Judge Ward Finds No Inequitable Conduct in Reexamination

Scott Daniels | July 9, 2010

A third party that is adverse to claims pending in an application or reexamination proceeding may possess strong prior art against those claims, but feel that it does not have an effective way of presenting that art to the examiner.  In such a case, the third party sometimes adopts the strategy of sending the prior art to the attorneys for the applicant or patentee.  The applicant or patentee is then in the predicament of either disclosing the art to the examiner, or withholding the art and thereby risking an allegation of inequitable conduct.  This strategy failed earlier this week in Fiber Systems Int’l, Inc. v. Applied Optical Sys., Inc., 2010 U.S. Dist. LEXIS 67331 (E.D. Tex. July 7, 2010).

Fiber Systems sued Applied Optical for patent infringement in November 2006.  Applied Optical defended, inter alia, by filing a reexamination request based on two prior art references.  During the pendency of that reexamination proceeding, a third party competitor sent Fiber Systems a letter identifying seven additional prior art references and stating that they were material to the patentability of the claims under reexamination.  The examiner subsequently rejected the claims on the basis of the two references cited in Applied’s reexamination request, but later withdrew the rejection after Fiber’s amendment of the claims and an interview with lawyers and other representatives for Fiber Systems.  A reexamination certificate issued in March 2009, stating that the amended claims were patentable.

The patentee, however, never disclosed to the reexamination examiner the seven prior art references mentioned in the letter from the third party competitor.

In a bench trial before Judge John Ward this past April, Applied Optical asserted that the patent was unenforceable because Fiber Systems had committed certain acts of inequitable conduct, including its failure to disclose during the reexamination the seven references.  Applied Optical argued that two of the seven references disclosed the specific claim limitation relied upon by the patentee and accepted by the examiner as establishing the patentability of the claims.  Accordingly, Fiber Systems should have disclosed them to the examiner.

Judge Ward has now ruled that Applied Optical failed to establish inequitable conduct by clear and convincing evidence.  He found that there was no evidence that Fiber Systems’ representatives involved in the prosecution were aware of the references identified in the letter from the third party competitor, or that the lawyers prosecuting the reexamination intended to deceive the PTO.  Judge Ward also found that there was no clear and convincing evidence that the references were material, in part because Fiber Systems had failed to present expert testimony explaining the disclosure of the references.

It is unclear from Judge Ward’s opinion precisely what was said in the third party competitor’s letter and to whom it was sent.  Also, the underlying submissions of proof by the parties are under seal.  Still, we can speculate that Applied Optical’s case might have been stronger if it had sent the letter to each of Fiber Systems’ reexamination lawyers and if the letter had explained in detail – perhaps through an expert statement – the materiality of the enclosed references.  Of course, if the third party competitor truly believed that its prior art was strong, it might have filed its own reexamination request.

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