Issue 06/32 | July 6, 2006
No Jury Trial Right For Inequitable Conduct: Validity and Enforceability are not "Common" Issues under Beacon Theaters

A divided panel of the Federal Circuit held that there is no Seventh Amendment right to a jury trial for inequitable conduct, even where one would exist for an invalidity claim. A substantial but contrary body of law may provide future litigants with arguments for jury demands in inequitable conduct cases where underlying facts are "common" to both the legal and equitable defenses.

In Agfa v. Creo Prods., Inc., No. 05-1079 (Fed. Cir. June 26, 2006), a divided panel of the Federal Circuit affirmed a district court judgment that Agfa's patents were unenforceable for inequitable conduct, as well as its order that inequitable conduct be tried to the court prior to a jury trial on the other issues in the case.

Agfa's patents-in-suit are directed to large scale printing presses that use plates made of materials such as aluminum or polyester. The plates are stored in cassettes, which in turn are stored in plate handlers. At issue was whether the "stack" of plates must be substantially horizontal or could include plate configurations angled at greater than 45o. Creo's inequitable conduct charge was based on withheld prior art alleged to be material. The district court judge severed the inequitable conduct issue from the rest of the case, conducted a bench trial on that issue, and declared all of Agfa's patents unenforceable.

On appeal, Agfa challenged the denial of its jury request for the inequitable conduct issue, but the Federal Circuit was unpersuaded. Relying on its earlier decision in Gardco and the Supreme Court's decision in Beacon Theatres, Inc. v. Westover, 359 U.S. 500 (1959), the Federal Circuit emphasized that inequitable conduct (including the materiality of the undisclosed prior art) and validity may "overlap to some degree," but are not "common" issues as required by Beacon Theatres sufficient to invoke the right to a jury. Even though materiality under Rule 1.56(b) (i.e., a prima facie case of unpatentability) could implicate aspects of a validity analysis, the issues of invalidity and materiality were not considered "common" within Beacon Theatres.

The Federal Circuit affirmed the construction that the claimed "stack" standing alone was not limited to horizontally positioned stacks. The undisclosed prior art showing an earlier Creo printing system (having angled stacks) was material because it was inconsistent with Agfa's misleading statements to the examiner during prosecution. Intent was established based on the knowledge of the withheld references and the arguments that could not have been made had the references been submitted.

In a sharp dissent, Judge Newman disagreed that there was no right to a jury on the factual questions of material misrepresentation and deceptive intent underlying inequitable conduct. The Seventh Amendment preserves the right to jury trial as it existed at common law, which included questions of whether a patent was obtained upon "false suggestion" to the granting authority. Judge Newman cited a litany of decisions from the Federal Circuit and the Supreme Court upholding the right of jury demand in cases involving inequitable conduct, and rejected the panel majority's selective reliance on Gardco:

when there is a jury right as to legal elements, as in Beacon Theatres, there is no discretion to deny the jury right as to factual questions relevant to both the legal and equitable issues.

Please visit http://media.aplf.org/rm/20060706-public/Agfa v. Creo.pdf for a copy of the case for your reference.

To discuss these topics further, please feel free to contact the author, Michael R. Dzwonczyk (mdzwonczyk@sughrue.com), at Sughrue Mion, PLLC in Washington DC, USA.

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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