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EXHIBIT 5

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EXHIBIT 5 MARITZ'S STATEMENT OF THE CONTESTED ISSUES OF LAW A. 1. Maritz Did Not Infringe the `412 Patent An issue that remains to be litigated is whether Maritz literally infringed certain

claims of the `412 patent - independent claim 10, 27 and 36 and dependent claims 11-17 and 28-34 (collectively, "the asserted claims"). 2. An infringement analysis entails two steps. First, the meaning and scope of the

asserted patent claims is determined.1 Aquatex Industries, Inc. v. Techniche Solutions, 419 F.3d 1374, 1380 (Fed. Cir. 2005). Second, the properly construed claims are compared to the accused product or process. Id. 1. 3. Maritz Did Not Literally Infringe the `412 Patent

Literal infringement can only be found if "every limitation recited in the claim

appears in the accused device, i.e., when `the properly construed claim reads on the accused device exactly.'" DeMarini Sports, Inc. v. Worth, Inc., 239 F.3d 1314, 1331 (Fed. Cir. 2001). 4. A method or process consists of one or more operative steps, and, accordingly,

"[i]t is well established that a patent for a method or process is not infringed unless all steps or stages of the claimed process are utilized." NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282, 1318 (Fed. Cir. 2005). 5. A dependent claim is properly interpreted to include every limitation of the claim

on which it depends. 35 U.S.C. §112 ¶ 4. Thus, it is axiomatic that dependent claims cannot be found infringed unless the claims from which they depend have first been found to be infringed. Finnigan Corp. v. International Trade Com'n, 180 F.3d 1354, 1364 (Fed. Cir. 1999).
1

Maritz set forth the legal issues and citations to the controlling law relating to claim construction in its Markman submissions. (D.I. 138, 151, 218). Issues of law reflected in Maritz's proposed jury instructions and the instructions jointly submitted by the parties are incorporated here by reference.

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2. 6.

Maritz Did Not Jointly Infringe the `412 Patent2

To show that a specific entity is liable for direct infringement under a joint

infringement theory, plaintiff must show that the specific entity is "connected" to the other entities performing the other steps. BMC Resources, Inc. v. Paymentech, L.P., 2006 WL 1450480, *3 (N.D. Tex. 2006). There must be "a close relationship between the infringer and the other entity such that the party accused of infringement directs or controls the actions of the other party." Id. at *4; Faroudja Laboratories, Inc. v. Dwin Electronics, Inc., 1999 WL 111788, *5-6 (N.D. Cal 1999). 3. The Doctrine of Equivalents Does Not Allow Affinion to Reach Maritz's Distinct Technology3

7.

If there is no literal infringement, the doctrine of equivalents may be considered to

the extent it is not precluded by the doctrine of prosecution history estoppel. Warner-Jenkinson Co. v. Hilton Davis Chemical Co., 520 U.S. 17, 40 (1997). The "all limitations rule" restricts the doctrine of equivalents by preventing its application when doing so would vitiate a claim limitation. Id. at 29. 8. "An element in the accused product is equivalent to a claim limitation if the

differences between the two are `insubstantial' to one of ordinary skill in the art." Eagle Comtronics Inc. v. Arrow Communication Labs. Inc., 305 F.3d 1303, 1315 (Fed. Cir. 2002).
2

The theory of "joint infringement" is inapplicable to the method described and claimed in the `412 patent. As such, no instruction should be given. Finding liability here based on a joint infringement theory would violate the "fundamental precept" of the invention described in the `412 patent. On Demand Machine Corp. v. Ingram Industries, Inc., 442 F.3d 1331, 1345 (Fed. Cir. 2006). Maritz plans to file a motion in limine to preclude testimony and evidence relating to joint infringement. If the Court, however, finds that testimony on this topic should be permitted and that the joint infringement doctrine applies to the business method described and claimed in the `412 patent, this legal standard--rather than that proposed by Affinion--is applicable. Maritz asserts that Affinion should not be permitted to present evidence or arguments relating to the doctrine of equivalents and will be filing a motion in limine on this topic. If the Court grants Maritz's motion, this issue becomes moot. If, however, the Court does not grant Maritz's motion, this is the law controlling this issue.

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Relevant is whether the alleged equivalent element in the accused device "performs substantially the same function in substantially the same way to obtain the same result" as that of the missing element of the claimed invention. Id. at 1315 (citing Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 608 (1950), overruled-in-part on other grounds, 535 U.S. 722 (2002)). 9. There are situations in which a patentee is not permitted to rely on the doctrine of

equivalents. Case law has established that the prior art and prosecution history estoppel provide independent "policy oriented" limitations on the doctrine of equivalents. Sextant Avionique, S.A. v. Analog Devices, Inc., 172 F.3d 817, 827 (Fed. Cir. 1999). Thus, where the accused infringer is merely practicing the prior art, he has a "complete defense" to a charge of infringement. Id. 10. A patentee also may not use the doctrine of equivalents to recapture that which he

disavowed during prosecution of the patent. Astrazeneca AB, Aktiebolaget Hassle, KBI-E, Inc. v. Mutual Pharmaceutical Co., Inc., 384 F.3d 1333, 1342 (Fed. Cir. 2004). Such a disavowal may be made in the specification, statements or arguments made to the examiner, or amendments made during prosecution. Id. at 1341-42; Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 740-41 (2002); Elkay Mfg. Co. v. Ebco Mfg. Co., 192 F.3d 973, 979 (Fed. Cir. 1999). B. 11. The Claims of the `412 Patent are Invalid An issue that remains to be litigated is whether the claims of the `412 patent are

invalid. Although an issued patent is presumed valid, it may be shown to be invalid by clear and convincing evidence. Iron Grip Barbell Co, Inc. v. USA Sports, Inc., 392 F.3d 1317, 1320 (Fed. Cir. 2004).

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1. 12.

The Prior Art

A patent claim is invalid if "the invention was known or used by others in this

country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent." 35 U.S.C. § 102(a). 13. A patent claim is invalid if "the invention was patented or described in a printed

publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b). 14. Under § 102(a), the knowledge or use will be prior art if it was: (1) a public use;

(2) by someone other than the inventor; (3) before the inventor's date of invention; (4) in the United States. Woodland Trust v. Flowertree Nursery, Inc., 148 F.3d 1368, 1370 (Fed. Cir. 1998); Lockwood v. AM. Airlines, Inc., 107 F.3d 1565, 1570 (Fed. Cir. 1997). Under § 102(b), any prior public use or secret commercial use that occurred more than one year before the patent was filed qualifies as prior art. 15. A prior publication, published before the established invention date or one year

prior to the filing date, qualifies as prior art under §§ 102(a) or (b), respectively, if it was reasonably accessible to that portion of the public most likely to use it. In re Cronyn, 890 F.2d 1158, 1160 (Fed. Cir. 1989). The date a printed publication qualifies as prior art is the date it became available to the public. 16. A prior patent that issued anywhere in the world before the invention of the patent

in suit or more than one year before the application leading to the patent in suit qualifies as prior art. 35 U.S.C. § 102(a), (b); Lamb-Weston, Inc. v. McCain Foods, Ltd., 78 F.3d 540, 545 (Fed. Cir. 1996); In re Chu, 66 F.3d 292, 296-97 (Fed. Cir. 1995); In re Robertson, 169 F.3d 743, 745 (Fed. Cir. 1999).

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17.

Section 102(e)(2) provides that a patent claim is invalid by reason of anticipation

if "the invention was described in . . . (2) a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent." 35 U.S.C. § 102(e)(2). 18. A patent claim is invalid under § 102(g) "if a patentee's invention has been made

by another, prior inventor who has not abandoned, suppressed, or concealed the invention." The Dow Chemical Co. v. Astro-Valcour, Inc., 267 F.3d 1334, 1339 (Fed. Cir. 2001). Generally, an invention was not abandoned, suppressed or concealed if the invention was made public, sold or offered for sale, or otherwise used for a commercial purpose. 19. Reduction to practice under § 102(g)(2) can be constructive or actual reduction to

practice. In re Katz, 687 F.2d 450, 454 (CCPA 1982); Roberts v. Sears, Roebuck & Co., 671 F. Supp. 671 (N.D. Ill. 1987) (rejecting plaintiff's argument that a constructive reduction is insufficient under § 102(g), "given the numerous cases in which constructive reduction was applied where patentability was at issue"). 2. 20. The `412 Patent is Invalid Because It Is Anticipated

An issue that remains to be litigated is whether the `412 patent is anticipated

and/or obvious in view of the prior art. A person is entitled to a patent only if the teachings of the patent are not obvious to a person of ordinary skill in the field of the invention and the invention is not anticipated. 35 U.S.C. §§102, 103. 21. Anticipation requires the presence in the reference, either expressly or inherently,

each and every limitation of the claimed invention. Novo Nordisk Pharmaceuticals, Inc. v. BioTechnology General Corp., 424 F.3d 1347, 1354 (Fed. Cir. 2005); In re Cruciferous Sprout Litigation, 301 F.3d 1343, 1349-1350 (Fed. Cir. 2002).

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22.

It is well settled that a prior art reference may anticipate when the claim

limitations not expressly found in that reference are nonetheless inherent in it. Id. "Under the principles of inherency, if the prior art necessarily functions in accordance with, or includes, the claimed limitations, it anticipates." Id. 23. An issue that remains to be litigated is whether the asserted claims of the `412

patent are entitled to the filing date of its parent, U.S. Patent No. 5,774,870. Claims in a patent application are entitled to the filing date of a previously filed application only if the earlier application sufficiently disclosed the subject matter of the later filed claims in the manner provided by the first paragraph of 35 U.S.C. § 112. 35 U.S.C. § 120. 24. Under the first paragraph of 35 U.S.C. § 112, a patent's specification must

describe the invention sufficiently to convey to a person of skill in the art that the patentee had possession of the claimed invention at the time of the application, i.e., that the patentee invented what is claimed. LizardTech, Inc. v. Earth Resource Mapping, Inc., 424 F.3d 1336, 1345 (Fed. Cir. 2005). 25. To prove a date of invention that antedates a piece of prior art, Affinion must

come forward with evidence that the named inventor, Thomas Storey, invented the subject matter of his patent before the date of the prior art reference. Mahurkar v. C.R. Bard, Inc., 79 F.3d 1572, 1576 (Fed. Cir. 1996). Such evidence may consist of either a prior reduction to practice or an earlier conception and due diligence until the invention is reduced to practice. Id. at 1577. Because the `412 patent was not reduced to practice before the December 15, 1995 filing date of the `870 patent, Affinion must present evidence of earlier conception and due diligence until the effective filing date of the `412 patent.

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26.

It is well established that, when a party seeks to prove conception via the oral

testimony of a putative inventor, the party must proffer evidence corroborating that testimony. Singh v. Brake, 317 F.3d 1334, 1340-41 (Fed. Cir. 2003); Price v. Symsek, 988 F.2d 1187, 1194 (Fed. Cir. 1993) ("[a]n inventor's testimony, standing alone, is insufficient to prove conception - some form of corroboration must be shown"); Invitrogen Corp. v. Clontech Labs, Inc., 429 F.3d 1052 (Fed. Cir. 2005) ("Indeed, because of the danger in post-hoc rationales by an inventor claiming priority, the court requires objective evidence to corroborate an inventor's testimony"). 3. 27. The Asserted Claims Are Invalid as Obvious

A patent claim is invalid under § 103(a) even if it is not identically disclosed by

the prior art if the differences between the subject matter claimed and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. 35 U.S.C. § 103(a). The factual considerations underlying the legal determination of obviousness include the scope and content of the prior art, the differences between the prior art and the claims at issue, the level of ordinary skill in the pertinent art, and any pertinent secondary considerations. Graham v. John Deere, 383 U.S. 1, 17-18 (1966). 28. One step in any obviousness analysis is to determine the scope and content of the

prior art. The term "prior art" as used in § 103 refers at least to the statutory material named in 35 U.S.C. § 102. Riverwood Int'l Corp. v. R.A. Jones & Co., Inc. 324 F.3d 1346, 1354 (Fed. Cir. 2003). Further, under § 103, a reference need not be enabled; it qualifies as prior art, regardless, for whatever is disclosed therein. Amgen Inc. v. Hoechst Marion Roussel, Inc., 314 F.3d 1313, 1357 (Fed. Cir. 2003).

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29.

Precedent requires that, to find a combination obvious, there must be some

teaching, suggestion, or motivation in the prior art to select the teachings of separate references and combine them to produce the claimed combination. In re Johnston, 435 F.3d 1381, 1384 (Fed. Cir. 2006). An explicit teaching that identifies and selects elements from different sources and states that they should be combined in the same way as in the invention at issue, is rarely found in the prior art. Id. at 1385. Thus, the "motivation-suggestion-teaching" test is not so rigid as to "require[] an actual teaching to combine before concluding that one of ordinary skill in the art would know to combine references." Alza Corp. v. Mylan Labs, Inc., --- F.3d ---, 2006 WL 2556356, *4 (Fed. Cir. Sep. 6, 2006) 30. Under the Federal Circuit's "non-rigid motivation-suggesting-teaching test, a

suggestion to combine need not be found in the prior art" itself. Id. at *7. Rather, it may be found in implicit factors such as "the nature of the problem solved by the claimed invention, or to the knowledge of one of ordinary skill in the art." Johnston, 435 F.3d at 1385. "[W]here the testimony of an expert witness is relevant to determining the knowledge that a person of ordinary skill in the art would have possessed at a given time, this is one kind of evidence that is pertinent to [the] evaluation of a prima facie case of obviousness." Alza, 2006 WL 2556356 at *7. 31. "As precedent illustrates, many factors are relevant to the motivation-to-combine

aspect of the obviousness inquiry, such as the field of the specific invention, the subject matter of the references, the extent to which they are in the same or related fields of technology, the nature of the advance made by the applicant, and the maturity and congestion of the field." Id. 32. Therefore, the "motivation-suggestion-teaching" test asks not merely what the

references disclose, but whether a person of ordinary skill in the art, possessed with the

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understandings and knowledge reflected in the prior art, and motivated by the general problem facing the inventor, would have been led to make the combination recited in the claims. In re Kahn, 441 F.3d 977, 988 (Fed. Cir. 2006). 33. Merely because a reference discloses more than one alternative does not

constitute a teaching away from the patented system unless the disclosure criticizes, discredits, or otherwise discourages the solution claimed. In re Fulton, 391 F.3d 1195, 1200-01 (Fed. Cir. 2004). Instead, the proper inquiry is "whether there is something in the prior art as a whole to suggest the desirability, and thus the obviousness, of making the combination, not whether there is something in the prior art as a whole to suggest that the combination is the most desirable combination available." Id. 34. The secondary considerations may include commercial success, long-felt but

unsolved needs, failure of others, licenses, unexpected results, and simultaneous development by others. Brown & Williamson Tobacco Corp. v. Philip Morris Inc. 229 F.3d 1120, 1129 (Fed. Cir. 2000), Monarch Knitting Machinery Corp. v. Sulzer Morat GMBH, 139 F.3d 877, 883-84 (Fed. Cir. 1998), ISCO Int'l, Inc. v. Conductus, Inc., 279 F. Supp. 2d 489, 498 (D. Del. 2003). There must be a nexus between the secondary consideration and the claimed invention to be relevant to the obviousness inquiry. Brown & Williamson, 229 F.3d at 1130. 35. Commercial success of an accused infringer becomes relevant to the obviousness

inquiry only upon a finding that the accused actually infringed the patent. See Truswal Systems Corp. v. Hydro-Air Engineering, Inc., 813 F.2d 1207, 1215 (Fed. Cir. 1987) (Judge Rich, concurring) ("Now as a matter of common sense, the way one proves commercial success of a patented invention is, first to demonstrate the success of the patentee or one or more licensees.

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Second, once an infringer is sued and proved to be an infringer, its sales are appropriately proved and added to the others.") (emphasis in original). 36. The Federal Circuit has made clear that there must be evidence of nexus where

the evidence of commercial success presented is a license, because it is often "cheaper to take licenses than to defend infringement suits." Iron Grip Barbell Co., Inc. v. USA Sports, Inc., 392 F.3d 1317, 1324 (Fed. Cir. 2004). Thus, while licenses "may constitute evidence of nonobviousness ... only little weight can be attributed to such evidence if the patentee does not demonstrate a nexus between the merits of the invention and the licenses of record." Id. Without a showing of nexus, "the mere existence of ... licenses is insufficient to overcome the conclusion of obviousness" when there is a strong prima facie case of obviousness. Id. 37. Just as the failure of others to make the invention may be evidence that an

invention would not have been obvious, independent making of the invention by persons other than the inventor at about the same time may be evidence that the invention would have been obvious. Ecolochem, Inc. v. S. Cal. Edison Co, 227 F.3d 1361, 1379 (Fed. Cir. 2000). 4. 38. The `412 Patent is Invalid For Failure to Name All of its Inventors

Inventorship is a question of law with underlying factual issues. Bd. of Educ. v.

Am. Bioscience, 333 F.3d 1330, 1337 (Fed. Cir. 2003). Section 102(f) provides that "[a] person shall be entitled to a patent unless ... he did not himself invent the subject matter sought to be patented." This subsection mandates that a patent accurately list the correct inventors of the claimed invention. Pannu v. Iolab Corp., 155 F.3d 1344, 1349 (Fed. Cir. 1998). If nonjoinder of an actual inventor is proved by clear and convincing evidence, a patent is rendered invalid. Id. at 1349.

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39.

Inventors may apply for a patent jointly even though (1) they did not physically

work together or at the same time; (2) each did not make the same type or amount of contribution, or (3) each did not make a contribution to the subject matter of every claim of the patent. 35 U.S.C. § 116. 40. While this section does not set an "explicit lower limit on the quantum or quality

of invention contribution required," each joint inventor must contribute to the conception of the invention in a way that is not insignificant in quality when measured against the dimension of the full invention. Eli Lily & Co., 376 F.3d at 1359, BJ Services Co. 338 F.3d at 1373; Caterpillar Inc. v. Sturman Industries, Inc., 387 F.3d 1358, 1377 (Fed. Cir. 2004). Conception occurs "when one of ordinary skill in the art could construct [the invention] without unduly extensive research or experimentation." Sewall v. Walters, 21 F.3d 411, 415 (Fed. Cir. 1994). 41. All that is required to be a joint inventor is that a person: (1) contribute in some

significant manner to the conception or reduction to practice of the invention; (2) make a contribution to the claimed invention that is not insignificant in quality, when that contribution is measured against the dimension of the full invention; and (3) do more than merely explain to the real inventors well-known concepts and/or the current state of the art. Pannu, 155 F.3d at 1351. 42. A co-inventor need not make a contribution to every claim of the patent; a

contribution to one claim is enough. Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1460 (Fed. Cir. 1998). Thus, "the critical question for joint conception is who conceived, as that term is used in the patent law, the subject matter of the claims at issue." Id. 5. The `412 Patent is Invalid Because It Was Derived From the Work of Others

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43.

Information derived by an inventor from another is prior art to claims

encompassing that information, even though, unlike most other § 102 prior art categories, the derived information may never have been publicly available. OddzOn Prods., Inc. v. Just Toys, Inc., 122 F.3d 1396, 1401-02 (Fed. Cir. 1997). 44. "[S]ubject matter derived from another not only is itself unpatentable to the party

who derived it under section 102(f), but, when combined with other prior art, may make a resulting obvious invention unpatentable to that party under a combination of sections 102(f) and 103." Id. at 1403-04. 6. 45. Claims 12, 13, 29 and 30 are Indefinite

A determination of claim indefiniteness is a legal conclusion that is drawn from

the court's performance of its duty as the construer of the claims. Datamize, LLC v. Plumtree Software, Inc., 417 F.3d 1342, 1347 (Fed. Cir. 2005). A claim is indefinite if it is not amenable to construction. Id. A claim is considered indefinite if it does not reasonably apprise those skilled in the art of its scope. Amgen, Inc. v. Chugai Pharm. Co., 927 F.2d 1200, 1217 (Fed. Cir. 1991). C. The `412 Patent is Unenforceable Due to the Inequitable Conduct that Occurred during the Prosecution of the Patent Application and Related Patent Applications As provided by 37 C.F.R. §1.56(a), "[e]ach individual associated with the filing

46.

and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section." This standard applies not only to the inventor, but also the prosecuting attorney or agent, and anyone else associated with the inventor or the assignee who is substantively involved in the preparation or prosecution of the

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application and extends throughout the patent's entire prosecution history. Fox Indus., Inc. v. Structural Preservation Sys., Inc., 922 F.2d 801, 804 (Fed. Cir. 1990); Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 n. 6 (Fed. Cir. 1995). 47. A patent may be rendered unenforceable for inequitable conduct if an applicant,

with intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the PTO during prosecution. Digital Control Inc. v. The Charles Machine Works, 437 F.3d 1309, 1313 (Fed. Cir. 2006). 48. Determining whether a party has engaged in such conduct is a two-step analysis:

(1) whether the conduct meets a threshold level of materiality; and (2) whether the evidence shows a threshold level of intent to mislead the PTO. Perspective Biosystems v. Pharmacia Biotech., 225 F.3d 1315, 1318-19 (Fed. Cir. 2000). If the materiality and intent thresholds are met, the court must then conduct a balancing test and determine whether the scales tilt to a conclusion that inequitable conduct occurred. Critickon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997). 49. Information is material to patentability where it is not cumulative to information

already of record or being made of record in the application, and: (1) if a reasonable examiner would have considered such information important in deciding whether to allow the application; (2) it establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or (3) it refutes, or is inconsistent with, a position the applicant takes in opposing an argument of unpatentability relied on by the Office or asserting an argument of patentability. 37 C.F.R. §1.56(b); Digital Control, 437 F.3d at 1314-16. 50. A withheld reference may be highly material when it discloses a more complete

combination of relevant features, even if those features are before the patent examiner in other

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references. Semiconductor Energy Laboratory Co., v. Samsung Electronics Co., 204 F. 3d 1368, 1374 (Fed. Cir. 2000). 51. A reference is not immaterial simply because the patent claims are eventually

deemed by an examiner to be patentable thereover. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). 52. Intent, on the other hand, "need not, and rarely can, be proven by direct

evidence." Bruno Independent Living Aids, Inc. v. Acorn Mobility Services, LTD, 394 F.3d 1348, 1354 (Fed. Cir. 2005). Instead, intent may be inferred from the surrounding circumstances. Critikon, 120 F.3d at 1256. Intent may be inferred where a patent applicant knew, or should have known, that withheld information would be material to the PTO's consideration of the application. Id. Additionally, the more material the omission, the lower the level of intent required to establish inequitable conduct, and vice versa. Id. A lapse on the part of the Examiner does not excuse the applicant. KangaROOS U.S.A., Inc. v. Caldor, Inc., 778 F.2d 1571, 1576 (Fed. Cir. 1985). 53. In the absence of a credible explanation, intent to deceive is generally inferred

from the facts and circumstances surrounding a knowing failure to disclose material information. Frazier v. Roessel Cine Photo Tech, Inc., 417 F.3d 1230, 1235-6 (Fed. Cir. 2005) (quoting Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs. Ltd., 394 F.3d 1348, 1354 (Fed. Cir. 2005). 54. The fact of misrepresentation, coupled with proof that the party making it had

knowledge of its falsity, is enough to warrant drawing the inference that there was a fraudulent intent. Lipman v. Dickinson, 174 F.3d 1363, 1370 (Fed. Cir. 1999).

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55.

Implied notice of a fact is notice that is inferred from facts that a person had a

means of knowing and that is thus imputed to that person; actual notice of facts or circumstances that, if properly followed up, would have led to a knowledge of the particular fact in question. Brasseler, U.S.A. v. Stryker Sales Corp., 267 F.3d 1370, 1382 (Fed. Cir. 2001). 56. To avoid a finding of inequitable conduct, doubts concerning whether information

is material should be resolved in favor of disclosure. Where an applicant, his representatives, or other involved in a substantial way with the application knew of information the materiality of which may be so readily be determined, he cannot intentionally avoid learning of its materiality, even through gross negligence; in such cases, you may find that the applicant should have known of the materiality of the information. Brasseler, U.S.A. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001). Close cases should be resolved by disclosure, not unilaterally by the applicant. Critkon, 120 F.3d at 1256, citing LaBounty Mfg., Inc. v. United States Int'l Trade Comm'n, 958 F.2d 1066, 1076 (Fed. Cir. 1992). 57. An applicant, his representative, or others involved in a substantial way with a

patent application cannot cultivate ignorance or disregard warnings that material information or prior art may exist, merely to avoid actual knowledge of that information or prior art. Where one does, deceptive intent may be inferred. Once an applicant, representative, or others involved has notice that information exists that appears material and questionable, that person cannot ignore that notice in an effort to avoid his duty to disclose. Brasseler, U.S.A. v. Stryker Sales Corp., 267 F.3d 1370, 1382 (Fed. Cir. 2001). 58. Attorneys representing patent applicants must conduct meaningful inquiries when

the surrounding factual circumstances would cause a reasonable attorney to understand that

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relevant and questionable material information should be assessed to determine whether it should be disclosed to the Patent Office. Id. at 1385. 59. "As a critical requirement for obtaining a patent, inventorship is material."

Perseptive Biosystems, 225 F.3d at 1321. See also Manual of Patent Examining Procedure § 2001.06(c) (inventorship disputes are material information). This is true because patent examiners "are required to reject applications under 35 U.S.C. § 102(f) on the basis of improper inventorship." Perseptive Biosystems, 225 F.3d at 1321, citing MPEP §§ 2137.01 (titled "Inventorship" and providing the rules for determining inventorship), 2004 (providing a checklist of "Aids to Compliance with Duty of Disclosure," including: 2. It is desirable to ask questions about inventorship. Who is the proper inventor? Are there disputes or possible disputes about inventorship? If there are questions, call them to the attention of the Patent and Trademark Office). See also 35 U.S.C. § 102(f) ("A person shall be entitled to a patent unless ... he himself did not invent the subject matter sought to be patented"). 60. Those individuals covered by 37 CFR § 1.56 are also required "to bring to the

attention of the examiner ... information within their knowledge as to other copending United States applications which are material to patentability of the application in question." MPEP § 2001.06(b). It is improper to "assume that the examiner of a particular application is necessarily aware of other applications `material to patentability' of the application in question." Id. See also Dayco Prod. Inc., v. Total Containment, 329 F.3d 1358, 1365-69 (Fed. Cir. 2003); MPEP § 2004 at No. 9 ("Do not rely on the examiner of a particular application to be aware of other applications belonging to the same applicant or assignee. It is desirable to call such applications to the attention of the examiner even if there is only a question that they might be `material to patentability' of the application the examiner is considering. It is

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desirable to be particularly careful that prior art or other information in one application is cited to the examiner"). 61. A patent is unenforceable if, in bad faith or with deceptive intent, the named

inventor(s) fails to correctly name all inventors. See, e.g., Frank's Casing Crew & Rental Tools, Inc. v. PMR Techs., Ltd., 292 F.3d 1363 (Fed. Cir. 2002). 62. Where withheld information is material and the applicant, his representatives, or

others involved in a substantial way with the application knew or should have known of the materiality, the applicant, representatives, and involved others will have great difficulty in establishing subjective good faith sufficient to overcome an inference of intent to mislead. Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., 326 F.3d 1226, 1239 (Fed. Cir. 2003). 63. F.3d at 1385. 64. Inequitable conduct committed during prosecution of a parent application can Inventors represented by counsel are presumed to know the law. Brasseler, 267

"infect" a later filed application. See Consolidated Aluminum Corp. v. Foseco Intern. Ltd., 910 F.2d 804, 810-11 (Fed. Cir. 1990). To prove infectious unenforceability, an accused infringer must establish two elements: (1) that a related patent is unenforceable due to inequitable conduct; and (2) that the patent(s) at issue bear an immediate and necessary relation to that alleged inequitable conduct." Mosaid Technologies Inc. v. Samsung Electronics Co., Ltd., 362 F. Supp. 2d 526 (D. N.J. 2005). 65. To cure inequitable conduct that occurred in the same or an earlier application, an

applicant must (1) expressly advise the PTO of the existence of the misrepresentation, stating specifically wherein it resides; (2) if the misrepresentation is of one or more facts, the PTO is to be advised what the actual facts are, the applicant making it clear that further examination in

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light thereof may be required; and (3) on the basis of the new and factually accurate record, the applicant must establish patentability of the claimed subject matter. Rohm & Haas Co. v. Crystal Chemical Co., 722 F.2d 1556, 1572 (Fed. Cir. 1983); eSpeed, Inc. v. Brokertec USA, L.L.C., 417 F. Supp. 2d 580, 597 (D. Del. 2006). 66. Where the subject matter for which a patent is being sought is or has been

involved in litigation, the existence of such litigation and any other material information arising therefrom must be brought to the attention of the U.S.P.T.O. "Examples of such material information include evidence of possible prior public use or sales, questions of inventorship, prior art, allegations of `fraud,' `inequitable conduct,' and `violation of duty of disclosure' .... [and] any assertion that is made during litigation which is contradictory to assertions made to the examiner." MPEP Section 2001.06(c). See also Critikon, 120 F.3d at 1259. Litigation is material per se to patentability. See Daimlerchrysler AG v. Feuling Advanced Tech., Inc., 276 F. Supp. 2d 1054, 1063 (S.D. Cal. 2003). D. 67. Plaintiff Has Come Before the Court With Unclean Hands An issue that remains to be litigated is whether Affinion is barred from asserting

the `412 patent against Maritz under the doctrine of unclean hands. Remedies are available under the unclean hands doctrine if some unconscionable act of one coming for relief has immediate and necessary relation to the equity that he seeks in litigation. Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245 (1933). 68. The doctrine of unclean hands is "not bound by formula or restrained by any

limitation that tends to trammel the free and just exercise of discretion." Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245-6 (1933). Unclean hands is an equitable defense that can be found both with respect to withholding information from the USPTO and with

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respect to misconduct in litigation. See Precision Instrument Mfg. Co. v. Automatic Maintenance Machinery Co., 324 U.S. 806, 816 (1945) (unclean hands found where "[t]he history of the patents and contracts at issue is steeped in perjury and undisclosed knowledge of perjury"); Consolidated Aluminum Corp. v. Foseco Intern. Ltd., 910 F.2d 804, 812 (Fed. Cir. 1990) (unclean hands can be found both with respect to withholding information from the Patent Office and with respect to conduct in litigation). 69. An unconscionable act committed during the prosecution of a patent before the

PTO has an immediate and necessary relationship to any subsequent attempt to enforce the patent in a court of equity, the court has the discretion under the unclean hands doctrine to dismiss the litigation brought to enforce such a patent. Hoffman-La Roche, Inc., v. Promege Corp., 319 F. Supp. 2d 1011, 1017 (N.D. Cal. 2004). 70. The Court may consider conduct occurring both before and after the patent was

issued in determining whether a party has unclean hands. Hoffman-La Roche, Inc. v. Promege Corp., 319 F. Supp. 2d 1011, 1025 (N.D. Cal. 2004). 71. If an unconscionable act in question took place during litigation, the Court has

authority to use the unclean hands doctrine to dismiss specific causes of action or the lawsuit in its entirety. Id. at 1017. 72. The validity of a patent asserted in a patent infringement action has an immediate

and necessary relation to the litigation. Hoffman-La Roche, 319 F. Supp. 2d at 1018; Aptix Corp. v. Quickturn Design Systems, Inc., 269 F.3d 1369, 1376 (Fed. Cir. 2001). E. Plaintiff Has Misused the `412 Patent

.

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73.

An issue that remains to be litigated is whether Affinion is barred from asserting

the `412 patent against Maritz under the doctrine of patent misuse. Patent misuse "requires that the alleged infringer show that the patentee has impermissibly broadened the physical or temporal scope of the patent grant with anticompetitive effect." Virginia Panel Corp. v. MAC Panel Co., 133 F.3d 860, 868-71 (Fed. Cir. 1997); C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1372 (Fed. Cir. 1998). 74. Patent misuse can arise when conditions of antitrust violation are not met. C.R.

Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1372 (Fed. Cir. 1998). 75. "The bringing of a lawsuit to enforce legal rights does not of itself constitute

violation of the antitrust laws or patent misuse; there must be bad faith and improper purpose in bringing the suit, in implementation of an illegal restraint of trade." Glaverbel Societe Anonyme v. Northlake Marketing & Supply, Inc., 45 F.3d 1550, 1558 (Fed. Cir. 1995). Such bad faith may include "knowing either at the time the lawsuit is filed or during its pendency that the particular patent sued upon is invalid." See Handguards, Inc. v. Ethicon, Inc., 601 F.2d 986, 990 (9th Cir. 1979). 76. "[A] finding of misuse is precluded ... only if the patent infringement suit is

brought in good faith." In re Indep. Serv. Org. Antitrust Litig., 964 F. Supp. 1479, 1484 (D. Kan. 1997), citing Glaverbel Societe Anonyme v. Northlake Marketing, 45 F.3d 1550, 1558-59 (Fed. Cir. 1995) (emphasis supplied). Misuse is established upon contrary evidence ­ i.e., that suit was brought or maintained in bad faith. See Glaverbel, 45 F.3d at 1558 (citing precedent to the effect that suit brought in bad faith and for improper purpose may constitute patent misuse); C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d 1340, 1373 (Fed. Cir. 1998) ("[I]t is not patent misuse to bring suit to enforce patent rights not fraudulently obtained") (emphasis supplied);

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Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, 709 (Fed. Cir. 1992) ("[A] patentee that has a good faith belief that its patents are being infringed violates no protected right when it so notifies infringers"). See also, McKesson Information Solutions, LLC v. The Trizetto Group, Inc., 2005 WL 914776 at *1-2 (D. Del. 2005) (while noting that such motions are "disfavored," court denied motion to strike affirmative defense of patent misuse which alleged that plaintiff had attempted to enforce a patent it "should reasonably know is invalid and not infringed"). F. Plaintiff Is Barred From Enforcing the `412 Patent Because It and Its Predecessors Have Committed Laches An issue that remains to be litigated is whether Affinion is barred from asserting

77.

the `412 patent against Maritz under the doctrine of laches. In order to invoke the laches defense, a defendant must prove two elements: (1) the plaintiff delayed filing suit for an unreasonable and inexcusable length of time from the time the plaintiff knew or reasonably should have known of its claim against the defendant; and (2) the delay operated to the prejudice or injury of the defendant. A.C. Aukerman Co. v. R.L. Chaides Const. Co., 960 F.2d 1020, 1032 (Fed. Cir. 1992); eSpeed, Inc. v. Brokertec USA, L.L.C., 417 F. Supp. 2d 580, 599 (D. Del. 2006). Such prejudice may be either economic or evidentiary. Aukerman, 960 F.2d at 1033. 78. The period of delay is measured from the time the plaintiff knew or reasonably

should have known of the defendant's alleged infringing activities to the date of suit. -A.C. Aukerman, 960 F.2d at 1032. 79. A patentee cannot avoid the consequences of his laches by transferring the patent.

Eastman Kodak Co. v. Goodyear Tire & Rubber Co., 114 F.3d 1547, 1559 (Fed. Cir. 1997), abrogated on other grounds by Cybor Corp. v. FAS Tech,, Inc., 138 F.3d 1448, 1454 (Fed. Cir. 1998). In determining the length of delay, a transferee of the patent must accept the

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consequences of the dilatory conduct of immediate and remote transferors. See Raber v. Pittway Corp., 1994 WL 374542, *3 (N.D. Cal. 1994), citing Donald S. Chisum, Patents, § 19.05[2][a][ii] (1994). In other words, the tacking of predecessor patentees' inaction is universally allowed. Id. G. 80. Plaintiff Is Estopped From Enforcing the `412 Patent Against Maritz An issue that remains to be litigated is whether Affinion is barred from asserting

the `412 patent against Maritz under the doctrine of equitable estoppel. Equitable estoppel is neither limited to a particular factual situation nor subject to resolution by simple or hard and fast rules. A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1041 (Fed. Cir. 1992). 81. Three elements must be established to bar a patentee's suit by reason of equitable

estoppel: (1) The patentee, through misleading conduct, leads the alleged infringer to reasonably infer that the patentee does not intend to enforce its patent against the alleged infringer ("Conduct" may include specific statements, action, inaction, or silence where there was an obligation to speak); (2) The alleged infringer relies on that conduct; and (3) Due to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its claim. Id. at 1028. If an alleged infringer establishes these three elements by a preponderance of the evidence, the patentee's claim may be entirely barred. Id. 82. In order for there to be equitable estoppel, "the alleged infringer must have

knowledge of the patentee and its patent and must reasonably infer that the patentee acquiesced to the allegedly infringing activity for some time." Winbond Elec. Corp. v. Int'l Trade Comm'n, 262 F.3d 1363, 1374 (Fed. Cir. 2001). H. Arguendo, If Infringement is Found, and the `412 Patent Is Not Found Invalid or Unenforceable, Plaintiff Has Insufficient Proof of Lost Profits

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Damages, And Plaintiff's Reasonable Royalty Proof is Overstated and Not Credible. 83. An issue that remains to be litigated is the amount of damages owed to plaintiff if,

arguendo, Maritz is found to have infringed the `412 patent (which Maritz denies). Upon a finding of infringement, damages are awarded under 35 U.S.C. § 284, which provides that the patentee is entitled to "damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court." 84. "Damages is the amount of loss to a patentee. A patentee may seek to recover

actual damages, usually, the amount of profits actually lost, or if unable to prove actual damages, the patentee is entitled to a reasonable royalty." SmithKline Diagnostics, Inc. v. Helena Labs. Corp., 926 F.2d 1161, 1164 (Fed. Cir. 1991) (internal citations omitted). 85. To recover lost profits, a patentee must show that, but for the defendant's

infringement, the patentee would have made the sales and would have made a certain level of profit. There are four elements required to prove lost profits: (1) a demand for the patented product; (2) the absence of an acceptable, non-infringing substitute for the patented product; (3) the patent owner's manufacturing and marketing capability to exploit the demand for the patented product; and (4) the amount of profit the patent owner would have expected to make if the patent owner had made the infringer's sales. Id. (citing Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978)). 86. The recovery of lost profits by a patentee is not limited to the situation in which

the patentee is selling the patented device; however, "the patentee needs to have been selling some item, the profits of which have been lost due to infringing sales, in order to claim

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damages consisting of lost profits." Poly-America, L.P. v. GSE Lining Tech., Inc., 383 F.3d 1303, 1311 (Fed. Cir. 2004). 87. The Federal Circuit has held that the existence of a relationship between two

companies is not enough to establish damages because separate corporate entities must endure both the benefits and burdens of their chosen corporation form. See Poly-America, 383 F.3d at 1311. In other words, companies may not enjoy the advantages of their separate corporate structure and, at the same time, avoid the consequential limitations of that structure, such as the patent holder's inability to claim the lost profits of its non-exclusive licensee. Id. 88. Another issue of law that remains to be litigated is the appropriate amount of

plaintiff's arguendo damages under a reasonable royalty analysis. "A reasonable royalty `may be based upon an established royalty, if there is one, or if not upon a hypothetical royalty resulting from arm's length negotiations between a willing licensor and a willing licensee.'" Philips Elecs. N. Am. Corp. v. Contec Corp., 418 F. Supp. 2d 470, 478 (D. Del. 2006); see also Georgia-Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). 89. A reasonable royalty can only be applied to Maritz's sales which are found to

have actually resulted in an infringement. See 35 U.S.C. § 284; Oak Indus., Inc. v. Zenith Elecs. Corp., 726 F. Supp. 1525, 1543 (N.D. Ill. 1989) (rejecting theory that royalty rate should be applied to all potentially infringing items sold; only those found to be actually infringing are appropriately taxed). Neither the "entire market value" rule nor the "convoyed sales" rule apply here in determining the sales that are subject to royalty, because, among other reasons, the parties to the hypothetical negotiation under the then-prevailing business circumstances would not have agreed to subject non-infringing conduct or sales to a royalty. See Georgia-

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Pacific Corp. v. United States Plywood Corp., 318 F. Supp. 1116 (S.D.N.Y. 1970). The parties would, however, have taken into account in the hypothetical negotiation the presence of noninfringing alternatives, including but not limited to obtaining rights to practice the patent from an authorized source other than the plaintiff. See Grain Processing Corp. v. American Maize Products, Co., 185 F.3d 1341 (Fed. Cir. 1999). I. Plaintiff Is Not Entitled to Recover Damages for Any Infringement Occurring Before the Present Suit Was Filed Another issue that remains to be litigated is if plaintiff and/or its predecessors in

90.

interest gave Maritz actual notice of its claim that its VAULT and/or AwardHQ systems infringed the `412 patent. To give actual notice, the patent owner must make an "affirmative communication to the alleged infringer of a specific charge of infringement by a specific accused product or device." Gart v. Logitech, Inc., 254 F.3d 1334, 1345 (Fed. Cir. 2001). A communication of infringement regarding one product or device is insufficient to provide actual notice of other products or devices also made, sold, or used by the accused infringer. See id. at 1346-47 (notice as to defendant's TRACKMAN VISTA products did not provide notice as to related TRACKMAN MARBLE products). See also Mosaid Technolgoies Inc. v. Samsung Electronics Co., Ltd., 362 F. Supp. 2d 526, 557-58 (D.N.J. 2005) (holding that naming a specific product did not give notice as to related products). J. 91. Plaintiff Is Not Entitled To Recover Prejudgment Interest Under 35 U.S.C. § 284, a successful patentee may recover damages adequate to

compensate for infringement. As the Supreme Court has stated, "§ 284 does not require an award of prejudgment interest whenever infringement is found." General Motors Corp. v. Devex Corp., 461 U.S. 648, 654 (1983).

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92.

Instead, prejudgment interest should be awarded "where necessary to afford the

plaintiff full compensation for infringement." Id. at 656. Under this standard, the grant or denial of prejudgment interest, the rate of such interest, and whether to award compound or simple interest are all matters within the Court's discretion. Bio-Rad Labs, Inc. v. Nicolet Instrument Corp., 807 F.2d 964, 967-69 (Fed. Cir. 1986). In exercising this discretion, the Court may limit prejudgment interest, or deny it altogether, where the patent owner unduly delays prosecuting the lawsuit and that delay results in prejudice to the defendant. General Motors Corp., 461 U.S. at 656; Crystal Semiconductors Corp. v. Tritech Microelectronics Int'l., Inc., 246 F.3d 1336, 1361-62 (Fed. Cir. 2001). J. If Infringement Is Found, Maritz Did Not Willfully Infringe The `412 Patent, And Enhanced Damages Cannot Be Awarded. Issues that remain to be litigated ­ if, arguendo, Maritz is found to have infringed

93.

the `412 patent ­ is whether Maritz's alleged infringement was willful and/or whether enhanced damages and/or attorneys' fees should be awarded to plaintiff. 94. An individual has "an affirmative duty of due care to avoid infringement of the

known patent rights of others." Knorr-Bremse Systeme Fuer Nutzfahrzeuge v. Dana Corp., 383 F.3d 1337, 1345-46 (Fed. Cir. 2004). 95. A finding of willfulness requires a finding "by clear and convincing evidence in

view of the totality of the circumstances that [defendant] acted in disregard of the ... patent and lacked a reasonable basis for believing it had a right to do what it did." WMS Gaming Inc. v. International Game Tech., 184 F.3d 1339, 1354 (Fed. Cir. 1999), Gustafson, Inc. v. Intersystems Indus. Prods. Inc., 897 F.2d 508, 510 (Fed. Cir. 1990). "There is no evidentiary presumption that every infringement is willful." Norian Corp. v. Stryker Corp., 363 F.3d 1321,

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1332 (Fed. Cir. 2004). "Willful infringement is not established by the simple fact of infringement," even where the accused has knowledge of the patents. Id. 96. The Court must weigh the totality of the circumstances in determining whether

any infringement was willful. Knorr-Bremse, 383 F.3d at 1342. Willfulness of infringement is a finding of fact. BIC Leisure Products, Inc. v. Windsurfing Int'l, Inc., 1 F.3d 1214, 1222 (Fed. Cir. 1993). The Court recently recognized in Tenneco Auto. Operating Co. v. Visteon Corp., 375 F. Supp. 2d 360, 365 (D. Del. 2005), that: The Federal Circuit has identified several factors that may be considered in determining whether infringement is willful: (1) whether the infringer deliberately copied the ideas or design of another; (2) whether the infringer, when he knew of the other's patent protection, investigated the scope of the patent and formed a good-faith belief that it was invalid or that it was not infringed; (3) the infringer's behavior as a party to the litigation; (4) the defendant's size and financial condition; (5) closeness of the case; (6) the duration of defendant's misconduct; (7) remedial action taken by defendant; (8) defendant's motivation for harm; and (9) whether defendant attempted to conceal its misconduct. (citing Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed.Cir.1992)). 97. The failure to obtain an exculpatory opinion of counsel does not provide an

adverse inference or evidentiary presumption that such an opinion would have been unfavorable. Knorr-Bremse, 383 F.3d at 1341-42. 98. Courts typically use the Read factors to determine whether enhanced damages are

appropriate. See e.g., Metabolite Labs, Inc. v. Lab. Corp. of Am. Holdings, 370 F.3d 1354, 1370-1371 (Fed. Cir. 2004); Trista Technology, Inc. v. ICN Pharmaceuticals, Inc., 314 F. Supp. 2d 356, 360-63 (D. Del. 2004). Under the evidence in this case, even if arguendo the jury finds Maritz infringed the `412 patent, such infringement was not willful, and enhanced damages to plaintiff are not appropriate. K. Affinion Is Not Entitled to a Permanent Injunction

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99.

A plaintiff seeking a permanent injunction must satisfy a four factor test before a

court may grant such relief. eBay Inc. v. Mercexchange, L.L.C., 126 S.Ct. 1837, 1839 (2006). A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. Id. 100. A finding of infringement does not create a presumption of irreparable harm. Paice LLC v. Toyota Motor Corp., 2006 WL 2385139, *4 (E.D. Tex. 2006); z4 Technologies, Inc. v. Microsoft Corp., 434 F. Supp. 2d 437, 440 (E.D. Tex. 2006). Instead, the plaintiff must meet its burden of demonstrating that it has suffered an irreparable injury. Id. 101. Infringing one's right to exclude alone is insufficient to establish that monetary damages are an inadequate remedy. Paice, 2006 WL 2385139 at *5. L. Maritz Is Entitled To Recover Its Attorneys' Fees

102. A trial court may, in its discretion, award attorneys' fees in "exceptional" patent cases to the prevailing party. See 35 U.S.C. § 285. 103. "Exceptional cases are normally those involving bad faith litigation or those involving inequitable conduct by the patentee in procuring the patent." Brasseler U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001). "The prevailing party may prove the existence of an exceptional case by showing: inequitable conduct before the PTO; litigation misconduct; vexatious, unjustified, and otherwise bad faith litigation; a frivolous suit or willful infringement." Id.

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104. In this case, the `412 Patent was inequitably obtained, and Affinion has vexatiously and unjustifiedly attempted to enforce that patent against Maritz and others. This conduct renders this case exceptional, and Maritz is entitled to recover its attorneys' fees. L. Maritz Did Not Falsely Mark Any Advertising Materials

105. To prove a violation of the false marking statute, 35 U.S.C. § 292, Affinion must prove (1) that Maritz marked upon, or affixed or used in advertising in connection with any article the words "patent applied for," "patent pending," or any word importing that an application for patent has been made, (2) that no application for patent was made, or if made, is not pending, (3) for the purpose of deceiving the public. 35 U.S.C. § 292(a); see also Arcadia Machine & Total Inc. v. Sturm, Ruger & Co., Inc., 786 F.2d 1124, 1125 (Fed Cir 1986). 106. "Intent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true." Id. at 1352. "The standard is whether [plaintiff] prove[s] by a preponderance of the evidence that [defendant] did not have an honest good faith belief in marking its products." Clontech Laboratories, Inc. v. Invitrogen Corporation, 406 F.3d 1347, 1355 (Fed. Cir. 2005). 107. The remedy for false marking is $500 per offense. 35 U.S.C. § 292(a). M. Defendant Did Not Engage In Unfair Competition

108. To prevail on its claim of unfair competition under the Lanham Act (15 U.S.C. § 1125(a)), the U.S. Court of Appeals for the Third Circuit has said a plaintiff must prove by a preponderance of the evidence that: (1) the defendant has made false or misleading statements as to his own product or another's; (2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; (3) that the deception is material in that

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it is likely to influence purchasing decisions; (4) that the advertised goods traveled in interstate commerce; and (5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc. Johnson & Johnson Merck Consumer Pharm. Co. v. Rhone-Poulenc Rorer Pharm., Inc., 19 F.3d 125, 129 (3rd Cir. 1994). 109. Affinion claims that the same alleged false marking that violated 35 U.S.C. § 292 also violates 15 U.S.C. § 1125(a). Maritz denies these allegations and further asserts that liability cannot arise under either code section unless Affinion can show (i) anticompetitive activity; and (ii) patent false marking. Congress enacted 35 U.S.C. § 292 to specifically address false marking of patent protection. Under the settled canon of statutory construction lex specialis derogat legi generali, this specific provision trumps the general false marking provision. Therefore, the elements and penalty for patent false marking are specifically addressed in § 292 and the solitary act of patent false marking is not actionable under 15 U.S.C. 1125(a). 110. If the Court instead finds Congress intended § 1125(a) to encompass patent false marking, it must also require a showing of bad faith. This Court and the Federal Circuit have found that, when a Lanham Act claim is asserted against commercial activities relating to rights arising from the Patent Act, the claimant is required to establish that the patent holder acted in bad faith. Serio-US Industries, Inc. v. Plastic Recovery Technologies Corp., --- F.3d ---, 2006 WL 2290995 *7 (Fed. Cir. August 10, 2006); Isco Intern., Inc. v. Conductus, Inc., 279 F. Supp. 2d 489, 504 (D. Del. 2003); Moore North America, Inc. v. Poser Business Forms, Inc. 2000 WL 1480992, *6 (D. Del. 2000) ("The court concludes that it is bound by Federal Circuit law on this issue. By requiring an element of bad faith in a Lanham Act claim, the Federal Circuit is not "trumping" patent law over the Lanham Act. Rather, the Federal Circuit is merely

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accommodating the entitlements under the Patent Act with the obligations under the Lanham Act. Consequently, for defendant to prevail on its counterclaims under the Lanham Act, it must show that plaintiff acted in bad faith"). 111. A finding of bad faith is required due to the tension between federal patent law and a Lanham Act claim for unfair competition. Serio, 2006 WL 2290995 at *7. "In general, a threshold showing of incorrectness or falsity, or disregard for either, is required in order to find bad faith in the communication of information about the existence or pendency of patent rights." Isco, 279 F. Supp. 2d at 505. However, the incorrectness or falsity of a statement, without more, is not sufficient to sustain a finding of bad faith. Id. Affinion has not alleged bad faith on the part of Maritz and cannot satisfy the requirements of § 1125(a). 112. "The court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case." 15 U.S.C. § 1117(a)(3). Again, the damages for patent false marking are specifically provided for in 35 U.S.C. § 292 and Affinion--assuming arguendo it could establish Maritz's liability--should be limited to such remedy. Maritz has found no case in which a court granted damages under § 1117 when the only accused action was patent false marking. 113. If the Court finds it is not limited to the damages provided by § 292, it should consider whether the challenged conduct was willful when calculating damages. Callaway Golf Co. v. Slazenger, 384 F. Supp. 2d 735, 741 (D. Del. 2005). This Court has stated, "in the context of a false advertising claim under the Lanham Act, `willfulness' and `bad faith' require a connection between a defendant's awareness of its competitors and its actions at those competitors' expense" and that aggravated activity such as "voluntary, knowing and intentional misconduct" is considered an indicator of willfulness. Id.

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EXHIBIT 6

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EXHIBIT 6 TO JOINT PRETRIAL ORDER AFFINION'S LIST OF PRE-MAR KED EXHIBITS, INCLUDING DESIGNATIONS OF INTERROGATORIES AND ANSWERS THERETO, THAT IT INTENDS TO OFFER AT TRIAL Affinion intends to offer at trial Interrogatory Nos. 1, 3, 6, 7, 8, & 15, & Maritz's answers thereto as set forth in Maritz's Second Supplemental Responses to Plaintiff Trilegiant Loyalty Solutions, Inc.'s First Set of Interrogatories. Affinion intends to offer at trial the following exhibits:
Trial Exh. 1 Description Certified U.S. Patent No. 6,009,412 Depo Exh. Date Bates Begin copy at AFF-MTZ 013295 copy at AFF-MTZ 013312 copy at AFF-MTZ 013687 copy at AFF-MTZ 014035 copy at AFF-MTZ 012949 copy at AFF-MTZ 014534 PX 218 PX 217 DX 268 06/25/1998 10/26/1998 05/10/1999 AFF-MTZ 015701 TRL-MTZ 03988 TRL-MTZ 04001 TRL-MTZ 04034 TRL-MTZ 18803 TRL-MTZ 16214 AFF-MTZ 015709 TRL-MTZ 04000 TRL-MTZ 04013 TRL-MTZ 04034 TRL-MTZ 19009 TRL-MTZ 16215 Bates End AFF-MTZ 013311 AFF-MTZ 013686 AFF-MTZ 014034 AFF-MTZ 014533 Offered Marked Admitted

2

Certified File History for U.S. Patent No. 6,009,412--part 1 of 3 parts Certified File History for U.S. Patent No. 6,009,412--part 2 of 3 parts Certified File History for U.S. Patent No. 6,009,412--part 3 of 3 parts Certified U.S. Patent No. 5,774,870 Certified File History for U.S. Patent No. 5,774,870 Certified U.S. Patent No. 6,578,012 Certified File History for U.S. Patent No. 6,578,012 Preliminary Statement Petition to Make Special Office Action for Application No. 9105227 U.S. Patent & Trademark Office Assignment Records Patent Purchase Agreement between Thomas W. Storey & Netcentives, Inc.--Netcentives Signature Patent Purchase Agreement between Thomas W. Storey & Netcentives, Inc.--Storey signature Assignment to Netcentives, Inc. from Interactive Promotions Online, Inc. Patent & License Purchase Agreement by & between Trilegiant Corp. & Netcentives, Inc. & other documents Assignment of Patents between Netcentives Inc. & Trilegiant Corp. PX 57 DX 58

3

4

5 6

AFF-MTZ 013294

7 8

AFF-MTZ 014828

9 10 11 12 13

DX 200 DX 201

07/21/1997

14 15 16

07/21/1997 07/21/1997 12/07/2001

17

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Trial Exh. 18 19 20

Description Assignment of Patent Applications between Netcentives, Inc. & Trilegiant Corp. News Release re: Trilegiant Loyalty Solutions Purchases Netcentives Patents PTO Notice of Recordation of Assignment of Patent Nos. 5,774,870 & 6,009,412 from Netcentives to Trilegiant Corp. Patent Assignment between Trilegiant Corp. & Trilegiant Loyalty Solutions, Inc. Executed Patent Assignment Agreement between Trilegiant Loyalty Solutions, Inc. & Affinion Net Patents, Inc. Executed Patent License Agreement between Affinion Net Patents, Inc. & Trilegiant Loyalty Solutions, Inc. Maritz's Chart re: Title Chain Per USPTO Chart re: Netcentives Licensees, Netcentives Patent-Related Agreements Fax from C. Chaney to B. Rooney re: Netcentives, Inc. Patent Information re: Licensees, Agreements & other information E-mail from P. Gonzalez to M. Beller re: Patent Payments Standard draft Patent License Agreement between Trilegiant Corp. & Licensee America Online Intera