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Patent Owner Must Pay Accused Infringer’s $14 Million Attorney Fees and Costs

Tuesday, July 24, 2018   (0 Comments)
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Patent Owner Must Pay Accused Infringer's $14 Million Attorney Fees and Costs Because of Prosecution and Litigation Misconduct

By John Paul, Brian Kacedon, and Regan Rundio

Abstract: A New Jersey court ordered a patent owner to pay $14 million to a company it sued for patent infringement to reimburse that company for its attorney fees and costs in the litigation filed by the patent owner.  The court based its order on the patent owner's misconduct before the Patent and Trademark Office and the patent owner's baseless positions during the litigation.

Courts may award attorney fees and costs to a prevailing party in patent infringement suits deemed to be "exceptional." To determine if a case is exceptional, courts extensively analyze the facts and consider the totality of the circumstances. Circumstances that commonly contribute to finding a case exceptional include advancing frivolous or baseless claims, inequitable conduct during either litigation or prosecution before the patent office, and other conduct suggesting bad faith.

The New Jersey court recently granted a defendant in a patent infringement case $14 million in attorney fees and costs due to the exceptional nature of a decade-long infringement litigation advanced by Howmedica Osteonics.

Background
In 2005, Howmedica sued Zimmer for infringing four patents covering methods for improving the longevity of polymer-based medical implants. Over eleven years of litigation, federal courts invalidated each of Howmedica's asserted patents. After the Federal Circuit struck down the last patent in 2016, Zimmer moved for an award of attorney fees and costs.

The Howmedica Decision
The New Jersey court found the case exceptional and awarded Zimmer its attorney's fees and costs based on Howmedica's conduct before the United States Patent and Trademark Office and a baseless litigation position taken by Howmedica. In finding the case exceptional and warranting payment of attorney fees, the court relied on several factors: (1) bad faith in selectively disclosing data and evading the patent examiner's concerns, (2) misrepresenting a witness as being independent of the patent owner, (3) presenting testimony discrediting their own prior contrary positions, (4) presenting testimony that was facially contradictory, (5) taking unreasonable patent claim constructions and (6) shifting patent claim constructions during litigation.

Bad Faith: Selectively Disclosing Data and Evading Examiner Concerns
To overcome a prior art obviousness rejection presented during prosecution leading to the asserted patents, Stryker Technologies (Howmedica's parent corporation and owner of the patent applications during prosecution) submitted a declaration by Dr. Aiguo Wang asserting that the claimed medical implant invention supplied unexpectedly improved wear characteristics.

The examiner maintained his rejection, unconvinced that the comparative data submitted by Dr. Wang represented a statistically significant degree of improvement.  
Instead of addressing the examiner's concerns about the claimed method's alleged degree of improvement, Dr. Wang, in a second declaration, maligned the wear characteristics of the asserted prior art.  Based on these representations, the examiner granted the patent.

Zimmer eventually discovered that Dr. Wang selectively disclosed his comparative testing data to the USPTO, omitting data supporting the examiner's obviousness rejection and data undermining the degree of improvement asserted by Dr. Wang to overcome the obviousness rejection.  In the Court's opinion, Dr. Wang's actions were "disingenuous" and "likely a violation of [applicant's] broad disclosure requirements before the [USPTO]."  Moreover, it described Dr. Wang's evasion of the examiner's concerns about the statistical significance of the purported wear-improvement as indicative of an "intent to deceive the [USPTO]."  According to the court, however, neither action amounted to inequitable conduct because Zimmer could not prove that the patents would not have issued but for the withheld data.  But, taken as a whole, Dr. Wang's actions suggested that Howmedica's predecessor in interest prosecuted before the USPTO in "bad faith."  

Mischaracterizing Declarant's Relationship to Applicant
Though Dr. Wang's declarations recorded that he was an employee of Howmedica, he was, in fact, employed by the owner of the patent applications, Stryker Technologies.  Because Stryker had only recently purchased Howmedica, USPTO examiners would not have been aware of the relationship between Stryker and Howmedica. By indicating that the declarant worked at Howmedica, the applicant misrepresented Dr. Wang as an independent expert. Though a declarant's failure to disclose his or her relationship with applicant is a common basis for a finding of inequitable conduct, the Court eschewed an inequitable-conduct analysis, satisfied that Dr. Wang's misrepresentation indicated exceptionality.

Inequitable Conduct: Affiant's Statements Contradicting His Prior Publications
In response to an obviousness rejection of a claimed solubility range based on inherency, the applicant again submitted a declaration from Dr. Wang. Dr. Wang asserted that the reference method was comparable to a conventional method that produced solubility values outside of the claimed range. Based on this assertion, the examiner allowed the claimed invention. Years earlier, however, Dr. Wang published data contradicting his declaration. Despite Dr. Wang's assertions that he "did not recall" the previously-published data, the Court found that the "single most reasonable inference" was that Dr. Wang intended to deceive the USPTO. Moreover, because the USPTO ultimately relied on these previously-published references to reject the patent during reexamination, the Court found that Dr. Wang's failure to disclose them was material to patentability. Thereby, the Therasense standard of inequitable conduct was satisfied.

Howmedica's Statements Discrediting Its Own Prior Publications Used as References During Reexam
In 2009, during a reexamination of one of the four asserted patents, Howmedica produced a declaration from a Howmedica employee, Dr. Streicher. The declaration discredited a publication—asserted to reject the claimed invention—that he had authored. This previous publication taught a method for reducing oxidation by 40%. In his declaration, Dr. Streicher asserted that one of ordinary skill would not have been motivated to use his previously-disclosed method because a 40% reduction in oxidation was "negligible." According to the court, this facial contradiction was "an unreasonable position" that also supported a finding of an exceptional case.

The final factor contributing to the court's finding of exceptionality concerned Howmedica's shifting claim construction. During prosecution and early in litigation, Howmedica (and its predecessor in interest, Stryker) adopted a first construction of a claimed limitation. One year into litigation, however, Howmedica adopted a second construction to distinguish its claims from a newly-found reference. In doing so, Howmedica demonstrated to the Court that it recognized the reference as fatal to its patent. Howmedica's persistence in claiming infringement in the face of an invalidating reference amounted to what the Court considered litigation misconduct. That Howmedica's position was "baseless" and "objectively unreasonable" was emphasized by the fact that their second construction was equally invalid for being incurably indefinite.

Strategy and Conclusion
Inequitable conduct and other misconduct, like omitting relevant test data and failing to fully disclose a declarant's relationship to the application, may support a finding of exceptional behavior in infringement litigation, warranting an award of attorney's fees and costs.

Further Information
The Howmedica decision can be found here.

Editors and Authors
The editors and authors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, LLP.
John Paul                        john.paul@finnegan.com
Brian Kacedon               brian.kacedon@finnegan.com
Cecilia Sanabria             cecilia.sanabria@finnegan.com
Robert MacKichan         robert.mackichan@finnegan.com

This article is for informational purposes and does not constitute legal advice.
The views expressed do not necessarily reflect the views of LES or Finnegan.


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