Opinion
Civil Action No. 3:02-CV-0602-K.
March 9, 2005
ORDER
Came on for Consideration, Lutron Electronics Co., Inc.'s ("Lutron") Motion for an Exceptional Case Finding and for Attorney's Fees, Motion for Judgment on Partial Findings — Inequitable Conduct, and Motion for Judgment on Partial Findings — Laches. Because Lutron has not proven by clear and convincing evidence that Genlyte engaged in inequitable conduct in procuring the patent or that Genlyte engaged in bad faith litigation, Lutron's Motion for an Exceptional Case Finding and for Attorney's Fees is DENIED.
I. Background
Genlyte sued Lutron alleging willful infringement of U.S. Patent No. 4,792,731 the ("`731 patent"). After a three-week trial, the jury returned a verdict of non-infringement and invalidated claims 1, 8, 14 and 15 of the '731 patent. Pursuant to the Court's Scheduling Order, Lutron's laches and inequitable conduct defenses were to be tried during the third phase of the trial. Because Lutron prevailed on the first phase of the trial, the liability phase, phase two (damages), and phase three (equitable issues — including laches and inequitable conduct) were not held.
Lutron then filed motions for an Exceptional Case Finding, for Judgment on Partial Findings — Inequitable Conduct, and for Judgment on Partial Findings — Laches in order to recover attorney's fees under 35 U.S.C. § 285. As a practical matter, the question to be decided by this Court is whether inequitable conduct by Genlyte, Laches or Lutron's other arguments in support of an exceptional case finding, are a basis for awarding attorney's fees under 35 U.S.C. § 285.
II. Exceptional Case Finding Legal Standard
Attorney's fees may be awarded in exceptional patent infringement cases. See 35 U.S.C. § 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party."). The prevailing party may prove the existence of an exceptional case by showing: "inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement." Epcon Gas Sys., Inc. v. Bauer Compressors, Inc., 279 F.3d 1022, 1034 (Fed. Cir. 2002) (citing Hoffman-La Roche, Inc. v. Invamed, Inc., 213 F.3d 1359, 1365 (Fed. Cir. 2000)). The Federal Circuit Court has upheld findings of exceptionality in cases where the patentee has procured the patent in bad faith or litigated its claim of infringement in bad faith. See Forest Laboratories, Inc. v. Abbott Laboratories, 339 F.3d 1324, 1329 (Fed. Cir. 2003); Cambridge Prods., Ltd. v. Penn Nutrients, Inc., 962 F.2d 1048, 1050-51 (Fed. Cir. 1992). The application of 35 U.S.C. § 285 involves a two-step analysis of first determining whether Lutron proved by clear and convincing evidence that the case is exceptional and then determining whether an award of attorney's fees is appropriate. Stephens v. Tech Intern, Inc., 393 F.3d 1269, 1273 (Fed. Cir. 2004).
A. Inequitable Conduct
1. Background
On March 16, 1987, Gordon Pearlman and Steve Carlson ("the Applicants") filed a patent application that ultimately resulted in the issuance of U.S. Patent 4,792,731 (the "731 patent"). Lutron alleges that the Applicants failed to disclose three material prior art references: 1) Kliegl Ambiance ("Ambiance"), 2) original Lytemode Generation I ("original Lytemode") and 3) the 198 Scenist ("Scenist") (cumulatively the "undisclosed references"). A prior art reference is material "if there is a substantial likelihood that a reasonable examiner would have considered the information important in deciding whether to allow the application to issue as a patent." Molins, 48 F.3d at 1179 (applying this Rule 56 definition to cases involving patents prosecuted under the pre-1992 version of the rule).
2. Legal Standard
Patent applicants owe a duty of candor, good faith and honesty to the United States Patent and Trademark Office ("PTO"). Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty may constitute inequitable conduct which can arise from a failure to disclose information material to patentability, coupled with an intent to deceive or mislead the PTO. See Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs, Ltd., 394 F.3d 1348, 1351 (Fed. Cir. 2005) (citing Molins 48 F.3d at 1178 (Fed. Cir. 1995)). Inequitable conduct includes affirmative misrepresentations of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive. Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer Inc., 326 F.3d 1226, 1233 (Fed. Cir. 2003). Proof of inequitable conduct based on a failure to disclose material prior art requires clear and convincing evidence of: (1) prior art that is material; (2) knowledge chargeable to Applicants of prior art and its materiality; and (3) Applicants' failure to disclose the prior art to the PTO resulting from an intent to mislead the PTO. Elk Corp. of Dallas v. GAF Bldg. Materials Corp., 168 F.3d 28, 30 (Fed. Cir. 1999). The party alleging inequitable conduct must put forth clear and convincing evidence as to the materiality of the misrepresentation or omission, as well as an intent to mislead the Patent Office. Molins, 48 F.3d at 1178. However, the more material the omission, the less culpable the intent required, and vice versa. Baxter Int'l, Inc. v. McGaw, Inc., 149 F.3d 1321, 1327 (Fed. Cir. 1998).
The question of whether inequitable conduct has been committed is an equitable issue to be decided by the trial court. See Duro-Last, Inc. v. Custom Seal, Inc., 321 F.3d 1098, 1110 (Fed. Cir. 2003). Once both materiality and intent are shown by clear and convincing evidence, the court must weigh them to determine whether the equities warrant a conclusion that inequitable conduct occurred. See Ulead Systems, Inc. v. Lex Computer Mgmt. Corp., 351 F.3d 1139, 1144 (Fed. Cir. 2003).
3. Material Misrepresentation
Lutron argues that by failing to disclose their own prior art and by misrepresenting the state of the prior art, the applicants intentionally mislead the PTO examiner about both the state of the art at the time and the patentability of the claims of the '731 patent. Lutron states that despite the fact that the Applicants emphasized the advantages of the '731 patent's operation in the "mimic" mode to the PTO examiner, the Applicants never disclosed the fact that they helped develop three earlier lighting control systems, the undisclosed references, which were each capable of operating in the mimic mode. The mimic mode operates whereby all the lighting controls remain alive and any one of the controls in the group can control all of the associated lights.
Genlyte argues that the Applicants' failure to disclose the undisclosed references was excusable because the references were merely cumulative. A reference is cumulative "if the reference teaches no more that what a reasonable examiner would consider to be taught by the prior art already before the PTO." Regents of the Univ. of Cal. v. Eli Lilly Co., 119 F.3d 1559, 1575 (Fed. Cir. 1997). Lutron counters that the undisclosed references each taught more that what a reasonable examiner would consider to be taught by the prior art already before the PTO.
The Court does not reach the issue of whether Genlyte's failure to disclose the undisclosed references was material because the Court finds below that Lutron has not proven by clear and convincing evidence that Genlyte had the requisite intent to deceive or mislead the PTO.
4. Intent to Mislead
Lutron argues that an inference of intent to deceive is proper because the applicants failed to disclose prior art that directly contradicted their patentability arguments. Genlyte states that the Applicants did not believe Ambiance, original Lytemode or Scenist to be material to the prosecution of the '731 patent. The Applicants testified at trial and in their depositions that when they were prosecuting the '731 patent, they understood and believed the mimic mode and function of the '731 patent to involve mimicking of raise/lower commands, not the mimicking of other information such as status information as with Ambiance, or scene select information as with original Lytemode and Scenist. This evidences good faith on their part. The Court recognizes that the intent element need not, and rarely can, be proven by direct evidence, see Elk Corp., 168 F.3d at 32, and that a mere denial of intent to mislead will not suffice to establish an intent to deceive. GFI, Inc., 265 F.3d 1268, 1275 (Fed. Cir. 2001). However, the Applicants have given plausible reasons for withholding the references and "intent to deceive cannot be inferred simply from the decision to withhold the reference where the reasons given for the withholding are plausible." Dayco Prod., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1367 (Fed. Cir. 2003); see also Speedplay, Inc. v. BeBop, Inc., 211 F.3d 1245, 1259 (Fed. Cir. 2000) (upholding trial court's finding of lack of intent where trial judge credited patentees' testimony regarding their opinions of prior art). For these reasons, the Court finds that Lutron has not proven by clear and convincing evidence that the Applicants intended to deceive the U.S. PTO in connection with the prosecution of the '731 patent. Therefore, the Court concludes that Genlyte did not engage in inequitable conduct in the prosecution of the '731 patent application.
B. Laches and Bad-Faith Litigation
Lutron filed a Motion for Judgment on Partial Findings — Laches. Laches arises when a patent owner unreasonably delays filing suit for infringement and the delay causes material prejudice to the alleged infringer. See, e.g., A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1028 (Fed. Cir. 1992). Pursuant to the Court's Scheduling Order, Lutron's laches defense was to be tried during the third phase of the trial. Because Lutron prevailed on the first phase of the trial, the liability phase, phase two (damages), and phase three (equitable issues, including laches) were not held.
Lutron originally moved for a finding on its laches defense to bar recovery of damages by Genlyte. Because Lutron prevailed at the liability phase of the trial, laches is currently irrelevant to the issue of damages, but laches is a factor to be considered in determining an exceptional case finding.
Laches, however, is only one factor to be considered in whether the case was exceptional. In support of its Motion for an Exceptional Case Finding, Lutron puts forth several additional arguments for why this is an exceptional case. Lutron argues that Genlyte's unreasonable delay in bringing the lawsuit, Genlyte's fabricated and mutating litigation theories, Genlyte's claim of willful infringement, Genlyte's destruction and concealment of evidence, Genlyte's creation of unnecessary and burdensome fees and expenses for Lutron in defending the action, Genlyte's bad motive, and Genlyte's litigation misconduct make this an exceptional case.
The Court assumes, without deciding, that even if laches applied, considering the totality of the circumstances, Lutron did not meet its burden of showing by clear and convincing evidence that this case is exceptional. Although Lutron is the prevailing party, the fact that the Court denied Lutron's Motion for Summary Judgment and all five of Lutron's Motions for Judgment as a Matter of Law demonstrates that Genlyte's suit was not frivolous. Therefore, the facts of this case do not support a factual finding of exceptionality.
IV. Conclusion
Because Lutron has not proven by clear and convincing evidence that Genlyte engaged in inequitable conduct in procuring the patent or that Genlyte engaged in bad faith litigation, Lutron's Motion for an Exceptional Case Finding is DENIED.
In the alternative, even if Genlyte had engaged in inequitable conduct and this case was extraordinary, given the closeness of the case and the absence of any bad-faith litigation tactics, the Court would in its discretion still decline to award attorney's fees. See Modine Mfg. Co. v. Allen Group, Inc., 917 F.2d 538, 543 (Fed. Cir. 1990) (holding that after the court makes an exceptionality determination, it retains broad discretion to award or decline to award attorney's fees and to determine the extent of an award); see also Nat'l Presto Indus., Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed. Cir. 1996) (holding that the award of attorney's fees is not automatic even in exceptional cases).