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Asghari-Kamrani v. United Services Automobile Ass'n
Citations: 220 F. Supp. 3d 707; 2016 U.S. Dist. LEXIS 170929Docket: CIVIL NO. 2:15cv478
Court: District Court, E.D. Virginia; December 8, 2016; Federal District Court
The Court denied the Motion to Dismiss filed by Nader Asghari-Kamrani and Kamran Asghari-Kamrani concerning their patent infringement case against United Services Automobile Association (USAA). The procedural history details that the initial complaint was filed on October 30, 2015, with a subsequent Second Amended Complaint submitted on April 12, 2016. USAA responded with a Motion to Dismiss and filed counterclaims alleging inequitable conduct by the Plaintiffs. On July 5, 2016, the Court invalidated the patent claims, ruling them ineligible for protection under 35 U.S.C. § 101, thus granting USAA’s Motion to Dismiss and dismissing USAA’s counterclaims as moot. However, the Court later amended the judgment to indicate that USAA's counterclaims were not moot due to a request for attorney’s fees. Following additional motions and hearings, USAA submitted an Amended Counterclaim on October 4, 2016. The factual background explains that the Plaintiffs are the inventors of Patent No. 8,266,432, which describes a system for user identification and authentication online, involving a Central Entity that manages user credentials and generates secure codes.
The User can submit their Username and Secure-Code to an External-Entity, which will relay this information to a Central-Entity for validation. The Central-Entity will inform the External-Entity of the validation result. The Court previously ruled that the '432 patent claims were invalid as they pertained to an abstract idea, disqualifying them from patent protection under 35 U.S.C. § 101. The current matter involves representations made by the Plaintiffs to the PTO regarding the '432 patent and three related patents: the '837 patent, the '676 patent, and the '129 patent. Plaintiffs claim that the '432 patent is entitled to the earlier filing date of the '837 patent through two potential chains of priority: either through the '676 patent or the '129 patent, both linking back to the '837 patent. USAA contends that the Plaintiffs made significant misrepresentations to the PTO during the prosecution of these patents, which could render the '432 patent unenforceable. The issue of inequitable conduct arises in connection with USAA’s Motion for Attorney’s Fees, authorized under 35 U.S.C. § 285 for "exceptional cases." Exceptional cases are identified by their substantive strength and the manner of litigation. Factors considered include frivolousness, motivation, and unreasonable conduct, which may encompass inequitable conduct before the PTO. USAA lists three grounds for seeking attorney’s fees: lack of factual or legal basis for the Plaintiffs' complaints, bad-faith litigation conduct, and inequitable conduct before the PTO during the prosecution of the '432 patent.
The third claim of inequitable conduct is central to USAA’s Third Counterclaim, which is currently addressed in USAA’s Amended Counterclaim and the Plaintiffs’ Motion to Dismiss. Patent applicants have a duty of candor and good faith towards the PTO, as established in case law and federal regulations. Breaches of this duty, such as misrepresenting, failing to disclose, or submitting false material facts with intent to deceive, result in the patent claims being unenforceable. This duty applies to all individuals involved in the patent application process, including inventors and attorneys.
To prove inequitable conduct, the accused must show by clear and convincing evidence that the applicant either made a misrepresentation or failed to disclose material information with deceptive intent. Additionally, the Federal Circuit mandates "but-for materiality," meaning the patent would not have been issued without the inequitable conduct, with an exception for cases of egregious misconduct like submitting false affidavits.
For patent complaints filed post-December 1, 2015, the pleading standards of Federal Rule of Civil Procedure 8(a) apply, and a motion to dismiss under Rule 12(b)(6) assesses the sufficiency of the complaint without resolving factual disputes or the merits of the claims.
To withstand a motion to dismiss, a complaint must present sufficient factual allegations to elevate the claim beyond mere speculation and demonstrate a plausible right to relief. The court is required to accept all well-pleaded allegations as true and draw reasonable inferences in favor of the plaintiff. Legal conclusions lacking factual support do not receive this presumption. Dismissals should occur only in very limited circumstances. In patent cases, claims of inequitable conduct necessitate stricter pleading standards under Federal Rule of Civil Procedure 9(b), which requires defendants to provide sufficient underlying facts to infer the intent to deceive the Patent and Trademark Office (PTO). Courts may consider misrepresentations during the prosecution of related patents to strengthen this inference. Moreover, inequitable conduct claims must detail the specifics of the alleged misrepresentation or omission to the PTO.
USAA claims inequitable conduct regarding the '432 patent and three related patents ('129, '676, and '837). Three specific instances of inequitable conduct are alleged: 1) false certification in the Non-Publication Request for the '676 patent; 2) false certification in the Non-Publication Request for the '129 patent; and 3) material misrepresentation concerning the priority chain of the '432 patent. The first two allegations involve similar actions and pertain to the requirement that non-publication requests certify that the invention has not been and will not be the subject of applications in other jurisdictions. The truthfulness of the Non-Publication Requests for the '129 and '676 patents at the time of filing is in dispute.
Prior to the enactment of 35 U.S.C.A. § 122 through the American Inventors Protection Act of 1999, U.S. patent applications were not published until they were granted, unlike foreign applications that were published 18 months post-filing. Section 122 mandates that U.S. patent applications be published 18 months after the earliest filing date unless a non-publication request is filed, certifying that the invention has not been and will not be subject to foreign applications. The law was introduced to enhance transparency for American inventors regarding foreign patent filings. If an applicant has a foreign counterpart that was filed before the U.S. application, they may submit a redacted version of the U.S. application, omitting any new information not present in the foreign application.
USAA claims that on August 29, 2001, the plaintiffs filed a patent application with the World Intellectual Property Organization, which published on March 13, 2003, and asserts that this application and the '837 patent are counterparts. On September 30, 2005, and January 18, 2006, Nader Asghari-Kamrani filed non-publication requests for the '676 and '129 patents, respectively, certifying that these inventions would not be subject to foreign applications. USAA contends that these requests lead to two outcomes: either the '676 and '129 patents are distinct inventions from the '837 patent, disrupting the priority chain for the '432 patent, or the plaintiffs did not accurately certify compliance with 35 U.S.C. § 112, rendering the '129 and '676 patents abandoned.
USAA alleges that the Plaintiffs and their agents, Bijan Tadayon, Veronica-Adele Déla Roca Cao, Marianna Hann, Tiffany Little, and Michael Fortkort, failed to rescind Non-Publication Requests while prosecuting the '432 patent and attempted to conceal these actions. USAA claims this conduct violated 37 C.F.R. § 11.18(b) by making false certifications, which, if known to the PTO, would have led to the termination of application proceedings under 37 C.F.R. § 11.18(c)(5). The Plaintiffs argue that the Non-Publication Requests were valid because they only needed to certify that the specific application had not been filed in another country, not considering other applications in the same family. They assert that USAA only alleges a foreign counterpart for the '837 patent, not for the '676 or '129 patents, making the requests proper. Plaintiffs reference the Manual of Patent Examining Procedure (MPEP) and legislative history to support their interpretation of 35 U.S.C.A. § 122, highlighting that the intent behind the publication requirements was to inform American inventors of foreign counterparts, which did not apply to the '676 and '129 patents. USAA counters that the clear language of the non-publication requests and statutory provisions indicates that the invention cannot have foreign filings, supporting its claim of inequitable conduct.
USAA contends that the Manual of Patent Examining Procedure (MPEP) is not legally binding and cannot be used by Plaintiffs to support positions that contradict established law. USAA asserts that the applicable legal standards are found in 37 C.F.R. § 1.213 and 35 U.S.C. § 122(b)(2)(B), which mandate that an applicant certify that the invention disclosed has not been the subject of a foreign application. USAA further argues that the MPEP itself refers to these statutory and regulatory requirements, emphasizing that the certification pertains to the invention rather than a specific application. For instance, MPEP § 1122 clarifies that the certification relates to whether the invention has been the subject of any foreign application.
The Court acknowledges the lack of clear guidance regarding the interpretation of 35 U.S.C.A. § 122(b)(2)(B)(i), particularly in defining "invention," as the American Inventors Protection Act (AIPA) does not provide a definition, and other patent law provisions offer ambiguous references. Despite this, the Court remains unconvinced by Plaintiffs' arguments for three primary reasons: (1) the statutes explicitly require certification that the invention has not been the subject of foreign applications; (2) the Congressional Record supports this requirement; and (3) accepting Plaintiffs' interpretation would render 35 U.S.C.A. § 122(b)(2)(B)(v) redundant, as this provision allows applicants to submit redacted copies of U.S. applications when corresponding foreign applications contain less extensive descriptions.
An applicant cannot withhold publication of an application that should be published if it relates to a previously foreign-filed application, as indicated by 35 U.S.C.A. § 122. However, the applicant may publish a redacted version limited to information disclosed in the prior foreign application, aligning with Congressional intent to keep American inventors informed about foreign patents. The Court finds that USAA has adequately claimed specific intent regarding inequitable conduct related to Non-Publication Requests. Under Fed. R. Civ. P. 9(b), allegations of inequitable conduct must show that a specific individual knew about the withheld material or false information and intended to deceive the PTO. USAA has presented facts suggesting that Nader Asghari-Kamrani, an inventor of the '837 patent and a signer of Non-Publication Requests for the '676 and '129 patents, was aware of the foreign filing and intended to deceive the PTO. The Requests he signed included a certification affirming knowledge of the foreign counterpart. Additionally, USAA alleges that multiple Plaintiffs and their agents knew about the false certifications and the Non-Publication Requests, inferring intent to deceive based on their involvement in at least thirty-two PTO filings related to the '432 patent. If the PTO had been aware of the misrepresentations, it might have affected the priority claims associated with the '432 patent or led to prosecution termination due to false statements.
Plaintiffs and their agents are accused of misrepresentations during the prosecution of the '432 patent, suggesting intent to deceive the PTO regarding their duty of candor. USAA has provided sufficient factual allegations to infer knowledge and intent behind these actions. Under Fed. R. Civ. P. 9(b), USAA has identified the specific individuals involved, including Plaintiffs and agents, as well as the particulars of the misrepresentation, including specific filings with the PTO, such as Non-Publication Requests made on September 30, 2005, and January 18, 2006, and the failure to rescind these requests during subsequent filings from 2008 to 2012. USAA claims that by signing false certifications in these requests, the Plaintiffs knowingly misrepresented information that could impact the patent's priority claims and chose not to disclose this to the PTO to avoid penalties under 37 C.F.R. § 11.18(b). The omission could have led to the termination of the patent prosecution had the PTO been aware. Furthermore, USAA alleges that the Plaintiffs materially misrepresented the priority claims of the '432 patent to secure a more advantageous filing date. This involves claims related to continuations and continuations-in-part, with the continuation application allowing for additional claims based on the original parent application that remains pending.
The application benefits from the filing date of an earlier patent, allowing it to claim the priority date of the first application for evaluating the novelty of the claimed invention. This means that prior art considered does not include everything published before the continuation application’s filing but is limited to what was published before the priority date from the parent application. In contrast, a continuation-in-part application includes additional material not disclosed in the earlier application, where claims supported by the parent’s specification can use its filing date, while unsupported claims cannot claim an earlier date than their own filing.
USAA has raised claims of inequitable conduct involving alleged misrepresentations in the filing of the '432 and '676 patents, incorrectly labeled as continuations rather than continuations-in-part, which the plaintiffs attribute to clerical errors rather than intent to deceive the Patent and Trademark Office (PTO). Similar mislabeling occurred with the '538 patent. Additionally, the plaintiffs asserted that the '432 patent claims priority to the 129 and '837 patents, citing unintentional delays in seeking this benefit. The core issue is whether these pleadings suggest inequitable conduct or merely inadvertent mistakes. USAA contends the '432 patent is unenforceable due to these misrepresentations, arguing the PTO would not have issued the patent if it had known the true priority dates, thus affecting its assessment of prior art and potentially rendering the '432 patent invalid.
USAA alleges that Plaintiffs Nader and Kamran Asghari-Kamrani, along with their agents, had a duty to be truthful to the PTO regarding the priority claims of the ’432 patent but willfully withheld and misrepresented material information throughout its prosecution. USAA cites at least thirty-two specific instances of material misrepresentation, including a failure by Bijan Tadayon to correctly file the priority claims in a September 15, 2008, application, despite knowing the ’432 patent could not claim priority from the ’676 and ’837 patents. The Plaintiffs continued to sign declarations and applications knowing they contained false priority information. Additional allegations include actions taken by Veronica-Adele Déla Roca Cao and Marianna Han on September 8, 2009, and Michael P. Fort-kort on August 5, 2010, where they failed to correct the known false priority chain. USAA claims that this ongoing deception resulted in the fraudulent issuance of the ’432 patent and argues that the involvement of multiple law firms indicates intent to deceive rather than mere error. USAA also references related patent filings by the Plaintiffs' current litigation counsel as further evidence of a consistent pattern of misrepresentation aimed at deceiving the PTO.
The excerpt outlines allegations by USAA regarding misstatements in the prosecution of the ’432 patent, which is claimed to be a continuation-in-part of the ’676 and ’837 patents. USAA asserts that these misrepresentations indicate a pattern of deception extending back to the prosecution of the ’432 patent. They highlight filings by attorney Jae Youn Kim, who claimed an unintentional delay of over four years in asserting priority through the ’129 patent, which itself claims priority to the ’837 patent. USAA contends that a Terminal Disclaimer submitted during the prosecution of both the ’432 and ’129 patents should have alerted the Plaintiffs to the pertinent relationship between the patents, suggesting that the failure to claim priority was not truly unintentional.
Moreover, USAA argues that the PTO's dismissal of one of Mr. Kim's petitions implies that the delay in submitting priority claims was deliberate, as prior law firms handling the applications were aware of both the ’432 and ’129 patents. USAA infers that these actions reflect an intentional effort to mislead the PTO regarding the priority of the ’432 patent. They also point out that Plaintiffs have disclaimed a priority chain through the ’129 patent, as indicated by a 2006 Non-Publication Request asserting that the ’129 patent covers a different invention from the ’837 patent. In contrast, Plaintiffs maintain that the initial mislabeling of the ’432 patent as a continuation rather than a continuation-in-part was an innocent clerical error, which they claim was subsequently corrected, arguing that the substantive relationship, not the label, is what matters.
Transco Products, Inc. v. Performance Contracting, Inc. highlights that terms like 'continuation,' 'divisional,' and 'continuation-in-part' are utilized by the PTO for administrative purposes. Plaintiffs assert that a superficial review of the applications for the patents in question would have uncovered a clerical error, particularly noting that the ’676 patent, with a distinct specification, qualifies as a “continuation-in-part.” They argue this indicates an innocent clerical mistake. However, USAA contends that even if a clerical error occurred, the ’432 patent's relationship to the ’837 patent's priority date renders any mislabeling significant. Plaintiffs further accuse USAA of engaging in an extensive and unfounded discovery effort by issuing numerous subpoenas to former counsel and others, alleging USAA has not adequately demonstrated “but-for” materiality regarding its claims.
On related patent applications, Plaintiffs claim that the error made by their attorney in designating the new ’538 patent as a “continuation” instead of a “continuation-in-part” was merely clerical. They also argue that any actions by Mr. Nienstadt and Mr. Kim post-issuance of the ’432 patent cannot substantiate a claim of inequitable conduct, as they were not involved in its prosecution and thus could not affect its issuance based on alleged misrepresentations. In contrast, USAA asserts that there is an exception to the standard established in Therasense for cases involving egregious misconduct, which applies here. USAA claims that false statements made by Mr. Kim regarding the delay in claiming priority and mischaracterizations by Mr. Nienstadt about the patents’ status amount to affirmative misconduct, fitting within the Therasense exception for materiality. USAA believes these assertions provide adequate grounds to infer that the Plaintiffs and their agents misrepresented the nature of the ’432 patent application.
Plaintiffs and their agents are accused of misrepresenting that the ’676 patent was a continuation of the ’837 patent, leading the PTO to assign an incorrect priority date to the ’432 patent. The Plaintiffs had a duty to disclose any misrepresentations they encountered while filing documents, given their familiarity with the patents involved. Their failure to disclose material information, which was critical to the patentability of the ’432 patent, constitutes a violation of their duty of candor. USAA's pleadings suggest that this nondisclosure was intentional, aiming to conceal information that could impact the patent's validity. The Court acknowledges that while USAA does not assert a distinct claim of inequitable conduct against agents Mr. Nienstadt and Mr. Kim, their actions in related patent applications contribute to a broader pattern of conduct that could indicate intent to deceive the PTO. This pattern strengthens the inference of deceptive intent regarding the priority claim of the ’432 patent. Even if some mislabeling and delays were mere clerical errors, they, combined with the overall pattern of inequitable conduct, suggest intentional wrongdoing. USAA has adequately demonstrated material misrepresentation or omission in its pleadings.
Had the PTO been aware of the accurate priority claims for the '432 patent and not misled by false representations, it would not have issued the patent, illustrating materiality. Under Fed. R. Civ. P. 9(b), inequitable conduct must be pled with specificity regarding the "who, what, when, where, and how" of the misrepresentation. USAA's Amended Counterclaim meets this requirement by identifying specific individuals involved in the misrepresentation, including Plaintiffs and their agents. It details over thirty instances between 2008 and 2012 where material information regarding the priority claims was withheld from the PTO.
USAA argues that the PTO relied on a false priority date, the '837 filing date, which if known would have led to the rejection of the '432 patent claims under 35 U.S.C. 102, as the '837 patent anticipates them. Furthermore, the misrepresentations in the Non-Publication Requests would have obstructed the '432 patent from making indirect priority claims. Additionally, had the PTO known about the breach of duty of candor, it might have terminated the prosecution of the '432 patent.
The Court concludes that USAA has adequately pled inequitable conduct and denies the Plaintiffs' Motion to Dismiss for Failure to State a Claim. The determination of whether these inequitable conduct claims can be proven will take place in future proceedings. The Court has not taken a position on any factual disputes or defenses at this stage. The Clerk is instructed to forward the Order to all Counsel of Record. Notably, Plaintiffs have expanded their claimed priority chain for the '432 patent to include both the '676 patent and the T29 patent, which also claim priority to the '837 patent.
The statute stipulates that an application is considered abandoned if the applicant does not notify the Office within 45 days of a later filed application in another country or under a multilateral agreement that mandates an 18-month publication period. This law aims to allow American inventors early access to foreign patent applications relevant to their inventions. According to the Congressional Conference Report (H.R. Rep. No. 106-464, 1999), when a U.S. application includes more material than a prior international application, the applicant can limit the USPTO's publication to only the content previously disclosed, thus delaying publication of additional improvements. However, any details present in the foreign filings cannot be excluded from the U.S. application’s publication.
USAA argues that if the patents in question ('676 and '129) contain descriptions found in the foreign filing of patent '837, the Non-Publication Requests are invalid. The document references a case (Arrow International, Inc. v. Spire Biomedical, Inc.) discussing improper foreign patent filings post Non-Publication Requests. The court did not interpret 35 U.S.C.A. 122 as requiring that an application be free of foreign filings, since both the foreign and U.S. applications pertained to the same invention.
An example illustrates that if an applicant files a U.S. application and a PCT application for the same invention, and later files a continuation in part (CIP) with additional content, they must certify that the disclosed invention has not been subject to foreign applications. If the applicant claims the earlier invention in the CIP, it must be published, but they can redact any non-duplicative information from the CIP to align it with the previously published U.S. application, thus not adding new information to public knowledge. USAA contends that the outcome of the Non-Publication Requests results in either scenario where the true status of the applications could be misrepresented.
The ’676 patent and T29 patent represent distinct inventions from the '837 patent, which means that the ’432 patent cannot claim the priority date of the '837 patent via these patents. Additionally, Plaintiffs allegedly did not accurately certify, as mandated by 35 U.S.C. § 112, that the invention of the ’837 patent was not subject to a foreign-filed application, resulting in the T29 and ’676 patents being considered abandoned. According to 35 U.S.C.A. § 120, a patent application can benefit from the filing date of an earlier application if it meets specific criteria, including containing a reference to the earlier application.
USAA contends that Plaintiffs are mistaken in asserting that USAA has not demonstrated but-for materiality concerning the lack of support for the ’432 patent in the '676 and T29 patents. USAA claims that Plaintiffs have already acknowledged that at least one claim of the ’432 patent lacks full support from its parent patents, as evidenced by the amendment of the ’432 patent to claim priority from both the ’676 and T29 patents. Furthermore, USAA argues that the responsibility to show which claims of the '432 patent are supported by its parent patents lies with the Plaintiffs.
Recent actions by the PTO have granted petitions for a Covered Business Method Review of the ’432 patent, where the PTO noted that Plaintiffs did not adequately demonstrate the priority chain, treating the '432 patent's filing date as September 15, 2008, instead of the earlier 2001 date of the ’837 patent. USAA emphasizes that the distinction between continuation and continuation-in-part patents is significant, as the Plaintiffs have still benefited from the priority date due to the patents in the chain being labeled as continuations.