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American Calcar, Inc. v. American Honda Motor Co., Inc.

United States Court of Appeals, Federal Circuit

September 26, 2014

AMERICAN CALCAR, INC., Plaintiff-Appellant,
v.
AMERICAN HONDA MOTOR CO., INC., AND HONDA OF AMERICA MANUFACTURING, INC., Defendant-Appellee

Page 1186

Appeal from the United States District Court for the Southern District of California in No. 06-CV-2433, Judge Dana M. Sabraw.

ROBERT L. MAIER, Baker Botts L.L.P. of New York, New York, argued for the plaintiff-appellant. With him on the brief was JENNIFER C. TEMPESTA.

ROBERT E. HILLMAN, Fish & Richardson P.C., of Boston, Massachusetts, argued for defendant-appellee. With him on the brief was JOHN T. JOHNSON, of New York, New York. Of counsel was MICHAEL F. AUTUORO.

Before PROST, Chief Judge,[*] NEWMAN and WALLACH, Circuit Judges. OPINION filed by Chief Judge PROST. NEWMAN, Circuit Judge, dissenting.

OPINION

Page 1187

Prost, Chief Judge.

American Calcar Inc. (" Calcar" ) appeals from the judgment of the U.S. District Court for the Southern District of California finding that U.S. Patent Nos. 6,330,497 (" '497 patent" ), 6,438,465 (" '465 patent" ), and 6,542,795 (" '795 patent" ) were unenforceable due to inequitable conduct. For the reasons stated below, we affirm.

I

This appeal arises from Calcar's suit against defendant-appellees American Honda Motor Co., Inc. and Honda of America Manufacturing, Inc. (collectively " Honda" ), asserting the infringement of fifteen patents--of which three remain at issue. All share a common specification and are derived from a priority application filed on January 28, 1997, which since issued as U.S. Patent No. 6,009,355 (" '355 patent" ). The patents describe and claim aspects of a multimedia system for use in a car to access vehicle information and control vehicle functions.

Calcar accused computerized navigation systems installed in Honda vehicles of infringing its patents. Calcar claimed that the accused systems included additional infringing features beyond providing the driver with travel directions. Honda responded with various defenses, including non-infringement, invalidity, and inequitable conduct. The case was transferred to the district court from the Eastern District of Texas in 2006. Over the course of the proceedings thereafter, Calcar dropped certain patents, summary judgment was granted finding others to be invalid or non-infringing, and finally, in 2008, four patents went to trial.

Before trial, Honda moved for a finding of inequitable conduct. Honda's motion was based on the actions of Calcar's founder, Mr. Obradovich. Among the three coinventors, Mr. Obradovich was the one primarily responsible for preparing the patent application. Honda alleged that he deliberately withheld prior art that was material to patentability from the U.S. Patent and Trademark Office (" PTO" ). Specifically, Honda argued that while Mr. Obradovich disclosed the existence of the 1996 Acura RL (" 96RL" ) navigation system, he intentionally did not disclose additional information that would have led the PTO to deny the patent as anticipated or rendered obvious by the system.

In 1996, Honda added the navigation system as an option for the Acura RL. At the time, Calcar was publishing " Quick Tips" guides: booklets with condensed information from a car's owner's manual. During the course of developing a QuickTips guide for the 96RL, Mr. Obradovich drove the car and operated the navigation system, and Calcar personnel took photographs of the navigation system and owner's manual. Subsequently, Mr. Obradovich began working on the parent application that ultimately issued as the '355 patent. The application explicitly referred to the 96RL system as prior art, and Mr. Obradovich acknowledged that the system was used as the basis of Calcar's inventions. Honda alleged that Mr. Obradovich knew that the owner's manual and photographs were in

Page 1188

Calcar's possession and deliberately withheld them during prosecution. Honda argued that the operational details that he did not disclose were precisely those that were the claimed in the patents at issue--the use of the system to display the status of vehicle functions (claimed by the '497 patent) and to search for information about the vehicle (claimed by the '465 and '795 patents).

The jury ultimately found the '497 patent invalid, and it found the '465 and '795 patents valid. After the trial ended and the jury rendered its verdict, the district court granted Honda's inequitable conduct motion and, therefore, held the patents at issue unenforceable. Am. Calcar, Inc. v. Am. Honda Motor Co., No. 06-cv-02433, (S.D. Cal. Nov. 3, 2008), ECF No. 577 (" Calcar I " ). Calcar then appealed to this court.

While the appeal was pending, this court established a revised and narrower test for inequitable conduct in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc). In light of Therasense, we affirmed the district court's finding of the materiality of the prior art with respect to the '497 patent, and vacated the district court's other determinations of materiality and intent. Am. Calcar, Inc. v. Am. Honda Motor Co., 651 F.3d 1318 (Fed. Cir. 2011) (" Calcar II " ). On the question of the materiality of the prior art as to the '465 and '795 patents, we remanded for the district court to determine whether the patents would have been granted " but for" the information that the applicant did not disclose, following the test for materiality set forth in Therasense. Id. at 1335. With respect to the applicant's specific intent to deceive the PTO, we vacated as to all three patents and remanded to the district court to " make a specific finding on whether any of the three inventors knew that the withheld information was material and whether they made a deliberate decision to withhold it." Id. at 1335-36.

On remand, the district court asked the parties for additional briefing and held a hearing in March 2012. The district court again found that the three patents at issue were obtained through inequitable conduct, detailing its findings of fact and conclusions of law in an opinion spanning over twenty pages. Am. Calcar, Inc. v. Am. Honda Motor Co., No. 06-cv-2433, 2012 WL 1328640 (S.D. Cal. Apr. 17, 2012) (" Calcar III " ).

The district court found that but for the information about the prior art withheld by Mr. Obradovich, the PTO would not have granted the '465 and '795 patents. [WL] at *8. It made further findings as to all three patents regarding Mr. Obradovich's specific intent to deceive the PTO, concluding that the only reasonable inferences from the evidence were that Mr. Obradovich knew that the prior art was material to his invention and that he made a deliberate decision to withhold material information. [WL] at *9-10. It also found that evidence of Mr. Obradovich's good faith did not overcome this other evidence, nor did it create a reasonable inference that Mr. Obradovich may have been merely negligent or grossly negligent. [WL] at *11. Having made findings on each prong of the Therasense standard, the district court once again concluded that the patents are unenforceable due to inequitable conduct.

Calcar appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

II

Inequitable conduct is an equitable defense to patent infringement. Therasense, 649 F.3d at 1285. The defendant proves inequitable conduct " by clear and convincing evidence that the patent applicant

Page 1189

(1) misrepresented or omitted information material to patentability, and (2) did so with specific intent to mislead or deceive the PTO." Ohio Willow Wood Co. v. Alps S., LLC, 735 F.3d 1333, 1344 (Fed. Cir. 2013). Intent and materiality must be separately established. Therasense, 649 F.3d at 1290. On appeal, we review the district court's findings of materiality and intent for clear error. Intellect Wireless, Inc. v. HTC Corp., 732 F.3d 1339, 1342 (Fed. Cir. 2013). We review the district court's ultimate finding of inequitable conduct based on those underlying facts for abuse of discretion. Id.

A. Materiality

This court held in Therasense that the standard for " the materiality required to establish inequitable conduct is but-for materiality." 649 F.3d at 1291. In particular, undisclosed prior art is " but-for material if the PTO would not have allowed a claim had it been aware of" it. Id. This means that to assess materiality, the court must look to the standard used by the PTO to allow claims during examination. To wit: " The court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction." Id. at 1291-92. District courts and the PTO employ different evidentiary standards and rules for claim construction. Therefore, " even if a district court does not invalidate a claim based on a deliberately withheld reference, the reference may be material if it would have blocked patent issuance under the PTO's different evidentiary standards." Id. The jury's verdict finding the patents at issue non-obvious thus does not weigh on the determination of materiality for inequitable conduct, and indeed, Calcar does not make any arguments on appeal that rely on the jury's determination.

As an initial matter, we have already held that the prior art " 96RL search function is substantially similar to the system described in the '465 and '795 patents." Calcar II, 651 F.3d at 1335. The case was remanded because the district court had not made a specific finding that the " withheld information would have blocked issuance of the claims" of said patents. Id.

Claim 1 of the '465 patent is representative of the patents for which materiality is at issue on appeal (emphasis added):

1. A system for use in a vehicle comprising:
a memory for storing a plurality of displays having predetermined contents, the plurality of displays being associated with a ...

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