Mar 3, 2020

Attorneys and Clients Behaving Badly – Deliberately Withheld Offer for Sale Is Inequitable Conduct

Before, Reyna, Wallach, and Hughes. Appeal from the District Court for the Northern District of Illinois.

Summary: Withholding and obscuring evidence of a pre-critical date offer for sale renders a patent unenforceable for inequitable conduct.

On August 1, 2003, CleanTech sent Agri-Energy a proposal offering an ethanol processing system for a 60-day trial (the “Proposal”). At the end of the trial, Agri-Energy could either purchase or return the system. Without disclosing the Proposal to its patent counsel, on August 17, 2004 CleanTech filed its patent application for the processing system. In subsequent patent applications, CleanTech declared that its representatives hand-delivered the Proposal to Agri-Energy on August 18, 2003. CleanTech’s counsel did not question its client’s Declarations, despite having a copy of the Proposal email to Agri-Energy dated August 1, 2003. The USPTO ultimately issued CleanTech several patents covering its ethanol processing system.

In subsequent infringement litigation, the district court determined that the Proposal was a commercial offer for sale and evidence showed that the system was ready for patenting in August 2003. The Federal Circuit held this determination was not an abuse of discretion. The Federal Circuit also affirmed the ruling that both CleanTech and its counsel engaged in inequitable conduct. The Federal Circuit emphasized that CleanTech was aware of the statutory on-sale bar when it withheld the Proposal from the USPTO. CleanTech also made false Declarations to the USPTO by stating that the Proposal was delivered to Agri-Energy on August 18, 2003, when documents showed it was actually delivered on August 1, 2003. The court ruled that CleanTech’s counsel also engaged in inequitable conduct for failing to verify and correct CleanTech’s false Declaration.

Editor: Paul Stewart

Written by: Brok S. Humbert & Mark Kachner