J.P. Stevens & Co. v. Lex Tex, Ltd., 747 F.2d 1553, (Fed. Cir. 1984)). Inequitable conduct requires not intent to withhold, but rather intent to deceive. Dayco Prods., Inc. v. Total Containment Inc., 329 F.3d 1358, 1367 (Fed. Cir. 2003). An intent to deceive may be inferred if an applicant: (1) knew of the information; (2) knew it was material to the issuance of the patent; (3) made a deliberate decision to withhold or misrepresent it; and (4) intended to deceive the PTO. Star Scientific, 537 F.3d at A decision to withhold the reference where the reasons given for the withholding are plausible cannot support an inference of deceit. Dayco, 329 F.3d at Even gross negligence does not justify an inference of intent to deceive. Kingsdown Med. Consultants v. Hollister, Inc., 863 F.2d 867, 876 (Fed. Cir. 1988). 26

34 Here, the evidence proves that Appellee committed inequitable conduct by deliberately concealing the MacGalver episode in an attempt to deceive the PTO. Appellee s failure to provide a plausible, good faith explanation for why Que and Parry chose to withhold a known material reference demonstrates that Appellee s conduct could in no way be construed as mere negligence. As previously discussed, the District Court properly held that the MacGalver episode was highly material for the purposes of inequitable conduct. (R. 33.) Both Parry and Que had actual knowledge of the episode but claim that they did not know of its materiality due to the fictitious nature of the show. (R. 11, 21.) Therefore, the issue of intent hinges upon whether Parry or Que knew or should have known about the episodes materiality. See Molins, 48 F.3d at ( In an inequitable conduct determination based on nondisclosure, the applicant must know, or should have known of the materiality of the reference for an inference of intent ). As Hershley argued above, the fictitious premise of MacGalver cannot negate the inherent materiality of the episode s content. The episode served as the sole source of inspiration for Parry s invention, and provided an enabling disclosure of how to seal a leaking pipeline using a bubble gumstarch mixture. As Parry discovered, one need only duplicate the 27

35 process depicted in the MacGalver episode to learn that the underlying science was real, even if the MacGalver character and his exploits were fictional. (R. 16.) It is also apparent that Parry knew or should have known about the episode s materiality, for on several occasions he publicly credited the show for his invention. This was overtly demonstrated when Parry repeatedly told tour groups that if it weren t for MacGalver, we would never have solved this problem, (R. 29,) and by his to Billy Bonka stating that MacGalver should receive credit for the bubble gum composition. (R. 32.) At trial, Parry admitted that he had intended to withhold the existence of the MacGalver episode from the PTO, and that perhaps he should have disclosed the episode to the examiner. (R. 33, 34.) Even though an intention not to disclose alone is not enough to support the inference of deceit, this statement, taken in conjunction with all of the facts, supports the conclusion that Parry intended to deceive. Kingsdown, 863 F.2d at 870. As this Court held in Praxair, Parry s self-serving testimony that he never intended to defraud the examiner is insufficient to combat an inference of intent to deceive. Praxair, 543 F.3d at 1318; (R. 33, 34.) As a patent attorney, Que breached his duty of candor before the PTO when he consciously chose not to question Parry 28

36 after learning that a television show was the inspiration for the 645 patent. Although Que testified at trail that it never crossed his mind to connect or associate the show with Dr. Parry s invention he then subsequently admitted that, during a meeting with the patent examiner he was [r]eminded of the moment in the episode when the character used bubble gum, a starch, and a solvent to strengthen the pipe. (R. 35, 36.) The duty of candor extends throughout the patent s entire prosecution history. Fox Indus., Inc. v. Structural Preservation Sys., Inc., 922 F.2d 801, 803 (Fed. Cir. 1990). Therefore, even if Que initially did not think much of the fact that a television show inspired the 645 patent, at the point when he realized the similarities between the 645 patent and the MacGalver episode, he had a duty to inquire further. Que s later testimony that he believed no one in their right mind would submit a fictional television episode as prior art to the United States Patent and Trademark Office was merely selfserving, and made in a transparent effort to justify his breach of his duty of candor and good faith. (R. 19.) These facts cannot be construed as mere gross negligence. Both Parry and Que knew, or should have known, that the MacGalver episode was highly material. Parry and Que s volitional decision to withhold the MacGalver reference was not a simple ministerial oversight, but a deliberate breach of the 29

37 duty of candor without a good faith explanation to the contrary. See Kingsdown, 863 F.3d at 870. Taken as a whole, these facts support an overwhelming inference of intent to deceive the PTO. Given that Appellant proved both elements of inequitable conduct, this Court should remand to the District Court in order to determine whether Appellee s conduct was so egregious that the 645 patent should be rendered unenforceable. CONCLUSION AND RELIEF SOUGHT For the foregoing reasons, Hershley respectfully requests that this honorable Court reverse the District Court s finding that Claim 1 of the 645 patent is not invalid and not unenforceable due to inequitable conduct, instead holding that the 645 patent is invalid and unenforceable. January 28, 2011 Respectfully submitted, Christopher Ricciuti Teagan S. Henwood Counsel for the Defendant-Appellant Hershley Flow Controllers 30

38 PROOF OF SERVICE I hereby certify that on this twenty-eighth day of January, 2010, copies of the foregoing BRIEF FOR THE DEFENDANT-APPELLANT were caused to be served on each counsel team for Plaintiff- Appellee and on the Midwestern Regional Director, as listed below. Thirteen copies were served by United Parcel Service on: Kevin E. Noonan McDonnell, Boehnen, Hulbert & Berghoff 300 South Wacker Drive, 32 nd Floor Chicago, IL One copy was served by on each of twenty-four counsel teams. January 28, 2011 Respectfully submitted, Christopher Ricciuti Teagan S. Henwood Counsel for the Defendant-Appellant Hershley Flow Controllers

39 CERTIFICATE OF COMPLIANCE 1. This brief complies with the type-volume limitations of Federal Rule of Appellate Procedure 32(a)(7)(B). This brief contains 30 pages, 6945 words, 758 lines of monospaced typeface, excluding the parts of the brief exempted by Federal Rule of Appellate Procedure 32(a)(7)(B)(iii). 2. This brief complies with the typeface requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule of Appellate Procedure 32(a)(6). The brief has been prepared in a monospaced typeface using Microsoft Word 2007 with 12 point Courier New font. January 28, 2011 Respectfully submitted, Christopher Ricciuti Teagan S. Henwood Counsel for the Defendant-Appellant Hershley Flow Controllers