Advanced Magnetic Closures, Inc. v. Rome Fastener Corp. , 607 F.3d 817 ( 2010 )

United States Court of Appeals
for the Federal Circuit
__________________________
ADVANCED MAGNETIC CLOSURES, INC.,
Plaintiff-Appellant,
and
DAVID JAROSLAWICZ
AND JAROSLAWICZ & JAROS, LLC,
Movants-Appellants,
and
ABELMAN, FRAYNE & SCHWAB,
Movant,
v.
ROME FASTENER CORPORATION, ROME
FASTENER SALES CORPORATION, ROMAG
FASTENERS, INC., AND RINGS WIRE, INC.,
Defendants-Appellees.
__________________________
2009-1102, -1118
__________________________
Appeal from the United States District Court for the
Southern District of
New York in case no. 98-CV-7766, Judge Paul A.
Crotty.
___________________________
Decided: June 11, 2010
___________________________
ADVANCED MAGNETIC v. ROME FASTENER 2
MICHAEL F. SARNEY, Katten Muchin Rosenman LLP,
of New York, New York, argued for plaintiff-appellant.
MICHAEL J. ALLAN, Steptoe & Johnson LLP, of Wash-
ington, DC, argued for movants-appellants. With him on
the brief was RICHARD K. WILLARD.
NORMAN H. ZIVIN, Cooper & Dunham LLP, of New
York, New York, argued for defendants-appellees. With
him on the brief was WENDY E. MILLER. Of counsel on the
brief was DONALD R. DUNNER, Finnegan, Henderson,
Farabow, Garrett & Dunner, LLP, of Washington, DC.
__________________________
Before RADER, Chief Judge, * ARCHER and GAJARSA, Cir-
cuit Judges.
Opinion for the court filed by Circuit Judge GAJARSA.
Concurring opinion filed by Chief Judge RADER.
GAJARSA, Circuit Judge.
Advanced Magnetic Closures, Inc. (“AMC”) brought an
action against Rome Fastener Corp., Rome Fastener Sales
Corp., Romag Fasteners Inc., and Rings Wire, Inc. (collec-
tively “Romag”) for allegedly infringing U.S. Patent No.
5,572,773 (the “’773 patent”). After AMC finished pre-
senting its case in chief, the U.S. District for the Southern
District of New York (the “district court”) granted Ro-
mag’s Rule 50(a) motion for judgment as a matter of law
(“JMOL”). The district court subsequently assessed
attorney’s fees and costs against AMC under 35 U.S.C.
§ 285 based on (1) the ’773 patent applicants’ inequitable
*Randall R. Rader assumed the position of Chief
Judge on June 1, 2010.
3 ADVANCED MAGNETIC v. ROME FASTENER
conduct before the U.S. Patent and Trademark Office (the
“PTO”) and (2) AMC’s litigation misconduct. Pursuant to
28 U.S.C. § 1927, the court also held AMC’s attorneys
jointly and severally liable for a portion of Romag’s attor-
ney’s fees, including the law firm Abelman, Frayne &
Schwab (“Abelman”) and David Jaroslawicz—the sole
member of Jaroslawicz & Jaros, LLC. AMC, Abelman,
and Mr. Jaroslawicz all appealed the judgment to this
court. But Abelman subsequently settled with Romag,
and this court dismissed Abelman’s appeal. Advanced
Magnetic Closures, Inc. v. Rome Fastener Corp., 331 F.
App’x 732, 733 (Fed. Cir. 2009). We affirm the district
court’s holding that the ’773 patent is unenforceable based
on inequitable conduct and its award of 35 U.S.C. § 285attorney’s fees and costs against AMC, but we reverse its
28 U.S.C. § 1927 sanction against Mr. Jaroslawicz.
BACKGROUND
AMC owns the ’773 patent, which discloses a mag-
netic snap fastener commonly used in women’s handbags.
Magnetic snap fasteners typically consist of two halves—a
male and female half. Both halves contain a rivet in the
center. In one of the ’773 patent preferred embodiments,
the female half contains a magnetic rivet positioned just
below a plate, creating an opening into which the male
rivet can insert or “snap” into place. ’773 patent col.4
ll.38–41. Once the male half has snapped inside the
female half, claim 1 of the ’773 patent states that the two
create a magnetic circuit that “passes at least through a
periphery of [the] first rivet of [the] female member.” Id.at col.8 ll.17–19. The last element of claim 1 requires a
“small hole” in at least one of the “rivets increasing the
magnetic attraction of [the] magnetic member [in the
female half] by modifying a resistance to said magnetic
circuit at said first and second rivets.” Id. at col.8 ll.19–
23. Figure 1 from the ’773 patent below shows holes
ADVANCED MAGNETIC v. ROME FASTENER 4
running through both the female and male halves, num-
bered as 32 and 35 respectively.
On October 30, 1998, AMC filed suit against Romag,
alleging, among other things, that Romag’s magnetic snap
fasteners infringed claim 1 of the ’773 patent. Romag
holds U.S. Patent No. 5,722,126 (the “’126 patent”) for a
magnetic snap fastener and marks all of its fasteners with
the ’126 patent number. To determine whether Romag’s
fasteners infringed, the district court construed the last
element of the ’773 patent’s claim 1 to cover a magnetic
snap fastener “in which the magnet causes lines of mag-
netic flux to pass through at least the outer sides of the
rivet in the female half, and the small hole(s) in one or
both rivets modifies their resistance to the flux and
thereby increases the magnetic attraction.” Advanced
Magnetic Closures, Inc. v. Rome Fastener Corp. (“AMC I”),
No. 98 Civ. 7766, 2005 WL 1241896, at *6 (S.D.N.Y. May
24, 2005). Accordingly, claim 1 only covers fasteners with
rivet holes that increase magnetic attraction, but not rivet
5 ADVANCED MAGNETIC v. ROME FASTENER
holes that do not increase magnetic attraction. Neither
party disputes the district court’s claim construction.
In an attempt to prove its claims, AMC submitted re-
constructed evidence, presented contradictory testimony,
and engaged in evasive litigation tactics. AMC submitted
an expert report from Dr. Dev Ratnum in support of its
claim for infringement. Dr. Ratnum opined that the
’773 patent covered Romag’s fasteners. As part of his
analysis, Dr. Ratnum purportedly performed a magnetic
finite element analysis that produced images showing the
magnetic flux of magnetic rivets with and without a hole.
Based on these images, he concluded that “[t]he pictures
obtained from the well established [finite element] analy-
sis do not lie and it appears, the hole has a dramatic effect
of increasing the flux in the center rivet.” J.A. 2784.
However, Dr. Ratnum failed to disclose in his report that
he had not performed the finite element analysis. Subse-
quently, Dr. Ratnum identified Brian Bell as the person
who had performed the analysis, causing Romag to re-
quest that AMC produce Mr. Bell’s communications with
Dr. Ratnum. As a result, AMC’s trial counsel, Mr. Jaro-
slawicz, withdrew Dr. Ratnum as an expert based on
“[i]rreconcilable differences” and refused Romag’s request
to produce Mr. Bell’s reports. J.A. 2762. The district
court, therefore, ordered AMC to produce Mr. Bell’s
reports. One of Mr. Bell’s memorandums to Dr. Ratnum
directly contradicted the expert’s report. Mr. Bell wrote,
“The results were the same, the no hole part had the most
force. . . . This does not help your case.” J.A. 2217.
Before trial, AMC moved for summary judgment, at-
tempting to remove several of Romag’s defenses, including
an “unclean hands” defense. Advanced Magnetic Clo-
sures, Inc. v. Rome Fastener Corp. (“AMC II”), No. 98 Civ.
7766, 2006 WL 3342655, at *1 (S.D.N.Y. Nov. 16, 2006).
The defense had been advanced by Romag on the basis
ADVANCED MAGNETIC v. ROME FASTENER 6
that Irving Bauer, AMC’s president, had misrepresented
to the PTO that he was the only inventor of the
’773 patent’s fastener. Id. at *1–2. Although Mr. Bauer is
the named inventor, both he and his former employee,
Robert Riceman, claim to have invented the ’773 patent’s
fastener. The district court, however, deferred on ruling
on Romag’s defense of unclean hands because Mr. Rice-
man could not testify against Mr. Bauer. Id. at *4. In a
previous lawsuit, Mr. Riceman had settled his claims to
inventorship and agreed not to voluntarily assist anyone
in litigating against Mr. Bauer. Id. Because of this
restriction, the district court directed Romag to subpoena
Mr. Riceman and depose him. Id.At the deposition, Mr. Riceman contradicted Mr.
Bauer’s explanation of how he had invented the
’773 patent’s fastener. Mr. Bauer testified that he became
interested in magnetic snap fasteners when an acquaint-
ance, Alexander Fischer, solicited him in the summer of
1992 about investing in the magnetic snap fastener
business. Advanced Magnetic Closures, Inc. v. Rome
Fastener Corp. (“AMC IV”), No. 98 Civ. 7766, 2008 WL
2787981, at *6 (S.D.N.Y. July 17, 2008). According to Mr.
Bauer, Mr. Fischer planned to acquire U.S. Patent Nos.
4,021,891 (the “’891 patent”) and 4,453,294 (the “’294
patent”), both of which also cover magnetic snap fasten-
ers. Id. Mr. Bauer further testified that before he in-
vested, he experimented with some fasteners at home in
an attempt to design around the ’294 patent. Id. at *7.
Although “he initially did not understand the magnetic
snap patents,” id., Mr. Bauer testified that he was able to
design around the ’294 patent through a series of mag-
netic strength experiments, such as comparing the mag-
netic attraction of solid magnets to magnets with holes,
id. at *7–8. In one of his more “difficult-to-follow”
strength experiments, he claimed that a nail through
7 ADVANCED MAGNETIC v. ROME FASTENER
which he drilled a hole adhered to a magnetic plate,
allowing the nail to carry more weight than another nail
without a hole. Id. 1
On approximately October 2, 1993, Mssrs. Bauer and
Fischer formed the Randolph-Rand Corporation of New
York (“RRNY”) and acquired the ’294 patent. Id. at *6;
Advanced Magnetic Closures, Inc. v. Rome Fastener Corp.
(“AMC III”), No. 98 Civ. 7766, 2007 WL 1552395, at *1
(S.D.N.Y. May 29, 2007). By the time the two had formed
RRNY, Mr. Fischer’s previous company, Amsco Products,
Inc. (“Amsco”), had acquired the ’891 patent. Id. But
Amsco subsequently assigned the ’891 patent to RRNY.
Id. Having an ownership interest in two magnetic snap
fastener patents, Mr. Bauer waited approximately three
years after conceiving of his magnetic snap fastener to file
the ’773 patent application. See ’773 patent at [22] (list-
ing a filing date of Feb. 15, 1995).
1 Mr. Bauer described his nail strength experiment
in the following exchange with the court:
THE COURT: You put nails on the wall?
THE WITNESS: I took a nail, the head of the nail,
and I drilled a hole in the back of the nail and I put it on
[a flat magnetic plate attached to the wall]. And I took a
piece of copper tubing and I cut round rings, as a weight.
I used three pieces of weight, and I put it through the end
of the nail. The one with the whole was holding-
THE COURT:-greater weight.
THE WITNESS:-greater weight. The one without the
hole tipped over.
AMC IV, 2008 WL 2787981, at *8 (alterations in the
original).
ADVANCED MAGNETIC v. ROME FASTENER 8
Contrary to Mr. Bauer’s version of events, Mr. Rice-
man testified that he invented the magnetic snap fastener
described by the ’773 patent. Mr. Riceman became an
employee at RRNY after Mr. Fischer acquired the
Randolph-Rand Corporation (“RRC”). AMC IV, 2008 WL
2787981, at *6. Mr. Riceman testified that Mssrs. Bauer
and Fischer became alarmed when the law firm Darby &
Darby announced that it was aiding the handbag industry
to design around the ’294 patent. Id. at *7. Upon hearing
of these efforts, Mr. Riceman claimed that he informed
Mssrs. Bauer and Fischer that a 1992 design he had
developed would avoid the ’294 patent and predate the
design-around attempts. Id. at *7. To protect their
investment in the snap industry, Mr. Riceman claims that
Mssrs. Bauer and Fischer decided to patent Mr. Rice-
man’s design. Id. However, Mr. Bauer did not list Mr.
Riceman’s name on the ’773 patent application because
the terms of Mr. Riceman’s 1992 consulting agreement
with RRC, his former employer, would have caused the
invention to be assigned to RRC’s former owner, Mitchell
Medina. Id. at *6–7; see also AMC III, 2007 WL 1552395,
at *1.
Although Mr. Riceman believed his status of inventor
would strip RRNY of its claim to the ’773 patent inven-
tion, he wrote a letter dated July 22, 1994, to the attorney
prosecuting the ’773 patent. See AMC III, 2007 WL
1552395, at *2. In that letter, Mr. Riceman advised the
prosecuting attorney that he, not Mr. Bauer, should be
listed as the inventor. Id. Shortly thereafter, however,
Mssrs. Bauer and Riceman jointly wrote the prosecuting
attorney, directing him to list Mr. Bauer as the sole
inventor. Id. Mr. Riceman testified that he signed the
joint letter under duress because RRNY threatened to
terminate his employment if he claimed to be the inven-
tor.
9 ADVANCED MAGNETIC v. ROME FASTENER
In response to Romag’s claim that Mr. Riceman was
the ’773 patent inventor, AMC submitted two documents
in an attempt to corroborate Mr. Bauer’s claim of inven-
torship. First, AMC submitted a 1993 invoice from a
machine parts manufacturer that demanded payment for
several magnetic snap fastener prototypes. AMC IV, 2008
WL 2787981, at *9. After Romag challenged the authen-
ticity of the manufacturer’s invoice, Mr. Bauer admitted
at trial that this invoice was not the original, but one that
he personally drafted and reconstructed. Id. Second,
AMC submitted an invoice from a law firm for patent
prosecution services of the ’773 patent. Id. AMC later
conceded that this invoice was also reconstructed, but
“only after Romag identified the [proferred] document’s
defect in its summary judgment reply brief.” Id. Despite
this dispute over inventorship and falsified evidence, the
district court deferred ruling on AMC’s motion for sum-
mary judgment on inventorship and allowed the case to
proceed to trial.
At trial, AMC submitted more “reconstructed” evi-
dence to demonstrate that Mr. Bauer was the inventor.
AMC submitted some “very poor, essentially illegible”
copies of sketches that Mr. Bauer allegedly made of the
invention for Mr. Fischer in 1992. Id. at *8. Unfortu-
nately, Mr. Bauer’s notations on the sketch were illegible.
To clarify these notations, AMC submitted “a copy of the
copy of the original sketch on which additional notations
were made, most of them apparently restating, in clearer
block letters, the original notations.” Id. Although AMC
never submitted the original sketch, “[Mr.] Bauer testified
[at trial] that he created the enhanced, legible copy in
2004 after the original was partially destroyed in a flood.”
Id.Mr. Bauer’s notation, however, conflicted with his tes-
timony. On this “enhanced” copy, Mr. Bauer wrote,
ADVANCED MAGNETIC v. ROME FASTENER 10
“HOLE IN MIDDLE RIVIT [SIC] DON’T PAY FOR 294
TO MITCH.” Id. at *9 (internal quotation marks omit-
ted). “MITCH” refers to Mitchell Medina, whom Mr.
Bauer apparently believed owned the ’294 patent when he
made the sketch. Id. Mr. Bauer, however, testified that
he purchased the ’294 patent from Tamoa Morita, not Mr.
Medina, but failed to submit evidence documenting the
purchase. Id. at *5, *9. Finally, Mr. Bauer’s notation
suggested that purchasing the ’294 patent was unneces-
sary, but Mssrs. Bauer and Fischer proceeded to acquire
the ’294 patent in spite of the notation. Id. at *6.
At trial, AMC also sought to establish patent in-
fringement without the testimony of its discredited expert
witness. As part of its case in chief, AMC presented three
pieces of circumstantial evidence: (1) the ’126 patent
summary of invention, (2) a Romag advertisement, and
(3) some of the ’126 patent prosecution history. At the
completion of AMC’s case in chief, the court granted
Romag’s Rule 50(a) motion for JMOL because AMC failed
to present any evidence on which a reasonable jury could
conclude that Romag’s fastener’s had a rivet hole that
increased magnetic attraction. Romag moved for attor-
ney’s fees under 35 U.S.C. § 285 based on litigation mis-
conduct and inequitable conduct for fraudulently listing
Mr. Bauer as the ’773 patent inventor.
After briefing and a hearing, the district court
granted Romag’s motion for attorney’s fees on both
grounds. Id. at *2–19. Moreover, the district court held
that the ’773 patent was unenforceable for inequitable
conduct and required AMC, Abelman, and Mr. Jaro-
slawicz to pay Romag’s attorney’s fees plus interest in the
amounts of $1,509,976.16; $1,000,160.74; and
$454,197.36, respectively.
11 ADVANCED MAGNETIC v. ROME FASTENER
Both AMC and Mr. Jaroslawicz appealed. This court
has jurisdiction over AMC’s and Mr. Jaroslawicz’s timely
filed appeals under 28 U.S.C. § 1295(a)(1).
DISCUSSION
On appeal, AMC argues that the district court erred
in finding (1) that the ’773 patent was unenforceable
because Mr. Bauer committed inequitable conduct and (2)
that this was an exceptional case under 35 U.S.C. § 285.
AMC does not argue, however, that the award of attor-
ney’s fees under 35 U.S.C. § 285 was improper because of
litigation misconduct. Finally, AMC argues that the
district court erred in granting Romag’s Rule 50(a) motion
for JMOL. Mr. Jaroslawicz argues that the district court
erroneously sanctioned him for attorney’s fees pursuant to
28 U.S.C. § 1927. We affirm the district court’s holding
that the ’773 patent is unenforceable based on inequitable
conduct and the award of 35 U.S.C. § 285 attorney’s fees
and costs against AMC. Because we hold that the
’773 patent is unenforceable, we need not address the
district court’s grant of JMOL. However, we reverse the
district court’s 28 U.S.C. § 1927 sanction against Mr.
Jaroslawicz.
I. Inequitable Conduct
AMC submits a broad and scattered challenge to the
district court’s finding that the ’773 patent is unenforce-
able based on inequitable conduct. We address each
argument in turn and affirm the district court’s holding of
unenforceability.
A. Jurisdiction
As a threshold matter, AMC argues that the district
court should not have addressed inequitable conduct
because it lacked jurisdiction to determine inventorship
after Romag withdrew its counterclaim that the
ADVANCED MAGNETIC v. ROME FASTENER 12
’773 patent was invalid under 35 U.S.C. § 102(f). We
review whether a district court properly asserted jurisdic-
tion without deference. Monsanto Co. v. Bayer Bioscience
N.V., 514 F.3d 1229, 1242 (Fed. Cir. 2008).
AMC misunderstands a district court’s authority to
retain jurisdiction under 35 U.S.C. § 285. This court has
held that a district court retains jurisdiction to consider a
motion for attorney’s fees under 35 U.S.C. § 285 and to
make findings of inequitable conduct—even after a party
has dismissed its counterclaims as to that patent. See id.at 1242–43. The district court, therefore, properly re-
tained jurisdiction to consider Romag’s motion for attor-
ney’s fees based on inequitable conduct.
B. Due Process
AMC also asserts that the district court violated its
due process rights because it did not give AMC a full and
fair hearing on inequitable conduct or inventorship.
Because this issue presents a procedural question not
unique to patent law, we apply the law of the regional
circuit from which the case is appealed. Massey v. Del
Labs., Inc., 118 F.3d 1568, 1572 (Fed. Cir. 1997). In
general, the Second Circuit reviews a claim that the lower
tribunal violated the petitioner’s due process rights with-
out deference. See Motorola Credit Corp. v. Uzan, 509
F.3d 74, 80–81 (2d Cir. 2007); United States v. Ramos, 401
F.3d 111, 115 (2d Cir. 2005).
AMC’s due process argument has no merit. AMC
mischaracterizes the issue by claiming the district court
failed to give it an opportunity to address inventorship
under 35 U.S.C. § 102(f). But the district court was
addressing Romag’s motion for attorney’s fees based on
inequitable conduct, not Romag’s withdrawn counterclaim
of invalidity under 35 U.S.C. § 102(f).
13 ADVANCED MAGNETIC v. ROME FASTENER
Contrary to AMC’s claim, the district court provided
AMC a full and fair hearing on the issue before it—a
motion for attorney’s fees based on inequitable conduct
and litigation misconduct. As in all federal courts of
appeals, the Second Circuit requires district courts to give
parties notice and a fair hearing before awarding attor-
ney’s fees. See Roadway Express, Inc. v. Piper, 447 U.S.
752, 767 (1980) (“Like other sanctions, attorneys’ fees
certainly should not be assessed lightly or without fair
notice and an opportunity for a hearing on the record.”);
Ametex Fabric, Inc. v. Just In Materials, Inc., 140 F.3d
101, 109 (2d Cir. 1998) (same). The district court pro-
vided AMC ample notice and opportunity to respond to
Romag’s motion for attorney’s fees based on inequitable
conduct. When Romag made its motion for fees in open
court, the district court consulted with AMC and Romag
in setting a briefing schedule. Pursuant to that schedule,
AMC submitted its brief demonstrating it clearly under-
stood Romag’s assertion that Mr. Bauer falsely claimed to
have invented the ’773 patent’s fastener. In its brief,
AMC argued in part that Mr. Bauer was the true inventor
of the fastener to rebut the claim of inequitable conduct.
Several months after the parties submitted their briefs,
the court held a hearing to address attorney’s fees.
Moreover, Romag’s motion for attorney’s fees based on
Mr. Bauer’s inequitable conduct represented the parties
second time addressing Mr. Bauer’s claim to inventorship.
AMC first had the opportunity to address inventorship
when it moved for summary judgment against Romag’s
“unclean hands” affirmative defense and 35 U.S.C.
§ 102(f) counterclaim. See AMC III, 2007 WL 1552395, at
*2–5. AMC does not dispute that it submitted evidence of
Mr. Bauer’s alleged inventorship at summary judgment
and at trial. Rather, AMC complains that it never had an
opportunity to rebut Mr. Riceman’s deposition testimony
ADVANCED MAGNETIC v. ROME FASTENER 14
at summary judgment, at trial, or during the hearing on
attorney’s fees and claims that the district court relied on
Mr. Riceman’s testimony to resolve inventorship.
Contrary to AMC’s argument, the district court did
not resolve inventorship, making AMC’s due process
arguments irrelevant. AMC’s arguments miss the mark
because they fault the district court for failing to address
an issue not before it—inventorship under 35 U.S.C.
§ 102(f). As explained below, the district court had no
obligation to address inventorship. Accordingly, the
district court provided AMC notice and a full and fair
hearing to address Romag’s motion for attorney’s fees
based on Mr. Bauer’s inequitable conduct and AMC’s
litigation misconduct.
C. Inventorship
AMC next argues that the district court erred by fail-
ing to determine inventorship under the standards of
35 U.S.C. § 102(f) when finding that AMC committed
inequitable conduct. According to AMC, “an inequitable
conduct finding based upon an alleged false oath of inven-
torship necessarily requires that the issue of inventorship
first be determined.” Appellant AMC’s Br. 28. We review
the meaning of a patent statute without deference as a
question of law. See In re McGrew, 120 F.3d 1236, 1237–
38 (Fed. Cir. 1997).
AMC’s argument is not supported by this court’s deci-
sions. We have held that when named inventors deliber-
ately conceal a true inventor’s involvement, the applicants
have committed inequitable conduct and the patent is
unenforceable even as to an innocent co-inventor. Frank’s
Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd., 292
F.3d 1363, 1376–77 (Fed. Cir. 2002). In Frank’s Casing,
this court held that the named inventors committed
inequitable conduct by deliberately excluding an innocent
15 ADVANCED MAGNETIC v. ROME FASTENER
co-inventor from their patent application. Id. at 1376.
The court explained that “‘if unenforceable due to inequi-
table conduct, a patent may not be enforced even by
“innocent” co-inventors. One bad apple spoils the entire
barrel. Misdeeds of co-inventors, or even a patent attor-
ney, can affect the property rights of an otherwise inno-
cent individual.’” Id. at 1337 (quoting Stark v. Advanced
Magnetic, Inc., 119 F.3d 1551, 1556 (Fed. Cir. 1997)).
Accordingly, this court sustained the district court’s
holding of unenforceability. Id. The court, however,
remanded the case “for the limited purpose of determining
the correct inventorship” because an action under
35 U.S.C. § 256 did not “prevent[] a court from correcting
the inventorship of an unenforceable patent.” Id. at 1377(alteration added).
As in Frank’s Casing, the district court here had no
obligation to resolve inventorship for the purposes of
holding the patent unenforceable. If Mr. Bauer—as the
sole named inventor—deliberately misrepresented that he
invented the ’773 patent’s fastener to the PTO, his deceit
would “spoil[] the entire barrel,” leaving the ’773 patent
unenforceable. Stark, 119 F.3d at 1556 (alteration
added). The only substantive difference between this case
and Frank’s Casing is that we have no reason here to
remand to the district to resolve inventorship as no party
has sought to correct inventorship under 35 U.S.C. § 256.
Accordingly, the district court did not err by addressing
inequitable conduct and unenforceability without resolv-
ing inventorship.
D. Inequitable Conduct on the Merits
AMC also challenges the merits of the district court’s
inequitable conduct finding. According to AMC, the
district court erred by relying on Mr. Riceman’s “uncor-
ADVANCED MAGNETIC v. ROME FASTENER 16
roborated and hearsay testimony” to infer Mr. Bauer’s
intent to deceive. Appellant AMC’s Br. 45.
“We review the district court’s inequitable conduct de-
termination under a two-tier standard; we review the
underlying factual determination for clear error, but we
review the ultimate decision as to inequitable conduct for
an abuse of discretion.” Star Scientific, Inc. v. R.J. Rey-
nolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008).
Because we find that the evidence AMC proffered inde-
pendently supports the district court’s findings on materi-
ality and intent, we hold that the district court did not
clearly err in its factual determinations. We further hold
that the district court did not abuse its discretion in
finding the ’773 patent unenforceable based on Mr.
Bauer’s inequitable conduct.
Patent applicants “have a duty to prosecute patent
applications in the [PTO] with candor, good faith, and
honesty.” Honeywell Int’l Inc. v. Universal Avionics Sys.
Corp., 488 F.3d 982, 999 (Fed. Cir. 2007) (alteration
added); see also 37 C.F.R. § 1.56(a) (2009). A party assert-
ing inequitable conduct must prove by clear and convinc-
ing evidence that a patent applicant breached that duty
by (1) “fail[ing] to disclose material information or sub-
mit[ting] materially false information to the PTO” with (2)
“intent to mislead or deceive the examiner.” McKesson
Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897,
913 (Fed. Cir. 2007) (internal quotation marks omitted)
(alterations added). “The required showings of material-
ity and intent are separate, and a showing of materiality
alone does not give rise to a presumption of intent to
deceive.” Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313
(Fed. Cir. 2008).
Under the materiality prong, information is material
when a reasonable examiner would “likely consider [the
17 ADVANCED MAGNETIC v. ROME FASTENER
information] important in deciding whether to allow an
application to issue as a patent.” McKesson, 487 F.3d at
913 (internal quotation marks omitted) (alteration added);
see also Symantec Corp. v. Computer Assocs. Int’l, Inc.,
522 F.3d 1279, 1297 (Fed. Cir. 2008).
Under the intent prong, a party can prove intent to
deceive the PTO based on direct evidence or on circum-
stantial evidence “with the collection of inferences permit-
ting a confident judgment that deceit has occurred.”
McKesson, 487 F.3d at 913 (internal quotation marks
omitted); see also Merck & Co., Inc. v. Danbury Phar-
macal, Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989) (“Intent
need not, and rarely can, be proven by direct evidence.”).
In evaluating intent, the district court must consider
evidence that the patent applicants withheld information
from the PTO in good faith. See Purdue Pharma L.P. v.
Endo Pharm. Inc., 438 F.3d 1123, 1134 (Fed. Cir. 2006).
A district court may not draw an inference of bad faith
when a party has plausible reasons for withholding in-
formation: mere intent to withhold does not support an
inference of intent to deceive. McKesson, 487 F.3d at 913.
In short, a court should only infer intent to deceive when
the evidence is clear and convincing. “[T]he inference [of
intent to deceive] must not only be based on sufficient
evidence and be reasonable in light of that evidence, but it
must also be the single most reasonable inference able to
be drawn from the evidence to meet the clear and convinc-
ing standard.” Star Scientific, 537 F.3d at 1366 (altera-
tions added).
After the accused infringer has made this threshold
showing of materiality and intent to deceive, “the district
court must balance the substance of those now-proven
facts and all the equities of the case to determine whether
the severe penalty of unenforceability should be imposed.”
Id. at 1367. If the court finds on the balance that the
ADVANCED MAGNETIC v. ROME FASTENER 18
applicants committed inequitable conduct, the patent is
unenforceable. Monsanto, 514 F.3d at 1242.
In this case, the district court did not commit clear er-
ror in its materiality and intent findings. First, the
district court did not clearly err in finding that Mr. Bauer
withheld highly material information when he “concealed
the most critical information: he was not the inventor he
claimed to be.” AMC IV, 2008 WL 2787981, at *10. “As a
critical requirement for obtaining a patent, inventorship
is material.” PerSeptive Biosystems, Inc. v. Pharmacia
Biotech, Inc., 225 F.3d 1315, 1321 (Fed. Cir. 2000). Sec-
ond, the district court did not clearly err in finding that
Mr. Bauer intended to deceive the PTO by claiming that
he invented the ’773 patent’s fastener. While the district
court could have restated all of its relevant factual find-
ings before explicitly inferring intent, AMC IV, 2008 WL
2787981, at *10, we believe that the district court’s find-
ings showing that Mr. Bauer was not the true inventor
support its finding of intent to deceive. For example, the
district court found (1) that Mr. Bauer was either “unable
or unwilling to articulate [his] claimed invention” during
his deposition, directing opposing counsel to read the
patent, id. at *7; (2) that Mr. Bauer offered difficult-to-
follow explanations of the magnetic strength experiments
he performed when he claimed to have conceived of the
invention, id. at *7–8; (3) that Mr. Bauer submitted
multiple sketches of his invention that he was forced to
later admit were “reconstructed” after Romag challenged
their authenticity, id. at *8; (4) that Mr. Bauer could not
offer any “scientific or technical explanation” of his own
patent, even though the “only allegedly patentable” claim
is based on scientific principles of magnetism, id.; and (5)
that Mr. Bauer offered an evasive, argumentative, and at
times contradictory testimony on his status as inventor,
id. at *8–9. Based on these facts, we cannot fault the
19 ADVANCED MAGNETIC v. ROME FASTENER
court for finding that Mr. Bauer’s testimony “bore clear
indicia of fabrication.” Id. at *8. Especially when Mr.
Bauer fabricated evidence to support his claim of inven-
torship, we find it difficult to fault a district court in
finding that “the single most reasonable inference able to
be drawn from the evidence” is that Mr. Bauer intended
to deceive the PTO. Star Scientific, 537 F.3d at 1366.
We recognize that in analyzing intent to deceive, the
district court did not explicitly weigh the letter Mssrs.
Bauer and Riceman sent to the prosecuting attorney
claiming to have resolved the inventorship dispute. In
evaluating intent, a district court must weigh all the
evidence, including evidence of good faith. See Purdue
Pharma, 438 F.3d at 1134. In this case, the district court
was unquestionably aware of the letter as shown in its
previous opinion. AMC III, 2007 WL 1552395, at *2.
Moreover, the district court clearly understood the back-
ground of Mssrs. Bauer and Riceman’s inventorship
dispute when it addressed inequitable conduct. In ex-
plaining Romag’s position on inequitable conduct, the
district court implicitly referred to the letters Mr. Rice-
man sent to the prosecuting attorney. The court wrote,
“Romag alleges that those charged under the patent laws
with the duty of candor before the PTO in connection with
the ’773 application failed to disclose . . . a dispute con-
cerning the inventorship of the ’773 snap . . . .” AMC IV,
2008 WL 2787981, at *4. Accordingly, the district court
considered Mssrs. Bauer and Riceman’s inventorship
dispute as resolved in their letters, but did not count it as
evidence of Mr. Bauer’s good faith. The district court
might have explicitly stated as much, but it did not com-
mit clear error by failing to state that it did not consider
Mr. Riceman’s second letter as evidence of good faith.
This court only requires the district court to consider all
the evidence, not to count a specific piece of evidence as
ADVANCED MAGNETIC v. ROME FASTENER 20
good faith. Because we review factual findings for clear
error, Star Scientific, 537 F.3d at 1365, it would be con-
trary to our standard of review to second guess how the
district court weighed the evidence here. Although some
would consider the joint letter as resolving the inventor-
ship dispute, it is clear from the record that the district
court considered the letter as not only detracting from Mr.
Bauer’s good faith, but as adding to the weight of the
evidence in support of Mr. Bauer’s deceit. Given all the
other evidence of Mr. Bauer’s deceit, the district court
could have easily considered the letters as further evi-
dence of Mr. Bauer’s deceptive intent. A remand in this
case to explicitly consider the letters would produce the
same result based on Mr. Bauer’s testimony and fabri-
cated evidence.
In upholding the district court’s findings on intent,
however, we decline to place any weight on the portions of
Mr. Riceman’s testimony explaining Mr. Bauer’s financial
motives for designing around the ’294 patent. See AMC
IV, 2008 WL 2787981, at *6, *10. AMC claims that the
district court erred in placing weight on Mr. Riceman’s
testimony because the court never admitted the hearsay
testimony into evidence and because Mr. Riceman’s
testimony is unreliable. As for admitting the testimony
as evidence, AMC fails to recognize that in the Second
Circuit, as in other federal courts of appeals, the Federal
Rules of Evidence do not generally apply when the judge
is acting as a fact-finder because a judge can presumably
exclude improper inferences. See BIC Corp. v. Far E.
Source Corp., 23 F. App’x 36, 39 (2d Cir. 2001) (“[T]he
admission of evidence in a bench trial is rarely ground for
reversal, for the trial judge is presumed to be able to
exclude improper inferences from his or her own deci-
sional analysis.”); 11 Charles Alan Wright, Arthur R.
Miller & Mary Kay Kane, Federal Practice and Procedure
21 ADVANCED MAGNETIC v. ROME FASTENER
§ 2885, at 454–55 (2d ed. 1995) (“In nonjury cases the
district court can commit reversible error by excluding
evidence but it is almost impossible for it to do so by
admitting evidence. The appellate court will disregard the
inadmissible evidence and hold that its admission was
harmless if there was competent evidence to sustain the
findings of the court.”).
Even though the district court was well within its dis-
cretion to consider Mr. Riceman’s testimony, we think
that his testimony concerning Mr. Bauer’s financial
motivations is unreliable and cannot serve as a basis to
infer intent to deceive. For example, Mr. Riceman testi-
fied “that [Mr.] Bauer did not want him to be named as an
inventor because, by the terms of [Mr.] Riceman’s consult-
ing agreement with RRC, the invention would be owned
by [Mr.] Medina.” AMC IV, 2008 WL 2787981, at *7
(alterations added). Neither Mr. Riceman nor the district
court explained why Amsco, Mr. Fischer’s previous com-
pany, would not have acquired those rights from RRC
when Amsco “acquired the magnetic snap business . . .
from RRC.” Id. at *6. Mr. Bauer and RRNY presumably
would have held an interest in any inventions Mr. Rice-
man developed while employed at RRC because Amsco
transferred its property rights to RRNY.
Although we agree with AMC that Mr. Riceman’s tes-
timony is not totally reliable, we disagree on the extent to
which the district court relied on his testimony to infer
intent. The district court never credited Mr. Riceman’s
claim that he invented the ’773 patent. At best, the
district court relied on Mr. Riceman’s testimony to find (1)
that Mr. Bauer was prompted to claim he invented the
’773 patent’s fastener because Darby & Darby was at-
tempting to design around the ’294 patent and (2) that
Mr. Bauer excluded Mr. Riceman as the inventor because
of Mr. Riceman’s consulting agreement with RRC. Id. at
ADVANCED MAGNETIC v. ROME FASTENER 22
*6–7 (citing to Mr. Riceman’s deposition). In its brief
analysis of intent, the district court only referred to Mr.
Bauer’s interest in “fend[ing] off looming competition in
the market by claiming the ’773 design for himself.” Id. at
*10 (alteration added). To the extent that the district
court relied on Mr. Riceman’s testimony to explain Mr.
Bauer’s motives for listing himself as the ’773 patent
inventor, the district court erred. However, we find this
error harmless because AMC’s own evidence, including
fabricated drawings and contradictory testimony, pro-
vided a sufficient basis on which to infer that Mr. Bauer
intended to deceive the PTO. See Praxair, 543 F.3d at
1318 (finding a district court’s erroneous reliance on a fact
with limited relevance to intent harmless error). Al-
though we disagree with the district court on the reliabil-
ity of Mr. Riceman’s testimony, the court needed to weigh
conflicting testimony and based its finding of inequitable
conduct in part on the witnesses’ credibility. As an appel-
late court, we cannot reweigh witnesses’ credibility. See
Liquid Dynamics Corp. v. Vaughan Co., Inc., 449 F.3d
1209, 1227 (Fed. Cir. 2006) (refusing to reweigh a district
court’s credibility findings in an inequitable conduct
appeal); LNP Eng’g Plastics, Inc. v. Miller Waste Mills,
Inc., 275 F.3d 1347, 1361 (Fed. Cir. 2001) (same). We
review a district court’s materiality and intent findings
for clear error, and we find no clear error here. Star
Scientific, 537 F.3d at 1365.
In addition to upholding the district court’s material-
ity and intent findings, we hold that the district court did
not abuse its discretion in finding that Mr. Bauer’s deceit
justified holding the ’773 patent unenforceable. When an
applicant falsely claims that he has invented a device, he
can hardly claim the right to enforce a patent to which he
was never entitled. We have upheld district court hold-
ings of unenforceability when the named inventors acted
23 ADVANCED MAGNETIC v. ROME FASTENER
with deceptive intent to exclude a true inventor. See
Frank’s Casing, 292 F.3d at 1375–77 (holding a patent
unenforceable when two named inventors deliberately
excluded a true inventor from the patent application and
concealed the true inventor’s participation from the
prosecuting attorneys); PerSeptive, 225 F.3d at 1321–23
(holding patents unenforceable when a group of named
inventors misrepresented their relationship with a labo-
ratory to conceal that other people may have participated
in inventing the technology). If district courts do not
abuse their discretion in holding patents unenforceable
when true inventors deliberately exclude co-inventors, a
district court can, a fortiori, exercise its discretion to hold
a patent unenforceable when a person falsely swears that
he invented a device before the PTO. Because AMC and
Mr. Bauer attempted to defraud the PTO, the district
court was correct in holding the ’773 patent unenforce-
able.
II. Litigation Misconduct as an Independent Basis for
Attorney’s Fees
AMC further argues that the district court erred in
finding that this was an exceptional case under 35 U.S.C.
§ 285 justifying an award of attorney’s fees. AMC does
not argue, however, that the award of attorney’s fees
under 35 U.S.C. § 285 was improper based on litigation
misconduct. In response, Romag asserts that AMC has
waived any argument that the district court improperly
awarded attorney’s fees based on the independent ground
of litigation misconduct and that this court must affirm
the district court’s award of attorney’s fees.
This court has consistently held that a party waives
an argument not raised in its opening brief. SmithKline
Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed.
Cir. 2006); Becton Dickinson & Co. v. C.R. Bard, Inc., 922
ADVANCED MAGNETIC v. ROME FASTENER 24
F.2d 792, 800 (Fed. Cir. 1990). However, the court main-
tains discretion to address an argument not properly
raised in the opening brief if disregarding the argument
would result in an unfair procedure. SmithKline
Beecham, 439 F.3d at 1320 n.9; Becton Dickinson, 922
F.2d at 800.
AMC indeed did not argue in its opening brief or even
in its reply brief that the district court erred in awarding
attorney’s fees under 35 U.S.C. § 285 based on litigation
misconduct. Moreover, AMC’s failure does not present a
case in which this court should address the issue to rem-
edy an unfair procedure. AMC clearly understood the
issue, but simply never made the argument. In its reply
brief, AMC admitted that “the district court did state that
the finding of litigation misconduct constituted an inde-
pendent basis for finding the case exceptional and award-
ing attorneys fees.” Appellant AMC’s Reply Br. 1
(emphasis added). Moreover, the district court made clear
that AMC itself was responsible for some of the litigation
misconduct. The court stated, “Even if the inequitable
conduct ruling is set aside, however, several litigation
decisions made by AMC and its counsel compel the deter-
mination that this case is extraordinary and attorney fees
are merited.” AMC IV, 2008 WL 2787981, at *11 (empha-
sis added). Because AMC never argued that that the
district court improperly awarded attorney’s fees based on
litigation misconduct and the district court relied on
litigation misconduct as an independent ground, we
affirm the district court’s award of attorney’s fees against
AMC for $1,509,976.16 plus interest.
III. Attorney Sanctions Under 28 U.S.C. § 1927Mr. Jaroslawicz argues that the district court improp-
erly sanctioned him for attorney’s fees under 28 U.S.C.
§ 1927. Under Second Circuit law, an appellate court
25 ADVANCED MAGNETIC v. ROME FASTENER
reviews a district court’s imposition of sanctions under
28 U.S.C. § 1927 for abuse of discretion. Shchlaifer Nance
& Co. v. Estate of Warhol, 194 F.3d 323, 333 (2d Cir.
1999). A district court can require an attorney to pay the
opposing party’s reasonable costs, expenses, and attor-
ney’s fees when that attorney “so multiplies the proceed-
ings in any case unreasonably and vexatiously.”
28 U.S.C. § 1927 (2006). In the Second Circuit, a court
may only award attorney’s fees under 28 U.S.C. § 1927after finding “clear evidence that (1) the offending party’s
claims were entirely without color, and (2) the claims
were brought in bad faith—that is, motivated by improper
purposes such as harassment or delay.” Eisemann v.
Greene, 204 F.3d 393, 396 (2d Cir. 2000) (per curiam)
(internal quotation marks omitted); see also Gollomp v.
Spitzer, 568 F.3d 355, 368 (2d Cir. 2009). “Bad faith is
the touchstone of an award under [28 U.S.C. § 1927].”
Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 79 (2d Cir.
2000) (quoting United States v. Int’l Bhd. of Teamsters,
948 F.2d 1338, 1345 (2d Cir. 1991)). The Second Circuit
has established strict requirements for both the colorless-
claim and bad-faith requirements. “[A] claim is entirely
without color when it lacks any legal or factual basis.”
Shchlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323,
337 (2d Cir. 1999) (internal quotation marks omitted).
For a finding of bad faith, the Second Circuit requires “a
high degree of specificity in the factual findings.” Dow
Chem. Pac. Ltd. v. Rascator Maritime S.A., 782 F.2d 329,
344 (2d Cir. 1986). A court may only infer bad faith “if
actions are so completely without merit as to require the
conclusion that they must have been undertaken for some
improper purpose such as delay.” Shchlaifer Nance, 194
F.3d at 336 (internal quotation marks omitted).
Under the Second Circuit’s strict standard, the dis-
trict court abused its discretion by sanctioning Mr. Jaro-
ADVANCED MAGNETIC v. ROME FASTENER 26
slawicz under 28 U.S.C. § 1927. The district court may
have had good reason to sanction Mr. Jaroslawicz, but it
failed to find that Mr. Jaroslawicz acted in bad faith. The
Second Circuit’s precedents make clear that the court
meant what it said: “[T]he court’s factual findings of bad
faith must be characterized by a high degree of specific-
ity.” Shchlaifer Nance, 194 F.3d at 338 (internal quota-
tion marks omitted) (emphasis added). Here, the district
court is not specific, never using language tantamount to
a finding of bad faith nor mentioning that bad faith is a
requirement for 28 U.S.C. § 1927 sanctions. The district
court wrote that “although he lacked any other evidence
that the Romag snap infringed the claims of the
’773 patent, [Mr.] Jaroslawicz continued to press AMC’s
patent infringement claim at trial.” AMC IV, 2008 WL
2787981, at *17 (alteration added). The court further
opined, “On th[e] date [that AMC decided to withdraw Dr.
Ratnum as an expert witness], if not sooner, [Mr.] Jaro-
slawicz should have been aware of the deficiency of AMC’s
patent infringement claim.” Id. (emphasis added). The
court does not address Mr. Jaroslawicz’s intent anywhere
else in its lone paragraph discussing 28 U.S.C. § 1927sanctions. These statements cannot equate to finding
that Mr. Jaroslawicz acted in bad faith. Rather, the
statements suggest that a reasonable attorney would
have known not to proceed with trial. But in the Second
Circuit, “[28 U.S.C.] § 1927 requires subjective bad faith
of counsel,” not objective unreasonableness. MacDraw,
Inc. v. CIT Grp. Equip. Fin., Inc., 73 F.3d 1253, 1262 (2d
Cir. 1996). Because the district court failed to identify
with specificity the bad-faith standard and used language
suggesting an objective standard, we are not convinced
that the district court found Mr. Jaroslawicz acted in bad
faith. The district court thus did not satisfy the Second
Circuit’s requirement for “a high degree of specificity in
the factual findings.” Dow Chem., 782 F.2d at 344.
27 ADVANCED MAGNETIC v. ROME FASTENER
CONCLUSION
For the foregoing reasons, we affirm the district
court’s holding that the ’773 patent is unenforceable based
on inequitable conduct and its award of attorney’s fees
against AMC under 35 U.S.C. § 285. However, we reverse
the district court’s sanction and award of attorney’s fees
against Mr. Jaroslawicz under 28 U.S.C. § 1927.
AFFIRMED IN PART and REVERSED IN PART
COSTS
Each party shall bear its own costs.
United States Court of Appeals
for the Federal Circuit
__________________________
ADVANCED MAGNETIC CLOSURES, INC.,
Plaintiff-Appellant,
and
DAVID JAROSLAWICZ
AND JAROSLAWICZ & JAROS, LLC,
Movants-Appellants,
and
ABELMAN, FRAYNE & SCHWAB,
Movant,
v.
ROME FASTENER CORPORATION, ROME
FASTENER SALES CORPORATION, ROMAG
FASTENERS, INC., AND RINGS WIRE, INC.,
Defendants-Appellees.
__________________________
2009-1102, -1118
__________________________
Appeal from the United States District Court for the
Southern District of New York in case no. 98-CV-7766,
Judge Paul A. Crotty.
__________________________
RADER, Chief Judge, concurring.
In this case, Mr. Bauer held himself out as the inven-
tor of the patent in suit when the record makes clear that
ADVANCED MAGNETIC v. ROME FASTENER 2
he knew he was not, especially in light of his attempts at
trial to hide the truth. Although I would not approve the
district court’s failure to explicitly consider Mr. Bauer’s
and Mr. Riceman’s joint letter to the prosecuting attorney,
see Highway Equip. Co. v. FECO, Ltd., 469 F.3d 1027,
1037 (Fed. Cir. 2006) (affirming finding of no intent where
“the record shows that, at the time the patent was filed,
[an alleged joint inventor] indicated that he should not be
named as an inventor.”), I perceive my colleagues to be
saying that the district court’s error was harmless. In
light of the entire record, I agree with that conclusion.
I write separately to express my view that, absent ex-
treme facts such as those found in the present case, this
court should refrain from resolving inequitable conduct
cases until it addresses the issue en banc. See
Therasense, Inc. v. Becton, Dickinson & Co., Nos. 2008-
1511, -1512, -1513, -1514, -1595, 2010 WL 1655391 (Fed.
Cir. April 26, 2010) (granting rehearing en banc). In
Therasense this court has been asked to address the
transformation of inequitable conduct from the rare
exceptional cases of egregious fraud that results in the
grant of a patent that would not otherwise issue to a
rather automatic assertion in every infringement case.
The exception has become the rule. Generally, I would
hold inequitable conduct cases until after this court
reexamines whether to put the doctrine back into the
exception category.