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Federal Circuit set asides $1.1 million patent award based on lies about prior art

4 minute read

The United States Patent and Trademark Office is seen in Alexandria, Virginia, U.S., September 1, 2020. REUTERS/Andrew Kelly

A mattress company president's misrepresentations about buying a similar product before it applied for a patent covering a "bed in a box" justified a Los Angeles federal court setting aside its $1.1 million infringement win against Cap Export LLC, the U.S. Court of Appeals for the Federal Circuit said Wednesday.

Former Zinus Inc president Colin Lawrie's lies – which were important to the question of whether Zinus' patent was valid – amounted to fraud, U.S. Circuit Judge Timothy Dyk wrote for a three-judge panel.

"By affirming the District Court's finding of Zinus' misrepresentations and concealment of prior art, the Federal Circuit reiterated the basic tenets of patent law: one cannot patent what one did not invent," Cap Export's attorney David Beitchman of Beitchman & Zekian said in an email.

Zinus and its attorney Darien Wallace of Imperium Patent Works didn't immediately respond to a request for comment.

Importer Cap Exports sued Zinus in the U.S. District Court for the Central District of California in 2016 to head off Zinus' threats to sue it for patent infringement. In response, Zinus claimed that Cap Export infringed its patent covering a bed that can be shipped with all of its components packed into the headboard.

In 2019, U.S. District Judge John Holcomb in Los Angeles rejected Cap Export's argument that parts of the patent at issue were invalid based on prior art that disclosed a similar "bed in a box." Among other things, the court credited Zinus' then-president Colin Lawrie's testimony that he didn't know of the earlier invention.

Cap Export then stipulated to a final judgment that it infringed Zinus' patent that required it to pay $1.1 million in damages.

But in a separate 2019 patent case filed by Zinus against another company, it was revealed that Lawrie had agreed to buy over 400 beds with "all components fitting in the headboard" from a Malaysian company a year before Zinus applied for its patent. Cap Export moved to vacate the judgment in its case based on fraud, pointing to Lawrie's false statements during the case.

Lawrie argued that his testimony that he had never seen a bed "shipped disassembled in one box" was "literally incorrect," but that he didn't intend to lie because he meant that he hadn't seen a bed disassembled in one box "with all of the components in the headboard."

Holcomb found the argument "wholly implausible" because Cap Export's attorneys had "specifically distinguished" between the two concepts, and set aside the judgment.

On appeal, Zinus argued the 9th U.S. Circuit Court of Appeals, whose law Dyk applied because the case concerned a motion to vacate a judgment for fraud under the Federal Rules of Civil Procedure and not patent law, requires the fraud to "not be discoverable by due diligence" before setting a final judgment aside. Zinus argued Cap Export's lawyers could have discovered emails related to its purchase of the beds if it had exercised due diligence.

But generally, "due diligence in discovering fraud does not require investigation unless there is reason to suspect fraud," Dyk said, joined by Circuit Judges William Bryson and Todd Hughes. He affirmed the ruling setting aside the judgment, and found there was no reason for Cap Export to have suspected that Lawrie's statements were false.

Cap Export performed several prior art searches that didn't reveal the purchases, and the evidence that Lawrie concealed wasn't widely available or in Cap Export's possession, Dyk said.

The case is Cap Export LLC v. Zinus Inc, U.S. Court of Appeals for the Federal Circuit, No. 20-2087.

For Cap Export: David Beitchman of Beitchman & Zekian; Milord Keshishian of Milord & Associates

For Zinus: Darien Wallace of Imperium Patent Works

Our Standards: The Thomson Reuters Trust Principles.

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