IP News

The district court found the two patents to be unenforceable based upon two documents withheld during prosecution showing that IMC 129 had oxidative stability properties similar to, and in one case, even overlapping the claimed range. The district court found the documents to be highly material because the oxidative stability of IMC 129 was a critical issue during prosecution. Further, the district court inferred intent based upon three circumstantial factors: the repeated nature of the omission, the applicant's motive to conceal, and the high materiality of the undisclosed information.

Despite the lack of direct evidence of intent to mislead, the Federal Circuit affirmed the district court's ruling. With regard to the first factors, the court opined that '[a]n applicant should know information is material when the examiner repeatedly raises an issue to which the information relates.' As for the district court's consideration of the motive to conceal (namely, the desire to obtain a patent), the Federal Circuit found this consideration to be appropriate given that it was one of three factors considered. Finally, the Cargill court found no error in the district court's consideration of the 'high degree of materiality' because it was part of the district court's 'assessment of all the evidence.' The court noted that it has never been held that materiality is irrelevant to the question of intent.

As for Cargill's assertion that a finding of intent to mislead was inconsistent with the district court's suggestion that the applicant had subjective good faith, the Federal Circuit held that '[w]hen an applicant knows or obviously should know that information would be material to the examiner ' but the applicant decides to withhold that information, 'good faith' does not negate an intent to manipulate the evidence.' Finally, the Cargill court found no error in the district court's balancing of materiality and intent given the high materiality of the undisclosed information and the strong circumstantial evidence of an intent to mislead.

Supreme Court Hears Oral Arguments in Microsoft v. AT&T

On Feb. 21, 2007, the Supreme Court heard oral argument in the case of Microsoft v. AT&T, No. 05-1056. Microsoft appealed a Federal Circuit ruling that it was liable for infringement under 35 U.S.C. '271(f) based upon its exportation overseas of a master version of Windows software, which was copied by authorized foreign 'replicators' and installed on foreign-assembled computers. The software incorporated certain speech codecs, which, when installed on a computer, were alleged to infringe AT&T's patent. The Federal Circuit had held that: 1) software may be a 'component' of a patented invention under '271(f), and 2) software replicated abroad from a master version exported from the United States ' with the intent that it be replicated ' may be deemed 'supplied' from the United States for the purposes of '271(f). The questions presented for the Supreme Court's review were:

1) Whether digital software code ' an intangible sequence of '1's' and '0's' ' may be considered a 'component[ ] of a patented invention' within the meaning of '271(f); and, if so,

2) Whether copies of such a 'component[ ]' made in a foreign country are 'supplie[d] ' from the United States.'

During oral argument, Microsoft was pressed on whether the master version of the disk would be a component. In response, Microsoft admitted that if the physical master disk were placed into the computer, then it would be a component. However, it argued that it was only the object code (which was the physical manifestation on the computer) that would be the component. The source code, Microsoft argued, was not a physical object and thus could not be a component. Microsoft further stated that in any event, the master disk was not installed on a computer ' that only copies were installed.

The United States argued next as amicus supporting Microsoft. First, the United States argued that a distinction needed to be made as far as copying in the United States and copying abroad. As for the latter, the United States argued that foreign governments need to be able to establish their own rules of competition. Second, the United States took the view that the component is the physical copy of the software that is inserted into the computer. In doing so, the United States provided an interesting analogy to a lock and key. It stated that any key could be described in terms of an abstract design ' namely, assigning numbers to describe the depth of the ridge. But the abstract design (analogous to the source code) would not be a component. Only the physical manifestation (the actual physical key) could be a component.

AT&T took the position that the object code itself was the component. However, AT&T had a difficult time distinguishing the object code from a mere transmission of information (i.e., if someone orally recited the source code over the phone). AT&T argued that the information transmitted over the phone could not be a component because it would not be in computer language (i.e., strings of 1s and 0s).

In general, the court seemed skeptical of AT&T's position and had difficulty understanding how the source code itself could be a component when it was analogous to a mere transmission of information or a blueprint.

Circumstantial Evidence of Intent to Mislead
PTO Sufficient to Uphold Finding Of Unenforceability

In Cargill, Inc. v. Canbra Foods, Ltd., No. 06-1265 (Fed. Cir. 2007), the Federal Circuit ruled that the district court did not abuse its discretion in finding that two of Cargill's asserted patents were unenforceable as a result of inequitable conduct even though there was no direct evidence of intent to mislead the PTO.

The patents at issue relate to a canola oil ('IMC 130') with superior oxidative and fry stability to prevent off-flavored food and undesirable odors when stored. Oxidative stability can be measured in at least two ways: Active Oxygen Method ('AOM') hours, or in terms of peroxide and para-anisidine. Each of the patents at issue includes claims directed to 35-40 AOM hours. During prosecution, the examiner initially rejected one of the patents over a reference that was claimed to inherently have a stability of 35-40 AOMs. Specifically, the examiner reasoned that the reference recited a similar fatty acid composition to that of IMC 130 and that AOMs were directly related to this fatty acid composition. The applicant, however, successfully overcame the rejection by arguing that test data in the specification showed that an oil designated as IMC 129 (which had a similar fatty acid composition to IMC 130) had strikingly dissimilar AOM properties.

The district court found the two patents to be unenforceable based upon two documents withheld during prosecution showing that IMC 129 had oxidative stability properties similar to, and in one case, even overlapping the claimed range. The district court found the documents to be highly material because the oxidative stability of IMC 129 was a critical issue during prosecution. Further, the district court inferred intent based upon three circumstantial factors: the repeated nature of the omission, the applicant's motive to conceal, and the high materiality of the undisclosed information.

Despite the lack of direct evidence of intent to mislead, the Federal Circuit affirmed the district court's ruling. With regard to the first factors, the court opined that '[a]n applicant should know information is material when the examiner repeatedly raises an issue to which the information relates.' As for the district court's consideration of the motive to conceal (namely, the desire to obtain a patent), the Federal Circuit found this consideration to be appropriate given that it was one of three factors considered. Finally, the Cargill court found no error in the district court's consideration of the 'high degree of materiality' because it was part of the district court's 'assessment of all the evidence.' The court noted that it has never been held that materiality is irrelevant to the question of intent.

As for Cargill's assertion that a finding of intent to mislead was inconsistent with the district court's suggestion that the applicant had subjective good faith, the Federal Circuit held that '[w]hen an applicant knows or obviously should know that information would be material to the examiner ' but the applicant decides to withhold that information, 'good faith' does not negate an intent to manipulate the evidence.' Finally, the Cargill court found no error in the district court's balancing of materiality and intent given the high materiality of the undisclosed information and the strong circumstantial evidence of an intent to mislead.

Supreme Court Hears Oral Arguments in Microsoft v. AT&T

On Feb. 21, 2007, the Supreme Court heard oral argument in the case of Microsoft v. AT&T, No. 05-1056. Microsoft appealed a Federal Circuit ruling that it was liable for infringement under 35 U.S.C. '271(f) based upon its exportation overseas of a master version of Windows software, which was copied by authorized foreign 'replicators' and installed on foreign-assembled computers. The software incorporated certain speech codecs, which, when installed on a computer, were alleged to infringe AT&T's patent. The Federal Circuit had held that: 1) software may be a 'component' of a patented invention under '271(f), and 2) software replicated abroad from a master version exported from the United States ' with the intent that it be replicated ' may be deemed 'supplied' from the United States for the purposes of '271(f). The questions presented for the Supreme Court's review were:

1) Whether digital software code ' an intangible sequence of '1's' and '0's' ' may be considered a 'component[ ] of a patented invention' within the meaning of '271(f); and, if so,

2) Whether copies of such a 'component[ ]' made in a foreign country are 'supplie[d] ' from the United States.'

During oral argument, Microsoft was pressed on whether the master version of the disk would be a component. In response, Microsoft admitted that if the physical master disk were placed into the computer, then it would be a component. However, it argued that it was only the object code (which was the physical manifestation on the computer) that would be the component. The source code, Microsoft argued, was not a physical object and thus could not be a component. Microsoft further stated that in any event, the master disk was not installed on a computer ' that only copies were installed.

The United States argued next as amicus supporting Microsoft. First, the United States argued that a distinction needed to be made as far as copying in the United States and copying abroad. As for the latter, the United States argued that foreign governments need to be able to establish their own rules of competition. Second, the United States took the view that the component is the physical copy of the software that is inserted into the computer. In doing so, the United States provided an interesting analogy to a lock and key. It stated that any key could be described in terms of an abstract design ' namely, assigning numbers to describe the depth of the ridge. But the abstract design (analogous to the source code) would not be a component. Only the physical manifestation (the actual physical key) could be a component.

AT&T took the position that the object code itself was the component. However, AT&T had a difficult time distinguishing the object code from a mere transmission of information (i.e., if someone orally recited the source code over the phone). AT&T argued that the information transmitted over the phone could not be a component because it would not be in computer language (i.e., strings of 1s and 0s).

In general, the court seemed skeptical of AT&T's position and had difficulty understanding how the source code itself could be a component when it was analogous to a mere transmission of information or a blueprint.