Gfi, Inc. v. Franklin Corporation, Defendant-Cross and Washington Furniture Manufacturing Co., and Astro Lounger Furniture Manufacturing, Defendants-Cross v. Parkhill Furniture, Inc.
Docket: 00-1268
Court: Court of Appeals for the Federal Circuit; September 7, 2001; Federal Appellate Court
GFI, Inc. appeals judgments from the United States District Court for the Northern District of Mississippi, which held its U.S. Patent No. 5,064,244 unenforceable due to inequitable conduct and granted summary judgment of non-infringement regarding Parkhill Furniture, Inc.'s model 8000. The cross-appellants, including Franklin Corporation and Washington Furniture Manufacturing Co., challenge the district court’s ruling that the '244 patent was not invalid for obviousness under 35 U.S.C. § 103 and the denial of their motion for summary judgment of non-infringement under the doctrine of equivalents. GFI filed for the patent covering a sectional sofa with specific recliner configurations on January 3, 1991, and after initial rejection, the patent was issued on November 12, 1991. During prosecution, GFI engaged with Mississippi designer Walter Durling, who had a similar design and had filed a patent application prior to GFI's. Despite discussions aimed at exchanging design information, GFI declined to share details about their invention. GFI subsequently sued for infringement in 1997, leading to defenses of inequitable conduct, obviousness, laches, equitable estoppel, and patent misuse being tried in a non-jury trial. The appellate court affirmed the lower court's decisions.
GFI's claim that the district court compelled it to disclose privileged information to Franklin is examined under the law of the Fifth Circuit, as the issue does not pertain to substantive patent law or meet the criteria for exclusive jurisdiction. The Fifth Circuit reviews waiver of attorney-client privilege rulings for clear error and legal conclusions de novo. For attorney-client privilege to be valid, communications must be made and maintained in confidence. A client waives this privilege by not asserting it when confidential information is sought, and general inquiries about legal services do not require the privilege to be asserted. However, inquiries into specific discussions between attorney and client do invoke the privilege, necessitating an assertion to preserve it. If a party voluntarily waives privilege, it extends to all related communications. Franklin claims GFI waived privilege when its patent attorney testified in a previous case regarding privileged matters and failed to submit detailed privilege logs timely. The district court correctly determined that GFI waived privilege during the attorney's testimony about his mental state, knowledge of prior art, and discussions about disclosure duties. The court's order for GFI to release the privileged information was found to be without error.
To establish a defense of inequitable conduct, Franklin must demonstrate by clear and convincing evidence that GFI intentionally withheld material information from the PTO, as outlined in Purdue Pharma L.P. v. Boehringer Ingelheim GMBH. Evidence must show affirmative misrepresentations, failures to disclose, or submission of false information, with a concurrent intent to deceive. The standard of review for the district court's determination of inequitable conduct is an abuse of discretion. The analysis consists of two steps: first, assessing whether the withheld information is material and whether there was intent to mislead; second, evaluating the overall circumstances to determine if the conduct warrants patent unenforceability. Both intent and materiality are factual questions reviewed for clear error. The relationship between material omission and intent is inverse—the more material the omission, the less culpable the intent needed. GFI acknowledges that five references were not presented to the examiner but contends they were not material and that Franklin failed to prove deceptive intent convincingly. Materiality encompasses any information a reasonable examiner would find significant for patent allowance, but does not require citing cumulative or less material references already considered.
The district court correctly identified the Durling references as material due to their depiction of two recliners connected by a middle console and console-mounted controls, despite being in the form of a loveseat rather than a sectional. GFI's argument that Durling cannot be considered material because it is not prior art is flawed; the relevance of Durling was underscored by ongoing discussions between GFI and Durling concerning the priority of invention related to the '244 patent. GFI failed to inform the examiner of the potential priority conflict, thus unilaterally deciding Durling's non-prior art status was inappropriate. Even if GFI's position on prior art was valid, the materiality of Durling would still be significant, as a reasonable examiner would likely find the combination of elements in Durling's application important. The Durling references were not cumulative, as no other references disclosed the specific combination of elements presented.
In cases of inequitable conduct, direct evidence of deceit is rare, and intent is usually inferred from circumstantial evidence. Materiality does not imply intent, which is a separate requirement. Evaluating intent involves considering all evidence, including signs of good faith. GFI's case for deceptive intent regarding the Durling references is strong; it had knowledge of these references, received the Durling patent application, and engaged in negotiations with Durling for priority information. Despite this knowledge, GFI did not disclose the Durling references to the PTO and instead argued against their materiality, despite having prior knowledge of the pertinent features. The district court did not err in concluding that GFI's deceptive intent was substantiated by clear evidence.
No single factor or combination of factors guarantees an inference of intent to mislead; however, a patentee demonstrating high materiality and clear awareness of that materiality faces challenges in proving "subjective good faith" to counter such inferences. A mere denial of intent is insufficient to defeat claims of inequitable conduct. The district court found no abuse of discretion in concluding that GFI's actions warranted a ruling of unenforceability, particularly given the materiality of the Durling references. The failure to disclose these references alone justifies the unenforceability of the '244 patent, rendering further claims regarding infringement moot. The judgment of the United States District Court for the Northern District of Mississippi is affirmed.
