1. The Duty of Good Faith Baker & McKenzie LLP Tamsen Valoir, Ph.D. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. Patents and Trademarks: The Duty of Good Faith

2. The Duty of Good Faith Duty of Good Faith 1. Patents―Duty of Candor 2. Trademarks―Fraud

3. The Duty of Good Faith Patents: Duty of Candor

4. The Duty of Good Faith Rule 56 A patent by its very nature is affected with a public interest. The public interest is best served, and the most effective patent examination occurs when, at the time an application is being examined, the Office is aware of and evaluates the teachings of all information material to patentability.

5. The Duty of Good Faith Who? Each inventor Each attorney or agent who prepares or prosecutes the application Every other person who is substantively involved in the preparation or prosecution of the application and who is associated with the inventor, with the assignee or with anyone to whom there is an obligation to assign the application

6. The Duty of Good Faith What is Material? 1977-1992 When there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent Under this rule, if the information withheld is not as pertinent as that considered by the examiner, or is merely cumulative to that considered by the examiner, such information is not material

7. The Duty of Good Faith What is Material? 1992-present [I]nformation is material when it is not cumulative, and It establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or It refutes, or is inconsistent with, a position the applicant takes in: (i) Opposing an argument of unpatentability, or (ii) Asserting an argument of patentability.

8. The Duty of Good Faith Is There a Difference? Hoffmann-La Roche v. Promega Corp. (Fed. Cir. 2003) “Although the current standard was not in effect at the time of the prosecution of this patent, the new standard was not intended to constitute a significant substantive break with the previous standard”

9. The Duty of Good Faith Is There a Difference? Dayco Prods. v. Total Containment (Fed. Cir. 2003) “Because we conclude that the outcome of this appeal would be the same under either materiality standard, we leave for another day a final disposition of this issue”

10. The Duty of Good Faith There is NO Difference! Digital Control v. Merlin Technology (Fed. Cir. 2006) “the [new] standard of materiality … merely provides an additional test of materiality. 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.”

11. The Duty of Good Faith When? Golden Valley Microwave v. Weaver Popcorn (ND Ind. 1992) Stating in finding inequitable conduct that “the case law and the... (MPEP) § 2002.03 (a) and § 2003 state that such references must be cited to the Examiner promptly and as soon as the applicant is aware of the references” See also 37 C.F.R. § 1.97 (3 month rules)

12. The Duty of Good Faith When? While claims pending, until canceled withdrawn or abandoned MPEP § 2012 (duty of candor issues can arise during reissue) MPEP § 2280 (duty of candor explicitly required during reexamination) MPEP § 2001.03 (duty of candor required during all proceedings with the Office)

13. The Duty of Good Faith Breach: Inequitable Conduct Two elements: Affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, and Intent to deceive Burden is clear & convincing Question of law

14. The Duty of Good Faith Breach: Inequitable Conduct A finding of materiality does not lead to a presumption of intent, but the more material a reference, the lesser the degree of intent required to prove inequitable conduct Intent generally inferred from the facts and circumstances because direct proof of intent usually not available

15. The Duty of Good Faith Breach: Inequitable Conduct Intent can be shown by proving a high degree of materiality and the applicant “should have known” of its materiality Gross negligence alone is not sufficient

16. The Duty of Good Faith Breach: Misrepresentations Refac Int’l v. Forward Reference Sys. (Fed. Cir. 1996) Holding that the submission of misleading affidavits, which failed to disclose the affiant’s prior connection to the assignee or his prior knowledge of the invention, was inequitable conduct

17. The Duty of Good Faith Breach: Misrepresentations Merck v. Danbury Pharmacal (Fed. Cir. 1989) Upholding finding of inequitable conduct where Merck emphasized the drug’s freedom from side effects like depression, muscle weakness, drowsiness, although FDA submissions established the most common side effect was drowsiness Also withheld prior art

18. The Duty of Good Faith Breach: Misrepresentations Novo Nordisk v. Bio-Technology Gen. (Fed. Cir. 2005) Holding patent unenforceable for inequitable conduct where the applicant held out example 1 as actual data, when it was only prophetic and where the example was important in determining that the priority document was enabling

19. The Duty of Good Faith Breach: Omissions Molins PLC v. Textron (Fed. Cir. 1995) “Failure to cite to the PTO a material reference cited elsewhere in the world justifies a strong inference that the withholding was intentional”

20. The Duty of Good Faith Breach: Omitting Best Mode Consolidated Aluminum v. Foseco Int’l (Fed. Cir. 1990) Affirming a holding of inequitable conduct where the patentee failed to provide the preferred slurry composition

21. The Duty of Good Faith Breach: Omitting Inventors Frank’s Casing v. PMR Techs. (Fed. Cir. 2002) 3 inventors named, 4th omitted, statement of refusal to sign oath for 3 rd, true inventors innocent, but cannot correct… “if unenforceable due to inequitable conduct, a patent may not be enforced even by ‘innocent’ co-inventors. One bad apple spoils the entire barrel.”

22. The Duty of Good Faith Breach: Partial Translation Semiconductor Energy v. Samsung (Fed. Cir. 2000) Affirming the invalidation of the patent due to inequitable conduct where a Japanese partial translation was found to be misleading and where the inventor “whose native language is Japanese, understood the materiality of the Canon reference”

23. The Duty of Good Faith Breach: Subject Matter Conflict Molins PLC v. Textron (Fed. Cir. 1995) “The position in which Smith placed himself was one fraught with possible conflict of interest because Smith’s dual representation of two clients seeking patents in closely related technologies created a risk of sacrificing the interest of one client for that of the other and of failing to discharge his duty of candor to the PTO with respect to each client”

24. The Duty of Good Faith Breach: Litigation Critikon v. Becton Dickinson (Fed. Cir. 1997) “Critikon should have disclosed that the original Lemieux patent was concurrently involved in the present litigation and that claims of invalidity and inequitable conduct were asserted against the patent”

25. The Duty of Good Faith Breach: Burying Golden Valley Microwave v. Weaver Popcorn (N.D. Ind. 1992) “It is likewise a violation of the duty of candor... to disclose a pertinent prior art reference to the examiner in such a way as to ‘bury’ it or its disclosures in a series of disclosures of less relevant prior art references...”

26. The Duty of Good Faith Breach: Related Cases McKesson Info. Sol’ns v. Bridge Med. (Fed. Cir. 2007) 3 related applications, 2 examiners Each cross cited in other, but art raised by Examiner in one case is not cited in other, nor was the substance of rejection cited, and inconsistent argument made NOA not cited (but same Examiner in both cases) and double patenting rejection conceivable

27. The Duty of Good Faith Breach: Related Cases McKesson cont… Omitted art not cumulative, even though other art teaches 3-node communications: “unlike the Baker patent, only two nodes are described in any significant detail in the Hawkins patent. ” “we find no clear error in the district court's conclusion that Baker discloses three-node communication more clearly than Hawkins”

28. The Duty of Good Faith Breach: Related Cases McKesson cont… No procedures in place to cross-cite OA “his firm at the time did not have procedures in place for citing office actions in co-pending applications…” “material rejections in co-pending applications fall squarely within the duty of candor.”

29. The Duty of Good Faith Breach: Related Cases McKesson cont… “allowance of the three-node system of the '372 patent claims plainly gives rise to a conceivable double patenting rejection”

30. The Duty of Good Faith Breach: Related Cases McKesson cont… Even where same Examiner allowed both cases! “a prosecuting attorney should not ‘assume that [a PTO examiner] retains details of every pending file in his mind when he is reviewing a particular application’”

31. The Duty of Good Faith Breach: Related Cases McKesson cont… Attorney argued that art did not teach 3-node communications, though omitted art did Therefore, inconsistent argument made!

32. The Duty of Good Faith Breach: Consequences Patent unenforceable Attorney’s fees Antitrust claims Disciplinary action or even disbarment

33. The Duty of Good Faith Breach: Infectious Unenforceability Fox Indus. v. Structural Preservation Sys. (Fed. Cir. 1990) “A breach of the duty of candor early in the prosecution may render unenforceable all claims which eventually issue from the same or a related application”

34. The Duty of Good Faith Breach: Infectious Unenforceability Consolidated Aluminum v. Foseco (Fed. Cir 1990) “Consolidated’s intentional concealment of the best mode and disclosure of a fictitious inoperable mode during prosecution of the application for the ‘917 patent so soiled Consolidated’s hands as to render the [continuation] ‘081, ‘212 and ‘303 patents equally unenforceable”

35. The Duty of Good Faith Compliance Tips Send “duty of candor” letter with draft and after filing Plain English, copy of rule, emphasize consequences of breach Checklist of information to consider Web pages, abstracts, posters, offers for sale, brochures, litigation, public uses, etc.

36. The Duty of Good Faith Compliance Tips Send to the letter inventors and IP manager, but... Maybe president too? division manager? marketing? technicians? co-authors? Follow-up phone call? Inform clients that copies of best prior art can reduce drafting & prosecution fees

37. The Duty of Good Faith Compliance Tips Keep a separate art file where client has a large portfolio of related technology Art is kept alphabetically in the file, along with an index that provides an indication of the relevance of each, and where cited Add art cited by Examiner Helps ensure related applications cross-cited Cross-cite Office Actions per McKesson?

38. The Duty of Good Faith Compliance Tips Prior art search not required, but… Wise to check inventors own papers and websites

39. The Duty of Good Faith Compliance Tips Clarify difference between actual v. prophetic work in drafting Include conflicts of interest and failed experiments* in preparing Declarations *Ask about failed experiments during drafting, can help to show non- obviousness

40. The Duty of Good Faith Compliance Tips Clean file on issuance, discard drafts and notes Should look like PTO file with only official correspondence

41. The Duty of Good Faith Compliance Tips What if you find art that has not been cited? Determine if material and not cumulative, Document! Cure unintentional breach by sending to PTO with complete statement of facts surrounding omission If needed withdrawn from issue, or re-issue or re-examine to clarify the record

42. The Duty of Good Faith Trademarks: Fraud

43. The Duty of Good Faith There IS a Duty of Good Faith… Aromatique v. Gold Seal (8th Cir. 1994) “Aromatique defended its actions in part by asserting that an applicant for a trademark owes no duty of candor to the PTO. This is plainly wrong”

44. The Duty of Good Faith But Perhaps Less Burdensome … TM rights exist on first use Registration only confers certain procedural rights (such as incontestability) on owners No rights exist outside of an issued US patent Therefore the duty of candor is more burdensome in the patent context

45. The Duty of Good Faith And Codified as Fraud… Not codified as duty of candor or good faith Instead codified as prohibiting “fraud” “Any person who shall procure registration in the Patent and Trademark Office of a mark by a false or fraudulent declaration or representation, oral or in writing, or by any false means, shall be liable in a civil action by any person injured thereby for any damages sustained in consequence”

46. The Duty of Good Faith Who? “Any person” who procures registration Attorney, owner, declarant

47. The Duty of Good Faith When? The applicable time period is not expressly codified But case law provides that the duty exists throughout the application for trademark Includes a duty to continuously review and amend the Statement of Use oath

48. The Duty of Good Faith When? Rosso & Mastracco. v. Giant Food (Fed. Cir. 1983) “RM bases its claim of fraud on the ground that Giant had a duty, which it failed to carry out, to continuously review and amend the oath filed with its application … We do not doubt that an applicant has that duty.”

49. The Duty of Good Faith No Duty to Search… Money Store v. Harriscorp Finance (7th Cir. 1992) “Nowhere does the Lanham Act specifically mandate a preapplication search by one who seeks a federal registration of a mark. The language of § 17 does not explicitly place such a burden on a potential registrant. To imply the duty…would appear inconsistent with the statutory scheme”

50. The Duty of Good Faith No Duty to Search? International Star Class Yacht Racing v. Tommy Hilfiger (2nd Cir. 1996) Failure to obtain a full search report may result in a finding of bad faith or even willful infringement if legal counsel's advice to obtain a full search report is ignored

51. The Duty of Good Faith Oath Requirement Rosso & Mastracco v. Giant Food (Fed. Cir. 1983) “That oath requires that an applicant aver that ‘no other person, firm, corporation, or association, to the best of his knowledge and belief, has the right to use such mark in commerce, either in the identical form thereof or in such near resemblance thereto as to be likely…to cause confusion…’”

52. The Duty of Good Faith No General Duty to Disclose… Rosso & Mastracco v. Giant Food (Fed. Cir. 1983) “The statute does not, however, obligate ‘one seeking federal registration of a mark to investigate and report all other possible users of an identical or confusingly similar mark.’”

53. The Duty of Good Faith Senior uses Rosso & Mastracco v. Giant Food (Fed. Cir. 1983) “We agree that a senior user ordinarily need not identify junior users in the oath.” “The rights of a junior user must be clearly established and must be in an identical mark or one so similar as to be clearly likely to cause confusion.”

54. The Duty of Good Faith “Clearly Established” uses Rosso & Mastracco v. Giant Food (Fed. Cir. 1983) Therefore, disclose senior uses and junior uses that are clearly established, such as by judgment, settlement, registration

55. The Duty of Good Faith Breach: Fraud Two elements: False material statement or ommission in obtaining registration Intent to deceive PTO Burden is clear & convincing Question of fact

56. The Duty of Good Faith Fraud: Intent Aromatique v. Gold Seal (8th Cir. 1994) “Proof that false statements were made to, or that facts were withheld from, the PTO, however, is not enough to show fraud for purposes of canceling a mark because of a party’s fraudulent conduct. In order to show that an applicant defrauded the PTO the party seeking to invalidate a mark must show that the applicant intended to mislead the PTO”

57. The Duty of Good Faith Fraud: Intent Medinol v. Neuro Vasx (TTAB 2003) “The appropriate inquiry is therefore not into the registrant’s subjective intent, but rather into the objective manifestations of that intent. ‘We recognize that it is difficult, if not impossible, to prove what occurs in a person’s mind, and that intent must often be inferred from the circumstances and related statement made by that person”

58. The Duty of Good Faith Fraud: Renewal Affidavit Torres v. Cantine Torresella (Fed. Cir. 1986) “The problem of fraud arises because Torres submitted a label that he knew or should have known was not in use that contained a mark clearly different from the one in use. In addition, he submitted an affidavit stating the mark was in use on wine, vermouth, and champagne when he knew it was in use only on wine”

59. The Duty of Good Faith Fraud: Statement of Use Medinol v. Neuro Vasx (TTAB 2003) “Respondent’s explanation … that the inclusion of stents in the NOA was ‘apparently overlooked’ - does nothing to undercut the conclusion that respondent knew or should have known that its statement of use was materially incorrect. Respondent’s knowledge that its mark was not in use on stents - or its reckless disregard for the truth - is all that is required to establish intent to commit fraud”

60. The Duty of Good Faith Fraud: Statement of Use Standard Knitting v. Toyota (TTAB 2006) Canceling a mark for a fraudulent use statement where “It was not reasonable for Mr. Groumoutis to believe that if the items of clothing were ever made or sold, even if the last sale took place 20 years ago, it would support a claim that the mark ‘is’ in use on the goods”

61. The Duty of Good Faith Cf. Nonuse Distinguished Grand Canyon West Ranch v. Hualapai Tribe (TTAB 2006) Where fraud is not alleged, an incorrect allegation of use about some, but not all, of the goods identified in an application will not cause the entire application to be declared void ab initio Rather, the applicant will be permitted to amend its application to delete the goods on which the mark has not been used

62. The Duty of Good Faith Fraud: Ownership Truong Giang v. Sunny Wong (TTAB 1999) “We consequently find that [distributor], by advising the PTO that petitioner was his licensee and claiming under oath that he was the owner of the “Three Ballerina” mark when he knew or plainly should have known otherwise, made knowingly false and material representations of fact in connection with his application which induced the PTO to issue him the subject registration”

63. The Duty of Good Faith Fraud: False Statements Falsely stating mark in use for 5 yrs Falsely dating a certificate of mailing Failure to disclose geographic identity Failing to correct statements no longer true Failing to disclose that mark now generic

64. The Duty of Good Faith Fraud: Consequence Mark can be cancelled But common law rights may still exist Attorney’s fees Disciplinary action or disbarment

65. The Duty of Good Faith Fraud: Consequence Far Out Prods. v. Oskar (9th Cir. 2001) “Moreover, even if Goldstein knowingly submitted a false declaration such that the appellees’ federal registration should be canceled, the appellees could (and did) still bring suit alleging common law trademark infringement.

66. The Duty of Good Faith Compliance Tips Send duty of good faith letter to client Plain English Explain the oath Mark used for ALL goods & services Inquire about all other marks & any controversies/settlements/judgments Explain the consequences of breach

67. The Duty of Good Faith Compliance Tips Confirm that TM used with ALL listed goods Specimens of each use? Check catalogs, websites? Investigate if there is an indication that ownership and use separated, mere licensees cannot acquire rights

68. The Duty of Good Faith See also, Christopher Cotropia, “Fraud on the Trademark and Copyright Office” at AIPLA MidWinter 2007 http://www.cotropia.com/bio/CotropiaAIPLAMid- Winter2007--TrademarkandCopyrightFraud.pdf http://www.cotropia.com/bio/CotropiaAIPLAMid- Winter2007--TrademarkandCopyrightFraud.pdf

69. The Duty of Good Faith See also, Tamsen Valoir, Ph.D. and David Hricik, J.D., Patents and Trademarks: The Duty of Good Faith, JPTOS 89(4): 287-300 (2007) tamsen.valoir@bakernet.com tamsen.valoir@bakernet.com

70. The Duty of Good Faith QUESTIONS?