Don't Overlook Nontraditional Defenses in Patent Litigations

Bottom line ' there may be more than meets the eye to documents produced in patent actions, and forensic examinations of those documents under appropriate circumstances may serve to change the dynamics in a case.

Jonathan S. Caplan is a partner and Mark A. Baghdassarian is a senior associate in the Intellectual Property Department of Kramer Levin Naftalis & Frankel LLP in New York City. Their practices focus on patent litigation and counseling.

It is a staple in virtually every patent case for defendants to assert defenses of non-infringement, invalidity, and inequitable conduct. While patent litigators appropriately focus on these traditional defenses, there are also nontraditional defenses ' including lack of ownership of the patent-in-suit, judicial estoppel, and unclean hands ' that may be incredibly beneficial to patent defendants. Each of these defenses can quickly, and sometimes more efficiently, end a bitterly contested patent action, either through summary judgment, settlement or, in a best case scenario, voluntary dismissal by the plaintiff-patentee.

So when does it make it sense to devote precious resources (including, of course, the client's money) to these less traditional defenses? Well, more often than you might think. These defenses, along with the factual indicators that often give rise to them, are discussed below.

Ownership of the Patent-in-Suit

It is black letter law that a plaintiff must own the patent to have standing to bring a patent infringement action. Gaia Technologies, Inc. v. Reconversion Technologies, Inc. , 93 F.3d 774, 777 (Fed. Cir. 1993). Of course, as litigators go through the prosecution history of the patent-in-suit, they can determine if the assignments have been properly executed to determine ownership interests. While such standard practice makes sense, a deeper probe into an inventor's prior work history may give rise to a dispositive ownership defense.

This is particularly appropriate where an individual inventor or corporation (whose principal is the inventor himself) has brought a patent action or sold his patent to another company that brought the action. Oftentimes, the inventor will have worked for a company to sustain himself financially during the period when he conceived of the invention. Generally, companies ' both large and small ' require employees to sign agreements in which the employee must assign any inventions conceived during, and related to, his employment. On other occasions, an inventor may have conceived of his invention during his tenure as a university student or faculty member and will have agreed to assign any and all inventions to the institution. Similarly, an inventor working for the government or on government contracts at the time he conceived the asserted invention is required to assign all inventions to the government.

Investigating such circumstances may reveal that the inventor's former employer, educational institution, or the government owns the asserted patent rather than the inventor, resulting in dismissal of the action for lack of standing. See, e.g., FilmTec Corp. v. Allied-Signal, Inc. , 939 F.2d 1568 (Fed. Cir. 1991). Indeed, dismissal might be appropriate even against a plaintiff that brought the patent infringement action after purchasing the patent-in-suit from an inventor (such as in the situation of a so-called patent troll). In responding to such an ownership defense, patentees will likely raise arguments over whether the invention falls within the scope of the inventor's employment, or whether the subsequent purchaser is a bona fide purchaser, and therefore, the plaintiff does in fact have standing to sue. No matter what, uncovering evidence to support a lack of ownership defense will, at a minimum, strengthen the client's position in the action, and, in the best case scenario, lead to a timely and less costly outright dismissal of the action.

Bottom line ' when doing battle in a patent infringement action, don't overlook the potentially powerful lack of ownership defense.

Judicial Estoppel

Judicial estoppel precludes a party from asserting claims where: 1) the party has taken a position clearly inconsistent with a position taken in a previous litigation; 2) the court in the prior proceeding accepted the previous position; and 3) where the previous position was failure to disclose, the non-disclosure must not have been inadvertent. See, e.g., In re Coastal Plains, Inc., 179 F.3d 197, 206-213 (5th Cir. 1999).

Consider the following hypothetical where a judicial estoppel defense may be used in a patent case: An inventor invests significant funds to develop her conceived invention and then to solicit companies to license the patent. Not surprisingly, the inventor incurs large sums of debt that ultimately force her into bankruptcy (a situation more likely due to the present economic environment). The inventor or her company's most valuable asset ' indeed, potentially the only asset of any value ' is the patent itself and the potential infringement claims the bankrupt inventor might have. However, during the course of the bankruptcy, the inventor doesn't mention the patent or the associated infringement claims, hoping
to shield those assets from her creditors.

Judicial estoppel prevents this inventor from subsequently bringing a patent infringement action, and dismissal on summary judgment grounds is appropriate. The rationale behind this result is to prevent a debtor from thwarting the full and honest disclosure requirements of bankruptcy proceedings and avoiding repayment of creditors. See, e.g., Austin v. McNamara, U.S. Dist. LEXIS 24229 (E.D. Tex. Mar. 30, 2007).

The benefit of such a defense is extremely high ' potentially ending a patent case very early in the process ' while the cost to pursue it is relatively low. A simple search of the appropriate databases will identify if the inventor filed for bankruptcy. Because bankruptcy petitions require the disclosure of all assets, including patents and potential causes of action, a simple review of the petition will reveal if the defense is worth pursuing.

Bottom line ' a quick search to see if the inventor has declared bankruptcy might lead to a less conventional, but equally powerful and dispositive defense.

Unclean Hands

Long ago, the Supreme Court explained the application and purpose of the unclean hands doctrine ' to prevent those who act in bad faith from seeking judicial relief:

[W]henever a party who, as actor, seeks to set the judicial machinery in motion and obtain some remedy, has violated conscience, or good faith, or other equitable principle, in his prior conduct, then the doors of the court will be shut against him in limine; the court will refuse to interfere on his behalf, to acknowledge his right, or to award him any remedy. Keystone Driller Co. v. Gen. Excavator Co. , 290 U.S. 240, 245 (1933).

The Federal Circuit has applied unclean hands to bar claims in a patent action where a corporation submitted fraudulent documents prepared by the inventor (who was the chairman of the corporate plaintiff) and made false statements to the court in related testimony to establish conception of the claimed invention. See, e.g., Aptix v. Quickturn Design Sys., Inc. , 269 F.3d 1369, 1378 (Fed. Cir. 2001).

More often than not, a patentee will need to overcome prior art by showing that she conceived of the invention before the invalidating prior art reference. On more occasions than one might think, inventors have manufactured, distorted or altered evidence ' for example, a laboratory notebook or the purported first disclosure of the claimed invention ' to overcome prior art that would invalidate their patent.

Sometimes, such misconduct may be exposed through careful review of documents. In other cases, a forensic examination of documents or computer files may be necessary. Consider the situation where, after review of the inventor's lab notebook, an attorney suspects that the dates written on the notebook pages are not correct and may have been added at a later time. A forensic document examiner can establish whether the same ink was used to write the dates on the page. If different inks were used, this suggests that the dates were added at different times and calls into question the truthfulness of the so-called conception proofs.

Similarly, a forensic examination can uncover what is not even visible on the pages of the notebook. For example, if an inventor had written on a post-it note or another piece of paper sitting on top of the notebook page, the forensic examiner can determine what was written on the post-it or paper based on the impressions made on the notebook page. Such evidence might reveal contradictory information to the visible writing on the notebook page. On other occasions, a forensic examination of the metadata and file fragments of documents created in computer programs such as Microsoft Word' may be extremely useful in confirming the actual creation date of documents or revealing that the documents were backdated.

On the one hand, exposing even the slightest misconduct can put a plaintiff-patentee on the defensive as well as crumble an inventor's conception proofs. More significant misconduct can result in dismissal of the action altogether. On the other hand, however, forensic examinations can be costly ' possibly amounting to six-digit fees ' and therefore pursuing such examinations must be evaluated in the context of the other proofs showing the misconduct. Indeed, it is likely that a substantial showing will be required to persuade a court to order such forensic examinations. As a rule of thumb, if you have enough supporting evidence to persuade the court to order a forensic examination, it is probably worth the cost of pursuing it.

Bottom line ' there may be more than meets the eye to documents produced in patent actions, and forensic examinations of those documents under appropriate circumstances may serve to change the dynamics in a case.

Jonathan S. Caplan is a partner and Mark A. Baghdassarian is a senior associate in the Intellectual Property Department of Kramer Levin Naftalis & Frankel LLP in New York City. Their practices focus on patent litigation and counseling.