In an action involving manufacturers of a self-sealing dining mat for toddlers, the US Court of Appeals for the Federal Circuit affirmed a district court’s finding that the defendants were barred from obtaining relief on their counterclaims under the unclean hands doctrine, thereby vacating the district court’s other findings on inequitable conduct, obviousness, attorneys’ fees and costs. Luv N’ Care, Ltd. et al. v. Laurain et al., Case No. 22-1905 (Fed. Cir. Apr. 12, 2024) (Reyna, Hughes, Stark, JJ.)
Luv N’ Care and Nouri E. Hakim (collectively, LNC) filed suit against Lindsey Laurain and Eazy-PZ (EZPZ), asserting various claims for unfair competition under the Lanham Act and Louisiana law. LNC also sought declaratory judgment that EZPZ’s design patent was invalid, unenforceable and not infringed. After the suit was filed, the US Patent & Trademark Office (PTO) issued Laurain a utility patent directed toward self-sealing dining mats. Laurain subsequently assigned her rights to EZPZ, which then asserted counterclaims for utility patent, design patent and trademark infringement.
Following discovery, the district court granted LNC’s motion for summary judgment, finding all claims of EZPZ’s utility patent as obvious in view of three prior art references. EZPZ moved for reconsideration, which the district court denied, indicating that a “ruling providing further reasoning will follow in due course.” Before any such ruling issued, the PTO issued an ex parte reexamination certificate confirming the patentability of the utility patent claims two days before the district court’s bench trial began.
EZPZ did not provide this reexam certificate to the district court prior to the bench trial. During the bench trial, the district court found that EZPZ had not committed inequitable conduct but that EZPZ’s litigation conduct constituted unclean hands. After the district court entered judgment, EZPZ moved for reconsideration of summary judgment based on the ex parte reexamination certificate. The district court denied this motion and found that the evidence did not compel alteration of the prior ruling that the utility patent was invalid. It also denied LNC’s motion for attorneys’ fees and costs. EZPZ appealed.
The Federal Circuit affirmed the unclean hands determination but vacated the district court’s rulings on inequitable conduct, invalidity, attorneys’ fees and costs. As to unclean hands, the Court reasoned that EZPZ failed to disclose patent applications related to the utility patent until well after the close of discovery and dispositive motion practice. EZPZ also blocked LNC’s efforts to discover Laurain’s prior art searches by falsely claiming that she had conducted no such searches and that all responsive documents had been produced. It further found that EZPZ witnesses, including Laurain and EZPZ’s former outside counsel, repeatedly gave evasive testimony during depositions and at trial. The Court affirmed the district court’s determination that EZPZ’s misconduct bore an immediate and necessary connection to EZPZ’s claims for infringement because the undisclosed material was directly relevant to the development of LNC’s litigation strategy and undermined LNC’s ability to press its invalidity and unenforceability challenges. The Court found no clear error in the district court’s reasoning that EZPZ’s unclean hands concerning the utility patent affected EZPZ’s other counterclaims because “[t]he Court’s loss of confidence in a party’s candor cannot be overcome with respect to other theories of recovery.”
As to inequitable conduct, the Federal Circuit concluded that the district court’s opinion did not provide sufficient clarity on whether it made findings concerning affirmative egregious misconduct and per se materiality – that is, whether the PTO would not have granted the utility patent “but for” EZPZ’s misrepresentation. The Court also reasoned that the district court erred in considering EZPZ’s individual acts of misconduct in isolation when evaluating Laurain’s deceptive intent when it should have evaluated these acts in the aggregate.
The Federal Circuit also vacated the summary judgment finding that the utility patent was invalid as obvious, explaining that it was erroneous for the district court to find a lack of genuine dispute of material fact by “ignoring, dismissing, or discounting the probative value of the reexamination evidence in the record.” The Court held that the district court improperly resolved genuine disputes of material fact concerning the scope of disclosure of the prior art references and that a reasonable fact finder might find that EZPZ established objective indicia of nonobviousness, such as the finding that LNC copied EZPZ’s technology and that EZPZ’s product embodying the utility patent claims enjoyed commercial success.
Finally, the Federal Circuit vacated the finding that the case was not exceptional under 35 U.S.C. § 285. The Court determined that the district court erred by failing to declare LNC as the prevailing party even though EZPZ was barred by unclean hands from obtaining relief from LNC. The Court also reasoned that the case was “far from over” given its decision to remand for further proceedings on obviousness and inequitable conduct, which made it impossible to assess the totality of circumstances (as required to find exceptional case and award attorneys’ fees). It reached the same conclusion concerning LNC’s request for costs.
