Suing for infringement, only to have your patent held invalid is bad enough. Being ordered to pay the defendants’ attorneys’ fees makes it worse. (Old Reliable Wholesale, Inc. v. Cornell Corporation)
Old Reliable sued Cornell, alleging infringement of a patent directed to a composite insulated roof board. Cornell responded that the patent was anticipated both by one of its earlier products, the VT-2, and by Air-Flo, a product of a third party, Branch River Foam Plastics, and hence was invalid. Old Reliable argued that neither of these products included all of the limitations of the patented roof board.
Old Reliable’s troubles began at a deposition of its founder, Mr. Crookston, who was also the named inventor on the patent-in-suit. Mr. Crookston testified that the supposedly anticipatory VT-2 product did “exactly the same thing” as Old Reliable’s commercial embodiment of the patented invention.
Following this, Old Reliable’s expert witness testified that if the Air-Flo product had been manufactured with cross-channels, it would have been “identical to” the claimed invention.
With the ball having been teed up for him, Mr. Richard Dauphinais, a Branch River employee, hit it out of the park, testifying that the Air-Flo product, with such channels, had been produced and sold prior to the critical date of the patent-in-suit. This proved to be enough for the trial court judge, who entered a summary judgment of patent invalidity.
Old Reliable appealed this decision, only to have the C.A.F.C. affirm it without even bothering to write an opinion. Not content with its victory, Cornell had requested that the trial court find the case to be “exceptional” and award it its attorneys’ fees. While the appeal of the summary judgment was pending before the C.A.F.C., the trial court awarded Cornell the requested attorneys’ fees. Old Reliable went back to the C.A.F.C. to appeal this decision.
While all of this disaster was befalling it, Old Reliable had sought re-examination of the patent-in-suit. In compliance with its duty of candor, Old Reliable had provided the Patent Office with, among other things, a copy of the C.A.F.C.’s decision affirming the trial court’s holding of invalidity. The Patent Office, nevertheless, issued a notice of intent to issue a re-examination certificate confirming all of the claims of the subject patent, holding that “none of the prior art references [including the VT-2 and the Air-Flo] discloses nor renders obvious the combination of features” of the claimed invention. Then, just two weeks later, the Patent Office, without any explanation, reversed itself and withdrew this notice, stating that “the claims of the [subject patent] are invalid.”
At this point, the C.A.F.C. chose to show Old Reliable some mercy, holding that “Old Reliable had reasonable grounds for its argument that the [subject] patent was valid over the prior art, even following inventor testimony that the prior art VT-2 product and the commercial embodiment of the [patent-in-suit] did exactly the same thing. Regardless of whether the VT-2 and the commercial embodiment of the [patent-in-suit] did ‘exactly the same thing,’ there could be no anticipation unless the VT-2 disclosed, either expressly or inherently, all the structural limitations contained in the asserted claims. Because Old Reliable pointed to alleged structural differences between the VT-2 and the commercial embodiment of the [patent-in-suit], it was not required to concede that its patent was anticipated even following inventor testimony that the two products were functionally equivalent.”
Turning to the Air-Flo product, the appellate court held that Mr. Dauphinais’ uncorroborated testimony could, arguably, be considered unreliable. “Generally, corroboration is required of any witness whose testimony alone is asserted to invalidate a patent.”
Finally, the appellate court took judicial notice of the fact that the Patent Office, after assessing the relevant prior art, issued a notice of intent to issue a re-examination certificate confirming the patentability of all claims of the [subject] patent. “The fact that the PTO confirmed the validity of the [patent-in-suit] on re-examination provides probative evidence on the issue of whether Old Reliable had a reasonable basis for its assertion that its patent was not anticipated.”
That brought the court to Cornell’s last argument in support of its claim that Old Reliable had engaged in misconduct, namely that Old Reliable had refused to engage in settlement negotiations. As to this, the Court held that a failure to negotiate “does not constitute the type of conduct worthy of sanctions.”
So, Old Reliable did not have to pay the fees of the attorneys who proved its patent invalid. Hopefully, Old Reliable took some consolation from that!
THE LESSON TO BE LEARNED: Although settlement is generally advisable, the refusal to negotiate does not, in itself, constitute litigation misconduct.