Motion to Declare Patent Unenforceable Granted - Court Finds Patentee Intentionally Withheld Information From PTO

Avid v. Datamars, 2:04cv183 (E.D. Tex. Sept. 28, 2007)
Judge: T. John Ward
Holding: Patent Unenforceable  Due to Inequitable Conduct
Major post-verdict deveopment in this case Friday, which was tried to a jury in Judge Ward's court in Marshall last spring.
At trial, Avid accused the defendants of unfair competition, and of infringing U.S. Patent Nos. 5,214,409, 5,499,017, and 5,235,326 (“the ‘326 patent”). In response, the defendants alleged that the ‘326 patent was invalid in light of pre-critical date reader and tag sales by Avid. The jury upheld the validity of the asserted claims of the ‘326 patent, found the defendants liable for the
willful infringement of claims of each patent, and found the defendants liable on Avid’s unfair
competition claim. (see verdict post here.  As readers may recall, the verdict was only $26,000 for patent infringement and $6 million for the unfair competiton).  After the jury trial, the parties agreed to forego a bench trial on inequitable conduct and submitted this issue to the court on the trial record, with supplemental briefing by the parties.
Avid argued that its Standard Reader and tag incorporating the e5500B integrated circuit was
not material because there was no evidence that these products were sold or publicly demonstrated in
the United States prior to the critical date for the ‘326 patent. "The court rejects this argument," Judge Ward wrote, "and finds that the Standard Reader and e5500B integrated circuit and tag are 102(b) prior art.  As an initial matter, the court finds that Dr. Hannis Stoddard’s trial and deposition testimony is simply not credible on key issues. This finding flows from Stoddard’s conspicuous inability to recall facts while testifying, combined with his refusal to acknowledge incontrovertible events."  (Emphasis added - more details on what parts of Dr. Stoddard's testimony Judge Ward found conspicuously un-credible are in the order). 
"In view of the trial record" Judge Ward went on, "the court finds Avid’s non-materiality argument implausible. At trial, for example, the defendants argued that Avid’s Standard Reader and tag incorporating the e5500B integrated circuited anticipated the claims of the ‘326 patent. This issue, which was submitted to the jury, was the subject of contested expert testimony. The volume of expert testimony and amount of trial time spent in this regard demonstrates that these activities were the closest prior art to the ‘326 patent’s disclosure. A reasonable examiner would find such activity extremely important when evaluating patentability. Therefore, the court finds by clear and convincing evidence that Avid’s Standard Reader and tag were highly material to the patentability of the ‘326 patent’s claims."  (Emphasis on the word "plausibility" added for those of you with visions of Twombly dancing your heads - internal footnotes omitted).
In conclusion, Judge Ward found 1) that Avid’s Standard Reader and e5500B tag were on sale prior to the critical date of the ‘326 patent, 2) that Avid’s Standard Reader and e5500B tag were highly material to patentability, and 3) "that Avid intentionally withheld information from the PTO in an effort to deceive the PTO and obtain allowance of the ‘326 patent." (Emphasis added).  Having found that the threshold levels of materiality and intent were satisfied, the court balanced the high level of materiality with the lower level of deceptive intent, and found that Avid committed inequitable conduct. The court therefore concluded that the ‘326 patent was unenforceable.
As noted above, the plaintiff asserted three patents at trial, and I don't recall offhand what patents the damages were based on, or what effect this might have on the unfair competion claim. I do recall that no judgment has been entered on the jury's verdict, so this might have an effect on the pending JMOL, new trial, etc. motions as well.  But last year's Marshall jury verdicts in patent cases were running about 50-50 (2 out of 4, as I recall) assuming this verdict stood (as are this year's).  If it doesn't, this will affect the  recent stats even more, since it would move one from the W column to the L, dropping last year's Marshall win rate to 25% and the overall district rate to about 50%.  I may have to break the calculator out to see what this one does once everything shakes out.