disclosed to the patent examiner by Mr. Hill's attorney. The next most pertinent art, which was also disclosed to the patent examiner, is the Cryogenic Railcar Report which describes the various prototype railcars developed by AFFCAR, including the AFFX 2002. (Def.'s Ex. 18). The Rubin patent, which involves two containers in a vehicle transport with ceiling vents on both sides is also relevant prior art. (Pl's Ex. AC). This patent was also reviewed by the patent examiner. The Kurth British Patent, which discloses a bunker floor which allows sublimated gas from solid CO to pass through apertures in the bunker floor down into a cargo area is also relevant prior art. (Pl's Ex. CR). The '876 Patent represents a significant improvement from the relevant prior art and is not obvious from a review of the relevant prior art. (Def.'s Ex. 234). No single item of prior art discloses the same thing or anticipates the invention specified by the '876 Patent claims.
20. There is no clear suggestion of combining different pieces of prior art to produce the invention claimed by the '876 Patent unless the patent is improperly used as a guide to make the combination.
21. The '876 Patent discloses a new approach to in-transit cooling. It uses a pre-deep freezing form of cooling because it substantially pre-deep-freezes the most exposed portion of the load during the time the bunker is being charged with CO snow through an adequate distribution of vents provided from the bunker area.
22. The Court specifically finds that the '876 Patent, as improperly copied by GATC, has had considerable commercial success in the marketplace and has served to satisfy a long felt need in the art. All of these factors, along with the failure of other persons of ordinary skill in the art to make the invention, has served to convince this Court that the '876 Patent is not invalid because its claims would have been "obvious". Graham v. John Deere Co., 383 U.S. 1, 15 L. Ed. 2d 545, 86 S. Ct. 684 (1966); Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530 (Fed. Cir. 1983); Perkin-Elmer Corp. v. Computervision Corp., 732 F.2d 888 (Fed. Cir.), cert. denied, 469 U.S. 857, 83 L. Ed. 2d 120, 105 S. Ct. 187 (1984).
23. Every applicant for a patent has a duty of candor and good faith in its dealing with the Patent Office and the Examiner handling his application. This means that the applicant and his or her lawyer must not intentionally withhold or misrepresent material information concerning the invention, as defined by the asserted claim. A breach of this duty is inequitable conduct and renders the patent unenforceable.
24. Inequitable conduct before the Patent Office arises from failure to disclose material information, or submission of false material information with an intent to deceive the Patent Office. FMC Corp. v. Manitowoc Co., 835 F.2d 1411 (Fed. Cir. 1987). To show that Cryo-Trans is guilty of inequitable conduct because of its "failure to disclose" prior art GATC must offer clear and convincing proof of (1) prior art or information that is material; (2) knowledge chargeable to Hill of that prior art or information and of its materiality; and (3) that Hill's failure to disclose the art or information resulted from an intent to mislead the Patent Office. Id. at 1415; Hewlett-Packard Co. v. Bausch & Lomb Inc., 882 F.2d 1556, 1562 (Fed. Cir. 1989), cert. denied, 493 U.S. 1076, 107 L. Ed. 2d 1031, 110 S. Ct. 1125 (1980); Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988), cert. denied, 490 U.S. 1067, 104 L. Ed. 2d 633, 109 S. Ct. 2068 (1989). To satisfy the "intent to deceive" element of inequitable conduct, "the involved conduct, viewed in light of all the evidence, including evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive." Paragon Podiatry Lab, Inc. v. KLM Lab, Inc., 984 F.2d 1182, 1189 (Fed. Cir. 1993).
25. "Inequitable conduct" is not, or should not be, a magic incantation to be asserted against every patentee. Nor is that allegation established upon a mere showing that art or information having some degree of materiality was not disclosed. FMC Corp. v. Manitowoc Co., Inc., 835 F.2d 1411, 1415 (Fed. Cir. 1987). A patent applicant is under no obligation to disclose "all pertinent prior art or other pertinent information of which he is aware." Digital Equip. Corp. v. Diamond, 653 F.2d 701, 716 (1st Cir. 1981). The two controlling factors are the materiality of the information and the intent of the action. Id.
26. In evaluating "inequitable conduct" the knowledge and actions of a patent applicant's attorneys are chargeable to the applicant. Argus Chem. Corp. v. Fibre Glass-Evercoat Co., 759 F.2d 10, 14-15 (Fed. Cir.), cert. denied, 474 U.S. 903, 88 L. Ed. 2d 230, 106 S. Ct. 231 (1985).
27. The Kurth Patent qualifies as a prior art publication pursuant to 35 U.S.C. § 102(b). Mr. Hill's failure to disclose the Kurth Patent was material because there was a substantial likelihood that a reasonable examiner would have considered it important in deciding whether to issue the patent-in-suit. J. P. Stevens Co. v. Lex Tex, Ltd., 747 F.2d 1553 (Fed. Cir. 1984), cert. denied, 474 U.S. 822, 88 L. Ed. 2d 60, 106 S. Ct. 73 (1985).
28. There must be an element of bad faith or total recklessness to find fraud or inequitable conduct. Digital Equip. Corp. v. Diamond, 653 F.2d 701 (1st Cir. 1981); Norton v. Curtiss, 57 C.C.P.A. 1384, 433 F.2d 779, 795-96 (C.C.P.A. 1970). See also Tegtmeyer, Fraud on the Patent and Trademark Office Under Rule 56, 58 J. Pat. [& Trademark] Off. Soc'y. 550, 561 (1976).
29. To establish fraud on the Patent Office a substantial degree of "wrongfulness" is required to be shown. Applicants for patents do not engage in fraudulent conduct when they make "honest mistakes in judgment" concerning the information material to consideration of their applications, nor does some slight deviation from the requisite standard of care suffice as fraud. Digital Equip. Corp. v. Diamond, 653 F.2d 701, 715 (1st Cir. 1981).
30. A fraud finding also requires that the withheld information meet a rather high standard of materiality. "Materiality" has generally been interpreted to mean that if the Patent Office had been aware of the complete or true facts, the challenged claims would not have been allowed. Norton v. Curtiss, 57 C.C.P.A. 1384, 433 F.2d 779, 794-95 (C.C.P.A. 1970). To establish fraud, the nondisclosed information must be such as to have a likely effect on the scope of allowable claims or the issuance of the patent. It is not enough that the information be simply "relevant" in some general sense to the subject matter of the claimed invention, or even to the invention's patentability. Digital Equip. Corp. v. Diamond, 653 F.2d 701, 716 (1st Cir. 1981). To satisfy the intent to deceive element of inequitable conduct, "the involved conduct, viewed in light of all the evidence, including evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive." Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988), cert. denied, 490 U.S. 1067, 104 L. Ed. 2d 633, 109 S. Ct. 2068 (1989).
31. GATC has not shown by clear and convincing evidence that the '876 Patent is unenforceable because of fraud on the Patent Office. There is no evidence indicating intent to mislead the Patent Office in connection with obtaining allowance of the '876 Patent. At best the evidence tends to indicate that Mr. Hill's counsel negligently failed to present certain relevant prior art to the Patent Office. The Court can not conclude that the totality of the circumstances establishes an intent to mislead or deceive the Patent Office by clear and convincing evidence.
32. Mr. Hill's Patent Application, which attached the Cryogenic Railcar Report, sufficiently disclosed relevant prior art. (Def.'s Exs. 1, 2). Although the better practice would have been for Mr. Klarquist to have disclosed the Kurth Patent, this prior art was not intentionally hidden from the Patent Office. Because the materiality of the Kurth Patent is open to some debate because it did not contain a manifold system for manufacturing CO snow, the Court does not find its materiality to be high enough to establish fraud on the Patent Office given the dearth of evidence regarding Mr. Hill's intent to deceive.
33. Mr. Hill was represented by Lamb-Weston's patent attorney during his patent application because at the time he applied for the '876 Patent he was a Lamb-Weston employee. There is no evidence to indicate that Mr. Hill, Mr. Klarquist or Lamb-Weston had any motivation to deceive the Patent Office. To the contrary, the evidence shows that Mr. Hill and Mr. Klarquist both acted in good faith throughout the patent application process.
34. The patent laws provide that Cryo-Trans shall be awarded damages adequate to compensate for any infringement that is proven with "reasonable certainty". Damages are compensation for all loses suffered as a result of the infringement. Adequate compensation should return Cryo-Trans to the position it would have occupied had there been no infringement. However, Cryo-Trans is not entitled to speculative damages which, although possible, are wholly remote or left to conjecture and/or guess.
35. Lost profits may be in the form of diverted sales, eroded prices, or increased expenses. Cryo-Trans must establish causation between its claimed lost profits and the infringement. A factual basis for the causation is that "but for" the infringement, Cryo-Trans would have made the sales that the infringer made, charged higher prices, and/or incurred lower expenses. In order to show that Cryo-Trans would have made the sales defendant made, plaintiff must show that: (1) there was a demand for the patented product; (2) plaintiff had the ability to meet the market demand; and (3) there were no acceptable non-infringing substitutes or alternatives.
36. "Price erosion" occurs when a plaintiff is forced to lower prices due to the presence in the market of the defendant's infringing product. Cryo-Trans' price erosion losses can include projected future losses which are sufficiently established by a preponderance of the evidence.
37. At the time of trial, Cryo-Trans sought total damages of $ 51,626,166 which represent treble damages of $ 17,208,722 in actual damages. Cryo-Trans seeks trebled damages based on the asserted willfulness of GATC's conduct.
38. The parties have agreed that the proper method of assessing damages in this case is the lost profits analysis. (Tr. 1142).
39. The total lost profits to Cryo-Trans for leases entered into by GATC are $ 8,920,732. (Tr. 656; Supp. 6/15/95 Declaration of Aron Levko). Cryo-Trans has also suffered price erosion for a lease it executed in December of 1994 in the total amount of $ 562,157 (Tr. 660, 1144; Supp. 6/15/95 Declaration of Aron Levko). The Court specifically rejects some of the damage calculations made by GATC's expert, Mr. Sims, as being unduly conservative and unreasonable. (Pl.'s Ex. HT).
40. With the elimination of GATC from the market, the Cryo-Trans cars will become the most economical way to transport frozen foods. (Tr. 768-69). Because of this fact, as well as the Court's injunction against GATC's further use of all of its infringing cryogenic railcars, this Court finds that Cryo-Trans' additional price erosion damages of $ 7,926,250 for further price erosion on its potential future leases is speculative and unsupported by a preponderance of the evidence.
41. Prejudgment interest, at a rate of 7.54%, as the parties have agreed, is appropriate. Therefore, the Court awards prejudgment interest of $ 222,283. (Supp. 6/15/95 Declaration of Aron Levko).
42. Total damages suffered as a result of the infringement by GATC consisting of lost profits, price erosion and prejudgment interest amount to $ 9,705,172.
43. After careful consideration of all the relevant facts in this case, including GATC's prior art defense and the opinion letters it received from its counsel prior to its production of the Arcticar, the Court has concluded that GATC's infringement of the '876 Patent was not willful and that this case is not an exceptional case which warrants an award of attorneys' fees in favor of Cryo-Trans. 35 U.S.C. § 284; Interspiro USA, Inc. v. Figgie Int'l, Inc., 18 F.3d 927, 933-34 (Fed. Cir. 1994); Read Corp. v. Portec, Inc., 970 F.2d 816, 829 (Fed. Cir. 1992); Avia Group Int'l, Inc. v. L.A. Gear California, Inc., 853 F.2d 1557, 1567 (Fed. Cir. 1988).
44. In accordance with this opinion, the Clerk of the Court is directed to enter judgment in favor of defendant Cryo-Trans on plaintiff GATC's claim for declaratory judgment pursuant to 28 U.S.C. § 2201 with respect to the enforceability of the '876 Patent. The Clerk of the Court is also directed to enter judgment in the amount of $ 9,705,172 in favor of defendant Cryo-Trans with respect to its counterclaim for infringement of claims 1, 2 and 3 of the '876 Patent pursuant to 35 U.S.C. § 281. Pursuant to this judgment, GATC is hereby permanently enjoined from any further infringement of the '876 Patent as of August 1, 1995 -- the date that was used for the calculation of Cryo-Trans' damages.
United States District Judge
July 14, 1995
Nov. 10, 1987
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