Golden Hour Data Systems v. emsCharts, Inc.

Federal Circuit Vacates and Remands Inequitable Conduct Determination for Further Factual Findings, and Affirms JMOL of No Joint Infringement

09-1306

August 09, 2010

Decision

Last Month at The Federal Circuit - September 2010

Judges: Newman (dissenting), Friedman, Dyk (author)

[Appealed from: E.D. Tex., Judge Ward]

In Golden Hour Data Systems, Inc. v. emsCharts, Inc., Nos. 09-1306, -1396 (Fed. Cir. Aug. 9, 2010), the Federal Circuit vacated the district court’s finding of inequitable conduct, remanding the issue for further factual findings regarding intent to deceive, and affirmed the district court’s grant of JMOL that the defendants did not jointly infringe.

Golden Hour Data Systems, Inc. (“Golden Hour”) obtained U.S. Patent No. 6,117,073 (“the ’073 patent”), which is directed to computerized, integrated information management services in connection with emergency medical transport. When Golden Hour initially filed its patent application, its chief executive and one of the named inventors, Dr. Kevin Hutton, believed that a system called the “AeroMed system” was the most similar to his invention. Golden Hour mentioned the AeroMed system in the body of its ’073 patent specification, but distinguished it as lacking integration with clinical, billing, and administrative systems. Several months after filing the application, Golden Hour filed an IDS further describing the AeroMed system. The description in the IDS was nearly identical to the description on the cover of an undated AeroMed brochure. Another page inside this brochure disclosed that the AeroMed system included billing integration. Dr. Hutton claimed he received the brochure about three weeks after the ’073 patent application was filed. Golden Hour’s IDS did not cite the brochure itself nor did it mention the AeroMed system’s inclusion of billing integration. The PTO allowed Golden Hour’s claims after Golden Hour distinguished other prior art of record as lacking billing integration.

emsCharts, Inc. (“emsCharts”) produces web-based medical charting software, and Softtech, LLC (“Softtech”) produces computer-aided flight dispatch software. The two companies entered into a strategic partnership, collaborating to sell their software as a unit. Golden Hour sued both emsCharts and Softtech for patent infringement, asserting certain claims against both defendants as joint infringers. At trial, the jury found that emsCharts and Softtech infringed the asserted ’073 patent. The district court then granted JMOL of no joint infringement for the claims asserted against the defendants jointly. Further, after a bench trial, the district court found the ’073 patent unenforceable due to inequitable conduct due to Golden Hour’s failure to disclose either the AeroMed brochure itself or the information it contained about billing integration.

On appeal, the Federal Circuit first considered the issue of inequitable conduct, which requires a showing of both materiality and intent to deceive. With regard to the materiality prong, Golden Hour argued that because the AeroMed brochure was undated, it could not be material to patentability. The Federal Circuit disagreed for several reasons, finding the nondisclosed information in the brochure to be highly material. First, the Court noted that the brochure may have been prior art based on the evidence of record, including testimony from the brochure’s author about its publication date. Given that Golden Hour’s ’073 patent specification discloses the AeroMed system, the Court found that a reasonable examiner probably would have wanted to know more about it. Second, the Court concluded that the brochure was material because it contradicted Golden Hour’s representation to the PTO that the AeroMed system did not provide integrated billing. Finally, the Court noted that, because the brochure disclosed integrated billing, a feature central to obtaining allowance of many of the claims, the brochure would have been material because it would have raised potential on-sale bar issues, even if the brochure itself was not prior art.

Regarding the intent prong, the Federal Circuit found that the district court inferred intent without making a critical factual determination. The Court stated that there were two possible reasons for the failure to disclose the integrated billing described in the AeroMed brochure: (1) Dr. Hutton and Golden Hour’s prosecution counsel, Mr. Michael Fuller, did not read the entire brochure, giving rise to a finding of gross negligence at most; or (2) at least one of Dr. Hutton or Mr. Fuller read the brochure in full but chose not to disclose the billing integration feature to the PTO, giving rise to an inference of an intent to deceive. Thus, the Court found it essential that the district court provide detailed factual findings with respect to whether Dr. Hutton or Mr. Fuller read the entire brochure, deliberately withheld material information, or deliberately avoided reading the entire brochure to avoid learning damaging information.

Golden Hour argued against remand because the record did not include evidence to support a finding of intent. The Court disagreed, pointing to four specific facts that could support a finding that Dr. Hutton or Mr. Fuller read the entire brochure and withheld material information from the PTO. First, Dr. Hutton regarded AeroMed as his primary and only competitor, making it likely that he would have been interested in a brochure describing the AeroMed system. Second, the description in Golden Hour’s specification about the AeroMed system was provided to Mr. Fuller by Dr. Hutton, who only knew of AeroMed by word-of-mouth rather than any documentation. Because they had received only imprecise hearsay about AeroMed, Dr. Hutton and/or Mr. Fuller may have had reason to review the brochure. Third, the fact that Golden Hour submitted an IDS based on the brochure after receiving it suggests that either Mr. Fuller or Dr. Hutton would have been interested in reading the brochure. Fourth, patent practitioners would most likely not make representations about the brochure in an IDS without reading the entire brochure, and would most likely want to review the brochure to determine its prior art status.

The Court concluded that no finding of deceptive intent was compelled, explaining that it was not the Federal Circuit’s role to make factual findings. Thus, the Court remanded to the district court for more detailed factual findings, including whether Dr. Hutton or Mr. Fuller in fact read the brochure and chose to withhold damaging information from the PTO.

Turning to joint infringement, the Federal Circuit considered the method claims separately from the system claims. For the method claims, the Court explained that “[w]here the combined actions of multiple parties are alleged to infringe process claims, the patent holder must prove that one party exercised ‘control or direction’ over the entire process such that all steps of the process can be attributed to the controlling party, i.e., the ‘mastermind.’” Slip op. at 27 (quoting Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008)). Without much discussion, the Court agreed with the district court that the strategic partnership between emsCharts and Softtech was not sufficient for a jury to infer that one company controlled or directed the other. As a result, there could be no joint infringement.

As for the system claims, Golden Hour had argued that emsCharts sold the products of both defendants together in one package and that this package infringed. The Court noted that this kind of sale may constitute direct infringement by emsCharts, but, because the jury only received instructions on joint infringement for the system claims in question, the Court must apply the “control or direction” test. Thus, as with the method claims, the fact that emsCharts did not control or direct Softtech compelled affirmance of the JMOL of no joint infringement.

In a dissenting opinion, Judge Newman questioned the materiality of the undated AeroMed brochure, emphasizing that the jury considered the brochure but did not find any claims invalid. Judge Newman also would not have remanded for further factual findings related to intent to deceive the PTO because she believed the accused infringers already had a chance, but failed, to establish intent. Alternatively, Judge Newman suggested staying the proceedings pending the Federal Circuit’s en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., Nos. 08-1511, -1512, -1513, -1514, -1595, which may change the way courts adjudicate inequitable conduct claims. Finally, Judge Newman expressed concern that the separate corporate status of emsCharts and Softtech was all that saved them from the jury’s finding of infringement. In Judge Newman’s view, a reasonable jury could have found that the collaborative activity infringed the asserted claims and the majority erred in discarding the jury’s verdict on the ground that infringement cannot be found as a matter of law.

Summary authored by John S. Sieman, Esq.