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BILL GATES IS NOT THE ONLY ONE WHO NEEDS TO THINK ABOUT ANTITRUST
Nobelpharma hauls Implant Innovations into Court and then Ends Up The Loser

By Breffni Baggot,

It seems that every day the newspapers report Microsoft's ongoing battles.
Bill Gates's defenders say "Let the software market perform it's own
shakeout." Others say Bill Gates is trying to monopolize the software
industry and that monopoly violates US antitrust laws.

You might be thinking, "How can antitrust have anything to do with me? I'm
not in the software business." Whether you are a senior executive in a
company or a researcher with a clever idea to patent, you might want to
spend some time thinking about antitrust laws. The folks at Nobelpharma
didn't. Now they probably wish they had. (1)

Patent suit

Nobelpharma had a license to a patent (2) claiming "an element intended for
implantation into bone tissue." The "element," when used as part of a dental
implant, is placed directly into the jawbone where it acts as a tooth root
substitute. The implants claimed in the patent are preferably made of
titanium and have a network of specifically sized and placed "micropits"
which allow a secure connection to form between the implant and the growing
bone tissue through a process called "osseointegration."

Nobelpharma charged the defendant, Implant Innovations, Inc. (3I), a U.S.
implant maker, with infringing the patent. Instead of peacefully settling
out of court, 3I countersued. It alleged that Nobelpharma's patent was
invalid because it had been obtained through fraud on the U.S. Patent and
Trademark Office(PTO).

What had Nobelpharma done wrong? It failed to disclose the "best mode." US
patent law requires that an inventor disclose to the US Patent Office the
"best mode" of making and using the invention. (3) Why? Fair dealing. When a
US patent issues, the US government grants a monopoly to the patent owner.
According to the US Constitution, the government does this "to promote the
progress of science…" (4) When the granting of a patent results in
publication of the invention, and others learn by it, those others can
improve on the patent and push science a little further. That's what the
public gets in the bargain - the progress of science. The inventor gets a
monopoly. The policy behind the best mode requirement is to penalize an
inventor who has not lived up to his end of the deal; if the inventor has
withheld the preferred method of making his invention, he undermines the
purpose of patent laws.

One of the named inventors on the Nobelpharma patent, Dr. Branemark, had
authored a book discussing titanium jaw implants that was published more
than a year before the earliest patent application filing. Under US patent
law, one may not get a patent on an invention published more than one year
before the date of filing of the patent application. (5) Knowing this, Dr.
Branemark did not disclose the book to the Patent Office. The court held
that the evidence produced at trial lead to only one reasonable conclusion:
Dr. Branemark possessed a preferred method of making the claimed invention
and failed to disclose it sufficiently to enable those skilled in the art to
practice that method.

On the basis of that, the judge ruled that the patent was invalid for
failing to disclose the best mode for practicing the invention.

Tough Verdict

It would have been well for Nobelpharma if that had been the end of the
case. The patent would have been lost and Nobelpharma would have lost the
time and money spent on the suit. However, 3I did not stop there. In its
countersuit, 3I claimed that not only was the patent invalid, but
Nobelpharma had tried monopolize the U.S. implant market and injure 3I,
violating antitrust laws.

Antitrust violation, the reader may ask? Isn't the point of getting a patent
to get a monopoly? Quite so. There is one exception, however. It's called
the Walker Process exception. The doctrine, articulated in a 1965 US Supreme
Court case of the same name, provides one exception to the general rule that
a patent-holder's assertion of patent rights cannot form the basis of an
antitrust monopolization claim against him. (6) According to the Walker
Process exception, an antitrust plaintiff may succeed if he can prove that
the patent-holder obtained its patent through fraud on the United States
Patent and Trademark Office (PTO). Relying on Walker Process, 3I claimed
that Nobelpharma had used its fraudulently obtained patent to monopolize the
U.S. implant market and injure 3I.

The jury found that (1) the patent was fraudulently obtained; (2)
Nobelpharma had knowledge of this when it brought suit; and (3) Nobelpharma
intended to interfere directly with 3I's ability to compete in the relevant
market. The jury awarded 3I $3.3 million in compensatory damages, which the
judge tripled to $9.9 million in accordance with standard practice under
antitrust laws. (7)

Nobelpharma Appeals

Its pockets lightened to the tune of $9.9M plus costs, Nobelpharma appealed
to the Court of Appeals for the Federal Circuit(CAFC). The CAFC is an
"expert court" unlike other courts, and is set up especially for hearing
patent appeals. For other types of appeals, there is more than one appeals
court. Not so in patent law. All patent appeals are handled by one
specialized court. Its judges are appointed by the President of the United
States and most have backgrounds in both science and law.

The CAFC heard the case, made up its mind, and then made up its mind again.
In other words, the CAFC heard two appeals on the same case. First,
Nobelpharma appealed the antitrust violation and the case was heard by a
three judge panel. The three judge panel "split the baby." A majority of the
three judge panel held that Walker Process did not apply because the
patent-holder merely failed to disclose critical prior art. The court made
this ruling even though patent laws explicitly require inventors to disclose
this information, to certify under oath that they are aware of and
understand this duty, and even though Nobelpharma's own lawyers had
counseled against suing 3I because had obtained the patent fraudulently. The
panel acknowledged that it was motivated partly by a fear that Walker
Process claims could proliferate. The result would be that patent owners
would be less inclined to enforce their rights in court. Although the
Nobelpharma patent remained invalid, the court was not willing to say the
fraud was so egregious as to amount to an antitrust violation. (8)

The case essentially allowed a passive but knowing withholding of the truth
to be treated less severely than an active false statement. With that
argument, 3I now asked for a second appeal from the first appeal. The CAFC
reconvened - this time with all its judges, not just the 3 judge panel. The
full court then overturned the ruling which the three judge panel had
disseminated just months before. (9) The court ruled that if evidence shows
that the asserted patent was acquired by a fraudulent misrepresentation or a
fraudulent omission, and the party asserting the patent was aware of the
fraud when bringing suit, such conduct can expose a patentee to liability
under the antitrust laws. Rejecting the reasoning of the earlier panel, the
full court said "a fraudulent omission can be just as reprehensible as a
fraudulent misrepresentation." (10) Such a misrepresentation or omission
must evidence a clear intent to deceive the patent examiner and thereby
cause the PTO to grant an invalid patent. The court emphasized that its
ruling was not based on an innocent error, saying that a finding of Walker
Process fraud requires clear evidence of deceptive intent together with a
clear showing of reliance, i.e., that the patent would not have issued but
for the misrepresentation or omission. Therefore, for an omission such as a
failure to cite a piece of prior art to support a finding of Walker Process
fraud, the withholding of the reference must show evidence of fraudulent
intent. A mere failure to cite a reference to the PTO will not suffice.
Although antitrust law must still be consulted to determine a violation
(11), a showing of fraud removes from the patent owner the antitrust
immunity he normally enjoys. 3I made this showing and collected $9.9M.

Comment

If your company is considering applying for a patent or litigating a patent,
you might bear in mind the law in the Nobelpharma case and the points it
raises. First, remember that publication of an invention more than one year
before application for patent in United States results and barring of that
patent. (12) In the Nobelpharma case, the inventor knew about this bar to a
patent and that was why he withheld the disclosure of his book; he knew that
his application would be denied if the US Patent Office knew about the book.

Second comply with the best mode requirement. In the Nobelpharma case, the
patent was invalidated because the inventor failed to disclose the preferred
method for practicing the invention. Although in the Nobelpharma case, the
inventor did so intentionally, in order to deceive the Patent Office, the
patent would have been invalidated even if the inventor had done so
innocently.

Third, fulfilling the best mode requirement is not as easy as it sounds. It
requires that the inventor make sure that her patent attorney understands
not only understand the invention, in order that the attorney can claim
invention as broadly as possible, but also requires that the inventor make
sure that her attorney is aware of the preferred method, if any.

Moreover, timing is critical. The test of whether the best mode requirement
has been met is measured as of the date of the patent application is filed
in the U.S. Patent Office. In practical terms, this means that the patent
attorney and inventor need to be in close contact with one another as they
prepare for the filing of the patent application. Most patents are filed on
inventions that are part of ongoing product development. The ongoing nature
of this product development may mean that the best mode is continually
changing. To be avoided is the following situation. The inventor files an
invention disclosure with the legal department in June and then months
later, management approves filing of a patent. By the time a patent
application is filed, the best mode has changed and R&D has a better, or at
least different, method. In that situation, the mode described in the
patent application - though preferred at the time of the invention
disclosure - is preferred no longer. The mode at the time the patent is
filed is not "best" and any patent will be invalid regardless of whether the
error was intentional or innocent.

This does not mean that a patent will not be granted. In almost all cases,
the U.S. Patent Office doesn't know that the best mode requirement has not
been met and if all the other requirements of the patent have been met, the
Patent Office will grant a patent. This seems like a good thing, but may
not be because the company receiving the patent may now try to enforce it -
not knowing that the patent will be held invalid in court. In addition, the
company will put a product on the market that is unprotected when - had it
known that the product was unprotected - the company might have decided to
put out a different product or decided repair the damage in the patent.

When does anyone find out that the best mode requirement was not met, and
the patent is invalid? Usually, not until long after the patent has issued.
In the Nobelpharma case, management knew the patent had problems, was
advised by its lawyers not to sue, and then sued 3I anyway.

The Nobelpharma case underscores the consequences of intentional
misrepresentation to the United States Patent Office. Every CEO wants to
win lawsuits and keep his company from losing lawsuits. The case offers
something for researchers too. No inventor wants to be responsible for the
kind of loss seen in an antitrust case. For the losing party, a company is
liable for the actual damages caused to the other party, and then antitrust
law triples these damages. Depending on the size of the actual damages, even
Bill Gates might have a hard time taking a hit like that

FOOTNOTES

1. Nobelpharma AB v. Implant Innovations, Inc. (CAFC 3/20/1998, No. 96-1463)
2. U.S. Patent No. 4,330,891
3. 35 U. S. Code Section 112
4. U.S. Constitution, Article I, section 8
5. 35 U.S. Code section 102
6. Walker Process Equipment Inc. v. Food Machinery & Chemical Corp. , 382
U.S. 172 (1965)
7. 44 USPQ2d 1705 (Fed. Cir. Nov. 18, 1997).
8. Id.
9. Nobelpharma AB v. Implant Innovations, Inc. (CAFC 3/20/1998, No. 96-1463)
10. Id.
11. See Walker Process, 382 U.S. at 178
12. 35 U.S. Code section 102




BREFFNI BAGGOT
INTELLECTUAL PROPERTY LAW
P.O. BOX 1215
MANCHESTER CT 06045-1215



Headings
Biotechnology law

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