GOLDEN HOUR DATA SYSTEMS, INC. v. EMSCHARTS, INC.Nos. 2009-1306, 2009-1396.
614 F.3d 1367 (2010)
GOLDEN HOUR DATA SYSTEMS, INC., Plaintiff-Appellant,
EMSCHARTS, INC., Defendant-Cross Appellant, and
Softtech, LLC, Defendant-Appellee.
EMSCHARTS, INC., Defendant-Cross Appellant, and
Softtech, LLC, Defendant-Appellee.
United States Court of Appeals, Federal Circuit.
August 9, 2010.
Carter G. Phillips, Sidley Austin LLP, of Washington, DC, argued for plaintiff-appellant. With him on the brief were Eric A. Shumsky and Rachel H. Townsend; and Tacy F. Flint, of Chicago, IL. Of counsel was Pankaj Venugopal, of Washington, DC. Eric H. Weisblatt, Wiley Rein LLP, of Washington, DC, argued for defendant-cross appellant and defendant-appellee. With him on the brief was Susan M. Dadio, Buchanan Ingersoll & Rooney PC, of Alexandria, VI. Of counsel was Martin A. Bruehs. Eric H. Findlay and Roger Brian Craft, Findlay Craft LLP, of Tyler, TX, for defendant-appellee.
Opinion for the court filed by Circuit Judge DYK. Dissenting opinion filed by Circuit Judge NEWMAN.
Before NEWMAN, FRIEDMAN, and DYK, Circuit Judges.
DYK, Circuit Judge.
Golden Hour Data Systems, Inc. ("Golden Hour") appeals from a judgment of the United States District Court for the Eastern District of Texas. After trial, a jury rendered a verdict of infringement of various claims of United States Patent No. 6,117,073 ("the '073 patent") in favor of Golden Hour against defendants emsCharts, Inc. ("emsCharts") and Softtech, LLC ("Softtech"). However, the district court subsequently granted Judgment as a Matter of Law ("JMOL") of no joint infringement of claims 1, 6-8, 10, and 12-22 of the '073 patent and held the '073 patent unenforceable due to inequitable conduct. Golden Hour Data Systems, Inc. v. emsCharts, Inc., et al., No. 2:06-CV-381, 2009 WL 943273 (E.D.Tex. Apr.3, 2009) ("Infringement Order"); Golden Hour Data Systems, Inc. v. emsCharts, Inc., et al., No. 2:06 CV 381, 2009 WL 781334 (E.D.Tex. Mar.23, 2009) ("Inequitable Conduct Order"). We affirm the district court's finding of no joint infringement. However, we conclude that the district court must make additional fact findings with respect to the intent prong of inequitable conduct. We therefore vacate the district court's inequitable conduct determination and remand for further proceedings consistent with this opinion.
Golden Hour's '073 patent, entitled "Integrated Emergency Medical Transportation Database System" is directed to computerized systems and methods for information management services in connection with emergency medical transport, which is often performed by helicopter. Providers of such emergency medical transportation must collect and track large amounts of data for the purposes of dispatching transport, treating patients (clinical services), and also for billing. The systems of the '073 patent provide for the integration of dispatch, clinical services, and billing data. The '073 patent discloses a dispatch module, a clinical module, an administration module, and a billing module. By integrating recordkeeping, these systems seek to avoid the inefficiency, inaccuracy and potential adverse clinical results that come with redundancy in recordkeeping.
The final sentence of the "Background of the Invention" section of the '073 patent summarizes the basic concept of the invention: "what is needed is a comprehensive system that includes modules for dispatching emergency medical teams, tracking their movement to and from the accident scene, managing a clinical diagnosis and treatment and accurately billing the patient for the services rendered." '073 patent col.1 l.66-col.2 l.3. Claims 1, 6-8, 10, and 12-14 are apparatus claims and claims 15-22 are method claims. Claims 1, 10, and 15 are independent claims. Claim 1 requires integrating dispatch and billing data. It provides:
Id. col.20 l.61-col.21 l.4 (emphasis added). Claim 15 requires integrating dispatch and clinical services data. It provides:
Id. col.21 l.54-col.22 l.6.
In February of 1997, Dr. Kevin Hutton ("Hutton") and Dr. Scott Jones ("Jones") formed Golden Hour in order to commercialize the invention ultimately covered by the '073 patent. Hutton acted as Golden Hour's chief executive officer. Hutton and Jones engaged the Knobbe Martens Olson & Bear LLP law firm ("Knobbe Martens") to assist in the prosecution of the patent application. The application leading to the '073 patent was filed on March 2, 1998. Hutton and Jones were the named inventors. Michael Fuller ("Fuller"), a senior patent agent, and John M. Carson ("Carson"), a partner who supervised his work, prepared, filed, and prosecuted the patent application with the knowledge and assistance of Hutton.
At the time of the filing of the application, Hutton believed that Air Medical Software ("the AeroMed system") was the system most similar to the subject matter of the application. The "Description of the Related Technology" section of the '073 patent specification discusses the AeroMed system. The specification provides:
'073 patent col.1 ll.11-57 (emphasis added).
On August, 4, 1998, during prosecution of the '073 patent, Fuller submitted an Information Disclosure Statement ("IDS") further describing the AeroMed system. In the IDS, Fuller stated: "Applicants are aware of AeroMed Software, computer software for Air Medical Dispatch, Flight Program Management, Medical Charting, Continuing Education Tracking, Transfer Center, Physician's Referral Lines, and Custom Applications. AeroMed Software is a product of Innovative Engineering of Lebanon, New Hampshire." J.A. 4944-45.
The patent application included 27 claims. During prosecution, the Patent and Trademark Office ("PTO") issued a first office action on February 18, 1999. In this office action, the examiner rejected claims 1-5, 8-14, and 23-27 as anticipated by U.S. Patent No. 5,619,991 ("Sloane"). Certain of these claims were directed to the integration of billing information with dispatch data alone and the integration of both billing and dispatch data with clinical data. The examiner's anticipation rejection noted that the system of Sloane "is configured to generate billing information." J.A. 4940. The examiner allowed original claims 15-22, which did not relate to the integration of billing information, but which related to the integration of dispatch and clinical data. The examiner noted that though "[t]he prior art teaches systems and methods of computerized integrated data management," it "does not teach or suggest a computerized method that includes collecting and integrating patient information with flight information to produce an encounter record." J.A. 4940-41. In response to the rejection, Golden Hour amended claims 1, 7, 10, 23, 26, and 27 in respects not relevant here. Golden Hour also traversed the rejections based on Sloane. Golden Hour overcame the rejections based on Sloane by arguing, in part, that Sloane's disclosure of billing information
J.A. 4951-52. In light of Golden Hour's response, all claims were allowed and the '073 patent issued on September 12, 2000.
The accused infringers are emsCharts and Softtech. emsCharts produces a web-based medical charting program called emsCharts. The emsCharts program charts patient information and provides integrated billing. Softtech produces computer-aided flight dispatch software called Flight Vector, which coordinates flight information, such as patient pickup and delivery, and flight tracking. The two companies formed a strategic partnership, enabled their two programs to work together, and collaborated to sell the two programs as a unit.
In September of 2006, Golden Hour sued emsCharts and Softtech for infringement of the '073 patent. Golden Hour accused emsCharts of directly infringing claims 10 and 12-14 of the '073 patent by making, using, offering to sell, and selling its emsCharts.com system. Golden Hour also accused emsCharts and Softtech together of jointly infringing claims 1, 6-8, and 15-22. Most of the asserted claims involve the integration of billing data. The jury returned a verdict for Golden Hour. It
After the jury verdict in favor of Golden Hour, the district court held a bench trial to consider the issue of inequitable conduct. The brochure that the jury had found not to anticipate was a central feature of the inequitable conduct trial. The brochure was undated and described the AeroMed system ("the AeroMed brochure"). Hutton testified that he did not have the brochure at the time that the application was filed on March 2, 1998, but that he received it about three weeks after at the AeroMedical Services Midyear Conference. Hutton gave prosecution counsel the AeroMed brochure sometime before August 4, 1998.
The inside of the AeroMed brochure described the AeroMed system as an integrated system with a dispatch module combined with medical charting and billing. It stated that "[t]he AMS Dispatch Module can be used with the Flight Management Module.... It is an integrated real-time flight dispatching program...." J.A. 10848. It advertised "[a] fast, easy way to create flight plans, cost quotes, track aircraft. No-nonsense medical charting. Billing." Id. at 10847. It noted that "[t]he Flight Management Module is a companion to the Dispatch Module. All information entered by the Dispatch Module is combined into Flight Management so that duplicate data entry is eliminated." Id. at 10848. It assured that, with the Flight Management Module, "[b]illing becomes a breeze with the user definable reports." Id. The parties do not dispute that the brochure would have been anticipatory of some of the claims of the '073 patent if it had been prior art, that is, if it had existed before the date of invention or more than a year before filing. See 35 U.S.C. § 102.
Based on the brochure, prosecution counsel prepared the IDS and filed it on August 4, 1998. The description of the AeroMed system in the IDS is identical (with the exception of "Centers" being plural in the brochure) with what is set forth on the front cover of the brochure. The IDS did not disclose the integrated billing system described in the brochure. At no time during prosecution of the application was the brochure or the billing system information provided to the examiner.
The defendants argued that prosecution counsel committed inequitable conduct by intentionally failing to disclose the brochure or the information contained in the brochure because it contradicted the statement in the specification that AeroMed "does not provide comprehensive integration of the flight information with a clinical diagnosis, billing system and administration system." '073 patent col.1 ll.54-57. Defendants also argued that the act of selectively disclosing material recited on the front of the brochure but not disclosing the recitation of "integrated" "billing" on the inside of the brochure also constituted inequitable conduct.
With respect to materiality, the district court found that the AeroMed brochure disclosed "integration" and "billing." Inequitable Conduct Order, slip op. at 13. The district court then observed that "the inventive feature of the '073 patent was billing integration" and that the brochure's disclosure of integration between the Dispatch Module and the Flight Management module (which includes billing) "clearly contradicts what both Dr. Hutton and prosecution counsel had represented to the
With respect to intent, the court found that Golden Hour's nondisclosure of the brochure and selective disclosure of the contents of the brochure evidenced intent to deceive the PTO. The court concluded that Fuller must have been aware of the contents of the brochure. Id. at 12-13. The court reiterated that "Golden Hour and its counsel selected the one part of the AeroMed brochure to disclose [that] was consistent with how it had described AeroMed to the PTO" and found that "[s]uch selectivity is strong evidence of intent to mislead the patent office about the relevant prior art system as described by its competitor." Id. at 13. The court therefore concluded that "the single most reasonable inference to be drawn is that Golden Hour intended to deceive the patent office." Id. at 14. The court then balanced the high level of materiality with the evidence of deceptive intent and concluded that Golden Hour committed inequitable conduct, rendering the '073 patent unenforceable.
The court also granted emsCharts' motion for JMOL with respect to the jury verdict of joint infringement. The court found that there was insufficient evidence of "control" or "direction" by emsCharts or Softtech (or vice versa) to find joint infringement of any of the claims 1, 6-8, 10, and 12-22. Golden Hour timely appealed to this court, and we have jurisdiction over this appeal under 28 U.S.C. § 1295(a)(1).
I Inequitable Conduct
On appeal, Golden Hour first argues that the district court improperly held the '073 patent unenforceable due to inequitable conduct. "A patent may be rendered unenforceable due to inequitable conduct if an applicant, with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution." Digital Control, Inc. v. Charles Mach. Works,
Golden Hour argues on appeal that the district court erred with respect to its factual findings concerning both materiality and intent, and that therefore, the ultimate determination of inequitable conduct cannot stand.
"[W]e have held that information is material when a reasonable examiner
37 C.F.R. § 1.56(b). The PTO rules clearly require the submission of known information that contradicts material information already submitted to the PTO. See Monsanto Co. v. Bayer Bioscience N.V.,
The district court found the brochure and the undisclosed information contained in the brochure to be material because it contradicted the representations about the AeroMed system in the specification, and that the brochure was also material in view of the partial disclosure of the brochure's contents in the IDS. Golden Hour argues that the PTO Rules and the Manual of Patent Examining Procedure ("MPEP") would have precluded an examiner from considering the undated AeroMed brochure, and therefore it cannot be material. MPEP section 609 instructs examiners not to consider references included in an IDS which do not comply with 37 C.F.R. § 1.98. Section 1.98(b)(5) requires that "[e]ach publication ... must be identified by publisher, author (if any), title, relevant pages of the publication, date, and place of publication." (emphasis added). Golden Hour therefore maintains that a reasonable examiner could not have considered the brochure material to patentability because the rules would prohibit the examiner from considering the brochure because it was not known to be prior art. In other words, Golden Hour maintains that a reference is not material unless the prior art status of the reference is established on the face of the reference.
The MPEP itself contradicts this reading. The sections on which Golden Hour relies do not limit an IDS to the submission of prior art references, and the MPEP states that "[t]here is no requirement that the information [identified in an IDS] must be prior art references in order to be considered by the examiner." MPEP § 609 (2008). Further, our prior cases make clear that information may be material even if it does not qualify as prior art. As we held in Duro-Last, Inc. v. Custom Seal, Inc.,
See also Digital Control, 437 F.3d at 1318 ("[A] misstatement or omission may be material even if disclosure of that misstatement or omission would not have rendered
First, the brochure may well have been prior art. While the district court made no finding as to the prior art status of the brochure, we note that there is substantial evidence in the record that the brochure is indeed prior art. Charles Freeman, AeroMed's software developer and the brochure's author, testified that he had the brochure with him at the 1996 AMTC Conference.
Second, the brochure and the information contained therein were material because they contradicted other representations to the PTO, even if the brochure was not itself prior art. In the specification, applicants described the AeroMed system in existence as of the time of the application. See Pl.-Appellant's Br. 23 ("In the `Background of the Invention' section of the '073 application, which was filed on March 2, 1998, Golden Hour identified the AeroMed software that existed at that time."). The specification of the '073 patent describes the AeroMed brochure, stating that "the [AeroMed system] provides computer software for dispatching emergency crews to accident scenes and managing flight information. However, it does not provide comprehensive integration of the flight information with a clinical diagnosis, billing system and administration system." '073 patent col.1 ll.52-57 (emphases added). The present-tense representation that the AeroMed system "does not provide comprehensive integration ... with ... billing" continued unchanged throughout the pendency of the application. In direct contradiction to that statement, the AeroMed brochure, received mere weeks after filing, states that with the Flight Management module, "[b]illing becomes a breeze with the user definable reports. Patient charges can be calculated and printed any number of ways to include transport time and itemizing of medical supplies." J.A. 10848.
Further, after receipt of the brochure, applicants filed the IDS describing the AeroMed brochure. The IDS was also worded in the present tense. In the IDS, prosecution counsel stated that "[a]pplicants are aware of AeroMed Software" and listed the attributes of the software found on the front of the brochure, but did not disclose the integrated billing found on the inside of the brochure. J.A. 4944-45 (emphasis added). Given the significance of integrated billing to patentability, the failure to disclose the billing characteristics of the AeroMed system in the IDS was also highly material. The failure to disclose the integrated billing would lead one to believe that the AeroMed system did not provide comprehensive integration with billing. The brochure's recitation of integrated billing, which applicants failed to disclose, would undoubtedly have been material to a reasonable examiner.
The intent element is a separate component of an inequitable conduct determination. Star Scientific, 537 F.3d at 1366. To prove intent, "the involved conduct, viewed in light of all the evidence, including evidence of good faith, must indicate sufficient culpability to require a finding of intent to deceive." Digital Control, 437 F.3d at 1319 (citations omitted). Intent need not be proven by direct evidence; it can be inferred from indirect and circumstantial evidence. Star Scientific, 537 F.3d at 1366 (citing Cargill, Inc. v. Canbra Foods, Ltd.,
The contention is that Fuller, Hutton, or both, intended to deceive the PTO by failing to fully disclose the capabilities of the AeroMed system described in the brochure. The district court appears to have inferred intent to deceive from the high materiality of the AeroMed brochure, from the selective disclosure in the IDS, and from the lack of a credible explanation on the part of Hutton and prosecution counsel for the selective disclosure.
We agree that the district court could find the explanation for not submitting the brochure or its undisclosed contents not to be credible (if its contents were known). The explanation was that it was Fuller's practice not to submit undated materials. But Fuller testified that he knew that other practitioners at Knobbe Martins submitted undated brochures to the PTO and that the PTO considers those brochures. But most importantly, even if Fuller believed that the PTO's rules would not have permitted the examiner to consider the undated brochure, there is no suggestion that Fuller thought that the information in the brochure was off-limits—indeed Fuller submitted information from the brochure in the IDS. See Semiconductor Energy, 204 F.3d at 1375, 1376 (holding that "[i]t was incumbent upon [the inventor] to provide the PTO with sufficient information for a reasonable examiner to consider the [submission] in context, not with a selective and misleading disclosure" and because "[t]he inventor failed to do that" he "cannot post facto hide behind the MPEP guidelines"). In sum, prosecution counsel failed to provide any explanation for withholding the missing information from the brochure, assuming he was aware of the brochure's contents.
The district court also did not err in finding that "[e]ven the most cursory of reviews would have revealed the description of AeroMed's billing and integration— the only thing described in the center column of the one page brochure," i.e., that it was inconsistent with the representations in the specification. See Inequitable Conduct Order, slip op. at 13.
J.A. 4673. Fuller never testified definitively that he did not read the brochure in full. Here, there are two possible explanations for the failure to advise the PTO about the integrated billing disclosed in the brochure: (1) that Fuller and Hutton failed to read the brochure, and (2) that one or both read it and deliberately withheld the information. The distinction between these two explanations is important. If one or both read the brochure and deliberately did not disclose the damaging information on the inside, their actions would give rise to an inference of intent to deceive. However, if they did not read the brochure (and did not do so to avoid learning of damaging information), those actions regarding the failure to disclose the information on the inside of the brochure would at most, amount to gross negligence. Gross negligence is not inequitable conduct. See Kingsdown, 863 F.2d at 876.
The district court appears to have discredited Fuller's testimony that he did not read the brochure because of its inconsistency with his statement that he did not disclose the brochure because it was undated, stating that
Inequitable Conduct Order, slip op. at 12-13 (citations omitted). However, Fuller never actually testified that he did not disclose the AeroMed brochure because it was undated.
Golden Hour argues that no remand is necessary because the record evidence could not, in any event, support a finding of intent. We disagree. Quite apart from the highly material nature of the withheld reference, the suspicious late production of the brochure, and the district court's findings as to witness credibility, there is ample evidence that could support finding that Fuller or Hutton or both actually read the brochure and determined to withhold its contents from the PTO, knowing it to be material. First, Hutton regarded AeroMed as his primary competitor. In a December 1996 business plan, Hutton told potential investors that "[t]he only similar information management product in the air medical transport market is a software product called Air Medical Software (AMS), (Innovative Engineering, Lebanon NH)." J.A. 7277. He repeated this statement in a proposal seeking financing from the UCSD CONNECT Technology Financial Forum. J.A. 10,211. And in an August 1997 "Business Overview" document, Hutton stated that "Golden Hour has one major software competitor in our initial market segment, called Aero Medical Software (AMS) (Innovative Engineering).... The AMS software does not comprehensively integrate information ... The AMS software cannot electronically bill or track inventory." J.A. 8262 (emphasis in original). It is likely that Hutton would have been quite interested in a brochure that described the competitor's system.
Second, the information that Hutton originally received about the AeroMed system was based on hearsay. Hutton testified at the jury trial that his knowledge of the AeroMed system at the time of filing the patent application was from a colleague
Third, representations as to the AeroMed system were central to the claim of patentability in the original application. This centrality was demonstrated by the filing of an IDS based on the brochure. This again suggests that Fuller and/or Hutton would be interested in reading the brochure.
Fourth, it might seem unlikely that a patent practitioner would make representations as to the brochure in an IDS without reading the entire brochure and would not be interested in reading the entire brochure to determine whether there was anything in it that might disclose its prior art status.
But this also is not a situation in which a finding of deceptive intent is compelled. It is not our task to make factual findings. Therefore we must remand to the district court for it to make detailed factual findings in the first instance. See Dennison Mfg. Co. v. Panduit Corp.,
II Joint Infringement
With respect to joint infringement, this court reviews the grant of JMOL de novo. Novartis Pharms. Corp. v. Abbott Labs.,
The district court also granted JMOL as to systems claims 1 and 6-8. On appeal Golden Hour apparently argues that emsCharts was liable for infringement of those claims because emsCharts sold its emsCharts.com program and Softtech's Flight Vector software together, and together these systems comprised the systems of the asserted claims. Such a sale might well create liability on the part of emsCharts for the sale of the patented system, whether or not emsCharts controlled Softtech. The problem is that by agreement, claims 1 and 6-8 were submitted to the jury only on a joint infringement theory. Such a verdict can only be sustained if there was control or direction of Softtech by emsCharts. Under these circumstances, JMOL was properly granted as to the systems claims as well as to the process claims.
NEWMAN, Circuit Judge, dissenting; stay requested.
I. INEQUITABLE CONDUCT
The district court held the patent in suit unenforceable on the ground of "inequitable conduct." The panel majority holds, and I agree, that on the evidence that was adduced before the district court, intent to deceive was not established by clear and convincing evidence; however, if deceptive intent was not established at the trial of this issue, by the party with the burden to do so, it is inappropriate for this court to remand for another shot at it.
As for materiality, I do not share the conclusion that the undated AeroMed brochure, obtained at a trade show (the Association of Aeromedical Services) a few weeks after this patent application was filed, and found not to be invalidating prior art, was so clearly and convincingly "material to patentability" that failure to provide a copy of the brochure while quoting its front page, invalidates the patent that was found valid over the entire content of the brochure. The record does not show that the brochure was published before the Golden Hour patent application was filed. The defendants provided no documentary evidence of any publication date, and the district court did not find the brochure to be prior art; their only evidence was the "uh-huh's" of the brochure's author, quoted at footnote 1 of the majority opinion.
The record showed that when the brochure came into Golden Hour's possession at the trade show, it was given to Golden Hour's patent attorney, who referred to it in the Invention Disclosure Statement filed with the PTO, including quotation of the cover page but not the inner page. At the trial, the full brochure was in evidence, and stressed by the defendants, and the jury found that it was not invalidating. In view of the majority's ruling that deceptive intent was not established in the district court, and the jury's verdict of validity despite the brochure, the charge of inequitable
The charge of inequitable conduct carries high stakes for both the attorney, whose career it can threaten, and the applicant, who can lose a perfectly valid patent. In Kingsdown Medical Consultants, Ltd. v. Hollister Inc.,
II. JOINT INFRINGEMENT
The court rules that when two entities collaborate to infringe a patent, such that one performs some steps of the claim and the other performs the other steps, there cannot be any infringement, on any theory, unless one entity "controls or directs" the activity of the other. As the majority opinion reports, here the defendants "formed a strategic partnership, enabled their two programs to work together, and collaborated to sell the two programs as a unit." Maj. Op. at 1371. The court now holds that such a relationship avoids all
The parties focused on the "control or direction" criterion as negating joint infringement, for this court has stated, for example in Muniauction, Inc. v. Thomson Corp.,
The evidence showed that emsCharts and Softtech integrated the functions of their software programs, and sold the ensuing system as a package. The jury was shown an October 2005 press release announcing "[t]his partnership," and promoting their resultant integrated system in "seamless transition." The press release states:
J.A.5030. On this and other evidence, a reasonable jury could have found that this collaborative activity infringed the various claims, as shown in the verdict form. My colleagues err in discarding this verdict on the ground that infringement cannot be found as a matter of law. From this ruling, I must again dissent.
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