Spectrum Healthcare Settles Charges with NLRB and Union, Agrees to Reinstate Employees with Backpay and Sign Collective Bargaining Agreement

A Connecticut nursing home operator has agreed to settle a National Labor Relations Board case involving multiple allegations of unlawful suspensions, discharges and unilateral changes by offering reinstatement and backpay to all discharged and striking workers and signing a new three-year collective bargaining agreement with its employees’ union, New England Health Care Employees Union District 1199, SEIU.

The settlement, which was reached midway through a hearing before an NLRB administrative law judge in Connecticut and approved by the judge yesterday, ends a long-running dispute which grew into a strike by almost 400 employees at four nursing homes in Connecticut operated by Spectrum Healthcare, LLC. Along with the contract and reinstatement of all employees, the company agreed to pay $545,000 in backpay and pension benefits to employees who were harmed by the unfair labor practices, and to expunge any disciplinary records related to the case. As a result, all NLRB charges against the company have been withdrawn. Spectrum admits to no wrongdoing in the settlement.

Complaints issued by the NLRB Regional Office in Hartford alleged that, beginning in the fall of 2009, several months after the prior collective bargaining agreement expired, Spectrum discharged seven employees and suspended three others to retaliate against their union activities and to discourage other employees from supporting the union. In addition, one employee was discharged and seven others were suspended after the employer unilaterally changed its tardiness discipline policy without first bargaining with the union.

The complaints further alleged that in April 2010, employees at the four nursing homes — in Derby, Ansonia, Winsted, and Hartford — went on strike to protest the unfair labor practices. When the strikers offered unconditionally to return to work in late August, the employer refused to take them back. Under federal labor law, if a strike is called because of an unfair labor practice, employees are entitled to reinstatement after an unconditional offer to return to work.

The reinstated employees are due to return to the facilities this week.

Therasense Makes Sense of Inequitable Conduct Defense

On May 25th, the Federal Circuit, sitting en banc, issued a decision reversing and remanded the district court’s holding that the patent-in-suit was invalid due to inequitable conduct. The patent remained invalid as anticipated, but the bar has been substantially raised for accused infringers attempting to prove the inequitable conduct defense – the “atomic bomb” of patent law, as Chief Judge Rader described it. With respect to the element of intent, the accused infringer must prove by clear and convincing evidence that the patentee acted with specific intent to deceive the PTO.

“The accused infringer must prove…that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Intent can still be established by circumstantial evidence, but a high level of materiality cannot satisfy the burden to prove intent. Also, the evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances….The absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.”

The materiality element of inequitable conduct was adjusted by the majority as well. The court held that, except for a narrow exception for truly egregious acts of misconduct, like false Rule 132 affidavits, the materiality required is now but-for materiality. This but-for materiality is a stricter standard than that imposed by current Rule 56 and the accused infringer must now show that the claim would not have issued but for the omitted information. The court declined to give any deference to current Rule 56, finding that part 1 was deficient in not giving weight to rebuttal evidence of the prima facie case of obviousness established by the omitted art and that part 2 was deficient because, well, it was just too broad.

Interestingly, though not addressing the issue head-on, the court made it clear that inequitable conduct cannot be proven based on acts by patentee relating to claims they did not ultimately obtain:

“Because inequitable conduct renders an entire patent (or event a patent family) unenforceable, as a general rule, this doctrine should only be applied in instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim… After all, the patentee obtains no advantage from misconduct if the patent would have issued anyway….enforcement of an otherwise valid patent does not injure the public merely because of misconduct, lurking somewhere in patent prosecution, that was immaterial to the patent’s issuance.”

Not just pretty words! Still, it is hard to see how this decision will deter applicants from sending in paper snow drifts of prior art. The minority made it clear that they felt that, even under these standards, the patent should be found unenforceable. Hal Wegner has noted that, for the disclosure burden to lighten on both applicants and the PTO, the PTO must respond proactively to this decision.