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Withheld offer for sale renders patents unenforceable for inequitable conduct

Withheld offer for sale renders patents unenforceable for inequitable conduct

GS CleanTech v. Adkins Energy was decided on March 2, 2020 on appeal from the Northern District of Illinois. The Patents-in-Suit are “directed to the recovery of oil from a dry mill ethanol plant’s byproduct, called thin stillage.” The district court determined on summary judgment that defendant Adkins did not infringe plaintiff CleanTech’s asserted claims and that certain claims were invalid because of the on-sale bar, obviousness, incorrect inventorship, inadequate written description, lack of enablement, and indefiniteness. Following summary judgment, the district court held an inequitable conduct bench trial. The court held the patent unenforceable due to inequitable conduct, finding that the inventors “offer[ed] their invention for sale … in July/August 2003, and later, they took affirmative steps to hide that fact from their lawyers, then, later from the USPTO when they learned that it would prevent them from profiting from the Patents-in-Suit.” CleanTeck appealed.

The Federal Circuit affirmed the finding of inequitable conduct.

In February 2004, the inventors contacted an attorney about preparing a patent application for their invention. The attorney “informed the Inventors about the on-sale bar of 35 U.S.C. § 102 (2000), which required that the claimed invention not be sold or offered for sale more than one year before the application filing date, and inquired if such an offer had been made.” The inventors provided the attorney with test results from June and July 2003. There was a July 2003 proposal to a third party Agri-Energy offering a “no-risk trial” of the system for sixty days, after which Agri-Energy “could purchase the system for $423,000.” A diagram of the system was prepared shortly thereafter. The attorney, “apparently without being told about the July 2003 Proposal or the [system diagram], filed… [a] U.S. Provisional Patent Application… setting the critical date for the on-sale bar at August 17, 2003.” In March 2008, the prosecution of the patent applications were transferred to another law firm.

“To prevail on a claim of inequitable conduct in a patent case, the accused infringer must prove by clear and convincing evidence that the patentee: (1) knew of the reference or prior commercial sale; (2) knew that it was material; and (3) made a deliberate decision to withhold it.” “The inequitable conduct claim here relates to whether the patentee failed to disclose information that would have implicated the on-sale bar under 35 U.S.C. § 102(b). A patent is invalid under the on-sale bar if, before the critical date, the invention was: (1) the subject of a commercial sale or offer for sale; and (2) ready for patenting.”

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“The District Court did not abuse its discretion in determining that the claimed invention was the subject of an offer for sale in [July] of 2003,” before the critical date of August 2003. The district court relied on the UCC to conclude that the July 2003 proposal was a “sale on approval.”

“The District Court did not abuse its discretion in determining the claimed invention was ready for patenting in June or July 2003.” The district court relied on tests performed in June and July of 2003 to support its determination. “Indeed, the Inventors themselves made statements contemporaneous to the June and July 2003 testing that the claimed invention was reduced to practice.”

“The district court did not abuse its discretion in concluding that [Plaintiff] and its lawyers made a deliberate decision to withhold material information with specific intent to deceive the USPTO.” “First, the District Court concluded that CleanTech knew the July 2003 Proposal to Agri-Energy threatened its chances of patenting its [invention].” “Second, the District Court found that the Inventors and [its attorneys] withheld evidence of successful testing in 2003 and made false representations by implying that the invention was not reduced to practice until 2004.” “Third, the District Court determined that CleanTech and [its attorneys] threatened Agri-Energy to coerce its support regarding the critical date for the Patents-in-Suit, after the July 2003 Proposal surfaced and during the pendency of [certain] patents.” “Fourth, the District Court concluded that the Inventors and [its attorneys] made a patently false statement in [a declaration], by claiming the July 2003 Proposal was delivered to Agri-Energy after the critical date.” “Fifth, the District Court explained that the Inventors’ and [its attorneys’] failure to correct the false declaration … was strong evidence of intentional deceit.” The Federal Circuit thus affirmed the finding of inequitable conduct.