Lead Opinion
Opinion for the court filed by Circuit Judge GAJARSA. Concurring opinion filed by Chief Judge RADER.
Advanced Magnetic Closures, Inc. (“AMC”) brought an action against Rome Fastener Corp., Rome Fastener Sales Corp., Romag Fasteners Inc., and Rings Wire, Inc. (collectively “Romag”) for allegedly infringing U.S. Patent No. 5,572,773 (the “'773 patent”). After AMC finished presenting its case in chief, the U.S. District for the Southern District of New York (the “district court”) granted Romag’s Rule 50(a) motion for judgment as a matter of law (“JMOL”). The district court subsequently assessed attorney’s fees and costs against AMC under 35 U.S.C. § 285 based on (1) the '773 patent applicants’ inequitable conduct before the U.S. Patent and Trademark Office (the “PTO”) and (2) AMC’s litigation misconduct. Pursuant to 28 U.S.C. § 1927, the court also held AMC’s attorneys jointly and severally liable for a portion of Romag’s attorney’s fees, including the law firm Abelman, Frayne & Schwab (“Abel-man”) and David Jaroslawicz — the sole member of Jaroslawicz & Jaros, LLC. AMG, Abelman, and Mr. Jaroslawicz all appealed the judgment to this court. But Abelman subsequently settled with Romag, and this court dismissed Abelman’s appeal. Advanced Magnetic Closures, Inc. v. Rome Fastener Corp.,
Background
AMC owns the '773 patent, which discloses a magnetic snap fastener commonly used in women’s handbags. Magnetic snap fasteners typically consist of two halves — a male and female half. Both halves contain a rivet in the center. In one of the '773 patent preferred embodiments, the female half contains a magnetic rivet positioned just below a plate, creating an opening into which the male rivet can insert or “snap” into place. '773 patent col.4 11.38-41. Once the male half has snapped inside the female half, claim 1 of the '773 patent states that the two create a magnetic circuit that “passes at least through a periphery of [the] first rivet of [the] female member.” Id. at col.8 11.17— 19. The last element of claim 1 requires a “small hole” in at least one of the “rivets increasing the magnetic attraction of [the] magnetic member [in the female half] by modifying a resistance to said magnetic circuit at said first and second rivets.” Id. at col.8 11.19-23. Figure 1 from the '773 patent below shows holes running through both the female and male halves, numbered as 32 and 35 respectively.
On October 30, 1998, AMC filed suit against Romag, alleging, among other things, that Romag’s magnetic snap 'fasteners infringed claim 1 of the '773 patent. Romag holds U.S. Patent No. 5,722,126 (the “'126 patent”) for a magnetic snap fastener and marks all of its fasteners with the '126 patent number. To determine whether Romag’s fasteners infringed, the district court construed the last element of the '773 patent’s claim 1 to cover a magnetic snap fastener “in which the magnet causes lines of magnetic flux to pass through at least the outer sides of the rivet in the female half, and the small hole(s) in one or both rivets modifies their resistance to the flux and thereby increases the magnetic attraction.” Advanced Magnetic Closures, Inc. v. Rome Fastener Corp. (“AMC I ”), No. 98 Civ. 7766,
In an attempt to prove its claims, AMC submitted reconstructed evidence, presented contradictory testimony, and engaged in evasive litigation tactics. AMC submitted an expert report from Dr. Dev Ratnum in support of its claim for infringement. Dr. Ratnum opined that the '773 patent covered Romag’s fasteners. As part of his analysis, Dr. Ratnum purportedly performed a magnetic finite element analysis that produced images showing the magnetic flux of magnetic rivets with and without a hole. Based on these images, he concluded that “[t]he pictures obtained from the well established [finite element] analysis do not lie and it appears, the hole has a dramatic effect of increasing the flux in the center rivet.” J.A. 2784. However, Dr. Ratnum failed to disclose in his report that he had not performed the finite element analysis. Subsequently, Dr. Ratnum identified Brian Bell as the person who had performed the analysis, causing Romag to request that AMC produce Mr. Bell’s communications with Dr. Ratnum. As a result, AMC’s trial counsel, Mr. Jaroslawicz, withdrew Dr. Ratnum as an expert based on “[i] rreconcilable differences” and refused Romag’s request to produce Mr. Bell’s reports. J.A. 2762. The district court, therefore, ordered AMC to produce Mr. Bell’s reports. One of Mr. Bell’s memorandums to Dr. Ratnum directly contradicted the expert’s report. Mr. Bell wrote, “The results were the same, the no hole part had the most force.... This does not help your case.” J.A. 2217.
Before trial, AMC moved for summary judgment, attempting to remove several of Romag’s defenses, including an “unclean hands” defense. Advanced Magnetic Closures, Inc. v. Rome Fastener Corp. (“AMC II”), No. 98 Civ. 7766,
At the deposition, Mr. Riceman contradicted Mr. Bauer’s explanation of how he had invented the '773 patent’s fastener. Mr. Bauer testified that he became interested in magnetic snap fasteners when an acquaintance, Alexander Fischer, solicited him in the summer of 1992 about investing in the magnetic snap fastener business. Advanced Magnetic Closures, Inc. v. Rome Fastener Corp. (“AMC IV”), No. 98 Civ. 7766,
On approximately October 2, 1993, Mssrs. Bauer and Fischer formed the Randolph-Rand Corporation of New York (“RRNY”) and acquired the '294 patent. Id. at *6; Advanced Magnetic Closures, Inc. v. Rome Fastener Corp. (“AMC III ”), No. 98 Civ. 7766,
Contrary to Mr. Bauer’s version of events, Mr. Riceman testified that he invented the magnetic snap fastener described by the '773 patent. Mr. Riceman became an employee at RRNY after Mr. Fischer acquired the Randolph-Rand Corporation (“RRC”). AMC IV,
Although Mr. Riceman believed his status of inventor would strip RRNY of its claim to the '773 patent invention, he wrote a letter dated July 22, 1994, to the attorney prosecuting the '773 patent. See AMC III,
In response to Romag’s claim that Mr. Riceman was the '773 patent inventor, AMC submitted two documents in an attempt to corroborate Mr. Bauer’s claim of inventorship. First, AMC submitted a 1993 invoice from a machine parts manufacturer that demanded payment for several magnetic snap fastener prototypes. AMC IV,
At trial, AMC submitted more “reconstructed” evidence to demonstrate that Mr. Bauer was the inventor. AMC submitted some “very poor, essentially illegible” copies of sketches that Mr. Bauer allegedly made of the invention for Mr. Fischer in 1992. Id. at *8. Unfortunately, Mr. Bauer’s notations on the sketch were illegible. To clarify these notations, AMC submitted “a copy of the copy of the original sketch on which additional notations were made, most of them apparently restating, in clearer block letters, the original notations.” Id. Although AMC never submitted the original sketch, “[Mr.] Bauer testified [at trial] that he created the enhanced, legible copy in 2004 after the original was partially destroyed in a flood.” Id.
Mr. Bauer’s notation, however, conflicted with his testimony. On this “enhanced” copy, Mr. Bauer wrote, “HOLE IN MIDDLE RIVIT [SIC] DON’T PAY FOR 294 TO MITCH.” Id. at *9 (internal quotation marks omitted). “MITCH” refers to Mitchell Medina, whom Mr. Bauer apparently believed owned the '294 patent when he made the sketch. Id. Mr. Bauer, how
At trial, AMC also sought to establish patent infringement without the testimony of its discredited expert witness. As part of its case in chief, AMC presented three pieces of circumstantial evidence: (1) the '126 patent summary of invention, (2) a Romag advertisement, and (3) some of the '126 patent prosecution history. At the completion of AMC’s case in chief, the court granted Romag’s Rule 50(a) motion for JMOL because AMC failed to present any evidence on which a reasonable jury could conclude that Romag’s fastener’s had a rivet hole that increased magnetic attraction. Romag moved for attorney’s fees under 35 U.S.C. § 285 based on litigation misconduct and inequitable conduct for fraudulently listing Mr. Bauer as the '773 patent inventor.
After briefing and a hearing, the district court granted Romag’s motion for attorney’s fees on both grounds. Id. at *2-19. Moreover, the district court held that the '773 patent was unenforceable for inequitable conduct and required AMC, Abelman, and Mr. Jaroslawicz to pay Romag’s attorney’s fees plus interest in the amounts of $1,509,976.16; $1,000,160.74; and $454,197.36, respectively.
Both AMC and Mr. Jaroslawicz appealed. This court has jurisdiction over AMC’s and Mr. Jaroslawicz’s timely filed appeals under 28 U.S.C. § 1295(a)(1).
Discussion
On appeal, AMC argues that the district court erred in finding (1) that the '773 patent was unenforceable because Mr. Bauer committed inequitable conduct and (2) that this was an exceptional case under 35 U.S.C. § 285. AMC does not argue, however, that the award of attorney’s fees under 35 U.S.C. § 285 was improper because of litigation misconduct. Finally, AMC argues that the district court erred in granting Romag’s Rule 50(a) motion for JMOL. Mr. Jaroslawicz argues that the district court erroneously sanctioned him for attorney’s fees pursuant to 28 U.S.C. § 1927. We affirm the district court’s holding that the '773 patent is unenforceable based on inequitable conduct and the award of 35 U.S.C. § 285 attorney’s fees and costs against AMC. Because we hold that the '773 patent is unenforceable, we need not address the district court’s grant of JMOL. However, we reverse the district court’s 28 U.S.C. § 1927 sanction against Mr. Jaroslawicz.
I. Inequitable Conduct
AMC submits a broad and scattered challenge to the district court’s finding that the '773 patent is unenforceable based on inequitable conduct. We address each argument in turn and affirm the district court’s holding of unenforceability.
A. Jurisdiction
As a threshold matter, AMC argues that the district court should not have addressed inequitable conduct because it lacked jurisdiction to determine inventorship after Romag withdrew its counterclaim that the '773 patent was invalid under 35 U.S.C. § 102(f). We review whether a district court properly asserted jurisdiction without deference. Monsanto Co. v. Bayer Bioscience N. V.,
AMC misunderstands a district court’s authority to retain jurisdiction un
B. Due Process
AMC also asserts that the district court violated its due process rights because it did not give AMC a full and fair hearing on inequitable conduct or inventor-ship. Because this issue presents a procedural question not unique to patent law, we apply the law of the regional circuit from which the case is appealed. Massey v. Del Labs., Inc.,
AMC’s due process argument has no merit. AMC mischaracterizes the issue by claiming the district court failed to give it an opportunity to address inventorship under 35 U.S.C. § 102(f). But the district court was addressing Romag’s motion for attorney’s fees based on inequitable conduct, not Romag’s withdrawn counterclaim of invalidity under 35 U.S.C. § 102(f).
Contrary to AMC’s claim, the district court provided AMC a full and fair hearing on the issue before it — a motion for attorney’s fees based on inequitable conduct and litigation misconduct. As in all federal courts of appeals, the Second Circuit requires district courts to give parties notice and a fair hearing before awarding attorney’s fees. See Roadway Express, Inc. v. Piper,
Moreover, Romag’s motion for attorney’s fees based on Mr. Bauer’s inequitable conduct represented the parties’ second time addressing Mr. Bauer’s claim to inventorship. AMC first had the opportunity to address inventorship when it moved for summary judgment against Romag’s “unclean hands” affirmative defense and 35 U.S.C. § 102(f) counterclaim. See AMC III,
C. Inventorship
AMC next argues that the district court erred by failing to determine inventorship under the standards of 35 U.S.C. § 102(f) when finding that AMC committed inequitable conduct. According to AMC, “an inequitable conduct finding based upon an alleged false oath of inventorship necessarily requires that the issue of inventorship first be determined.” Appellant AMC’s Br. 28. We review the meaning of a patent statute without deference as a question of law. See In re McGrew,
AMC’s argument is not supported by this court’s decisions. We have held that when named inventors deliberately conceal a true inventor’s involvement, the applicants have committed inequitable conduct and the patent is unenforceable even as to an innocent co-inventor. Frank’s Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd.,
As in Frank’s Casing, the district court here had no obligation to resolve inventorship for the purposes of holding the patent unenforceable. If Mr. Bauer— as the sole named inventor — deliberately misrepresented that he invented the '773 patent’s fastener to the PTO, his deceit would “spoilt] the entire barrel,” leaving the '773 patent unenforceable. Stark,
D. Inequitable Conduct on the Merits
AMC also challenges the merits of the district court’s inequitable conduct finding. According to AMC, the district court erred by relying on Mr. Riceman’s “uncorroborated and hearsay testimony” to infer Mr. Bauer’s intent to deceive. Appellant AMC’s Br. 45.
Patent applicants “have a duty to prosecute patent applications in the [PTO] with candor, good faith, and honesty.” Honeywell Int’l Inc. v. Universal Avionics Sys. Corp.,
Under the materiality prong, information is material when a reasonable examiner would “likely consider [the information] important in deciding whether to allow an application to issue as a patent.” McKesson,
Under the intent prong, a party can prove intent to deceive the PTO based on direct evidence or on circumstantial evidence “with the collection of inferences permitting a confident judgment that deceit has occurred.” McKesson,
After the accused infringer has made this threshold showing of materiality and intent to deceive, “the district court must balance the substance of those now-proven facts and all the equities of the case to determine whether the severe penalty of unenforceability should be imposed.” Id. at 1367. If the court finds on the balance
In this case, the district court did not commit clear error in its materiality and intent findings. First, the district court did not clearly err in finding that Mr. Bauer withheld highly material information when he “concealed the most critical information: he was not the inventor he claimed to be.” AMC IV,
We recognize that in analyzing intent to deceive, the district court did not explicitly weigh the letter Mssrs. Bauer and Rice-man sent to the prosecuting attorney claiming to have resolved the inventorship dispute. In evaluating intent, a district court must weigh all the evidence, including evidence of good faith. See Purdue Pharma,
In upholding the district court’s findings on intent, however, we decline to place any weight on the portions of Mr. Riceman’s testimony explaining Mr. Bauer’s financial motives for designing around the '294 patent. See AMC IV,
Even though the district court was well within its discretion to consider Mr. Riceman’s testimony, we think that his testimony concerning Mr. Bauer’s financial motivations is unreliable and cannot serve as a basis to infer intent to deceive. For example, Mr. Riceman testified “that [Mr.] Bauer did not want him to be named as an inventor because, by the terms of [Mr.] Riceman’s consulting agreement with RRC, the invention would be owned by [Mr.] Medina.” AMC IV,
Although we agree with AMC that Mr. Riceman’s testimony is not totally reliable, we disagree on the extent to which the district court relied on his testimony to infer intent. The district court never credited Mr. Riceman?s claim that he invented the '773 patent. At best, the district court relied on Mr. Riceman’s testimony to find
In addition to upholding the district court’s materiality and intent findings, we hold that the district court did not abuse its discretion in finding that Mr. Bauer’s deceit justified holding the '773 patent unenforceable. When an applicant falsely claims that he has invented a device, he can hardly claim the right to enforce a patent to which he was never entitled. We have upheld district court holdings of unenforceability when the named inventors acted with deceptive intent to exclude a true inventor. See Frank’s Casing,
II. Litigation Misconduct as an Independent Basis for Attorney’s Fees
AMC further argues that the district court erred in finding that this was an exceptional case under 35 U.S.C. § 285 justifying an award of attorney’s fees. AMC does not argue, however, that the award of attorney’s fees under 35 U.S.C. § 285 was improper based on litigation misconduct. In response, Romag asserts that AMC has waived any argument that the district court improperly awarded attorney’s fees based on the independent
This court has consistently held that a party waives an argument not raised in its opening brief. SmithKline Beecham Corp. v. Apotex Corp.,
AMC indeed did not argue in its opening brief or even in its reply brief that the district court erred in awarding attorney’s fees under 35 U.S.C. § 285 based on litigation misconduct. Moreover, AMC’s failure does not present a case in which this court should address the issue to remedy an unfair procedure. AMC clearly understood the issue, but simply never made the argument. In its reply brief, AMC admitted that “the district court did state that the finding of litigation misconduct constituted an independent basis for finding the case exceptional and awarding attorneys fees.” Appellant AMC’s Reply Br. 1 (emphasis added). Moreover, the district court made clear that AMC itself was responsible for some of the litigation misconduct. The court stated, “Even if the inequitable conduct ruling is set aside, however, several litigation decisions made by AMC and its counsel compel the determination that this case is extraordinary and attorney fees are merited.” AMC IV,
III. Attorney Sanctions Under 28 U.S.C. § 1927
Mr. Jaroslawiez argues that the district court improperly sanctioned him for attorney’s fees under 28 U.S.C. § 1927. Under Second Circuit law, an appellate court reviews a district court’s imposition of sanctions under 28 U.S.C. § 1927 for abuse of discretion. Schlaifer Nance & Co. v. Estate of Warhol,
Under the Second Circuit’s strict standard, the district court abused its discretion by sanctioning Mr. Jaroslawicz under 28 U.S.C. § 1927. The district court may have had good reason to sanction Mr. Jaroslawicz, but it failed to find that Mr. Jaroslawicz acted in bad faith. The Second Circuit’s precedents make clear that the court meant what it said: “[T]he court’s factual findings of bad faith must be characterized by a high degree of specificity.” Schlaifer Nance,
Conclusion
For the foregoing reasons, we affirm the district court’s holding that the '773 patent is unenforceable based on inequitable conduct and its award of attorney’s fees against AMC under 35 U.S.C. § 285. However, we reverse the district court’s sanction and award of attorney’s fees against Mr. Jaroslawicz under 28 U.S.C. § 1927.
AFFIRMED IN PART and REVERSED IN PART
Costs
Each party shall bear its own costs.
Notes
. Mr. Bauer described his nail strength experiment in the following exchange with the court:
THE COURT: You put nails on the wall?
THE WITNESS: I took a nail, the head of the nail, and I drilled a hole in the back of the nail and I put it on [a flat magnetic plate attached to the wall]. And I took a piece of copper tubing and I cut round rings, as a weight. I used three pieces of weight, and I put it through the end of the nail. The one with the whole was holding-
THE COURT:-greater weight.
THE WITNESS:-greater weight. The one without the hole tipped over.
AMC IV,
Concurrence Opinion
concurring.
In this case, Mr. Bauer held himself out as the inventor of the patent in suit when the record makes clear that he knew he was not, especially in light of his attempts at trial to hide the truth. Although I would not approve the district court’s failure to explicitly consider Mr. Bauer’s and Mr. Riceman’s joint letter to the prosecuting attorney, see Highway Equip. Co. v. FECO, Ltd.,
I write separately to express my view that, absent extreme facts such as those found in the present case, this court should refrain from resolving inequitable conduct cases until it addresses the issue en banc. See Therasense, Inc. v. Becton, Dickinson & Co., Nos.2008-1511, -1512, -1513, - 1514, -1595, — Fed.Appx.-,