2010-1135 exceptional award

8/14/2019 2010-1135 Exceptional Award

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UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

B-K LIGHTING, INC., a Californiacorporation,

Plaintiff,

vs.

VISION3 LIGHTING, a business entity of

unknown form, and FRESNO VALVES& CASTINGS, INC., a CaliforniaCorporation,

Defendants.

))))))))

))))))

CASE NO. CV 06-02825 MMM (PLAx)

ORDER GRANTING FVC’S MOTIONFOR ATTORNEYS’ FEES

This is a patent dispute between plaintiff B-K Lighting, Inc. (“B-K”) and defendant Fresno

Valves & Casting, Inc. (“FVC”). On May 23, 2008, the court granted FVC’s motion for

summary judgment, finding, based on undisputed evidence, that the patent-in-suit was invalid as

obvious. Given this conclusion, the court declined to consider other invalidity and enforceability

arguments raised by FVC, as well as the parties’ arguments regarding infringement. On July 21,

2008 the parties stipulated to entry of a judgment that dismissed the remainder of FVC’s invalidity

and unfair competition counterclaims without prejudice.

On July 7, 2008, FVC filed a motion requesting that the court declare the case exceptional

Case 2:06-cv-02825-MMM-PLA Document 316 Filed 11/14/2008 of 42



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and award attorneys’ fees and expenses. FVC asserts that B-K engaged in inequitable conduct

before the patent office, that it engaged in misconduct during the course of the litigation, and that

the action was frivolous and pursued in bad faith.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The History of the Patent-in-Suit

The subject matter and history of the ’084 patent is addressed fully in the court’s claim

construction and summary judgment orders, and the court incorporates its discussion of those

matters by reference in this order. The court recites below facts relevant to FVC’s contentions

that B-K failed to disclose material prior art to the patent office during prosecution of the patent

and that it incorrectly identified the inventor of the patent to the patent office.

1. Presentation of Prior Art to the Patent Office

In its order granting summary judgment on the basis that the ’084 patent was invalid as

obvious, the court relied on two prior art references that B-K failed to present to the patent office:

the 360SL, a product previously designed and developed by B-K, and the Hydrel reference, a

competitor’s lighting mount that incorporated a tapered post/opening interaction. FVC asserts that

B-K’s failure to disclose these two references to the patent office constitutes inequitable conduct,

which justifies a finding that the case is exceptional.

a. The 360SL Reference

Before B-K patented the invention at issue, it employed a similar knuckle mounting

system. The 360SL knuckle (“360SL”) is a mounting for a light fixture that B-K sold or offered

for sale. It is the predecessor to B-K’s 360HD knuckle, which is the commercial embodiment of

the patent-in-suit. As noted in the summary judgment order, there are only two significant

differences between the 360SL and the 360HD: (1) the 360SL lacks the tapered opening/tapered

post interaction described in the ’084 patent and employed by the 360HD; and (2) the base

member/stud member interaction used in the 360HD is reversed in the 360SL. Thus, the 360SL

is essentially identical to the 360HD save for the addition of a tapered post/tapered opening

interaction and a reversed stud member/base member connection.




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1See Declaration of Irene Yang in Support of Motion for Attorneys’ Fees (“Yang Decl.”),Exh. 1 (Deposition of Douglas Hagen (“Hagen Depo.”)) at 92:9-21 (noting that the design of the’084 patent “was really an expansion of our smaller knuckle,” and that “other than the featuresof the 360-HD, the actual look and feel of it is just an enlargement of that short knuckle”); Yang

Decl., Exh. 2 (Deposition of Joseph Patrick Case (“Case Depo.”) at 18:11-22:16 (describing howthe designers used the 360SL as a “baseline” and sought to “scal[e] the existing one inch diameterstock knuckle up”); Yang Decl., Exh. 3 (Deposition of Michael Gillespie (“Gillespie Depo.”))at 22:15-27:17 (describing B-K’s desire to upscale the 360SL, which eventually led todevelopment of the taper interaction).

2Declaration of Douglas Hagen in Opposition to Motion for Attorneys’ Fees (“Hagen Decl.”), ¶ 12. Hagen bases this assertion on five differences between the 360SL and the device protected by the ’084 patent: “(a) the tapered post/tapered opening arrangement which is not present in the 360SL; (b) a seal around the tapered post to seal the connection between the support

member and base member . . . ; (c) a redesign of the passageway connection between the basemember and the support member; (d) a change of the rotational limiting means between the basemember and the stud member . . . ; (e) a complete redesign of the base member and the studconnection.” ( Id.)

3See Declaration of James R. Benya in Opposition to Motion for Attorneys’ Fees (“BenyaDecl.”), ¶¶ 1-2.

4 Id., ¶ 10.

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The parties dispute the relevance of the 360SL to development of the device protected by

the ’084 patent. They agree generally that in developing the ’084 patent, B-K expanded upon its

earlier 360SL design.1 Despite the admittedly close resemblance between the 360SL and the ’084

patent, however, Hagen subsequently asserted in a declaration that he did not believe that the360SL was “important or even relevant to the patentability of the invention claimed in the ’084

patent.”2 To support Hagen’s opinion in this regard, B-K proffers the declaration of James R.

Benya, an electrical engineer who owns a lighting design company in Oregon.3 Based on his

experience in the field, Benya states that he “would not consider the 360 HD as an evolution of

the 360 SL . . . [and he] would not have believed that it was necessary to disclose the 360SL [ ]

to the PTO as prior art.”4 Despite the fact, therefore, that Hagen and other B-K employees

acknowledge that the device protected by the ’084 patent was developed by expanding on the

360SL design, and that there are only a few differences between the ’084 patent and the 360SL,




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5See Hagen Decl., Exh. A at 2 (“Hydrel uses a similar taper lock system on a much larger

scale, but wireway is not integral”). B-K argues that Hagen also referenced the 360SL on theinformation disclosure form in stating that prior art had “a smaller integral wireway knuckle [that]ha[d] limited resistance to repositioning.” ( Id. at 1.) While this answer may have referenced the360SL, it did not effectively “disclose” the 360SL. The fact that some device used a smallerintegral wireway knuckle does not identify which device did so, much less that the device wasdeveloped by B-K and was the basis of the design of the invention for which a patent was sought.

6Hagen Depo. at 79:12-14 (“The only manufacturer at that time that I was aware of that is this type of taper fit was a company by the name of Hydrel”).

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B-K has presented evidence suggesting that, at the time it presented the ’084 patent and its

predecessor to the patent office, it did not consider the 360SL a prior art reference that was

materially relevant to patentability.

FVC proffers no evidence that affirmatively contradicts Hagen’s statement that he did not believe the 360SL was relevant prior art. It relies instead on the fact that the ’084 patent was

developed from the 360SL; the fact that the court found the ’084 patent obvious in light of the

360SL; and the undisputed fact that the 360SL was never presented to the patent office.

b. The Hydrel Reference

As noted in the summary judgment order, the Hydrel 7100 is an adjustable mount for a

light fixture that has a two piece support member that pivots on a base member. One piece of the

support member has a tapered opening that is configured to receive a tapered post on the base

member and allow for frictional pivoting under a load.

It is undisputed that B-K knew of Hydrel at the time it filed its original application for the

’948 patent. Indeed, Hagen identified Hydrel as the most closely related patent on the

“information disclosure form” he submitted to B-K’s patent counsel.5 Hagen also testified that,

at the time he suggested use of a taper, Hydrel was the only manufacturer he knew that used that

type of taper fit.6

Although it is undisputed that B-K knew of Hydrel at the time it submitted its patent

application, it contends it did not believe Hydrel was material at the time. Hagen asserts he did

not “believe that the Hydrel reference was important or even relevant to the patentability of the




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7Hagen Decl., ¶ 13.

8 Id. Hagen notes that the ’084 patent discloses a base member, a stud member, and asupport member and that, because Hydrel does not disclose all three of those elements, it was not relevant to the patentability of the ’084 patent. ( Id.) Hagen goes on to describe the ways in whichHydrel differs from the ’084 patent, essentially repeating the arguments advanced by B-K in opposition to FVC’s obviousness arguments. The mere fact that Hydrel was not identical to the

’084 patent does not excuse B-K’s failure to disclose or explain Hagen’s purported belief that it was not material.

9Benya Decl., ¶ 10.

10See id., ¶ 7. Notably, Benya does not address the tapered post/tapered openinginteraction in Hydrel nor explain why the reference is not material in light of that element alone.


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invention claimed in the ’084 patent.”7 He notes that Hydrel differed from the ’084 patent in

several ways, including that it did not disclose the three “major components” of the ’084 patent.8

Benya supports this, stating that he “would not have believed that it was necessary to disclose the

[ ] Hydrel reference to the PTO as prior art.”9

Benya’s opinion is based on the fact that thevertical adjustment mechanism in Hydrel is different than that used in the ’084 patent; there is no

seal between the elements containing the tapered post/tapered opening; and there is no separate

element for horizontal adjustment.10 Like Hagen, Benya focuses on the fact that many of the

elements in Hydrel performed differently than corresponding elements in the ’084 patent. Both

Benya and Hagen argue that there was no reason to present Hydrel to the patent office because

the only similarity was the tapered post/tapered opening. This implies that they did not consider

the disclosure of this element in the prior art relevant to patentability, an argument that runs

counter to B-K’s assertion that the taper was the fundamental innovation of the ’084 patent.

c. Other Prior Art

It is undisputed that B-K submitted no prior art along with its original application for the

’948 patent. It asserts that, once it learned of potentially relevant prior art, Hagen “immediately

notified the Patent Office and sought reissuance.”11 B-K contends that, during a prior patent




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12See Plaintiff’s Opposition to Motion for Attorneys’ Fees (“Pl.’s Opp.”) at 13. B-Krefers to B-K Lighting v. Kim Lighting, Eastern District of California No. CIV F-02-5739. It

states that during the litigation, “certain prior art was discovered that was thought to be relevant to the claims of B-K Lighting’s [’948 patent].” ( Id.)

13 Id. The only prior art reference B-K presented to the patent office was U.S. Patent No.5,713,662 (Kira). It submitted this reference with inventor Hiroshi Kira’s declaration. (SeeDeclaration of Jaye Heybl in Opposition to Motion for Attorneys’ Fees (“Heybl Decl.”), ¶ 3.)

14See Hagen Depo. at 37:7-8 (“I couldn’t tell you when I first learned about the Coronado

series. Years ago”); id . at 37:15-19 (“Q: But you were aware of [the Coronado Series] prior toMay 26th of [19]99 when you filed your patent application, correct? A: I was aware of the – Iwas aware of the Coronado series”).

15Hebyl Decl., ¶ 4.

16Hagen asserts, without support, that “the individuals managing the Vision3 division of Fresno Valves were well aware of [the 360SL and Hydrel] as former employees of B-K Lighting.”(Hagen Decl., ¶ 14.)

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action, it discovered prior art that it considered relevant to the claims of the ’948 patent.12 It

asserts that it dismissed the infringement action upon learning of the prior art, presented the newly

discovered prior art to the patent office, and sought a reissue patent.13 FVC challenges this

assertion, noting that Hagen testified he was aware of the Lumiere Coronado Series (i.e., theembodiment of the Kira patent) before he filed the original patent application.14 FVC suggests that

B-K did not “newly discover” the Kira reference and immediately submit it to the patent office

in support of an application for a reissue patent; rather, it contends, B-K presented the reference

only when faced with the prospect of having the ’948 patent declared invalid by the court.

Without speculating as to B-K’s motivation, the court concludes that Hagen’s deposition testimony

undermines B-K’s suggestion that it acted promptly to disclose all possibly relevant prior art to

the patent office as soon as it was discovered.

During prosecution of the reissue application, FVC initiated a protest that raised eight

additional prior art references that were allegedly relevant.15 It is undisputed that neither the

360SL nor Hydrel was among these references.16 B-K argues that FVC’s failure to bring the

360SL and Hydrel to the attention of the patent office reinforces its view that the references were




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17 Id.

18Plaintiff’s Statement of Undisputed Facts in Support of Motion for Summary Judgment Re: Validity, ¶ 30. FVC does not dispute that Hagen is the sole named inventor on the patents.It argues, however, that Hagen was incorrectly identified as the sole inventor. (Def.’s InvalidityIssues, ¶ 30.)

19Pl.’s Invalidity Facts, ¶ 31.

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not relevant to patentability.17

While FVC could have presented the 360SL and Hydrel to the patent office, the court

declines to draw any inference from its failure to do so. First, as discussed infra, the burden is

on the patent applicant to present relevant prior art to the patent office. The fact that a protestordoes or does not present prior art for consideration is not relevant in assessing whether the patent

applicant engaged in inequitable conduct. Additionally, B-K proffers no evidence that FVC knew

of the 360SL or Hydrel at the time it filed its protest; it relies exclusively on Hagen’s speculation

in this regard. For both reasons, the court declines to draw the inference B-K seeks from FVC’s

failure to cite the 360SL and Hydrel in support of its protest.

2. Inventorship

As they did at summary judgment, the parties vigorously dispute the inventorship of the

patent-in-suit. The principal issue is whether, as FVC urges, Patrick Case and Gary Gillespie

were co-inventors (or sole inventors) of the patented device or whether, as B-K argues, Hagen was

the sole inventor. Although the court declined to decide this issue at the summary judgment stage,

it utilizes the briefing and exhibits presented at that stage to frame the issue.

a. B-K’s Version of the Facts

B-K asserts that Hagen is the sole inventor of the ’948 and ’084 patents.18 It contends there

is no “corroborated evidence” that he was not properly named the inventor, nor that Case or

Gillespie should have been included as inventors.19 It also argues that FVC has adduced no

evidence that it intended to deceive regarding the identity of the true inventors. Indeed, it asserts,

the fact that Case is named as an inventor on other patents assigned to B-K shows that it had no




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20 Id., ¶ 32.

21Gillespie Depo. at 88:17-19.

22 Id. at 88:22-91:4.

23 Id. at 92:11-14.

24 Id. at 26:7-13.

25Hagen Depo. at 69:23.

26Gillespie Depo. at 32:13.

27 Id. at 26:15-16. Gillespie added: “I’m not prepared to say out of whose mouth that camefrom.” ( Id. at 26:17-18.)

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such motive or intent.20

B-K notes that during his deposition, Gillespie described Hagen as a “conceptual guy that

would come up with product concepts.”21 He also acknowledged that Hagen had conceived the

idea of a heavy duty lamp mount that included a lighting element, a lighting support, a basemember, a stud member, and a pass through for wiring that would permit 360 degree rotation.22

Gillespie conceded that Hagen “storyboard[ed] his ideas, his concepts, and then provide[d] them

to [him] or the engineering department for implementation.”23 Gillespie recalled that development

of Hagen’s concept involved “many meetings, brainstorming sessions with – at any given time,

it could be Doug Hagen, Bruce Kowkowlsky, Patrick Case, myself, Ryan Barrios, all . . . in the

room at the same time discussing what we needed to do to fix this thing.”24

The parties appear to agree that the critical element of the invention was the tapered

post/opening interaction. Hagen testified that this “was [his] idea.”25 Gillespie did not directly

contradict this, and stated that “the word ‘taper’ [might] have come from [Hagen].”26 He recalls

meetings and brainstorming sessions, but cannot identify the “first one to actually say the word

‘taper.’”27

B-K acknowledges Case testified that Hagen did not conceive of the taper, and that he and




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28Case Depo. at 107:18-23. B-K seeks to undermine Case’s credibility, noting that he left his job at B-K after “repeated verbal abuse from Hagen” (id. at 15:9-20), and that he admitted that he was “pretty biased against B-K Lighting,” and did not want to see Hagen’s name on another patent. ( Id. at 91:14-20). The court declines to assess Case’s credibility at this stage of the proceedings, particularly since Gillespie’s testimony is largely cumulative of Case’s. and noquestions have been raised regarding Gillespie’s credibility.

29 Id. at 108:1-9.

30 Id. at 108:10-16.

31Gillespie Depo. at 30:19-25 (asked whether Hagen had provided any details regarding thetaper, Gillespie responded: “Absolutely not. Doug lacked a certain mechanical aptitude regardingdesign”).

32 Id. at 27:9-12.

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Gillespie developed the concept for that element.28 It discounts this, however, noting that Case

could not recall whether he or Gillespie conceived of the taper, and stated that Gillespie could

have developed the concept first.29 Case conceded that Gillespie had spoken with Hagen outside

his presence, and that he could not say “with any certainty” that Hagen had not given Gillespiethe taper idea.30

B-K also contends that, even if the patent mistakenly identified the inventors, there is no

evidence of intent to deceive. It notes that during the time Case worked at B-K, he was named

as inventor on three patents. It asserts this shows that it did not attempt to exclude Case (and

substitute Hagen) when he invented a device on which a patent was sought.

b. FVC’s Version of the Facts

FVC argues that Gillespie and Case are the true inventors of the patented device, and that,

at a minimum, they should have been named as co-inventors of the patent-in-suit. Like B-K, FVC

focuses on the tapered post/opening interaction. It notes that while Gillespie testified Hagen might

have contributed the word “taper,” he did not provide any details as to how the taper should be

designed.31 Gillespie stated that once the idea of a taper surfaced, he was the one who developed

the taper’s geometry and “pretty much everything else.”32




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33 Id. at 26:19.

34 Id. at 28:10.

35 Id. at 29:13-19.

36 Id. at 30:10-17.

37 Id. at 30:17-18.

38 Id. at 27:9-12. Gillespie asserts that Hagen’s only involvement was to conceive of theword “taper.” He asserts that “the entire design is either [his] or Patrick Case’s. Completely.”( Id. at 32:13-15.)

39See Hagen Depo. at 68:4-14.

40 Id. at 62:11-14. In fact, Hagen later testified that the taper used in the commercialembodiment (360HD) uses a combination of both technologies. ( Id. at 67:8-15.)

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Gillespie had experience with self-releasing tapers due to his work as a machinist.33 He

testified that there were a number of problems that had to be overcome in designing the taper.34

As he described it, “we played with [the taper] angle until we came up with an angle” that worked

to “allow the fixture to be adjusted and relocked.”35

Gillespie also stated that the length of thetaper was resolved through experimentation.36 He testified repeatedly that he doubted the tapered

interaction would work, and that in the end, he was “surprised [that] it [did]. Very, very

shocked.”37 As Gillespie recalls events, he conceived the taper’s design and Case developed the

geometry for the wireway.38 Gillespie also created some of the figures in the patent application

(i.e., figures one and three as well as the front page figure) using CAD.

FVC cites portions of Hagen’s testimony that essentially corroborate Gillespie’s account.

Hagen admitted that a full set of parameters for the taper (including depth, diameter, compression,

and “all kinds of other issues”) were critical to the invention.39 He acknowledged that he was not

aware of these details nor of the precise angle of the taper. Hagen, in fact, demonstrated that he

did not appreciate the difference between “self-releasing” and “self-locking” tapers – a distinction

that is crucial to operation of the invention’s taper – and admitted that he did not know whether

a decision had been made to use one or the other.40 FVC contends that, apart from expressing a




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41Gillespie Depo. at 24:21-25:5.

42See Case Depo. at 30:20-51:13.

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desire that the new product look like the old, Hagen provided no input regarding the engineering

decisions involved in creating the device.41 It asserts this corroborates its view that Gillespie and

Case designed the device with minimal (if any) input from Hagen.

Case’s testimony, FVC notes, corroborates Gillespie’s version of events. Like Gillespie,Case testified that Hagen provided little direction regarding design of the device and that each

element protected by the ’084 patent was designed by some combination of him and Gillespie.42

Based on their testimony, FVC contends that Hagen did not conceive every element of the device

claimed in the ’084 patent, and may not have conceived of any element.

As respects intent to deceive, FVC notes that Hagen was the only individual named as

inventor in the original and reissue patent applications. At the time the device was invented,

neither Case nor Gillespie had an employment agreement which assigned the rights to any patents

he developed to B-K. Citing this fact, FVC asserts that B-K may have wanted to prevent Case and

Gillespie from claiming ownership of the patented device, and that this provided a motive for

deceiving the patent office regarding inventorship.

B. Issues Related to the Prosecution of This Litigation

FVC next alleges that B-K pursued this litigation in bad faith, arguing that (1) B-K’s

assertion of the ’948 patent was frivolous; (2) it asserted non-meritorious infringement claims;

(3) its continued prosecution of the action following claim construction was frivolous; (4) it

improperly named Vision3 Lighting as a defendant and refused to amend the complaint to name

FVC; (5) it engaged in discovery abuse related to the inventorship challenge; (6) it made

misrepresentations regarding Monte Matts’ drawings; and (7) it refused to engage in a mediation.

The factual bases for these charges are fairly straightforward. It is undisputed that B-K’s

original complaint alleged that FVC had infringed both the ’948 and the ’084 reissue patents.

FVC proffers evidence that it asked B-K to drop claims related to the ’948 patent at an early point

in the litigation, but that B-K refused to do so until the court addressed the issue in November




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43FVC first approached B-K about having improperly asserted the surrendered ’948 patent in June 2006. (See Yang Decl., Exh. 18 (June 9, 2006 letter from FVC’s counsel to B-K’scounsel).) B-K refused to drop the claim until the court noted that it believed a surrendered patent could not be asserted in November 2006.

44Yang Decl., Exh. 18 (June 9, 2006 letter from FVC’s counsel to B-K’s counsel).

45 Id., Exh. 19 (July 14, 2006 letter from FVC’s counsel to B-K’s counsel).

46 Id., Exh. 20 (July 17, 2006 letter from B-K’s counsel to FVC’s counsel).

47Defendant’s Memorandum of Points and Authorities in Support of Motion for Attorneys’Fees (“Def.’s Mem.”) at 30.

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2006 in connection with a hearing on FVC’s motion to dismiss.43 Similarly, FVC complains that

B-K initially sued Vision3 Lighting improperly and refused to amend its complaint to name FVC

– Vision3’s parent company and the real party in interest. FVC alleges that on June 9, 2006, it

notified B-K that Vision3 was a subsidiary of FVC and could not be sued.44

FVC repeated andexpanded on this point in a subsequent July 14, 2006 letter.45 On July 17, 2006, B-K expressed

a willingness to amend the complaint to name FVC rather than Vision3, but requested that FVC

provide facts supporting its representation that it was the real party in interest.46 The dispute

apparently continued with FVC refusing to provide more information and B-K refusing to

acknowledge that FVC was the real party at interest. Ultimately, FVC filed a motion to dismiss,

which the court granted in November 2006. FVC characterizes B-K’s behavior as intransigent,

while B-K suggests that FVC’s failure to provide evidence that it was the real party in interest

shows it was the intransigent one.

The remainder of FVC’s litigation misconduct argument concerns changes in B-K’s

infringement allegations before and after claim construction, alleged discovery abuse and failure

to mediate. As respects discovery, FVC charges that (1) B-K failed to produce the Invention

Disclosure Form until the end of Case’s deposition; (2) that it failed to produce Case’s engineering

notebook until his deposition had concluded; (3) that it failed to produce a timeline for

development of the 360HD; and (4) that it answered a number of interrogatories inaccurately.47




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48Pl.’s Opp. at 31-32.

49See Def.’s Mem. at 31-32.

50Pl.’s Opp. at 33.

51Def.’s Mem. at 33.

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B-K responds that it produced all relevant documents requested as soon as it had access to them.48

FVC also highlights B-K’s “lack of candor” with the court. It notes that in challenging Monte

Matts’ rendering of the 360SL, B-K asserted that he had no knowledge of the product’s design

because it was developed prior to his arrival at B-K in 1998. Later, however, B-K argued that,by virtue of his past employment at B-K, Matts surely knew of the 360SL long before the action

was filed.

The final issue FVC raises is B-K’s purported failure to mediate. FVC notes that a

mediation was initially set for May 6, 2008, but was postponed because summary judgment

motions were pending. After the court issued a tentative ruling, FVC attempted to reschedule the

mediation; B-K purportedly refused to cooperate or appear.49 B-K suggests that it made settlement

proposals, noting that “[o]n more than one occasion [it] offered Fresno Valves a license in the

patent at issue.”50 It states that after the motions for summary judgment were filed, it was

reluctant to participate in a mediation until all issues in the case had been resolved. After the court

entered a summary judgment order, the parties disagreed as to the issues that remained to be tried

or otherwise resolved and B-K declined to mediate.

C. Alleged Theft of the Prototype

The final issue FVC cites in support of its claim that the case is exceptional is based on the

§ 17200 claim, which alleged that B-K stole an FVC prototype at Lightfair 2003. FVC argues that

it has incurred significant fees litigating this issue, and that the fact that B-K returned the fixture

strongly suggests it was stolen. In essence, FVC argues that, although it dismissed its claim that

the prototype was stolen, the facts clearly show that it was and that B-K’s subsequent denials

demonstrate bad faith and merit an award of attorneys’ fees.51




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52Pl.’s Opp. at 34.

53The Federal Circuit has noted that § 285’s deterrent purpose justifies awards above andbeyond the cost of legal services. See Mathis, 857 F.2d at 754 (“No award under Section 285 can fully compensate a defendant subjected to bad faith litigation, e.g., for loss of executives’ time andmissed business opportunities. Thus that defendant cannot be fully returned to ‘the situation hewould have occupied if the wrong had not been committed.’ [citing Albermarle Paper Co. v.

Moody, 422 U.S. 405, 418-19 (1975)] In determining the compensatory quantum of an award under Section 285 in such an egregious case, therefore, courts should not be, and have not been,limited to ordinary reimbursement of only those amounts paid by the injured party for purely legalservices of lawyers, or precluded from ordinary reimbursement of legitimate expenses defendant was unfairly forced to pay”).

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B-K responds that it, not FVC, should receive attorneys’ fees on the § 17200 claim because

FVC insisted on pursuing the cause of action following the court’s summary judgment ruling and

the prototype’s return. Only after the parties had submitted additional briefing and an additional

status conference had been held did FVC finally agree to dismiss its § 17200 claim without prejudice.52 B-K suggests that, despite the fact that no relief was available on the claim, FVC

continued to litigate it, incurring needless additional fees.

II. DISCUSSION

A. Legal Standard Governing Attorneys’ Fees in Patent Cases

“The court in exceptional [patent] cases may award reasonable attorneys fees to the

prevailing party.” 35 U.S.C. § 285. The statute is designed “to compensate the prevailing party

for its monetary outlays in the prosecution or defense of the suit,” Central Soya Co. v. Geo. A.

Hormel & Co., 723 F.2d 1573, 1578 (Fed. Cir. 1983), and to serve “ as a deterrent to ‘improper

bringing of clearly unwarranted suits’ for patent infringement,” Automated Business Companies,

Inc. v. NEC America, Inc., 202 F.3d 1353, 1355 (Fed. Cir. 2000) (quoting Mathis v. Spears, 857

F.2d 749, 754 (Fed. Cir. 1988).53

“A case may be deemed exceptional when there has been some material inappropriate

conduct related to the matter in litigation, such as willful infringement, fraud or inequitable

conduct in procuring the patent, misconduct during litigation, vexatious or unjustified litigation,




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conduct that violates Fed.R.Civ.P. 11, or like infractions.” Brooks Furniture Mfg., Inc. v.

Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005) (citing Cambridge Prods. Ltd. v. Penn

Nutrients, Inc., 962 F.2d 1048, 1050-51 (Fed. Cir. 1992)); see Braessler, U.S.A. I, L.P. v.

Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001) (“The prevailing party may prove theexistence of an exceptional case by showing: inequitable conduct before the PTO; litigation

misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful

infringement”).

“[U]se of the term ‘exceptional’ in § 285 is not to be taken lightly.” Visto Corp. v. Sproqit

Technologies, Inc., No. C-04-0651 EMC, 2007 WL 160942, *2 (N.D. Cal. Jan. 17, 2007).

“Congress in choosing to limit district court authority to award attorney’s fees to ‘exceptional’

cases has made clear that this should occur only in rare or extraordinary cases. . . . [Thus,] courts

elucidating this statutory language have generally found that ‘exceptional’ cases are those rare or

extraordinary cases blighted and marked by a party’s bad faith or inequitable conduct.” Knorr-

Bremse Systeme Fuer Nutzfarzeuge GmbH v. Dana Corp., 372 F.Supp.2d 833, 848 (E.D. Va.

2005). Consequently, a court that intends to award fees under § 285 must make a finding that a

party took “egregious action . . . such that fees must be awarded . . . to prevent a gross injustice.”

Visto, 2007 WL 160924 at *2.

To decide “whether a case is exceptional and, thus, . . . warrant[s] an award of attorney

fees under § 285 is a two-step process in which the district court must (1) determine whether there

is clear and convincing evidence that a case is exceptional . . . and (2) if so, . . . determine in its

discretion whether an award of attorney fees is justified.” Digeo, Inc. v. Audible, Inc., 505 F.3d

1362, 1366-67 (Fed. Cir. 2007). On appeal, the court’s finding on the first question is reviewed

for clear error while its finding on the second is reviewed for abuse of discretion. Id. Although

a court may not award attorneys’ fees absent a finding that a case is exceptional, it may decline

to award fees in an exceptional case in its discretion. See Enzo Biochem, Inc. v. Calgene, Inc.,

188 F.3d 1362, 1370 (Fed. Cir. 1999) (“[I]f the case is found to be exceptional, the district court

must then determine whether attorney fees should be awarded”).

B. Legal Standard Governing Sanctions




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Federal courts have inherent power to impose sanctions against attorneys and parties for

bad faith conduct or willful disobedience of a court order. See Chambers v. NASCO, Inc., 501

U.S. 32, 43 (1991); Roadway Express, Inc. v. Piper , 447 U.S. 752, 764-66 (1980). The court’s

inherent powers “are governed not by rule or statute but by the control necessarily vested in courtsto manage their own affairs so as to achieve the orderly and expeditious disposition of cases.”

Chambers, 501 U.S. at 43.

In addition to imposing sanctions as an exercise of inherent authority, the court may also

levy sanctions against attorneys under 28 U.S.C. § 1927. That statute provides:

“Any attorney or other person admitted to conduct cases in any court of the United

States or any Territory thereof who so multiplies the proceedings in any case

unreasonably and vexatiously may be required by the court to satisfy personally the

excess costs, expenses, and attorneys’ fees reasonably incurred because of such

conduct.” 28 U.S.C. §1927.

See also In re TCI, Ltd., 769 F.2d 441, 446 (7th Cir. 1985) (“When an attorney recklessly creates

needless costs the other side is entitled to relief”).

Exercising its inherent power, the court may impose “[s]anctions . . . for a variety of types

of willful actions, including recklessness when combined with an additional factor such as

frivolousness, harassment, or an improper purpose.” Fink v. Gomez, 239 F.3d 989, 994 (9th Cir.

2001); id. (“Therefore, we hold that an attorney’s reckless misstatements of law and fact, when

coupled with an improper purpose, such as an attempt to influence or manipulate proceedings in

one case in order to gain tactical advantage in another case, are sanctionable under a court’s

inherent power”). Sanctions under § 1927 require a finding of recklessness or bad faith. In re

Keegan Mgmt Co. Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996); id. (holding that § 1927

sanctions “‘must be supported by a finding of subjective bad faith,’” or “an intent to harass,”

quoting New Alaska Dev. Corp. v. Guetschow , 869 F.2d 1298, 1306 (9th Cir. 1989)).

C. Section 285 Analysis

1. Whether the Case is Exceptional

FVC advances several bases for a finding that the case is exceptional. These can be




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categorized generally as inequitable conduct before the patent office and litigation misconduct.

a. Inequitable Conduct

“Patent applicants ‘have a duty to prosecute patent applications in the Patent Office with

candor, good faith, and honesty.” Symantec Corp. v. Computer Assocs. Int’l, Inc., 522 F.3d1279, 1296 (Fed. Cir. 2008) (quoting Honeywell Int’l Inc. v. Universal Avionics Sys. Corp., 488

F.3d 982, 999 (Fed. Cir. 2007)); 37 C.F.R. § 1.56(a) (“Each individual associated with the filing

and prosecution of a patent application has a duty of candor and good faith in dealing with the

Office”). “A breach of this duty constitutes inequitable conduct.” Symantec Corp., 522 F.3d at

1296.

The Federal Circuit has outlined a three step test for determining whether a patentee

engaged in inequitable conduct. The party asserting inequitable conduct must establish (1) that

the patent applicant made an affirmative misrepresentation, failed to disclose material information,

or submitted false information to the patent office; and (2) that the applicant did so with intent to

deceive. If these elements are established, (3) the court must weigh them to determine whether

inequitable conduct occurred. See id. (“[T]he party challenging the patent is required to establish

by clear and convincing evidence that the patent applicant ‘(1) either made an affirmative

misrepresentation of material fact, failed to disclose material information, or submitted false

material information, and (2) intended to deceive the U.S. Patent and Trademark Office.’ Cargill,

Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1363 (Fed. Cir. 2007). ‘Once threshold findings of

materiality and intent are established, the trial court must weigh them to determine whether the

equities warrant a conclusion that inequitable conduct occurred,’” quoting Purdue Pharma L.P.

v. Endo Pharm. Inc., 438 F.3d 1123, 1128 (Fed. Cir. 2006)); Innogenetics, N.V. v. Abbott Lab.,

512 F.3d 1363, 1378 (Fed. Cir. 2008) (“‘[I]nequitable conduct includes affirmative

misrepresentation of a material fact, failure to disclose material information, or submission of false

material information, coupled with an intent to deceive,’” quoting Pharmacia Corp. v. Par

Pharm., Inc., 417 F.3d 1369, 1373 (Fed. Cir. 2005)). Materiality and intent are questions of fact

that must be proved by clear and convincing evidence. See Innogenetics, 512 F.3d at 1378 (“Both

intent and materiality are questions of fact, and must be proven by clear and convincing




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54The court’s analysis of this issue is set forth in its Order Denying Ex Parte Application for Clarification, Docket No. 247 (July 3, 2008).

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evidence”).

(1) Failure to Disclose

(a) Whether Failure to Disclose Must be Pled

Before this motion was filed, the parties briefed whether the court could address FVC’sclaim that B-K failed to disclose prior art to the patent office in the context of a § 285 motion

given that FVC had not included allegations to this effect in its answer or counterclaims. After

reviewing the case law, the court determined that the matter could be raised for the first time in

a motion for attorneys’ fees.54 Because of the procedural posture in which the issue is being

addressed, the court considers whether B-K engaged in inequitable conduct only for the purpose

of determining whether this is an exceptional case. Any ruling regarding the issue does not bear

on the enforceability of the ’084 patent, but is a finding related solely to the court’s discretionary

consideration of attorneys’ fees.

An additional question is what standard of review applies. B-K argues that the court should

apply a summary judgment standard and draw all inferences in its favor because it did not have

the opportunity to litigate the issue in the underlying case. FVC counters that the court should

simply apply the clear and convincing evidence standard set forth in the case law. It is clear that,

at a minimum, FVC must adduce clear and convincing evidence of inequitable conduct. In other

cases addressing inequitable conduct for the first time in the context of a motion for attorneys’

fees, courts have utilized this standard. See Serious Materials, LLC v. Suppress Products, LLC ,

No. C-07-01328 RMW, 2008 WL 754878, *3 (N.D. Cal. Mar. 21, 2008) (applying the clear and

convincing standard to an inequitable conduct argument raised for the first time in connection with

a § 285 motion); cf. Special Devices, Inc. v. OEA, Inc., 131 F.Supp.2d 1171, 1176-78 (C.D. Cal.

2001) (not expressly articulating the evidentiary standard applied, but stating that “[b]ased on the

parties’ [evidentiary] showing, this Court makes a factual determination as to whether the case is

exceptional, and if so, whether fees should be awarded”).




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In view of this authority, the court declines to apply the summary judgment standard in

assessing FVC’s inequitable conduct argument. It will, however, scrutinize the evidence closely

to determine whether it constitutes clear and convincing proof, and whether, if it does, equity

supports a discretionary award of fees.(b) Materiality

Where the inequitable conduct alleged is failure to disclose prior art to the patent office,

materiality is “defined as ‘what a reasonable examiner would have considered important in

deciding whether to allow a patent application.’” Eisai Co. Ltd. v. Dr. Reddy’s Labs., Ltd., 533

F.3d 1353, 1360 (Fed. Cir. 2008) (quoting Innogenetics, 512 F.3d at 1378). The “reasonable

examiner” standard is based in part on the PTO’s Rule 56, which articulates applicants’ duty of

candor and good faith before the office. See Digital Control, Inc. v. Charles Mach. Works, 437

F.3d 1309, 1314 (Fed. Cir. 2006). In 1992, the PTO amended Rule 56 and “creat[ed] an

arguably narrower standard of materiality.” Id. The rule now provides that

“information is material to patentability when it is not cumulative to information

already of record or being made of record in the application, and

(1) It establishes, by itself or in combination with other information, a prima

facie case of unpatentability of a claim; or

(2) It refutes, or is inconsistent with, a position the applicant takes in:

(i) Opposing an argument of unpatentability relied on by the Office,

or

(ii) Asserting an argument of patentability.

A prima facie case of unpatentability is established when the information compels

a conclusion that a claim is unpatentable under the preponderance of evidence,

burden-of-proof standard, giving each term in the claim its broadest reasonable

construction consistent with the specification, and before any consideration is given

to evidence which may be submitted in an attempt to establish a contrary conclusion

of patentability.” 37 C.F.R. §1.56(b).

Although amended Rule 56 was intended to provide a clearer and more objective definition




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of materiality, it “was not intended to replace or supplant the ‘reasonable examiner’ standard. “

See Digital Control , 437 F.3d at 1316 (“That the new Rule 56 was not intended to replace or

supplant the ‘reasonable examiner’ standard is supported by the PTO’s comments during the

passage of the new rule”). Indeed, as the Digital Control court noted, still other formulations of materiality exist. See id. at 1315 (“[N]either the Supreme Court nor the PTO [has] articulated

exactly what constituted a material misrepresentation. Thus, several different standards of

materiality emerged from the courts”). These include:

(1) “the objective ‘but for’ standard, where the misrepresentation was so material

that the patent should not have issued; [(2)] the subjective ‘but for’ test, where the

misrepresentation actually caused the examiner to approve the patent application

when he would not otherwise have done so; and [(3)] the ‘but it may have’

standard, where the misrepresentation may have influenced the parent examiner in

the course of prosecution.” Id. (citing Am. Hoist & Derrick Co. v. Sowa & Sons,

Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984)).

Although the standards are different, they are all ways of conceptualizing what “a

reasonable examiner would have considered important.” Innogenetics, 512 F.3d at 1378. As a

result, the Federal Circuit has held that materiality can be shown under any of these tests. See

Digital Control , 437 F.3d at 1316 (“That is, if a misstatement or omission is material under the

new Rule 56 standard, it is material. Similarly, if a misstatement or omission is material under

the “reasonable examiner” standard or under the older three tests, it is also material”). Where

the test used requires a higher showing of materiality, less evidence of intent to deceive is

required. Id.

The court previously found, based on undisputed evidence, that the ’084 patent was invalid

as obvious in light of the two undisclosed prior art references – the 360SL and Hydrel. As a

result, it has conclusively determined that two references rendered the claims of the ’084 patent

unpatentable and that they are material. B-K does not dispute that the two prior art references are

now material given the Supreme Court’s intervening decision in KSR Int’l Co. v. Teleflex, Inc.,

127 S.Ct. 1727 (2007). It suggests, however, that they may not have been material at the time




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the application was filed. As discussed in detail in the court’s summary judgment order, KSR

rejected a formalistic application of the Federal Circuit’s teaching, suggestion, and motivation test

for obviousness in favor of a broader, more flexible analysis. See id. at 1741 (“The obviousness

analysis cannot be confined by a formalistic conception of the words teaching, suggestion, andmotivation, or by overemphasis on the importance of published articles and the explicit content

of issued patents. The diversity of inventive pursuits and of modern technology counsels against

limiting the analysis in this way”).

While KSR may have changed the manner in which the Federal Circuit’s teaching,

suggestion, motivation test is applied, the Federal Circuit has stated, on numerous occasions, that

it did not announce a new rule of law. See, e.g., Cordis Corp. v. Medtronic AVE, Inc., 511 F.3d

1157, 1172 (Fed. Cir. 2008) (responding to a party’s argument that KSR effected a significant

change in the law, the court stated: “The Supreme Court . . . stated that ‘[t]here is no necessary

inconsistency between the idea underlying the TSM test and the Graham [ v. John Deere Co., 383

U.S. 1 . . . (1966)] analysis.’ . . . This court’s error, the Supreme Court explained, was to

‘transform[ ] the general principle into a rigid rule that limit[ed] the obviousness inquiry.’ . .); In

re Translogic Tech., Inc., 504 F.3d 1249, 1257 (Fed. Cir. 2007) (“[A]s the Supreme Court

suggests, a flexible approach to the TSM test prevents hindsight and focuses on evidence before

the time of invention”); Takeda Chem. Indus., Ltd. v. Alphapharm Pty., Ltd ., 492 F.3d 1350,

1357 (Fed. Cir. 2007) (“As long as the [TSM] test is not applied as a ‘rigid and mandatory’

formula, that test can provide ‘helpful insight’ to an obviousness inquiry,” quoting KSR, 127 S.Ct.

at 1731) ; see also Black & Decker, Inc. v. Robert Bosch Tool Corp., 260 Fed. Appx. 284, 290

(Fed. Cir. Jan. 7, 2008) (Unpub. Disp.) (“This court has already said that the teaching,

suggestion, motivation test remains good law for obviousness, only a rigid application of that test

is problematic”). Consequently, the court does not believe that the materiality analysis is affected.

The undisputed facts show clearly that both the 360SL and Hydrel were material to the

patentability of the ’084 patent. Looking first at the 360SL, every person at B-K involved in

developing the device protected by the ’084 patent agrees that the 360SL provided the inspiration

for the device, and served as a baseline design during the development process. Hagen himself




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55For example, B-K repeatedly argued that the fact that the stud member“threadably”connected to a power source was a distinction over the prior art. It is undisputed, however, that the 360SL also “threadably” connects to the power source.

56Indeed, Hagen testified that the taper was what set the ’084 patent apart from the 360SL.

57Supplemental Declaration of Irene Yang in Support of Motion for Attorneys’ Fees(“Supp. Yang Decl.”), Exh. 60 at 124.

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noted that the only significant difference between the 360SL and the ’084 patent was the addition

of the tapered post/tapered opening interaction (first resistance means). The patent claims,

however, much more than the first resistance means.55 During claim construction and at summary

judgment, the parties disputed every element of the ’084 patent from connection of the studmember to the source of electrical power to placement of the O-ring seals. To the extent that

issuance turned on the patentability of elements other than the first resistance means, Hagen’s

testimony makes clear that the 360SL was not only material, but highly material, prior art. This

is true regardless of the standard of obviousness applied.

Much the same can be said of the Hydrel reference. As noted, Hydrel was the only prior

art referenced by Hagen in the Invention Disclosure Statement. Hagen not only acknowledged

that Hydrel incorporated a taper; he stated in his deposition that he knew Hydrel was the only

other lighting company that used a taper. Hagen and B-K have repeatedly identified the first

resistance means as the innovative element of the invention.56 Because Hydrel is the only prior

art reference that disclosed a tapered interaction providing frictional rotational motion, it was

clearly material to patentability.

B-K’s representations during prosecution of the reissue patent also support the conclusion

that Hydrel is material. In response to a challenge to claim three, B-K stated that “[t]he cited

references do not disclose, teach or suggest a tapered post or a tapered opening which allows

‘frictional pivoting’ of the tapered post in the opening.”57 As can be seen, B-K carefully limited

its statement to “cited references”; it could not have argued that the tapered post and opening

distinguished its invention from the prior art had it disclosed Hydrel to the examiner. B-K’s

argument, in fact, makes clear the fact that the taper was a materially relevant element of the




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58The patent itself identifies the taper as a critical advance over the prior art. As the court noted in its summary judgment order, the patent stated that

“prior art fixtures typically employed a knuckle joint with serrated edges that hadto be rotated to lock and form the desired angle. The fact that the serrated edgeshad to lock together limited the available angles of adjustment. Additionally, two people had to work together to set the angle; if one person attempted to adjust thelight alone, a time-consuming iterative process was required. The inventor sought to create a mount with infinite adjustability that maintained the integrity of thesealed wiring, and that could be adjusted by one person with ease.” (SummaryJudgment Order at 3.)

B-K identified the taper as a significant advance over the difficult serrated interactions of the priorart. Consequently, a reference that disclosed a similar taper – especially a taper in an outdoorlight fixture – was clearly material and would have been important to a patent examiner evaluatingB-K’s patentability arguments.

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patented device. This leads ineluctably to the conclusion that the only prior art disclosing such

a taper was also materially relevant.58

Consequently, the court concludes that any reasonable examiner would have considered

the 360SL and Hydrel important, before or after KSR, in assessing obviousness. The 360SL wasthe base reference for the ’084 patent, and Hydrel disclosed what was B-K concedes is the central

element of the ’084 patent – the tapered post/tapered opening interaction. Whether disclosure of

these references would have led the examiner to conclude that all of the claims of the ’084 patent

were obvious is not the issue. The fact that the references could have rendered the claims obvious

is sufficient.

(c) Intent

Having found that both the 360SL and Hydrel were clearly material to the patentability of

the ’084 patent, the court must next determine whether there is clear and convincing evidence that

B-K intended to deceive the patent office. B-K offers two arguments that it contends refute any

claim of intent to deceive. First, it proffers the Hagen and Benya declarations. As noted, Hagen

testified that he did not believe either the 360SL or Hydrel was relevant to patentability, and that

his failure to disclose was not the product of an intent to deceive the patent office. Benya supports

Hagen’s view of materiality, asserting that, as an engineer, he would not have considered either




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59FVC has moved to strike the Hagen and Benya declarations, arguing (1) that Hagen’s

declaration contradicts his prior testimony; (2) that Benya was not disclosed as an expert on thesubjects to which he testifies; and (3) that B-K’s submission of the declarations amounts to an unilateral reopening of discovery. Given the discretionary nature of the attorneys’ fees inquiry,the court declines to strike the evidence. Although FVC argues with some force that it has hadno opportunity to cross-examine Hagen or Benya regarding their opinions or to rebut the evidencethey offer, this is a product of the fact that FVC did not allege failure to disclose in its answer orcounterclaims, and the issue was not litigated as a result. Consequently, the court will considerthe declarations, but will also take into account their self-serving nature and the fact that FVC didnot have an opportunity to cross-examine the declarants or respond to their assertions.

To the extent Hagen’s declaration contradicts his prior testimony, the court affords thetestimony little weight and/or disregards it. As respects Benya, B-K not only failed to disclosehim as an expert, but his declaration does not provide the information required as a foundation forexpert testimony by Rule 26(a)(2)(B). See FED. R. CIV. PROC. 26(a)(2)(B) (requiring that an expert witness disclose his qualifications, including a list of publications; a list of all cases in which he has testified; and a statement of the compensation to be paid for his work in the case).The court therefore concludes that Benya is offered as a lay opinion witness, and accords histestimony little weight as a result.

FVC also moved to strike the declaration of Anthony Gorman. As the court did not relyon this declaration in deciding the motion, it denies FVC’s motion to strike.

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reference relevant to patentability.59 B-K also contends that FVC has adduced no direct evidence

of intent to deceive and that without such evidence, the court cannot conclude that it engaged in

inequitable conduct.

Addressing B-K’s second argument first, it is well settled that “[d]irect evidence of intent to deceive is not necessary, but may be inferred from the surrounding circumstances.” Monsanto

Co. v. Bayer Bioscience N.V., 514 F.3d 1229, 1241 (Fed. Cir. 2008) (citing Critikon, Inc. v.

Becton Dickinson Vascular Access, 120 F.3d 1253, 1256 (Fed. Cir. 1997); In re Metoprolol

Succinate Patent Lit., 494 F.3d 1011, 1020 (Fed. Cir. 2007) (“We have stated that ‘[i]ntent need

not, and rarely can, be proven by direct evidence,’” quoting Impax Laboratories, Inc. v. Aventis

Pharm. Inc., 468 F.3d 1366, 1375 (Fed. Cir. 2006)); and Ferring B.V. v. Barr Laboratories,

Inc., 437 F.3d 1181, 1191 (Fed. Cir. 2006) (“However, ‘[i]ntent need not, and rarely can, be

proven by direct evidence,’” quoting Merck & Co., Inc. v. Danbury Pharmacal, Inc., 873 F.2d

1418, 1422 (Fed. Cir. 1989)). “Rather, in the absence of a credible explanation, intent to deceive

is generally inferred from the facts and circumstances surrounding a knowing failure to disclose




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60During the hearing, B-K argued that negligent or grossly negligent failure to disclose

prior art references is an insufficient basis for inferring an intent to deceive. In support of this proposition, B-K cited Hoffman-La Roche, Inc. v. Promega Corp., 323 F.3d 1354 (Fed. Cir.2003), and Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988).These cases, however, do not undermine or contradict the court’s conclusion here regarding B-K’sintent to deceive.

In Kingsdown, the Federal Circuit held that “[w]hether the intent element of inequitableconduct is present cannot always be inferred from a pattern of conduct that may be described asgross negligence. That conduct must be sufficient to require a finding of deceitful intent in light

of all the circumstances.” Kingsdown, 863 F.2d at 873 (emphasis added). Likewise, in Hoffman-

La Roche, the Federal Circuit concluded that “an important step in the judicial resolution of inequitable conduct claims is for the court to determine whether the material misrepresentationsor omissions in question are sufficiently serious in light of the evidence of intent to deceive, under

all the circumstances, to warrant the severe sanction of holding the patent unenforceable.” 323F.3d at 1372 (emphasis added); see also id. at 1377 (Newman, J., dissenting) (observing that “it is established that negligence alone, even gross negligence, does not establish inequitableconduct”).

The court has analyzed B-K’s intent in light of all the circumstances as directed by Kingsdown and Hoffman-La Roche, and concluded that the record supports a finding of intent todeceive. Its finding is not based on negligence or gross negligence alone.

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material information.” Bruno Independent Living Aids, Inc. v. Acorn Mobility Svcs., Ltd., 394

F.3d 1348, 1354 (Fed. Cir. 2005); see Impax Laboratories, 468 F.3d at1375 (“Rather, intent to

deceive is generally inferred from the facts and circumstances surrounding the applicant’s overall

conduct”).Indeed, the Federal Circuit “[has] held that absent a credible reason for withholding the

information, ‘[i]ntent may be inferred where a patent applicant knew, or should have known, that

withheld information would be material to the PTO’s consideration of the patent application.’”

Monsanto, 514 F.3d at 1241 (quoting Critikon, 120 F.3d at 1256); Bruno Independent Living

Aids, 394 F.3d at 1354 (“[A]n inference of deceptive intent may fairly be drawn in the absence

of [a credible] explanation [for the non-disclosure]”). Stated differently, where a patent applicant

(1) knew that prior art existed, (2) knew or should have known that it was material, (3) withheld

the information, and (4) offers no good explanation for doing so, the court may infer intent to

deceive.60

The court has already found that B-K knew of the prior art and failed to disclose it. The




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61B-K appears to imply that there was some miscommunication between Hagen and its patent counsel regarding disclosure of the prior art to the patent office. Hagen testified, forexample, that he “freely disclosed both products to [his] patent counsel in the Invention DisclosureForm.” (Hagen Decl., ¶ 11.) As discussed, the court cannot agree that Hagen’s obliquereference to a prior knuckle affirmatively disclosed the 360SL to counsel. More importantly, even if Hagen had “freely disclosed” both references to patent counsel, that disclosure did not relieveB-K of its duty to ensure that the references were disclosed to the patent office. The duty todisclose set out in § 1.56 applies to “individuals associated with the filing or prosecution of a patent application,” including “[e]ach attorney or agent who prepares or prosecutes theapplication.” 37 C.F.R. § 1.56 (c)(2). B-K is responsible for its attorney’s actions. See In re

Cygnus Telecomms. Tech., LLC, Patent Lit., 481 F.Supp.2d 1029, 1050 (N.D. Cal. 2007)(“Alleman cannot blame the attorney who drafted the declaration for the mistake. A party is‘bound by the actions of its attorney.’ . . . Alleman and ‘counsel for Cygnus’ had a duty to ensurefilings were accurate” (internal quotation omitted)). As a consequence, Hagen cannot excuse B-K’s failure to disclose by stating that he advised counsel of the prior art.


63Hagen Depo. at 92:18-21.

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only question, therefore, is whether B-K knew or should have know that the prior art was material

and whether it has offered a good explanation for withholding it. B-K’s explanation for not

disclosing the 360SL and Hydrel is that it did not believe they were material. To the extent B-K

should have known that the references were material, therefore, it has failed to offer a goodexplanation for withholding it.

B-K argue that neither Hagen nor its patent counsel knew that the 360SL and Hydrel were

material,61 and denies that they had any intent to deceive. “A mere denial of intent to mislead

(which would defeat every effort to establish inequitable conduct) will not suffice.” GFI, Inc. v.

Franklin Corp., 265 F.3d 1268, 1275 (Fed. Cir. 2001) (citing FMC Corp. v. Manitowoc Co., 835

F.2d 1411, 1416 (Fed. Cir. 1997)). The factual support Hagen offers for the assertion, moreover,

is unpersuasive. Although Hagen now states that he “considered the 360HD an entirely new

concept, and never believed that the existence of the 360SL was important or even relevant to the

patentability of the invention claimed in the ’084 patent,”62 this directly contradict his deposition

testimony that “other than the features of the 360HD, the actual look and feel of [the device was]

just an enlargement of the 360SL.”63 Read charitably, Hagen’s most recent declaration suggests




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64Even in his most recent declaration, Hagen identifies only five differences between the360HD and the 360SL: (1) the tapered post/tapered opening interaction; (2) a seal around thetapered post; (3) a redesign of the passageway connection between the support member and the

base member; (4) a change of the rotational limiting means to include two pins rather than a pin and a slot; and (5) a complete redesign of the base member and stud connection. By referencingitems (3)-(5), Hagen essentially seeks to relitigate the differences between the two devices. In particular, this is the first time B-K has adduced evidence that the two devices used a different pin interaction in the rotational limiting means. As respects the passageway connection, Hagen admitted at his deposition that the only change in the passageway was one made to accommodatethe tapered post. Finally, regarding his assertion that there was a “complete redesign of the basemember and stud connection,” the court found in its summary judgment order that the basemember/stud connection redesign was nothing more than a reversal of the connection – i.e., in the 360SL, the base member was designed to be inserted into the stud member, while the

relationship of the two members was reversed in the 360HD. The innovative “feature” of the360HD, therefore, was the tapered post/tapered opening interaction.Even were the court to accept Hagen’s assertion regarding these five differences, however,

the ’084 patent claimed elements other than these features. The court infers from Hagen’s failureto address these additional elements that he concedes the 360SL incorporated features also foundin the 360HD and claimed in the ’084 patent. By way of example, the patent claims a first andsecond locking means, neither of which Hagen argues are not present in the 360SL.


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that the “features” of the 360HD protected by the ’084 patent were conceptually new, rendering

the fact that the 360HD was merely an enlargement of the 260SL irrelevant. This interpretation

has two major flaws. First, as noted, the ’084 patent claimed more than just new “features.”64

Even if Hagen correctly identifies the differences between the 360SL and 360HD (which the court does not concede), he does not explain how the 360SL is irrelevant to other elements claimed in

the ’084 patent.

Second and relatedly, Hagen argues that Hydrel was not important or relevant to

patentability because it omitted many of the structural elements (base member, stud member,

support member, integral wireway, etc.) found in the patented device,65 i.e., that Hydrel did not

include all of the structural elements the 360SL did include. The tapered interaction that

differentiated the 360HD from the 360SL is disclosed by Hydrel, however. Hagen and B-K would

have the court believe that B-K determined neither Hydrel or the 360SL was material because

neither individually disclosed every element claimed in the ’084 patent. It is clear, however, that




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66B-K’s patent counsel has offered no explanation for his failure to disclose the 360SL andHydrel. Indeed, in his deposition, counsel was quite vague regarding the patent prosecution andhis reasons for the actions he took.

67The Federal Circuit has held that a party cannot avoid a finding of inequitable conduct merely by ignoring the materiality of a prior art reference or taking a narrow view of the scopeof materiality. See Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed.Cir. 2001) (“To avoid a finding of inequitable conduct, doubts concerning whether information is material should be resolved in favor of disclosure,” citing Critikon, 120 F.3d at 1257); see alsoid. (“Where an applicant knows of information the materiality of which may so readily bedetermined, he or she cannot intentionally avoid learning of its materiality, even through grossnegligence; in such cases the district court may find that the applicant should have known of themateriality of the information”).

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in combination, they disclosed all of the claimed elements. If the only prior art that were material

were that which discloses all of the elements of a patent, then the patent office would be tasked

only to determine whether claims are anticipated. Obviousness inquires whether elements of

separate prior art references have been combined in an apparent way. Because obviousness can render a patent invalid just as anticipation can, a reference can be material if it discloses one or

more claimed elements despite the fact that it does not disclose all .

For these reasons, the court cannot accept B-K’s suggestion that it should not have known

that the 360SL and Hydrel were material. Consequently, it has failed to offer an adequate

explanation for its failure to disclose relevant prior art.66 Reading Hagen’s most recent

declaration, the court is forced to conclude either that B-K took an incorrectly narrow view of

what constituted a “material reference,”67 or that Hagen’s testimony is a post-hoc attempt to

excuse a knowing failure to disclose. Either conclusion supports a finding of intent to deceive.

Such a finding is also supported by Federal Circuit authority. In Bruno, the Federal Circuit

recognized that deceptive intent could be inferred from “evidence of [an] applicant making

patentability arguments that could not have been made had the prior art been disclosed.” Bruno,

394 F.3d at 1354 (paraphrasing LaBounty Mfg., Inc. v. U.S. Intern. Trade Com’n, 958 F.2d

1066, 1076 (Fed. Cir. 1992)); GFI , 265 F.3d at 1275 (“We have held deceptive intent to be

shown where a patentee withheld references and made an argument for patentability that could not




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have been made had the art been disclosed”). As noted, during prosecution B-K argued that none

of the “cited references” revealed a tapered post/tapered opening interaction. Had Hydrel been

before the examiner, B-K would not have been able to make this statement.

Additionally, courts are apt to find intent to deceive where a party fails to disclose its own material prior art. This occurred in LaBounty. The court held that the applicant’s failure to

disclose its prior art supported a finding of intent to deceive. See LaBounty, 958 F.2d at 1076;

see also Fox Indus. v. Structural Preservation Sys., 922 F.2d 801, 803-05 (holding that the

applicant had had a duty to disclose a brochure that it used as a reference in developing the

patent). “The PTO is particularly dependent upon a patent applicant for prior art information that

is uniquely within the knowledge of the applicant, such as the applicant’s own prior art machines

which are known only in the commercial world and not in the patent literature available to the

PTO examiners.” Tiegel Mfg. Co. v. Farmer Mold & Mach. Works, Inc., 225 U.S.P.Q. 1051,

1061 (M.D. Fla. 1984). The 360SL was precisely this sort of prior art, i.e., a commercial

product that was uniquely known to B-K. The fact that it was clearly material to the ’084 patent,

and that B-K failed to disclose it, merely strengthens the court’s conclusion that the inference of

deceptive intent in this case is strong.

(d) Weighing Materiality and Intent

Because FVC has demonstrated both materiality and intent by clear and convincing

evidence, the court must exercise its discretion and determine whether to find, in the context of

this case, that B-K engaged in inequitable conduct. For reasons already discussed, FVC’s

showing of materiality is strong. As the court found in its summary judgment order, together the

360SL and Hydrel references disclose all of the elements of the ’084 patent. The 360SL

essentially discloses the ’084 patent minus the first resistance means, while the Hydrel reference

fills in the gap by disclosing a tapered interaction. The strength of FVC’s materiality showing,

therefore, weighs heavily in favor of a finding of inequitable conduct.

FVC’s showing of intent is also strong. The fact that FVC has not adduced direct evidence




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68At the hearing, B-K argued that there is often direct evidence of intent to deceiveavailable, as when a patentee makes affirmative misrepresentations to the PTO. This case does

not involve affirmative misrepresentations, however. Where, as here, the inequitable conduct alleged consists of a failure to disclose relevant prior art, direct evidence of intent to deceive willrarely be available .

69FVC also raised the issue in its motion for summary judgment, filed more than fivemonths ago on April 14, 2008.

70Indeed, it is not clear what sort of discovery or research B-K would need to conduct toexplain its own failure to disclose.

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of intent to deceive does not alter this fact. Such evidence is rarely available,68 and merely

denying that one intended to deceive is not sufficient to defeat a strong circumstantial showing.

B-K’s stated reasons for failing to disclose the 360SL and Hydrel are weak; B-K relied, inter alia,

on the absence of the Hydrel reference to make certain arguments before the patent office; and B-K failed to disclose its own prior art. B-K has offered little persuasive evidence to the contrary.

Although FVC’s showing of materiality and intent is strong, the fact that it raised the issue

only in a post-judgment motion has precluded full litigation of the question and compilation of a

complete record. This concern is offset somewhat by the fact that, although FVC did not properly

plead an inequitable conduct claim based on failure to disclose prior art, B-K was on notice as

early as late 2007 that FVC intended to pursue such an argument. FVC not only signaled its intent

to pursue the issue in an answer to an interrogatory, but questioned Hagen and B-K’s patent

counsel regarding it at their depositions. B-K, therefore, had ample opportunity to prepare to meet

the charge.69 Given the fact that B-K had more than adequate notice that FVC alleged it had

deceived the patent office, it was in a position to adduce evidence rebutting the charge. See

Bruno, 394 F.3d at 1354 (“Normally it can be expected that an innocent party will be motivated

to try to present convincing reasons for its actions or inaction”). The fact that it produced weak

and contradictory evidence gives rise to an inference that it could not have offered stronger

evidence had it had more time.70 See id. (“That did not occur here. Accordingly, we cannot

assign clear error to the district court’s inferential finding that Bruno intentionally withheld the

Wecolator prior art in an attempt to mislead the PTO”). In sum, the court finds that B-K has not




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71As the court noted in its clarification order, a finding of inequitable conduct made in thecontext of a motion for attorneys’ fees is not a binding decision on the merits. See Revolution

Eyewear, Inc. v. Aspex Eyewear, Inc., 2006 WL 1308029, *2 (Fed. Cir. May 12, 2006) (Unpub.Disp.) (“That is because a finding of inequitable conduct [in the context of an attorneys’ feesmotion] is not a judgment of unenforceability, and no judgment of unenforceability has been entered in this case. In other words, the court’s finding here does not render the patent unenforceable”). The court’s determination is made only for the purpose of deciding whether thiscase is exceptional as that term is used in § 285.

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been prejudiced by having this issue presented for the first time in the context of this motion.

Weighing the evidence of materiality and intent, the court reaches the inescapable

conclusion, for purposes of an attorneys’ fees analysis, that B-K engaged inequitable conduct.71

The two prior art references it failed to disclose – the 360SL and Hydrel – appear to have been the references most relevant to development of the patent-in-suit. The ’084 patent and its

predecessor, the ’948 patent, issued without an examination by the patent office of this material

prior art. B-K has offered no good reason for this apart from Hagen’s implausible and ex post

explanation that B-K did not believe the references were material. As noted, the court finds his

explanation unpersuasive and not credible.

As a result of B-K’s failure to disclose the references, the patentability of the claims in the

’084 patent, which should have been fully evaluated by the patent office, was litigated extensively

and expensively in court. As a consequence, B-K’s inequitable failure to disclose alone justifies

a finding that the case is exceptional for purposes of § 285.

(2) Inventorship

(a) Legal Standard

“A patent is invalid if more or fewer than the true inventors are named.” Gemstar-TV

Guide Intern., Inc. v. Int’l Trade Comm’n, 383 F.3d 1352, 1381 (Fed. Cir. 2004). Because

patents are presumed valid, “there follows a presumption that the named inventors on a patent are

the true and only inventors.” Id. (citing Hess v. Advanced Cardiovascular Sys., Inc., 106 F.3d

976, 980 (Fed. Cir. 1997)). As the Gemstar court explained:

“When two or more persons jointly invent, they must jointly apply for a patent. 35




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U.S.C. § 116 (2000). Co-inventors must so apply ‘even though . . . they did not

physically work together or at the same time, . . . each did not make the same type

or amount of contribution, or . . . each did not make a contribution to the subject

matter of every claim of the patent.’ Id. § 116. Because conception is thetouchstone of inventorship, each ‘joint inventor must contribute in some significant

manner to the conception of the invention.’ Fina Oil & Chem. Co. v. Ewen, 123

F.3d 1466, 1473 (Fed. Cir.1997); see also Ethicon, Inc. v. U.S. Surgical Corp.,

135 F.3d 1456, 1460 (Fed. Cir. 1998). ‘Conception is the formation in the mind

of the inventor, of a definite and permanent idea of the complete and operative

invention, as it is hereafter to be applied in practice.’ Hybritech Inc. v. Monoclonal

Antibodies, Inc., 802 F.2d 1367, 1376 (Fed.Cir.1986) (internal quotation marks

omitted). ‘An inventor may solicit the assistance of others when perfecting the

invention without “losing” any patent rights.’ Trovan, Ltd. v. Sokymat SA, 299

F.3d 1292, 1302 (Fed. Cir. 2002).

Because co-inventors need not contribute to the subject matter of every claim

of the patent, inventorship is determined on a claim-by-claim basis. Id . Moreover,

the inventorship analysis, like an infringement or invalidity analysis, first requires

the construction of each disputed claim to determine the subject matter encompassed

thereby. Id . The second step is a comparison of the alleged contributions of each

asserted co-inventor with the subject matter of the correctly construed claim to

determine whether the correct inventors were named. Id .; Ethicon, 135 F.3d at

1460-61.

Alleged co-inventors must establish their co-inventorship by facts supported

by clear and convincing evidence. Ethicon, 135 F.3d at 1461. To meet the burden

of clear and convincing evidence, the alleged co-inventors must prove their

contribution to the conception of the invention with more than their own testimony

concerning the relevant facts. Trovan, 299 F.3d at 1302 (citing Price v. Symsek ,

988 F.2d 1187, 1194 (Fed. Cir. 1993)). Whether the co-inventor’s testimony has




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been sufficiently corroborated is evaluated under a ‘rule of reason analysis,’ which

requires that an ‘evaluation of all pertinent evidence must be made so that a sound

determination of the credibility of the inventor’s story may be reached.’ Price, 988

F.2d at 1195. Corroborating evidence may take many forms. Reliablecorroboration preferably comes in the form of records made contemporaneously

with the inventive process. Sandt Tech., Ltd. v. Resco Metal & Plastics Corp., 264

F.3d 1344, 1350-51 (Fed. Cir. 2001). Circumstantial evidence of an independent

nature may also corroborate. Trovan, 299 F.3d at 1303. Additionally, oral

testimony from someone other than the alleged inventor may corroborate.” Id .

The Federal Circuit has held that “‘[i]ncorrect inventorship is a technical defect in a patent

that may be easily curable.’” Winbound Electronics Corp. v. Int’l Trade Comm’n, 262 F.3d 1363,

1371 (Fed. Cir. 2001). It has thus disapproved findings of invalidity based on failure to name co-

inventors. “[I]f a patentee can demonstrate that inventorship can be corrected as provided by [35

U.S.C. § 256], a district court must order correction of the patent, thus saving it from being

rendered invalid.” Pannu v. Iolab Corp., 155 F.3d 1344, 1350 (Fed. Cir. 1998). The only

condition under which correction is not appropriate is where the failure to join the inventors is a

product of deceptive intent. See PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225

F.3d 1315, 1318 (Fed. Cir. 2000) (upholding the district court’s decision not to correct

inventorship because the “named inventors had omitted the unnamed inventors with deceptive

intent”).

(b) Whether FVC Has Shown That B-K Intentionally

Failed to Name Co-Inventors

As noted, the Federal Circuit generally disapproves findings of inequitable conduct based

on failure to name the correct inventor or join co-inventors. Where inventorship is incorrect, the

court should normally order the patent corrected rather than find that the applicant engaged in

inequitable conduct. This reluctance reflects the fact that intent to deceive respecting inventorship

is often more difficult to infer than intent to deceive based on a failure to disclose. Where a party

knows of prior art and fails to disclose it, the intent inquiry turns on whether there is a good




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72The evidence indicates that Hagen may have conceived of the idea of adding a taper tothe 360SL. To the extent this was the only innovative concept claimed in the ’084 patent, thereis a strong argument that Hagen was, at a minimum, correctly named as a co-inventor. FVC,moreover, has adduced little evidence as to why B-K would have excluded Gillespie and Case asinventors. Both were named as co-inventors in other B-K patents, and it appears they understoodthat anything they invented while at B-K was B-K’s property. To conclude that B-K intentionally

deceived the patent office by naming Hagen as inventor would require that the court examine eachelement of the patent and determine (1) whether or not Case and Gillespie were co-inventors withrespect to that element and (2) whether B-K intentionally hid that fact from the patent office. Therecord is not sufficiently clear or detailed to permit the court to conduct such an analysis.

73The court’s observation that the evidence of deceptive intent regarding inventorship presented by FVC is unclear does not constitute a finding on the merits. In the event that FVCor another party challenges inventorship of the ’084 patent in a future proceeding, nothing in thisorder should be viewed as a statement regarding the validity of such a claim.

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explanation for the failure. In the context of inventorship, however, the court must evaluate who

truly “conceived” of the invention, which putative co-inventors contributed, and to what extent.

To conclude that a party intended to deceive the patent office regarding inventorship, the court

must not only examine the process of conception, but conclude that individual inventors’ roleswere so clear that the process could be viewed only one way, and that the applicant knew it was

deceiving the patent office by portraying it differently. While such a showing can undoubtedly

be made in an appropriate case, it has not been made here. Because FVC has made a strong

showing of inequitable conduct based on failure to disclose prior art, and because that showing

alone renders the case exceptional, the court need not decide whether B-K engaged in additional

inequitable conduct regarding inventorship. The court’s decision to forego conducting this

analysis is supported by the fact that FVC’s evidence of deceptive intent is far from clear.72

Consequently, the court declines to consider whether B-K engaged in inequitable conduct

with respect to inventorship in deciding this motion.73

b. Litigation Misconduct

FVC asserts that various aspects of the manner in which B-K litigated the action provide

independent support for a finding that the case is exceptional. Because the court has found the

case exceptional based on B-K’s inequitable conduct in failing to disclose prior art to the patent




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74Some of FVC’s bad faith contentions are based on its assertion that B-K changed itsinfringement position following claim construction. Assuming this is true, it does not conclusivelydemonstrate that the suit was pursued in bad faith. It is not uncommon for a court to permit parties to change their infringement contentions following claim construction to take into account its interpretation of the patent language. Cf. Abbott Diabetes Care Inc. v. Roche Diagnostics

Corp., No. C05-03117 MJJ, 2007 WL 2221029, *1 (N.D. Cal. July 30, 2007) (noting that underthe local rules of the Northern District of California, a party alleging infringement “may amendits preliminary infringement contentions without leave of the court when, ‘the Court’s ClaimConstruction Ruling . . . so requires’ within 30 days of service of the Claim Construction Ruling,”quoting ND CA PATENT L.R. 3-6(a)). While the court makes no finding as to whether B-K properly amended its infringement contentions, it cannot conclude that the mere attempt to modifythem following claim construction constituted litigation misconduct. Similarly, the court is not in a position to evaluate whether, as FVC asserts, the claim construction order effectively nullifiedB-K’s infringement case. The claim construction order was lengthy and ruled in favor of each

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office during prosecution, it addresses these arguments only in broad terms. This is because any

litigation misconduct on B-K’s part will constitute only a thumb on the scale favoring an award

of attorneys’ fees in the equitable analysis that follows.

FVC argues first that B-K took infringement positions it knew to be objectively frivolousand pursued those positions in bad faith. This aspect of the parties’ dispute seek to litigate issues

of infringement on which the court declined to rule at the summary judgment stage because it had

declared the patent invalid as obvious. The court observes only that FVC appears to overstate the

frivolousness of B-K’s infringement positions. Even a cursory examination of the ’084 patent and

the accused devices reveals that they appear similar. The accused device differs from the patented

invention in the following principal ways: (1) instead of incorporating a single tapered post/tapered

opening interaction, FVC’s device has a tapered ring that fits into a tapered, ring- shaped opening;

(2) instead of an integral base member, FVC’s device utilizes two connecting pieces; (3) while,

in the ’084 patent, the base and stud members are locked together by a screw that connects them

directly, FVC’s device employs a screw that tightens the connection without coming into direct

contact with the base member. These differences were the subject of voluminous technical

arguments and a vigorous expert dispute. Even had the court ruled against B-K on the issue

(which it did not), this would not mandate a conclusion that B-K’s infringement contentions were

objectively meritless and pursued in bad faith.74




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28 party on some issues. Consequently, the court declines to find that B-K engaged in litigation misconduct by continuing to litigate its infringement claims following claim construction.

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FVC next contends that B-K asserted the surrendered ’948 patent against FVC with full

knowledge that the patent provided no basis for an infringement action. The parties dispute

whether it was appropriate to assert the surrendered patent as respects the infringement of

substantially similar claims in the reissue patent. Claims in a reissue patent that are substantiallyidentical to claims in the original patent can be enforced from the date of the original patent. See

25 U.S.C. § 252 (“The surrender of the original patent shall take effect upon the issue of the

reissued patent. . . . [I]n so far as the claims of the original and reissued patents are identical,

such surrender shall not affect any action then pending nor abate any cause of action then existing,

and the reissued patent, to the extent that its claims are identical with the original patent, shall

constitute a continuation thereof and have effect continuously from the date of the original

patent”); Kaufman Co. v. Lantech, Inc., 807 F.2d 970, 976 (Fed. Cir. 1986) (absent identity

between the original and reissue claims, “the patentee has no rights to enforce before the date of

reissue because the original patent was surrendered and is dead”).

The court is troubled that B-K persisted in asserting a surrendered patent against FVC, and

did not agree to proceed solely on the basis of the reissue patent until the court addressed the issue

at a hearing on FVC’s motion to dismiss. Nonetheless, the court cannot accept FVC’s argument

that B-K’s assertion of the ’948 patent caused FVC to incur “thousands” of dollars of unnecessary

fees. The subject matter of the ’948 and ’084 patents was essentially the same. The only dispute

was whether B-K had to assert the surrendered patent to recover for alleged infringement

predating reissue. This is a purely legal issue that FVC’s lawyers (who are patent specialists)

could not have spent more than a few hours researching. It was, moreover, a disputed issue that

turned on whether the claims in the original and reissue patents were substantially identical. B-K’s

willingness after prompting by the court to drop claims based on the original patent suggests that

the issue was not a hard one to assess. Nonetheless, the court cannot say that B-K’s initial

assertion of that patent, standing alone, constituted litigation misconduct that warrants an




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75The court, on its own initiative, has reviewed Vision3’s(http://www.vision3lighting.com/) and FVC’s (http://www.fresnovalves.com/) websites. Neither

clearly reflects that the companies are associated, much less that FVC is the parent of Vision3.Indeed, FVC’s website fails to mention its lighting business at all. A google search using theterms “fresno valves vision 3” likewise reveals no obvious connection between the companies.

76Had this representation been inaccurate, B-K had possession of an email that it could have used to demonstrate that it had been misled.

77Blame for this cannot be ascribed to B-K alone. After the court issued its tentative rulingregarding summary judgment, for example, which clearly stated that it deemed certain invalidity

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exceptional case finding.

There is more merit to FVC’s argument that B-K improperly named Vision3 as a defendant

and then refused to amend its complaint until compelled to do so by the court. B-K seeks to

excuse its conduct, asserting that neither FVC’s nor Vision3’s website made clear that Vision3was a subsidiary or division of FVC. Moreover, FVC declined B-K’s request to provide

information corroborating its claim that Vision3 could not be sued. B-K argues that FVC’s

decision to decline its request justified its refusal to amend the complaint, and that it was not guilty

of litigation misconduct as a consequence.

The court accepts this explanation to some extent. It is true that neither Vision3’s nor

FVC’s website make clear that FVC is the real party in interest here.75 The fact that it is difficult

to discern the affiliation between Vision3 and FVC from their web pages, however, does not mean

that B-K acted reasonably after being advised that an association existed. B-K’s professed

skepticism in the face of a representation by FVC’s counsel is difficult to understand. FVC’s

counsel stated unequivocally, not that Vision3 could not be sued, but that it was FVC that should

have been sued.76

B-K’s refusal to credit FVC’s representation is emblematic of the manner in which the

parties elected to litigate this action. Both B-K and FVC filed numerous ex-parte applications,

refused to narrow or agree on issues, and engaged in unnecessary motion practice. The fact that

FVC was forced to file a motion to dismiss to compel B-K to name the correct party is merely one

example of the parties’ uncooperative litigation tactics.77 Nonetheless, B-K’s stubbornness in




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arguments moot, FVC failed to notify the court that it took the position such issues had to be tried.This resulted in multiple filings and proceedings concerning the claims that remained in the casefollowing issuance of the final summary judgment ruling. At claim construction, moreover, FVC

sought construction of many more terms than B-K. Even after the court requested that the partiesnarrow the focus of the claim construction dispute, FVC continued to seek construction of termswithout clearly explaining why construction was needed.

78The court declines to address FVC’s further argument that B-K engaged in discoveryabuses by failing to produce requested documents in a timely manner. B-K asserts that it produceddocuments as it acquired them. FVC does not directly dispute this. Rather, it seeks to have thecourt infer from a general pattern of delay that documents were intentionally withheld. This thecourt declines to do.

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failing to amend its complaint lends some support to the court’s earlier finding that the case is

exceptional.

The same can be said of B-K’s apparent refusal to engage in mediation after the court’s

summary judgment order was issued. Although the parties had scheduled and paid for amediation, B-K declined to attend. There is no doubt that it took this position in part because FVC

asserted that issues remained to be tried. The purpose of mediation, however, is to resolve

outstanding issues and work toward resolution of the case. That B-K refused even to appear

indicates that it had no good faith intention of participating in mediation, despite the court’s order

that it do so. This further instance of apparent intransigence also lends some support to the court’s

conclusion that this is an exceptional case.78

c. Conclusion

B-K’s inequitable conduct in failing to disclose the 360SL and Hydrel references to the

patent office, coupled with certain minor instances of litigation abuse, render this case exceptional.

The court will therefore assess whether to exercise its discretion to award attorneys’ fees.

2. Whether the Court Should Award Attorneys’ Fees

Once a court finds that a case is exceptional, it must then exercise its discretion, “informed

by [its] familiarity with the matter in litigation and the interest of justice,” to determine whether

to award fees. Gardco Mfg., Inc. v. Herst Lighting Co., 820 F.2d 1209, 1215 (Fed. Cir. 1987).

Simply because a party has engaged in inequitable conduct does not compel the entry of a fee




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79Some cases address a request for fees under § 285 by inquiring whether the case isexceptional, while others examine whether, exceptional or not, the facts warrant a discretionaryaward of attorneys’ fees. Although the rubric differs, the analysis is essentially the same.

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award. See Nilssen v. Osram Sylvania, Inc., 528 F.3d 1352, 1358 (Fed. Cir. 2008) (“As a

preliminary matter, we agree with appellants that there is no per se rule of exceptionality in cases

involving inequitable conduct. There are numerous instances in our case law in which we have

affirmed a district court’s denial of attorney fees in cases involving inequitable conduct,” citing Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1366-67 (Fed. Cir. 2004));

Gardco, 820 F.2d at 1215 (“After the district court determines that a case is exceptional, there

remains in every case its freedom to exercise its discretion”). “In short, our case law provides

wide discretion to district courts; courts may award attorney fees in inequitable conduct cases, but

are not required to do so.” Nilssen, 528 F.3d at 1358.

In deciding how to exercise this discretion, the Federal Circuit has directed that district

courts weigh factors including (1) the party’s degree of culpability; (2) the closeness of the

question; (3) litigation behavior; and (4) “any other factor whereby fee shifting may serve as an

instrument of justice.” National Presto Indus., Inc. v. West Bend Co., 76 F.3d 1185, 1197 (Fed.

Cir. 1996); see Nilssen, 528 F.3d at 1359 (“In determining whether to award attorney fees, courts

must weigh factors such as degree of culpability, closeness of the questions, and litigation

behavior”). These are essentially the factors the court utilized in determining that this case was

exceptional.79 Because the court has determined that these factors favor a finding that the case was

exceptional, it concludes that they also support an award of attorneys’ fees.

As respects the degree B-K’s culpability, the evidence in the record gives rise to a strong

inference that B-K intended to deceive when it failed to disclose prior art to the patent office. The

prior art was known to B-K, and in the court’s view was clearly material. B-K’s explanation of

the failure to disclose, moreover, lacks credibility. For these reasons, inequitable conduct is not

a close question. As respects B-K’s litigation conduct, although neither party is without fault,

certain aspects of B-K’s litigation behavior support a finding that fees should be awarded.

Taking all relevant factors into account, and considering the equities of the case, the court




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concludes that it is appropriate to award attorneys’ fees to FVC. In particular, the court concludes

that B-K’s failure to disclose the two most material prior art references to the patent office led

directly to issuance of the patent that has been asserted against FVC for more than two years.

Attorneys’ fees are warranted to compensate FVC to some degree for the time, resources, andenergy that it expended defending the suit.

D. Whether the Court Should Award Sanctions

FVC seeks a separate award of fees to sanction B-K for its continued insistence that it did

not steal FVC’s prototype at Lightfair 2003. As noted, the court may award fees as a sanction

under § 1927 where a party has unnecessarily or frivolously multiplied proceedings. FVC appears

to argue that B-K multiplied the proceedings by contending that it did not steal the prototype.

FVC’s position is undermined by the fact that (1) FVC never properly pled that B-K stole the

prototype (and could not have done so given the statute of limitations); (2) although FVC had

evidence indicating that B-K stole the device, B-K has never admitted that it did; and (3) the §

17200 claim was dismissed without a ruling on the merits. In essence, FVC contends that B-K

should be sanctioned for refusing to admit liability on a claim that was never resolved by the

court. However likely it is that B-K stole the prototype, the court declines to award fees as a

sanction absent a specific finding to that effect.

B-K’s mirror request that the court impose sanctions on FVC must also be denied. B-K

suggests that FVC should have abandoned its §17200 claim as soon as it received the disputed

prototype from B-K. At that point, B-K asserts, FVC could obtain no further relief and lacked

standing to proceed. While this is the conclusion the court ultimately reached, it does not find

FVC’s position so frivolous or meritless as to warrant sanctions under § 1927.

Both parties, in fact, appear to use the § 17200 claim based on theft of the prototype as a

proxy for broader positions regarding culpability. FVC asserts that the theft of the prototype

shows that B-K acted in bad faith from the outset of this litigation. B-K counters that FVC has

made unsupported and procedurally faulty allegations to avoid a finding of infringement. Because

it concludes that both parties engaged in overly aggressive, time-consuming and expensive

litigation tactics, the court declines to conclude that either unnecessarily multiplied proceedings




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80

Mathiowetz Decl., ¶ 1.81Mathiowetz has submitted a report from the American Intellectual Property Law

Association indicating that the requested award is within the reasonable range for attorneys’ feesawards. Although this information may prove useful, it is not sufficient, standing alone, to justifythe amount sought.

82To the extent that FVC’s documentation contains protected attorney work product, FVCmay redact the documents as necessary.

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such that sanctions should be awarded.

E. The Amount of Attorneys’ Fees

In its motion, FVC argues that it has requested reasonable fees. FVC does not specify the

amount of fees it seeks, although it references the declaration of Duane Mathiowetz. Mathiowetzstates that he was the billing partner on this matter and that “based on [his] review of the billing

records, FVC has incurred $1,019,590.75 in legal fees and $109,961.04 in disbursements.”80

Mathiowetz proffers no documentation supporting this amount, but represents that he will

provide documentation for in camera review if the court awards fees. Although the court has

found that an award of attorneys’ fees is appropriate, it cannot presently conclude that the amount

proposed by Mathiowetz is reasonable.81 As a consequence, the court directs FVC, that, within

10 days of the date of this order, to file an additional pleading (1) that sets forth a detailed

accounting of the hours expended and rates charged; and (2) offers further legal and/or evidentiary

support for the amount of the award it seeks. The filing must be public and be served on B-K.82

B-K may file a response within 10 days after service of FVC’s further pleading. In the event the

court requires a further hearing on the matter, it will notify the parties.




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III. CONCLUSION

For the reasons stated, the court grants FVC’s motion to declare the case exceptional and

to award attorneys’ fees. FVC is directed to submit a pleading within 10 days of this order that provides support for its proposed fee award. B-K may file a response within 10 days after service

of FVC’s supplemental pleading.

DATED: November 14, 2008MARGARET M. MORROW

UNITED STATES DISTRICT JUDGE


2010-1135 exceptional award

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