In its September 24, 2013 opinion in Network Signatures, Inc. v. State Farm Mutual Auto Ins. Co., the US Court of Appeals for the Federal Circuit reversed and remanded the US District Court for the Central District of California's grant of summary judgment to State Farm in a patent infringement suit brought by Network Signatures.

The district court found that counsel for the Naval Research Laboratory (NRL), the owner of the licensed patent that is the subject of the suit, had engaged in inequitable conduct and therefore the patent was unenforceable. Specifically, after the NRL chose to abandon the patent for lack of commercial interest, it then petitioned the US Patent and Trademark Office (PTO) for delayed maintenance fees on the grounds that the failure to make the payment was due to "unintentional" non-payment. The Federal Circuit concluded that the PTO Director acted in accordance with the law and within his discretion in excusing Network Signatures' delayed payment and that State Farm had not established inequitable conduct.

US Patent No. 5,511,122 ('122 patent) was developed by a scientist at the NRL and issued on April 23, 1996. The NRL let the patent lapse for nonpayment of the 7.5-year maintenance fee on April 23, 2004. However, two weeks after the lapse became effective, Network Signatures' predecessor asked NRL about licensing the patent. The NRL's counsel, John Karasek, then petitioned the PTO to accept delayed payment of the fee, using the standard form petition for unintentional delay without including details of how or why the delay occurred. The PTO granted the petition and extended the life of the patent. The NRL then licensed the '122 patent to Network Signatures, who sued State Farm for infringement. In defense, State Farm argued the patent was permanently unenforceable because Karasek engaged in inequitable conduct by falsely representing to the PTO that the NRL's non-payment was unintentional, but where the NRL only paid the fee after learning of the licensing interest.

Karasek testified that the late payment was unintentional because it resulted from a "mistake of fact" and the NRL would have paid the fee had it known there was a commercial interest in the patent. While the district court acknowledged that a mistake in fact may form the basis for a holding of unintentional abandonment, it held that a discovery of additional information after a deliberate decision to withhold a timely action could not be a mistake of fact. After it ruled that Karasek had engaged in inequitable conduct, Network Signatures appealed.

The Federal Circuit reversed and remanded the district court's decision. The court outlined that the two elements of inequitable conduct require the challenger to prove with clear and convincing evidence that the patent applicant both:

The court noted that:

The court concluded there was no inequitable conduct because:

In the court's view, Karasek's compliance with the standard PTO procedures therefore did represent clear and convincing evidence of an intent to withhold material information from the PTO.

Circuit Judge Clevenger wrote a dissent, arguing that the district court was correct in granting summary judgment on materiality, but should not have granted summary judgment on intent. First, based on the PTO's precedent, the dissent argued that the failure to disclose to the PTO that the patent was initially intentionally abandoned was a failure to disclose material information. In his view, if the PTO was made fully aware of the circumstances, the revival petition would have been denied. Second, the dissent argued that there were disputed facts as to whether Karasek deliberately withheld information from the PTO because he believed that the PTO would grant his revival petition if he remained silent. In the dissent's view, the issue of whether this inaction rose to the level of an intent to deceive or was mere negligence should have been brought to trial.