## Facts

- AmHoist owned U.S. Patent No. 4,079,584 covering a forged “heavy duty shackle” and sued Sowa for infringement in the District of Oregon.
- At trial, AmHoist asserted claims 3, 5, and 7; Sowa defended on invalidity (obviousness) and alleged “fraud” on the PTO (inequitable conduct) for nondisclosure of prior art.
- Sowa identified additional prior-art references not cited during original prosecution and notified AmHoist; AmHoist then sought a reissue and disclosed the additional art.
- The jury found the asserted claims obvious and found fraud in prosecution, based on an instruction that applicants must disclose all pertinent prior art they “reasonably should have been aware” of.
- The district court adopted the jury’s obviousness and fraud findings, deemed the case “exceptional” under 35 U.S.C. § 285, and awarded Sowa $50,000 in attorney’s fees (less than requested).
- The district court granted summary judgment against Sowa on antitrust and unfair-competition counterclaims.
- AmHoist appealed invalidity, unenforceability/fraud, damages, and fees; Sowa cross-appealed on the counterclaims and the fee reduction.

## Issues

1. Whether the presumption of validity under 35 U.S.C. § 282 and the clear-and-convincing burden to prove invalidity persist when the challenger relies on prior art not considered by the PTO.
2. Whether inequitable conduct can be found under a negligence-based duty to disclose prior art the applicant “reasonably should have been aware” of, or whether proof of intent to deceive is required.
3. Whether the record permitted a finding of no patent damages where infringement evidence supported at least a reasonable royalty.
4. Whether summary judgment properly disposed of Sowa’s antitrust and unfair-competition counterclaims premised on fraudulent procurement/enforcement and related theories.

## Decision

- The Federal Circuit vacated the judgment and remanded for a new trial on principal issues due to erroneous jury instructions and unresolved factual disputes.
- The court held that uncited prior art does not eliminate the statutory presumption of validity or shift the burden of persuasion; invalidity must still be proved by clear and convincing evidence.
- The court ruled the fraud/inequitable-conduct instruction was legally erroneous because it allowed liability based on what applicants “should have known,” rather than requiring proof of intent to mislead or deceive the PTO.
- The court reversed the district court’s acceptance of the jury’s “no damages” finding, concluding the record did not support zero damages.
- On Sowa’s counterclaims, the court affirmed dismissal in part and reversed in part, holding some theories were improperly dismissed on summary judgment and required further proceedings.

## Legal Principles

- The presumption of validity in 35 U.S.C. § 282 remains in effect even when litigation introduces prior art not considered by the PTO; the challenger bears the burden of proving invalidity by clear and convincing evidence.
- Uncited prior art may affect the factfinder’s evaluation of the evidence, but it does not shift the burden of persuasion to the patentee.
- Inequitable conduct requires more than negligence or a failure to discover prior art; it requires proof (by clear and convincing evidence) of materiality and intent to mislead or deceive the PTO.
- Factual questions relevant to validity and inequitable conduct may be tried to a jury, but ultimate legal and equitable determinations (including enforceability and exceptional-case/fee determinations) are for the court applying correct legal standards.
- A patent damages award cannot be reduced to zero where the evidence supports at least a reasonable royalty under the governing damages framework.

## Conclusion

The Federal Circuit set aside the trial result and ordered a new trial because the jury was instructed under incorrect standards for inequitable conduct and related issues, reaffirmed that invalidity must be proved by clear and convincing evidence even with uncited prior art, reversed the zero-damages outcome, and required renewed consideration of certain antitrust and unfair-competition counterclaims.


Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984)