CAFC Vacates Summary Judgment on Inequitable Conduct and Walker Process Claims in Coiled Tubing Patent Dispute

The U.S. Court of Appeals for the Federal Circuit (CAFC) today issued a precedential decision in Global Tubing LLC v. Tenaris Coiled Tubes LLC vacating a district court’s summary judgment rulings on both inequitable conduct and a Walker Process fraud claim. The court determined that genuine disputes of material fact precluded summary judgment on both issues and remanded the case for further proceedings.

The dispute centers on patents held by Tenaris Coiled Tubes LLC and Tenaris S.A. for its “BlueCoil” coiled tubing product. Global Tubing LLC filed a lawsuit seeking a declaratory judgment that its own “DURACOIL” product did not infringe Tenaris’s U.S. Patent Nos. 9,803,256, 10,378,074, and 10,378,075. The case’s background involves Tenaris’s acquisition of assets from a predecessor, Southwestern Pipe, Inc., which included documents for a 1990s product called “CYMAX.” These “CYMAX Documents” described a coiled tubing product with technical specifications, including a carbon content, that overlapped with the range claimed in Tenaris’s ‘256 patent.

During the prosecution of the ‘256 patent, Tenaris did not submit the CYMAX Documents to the U.S. Patent and Trademark Office (USPTO). The case revealed internal communications at Tenaris, including a comment from an inventor, Dr. Martín Valdez, regarding the CYMAX Documents, where he wrote, “I am not sure it is a good idea to disclose this document.” This led Global Tubing to amend its complaint to include a claim for inequitable conduct by alleging that Tenaris withheld material prior art with an intent to deceive the USPTO. Global Tubing also filed a Walker Process fraud claim by alleging that Tenaris was attempting to monopolize the market through fraudulently obtained patents.

The U.S. District Court for the Southern District of Texas granted summary judgment to Global Tubing on the inequitable conduct claim. It also granted summary judgment to Tenaris on the Walker Process claim, concluding Tenaris was “a small market player” and that the “acts alleged as constituting an attempt at monopolization are insufficient to create a genuine issue of material fact.” Ultimately, both Tenaris and Global Tubing appealed.

Writing for the CAFC, Judge Stark stated that summary judgment for inequitable conduct was improper because the record contained genuine disputes of material fact regarding Tenaris’s intent. To prove inequitable conduct, a party must show by clear and convincing evidence that an applicant withheld material information with the specific intent to deceive the USPTO. The Federal Circuit found that the district court erred by not viewing the evidence in the light most favorable to Tenaris, the non-moving party. Additionally, the court noted that Dr. Valdez provided deposition testimony explaining his comment. He testified he was unsure about disclosure because he believed the CYMAX product was different from the claimed invention and that its details were cumulative of the already-submitted Chitwood reference. The Federal Circuit reasoned that a factfinder could credit Dr. Valdez’s testimony and find he was mistaken or confused, rather than intending to deceive. At the summary judgment stage, the court noted that “we must credit the reasonable inference that Dr. Valdez was innocently mistaken.”

Furthermore, the Federal Circuit found a genuine dispute of material fact regarding whether the CYMAX Documents were material to patentability. A prior art reference is not but-for material if it is merely cumulative of other references already before the USPTO. Tenaris argued that the CYMAX Documents were cumulative of the Chitwood reference. The court pointed to Dr. Valdez’s testimony that a person of ordinary skill could have derived the specific chemistry of CYMAX from the Chitwood paper, combined with publicly available industry standards. Moreover, the court also noted that Tenaris’s later-prosecuted “grandchild” patents were allowed by the USPTO even after the full CYMAX Documents were disclosed, which could support a finding that the documents were not but-for material. Since a factfinder could reach different conclusions on intent and materiality, the summary judgment of inequitable conduct was vacated.

On the cross-appeal, the Federal Circuit also vacated the summary judgment ruling in favor of Tenaris on Global Tubing’s Walker Process fraud claim. The court found that the district court erred by concluding Tenaris was “a small market player” without first defining the relevant market, which the Federal Circuit described as a “question of fact.” The parties had presented competing definitions of the relevant product and geographic markets, creating a genuine dispute. The court stated that it was aware of no authority “holding that an alleged attempted monopolist must hold a minimum market share in order for a Sherman Act violation to be proven.” It also found genuine disputes of material fact regarding whether Tenaris engaged in predatory or anticompetitive conduct, pointing to testimony that a Tenaris executive told a Global Tubing employee, “we’re probably going to court.” The court concluded that this evidence, viewed in the light most favorable to Global Tubing, could support a finding of anticompetitive conduct.

Thus, the CAFC ultimately vacated the grant of summary judgment to Global Tubing on its inequitable conduct claim; vacated the grant of summary judgment to Tenaris on Global Tubing’s Walker Process fraud claim; affirmed the district court’s denial of summary judgment to Tenaris of no inequitable conduct; and remanded for further proceedings.