Precision Instrument Manufacturing Co. v. Automotive Maintenance MacHinery Co.

Background

A tool manufacturer called Automotive owned patents on torque wrenches and sued others for patent infringement and contract breaches. An employee, Thomasma, secretly shared wrench ideas with Larson, who filed a patent application using false early dates and claimed sole invention. A new company, Precision, then supplied a distributor, Snap‑On, taking business from Automotive. Automotive’s lawyer learned of Thomasma’s detailed affidavit alleging Larson’s perjury, investigated, but instead of reporting the matter to the Patent Office, Automotive settled the interference, acquired Larson’s application, and later enforced the resulting patents.

Reasoning

The Court asked whether a party that knew or reasonably believed that patent claims were based on perjury could still enforce those patents and related contracts. Applying the equitable rule that a party must come with “clean hands,” the Court found that Automotive had reason to believe Larson’s statements were false, suppressed that knowledge, and used an outside settlement to secure and broaden the suspect application. Because Automotive did not bring the fraud to the Patent Office and instead preserved and enforced the questionable patents, equity required denying its relief. The Supreme Court reversed the Court of Appeals and held that the District Court’s dismissal for want of equity was justified.

Real world impact

The ruling protects the public interest in honest patent proceedings and limits enforcement of patents founded on known fraud. It emphasizes that parties aware of possible patent perjury should disclose such facts to the Patent Office and that private settlements concealing fraud may not be enforced.

Dissents or concurrances

Two Justices thought the case should not have been taken here and would have left the appeals court’s factual judgment undisturbed, saying this Court should not reweigh the record.