In general terms, these machines allow an operator to pour a large quantity of assorted coins into a central hopper. The hopper funnels the coins onto the center of a rotating disc. The disc presses the coins against a guide plate. As the disc continues to rotate, the guide plate aligns the coins in single file against its outer edge or the peripheral limit guide. Coins move at high speed along this edge until released into a slot of the proper diameter. Thus, nickels find a nickel-sized slot, dimes a dime-sized slot, and so forth. Once in the proper slot or exit guide, the coins move out of the sorter. Counting devices detect each coin as it passes out of the coin release guides. Thus, the machine sorts and counts at the rate of up to 6,000 coins per minute. Public transportation companies, banks, department stores, casinos, and other institutions which handle vast quantities of coins often use these high-speed coin sorters.
In July 1991, this court notified the parties to prepare for trial. Cummins moved to dismiss the '212, '531, and '561 patents from its complaint. Rather than welcoming a narrowing of the complaint, Brandt opposed this motion. This court permitted the parties to present arguments on Cummins' motion. Transcript of Proceedings (Tr.), Sept. 17, 1991, p. 2, and pp. 15-21. Brandt opposed the motion because it felt it could prove inequitable conduct in the prosecution of the '212, '531, and '561 patents. Furthermore, it asserted that inequitable conduct on these patents tainted the remaining patents -- the '280, '003, and '043 patents. On the basis of Brandt's allegation that it could prove that inequitable conduct on the '212, '531, and '561 patents tainted and rendered unenforceable the patents-in-suit, this court agreed to hear that evidence. The parties agreed to present the inequitable conduct issue to the court at the conclusion of the jury trial.
Before trial, this court dismissed with prejudice Cummins' complaint that Brandt's accused device infringed the '212, '531, and '561 patents. Therefore, Cummins could not and did not present at trial any evidence about infringement of these patents. During trial, this court limited Cummins to evidence about Brandt's alleged infringement of the '280, '003, and '043 patents. In special verdicts, the jury determined that Brandt infringed each of the patents-in-suit. The jury also determined that Brandt had not proven the invalidity of the '280, '003, or '043 patents.
At the conclusion of trial, the parties submitted to the court stipulated facts
and memoranda of law on the inequitable conduct allegations. The uncontested material facts on inequitable conduct focus on two events: a 1979 trade show where Cummins displayed a coin sorter and a 1982 business meeting between Cummins and the De La Rue Company about coin sorters.
The 1979 Trade Show
On May 20-23, 1979, Cummins exhibited a pre-production coin sorter at the American Bankers Association trade show in Anaheim, California. The high-speed coin sorter at the Anaheim trade show had a guide plate similar to the sorter head disclosed in the '280, '003, and '212 patents. Ristvedt-Johnson had filed the '280 and '003 patent applications long before this trade show.
The trade show sorter also had mechanisms for deshingling coins. Shingling occurs when coins overlap and stack up under the guide plate. To sort effectively, a coin handling machine must align a single layer of coins against its outer edge.
The '212 patent discloses means for deshingling coins. The patent describes a notch at the point where the rotating disc presses coins against the guide plate or sorter head. The notch ensures that coins slip in a single layer into the alignment area. Patent '212, col. 7, lines 1-6. A taper in the wall profile of the guide plate also separates shingled coins. The '531 and '561 patents -- dismissed before trial -- disclose ridges and recesses for deshingling coins similar to the notch and tapered walls in the '212 patent.
The '043 patent -- one of the patents-in-suit -- also claimed tapered edges and recesses to deshingle coins. In prosecution of the '043 patent, Ristvedt-Johnson cited as prior art both the '212 and '531 patents, which disclosed, among other features, deshingling means.
Cummins did not disclose the trade show sorter to the United States Patent and Trademark Office during prosecution of the '212, '531, '561, and '043 patents. The 1979 show antedates the filing dates of these patents by more than one year. Ristvedt-Johnson filed applications on the '212 in November 1980, the '531 in June 1983, the '561 in December 1984, and an original application on the '043 in December 1983.
Because filed in 1976 and 1978, the '280 and '003 are not subject to Brandt's allegations about the trade show.
In March 1989, Cummins -- Ristvedt-Johnson's exclusive licensee -- disclaimed claims 1-7 and 9 of the '212 patent. Cummins conceded that those claims define coin sorter features that were in the 1979 trade show sorter. Claim 10, one of the two remaining claims, describes the coin deshingling means.
De La Rue Meeting
Pursuant to a confidentiality agreement, Cummins' officers met on July 1, 1982 with officers of De La Rue, an English corporation. The De La Rue company markets currency and coin handling equipment. Both companies wanted to explore the possibility of forming a business relationship to develop coin handling products.
Each company came to the 1982 meeting intent upon presenting its own concept. De La Rue presented a coin packager; Cummins presented a coin counter and loader. Each concept applied very different solutions to the problem of handling coins. During the 1982 meeting, Cummins tried to demonstrate a coin counting and loading prototype. However, the demonstration did not work.
Mr. Jones, Cummins' Chief Executive Officer, was a principal participant in the meeting with De La Rue. He testified at trial that Cummins wanted to persuade De La Rue that the coin counting and loading technology would mesh well with coin packaging technology. Cummins hoped to interest De La Rue in supplying funds to develop the coin counter and loader concept. Mr. Jones testified that Cummins did not intend to sell anything at the July 1982 meeting. Mr. Raterman, Cummins' Director of Engineering, described the results of the De La Rue meeting to Victor Ristvedt, one of the '043 inventors. In a July 8, 1982 letter, Mr. Raterman stated:
We presented the concept studies, a proposed mechanical design and discussion of the technology to DELARUE Representatives on July 1, in the Cummins' plant.
Reducing the concept discussed during the 1982 meeting to a workable commercial product took five years.
Cummins did not disclose the De La Rue meeting to the PTO during prosecution of the '043 patent. The De La Rue allegations only apply to the '043 patent which Ristvedt-Johnson filed originally in 1983. In July 1987, Cummins filed a patent application which issued as United States Patent No. 4,966,570. The '570 patent covers the coin sorter portion of the coin counter and loader featured in the De La Rue meeting. In conjunction with this application, Cummins disclosed the De La Rue meeting to the PTO.
Standard for Inequitable Conduct
To prove inequitable conduct, a defendant must show by clear and convincing evidence that a reference is (1) material prior art; (2) that the applicant had or should have had knowledge of the prior art and its materiality; and (3) the applicant failed to disclose the prior art to the PTO with the intent to mislead. Fox Indus. v. Structural Preservation Sys., 922 F.2d 801, 803, 17 USPQ2d 1579, 1580 (Fed. Cir. 1990). Thus, the doctrine of inequitable conduct requires "conduct sufficient to support an inference of culpable intent." Northern Telecom v. Datapoint Corp., 908 F.2d 931, 939, 15 USPQ2d 1321, 1327 (Fed. Cir.), cert. denied, 111 S. Ct. (1990). A finding of gross negligence alone does not satisfy this intent requirement. Kingsdown Medical Consultants v. Hollister Inc., 863 F.2d 867, 876, 9 USPQ2d 1384, 1389 (Fed. Cir 1988), cert. denied, 490 U.S. 1067, 104 L. Ed. 2d 633, 109 S. Ct. 2068 (1989).
Thus, this court must first make two threshold inquiries: (1) whether the nondisclosed information satisfies a minimum level of materiality, and (2) whether the applicant's conduct shows an intent to mislead the PTO. Halliburton Co. v. Schlumberger Technology, 925 F.2d 1435, 1439-40, 17 USPQ2d 1834, 1838 (Fed. Cir. 1991). If the record satisfies both of these thresholds, then this court must balance the separate elements of materiality and intent to deceive. Id. ; Under Sea Indus. v. Dacor Corp., 833 F.2d 1551, 1559, 4 USPQ2d 1772, 1777 (Fed. Cir. 1987). This balancing ultimately determines whether the doctrine of inequitable conduct bars enforcement of the contested patents. Id. A greater showing of materiality reduces the showing of intent needed to prove inequitable conduct. A showing which barely satisfies the threshold of materiality requires a greater showing of intent to prove inequitable conduct. Id.
The Dismissed Patents
This court dismissed with prejudice Cummins' complaint that Brandt infringed the '212, '531, and '561 patents. Even if Brandt succeeded in proving misconduct in the prosecution of these patents, the jury did not consider these patents. To provide a defense to the jury's infringement verdict, Brandt must either show that Cummins conducted its prosecutions of the '280, '003, or '043 patents inequitably or that Cummins' misconduct otherwise renders these patents-in-suit unenforceable.
Ristvedt-Johnson filed patent applications which ripened into the '280 and '003 patents long before either the 1979 trade show or the 1982 De La Rue meeting. Thus, neither of these events shows inequitable conduct in the prosecution of the '280 or '003 patents.
The '043 Patent
The '043 patent issued on a series of three applications beginning with an application in December 1983. None of these applications was connected to applications which ripened into the '212, '531, or '561 patents. Brandt argues that claim 18 of the '043 patent (deshingling means) defines subject matter anticipated by the coin sorter displayed at the 1979 trade show. Thus, according to Brandt, Cummins committed inequitable conduct by failing to disclose the 1979 coin sorter to the PTO.
Brandt also argues that the 1979 trade show sorter anticipated the subject matter in the '212 and '531 patents. Defendant's Memorandum in Support of its Defense, Oct. 29, 1991 at 2 and 4. Brandt's own argument is fatal to its attack on the '043 patent. During prosecution of the '043 patent, Ristvedt-Johnson disclosed as prior art both the '212 and '531 patents. Indeed both the '212 and '531 patents appear as references of record in the '043 patent.
During prosecution of the '043 patent, the subject matter of the trade show sorter was already before the examiner in the form of the '212 and '531 patents. In particular, the '212 and '531 patents disclosed deshingling technology on which Brandt focuses in its inequitable conduct allegations against the '043 patent. Cummins had no obligation to disclose cumulative prior art or prior art already before the examiner. Halliburton, 925 F.2d at 1442; Specialty Composites v. Cabot Corp., 845 F.2d 981, 992, 6 USPQ2d 1601 (Fed. Cir. 1988).
In light of Cummins' disclosure of the '212 and '531 patents, the 1979 trade show sorter was not material to prosecution of the '043 patent, but merely cumulative prior art. Cummins' failure to disclose the 1979 coin sorter does not support Brandt's allegations of inequitable conduct. Brandt has not shown by clear and convincing evidence that Cummins withheld material prior art during prosecution of the '043 patent.
The absence of a threshold level of materiality in the undisclosed 1979 coin sorter alone precludes this court from finding inequitable conduct based on the trade show. Nonetheless, this court also notes that the record concerning the trade show does not show even a threshold level of intent to deceive. None of the individuals with knowledge of the 1979 show realized that the event was material to the '043 application. Indeed Cummins timely disclosed to the PTO the '212 and '531 patents which included, among other things, the deshingling means in claim 18 of the '043 patent.
Brandt contends that this court cannot enforce the '043 patent because Ristvedt-Johnson did not disclose to the PTO the 1982 De La Rue meeting. Once again Brandt tries to invoke the inequitable conduct doctrine against the '043 patent. This court, however, has the benefit of considerable evidence about the De La Rue meeting presented at trial.
For instance, in response to a question about the purpose of the De La Rue meeting, Mr. Jones testified "it was to discuss a possible development of a product." Tr., Vol. II at 214. He further testified:
The purpose [of the meeting] was to talk to them about using and developing this concept, to be used in a packager. . . .
We wanted to develop a machine, [and] get development money to develop this concept into a machine.