Under 37 CFR §1.56, there is a duty to disclose to the Patent and Trademark Office (PTO) all information known to be material to patentability with respect to each pending claim. Failure to disclose may result in a patent being declared invalid where such failure is associated with bad faith or intentional misconduct. In light of OddzOn Products, Inc. v. Just Toys, Inc., 43 USPQ2d 1641 (Fed. Cir. 1997), this duty now encompasses confidential disclosures between separate, independent companies engaging in joint venture or collaborative activities.
Research teams within a corporation commonly build on confidential information to develop new technology. Similarly, multiple research teams often separately develop different aspects of the same invention. Prior to 1984, the decisions of In re Bass, 177 USPQ 178 (CCPA 1973) and In re Clemens, 206 USPQ 289 (CCPA 1980) established that non public disclosures could be treated as prior art under 35 U.S.C. §102(g) and perhaps 102(f) with respect to an obviousness claim under 35 U.S.C. §103. The decisions discouraged communication and information sharing between research groups within the same organization by prohibiting patent protection of subsequent inventions due to disclosed prior art of coworkers. More significantly, these decisions contravened the basic premise that prior art is "technology already available to the public." Kimberly-Clark Corp. v. Johnson & Johnson, 223 USPQ 603 (Fed. Cir. 1984).
In response, Congress amended 35 U.S.C. §103 (now §103(c)) to exempt subject matter as prior art under certain circumstances. If the subject matter qualifies as prior art, exclusively under 35 U.S.C. §102(f) or (g), and the subject matter and the claimed invention were owned by the same party or subject to an obligation of assignment to the same party at the time the invention was made, then the subject matter does not qualify as prior art for the purposes of invalidating a patent for obviousness under 35 U.S.C. §103. While the law has been clear for research efforts of single inventive entities, such as an individual corporation or common parent company, the law has been less clear concerning information disclosed under joint venture, collaborative and non-disclosure agreements between separate, independent companies.
Until recently, the Federal Circuit has been reluctant to answer the question of whether the prior art exception applies to confidential disclosures between separate independent companies. In the OddzOn decision, the Federal Circuit affirmed that confidential information between two separate companies may be combined with other prior art information when determining an obviousness claim under 35 U.S.C. §102(f) and 35 U.S.C. §103. OddzOn and Just Toys sell competing lines of foam football-shaped balls. Just Toys disclosed certain confidential designs to OddzOn, who later obtained a design patent covering its "Vortex" ball. However, the confidential disclosures by Just Toys were not revealed to the Patent Office. OddzOn subsequently sued Just Toys for infringement of its design patent, while Just Toys sought to invalidate the patent. The District Court held that the patent was not infringed and that, although confidential designs qualified as prior art, the patent was not invalid. Both parties appealed.
OddzOn argued that the design disclosures were confidential, and thus not accessible to the public as prior art. However, the Federal Circuit took special note that "§102(f) does not pertain only to public knowledge, but also applies to private communications between the inventor and another which may never become public." The Court concluded that confidential disclosures from Just Toys to OddzOn qualified implicitly as prior art since these two companies were not under common ownership and therefore the prior art exception in the 1984 amendment to 35 U.S.C. §103 did not apply. This qualification of confidential information as prior art is a departure from the general proposition that prior art must be accessible to the public or in public use.
Just Toys also argued that OddzOn's failure to disclose the confidential disclosures to the PTO represented inequitable conduct on the part of OddzOn. The Federal Circuit responded that "in light of the ambiguous nature of the statute and the unclear development of the case law regarding the prior art status of §102(f) subject matter until this point ... OddzOn could not have acted with deceptive intent when it failed to disclose this information to the PTO." The Court's temporal reference to "until this point" implies an affirmative duty to disclose as of the publication date of this case (August 1997).
In light of OddzOn, the duty to disclose information material to the patentability of the invention now includes confidential information between separate, independent companies. This duty encompasses information exchanged under collaborative, joint venture and non-disclosure agreements. As a result, failure to disclose shared yet confidential information may expose the patentee to patent invalidation under 37 C.F.R. §1.56.