Inequitable Conduct Found in False Statements and DeceptionMarch 21, 2007

In a case before the Federal Circuit, the District Court’s conclusion that Cantor’s patent was unenforceable due to inequitable conduct was affirmed. The matter before the Court involved a patent for a method and system for trading financial instruments. Specifically, Cantor developed a system that would automate the trading process and avoid the use of “open outcry” and “trade capture processes.” However, during the prosecution of its patent, Cantor neglected to disclose its earlier art or versions of software for the same type of methods and systems. This was discovered in another matter where Cantor asserted patent infringement against another defendant over this same art. Cantor tried to cover its tracks with a “blizzard of paper” to the PTO asserting a number of reasons and excuses for failing to disclose during earlier prosecutions; none of which the Court bought. The Federal Circuit held the District Court did not abuse its discretion in finding Cantor provided false statements with intent to deceive the PTO with its ultimate disclosures. More details of the case after the jump.The case involved a patent to create a more efficient automated trading system wherein various bid and offer prices were captured during “open-cry” financial tradings. Cantor successfully prosecuted several patents with this art. Shortly after one of its patents – the ‘974 patent – issued, Cantor asserted patent infringement against Liberty Brokerage. In preparing for the lawsuit, Cantor’s outside counsel discovered that Cantor had not filed the proper disclosures during the prosecution of the ‘974 patent. Cantor subsequently dismissed its suit upon discovery of this non-disclosure. In an effort to purge any possible inequitable conduct with regard to the ‘974 patent and to avoid a similar problem with any patent that might issue from the parent patent, Cantor submitted declarations and disclosures of more than 1100 pages to the PTO. The district court found false statements in the documents and from that an inference of intent to deceive the PTO which was affirmed by the Federal Circuit. To read the full decision in eSpeed, Inc. v. BrokerTec USA, L.L.C., click here.

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