Appeal No In the United States Court of Appeals for the Federal Circuit. BILLY BONKA CANDY EMPORIUM Plaintiff/Appellee

Appeal No. 10-1971 In the United States Court of Appeals for the Federal Circuit BILLY BONKA CANDY EMPORIUM Plaintiff/Appellee v. HERSHLEY FLOW CONTROLLERS Defendant/Appellant ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NORTH TAKOMA BRIEF FOR DEFENDANT/APPELLANT HERSHLEY FLOW CONTROLLERS By: Steve Helseth Jennifer C. Middleton Attorneys for the Defendant/Appellant Jennifer C. Middleton TK Bar No. 09181980 Law Offices of Helseth & Middleton 555 Bonka Place Emporium, North Takoma 55432 Phone # (555) 555-5555

CERTIFICATE OF INTEREST Counsel for the Defendant/Appellant Hershley Flow Controllers certify the following: 1. Hershley Flow Controllers is the sole party represented by the undersigned attorneys. 2. Steve Helseth and Jennifer C. Middleton are expected to appear in this court. Respectfully Submitted Steve Helseth Jennifer C. Middleton January 27, 2010 Attorneys for the Defendant/Appellant Billy Bonka s Candy Emporium i

TABLE OF CONTENTS CERTIFICATE OF INTEREST... I TABLE OF CONTENTS... II TABLE OF AUTHORITIES... IV STATEMENT OF RELATED CASES... VI JURISDICTIONAL STATEMENT... 1 STATEMENT OF ISSUES... 1 STANDARD OF REVIEW... 1 STATEMENT OF THE CASE AND FACTS... 2 ARGUMENT... 6 I. The Court of Appeals for the Federal Circuit should find that the district court erred in holding that Claim 1 of U.S. Patent 9,428,645 ( Method of Plugging Pipeline Leaks ) was not patentable subject matter.... 6 1. The Chakrabarty test was the incorrect test for the district court to apply.... 7 2. The district court should have applied the machine-ortransformation test.... 8 3. Claim 645 is a claim for the formula alone, not the process, and therefore the district court erred when it held the claim was patentable... 10 4. The 645 patent is not patentable under Benson.... 11 5. The 645 patent is not patentable under Flook.... 13 II. The Court of Appeals for the Federal Circuit should find that the district court abused its discretion in determining a lack of inequitable conduct in regards to the 645 patent. 15 1. The district court did not clearly err in determining the MacGalver episode was material.... 16 ii

2. The district court clearly erred when it failed to find intent to deceive the PTO by Dr. Parry & Mr. Que.... 21 3. The district court abused its discretion in balancing the levels of intent and materiality... 29 CONCLUSION... 30 iii

Cases TABLE OF AUTHORITIES Amhil Enters. Ltd. v. Wawa, Inc., 81 F.3d 1554 (Fed. Cir. 1996)...29 Baxter Intern., Inc. v. McGaw, Inc., 149 F.3d 1321 (Fed. Cir. 1998)...23, 24 Bilski v. Kappos, 130 S.Ct. 3218 (2008)...8 Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 394 F.3d 1348 (Fed. Cir. 2005)...20 Cochrane v. Deener, 94 U.S. 780 (1876)...9, 10 Critikon, Inc. v. Becton Dickinson Vascular Access, 120 F.3d 1253 (Fed. Cir. 1997)...22 Dayco Prods., Inc. v. Total Containment, 329 F.3d 1358 (Fed. Cir. 2003)...18 Diamond v. Chakrabarty, 447 U.S. 303 (1980)...7 Diamond v. Diehr, 450 U.S. 175 (1981)...10, 11 Digital Control v. Charles Machine Works, 437 F.3d 1309 (Fed. Cir. 2006)...16, 18, 19, 22 Eisai Co. Ltd. v. Dr. Reddy s Laboratories, Ltd., 533 F.3d 1353 (Fed. Cir. 2008)...16 Eli Lilly v. Zenith Goldline Pharma., 471 F.3d 1369 (Fed. Cir. 2006)...22 Ex Parte Halligan, 89 U.S.P.Q.2d 1355 (B.P.A.I. 2008)..12 Gottschalk v. Benson, 409 U.S. 63 (1972)...9, 12 In re Bilski, 545 F.3d 943 (Fed. Cir. 2008)...1, 6 In re Grams, 888 F.2d 835 (Fed. Cir. 1989)...9 In re Schrader, 22 F.3d 290 (Fed. Cir. 2004)...9, 10 Judkins v. HT Window Fashion Corp., 529 F.3d 1334 (Fed. Cir. 2008)...23 Kingsdown Med. Consultants v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988)...23, 24 Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995)...15, 22, 24 Novo Nordisk Pharms., Inc. v. Bio-Tech Gen. Corp., 424 F.3d 1347 (Fed. Cir. 2005)...2, 16, 22, 29, 30 Parker v. Flook, 437 U.S. 584 (1978)...14 Rentrop v. Spectranetics, 550 F.3d 1112 (Fed. Cir. 2008)...17 SiRF Technology, Inc. v. Int l Trade Comm., 601 F.3d 1319 (Fed. Cir. 2010)...8, 9 Union Pac. Res. Co. v. Chesapeake Energy Corp., 236 F.3d 684 (Fed. Cir. 2001)...15 Rules iv

37 C.F.R. 1.56(b) (2004)...20 Statutes 28 U.S.C. 1295...1 35 U.S.C. 101 (2006)...6 35 U.S.C. 102...17 35 U.S.C. 103...17 v

STATEMENT OF RELATED CASES Pursuant to Federal Circuit Rule 47.5, Defendant/Appellant provide as follows: (a) There have been no previous appeals in this case. (b) They are aware of no other case that will be directly affected by the Court s decision in this case. vi

JURISDICTIONAL STATEMENT The United States District Court for the District of North Takoma had subject matter jurisdiction under 28 U.S.C. 1338(a). The district court entered final judgment for Billy Bonka s Candy Emporium, holding that Claim 1 of U.S. Patent No. 9,428,645 was valid as patentable subject matter and was not unenforceable due to inequitable conduct. Hershley filed a timely Notice of Appeal in the United States Court of Appeals for the Federal Circuit. This Court has jurisdiction pursuant to 28 U.S.C. 1295. STATEMENT OF ISSUES I. Under United States patent law, did the district court err in utilizing the test proffered in Diamond v. Chakrabarty, 447 U.S. 303, to hold that Claim 1 of U.S. Patent No. 9,428,645 ( Method of Plugging Pipeline Leaks ) was patentable subject matter? II. Under Federal Circuit law, did the district court abuse its discretion when it failed to find inequitable conduct on the part of Dr. Parry and Attorney Que despite their failure to disclose all known prior art to the Patent & Trademark Office? STANDARD OF REVIEW When reviewing the issue of whether a claim is drawn to patent-eligible subject matter under 35 U.S.C. 101, the court will review de novo. In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008). When reviewing issues of statutory interpretation, the court will review de novo. Id. 1

When reviewing factual findings as to materiality and deceptive intent, the court reviews those factual findings for clear error. For the decision of inequitable conduct the court reviews for abuse of discretion. Novo Nordisk Pharms., Inc. v. Bio-Tech Gen. Corp., 424 F.3d 1347, 1359 (Fed. Cir. 2005). STATEMENT OF THE CASE AND FACTS The patent infringement trial of Hershley Flow Controllers ( Hershley ) was held in the United States District Court for the District of North Takoma. (R. at 1). The plaintiff, Billy Bonka s Candy Emporium ( Bonka ) alleged infringement of Claim 1 of U.S. Patent No. 9,428,645 ( Claim 1 ). (R. at 1). The defendant, Hershley, stipulated to infringement but asserted that Claim 1 was invalid as unpatentable subject matter, and unenforceable because of inequitable conduct. (R. at 1). The district court entered judgment for Bonka, holding that Claim 1 was valid patentable subject matter and was not unenforceable because of inequitable conduct. (R. at 1). Hershley filed a timely Notice of Appeal in the United States Court of Appeals for the Federal Circuit. (R. at 1). Billy Bonka s Candy Emporium is located in North Takoma and produces a variety of candy products. (R. at 1). Dr. Barnaby Parry worked for Bonka from 1994-2004 and specializes in managing the transport of liquid chocolate within the factory. (R. at 2). Dr. Parry developed a pipeline system, which sprung a 2

leak shortly after implementation. (R. at 2). In order to fix the pipeline leak, Dr. Parry experimented with a chicle substance which had been promoted in the highly rated episode of MacGalver. (R. at 4). The episode showed MacGalver fixing a pipeline leak by dissolving large quantities of bubble gum into a mixture of starch and quick drying solvent. (R. at 4). The mixture was applied to the pipeline and hardened upon exposure to air. (R. at 4). The show s creators were aware that the mixture worked in real world settings and the depiction on the show was the process actually in action. (R. at 4). Dr. Parry proceeded to experiment with the mixture, using both chicle and starch. (R. at 4). He determined there was a correlation between pipeline flow rate, size of the crack and amount of mixture needed to plug the leak. (R. at 5). In 2003, Dr. Parry met with Bonka s patent attorney, Jim Que, to discuss patenting the method of plugging pipeline leaks with the chicle-starch mixture. (R. at 5). He briefly mentioned he was inspired by a television show; however, Mr. Que failed to follow up further on the statement. (R. at 5). Mr. Que inquired as to any prior art which disclosed the invention, and Dr. Parry only disclosed a patent he had reviewed, U.S. Patent No. 8,064,578, which disclosed chicle as a tacky substance that could be used like a glue to mend broken metal and ceramics. (R. at 5). Dr. Parry failed to disclose the MacGalver episode to his 3

attorney, and Mr. Que did not broach the episode subject despite that he was an avid fan, owned copies of all episodes of the show and was familiar with the episode. (R. at 5-6). U.S. Patent No. 9,428,645 ( the 645 patent ) was issued in Dr. Parry s name on July 26, 2005, then later assigned to Bonka. (R. at 6). The patent is titled Method for Plugging Pipe Leaks. (R. at 6). Claim 1 is as follows: A computer-implemented method for notifying a user of a leak in a pipeline, the method comprising the steps of: determining whether a pipeline has a leak, comprising: receiving flow-rate data taken at intervals from two flowrate sensors, S1 and S2, coupled to the pipeline; comparing with a processor a flow-rate data measurement F1 and a flow-rate 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 flow-rate sensor S2; 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 ) x (.04 kg chicle)wherein F1 and F2 are measured in liters per second; storing the results of the calculation performed on a nontransitory computer-readable medium; and automatically sending a user an indication by an electronic mail message of the amount of chicle-starch mixture necessary to plug the leak. (R. at 6.) The use of the chicle-starch composition became increasingly popular in the food service industry in late 2003, because it allowed companies to fix pipeline leaks without interrupting production. (R. at 7). Bonka received over $9 million per year licensing the 645 patent. (R. at 7). Dr. Parry shared with tour groups that he was inspired by the episode of MacGalver, and without that episode, he likely would not have 4

solved the problem. (R. at 7). Hershley, Bonka s primary competitor and party to this suit, designed and installed computer flow control systems that were infringing Bonka s patent. (R. at 7). Bonka brought suit against Hershley. (R. 8). During litigation, an e-mail between Dr. Parry and Bonka surfaced, which provided response by Dr. Parry to a request by Bonka to broaden the patent claim to include the actual composition of chicle and starch. (R. at 8). Dr. Parry stated in the e-mail that he did not feel right claiming the composition, and the MacGalver episode should get credit for the composition. (R. at 8). Dr. Parry testified at trial that he did not disclose the MacGalver episode because he thought it was fictitious. (R. at 8). Further, Dr. Parry testified that his invention was not covered by the pipe-fixing solution in MacGalver, because that solution did not disclose the ratios of the chicle-starch mixture nor did it disclose the proper flow rate formula. (R. at 8). Dr. Parry admitted that he should have disclosed the episode. (R. at 8). On cross-examination, Dr. Parry testified that he never intended to disclose the episode to the patent examiner, but would have upon request. (R. at 8-9). Mr. Que admitted during his deposition that he thought of the MacGalver episode when speaking with the PTO examiner, but never mentioned the it during the patent prosecution. (R. at 9). Mr. Que stated that he did not believe a reasonable person would 5

submit a television episode to the USPTO as prior art. (R. at 9). Mr. Que also testified that he was aware the PTO based its allowance of the patent on its discussion with him. (R. at 9). ARGUMENT I. The Court of Appeals for the Federal Circuit should find that the district court erred in holding that Claim 1 of U.S. Patent 9,428,645 ( Method of Plugging Pipeline Leaks ) was not patentable subject matter. Congress developed Title 35 of the United States Code to govern patentability. Section 101 describes what types of inventions are patentable, stating that [w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title. 35 U.S.C. 101 (2006). The test for patentability under 101 is a threshold inquiry and any claim of an application failing the requirements of 101 must be rejected even if it meets all of the other legal requirements of patentability. In re Bilski, 545 F.3d 943, 950 (Fed. Cir. 2008). When reviewing the issue of whether a claim is drawn to patent-eligible subject matter under 35 U.S.C. 101, the court will review de novo. In re Bilski, 545 F.3d 943, 951 (Fed. Cir. 2008). When reviewing issues of statutory interpretation, the court will review de novo. Id. 6

1. The Chakrabarty test was the incorrect test for the district court to apply. The district court improperly chose to use the test proffered in Diamond v. Chakrabarty to determine the patentability of the 645 patent, because the Chakrabarty test does not focus on the patentability of processes. The Chakrabarty test is appropriately applied when there is a process involving a manufacture or composition of matter which is a product of human ingenuity and which has a distinctive name, character and use as the focus of the patent claim. Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). In Chakrabarty, the Supreme Court allowed a process of developing a non-naturally occurring bacteria to be patent-eligible, focusing its analysis on the different characteristics of the bacteria. Id. at 310. The claim for the process of the bacteria was approved without problem, and the Court did not discuss the process itself in its holding. Id. at 305-06. The 645 patent differs from what was focused on in Chakrabarty and should be analyzed differently, because the question is not whether the chicle-starch mixture itself can be patented but rather whether the overall process can be patented. Therefore, the focus is not on a manufacture or composition of matter. In fact, Dr. Parry had no intention to patent the composition, which was stated in his email to Bonka. Because the 7

district court focused on the composition as being the distinctive component of human ingenuity, it failed to focus on the actual invention up for patent the process. Due to the fact that the mixture itself is not included in the patent, the claim should not have been analyzed under the Diamond test. 2. The district court should have applied the machine-ortransformation test. The district court erred in not applying the machine-ortransformation test, because the test specifically relates to process patents and is a useful clue to determining patentability. Bilski v. Kappos, 130 S.Ct. 3218, 3227 (2008); however, even if the court would have applied the machine-ortransformation test, the 645 patent would have failed to satisfy the test. Under the machine-or-transformation test, an invention is a process only if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. Bilski, 130 S.Ct at 3225. The first part of the test requires a particular machine or apparatus. Machine is defined as a concrete thing, consisting of parts, or of certain devices and combination of devices... include[ing] every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result. SiRF Technology, Inc. v. 8

Int l Trade Comm., 601 F.3d 1319, 1332 (Fed. Cir. 2010) (citing In re Ferguson, 558 F.3d 1359, 1364 (Fed. Cir. 2009)). Here, the only machine involved in the process is a general purpose computer, because a pipeline and sensors do not perform a function which produces a result or effect. According to the Supreme Court, the use of a computer is not sufficient to create a patentable process. Gottschalk v. Benson, 409 U.S. 63, 71-72 (1972). Furthermore, the Court refused to allow computer programs to be patentable. Id. at 72. Therefore, the claim should not be considered tied to a particular machine. Even if the sensors might be considered a machine because they gather data, the process will still fail to be patentable subject matter, because the sensors merely provide data for the algorithm. The Court held that a process which merely involves gathering data for an algorithm is not patentable. In re Grams, 888 F.2d 835, 839 (Fed. Cir. 1989). There is no math equation that can be used without data, so allowing a patent in this case would be allowing patent on the formula itself. Id. Transformation is generally defined as the changing of an article to a different state or thing. Cochrane v. Deener, 94 U.S. 780, 788 (1876). Things can include both physical activity and objects. In re Schrader, 22 F.3d 290, 294 (Fed. Cir. 2004). The Supreme Court has allowed a patent for a process which resulted in superfine powder, regardless of the machine being 9

used. Cochrane, 94 U.S. at 788. The Court also held that claims which include processes that are representative of physical objects are patentable. Schrader, 22 F.3d at 294. The 645 patent does not change or alter a physical object, because it does not result in plugged leaks. Therefore, it is not analogous to the patentable claims in Cochrane or Diehr, where flour and cured rubber, respectively, were results that aided the patentability of the processes. Additionally, the 645 patent lacks any transformation of electronic signals which represent physical parameters, which were held to be patentable under In re Schrader. Because the 645 patent does not actually transform an article, it fails this part of the test. Neither prong of the machine-or-transformation test is satisfied by the 645 patent, so the claim should be rendered unpatentable. 3. Claim 645 is a claim for the formula alone, not the process, and therefore the district court erred when it held the claim was patentable. The Supreme Court stated that a process may be patentable and is a mode of treatment of certain materials to produce a given result. Diamond v. Diehr, 450 U.S. 175, 183 (1981). In Diehr, the process created an end result of cured rubber. Id. Thus, there was an application of the mathematical equation into a process which resulted in more efficient solution. Id. at 188. The Court held that the claim was patentable, because it was not 10

seeking to preempt the formula bur rather sought to patent the entire process of curing rubber. Id. at 187. The district court erred when it found Claim 1 patentable. Unlike the claim in Diehr, the 645 patent lacks an end result, and therefore should be unpatentable. The pipeline leak is not fixed at the end of the claimed process, nor is the mixture created. Instead the equation gives the amount of mixture that is necessary to plug the pipeline leak, and then an email is sent to an employee who is responsible for fixing the leak. The equation is an integral part of the claim, but the claimed process does not result in an application of the equation solution. Thus, the claim should be distinguished from that in Diehr as not creating a more efficient or novel solution. Furthermore, according to Justice Stevens dissent in Diehr, the lack of uniqueness of a process can render a claim unpatentable. 450 U.S. at 207 (Stevens, P., dissenting). The 645 patent lacks uniqueness outside the mathematical chiclestarch equation. The claim fails to state how either the pipeline flow sensors and measurement techniques or the emailing of the equation solution might be unusual or novel in the food manufacturing industry. 4. The 645 patent is not patentable under Benson. The landmark case, Gottschalk v. Benson, helped determine what constitutes patentable subject matter when processes are 11

involved. 409 U.S. 63, 68-72 (1972). Benson involved a patent claim for a general formulation computer program which was used for the general mathematical problem of converting numerals. Id. at 65-66. The process claim failed to specify the type of machine to be used in the process. Id. at 65. The court rejected the patent, because the claim was too abstract. Id. at 68. The end use could vary for any type of problem and it could be performed on any existing machinery or even without machinery. Id. Therefore, the Court held that a process which used a mathematical formula only in conjunction with a computer was unpatentable, because it would essentially be a patent on the algorithm itself. 409 U.S. at 72. Furthermore, in more recent precedent, the BPAI has been unwilling to allow a general computer which runs a program to be a patentable process, because the computer adds nothing more to the process. Ex Parte Halligan, 89 U.S.P.Q.2d 1355, 1356-57 (B.P.A.I. 2008). The district court erred in failing to find the 645 patent analogous to the claim in Benson and, therefore, unpatentable. In this case, the 645 patent is similar to the claim in Benson in a number of ways. First, it seeks to patent the use of a computer to run a mathematical formula using data from pipeline flow sensors to produce a solution to the chicle-starch mixture equation. Similar to how the claim in Benson did not specify any type of machine, the 645 patent does not specify a machine 12

other than a computer and standard pipelines. The claim in Benson converted input data to output data, which is similar to how the 645 patent uses sensor input data to convert it to output mixture data, specifically a measurement for the chiclestarch mixture needed to plug the leak. There is no specific process outside the use of the mathematical formula, because the pipeline leak is not actually fixed in the process. The measurement amount is the only result, and the pipeline leak would remain without additional human interaction. Furthermore, Benson defines a process as producing a given result. Here, there is no result other than the solution to the mathematical equation. The mathematical formula does not appear to have a practical application outside of it being used on a computer. Without a computer to determine the input data, the formula cannot be correctly determined. Therefore, it appears that the 645 patent is a claim for the mathematical formula alone, which would not satisfy the requirements of 101. The 645 patent should be unpatentable, because of its similarities to the Benson claim and the fact that it would preempt a mathematical formula. The district court clearly erred in its holding allowing patentability. 5. The 645 patent is not patentable under Flook. Neither insignificant post-solution activity nor a limited field of use would transform an ineligible process claim 13

involving an algorithm into an eligible one. Parker v. Flook, 437 U.S. 584, 590 (1978). However, the use of a mathematical formula is not a per se bar to patent claims. Id. at 594. The Supreme Court stated that patent should be viewed as a whole, and the claim would be patent-ineligible if there was nothing left to constitute a patentable invention once the algorithm is assumed to be prior art. Id. at 592-94. The 645 patent attempts to gain patentability by using both corollaries which Flook rendered insufficient. According to Flook, a process involving measuring variables, calculating data and then updating an alarm was unpatentable, because the update was an insignificant post-solution activity once the algorithm was assumed to be prior art. 437 U.S. at 594-95. In this case, the claim does not even include that final step of finishing the process, and, therefore, it should be judged in the same light as the claim in Flook and rendered unpatentable. Once the algorithm is considered to be prior art, the process involves only measuring flow data and emailing an employee. Furthermore, the email should be considered an insignificant post-solution activity, because it does not fix the pipeline leak without additional human activity. In order for the pipeline leak to be plugged, the employee must create and apply the mixture. If he or she does not plug the leak, the process will not be fulfilled. Because the 645 patent has the 14

same process of measuring and calculating variables, as seen Flook, but not the final step of actually completing the process, it should be unpatentable. Furthermore, the Court in Flook held that patents which are limited to a particular field are not patentable. Here, the claim does not even attempt to limit the process to a particular field. It seeks to preempt all uses of the formula when plugging pipeline leaks. The fact that is it more beneficial to the food industry is moot, since it is not in the claim and would be insufficient anyway. The claim in Flook was unpatentable despite a limited field, and the 645 patent should be unpatentable because it is even more broadly applied. II. The Court of Appeals for the Federal Circuit should find that the district court abused its discretion in determining a lack of inequitable conduct in regards to the 645 patent. In order to succeed on a claim for inequitable conduct, as a threshold matter, the asserting party must establish both the element of materiality and the element of intent by clear and convincing evidence. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). The court will then make a determination as to whether the conduct should be considered inequitable, by balancing the level of materiality and the level of intent. Union Pac. Res. Co. v. Chesapeake Energy Corp., 236 F.3d 684, 693 (Fed. Cir. 2001). Inequitable conduct can take many forms, 15

including: affirmative misrepresentation of material fact, a failure to disclose material information, or the submission of false material information. Eisai Co. Ltd. v. Dr. Reddy s Laboratories, Ltd., 533 F.3d 1353, 1359-60 (Fed. Cir. 2008). When making this determination, a high level of one element can compensate for a lower level of satisfaction of materiality. Id. 1. The district court did not clearly err in determining the MacGalver episode was material. With respect to the materiality element, the Federal Circuit operates based on a relatively flexible standard. Digital Control v. Charles Machine Works, 437 F.3d 1309, 1315 (Fed. Cir. 2006). This flexible standard is comprised of several different analyses for determining materiality: the objective but for test, where the misrepresentation was so material that the patent should not have issued; the subjective but for test, where the misrepresentation actually caused the examiner to approve the patent application when he would not otherwise have down so; and the but it may have standard, where the misrepresentation may have influenced the patent examiner in the court of prosecution. Id. at 1315-16. Because the determination of inequitable conduct requires a balancing of materiality and intent, the stricter the analysis in determining materiality, the lower the requisite level of intent needed to find inequitable conduct. Id. at 1316. Where a trial court makes a 16

factual finding with respect to materiality, the finding will be reviewed for clear error. Novo Nordisk Pharms., Inc. v. Bio- Tech Gen. Corp., 424 F.3d 1347, 1359 (Fed. Cir. 2005). When determining materiality, it is important to consider whether an omitted reference would affect the patentability of the invention. In order for an invention to be patentable it must be novel and nonobvious. 35 U.S.C. 102-03 (2006). An invention is considered obvious where the differences between the (invention) and the prior art are such that the (invention) would have been obvious at the time the invention was made to a person having ordinary skill in the art to which the (invention) pertains. 35 U.S.C. 103 (2006). Where an invention is considered obvious under the aforementioned standard, the invention will not be considered patentable. Id. A claim is not obvious and invalid, simply because the claim combines elements that can all be found among... prior art... but must have been a motivation or a suggestion to combine the limits in a manner disclosed by the patent. Rentrop v. Spectranetics, 550 F.3d 1112, 1118 (Fed. Cir. 2008). Prior art includes prior inventions used or known by others in the United States, prior patented inventions, or prior inventions that were described in a printed publication. 35 U.S.C. 102 (2006). A. The reasonable examiner standard was correctly analyzed. 17

One analysis for determining materiality of a reference is the reasonable examiner standard. Under the reasonable examiner standard, the materiality element will be satisfied by showing a reasonable examiner would have considered such prior art important in deciding whether to allow the patent application. Dayco Prods., Inc. v. Total Containment, 329 F.3d 1358, 1363 (Fed. Cir. 2003). Because the standard only requires proof that the prior art would be considered important, the reasonable examiner standard does not require that the omission change the patentability of the application. Digital Control, 437 F.3d at 1318. If the prior art is cumulative to other information considered by the examiner, it is not material. Id. at 1319. Under this standard of materiality, the required showing of intent must be high. Id. at 1315-16. A reasonable examiner would have considered the MacGalver episode when deciding the patentability of the claim, because of its obvious similarity to the claim. The patent claim was based entirely off of the idea portrayed in the television episode, and it would be important for the examiner to consider the episode as prior art when making the determination on obviousness of the 645 patent. Additionally, Dr. Parry testified that he told people on the tours that he would not have thought of the patent if not for the episode. According to Rentrop, this type of motivation can lead to a finding of 18

obviousness. A reasonable examiner need only find the art important, which it was in this situation. Because the examiner did not have any other similar information, the episode was not cumulative in nature which would exempt it from disclosure. Furthermore, MacGalver is an extremely popular television show among engineers, so the method used in the show would have been obvious to anyone possessing ordinary skill in the art of manufacturing. The combination of factors shows that the episode was something that a reasonable examiner would find important when examining the claim for patentability. Thus, the materiality requirement for inequitable conduct is satisfied, and the court did not clearly error in its holding. B. The non-utilization of the Rule 56 standard did not constitute a clear error. Here, the court was correct in its finding that the MacGalver episode was material and did not clearly error by using the reasonable examiner standard instead of the Rule 56 standard, which is promoted by the Patent & Trademark Office ( PTO ). Case law explicitly states that the Rule 56 standard is not a replacement for the reasonable examiner standard, and merely provides an additional test which may be utilized to determine materiality. Digital Control, 437 F.3d at 1316. As a narrower and more restrictive alternative standard, Rule 56 of the Code of Federal Regulations provides that the 19

materiality element will be satisfied where the omission is not cumulative and establishes, by itself, or in combination with other information, a prima facie case of unpatentability of a claim. 37 C.F.R. 1.56(b) (2004). If a claim fails the patentability test because a piece of prior art reveals a lack of novelty, the court will consider the art material. Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 394 F.3d 1348, 1350 (Fed. Cir. 2005). In addition, where an omission would not be considered cumulative and goes against the applicant s position in arguing patentability or unpatentability to the PTO, the Rule 56 materiality standard would be satisfied. Id. The prima facie case of patentability will be determined by a preponderance of the evidence standard. Id. If this but for standard of materiality is shown, then a lesser intent is necessary to find inequitable conduct. Id. at 1316. Even though the district court did not err in applying the reasonable examiner standard, the Rule 56 standard for materiality would have been met if applied by the court, because but-for the episode s exclusion, the PTO would not have found the claim patentable. The episode rendered the concept not novel, because a very similar process was used in the MacGalver episode. Therefore, it violates 35 U.S.C. 102 (2006). According to Bruno, if a piece of prior art would render a patent not novel 102, it would be considered material. 20

Furthermore, the show was extremely popular with engineers, which lends to the conclusion that the invention would have been obvious to anyone who worked in manufacturing and watched the episode. Even Attorney Que watched the show and was familiar with the mixture being used to plug the pipeline. It is not a far extension of this idea to tie the mixture to a process which would determine the amount needed to plug pipeline leaks. Thus, the invention would be rendered unpatentable subject matter under 35 U.S.C. 102-103. It would have been imperative for the PTO examiner to consider the MacGalver episode in order determine whether the method was patentable, because the claim essentially fails to meet the requirements to be patentable. Additionally, the omission could be used to refute the applicant s position in arguing for patentability of the claim, because it could be used to show how the claim is not novel and is obvious. While the applicant may try to argue that the claim satisfies the other requirements of patentability, the episode would be imperative to the analysis of 35 U.S.C. 102-103. Thus, the district court did not clearly error when it found the episode to be material under an even less restrictive test. 2. The district court clearly erred when it failed to find intent to deceive the PTO by Dr. Parry & Mr. Que. When prosecuting a patent application, the applicant must deal with the PTO with candor, good faith, and honesty. 21

Molins, 48 F.3d at 1178. This duty to the applicant and any representative of the applicant, including an attorney of the inventor, an agent of the inventor, or any other person substantially involved in the application and prosecution of the patent, have a duty to disclose material information. Id. (citing FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 (Fed. Cir. 1987)). A factual finding regarding intent shall only be disturbed where the finding was clearly erroneous. Novo Nordisk Pharms., 424 F.3d at 1359. In order to establish the requisite level of intent, the moving party must show that both the applicant made a deliberate decision to withhold a known material reference (and)... withheld the material subject matter with the intent to deceive. Eli Lilly v. Zenith Goldline Pharma., 471 F.3d 1369, 1382 (Fed. Cir. 2006). Intent need not be shown directly, but can be inferred from surrounding circumstances. Digital Control, 437 F.3d at 1319. Intent may also be inferred if the patent applicant knew, or should have known, that withheld information would be material to the PTO's consideration of the patent application and there was no credible reason for withholding the information. Critikon, Inc. v. Becton Dickinson Vascular Access, 120 F.3d 1253, 1256 (Fed. Cir. 1997). The inference of an intent to deceive can also be based on the failure to disclose material which the examiner has no way of securing on 22

his own. Judkins v. HT Window Fashion Corp., 529 F.3d 1334, 1343 (Fed. Cir. 2008). When dealing with a prior art reference, the patentee must have actual knowledge of the prior art. Digital Control, 437 F.3d at 1317. Mere negligence, or inattention to detail, will not satisfy the intent prong. Kingsdown Med. Consultants v. Hollister Inc., 863 F.2d 867, 873 (Fed. Cir. 1988). In addition, mistakes in administrative acts will be less likely to satisfy the requisite amount of intent than mistakes in substantive acts. Id. at 875. Good faith is considered when finding intent to deceive. Id. at 876. Where the omitted reference has a high degree of materiality and there is no evidence of good faith on behalf of the applicant, the court will find the intent element satisfied. Baxter Intern., Inc. v. McGaw, Inc., 149 F.3d 1321, 1329 (Fed. Cir. 1998). In Baxter, the court rejected the assertion that disclosure of a large volume of prior art supports a finding of good faith. Id. at 1330. In rejecting the assertion, the court reasoned that failure to disclose a highly material reference makes the volume of other disclosure immaterial. Id. Furthermore, in Baxter, there was evidence of a memorandum that the applicant admitted was significantly similar to the subject patent, with only minor changes accounting for the differences. Id. Therefore, the court found the intent element met in Baxter where the applicant did not disclose a device as prior art that 23

was very similar to the patent being prosecuted, and did not establish any evidence of good faith. Id. at 1329. Failure to abide by the duty to disclose or meet the aforementioned standard of candor can result in a finding of inequitable conduct. Id. at 1178. Where the court determines inequitable conduct occurred during the prosecution of the patent, the entire patent is rendered unenforceable. Kingsdown, 863 F.2d at 877. A. Attorney Que had the requisite level of intent to deceive. The district court erred in not finding intent to deceive on the part of Attorney Que, because the circumstantial evidence regarding his behavior amounts to intent to deceive. Several factors may be considered when determining whether the circumstantial evidence points to intent to deceive the PTO by the applicant. Molins, 48 F.3d at 1181-82. For example, in Molins, the court found intent to deceive where the conduct was unlikely to be caused by negligence, because the attorney working on the application had a lot of experience in prosecuting patents, he was aware of his duty of disclosure to the PTO, he had knowledge of the omitted material reference, and failed to disclose the material reference over thirteen years spent working on applications leading to the subject patent. Id. at 1181. Furthermore, the attorney s conduct was viewed as 24

intentional, as opposed to a simple mistake, because he had disclosed the omitted material reference in several foreign patent applications for patents similar to the subject patent. Id. at 1181-82. Therefore, the circumstantial evidence can provide a strong inference of intent to deceive. Similar to the attorney in Molins, who had significant experience in prosecuting patents, was aware of his duty to disclose, had knowledge of the omitted reference, and failed to disclose it over a significant period of time, Attorney Que had similar credentials and knowledge. He was a patent attorney, knew of the duty of disclosure, knew of the MacGalver episode in question, and did not disclose the episode during years of patent prosecution. Because of similarities between Attorney Que and the attorney in Molins, the court should echo the holding in Molins and find that the district court erred in its holding that Attorney Que lacked intent to deceive and was instead subject to negligence which resulted in the failure to disclose. B. Dr. Parry lacked good faith. Dr. Parry possessed the requisite level of intent to deceive through a lack of good faith, because he readily admitted the similarity between his solution but failed to disclose the episode to the PTO. This is similar to the scenario in Baxter, were there was evidence of a memorandum where the applicant admitted the significant similarity between the 25

omitted reference and the subject patent, with only minor changes accounting for the difference between the two. Similarly, Dr. Parry admitted to tour groups and through e-mails that the starch-bubble gum composition to fix the pipes was inspired by, and similar to, the composition used to fix the pipes in the MacGalver episode, with the only difference being the formula for determining the ratio for the best flow rates. This acknowledged similarity between the MacGalver episode and the process claim shows the materiality of the episode to the development of the process claim. The Court in Molins explicitly stated that disclosing other prior art is insufficient to constitute good faith if material elements are not disclosed. Unlike the applicant in Dayco, who made a good faith determination that the undisclosed reference was not material, Dr. Parry s determination could not have been made in good faith. Dr. Parry was aware that the MacGalver episode inspired his patented process and made that fact clear to others, but did not provide the episode to the PTO so that the examiner could make the determination of whether it was important in assessing patentability. It is implausible that Dr. Parry could have believed a reasonable examiner would have considered the inspiration for his process unimportant in determining patentability. This is emphasized by the fact that Dr. Parry took no steps to determine the authenticity of the process on 26

the show. Dr. Parry blatantly disregarded the fact that he might have stolen an actual idea from the television show when he failed to disclose the episode to the PTO. Furthermore, the court in Baxter held that even if large volumes of prior art are disclosed, omitting any material prior art will constitute a lack of good faith. In our case, Dr. Parry only disclosed one other piece of prior art in regards to his patent claim. While there are policy considerations for not overwhelming examiners with information, Dr. Parry certainly did not overload the examiner by providing only one piece of prior art. Dr. Parry did not have to work with large volumes of prior art, and therefore should have disclosed both pieces of which he was aware. The court clearly erred when it found a lack of intent to deceive by Dr. Parry, because Dr. Parry failed to disclose a material element which constituted a lack of good faith on his part. C. Dr. Parry had more than knowledge & intent to withhold. Finally, the District Court made a clear error in judgment by failing to find that Dr. Parry had the intent to deceive the PTO, because the evidence points to the inference that Dr. Parry had more than knowledge and intent to withhold, but he also possessed intent to deceive. Unlike the actions of the patent claimant in Kingsdown who unknowingly filled out the claim paperwork incorrectly, Dr. Parry knowingly failed to disclose 27

the MacGalver episode. While ministerial acts are not judged as harshly as substantive ones, Dr. Parry s act was far from ministerial. It was not simply an error on a form like in Kingsdown, but instead was the nondisclosure of a popular television program which depicted an invention extremely similar to his own. Thus, the act was substantial and should be differentiated from the actions allowed in Kingsdown. Furthermore, the PTO examiner had no way of obtaining the MacGalver episode on his own since he was completely unaware that the show depicted this type of invention and would not have had access to it. The court Judkins held that this type of circumstance would allow an inference of intent to deceive. Additionally, Dr. Parry had no credible reason for withholding the episode. His only reasoning was that he did not think it would be material and it was not exactly the same as his invention. However, according to the holding in Critikon, the court may infer intent to deceive if the patent applicant should have known the information was material. Here, Dr. Parry is an educated individual who was fully aware of the similarities between his invention and the one portrayed on MacGalver. He knew that the PTO required prior art, and should have determined that it should be up to the PTO, not his own discretion, to decide whether the episode affected patentability. Therefore, he intent in not disclosing the episode was deceitful. 28

Additionally, Dr. Parry failed to explain the similarities between his invention and the MacGalver invention when Attorney Que asked him if there was any prior art disclosing either the invention or elements of the invention. This constitutes a lack of honesty on the part of Dr. Parry, which can lead the court to infer intent to deceive. Even if Dr. Parry had felt the episode was immaterial, it was a falsehood for him to tell Attorney Que there was no other prior art depicting any claim of his invention. This directly violates of the honesty required when dealing with the PTO. The district court clearly erred regarding intent to deceive by Dr. Parry and Attorney Que. 3. The district court abused its discretion in balancing the levels of intent and materiality. With respect to the ultimate determination of inequitable conduct, the District Court found inequitable conduct was not present in the prosecution of the 645 patent. That determination should only be disturbed upon a finding of abuse of discretion. Amhil Enters. Ltd. v. Wawa, Inc., 81 F.3d 1554, 1562 (Fed. Cir. 1996) (quoting U.S. v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). Abuse of discretion may only be found where a court relies on clearly erroneous findings of fact or misapplication or misinterpretation of the law or where a court makes a clear error of judgment. Novo Nordisk Pharms., 424 29

F.3d at 1359 (quoting Elk Corp. of Dallas v. GAF Bldg. Materials Corp., 168 F.3d 28, 30 (Fed. Cir. 1999)). With respect to the determination of inequitable conduct, there was an abuse of discretion by the district court because it clearly erred finding there was no intent to deceive on the part of Dr. Parry and Attorney Que. The test for inequitable conduct requires balancing materiality and intent, and the district court erred in finding there was not sufficient intent to be used with the high level of materiality. Therefore, the district court abused its discretion in its determination that there was no inequitable conduct on the part of Bonka. CONCLUSION For the foregoing reasons, Hershley Flow Controllers respectfully asks this Court to hold that Claim 1 is unpatentable subject matter. This Court should reverse the district court s decision holding that the 645 was not procured through inequitable conduct. 2011. RESPECTFULLY SUBMITTED at Takoma this 27 day of January, Law Offices of Helseth & Middleton Attorneys for the Appellee By Jennifer C. Middleton Steve Helseth TK Bar No. 9181980 30

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