Patentee’s Unclean Hands

by Dennis Crouch

The Federal Circuit’s new decision in Luv’N’Care, Ltd. (LNC) v. Laurain and EZPZ, relies on the doctrine of unclean hands to deny relief to the patentee (Laurain and EZPZ), affirming the district court’s judgment.  The appellate panel also vacated and remanded the district court’s finding that LNC failed to prove the asserted patent is unenforceable due to inequitable conduct during prosecution, as well as its grant of summary judgment one of the asserted patents was invalid as obvious.  U.S. Patent No. 9,462,903. The case here involves bowls/plates attached to a mat to help avoid spills and for easy cleanup. 22-1905.OPINION.4-12-2024_2300689.

Unclean Hands: The doctrine of unclean hands is an equitable defense that bars a party from obtaining relief when they have engaged in misconduct related to the subject matter of the litigation. As the Supreme Court explained in Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933), the doctrine applies “where some unconscionable act [by the party seeking] relief has immediate and necessary relation to the equity that he seeks in respect of the matter in litigation.” The Federal Circuit has further clarified that the misconduct must bear an “immediate and necessary relation” to the claims at issue, and the doctrine should not be used merely to punish a wrongdoer. See Gilead Scis., Inc. v. Merck & Co., 888 F.3d 1231 (Fed. Cir. 2018). The doctrine of unclean hands is traditionally associated with equity and is primarily applied in equitable matters such as injunctions. Its foundational principle is that “he who comes into equity must come with clean hands.” This means that a party seeking an equitable remedy must not have engaged in improper conduct in the matter at hand.

The district court concluded that EZPZ’s litigation misconduct rose to the level of “unconscionable acts” directly related to the relief being sought. On appeal, the Federal Circuit found no clear error.  The appellate court pointed to several examples: EZPZ’s failure to disclose relevant patent applications during discovery; EZPZ’s attempts to block LNC from discovering prior art searches conducted by EZPZ’s founder; and repeated false testimony by the party.  The appellate court agreed that this conduct was “offensive to the integrity of the court.” The result then is that the district court tossed out all of EZPZ’s remaining infringement claims.

In recent years, the Supreme Court has been asking the lower courts to re-focus attention on the historic law/equity divide.  One problem that I have with this opinion is that it glosses over the distinction. In particular, unclean hands is an equitable defense against equitable claims. But here, the patentee had alleged both legal and equitable claims — seeking compensatory damages and injunctive relief respectively. The district court dismissed the entirety of these claims, without explaining how the legal claims are properly swept into being protected by the otherwise equitable defense.  In the 19th century, the divide was easier because plaintiffs had to choose whether to file their action in law or in equity. When those were merged, all the lines became blurred and seemingly continue in that fashion.

Although the accused infringer (LNC) won the case on unclean hands, it also had several strategic reasons for its own cross-appeal seeking a finding that the patents are unenforceable due to inequitable conduct to protect the finding that one of the patents is invalid as obvious. In particular, unclean hands is typically limited to the particular lawsuit. An obviousness finding would block new suites on other LNC products; and an unenforceability finding could spill over to the entire patent family. One note though, is that the appellate panel does not consider whether these issues are moot and whether it would retain jurisdiction after affirming on unclean hands.

Inequitable Conduct: The case includes evidence that EZPZ’s founder, Lindsey Laurain, and her patent agent, Benjamin Williams, committed fraud on the USPTO via (1) misrepresentations and omissions regarding a Platinum Pets mat prior art reference, and (2) submission of false or misleading declarations to the USPTO.  For instance, despite observing that the Platinum Pets mat self-sealed, including creating a suction (features of the EZPZ patent), they described the reference as lacking self-sealing functionality. Laurain also failed to provide the USPTO with a video showing the Platinum Pets mat’s self-sealing behavior, and instead submitting a less pertinent Amazon advertisement.  [One problem to note is that the USPTO does not accept video submissions as prior art.]

The district court concluded that the evidence was insufficient to find inequitable conduct during prosecution. On appeal though the Federal Circuit found problems with the the district court analysis of both materiality and intent. First, the district court did not explicitly address whether Laurain and Williams’ misrepresentations and omissions regarding the Platinum Pets mat prior art constituted “affirmative egregious misconduct” that would establish materiality per se, irrespective of whether the USPTO would have allowed the claims had it been aware of the true facts.  Further, the district court “must evaluate whether the PTO’s patentability decision may have differed if [the patentee] had described the Platinum Pets mat accurately and had disclosed the withheld video to the PTO.” See TransWeb, LLC v. 3M Innovative Props. Co., 812 F.3d 1295 (Fed. Cir. 2016) (disclosed reference may be still be material if mischaracterized by the patentee). Second, the district court erred by not considering Laurain’s and Williams’ misconduct “in the aggregate” and instead analyzing each act in isolation, contrary to Federal Circuit precedent requiring courts to assess the “totality of the evidence” and “collective weight” of the misconduct. The Federal Circuit directed the district court on remand to holistically reevaluate the evidence of Laurain’s and Williams’ intent to deceive, in light of their seeming pattern of misconduct.

To be clear, the appellate panel did not make an affirmative finding of inequitable conduct, but rather vacated the district court’s judgment and remanded for further proceedings consistent with its guidance on materiality and intent.

Finally, on obviousness, the Federal Circuit vacated the grant of summary judgment of obviousness – finding genuine disputes of material fact that should not have been resolved against the patentee EZPZ as the non-moving party. The appellate court pointed to conflicting expert testimony on whether the asserted prior art disclosed all limitations of the claims, including the key “self-sealing” feature. The district court also failed to properly consider EZPZ’s objective evidence of nonobviousness, including copying and commercial success, which must be evaluated before making an ultimate determination on obviousness. It was not proper for the district court to make these factual findings on summary judgment, when its proper role was to view the evidence in the light most favorable to EZPZ as the non-moving party.

On remand, the district court will need to proceed on the inequitable conduct and obviousness issues. The appellate panel also vacated the denial of attorney fees and costs – that will also be reconsidered on remand.

Judge Stark wrote the opinion, joined by Judges Reyna and Hughes. Carol Welborn Reisman argued for Luv N’ Care, Ltd. and Jennifer Fischer for Eazy-PZ LLC.