Defense Disputes Patent Ownership

In this dispute over patents for encryption and security techniques, an Alexandria U.S. District Court says there are genuine factual disputes concerning a defense of “inequitable conduct” based on the identity of the proper inventor on a patent in question, and the court denies summary judgment on that defense.

Plaintiff TecSec’s primary business is the development of encryption and security techniques; it has designed, developed and sold a number of cryptography and security-related products since its founding in 1990, and has been awarded more than 30 U.S. patents in the field of encryption.

TecSec asserts defendant IBM and several other defendants have infringed one or more of the claims of six of its patents. IBM responds that four patents are unenforceable due to inequitable conduct by the applicant, M. Greg Shanton and his attorneys before the U.S. Patent and Trademark Office, in failing to disclose the alleged role of a former TecSec employee, Roy D. Follendore III, in inventing the “Distributed Cryptographic Object Method” (DCOM) encryption methods in the ‘702 patent family. The parties have filed cross-motions for summary judgment on the defenses of inequitable conduct and invalidity.

Taken together, IBM’s evidence regarding TecSec’s conduct during its ‘702 patent prosecution raises significant concerns. The proper inventorship of a claimed invention is highly material to patentability, and misrepresentations regarding inventorship, if true, could easily render a patent unenforceable due to inequitable conduct. Likewise, the copying of claims from another’s patent application without disclosing that to the PTO Examiner raises significant suspicions of invalidity or inequitable conduct.

But at this stage of the litigation, IBM cannot carry its burden to establish inequitable conduct by clear and convincing evidence. IBM’s arguments rest to a considerable degree on testimony of Follendore himself, who alleges he invented the CDOM technology and should have been credited as an inventor of the ‘701 patents. Follendore, however, is a former TecSec employee who was previously involved in litigation against TecSec over the rights to another product TecSec was developing, called “NetShield”; in fact, TecSec alleges that in the course of that dispute, Follendore unlawfully removed the NetShield software code from various TecSec computers in an effort to obtain leverage over TecSec and to improve his bargaining position during settlement negotiations. Follendore thus comes to this case with potentially serious credibility baggage.

Also, while Shanton and his attorneys did not specifically list Follendore’s ‘707 patent as prior art, the specification of the ‘702 patent clearly references the claims in Follendore’s ‘707 patent application, and that disclosure did not go unnoticed by the PTO Examiner.

IBM’s motion for summary judgment on inequitable conduct and invalidity is denied in all respects and TecSec’s motion for summary judgment on defendant’s affirmative defenses of invalidity and inequitable conduct is denied in part as to the issues of the inventorship dispute regarding the ‘702 (DCOM) patents and the alleged inequitable conduct in the prosecution of the ‘702 patent family.

Although TecSec did not affirmatively move for summary judgment in its favor regarding IBM’s affirmative defenses of invalidity of the ‘433 patent due to anticipation by another patent and failure to comply with the written description requirement, or IBM’s affirmative defense of invalidity of the ‘448 patent due to anticipation by Krishna, the court finds as a matter of law that IBM cannot meet its burden of proof on those affirmative defenses and summary judgment Is granted in TecSec’s favor on those matters.

TecSec Inc. v. Int’l Business Machines Corp. (Brinkema) No. 1:10cv115, Jan. 12, 2011; USDC at Alexandria, Va. VLW 012-3-052, 40 pp.