Federal Circuit Says District Court Erred in Assessing Inequitable Conduct in Toddler Dining Mat Patent Case

Source: CAFC opinion

In a precedential decision issued Friday by Judge Leonard Stark, the U.S. Court of Appeals for the Federal Circuit (CAFC) affirmed a district court’s judgment that Luv n’ care, Ltd. and Nouri E. Hakim (LNC) succeeded in proving Lindsey Laurain and Eazy-PZ, LLC (EZPZ) were barred from relief due to unclean hands but vacated the court’s judgment for EZPZ of no inequitable conduct. The CAFC also vacated a grant of partial summary judgment of invalidity and vacated orders denying LNC attorney fees and costs.

LNC originally filed a complaint against EZPZ in the U.S. District Court for the District of Louisiana under the Lanham Act and the Louisiana Unfair Trade Practices and Consumer Protection Law (LUTPA), alleging “acts of unfair competition” and seeking injunctive and monetary relief. LNC also sought declaratory judgment that EZPZ’s U.S. Design Patent No. D745,327 was invalid, unenforceable and not infringed. Subsequently, U.S. Patent No. 9,462,903 was issued, assigned to EZPZ, and LNC amended its declaratory judgment claim to also request the court declare that patent invalid, unenforceable and not infringed.

The district court ultimately granted LNC’s partial summary judgment motion, finding that all claims of the ’903 patent were obvious over three prior art references. Although EZPZ filed for ex parte reexamination of the ‘903 patent with the U.S. Patent and Trademark Office (USPTO) and obtained a certificate confirming patentability of the claims, the district court did not have the certificate in the record before or during the bench trial and did not consider it. While the court found that EZPZ made misrepresentations about a prior art reference – the Platinum Pet Mat – to the USPTO, as well as submitted declarations containing false or misleading information, it held these actions did not demonstrate a specific intent to deceive the Office rising to the level of inequitable conduct.

However, with respect to unclean hands, the district court found that EZPZ “engaged in litigation misconduct, including by failing to disclose certain patent applications during discovery, attempting repeatedly to block LNC from obtaining Ms. Laurain’s prior art searches, stringing LNC along during settlement negotiations, and providing evasive and misleading testimony.” Thus, EZPZ was not entitled to the relief it sought, said the court.

Unclean Hands

LNC appealed and EZPZ cross-appealed to the Federal Circuit, which first addressed EZPZ’s appeal of the determination that the doctrine of unclean hands bars EZPZ from obtaining relief. The CAFC found that the district court’s determination that “EZPZ ‘by deceit and reprehensible conduct attempted to gain an unfair advantage’ in seeking the relief it requested in the litigation” was supported by the evidence in the record and that there was no clear error in the court’s finding that the misconduct bore “an immediate and necessary connection to EZPZ’s claims for infringement of its ’903 patent.” The CAFC also agreed with the district court that the misconduct bore a necessary and immediate connection to its design patent and trade dress claims.

District Court Failed to Consider Misconduct as a Whole

With respect to the district court’s inequitable conduct analysis, the CAFC said the court failed to apply the proper legal standard and therefore abused its discretion. The district court considered each of Laurain’s and her patent agent, Benjamin Williams’ acts of misconduct “in isolation and failed to address the collective weight of the evidence regarding each person’s misconduct as a whole,” said the CAFC. The opinion added:

“When a person having a duty of candor and good faith has engaged in serial misconduct during the prosecution of the same or related patents, it is not enough for a court to consider each individual act of misconduct without also considering the collective whole….

Here, the district court did not apply this legal standard and, thereby, abused its discretion. The district court considered each of Ms. Laurain’s and Mr. Williams’ individual acts of misconduct in isolation and failed to address the collective weight of the evidence regarding each person’s misconduct as a whole.”

Obviousness and Attorney’s Fees

The CAFC went on to vacate the grant of summary judgment that the ‘903 patent claims are invalid as obvious because it said genuine disputes of material fact are evident in the record and determined that the district court legally erred in failing to declare LNC the prevailing party for purposes of awarding attorney fees. “By proving unclean hands – a decision we are affirming today– LNC obtained the dismissal with prejudice of EZPZ’s then-remaining counterclaims, including its claim for infringement of the ’903 patent,” wrote the CAFC.

While the court acknowledged that LNC did not prevail on all claims and that it may not succeed on inequitable conduct and obviousness on remand, “a party is not required “to prevail on all claims in order to qualify as a prevailing party,” wrote the court. On remand the district court should also consider the “totality of circumstances” to assess whether the case is exceptional for purposes of awarding attorney fees, as well as “reevaluate the closeness of the case, and any other factors it deems pertinent to whether the ‘strong presumption’ in favor of awarding costs has been overcome,” said the opinion.

This article was updated on April 14 to clarify that the court said it was EZPZ, not LNC, that made misrepresentations about the Platinum Pet Mat.