Opposition Brief — Revlon, Inc. v. Carson Products Co.

Supreme Court, U.S,

ft EILED

| NOV 26 1996

i * JOSEPH F. SPANIOL, JR.

q | CLERK

No. 86-673

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1986

REVLON, INC.

Petitioner,

VS.

CARSON PRODUCTS COMPANY

Respondent.

BRIEF FOR RESPONDENT IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

FEDERAL CIRCUIT

THOMAS J. MACPEAK

SUGHRUE, MION, ZINN

MACPEAK & SEAS

1776 K Street, N.W.

Washington, D.C. 20006

(202) 293-7060

Counsel for Respondent

Of Counsel:

SHELDON I. LANDSMAN

1776 K Street, N.W.

Washington, D.C. 20006

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

QUESTION PRESENTED

The case at bar presents a narrow question of law,

namely, whether conduct before the U.S. Patent and

Trademark Office (PTO) during prosecution of a pat-

ent application which falls short of ‘‘inequitable con-

duct’’, as that term is interpreted by the Federal

Circuit, constitutes a sufficient basis for a holding of

“exceptional case’’ under 35 U.S.C. §285. This case

does not present the question of whether, once having

found the case exceptional, there was an abuse of

discretion on the part of the trial court in making an

award.

ii

STATEMENT PURSUANT TO RULE 28.1

Aminco, Ine. is the parent corporation of

Respondent, Carson Products Company.

ili

TABLE OF CONTENTS

Page

RII IIORIED cco cccnssnccssccsesecsencqnosececvensdesevess i

STATEMENT PURSUANT TO RULE 28.1 .............00060 ii

BE SI SATE vivcnsscinesesicsecctessccsiecccsossasses iv

UIE TT UD GA onccsccsccnncensssvccssccscnsssvonees

UIE GP TINE ccc csnsccccsccnccecssosesoncccnessess

I eis alive sinksdeasdnncuicakescnecnenisceneste 4

I. The Federal Circuit Followed Well Estab-

lished Precedent in Holding That Conduct

During Prosecution Before the PTO: Which

Fails to Amount to Fraud or Inequitable

Conduct Is Not a Sufficient Basis for ‘“Ex-

ceptional Case” Under 35 U.S.C. §285 ...... 4

II. The Legal Authorities Cited By Revlon Do

Not Support Its Position On The Narrow

Question Presented For Review .................. 7

III. The Legislative History and Public Policy

Support the Denial of Attorney Fees to’ Rev-

ea ail leach cues cae eaedabainncvnaictesncncnincouns 13

iv

TABLE OF AUTHORITIES

CASES:

A.B. Dick Co. v. Burroughs Corp., 798 F.2d 13892

SES: SIUMITEE > “scsincehscethincedncsavacauabilinnataentdausaten

ADM Corp. v. Speedmaster Packaging Corp., 525

fe gf. ” et Re: : | erereorminenmoncpnnrnton

American Can Co. v. Crown Cork & Seal Co., 693.

F.2d 658 (7th Cir. 1982) ...ccccccccccccsssssecocceeess

American Chain & Cable Co. v. Rochester Ropes,

Inc., 199 F.2d 325 (4th Cir. 1952) . ............00

American Hoist & Derrick Co. v. Sowa & Sons,

Inc., 725 F.2d 1850 (Fed.Cir. 1984), cert. de-

secu, GO UT, GE CE ai davccsesecccceenccscssaus.

Arbrook, Inc. v. American Hospital Supply Corp.,

GOD FO Bie COG GAR. TIE) vnccvescvercsnseseeses.

Armour & Co. v. Wilson & Co., 274 F.2d 1438 (7th

Cie; TOG) skins PRR POE OER EY Re a

Campbell v. Spectrum Automation Co., 601 F.2d 246

I SI: MEE. Lcieicsasdinicibneitaiendseraibinkerbekase

Chemical Construction Corp. v. Jones & Laughlin

Steel Corp., 197 F.Supp. 644 (W.D. Pa. 1961),

aff'd, 311 F.2d 367 (8rd Cir. 1962) _..............

Chemical Construction Corp. v. Jones & Laughlin

Steel Corp., 311 F.2d 367 (8rd Cir. 1962)

Collins v. Owen, 310 F.2d 884 (8th Cir. 1962)

Colortronic Reinhard & Co. v. Plastic Controls, Inc.,

ee ae & CO Gr FOE) | ivtesdrseserpeadviccenns

Digtal Equipment Corp. v. Diamond, 653 F.2d 701

EE IG SEE scuscsushaicdhanmccumecs eieeabaicdnswilindceas

Digtronics Corp. v. New York Racing Ass’n, Inc.,

553 F.2d 740 (2nd Cir. 1977), cert. denied, 434

SEG: EE RIPE. eciscsasmatsaiuanavhidiebtesaainapiaubliesans

Dubil v. Rayford Camp & Co., 184 F.2d 899 (9th

Se EE. chssadacuadinnensconsuivabannmaentideatcnes\basninads

Page

Table of Authorities Continued

Fleischmann Distilling Corp. v. Maier Brewing Co.,

386 U.S. 714, 87 S.Ct. 1404, 18 L.Ed 475

(RBRE). aicnnoiosinae a ugunasiinbaventbishtionhinsitaritiinsiianios 13,

H.K. Porter Co. v. Black & Decker Manufacturing

Co., 518 F.2d 1177 (7th Cir. 1976) .................

Halliburton Co. v. Dow Chemical Co., 514 F.2d 377

Ce Se, TI ai chstaccteneeenitinssddaerrctiercs

Hycor Corp. v. Schlueter Co., 740 F.2d 1529

CPG. SIE. | cncscaeskdipertsscsnacseatnnendens

Indiana General Corp. v. Krystinel Corp., 421 F.2d

1023 (2nd Cir. 1970), cert. denied, 398 U.S. 928

CIE scashadiiay tiddaacassnbdinpsiciansneisaaaiiedeaiiartacas

J.P. Stevens & Co. v. Lex Tex, Ltd., 747 F.2d 1553

(Fed.Cir. 1984), cert. denied, U.S , 106

BAR: Te SK: Uisisaistesumvanuitehitaipsbadnas

Kaehni v. Diffraction Co., 342 F.Supp. 523 (D.Md.

1972), aff'd, 473 F.2d 908 (4th Cir. 1973), cert.

Gumted, 414: Git, GG CGT svsascsscssessvisscssse.

Kahn v. Dynamics Corp. of America, 508 F.2d 939

(2nd Cir. 1974), cert. denied, 421 U.S. 930

CRUFOS ckccincsccisvisds hdrcemneccteend ao tenedeiinans

Kimberly-Clark Corp. v. Johnson & Johnson, 745

Fe ROE CPOE. SOE vkrtscadoisicancieenes

Laufenberg, Inc. v. Goldblatt Bros., 187 F.2d 823

Fae Mas. TANED:. cndcesscsldincabinnsnandineataboeuievindoneite

Livesay Window Co. v. Livesay Industries, 251 F.2d

Be Sy i TI orci ecctanncenssiecnnentiniodines

Lundy Electronics & Systems, Inc. v. Optical Rec-

ognition Systems, Inc., 362 F.Supp. 130

(E.D.Va. 1973), aff'd. per curiam, 493 F.2d

Re Ce SEs IE aitstcsicennincsesaseticacteiies

Machinery Corp. of America v. Gullfiber, A.B., 774

FOG GBT CPGGL. TRB). ccseriitaiciccsscscccscsicns

Page

15-16

12

5,16

4,8,16

Table of Authorities Continued

7 Page

Maurice A. Garbell, Inc. v. Boeing Co., 385 F. Supp.

1 (C.D. Cal. 1973), affd, 546 F.2d 297 (9th

Cir. 1976), cert. denied, 431 U.S. 955

CRUE: enesbsssscniaibeanibadaidaenbakaiedh MiieciniareLintcasadens 11

Monolith Portland Midwest Co. v. Kaiser Aluminum

& Chemical Corp., 407 F.2d 288 (9th Cir. .

ROD siciicccdvsccpabadasicsundscaaavaienebenas 7,8,9,11,15,17

Mueller Brass Co. v. Reading Industries, Inc., 352

F.Supp. 1857 (E.D. Pa. 1972), affd, 487 F.2d

RE CRC Ub, BERD isccscicinssssvntibestinseriers 5,6,16,17

Orthopedic Equipment Co. v. All Orthopedic Appl?-

ances, Inc., 707 F.2d 1376 (Fed.Cir.

PIUINTED. .. wusssiesdenstnsiutiseshicenhalislimeseeahaaaedaMaL anal ta eon 5,13

Park-In-Theatres, Inc. v. Perkins, 190 F.2d 137 (9th

CA SIE) cexvesccnsicsiepniesicensca elses 10

Parker v. Motorola, Inc., 524 F.2d 518 (5th Cir.

1975), cert. denied, 425 U.S. 975 (1976) _.....: 10

Phillips Petroleum Co. v. Esso Standard Oil Co.,

91 F.Supp. 215 (D.Md. 1950), affd, 185° F.2d

Oem UE Ce, FOG secccasnteieiaicnen chrcieiscensens 14

Purer & Co. v. Aktiebolaget Addo, 410 F.2d 871

(9th Cir. 1969), cert. denied, 396 U.S. 834

ERPUEE: . ‘serinnscwticucssibinslindasminxasicamanaemmaaneaieces aaa 10

Q-Panel Co. v. Newfield, 482 F.2d 210 (10th Cir.

1973) ...... onsevanahedsdsheseseueonssersnecstbannisvvaiesiutasssece 5,15

Reactive Metals & Alloys Corp. v. ESM, Inc., 769

Pe BOT CC, WORD eeiescisbicctlincivcen, 15

Regents of the University of Cal. v. Howmedica, Inc.,

530 F.Supp. 846 (D.N.J. 1981), affd, 676 F.2d

Gre Carte See: SE sieeiemintnteninics 5,6

Rohm & Haas Co. v. Crystal Chemical Co., 736 F.2d

688 (Fed.Cir. 1984), cert. denied, 469 U.S. 851

LEME resnniishiceandsustcemnnoennsckdudaeaeaaiauma mamas 12,13,15,17

Sarkes Tarzian, Inc. v. Philco Corp., 351 F.2d 557

CF CAE. TO © ckisicecensitetaghsseas 11-12

Table of Authorities Continued

Page

S.C. Jehnson & Son, Inc. v. Carter-Wallace, Inc.,

781 F.2d 198 (Fed.Cir. 1986) ou... eeeeeeeee 15

State Industries, Inc. v. Rheem Manufacturing Co.,

769 F.2d 762 (Fed.Cir. 1985). ......cceceeeeeeeeeees 5,6

Stevenson v. Sears, Roebuck & Co., 712 F.2d 705

CA: NED... Sanaratenseenseronssapeeencnszaiiessincsesvens 13

Technograph Printed Circuits, Ltd. v. Methode Elec-

tronics, Inc., 484 F.2d 905 (7th Cir. 1973) .. 12

True Temper Corp. v. C.F. & I. Steel Corp., 601

Fe A Cee CR. BTID > idiiccccdastesecssivesocese. 10

Uniflow Manufacturing Co. v King- Seeley Thermos

Co., 428 F.2d 335 (6th Cir. 1970), cert. denied,

ET EN, |. lsescheca Ssdtubingniiessenvtiokeoncss 10

Vandenberg v. Dairy Equipment Co., 740 F.2d 1560

Ry: MES, ahcdasthlantucadsveasaasiscantephsiateeabewnsss 5

STATUTES, RULES AND REGULATIONS:

i a I ilies a sate tuctcascaishangunenbhisieas 2,4,13,16

Patent Act of August 1, 1946, Chapter 726, §1, 60

Stat. 776, 2 UBL. 870 (1946 O6,) ...cccecesers: 14

OTHER AUTHORITIES

Ahart, ‘“‘Attorneys’ Fees: The Patent Experience”’,

57 J.Pat.Of.Soc’y, GOB (1975) ............0c0.c0000. 7

5 D. Chisum, Patents, §20.03[4] (1986) _ ............... 15

Revisor’s Note for §285, S.Rep.No. 1979, 82nd

Cong., 2d Sess. (1952), reprinted in 1952 U.S.

Code Cong. & Ad.News 2394 .......ccceceseeeees 14

S.Rep.No. 1503, 79 Cong., 2d Sess. (1946), re-

printed in 1946 U.S. Code Cong.Serv.

TOE disksdsacnathhcsaunieiassiniabasscabreaguaeseeiganinsaaieenien 14,15

STATEMENT OF THE CASE

Petitioner, Revlon, a “billion dollar’’ company, filed

a declaratory judgment action against Carson, a small

company specializing in the black ethnic hair care

field. The suit was filed, without warning, when it

was not necessary for Revlon to institute litigation.'

In the declaratory judgment suit Revlon fired a bar-

rage of fraud and inequitable conduct charges against

Carson based on the prosecution of Carson’s patent

applications in the U.S. Patent and Trademark Office

(PTO) and later also charged that Carson had con-

ducted the litigation in bad faith.

After analyzing each of Revlon’s arguments that

the patentee had engaged in fraudulent conduct be-

fore the PTO, the district court found in the ‘‘Fraud’”’

portion of its opinion (78a)? that there was a lack of

clear and convincing evidence necessary for a holding

of fraud and expressly held that Carson had not com-

mitted fraud. The district court found in some in-

stances that Revlon had failed to prove materiality

and in other instances that Revlon had failed to prove

wrongful intent (scienter). The court did say that in

four instances, it found a “‘lack of fair dealing,’’ but

also found these instances did not rise to the level

of fraud.

‘Carson was at all times willing to grant Revlon a license:

under the patents-in-suit under terms accorded other licensees,

but Revlon never seriously pursued such a license. Further, dur-

ing prosecution of the patents, Carson requested Revlon to iden-

tify to Carson the prior art of which Revlon was aware, but

Revlon refused to do so.

2 References to pages of the appendices to Revlon’s Petition

are denoted ‘“‘__a’’. References to pages of Revlon’s Petition

are denoted ‘‘Pet._”’.

During the trial, the district court repeatedly

praised counsel as to the fairness, thoroughness and

competence of counsel, and did not find Carson to

have conducted the litigation in bad faith.

In a separate portion of its opinion entitled

“Attorneys Fees and Costs’’ (79a), the court stated

that “‘defendant failed on a number of occasions to

act in good faith toward the PTO sufficient to justify

classifying the case as exceptional” under 35 U.S.C.

§285. The court set forth no instance which it con-

sidered evidenced a lack of good faith sufficient to

classify the case as exceptional. The attorney fee

award was set by stipulation at $525,440.00 in the

Final Judgment (11a).

Carson appealed to the Federal Circuit on the ques-

tion of attorney fees and Revlon appealed on the ques-

tion of fraud or inequitable conduct. The Federal

Circuit in its decision stated that it had reviewed each

of the allegations of inequitable conduct, and found

no error in the district court’s findings of materiality

or intent to deceive, or in the balance achieved in

holding that Carson had not committed inequitable

conduct in the PTO.

Revion also raised before the Federal Circuit the

question of Carson’s conduct during the district court

proceedings and during the appeal proceedings itself.

The Federal Circuit chose not even to dignify with

comment Revlon’s baseless charges, and also point-

edly stated that Revlon was wasting the appellate

court’s resources with its meritless patent misuse al-

legation. (Carson expects that at some stage during

these proceedings, Revlon will find yet another base-

less ground to attack Carson’s conduct.)

Consistent with well-established precedent that

when conduct in the PTO is at issue, an exceptional

case exists only if the conduct arises to the level of

fraud or inequitable conduct (with the concomitant

result of patent unenforceability), the Federal Circuit

reversed the trial court’s award of attorney fees.

SUMMARY OF ARGUMENT

In holding that an exceptional case does not exist

where the sole basis for the exceptional case finding

by the district court comprises acts by the patentee

in the PTO which did not amount to fraud or ine-

quitable conduct, the Federal Circuit followed well-

established precedent. The Federal Circuit has never

held that ‘“‘bad faith’ conduct in the PTO, without

more, is sufficient for an exceptional case holding.

The overwhelming weight of authority in the regional

circuit.courts and lower courts is to the same effect.

Revlon has misapplied the cases it relies on with re-

spect to the specific issue presented for review.

The stated legislative purpose behind awarding

attorney fees to a prevailing accused infringer is to

prevent a “gross’’ injustice. In the absence of ‘‘ine-

quitable conduct,” the patent is not invalid or unen-

forceable, and therefore it is fair for an alleged

infringer to bear his costs and expenses in connection

with the litigation since the alleged infringer still

would have had to litigate the patent.

Accordingly, the petition for a writ of certiorari

should be denied.

ARGUMENT

I. The Federal Circuit Followed Well Established Prec-

edent in Holding That Conduct During Prosecution

Before the PTO Which Fails to Amount to Fraud or

Inequitable Conduct Is Not a Sufficient Basis for

“Exceptional Case’’ Under 35 U.S.C. §285

The Federal Circuit has consistently held that where

conduct before the PTO forms the basis for a holding

of exceptional case, the conduct must rise to the level

of “fraud’’ o1 “inequitable conduct” before the case

will be held exceptional.* Hycor Corp. v. Schlueter Co..

‘The term “fraud” does not appear in Title 35. It is a term

that has frequently been invoked by courts and litigants in pat-

ent cases, but often with different shades of meaning in each

context in which it is employed. Digital Equipment Corp. v.

Diamond, 653 F.2d 701 (1st Cir. 1981). Thus, whenever a patent

case talks about “fraud” or ‘“‘conduct short of fraud”, it is es-

sential to determine what it means by “fraud” before that case

can be compared with other decisions.

In an effort to provide a clear framework for analyzing con-

duct before the PTO, the Federal Circuit has begun using the

term “inequitable conduct” as the description of the proscribed

activity, with the understanding that the term encompasses af-

firmative acts of commission as well as omission. J.P. Stevens

& Co. v. Lex Tex, Ltd., 747 F.2d 1553, 1559 (Fed. Cir. 1984),

cert. denied, __. U.S. __, 106 S.Ct. 73 (1985).

Inequitable conduct as defined by the Federal Circuit requires

proof by clear and convincing evidence of 1) a threshold degree

of materiality and 2) a threshold intent, and then only after a

careful balancing of intent in light of materiality. J.P. Stevens,

747 F.2d at 1559-60. The lower threshold for intent is gross

negligence. Hycor Corp. v. Schlueter Co., 740 F.2d 1529, 1540

(Fed.Cir. 1984). If one of the thresholds has been exceeded, but

not the other, there can be no holding of inequitable conduct.

Where inequitable conduct is found to occur, the result is that

the patent is unenforceable. J.P. Stevens, 747 F.2d at 1560.

5

740 F.2d 1529 (Fed.Cir. 1984); Vandenberg v. Darry

Equipment Co., 740 F.2d 1560 (Fed.Cir. 1984); Kim-

berly-Clark Corp. v. Johnson & Johnson, 745 F.2d

1437 (Fed.Cir. 1984); American Hoist & Derrick Co.

v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed.Cir. 1984),

cert. denied, 469 U.S. 821 (1984); State Industries,

Inc. v. Rheem Manufacturing Co., 769 F.2d 762

(Fed.Cir. 1985); Orthopedic Equipment Co. v. All Or-

thopedic Appliances, Inc., 707 F.2d 1376, 1384 (Fed.

Cir. 1983).

Similarly, other regional and lower courts have held

to the same effect. See, Armour & Co. v. Wilson &

Co., 274 F.2d 143 (7th Cir. 1960); Arbrook, Inc. »v.

American Hospital Supply Corp., 645 F.2d 273, 279

(5th Cir. 1981) (Award proper ‘only when ... [pa-

tentee] has acquired his patent by fraud or brings an

infringement suit with no good faith belief that his

patent is valid and infringed.’’); Halliburton Co. v.

Dow Chemical Co., 514 F.2d 377 (10th Cir. 1975)

(reversing district court award based on fraud in Pat-

ent Office); Digitronics Corp. v. New York Racing

Ass'n, Ine. 553 F.2d 740 (2nd Cir. 1977), cert. denied,

434 U.S. 860 (1977); Lundy Electronics & Systems,

Inc. v. Optical Recognition Systems, Inc., 362 F.Supp.

130 (E.D.Va. 1973), aff'd per curiam, 493 F.2d 1222

(4th Cir. 1974); Mueller Brass Co. v. Reading Indus-

tries, Inc., 352 F.Supp. 1357 (E.D. Pa. 1972), affd,

487 F.2d 1395 (8rd Cir. 1973); Regents of the Uni-

versity of Cal. v. Howmedica, Inc., 530 F.Supp. 846

(D.N.J. 1981), aff'd, 676 F.2d 687 (3rd Cir. 1982); Q-

Panel Co. v. Newfield, 482 F.2d 210 (10th Cir. 1978).

These holdings of no exceptional case have been

made regardless of whether the basis for the deter-

mination that there is no inequitable conduct resulted

from the fact that a) there was no intent or b) that

there was no materiality.

In the present case, Revlon fell decisively short in

its proof of materiality and accordingly there can be

no finding of exceptional case.‘ See, e.g., State In-

dustries, Inc v. Rheem Manufacturing Co., 769 F.2d

762 (Fed.Cir. 1985); Kimberly-Clark Corp. v.. Johnson

& Johnson, 745 F.2d 1487 (Fed.Cir. 1984); Mueller

Brass Co. v. Reading Industries, Inc., 352 F.Supp.

1357 (E.D. Pa. 1972), affd, 487 F.2d 1395 (8rd Cir.

1973); Regents of the University of Cal. v. Howmedica,

Inc., 5380 F.Supp 846 (D.N.J. 1981). In each of these |

cases, the court held that the lack of materiality pre-

cluded a finding of inequitable conduct and therefore

a finding of exceptional case.°

‘With respect to the Moore article, Revion fell short in its

proof of intent (73-75a).

>In State Industries, the conduct of the patentee amounted

to gross negligence, but since there was absence of materiality

there was no basis for an exceptional case.

In Kimberly-Clark, the court found that the defendant had

failed to prove materiality with respect to non-disclosure of Kim-

berly-Clark’s in-house research, reversed the trial court’s holding

of fraud on this ground, and vacated the award of attorney fees

that the trial court had made because of the fraud.

In Mueller Brass, the court did not condone the actions of

the patentee in the prosecution before the Patent Office, but

because of, inter alia, a lack of materjality, found no inequitable

conduct and no exceptional case.

In Regents, the patentees acted wrongly before the PTO, but

because the wrongful conduct did not render the patent invalid,

that is, there. was a lack of materiality, the court found that

there was neither fraud nor inequitable conduct and the court

Thus, the Federal Circuit in finding no exceptional

case in the present case was merely following well-

established precedent.

II. The Legal Authorities Cited By Revlon Do Not Sup-

port Its Position On The Narrow Question Presented

For Review

Revlon argues that the Federal Circuit departed

from the standard set forth in the Ninth Circuit’s

decision in Monolith Portland Midwest Co. v. Kaiser

Aluminum & Chemical Corp., 407 F.2d 288 (9th Cir.

1969) and the Second Circuit’s decision in Kahn v.

Dynamics Corp. of America, 508 F.2d 939 (2nd Cir.

1974), cert. denied, 421 U.S. 930 (1975), both of which

were relied on by the district court in the present

case. This argument is wrong.

The Monolith decision in 1969 is the first decision

under the 1952 Patent Act (the present day statute)

to hold an exceptional case based on conduct in the

Patent Office. Ahart, ‘‘Attorneys’ Fees: The Patent

Experience”, 57 J. Pat. Off. Soc’y, 608, 626-27 (1975).

What is remarkable about the Monolith decision is

that, in reality, it was a harbinger to the Federal

Circuit’s present day analysis concerning ‘‘inequitable

conduct,” which requires that thresholds cf materi-

did not award attorney fees.

See also, Indiana General Corp. v. Krystinel Corp., 421 F.2d

1023 (2nd Cir. 1970), cert. denied, 398 U.S. 928 (1970) where

although there was a lack of candor by the patentee in its

dealings with the PTO, which was coupled with a suspicion that

the patent would not have been granted if the full facts had

been known to the PTO, there was a failure to prove “deliberate

fraud” and therefore was no basis for an award of attorney

fees.

ality and intent be breached before there can be “ine-

quitable conduct.” See, footnote 3, supra; J.P Stevens

& Co. v. Lex Tex, Ltd., 747 F.2d at 1559-60.

In Monolith, the Ninth Circuit never defined what

it meant by “fraud,”’ but appeared to require an ele-

ment of specific intent. The Ninth Circuit stated that

conduct ‘‘short of fraud but in excess of simple neg-

ligence” was sufficient. This statement is the Mono-

lith court’s way of defining the intent elemert of

inequitable conduct as being satisfied by gross neg-

ligence.* The Monolith court then found that material

misrepresentations had been made which were a cru-

cial factor in the obtaining of the patent, and that

those misrepresentations were made with a “calcu-

lated recklessness about the truth.”

The Monolith court, in reality, found that thresholds

of materiality and intent had been exceeded, and un-

der these circumstances had no trouble in finding the

case to be exceptional. The same result undoubtedly

would be arrived at today applying the Federal Cir-

cuit current analytical framework for deciding whether

inequitable conduct had occurred.’ Thus, Monolith does

not stand for the proposition that conduct in the PTO

which does not amount to fraud (inequitable conduct)

can by itself be a basis for a case being exceptional

* See also, Digital Equipment Corp. v. Diamond, 653 F.2d at

710, for the concept that “inequitable conduct—falling somewhat

short of common law fraud” renders a patent unenforceable.

’ The Monolith Court did not expressly address the balancing

required by the Federal Circuit, but inasmuch as the materiality

in Monolith appears to have been at the highest level, there is

no doubt the balancing would result in a holding of inequitable

conduct.

ait Bie

and is in accord with the Federal Circuit’s analysis

of exceptional case.

Significantly, in Monolith, the Ninth Circuit stated

that an award of attorney fees should be made against

“the patentee who obtained the patent by his wrong-

doing.” In the present case, the trial court held that

the patent would have issued notwithstanding Car-

son’s actions, and that Carson’s actions were imma-

terial to the issuance of the patent. Accordingly, the

Monolith decision does not provide any support for

an award in the present case, but rather speaks

against such an award.

The Kahn decision quoted with approval the Mon-

olith decision, and found an exceptional case based

on numerous instances of misconduct including bad

faith in commencing and continuing the litigation, di-

latory tactics, and a misleading of the PTO. The Kahn

decision was not based on mere bad faith in prose-

cution before the Patent Office.’ Thus, the Kahn de-

cision does not provide any support for an award in

the present case.

Revion argues further that every circuit that has

considered the question in issue here has adopted the

“bad faith” standard governing attorney fee awards,

accuses the Federal Circuit of disregarding these ear-

® The trial court in the present case relied heavily on Kahn

by employing a distorted and cropped quote from Kahn which

changed important words and deleted precisely the language

which makes it clear that the “bad faith” referred to in Kahn

was bad faith in commencing and continuing the suit, and was

not mere bad faith in prosecution before the PTO. Moreover,

the patentee’s conduct before the PTO in Kahn undoubtedly

amounted to “inequitable conduct.”’

10

lier decisions, and calls the Federal Circuit decision

a precedent changing departure from a “bad faith”

standard*. The simple fact is, however, that the cases

Revlon relies on are inapposite to the narrow issue

presented here, that is, whether conduct before the

PTO which is not inequitable or fraudulent is, by it-

self, a proper basis for an exceptional case. The cases

cited by Revlon simply do not address this. issue.

Thus, the patentee’s conduct before the PTO was

not even in issue in the Uniflow, Kaehni, Parker,

Livesay, Collins, Park-In-Theatres, and Purer cases

cited by Revlon.’ Similarly, Chemical Construction

Corp. v. Jones & Laughlin Steel Corp., 311 F.2d 367

(3rd Cir. 1962) did not relate to the patentee’s con-

duct before the PTO, but to bad faith in bringing an

unfounded action as made clear in the lower court’s

decision reported at 197 F.Supp. 644."

In True Temper Corp. v. CF&I Steel Corp., 601

F.2d 495 (10th Cir. 1979), inequitable conduct and

*The Federal Circuit considered its decision to be so insig-

nificant to the body of law that initially it did not even publish

its opinion, and did so later only because Revlon filed a motion.

'° Uniflow Manufacturing Co. v. King-Seely Thermos Co., 428

F.2d 335 (6th Cir.), cert denied, 400 U.S. 943 (1970); Kaehni v.

Diffraction Co., 342 F.Supp. 523 (D.Md. 1972), aff'd, 473 F.2d

908 (4th Cir. 1973), cert. denied, 414 U.S. 854, (1973); Parker

v. Motorola, Inc., 524 F.2d 518 (5th Cir. 1975), cert. denied, 425

U.S. 975 (1976); Livesay Window Co. v. Livesay Industries, 251

F.2d 469, 475 (5th Cir. 1958); Collins v, Owen, 310 F.2d 884

(8th Cir. 1962); Park-In-Theatres, Inc. v. Perkins, 190 F.2d 137

(9th Cir. 1951); and Purer & Co. v. Aktiebolaget Addo, 410 F.2d

871, 880 (9th Cir. 1969), cert. denied, 396 U.S. 834 (1969).

' Chemical Construction Corp. v. Jones & Laughlin Steel Corp.,

197 F.Supp. 644 (W.D. Pa. 1961), affd, 311 F.2d 367 (8rd Cir.

1962).

2 em a le et i

11

unenforceability of the patent were found. In Color-

tronic Reinhard & Co. v. Plastic Controls, 668 F.2d

1 (1st Cir. 1981), the patentee had committed a know-

ing fraud, and “bad faith’ was found based on the

patentees suing and continuing to press suit.

In Campbell v. Spectrum Automation Co., 601 F.2d

246, 251 (6th Cir. 1979), an exceptional case finding

was upheld because the patentee had failed to respond

truthfully to a request for admissions, which had the

effect of prolonging the litigation. The patentee also

had made material misrepresentations to the PTO,

but it was his bad faith conduct during litigation which

gave rise to the award.

In Maurice A. Garbell, Inc. v. Boeing Co., 385

F.Supp. 1 (C.D. Cal. 1973), affd, 546 F.2d 297 (9th

Cir. 1976), cert. denied, 431 U.S. 955 (1977), attorney

fees were awarded based on misconduct in the PTO

relating to suppression of relevant evidence of prior

publications, coupled with the failure of the patentee

to make a reasonable assessment of the possibilities

of infringement before bringing suit. In Garbell, the

Ninth Circuit referred to its previous decision in Mon-

olith as setting forth the basis for finding a case

exceptional when concerned with conduct in the

Pru

12 American Can Co. v. Crown Cork & Seal Co., Inc., 693 F.2d

653 (7th Cir. 1982) arguably supports Revlon’s position if its

discussion of the effect of the co-inventor’s view is considered

to be the basis of the decision, but this discussion appears to

be mere dicta since it is not necessary to the court’s holding

given that the court found numerous other bases for the award.

Moreover, the discussion of the effect of the co-inventors’ view

appears to be contrary to the weight of authority in the Seventh

Circuit. See, e.g. Sarkes Tarzian, Inc. v. Philco Corp., 351 F.2d

12

It is clear that Revlon’s broad generalization that

a ‘“‘bad faith” standard ex’sts in every circuit is simply

not true when the alleged misconduct refers solely to

conduct before the PTO which is insufficient to render

a patent unenforceable. Although the collective import

of the above cases is that “bad faith’ may be a suf-

ficient basis for finding a case “exceptional,”’ the bad

faith referred to stems from, e.g., misconduct during

litigation, bringing suit knowing that the patent is

invalid, or making frivolous charges of infringement.

These cases do not stand for the proposition that

conduct in the PTO which is judged not to be “‘ine-

quitable conduct” is a sufficient basis for a finding

of an exceptional case under the statute. To the con-

trary, as discussed above, it is well settled that con-

duct in the PTO is not, by itself, a basis for a finding

of an exceptional case where the conduct does not

rise to the level of fraud or inequitable conduct suf-

ficient to render the patent unenforceable.

Revlon also cites several decisions of the Federal

Circuit as allegedly adopting this “bad faith” stand-

ard. The narrow issue present in this case, however,

was not before the Federal Circuit in any of the cases

relied on by Revlon.

587 (7th Cir. 1965); Technograph Printed Circuits, Ltd. v. Meth-

ode Electronics, Inc., 484 F.2d 905 (7th Cir. 1973); H.K. Porter

Co. v. Black & Decker Manufacturing Co., 518 F.2d 1177 (7th

Cir 1975). In any event, American Can is contrary to the over-

whelming weight of authority discussed supra, pp. 4-7. The

American Can discussion is an aberration and is not binding

precedent on the Federal Circuit. The Federal Circuit was cre-

ated for the purpose of providing uniformity in the patent law,

and its decision in the present case does so while adhering to

well-established principles.

‘’ In Rohm & Haas Co. v. Crystal Chemical Co., 736 F.2d 688

ciiniudtibaspuinlibaieana cots ee a _—_~

a. re eee

13

III. The Legislative History and Public Policy Support

the Denial of Attorney Fees to Revlon

The traditional American rule on attorney fees is

that they may not be awarded as costs or damages

absent statutory authority or contract provision.

Fleischmann Distilling Corp. v. Maier Brewing Co.,

386 U.S. 714, 717-21, 87 S.Ct. 1404, 18 L.Ed 475

(1967). In 1946, Congress amended the patent remedy

statute to provide that the “‘court may in its discre-

tion award reasonable attorney fees to the prevailing

(Fed.Cir. 1984), cert. denied, 469 U.S. 851 (1984), the issue be-

fore the Federal Circuit was whether or not attorney fees could

be awarded under §285 for an exceptional appeal. In Rohm &

Haas, the Federal Circuit sets forth a review of the legislative

history of the attorney fee statute, and of all the differing bases

on which an exceptional case has been found. The Federal Circuit

specifically noted that when prevailing alleged infringers have

been awarded attorney fees, exceptional cases have involved lit-

igation in bad faith by the patentee, or fraud or inequitable

conduct during prosecution before the PTO. The Federal Cir-

cuit’s review establishes that it has never held that conduct in

the PTO which does not rise to fraud or inequitable conduct

can be a basis for an exceptional case.

In Stevenson v. Sears, Roebuck & Co., 718 F.2d 705, 713

(Fed.Cir. 1983), the patentees conduct before the PTO was not

in issue, but only his conduct in pursuing the litigation.

Finally, in Orthopedic Equipment Co. v. All Orthopedic Ap-

pliances, Inc., 707 F.2d 1376, 1384 (Fed.Cir. 1983), the Federal

Cicuit affirmed the lower court’s denial of attorney fees because

the patentee’s conduct during prosecution in the PTO did not

constitute fraud or inequitable conduct. The Federal Court fur-

ther stated that in addition to fraud or inequitable conduct dur-

ing prosecution, a case may be exceptional for ‘‘some other

reason”. No other reason was identified, but it is clear that

these reasons related to litigation, as later confirmed in Rohm

& Haas Co. v. Crystal Chemical Co., 736 F.2d at 693.

14

party upon the entry of judgment on any patent case.”’

Patent Act of August 1, 1946, Chapter 726, §1, 60

Stat. 778, 35 U.S.C. §70 (1946 ed.). The Senate Re-

port stressed that awards of attorney fees should not

be “an ordinary thing in patent cases,’ and stated

that an alleged infringer could recover only “to pre-

vent a gross injustice.” S. Rep. No. 1503, 79th Cong.,

2d Sess. (1946), reprinted in 1946 U.S. Code Cong.

Serv. 1386; 1387.

Under the 1946 Act, the courts generally stated

that although the award is discretionary, the trial

court should make a specific finding to show the basis

upon which the award is made, and that the statute

should not be invoked ‘“‘except in situations involving

vexatious and unjustified litigation on the part of the

patentee.” American Chain & Cable Co. v. Rochester

Ropes, Inc., 199 F.2d 325 (4th Cir. 1952); Laufenberg,

Inc. v. Goldblatt Bros., Inc., 187 F.2d 823 (7th Cir.

1951); Phillips Petroleum Co. v. Esso Standard Oil

Co., 91 F.Supp. 215 (D.Md. 1950), aff'd, 185 F.2d 672

(4th Cir. 1950). No court ever awarded attorney fees

to a prevailing infringer under the 1946 Act based

on conduct before the PTO, and the few courts that

suggested that an award could be made based on

conduct before the PTO indicated that the conduct

must amount to fraud. See, e.g., Dubil v. Rayford

Camp & Co., 184 F.2d 899, 902 (9th Cir. 1950).

In 1952, the patent statute was rewritten and the

attorney fee provision was codified as 35 U.S.C. §285.

The Revisor’s Notes indicate that no change in mean-

ing was intended. Revisor’s Note for §285, S.Rep.No.

1979, 82nd Cong., 2d Sess. (1952), reprinted in 1952

U.S. Code Cong. & Ad.News 2394, 2423. The case

law subsequent to 1952 makes it clear that the award

15

of attorney fees to a prevailing party requires a) a

holding of “exceptional case,’’ followed by b) the ex-

ercise of discretion.'* Thus, even when a case is prop-

erly classified as exceptional, the award may be

refused in the exercise of the court’s discretion. A.B.

Dick Co. v. Burroughs Corp., 798 F.2d 1392 (Fed.Cir.

1986); S.C. Johnson & Son, Inc. v. Carter-Wallace,

Inc., 781 F.2d 198 (Fed.Cir. 1986). See also, Rohm &

Haas Co. v. Crystal Chemical Co., 736 F.2d 688

(Fed.Cir. 1984), cert. denied, 469 U.S. 851 (1984)."

Since the legislative history makes clear that al-

leged prevailing infringers can recover attorney fees

only “‘to prevent a gross injustice.’’ S. Rep. No. 1503,

79 Cong., 2d Sess. (1946), it is clear that the denial

of the award to Revlon in the present case was

proper.

First, Revlon had no need to file the suit at all.

See, footnote 1, supra. Moreover, Carson was merely

defending a lawsuit which it did not bring and in

which it acted properly. Fleischmann Distilling Corp.

‘4 ADM Corp. v. Speedmaster Packaging Corp., 525 F.2d 662

(3rd Cir. 1975); Monolith Portland Midwest Co. v. Kaiser Alu-

minum & Chemical Corp., 407 F.2d 288 (9th Cir. 1969); Q-Panel

Co. v. Newfield, 482 F.2d 210 (10th Cir. 1973); Reactive Metals

& Alloys Corp. v. ESM, Inc., 769 F.2d 1578 (Fed.Cir. 1985);

Machinery Corp. of America v. Gullfiber, A.B., 774 F.2d 467

(Fed.Cir. 1985). See also, 5 D. Chisum, Patents, §20.03[4] at

pages 20-188 to 20-190 (1986).

‘s Although Revlon cites a number of cases for the proposition

that the decision to make an award of attorney fees is discre-

tionary (Pet. 8), these cases do not hold that the district court

has wide discretion in deciding whether the case is exceptional

in the first instance, but only that once a case is determined

to be exceptional, the district court has discretion in deciding

whether to make the award.

16

v. Maver Brewing Co., 386 U.S. 714, 717-21 (1967).

Compare, Machinery Corp. of America v. Gullfiber,

A.B., 774 F.2d 467 (Fed.Cir. 1985); Halliburton Co.

v. Dow Chemical Co., 514 F.2d 377 (10th Cir. 1975).

Under these circumstances, failure to award Revlon

attorney fees does not constitute a gross injustice.

In addition, the purpose of §285 is compensatory,

not punitive:

The major purpose of the Section is to com-

pensate a prevailing party for monies which

he had to spend which he would not have

had to spend but for the losing party’s mis-

conduct. If the prevailing party would have

had to spend approximately the same amount

litigating the patent even if none of the al-

leged misconduct had taken place, it appears

to this Court that an award of attorneys fees

would be punitive and not compensatory.

Mueller Brass Co. v. Reading Industries, Inc., 352

F.Supp. at 1381.

An award of attorney fees in the present case would

be clearly punitive rather than compensatory. None

of Carson’s alleged ‘‘misconduct”’ led to the issuance

of patents to which it was otherwise not entitled. The

patents at issue have at all times been enforceable,

and do not suffer from unenforceability due to Car-

son’s conduct in the PTO. See, J.P. Stevens & Co. v.

Lex Tex, Ltd., 747 F.2d at 1560. Accordingly, Revlon

would have had to litigate the patent, notwithstanding

Carson’s alleged misconduct at the PTO. Mueller

Brass, 352 F.Supp. at 1381. The reversal by the Fed-

eral Circuit of the award of attorney fees fully served

the purpose of §285.

17

Revlon argues that the purpose of awarding

attorney fees to a prevailing accused infringer is to

provide an incentive to infringers to litigate suspect

patents and enforces the patentees duty of good faith

and candor. Although such an award might have a

salutory disciplining effect, it has been recognized that

disciplining is better left to other available channels.

Mueller Brass, 352 F.Supp. at 1381.

The Federal Circuit has recognized the frequently

cited policy consideration that supports an award to

a party who succeeds in invalidating “fraudulent pat-

ents,’ but supports the proposition only to the extent

that the award should be made ‘‘only when it would

be unjust not to make such an award’’. Rohm & Haas,

736 F.2d at 692.

The stated policy considerations of awarding

attorney fees to one who attacks a patent were enun-

ciated in the Monolith decision, but as recognized in

Mueller Brass, 352 F.Supp. at 1381, even Monolith

speaks of awarding attorney fees against ‘‘the paten-

tee who obtained the patent by his wrongdoing.”

Monolith Portland Midwest Co. v. Kaiser Aluminum

& Chemical Corp., 407 F.2d at 294. In the present

case, the patent did not issue as a result of wrong-

doing by Carson, and thus even this policy consid-

eration is inapplicable here. As recognized by Mueller

Brass, ‘“{e]ven if there was gross negligence or im-

proper motivation behind any of the things which oc-

curred before the Patent Office ..., it would have

been immaterial in the sense that ... the .. .[alleged

infringer] would still have to [litigate] the present

suit.’’ Mueller Brass Co. v. Reading Industries Inc.,

352 F.Supp. at 1381. Such is the case here.

18

The effect of awarding attorney fees to an alleged

infringer who has not proved that a patent is unen-

forceable because of fraud or inequitable conduct

would be to reward a party for establishing that a

wrong was committed in an administrative proceeding

to which he was not a party and which did not affect.’

his rights or liabilities. Such an award would turn an

alleged infringer into a self appointed public enforcer

or policeman, a purpose for which the statute was

not designed.

Revion’s argument that it was Congress’ intent to

allow trial courts wide discretion to assess attorney

fees for any bad faith misconduct before the PTO

(Pet. 8-9) is unsupported by the legislative history.

Nowhere does the legislative history refer to miscon-

duct before the PTO. Revion’s argument that denial

of attorney fees to a patent challenger removes one

important incentive to litigate suspect patents is fal-

lacious. Revlon could have been awarded attorney fees

if it had proved its case that the patent was obtained

by inequitable conduct. An a’ ard of attorney fees,

however, was never meant to reward a party who

failed in its effort to prove inequitable conduct.

In the present case, no gross injustice occurred as

the result of denying attorney fees to Revlon.

19

CONCLUSION

‘The petition for a writ of certiorari should be de-

nied.

Respectfully submitted,

THOMAS J. MACPEAK

SUGHRUE, MION, ZINN,

MACPEAK & SEAS

1776 K Street, N.W.

Washington, D.C. 20006

(202) 293-7060

Counsel for Respondent

Of Counsel:

SHELDON I. LANDSMAN

1776 K Street, N.W.

Washington, D.C. 20006