Judges: Michel, Clevenger (author), Gajarsa

[Appealed from S.D.N.Y., Judge Chin]

In Scanner Technologies Corp. v. ICOS Vision Systems Corp. N.V., Nos. 07-1399, 08-1081 (Fed. Cir. June 19, 2008), the Federal Circuit reversed the district court on its inequitable conduct holding regarding U.S. Patent Nos. 6,064,756 (“the ’756 patent”) and 6,064,757 (“the ’757 patent”) (collectively “the patents-in-suit”); vacated the award of attorneys’ fees; affirmed the holding that claim 1 of the ’756 patent is obvious and that all claims of the patents-in-suit are invalid, given a stipulation between the parties that the case would be tried on representative claim 1; and affirmed the district court’s holding that ICOS Vision Systems Corporation N.V.’s (“ICOS”) product does not infringe the patents-in-suit.

Scanner Technologies Corporation (“Scanner”) holds an exclusive license to the patents-in-suit, which are directed to a system and process for three-dimensional inspection of ball array devices positioned in a fixed optical system. ICOS developed a ball array device inspection product (“CyberSTEREO”) that implemented a two-camera system to measure coplanarity of solder balls on circuit boards. The CyberSTEREO replaced ICOS’s older inspection product, the ICOS Projector, which had been on the market before the effective filing date of the applications for the patents-in-suit.

While the applications for the patents-in-suit were pending, and upon learning that ICOS had launched the competing CyberSTEREO product, Scanner submitted a petition to make special to the PTO to seek accelerated examination because of actual infringement. The petition contained all the prerequisites that the PTO requires, including a statement that a “rigid comparison” of the alleged infringing method with the claims of the application had been made, that some claims are “unquestionably infringed,” and a description of the invention, Scanner’s interactions with ICOS, and ICOS’s competing system. The petition was granted and the PTO considered the applications patentable over the prior art ICOS Projector.

Scanner then filed suit against ICOS for infringement of the patents-in-suit. ICOS counterclaimed, asking the district court to declare the patents-in-suit invalid, unenforceable, and not infringed by ICOS. The parties agreed that the case would rise and fall on claim 1 of the ’756 patent. The district court found that statements made in the petition were “intended to mislead the PTO into believing” that ICOS copied Scanner’s competing product, and thus held the patents-in-suit unenforceable due to Scanner’s inequitable conduct. The district court also found that the ICOS Projector rendered the claims of the patents-in-suit obvious and that the CyberSTEREO product did not infringe claim 1 of the ’756 patent. Scanner appealed the district court’s rulings.

Scanner argued that a misrepresentation must be material to patentability to support a charge of inequitable conduct. The Court rejected Scanner’s argument and reaffirmed that when the setting involves a petition to make special, a false statement that succeeds in expediting the application is, as a matter of law, material for purposes of assessing the issue of inequitable conduct.

The Court found, however, that the district court failed to draw all reasonable inferences on the factual findings relied upon to show materiality. First, the Court found that a physical inspection should not be an implied requirement to use the phrase “rigid comparison” in a petition to make special. The district court also did not credit the fact that the words “rigid comparison” are required by the PTO’s rules for the contents of a petition to make special. The Court also found that the district court erred when it inferred from Scanner’s statement that its product was on “open display” at a trade show and that the display revealed how calculations were performed. Instead, the Court considered an equally reasonable inference was that “open display” meant the product was accessible to people as opposed to a closed method of display where people could not get to them. Moreover, given that the memory of both witnesses was vague, the Court determined that the district court erred in favoring ICOS’s witness testimony over Scanner’s witness testimony regarding whether ICOS had visited Scanner’s booth. Finally, recognizing that what constitutes “copious” note-taking is a relative determination, the Court found that the district court erred in presuming an unfavorable inference in deciding whether Scanner falsely described the notes taken by ICOS at the trade show. Accordingly, the Court held that the district court erred in its finding of materiality and reversed the district court’s determination that the patents-in-suit are unenforceable for inequitable conduct. Further, because the district court based its finding of an exceptional case on an erroneous finding of inequitable conduct, the Court found that the district court abused its discretion in awarding attorneys’ fees to ICOS.

With respect to obviousness, the Court held that the district court did not err in finding the claims obvious where Scanner did not rebut ICOS’s expert testimony regarding the level of ordinary skill in the art, and did not present much evidence of secondary indicia of obviousness. Further, the Court disagreed with Scanner that the record contains no evidence that suggests implementing stereo triangulation calculations on related images in the prior art ICOS Projector system. Referencing KSR International Co. v. Teleflex Inc., 127 S. Ct. 1727 (2007), the Court concluded that the trial testimony showed that the relatively small logical gap between the prior art and asserted claim 1 is closed by a person of ordinary skill in the art pursuing known options within his or her technical grasp.

The Court also found that the district court correctly construed the terms “triangulation calculation” and “pre-calculated calibration plane.” And the district court correctly determined that the accused product does not satisfy either limitation. As such, the Court affirmed the district court’s finding of noninfringement of claim 1.

Finally, Scanner argued that the district court erred in ruling on the validity and infringement of unasserted claims of the patents-in-suit based on its analysis of only claim 1 of the ’756 patent. Scanner argued that the district court lacked jurisdiction because no case or controversy exists and that it erred in ruling on validity where ICOS presented no evidence. The Court rejected these arguments. The Court cited the parties’ stipulation that the “case stands and falls on Claim 1 of the ’756 patent,” noting that “parties can stipulate to almost anything but jurisdiction.” Slip op. at 28-29. The Court found no ambiguity in the parties’ representation of the stipulation and determined that “the case” constituted allegations of infringement of both patents and a DJ action seeking invalidity, noninfringement, and unenforceability of all the claims in the patents-in-suit. Thus, the Court affirmed the district court’s judgment invalidating the claims of both patents-in-suit. The Court also affirmed the district court’s judgment of noninfringement, given Scanner failed to provide facts to support a finding that ICOS infringed those claims.