FTC Judge Dismisses Remaining Allegations in Complaint Against VISX

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Administrative Law Judge Stuart A. Levin has dismissed Federal Trade Commission charges that VISX, one of the first companies to develop laser eye surgery equipment and technology, known as photorefractive keratectomy ("PRK"), acquired a key patent by inequitable conduct and fraud by omission on the U.S. Patent and Trademark Office. The charges against VISX stem from a March 1998 complaint alleging that Summit Technology, Inc. and VISX, the only two firms legally able to market equipment for PRK, placed their competing patents in a patent pool and shared the proceeds each and every time a Summit or VISX laser was used, a violation of antitrust laws.

In March of this year, the Commission accorded final approval to consent orders settling all the charges against Summit and all the charges against VISX except for the allegations that VISX acquired a patent by fraud. The consent orders are intended to make Summit and VISX vigorous competitors both in selling their lasers and in licensing their intellectual property to rivals. The administrative litigation continued with respect to the fraudulent patent acquisition allegations against VISX. In December 1998, Judge Levin issued an order dismissing paragraphs 17-19 of the complaint, which relates to three of the four patent interference proceedings at issue.

The remaining allegations charge that VISX and others, on behalf of Dr. Stephen Trokel, the named inventor of the key patent for PRK (Trokel '388), willfully withheld from the PTO certain articles, patents, and patent applications which they knew were material "prior art." Had this "prior art" been disclosed to the PTO, Trokel '388 would not have been issued, FTC Complaint Counsel charged. Prior art refers to information that a reasonable examiner would consider important. The complaint alleges that such withholding of prior art constitutes inequitable conduct and fraud on the PTO, and that the acquisition of a patent by such conduct is an unfair method of competition in violation of Section 5 of the FTC Act.

Judge Levin's initial decision ordering the dismissal of the remaining charges against VISX states that Complaint Counsel have not satisfied their burden of establishing by clear and convincing evidence that the prior art was actually withheld with intent to deceive.

The complaint alleges that four material prior art references (the Keates, Karp, Girard, and Blum references) were not disclosed to the PTO examiner in connection with the prosecution of Trokel '388. Judge Levin outlined in detail the history of the Trokel '388 patent, including an "interference" proceeding initiated by Trokel against a previously filed patent, and the post-interference prosecution of '388.

The decision finds that it is undisputed that, in connection with the '388 patent prosecution, the examiner did not list Keates, Karp, Blum, and Girard as having been discussed. However, Judge Levin noted numerous references to Keates, Karp, Girard, and Blum cited during the interference process as well as in co-pending applications before the examiner. Complaint Counsel contended that none of the many disclosures satisfies VISX's duty of candor to the PTO. Judge Levin concluded, however, that no case involving hidden prior art cited by Complaint Counsel approximates the sheer volume and openness of the prior art disclosures actually put before the PTO during the interference proceeding and in co-pending applications before the PTO examiner.


The decision refers to precedents that "have held that inequitable conduct before the PTO may be sufficient to render a patent unenforceable against an infringer, but absent fraud, the antitrust laws ... cannot be invoked." Fraud by omission as alleged in the complaint is "evidenced by a clear intent to deceive the examiner and thereby cause the PTO to grant an invalid patent. It may be distinguished from inequitable conduct by evidence of a lesser misrepresentation or an omission of a reference that would merely have been considered important to the patentability of a claim by a reasonable examiner," the decision states. "A finding of fraud requires more than a mere failure to cite a reference. Clear and convincing evidence of an intent to deceive the examiner and reliance must be adduced."

Considering the totality of VISX's disclosures, Judge Levin noted that this case involves issues of first impression. "The facts here are not akin to cases involving references buried within cited references or a ... nugget of material information imbedded in a mountain of paperwork. ... A superficial perusal of the interference record in this matter yields not a nugget of useful data, but rich veins of prior art paydirt," Judge Levin said. "The record, considered as a whole, is devoid of clear and convincing evidence that either Dr. Trokel or anyone acting on his behalf committed fraud in the procurement of the '388 patent," the decision states.


Judge Levin also held that Complaint Counsel did not establish that VISX, by inequitable means, obtained a patent which adversely affects competition in violation of Section 5 of the FTC Act. "To establish inequitable conduct, clear and convincing evidence must demonstrate both the materiality of the reference, and a deceptive intent in withholding the reference. ... If both materiality and intent are established, it is then necessary in an inequitable conduct case ... to balance the deceitful intent and the degree of materiality." After examining the similarities and differences between the prior art, the Trokel '388, and references before the examiner, Judge Levin concluded that Blum is cumulative and the other references were not highly material. Therefore he held that "far stronger evidence of intent or considerably greater prior art materiality than this record provides would be needed to establish a violation of Section 5. In the absence of evidence demonstrating a clear duty to recite references disclosed ... the voluminous evidence in this record documenting the actual disclosure of all four references to the PTO, amply refutes the contention that VISX, by omission or otherwise, intended to deceive the PTO."

Judge Levin further noted that on March 31, 1999, the examiner, on reexamination of Trokel '388, issued an office action rejecting the claims of the '388 patent. The judge emphasized that his initial decision neither addresses nor comments on the PTO examiner's decision to reject the claims of the '388 patent based on the combination of prior art references that the examiner considered, which included a reference not involved in the FTC complaint.

The decision also discusses Supplemental Findings in respect to the alleged product markets in '388 technology and the sale and lease of PRK equipment, including actual and potential competitors in excimer laser sales, downstream competition arising from radial keratotomy, a host of new vision care technologies in various stages of development, as well as concentration data, barrier information, VISX's conduct and performance in the marketplace, specific intent to monopolize, and market power issues.

Copies of Judge Levin's initial decision as well as the March 1998 complaint are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 951 0029; Docket No. 9286)

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