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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1986
- **Citation:** 479 U.S. 1018

## Text

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_2257%3A2. Public record. Not legal advice.