Dippin’ Dots: brought to you by inequitable conduct, but not an antitrust violationFebruary 9, 2007

Dippin' Dots

What do Dippin' Dots, the little beads of ice cream sold at fairs, stadiums, and malls, have to do with patent and antitrust law? For the Federal Circuit, they presented the "close case" where a patent holder can be found to have engaged in inequitable conduct during prosecution of the patent but is not liable for a Walker Process antitrust claim by an infringement defendant. This is possible based on the differing standards of proof required by the infringement defendant, as explained by the Federal Circuit in the case. While both inequitable conduct and a Walker Process antitrust claim require proof that the patent holder either misrepresented or failed to disclose to the patent office something material to patentability and that it was done with intent to deceive. However, if evidence of one is scant, an inequitable conduct claim can still be proven if evidence of the other is strong; not so with a Walker Process claim. More details of the case after the jump.

Dippin' Dots is the assignee of the '156 patent, which has one independent claim to a "method of preparing and storing a free-flowing, frozen alimentary dairy product." The claim requires six steps, listed below:

  1. preparing an alimentary composition for freezing;
  2. dripping said alimentary composition into a freezing chamber;
  3. freezing said dripping alimentary composition into beads;
  4. storing said beads at a temperature at least as low as -20° F so as to maintain said beads free-flowing for an extended period of time;
  5. bringing said beads to a temperature between substantially -10° F and -20° F prior to serving; and
  6. serving said beads for consumption at a temperature between substantially -10° F and -20° F so that said beads are free flowing when served.

As filed, the patent did not include the final "serving" step, but after the application was rejected based on a Canadian patent, the last step was added. The claims were still rejected as obvious, but Dippin' Dots filed a declaration offering evidence of its commercial success. The examiner accepted this evidence, and the patent issued in June, 1992. The main issue here, however, centers around sales made at a mall more than one year before the patent application was filed. Under patent law, if a product is on sale more than one year before an application for patent is filed, the inventor is barred from getting a patent on that product. Here, the application that eventually issued as the '156 patent was filed on March 6, 1989, making the so-called "critical date" March 6, 1988. In July, 1987, the inventor sold and gave away cryogenically-prepared, largely beaded ice cream. These sales were never disclosed to the USPTO during prosecution of the application. In fact, the declaration touting the product's commercial success stated that the first sales of the product took place in March, 1988. It was the omission of these earlier sales that the defendants asserted constituted both inequitable conduct and an antitrust violation. In order to show inequitable conduct, a defendant must show by clear and convincing evidence that the applicant "with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution." Here, it was undisputed that Dippin' Dots failed to disclose the 1987 sales to the PTO. Dippin' Dots claimed that those sales did not meet all the limitations of the claim, because they did not meet the required temperature limitations. It also claimed that these sales were experimental, and thus did not implicate the on-sale bar. The court found that these sales were highly material, because, unlike undisclosed prior art, the examiner has no way to discover pre-critical date sales that are not disclosed to the examiner. Thus, while the court found a low level of intent to deceive, the omission was highly material, and the court affirmed the lower court's finding of inequitable conduct. The antitrust claim, however, was a different story. In order to support a Walker Process antitrust claim, there must be proof that the patentee has "obtained the patent by knowingly and willfully misrepresenting facts to the Patent Office." Here, while there was sufficient evidence to support a finding of inequitable conduct, there was not enough to support an antitrust violation. This is because "a finding of Walker Process fraud cannot result from an equitable balancing between the two factors [materiality and intent]; a strong showing of one cannot make up for a deficiency in the other." As a result, because the evidence did not support a sufficient intent to deceive, the court reversed the lower court's finding on the antitrust claim. The court also affirmed the lower court's finding of noninfringement and invalidity based on obviousness. So, the end result is that while Dippin' Dots did not violate antitrust laws, they have a patent that is both invalid and unenforceable. This case once again underscores the importance of the duty of candor with the USPTO. If all material prior art is not disclosed, or if a misrepresentation is made, all the time and money spent to get a patent could result in nothing to enforce later. To read the full decision in Dippin' Dots, Inc. v. Mosey, click here.

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