By Kevin E. Noonan --
Appellees Becton, Dickinson & Co. and Nova Biomedical Corp. filed their responsive brief in Therasense, Inc. v. Becton, Dickinson & Co. on October 8th. While addressing the Federal Circuit's questions generally directed to its application of the inequitable conduct doctrine, appellees' brief is particularly focused on its main objective -- having the en banc Court affirm the District Court's finding that Abbott committed inequitable conduct in procuring the patent-in-suit (U.S. Patent No. 5,820,551).
The brief contends that the standard for materiality that best conforms judicial review of patentee conduct is the U.S. Patent and Trademark Office's Rule 56. Using the Rule 56 standard is proper, according to appellees, because it makes more consistent the standards used before the USPTO and at trial, thus minimizing any "unfairness" to patentees. In addition, the brief argues that using the Rule 56 standard is advantageous when compared with standards that are more or less stringent. Using the "reasonable examiner" standard would result in overdisclosure to the Office, since an applicant could not predict what a court might later find would be "reasonably" material, whereas a "but for" standard would not promote the public interest by motivating applicants to disclose prior art known to them. The best benchmark is the agency standard, in view of its expertise as well as the administrative considerations that underlie the rule (requiring consistent argument and submission of information or art that established a prima facie case of unpatentability). The brief notes that the Government's brief also argues for the Rule 56 standard of materiality for similar administrative efficiency reasons. And the brief argues that adoption of this standard would reduce the number of inequitable conduct claims asserted, since it would (presumably) prevent accused infringers from using less stringent standards (citing Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309, 1314-16 (Fed. Cir. 2006); American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362-1363 (Fed. Cir. 1984); Dayco Products, Inc. v. Total Containment, Inc., 329 F.3d 1358, 1363-64 (Fed. Cir. 2003); Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1354 (Fed. Cir. 2008), as examples of cases where less stringent standards were applied).
Moreover, the brief argues that the Rule 56 standard is consistent with Supreme Court precedent -- specifically, Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); and Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 814 (1945). Appellees read this precedent for the proposition that the Keystone Driller and Hazel-Atlas cases were based on unclean hands principles, in view of the frankly fraudulent behavior patentees in these cases exhibited both before the USPTO and during litigation. But the brief contends that the Court created an "inequitable conduct" doctrine that was distinct from fraud in the Precision Instrument case: in that case, appellees argue that that Court stated that "the patentee must disclose 'all facts concerning fraud or inequitableness underlying the applications in issue' to the PTO," and that this distinction signaled that the doctrine should be broader than common law fraud (as well as providing "further guidance about what information should be considered for inequitable conduct"). The public policy rationale for this argument is that "the public has a strong interest in 'seeing that patent monopolies spring from backgrounds free from fraud or other inequitable conduct,'" again citing language that seems to suggest that the doctrine encompasses behavior in addition to common law fraud. The brief also argues that the current inequitable conduct doctrine is more equitable to patentees, since the "unclean hands" doctrine in the Keystone Driller and Hazel-Atlas cases was "amorphous" and did not set out clear lines for assessing culpable conduct. And the requirement of common law fraud for reliance and harm resulting from that reliance "may not be evident in the prosecution record in every case," allowing improperly procured patents to issue and be enforceable against the public interest. Thus, "reverting" to a common law fraud standard, as argued by Abbott and some amici, would be contrary to settled Supreme Court precedent, and would harm the public interest by permitting patents to be enforced that were obtained through inequitable conduct that fell short in some respect to fraud. "Swinging the pendulum too far in the other direction," to the unclean hands standard of Keystone Driller and Hazel-Atlas is just as bad, according to the brief, because the unclean hands doctrine is even more devoid of standards and guidelines than the current inequitable conduct doctrine.
The brief rejects the "but for" test called for by Abbott and some amici, arguing that such a decision would "turn back the clock of progress" to the standard applied prior to establishment of Rule 56 by the Office in 1977. The brief argues two practical deficiencies for using the "but for" standard: first, the standard fails to capture situations where the patent issued due to misconduct, but the prosecution record is unclear about the reason for allowance, inter alia because Examiners do not testify in infringement litigation and thus a court "will not know critical facts that may prove inequitable conduct." This is essentially an evidentiary argument, wherein "patentees may withhold or misrepresent information that significantly impacts the examiner's decision to issue the patent, without creating any record that such information was necessary for issuance" (emphasis in original). Second, "dishonest patentees could ignore the PTO's disclosure requirements knowing that the courts will apply a narrower materiality standard, without any effective sanction for violating the PTO's Rule" except practitioner disciplinary proceedings in the Office (that the Office itself admits it lacks the capability to properly enforce). Conversely, the brief argues, "[a]n honest applicant . . . would be left with less guidance about what to disclose because the 'but/for' test is applied in hindsight. Because he cannot know in advance what will be the 'but/for' reason for allowance, he will be forced to overdisclose to the PTO out of an abundance of caution," further impeding the efficient operation of the Office. The brief also disputes Abbott's interpretation of Supreme Court and Federal Circuit precedent upon which Abbott relied in its brief.
Finally, the materiality portion of the brief closes with a section on the materiality of the "misleading" declaration and argument Abbott submitted to the Office to overcome rejection and have the '551 patent grant; significantly, the brief argues that these "misrepresentations" satisfy the "but for" test (and thus that the District Court's finding of unequitable conduct should be affirmed no matter how the en banc Court decides to modify how it applies the inequitable conduct doctrine).
Turning to the intent prong, the brief argues that the "single most reasonable inference" standard as enunciated in Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008), should be used, so that circumstantial evidence can be considered by a court in finding deceptive intent. Appellees argue that instances where a patentee "admits" to committing inequitable conduct are "rare," as are instances where there is a "smoking gun" evincing an intent to deceive. Thus, circumstantial evidence and inferences therefrom are important for determining whether a patentee had deceptive intent by clear and convincing evidence, the brief contends. This standard is necessary, appellees argue, because otherwise "a dishonest patentee could deceive the PTO and then further perpetuate the wrong by simply refusing to admit intent in court." Using the "single most reasonable" inference standard is fair to patentees, according to the brief, because "[t]his is the most stringent possible standard for intent short of requiring an outright admission." This is also the standard used by the District Court in finding intent below.
The question of circumstantial evidence and how it (and what evidence) is applied does not somehow permit courts to find "lesser" evidence of intent the "greater" the evidence of materiality. Rather, the brief argues that courts can permissibly look to the degree of materiality as circumstantial evidence of intent (since it is difficult and unlikely to have deceptive intent for not disclosing information that is not material). Provided that a court does not find intent "solely" from the evidence of materiality, and finds both materiality and intent separately by clear and convincing evidence, appellees argue that using facts relating to materiality as circumstantial evidence of intent is proper (although it is apparent that this approach can easily be misapplied), citing Judge Prost's concurring opinion in Optium Corp. v. Emcore Corp., 603 F.3d 1313, 1325 (Fed. Cir. 2010). Ignoring the degree of materiality in assessing intent would require a court to ignore a portion of the "totality of circumstances" that it should consider for deciding inequitable conduct, the brief argues. Relevant evidence also includes patentee's excuses for not submitting material information, says the brief, and the credibility of such excuses also comprise relevant evidence for a court to consider in considering the sufficiency of the evidence for deceptive intent. "Facts common to materiality and intent include the prominence of a withheld reference in prosecution, concealing prior inconsistent statements, and submitting false declarations," which sounds reasonable; however, the brief goes on to argue that "[p]rominence of a reference, even in related litigation, underscores its materiality and the patentee's awareness of its relevance to show he deceptively withheld it" (emphasis added). This argument underscores arguments by plaintiff and amici that the Court should establish a deceptive intent standard that would not encourage litigation-related "bootstrapping" of evidence of materiality to establish intent. Appellees also argue that "[t]he 'single most reasonable inference' based on the totality of the evidence provides a high standard of intent, just short of an outright admission. That totality includes all the facts, including those that may also bear on materiality. It also limits the inequitable conduct doctrine by giving the patentee every opportunity to provide exculpatory evidence of good faith for his conduct and maintains 'a high bar' for proving intent," citing Eisai Co. v. Dr. Reddy's Labs., Ltd., 533 F.3d 1353, 1360 (Fed. Cir. 2008). This portion of the brief ends with a detailed discussion and argument supporting the District Court's determination that plaintiffs' acted with an intent to deceive.
The brief then addresses the appropriateness of the "materiality-intent-balancing" test that the Federal Circuit uses to determine whether there is sufficient evidence to support the exercise of the court's equitable powers to render a patent unenforceable. Appellees argue that this is the appropriate standard in cases ("the vast majority") where "the [withheld] information at issue bears on patentability of claims," but concede that there may be other cases where a court should not use its powers to negate patent rights. Such cases include those where the conduct in question has no bearing on patentability (e.g., disclosures regarding Inventorship [PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc., 225 F.3d 1315 (Fed. Cir. 2000)], Petitions to Make Special [General Electro Music Corp. v. Samick Music Corp., 19 F.3d 1405], or Small Entity Status [Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223 (Fed. Cir. 2007)]. While being careful to note that "[t]he issue of non-patentability cases is not before the Court on the facts here," the brief suggests that "[c]ourts should have the discretion to refer such cases to the PTO for disciplinary action or, in rare circumstances, find the patent unenforceable under the unclean hands doctrine." The balancing test permits courts "to balance the equities before finding inequitable conduct," comprising "an important safeguard where the overall context of the case shows that the conduct was too insignificant to justify the severe penalty of unenforceability." However, the brief concedes that for most cases, "[o]nce materiality and intent are independently established, the balance will typically favor finding inequitable conduct," citing Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995), and Refac Int'l Ltd. v. Lotus Dev. Corp., 81 F.3d 1576, 1582-1583 (Fed. Cir. 1996). Nonetheless, even under these circumstances, the balancing test permits a court to exercise its discretion in imposing sanctions short of complete unenforceability.
The brief's arguments that the District Court's finding of inequitable conduct should be affirmed are straightforward. The declaration was an affirmative misrepresentation about the meaning of the language that a membrane was "optional" as disclosed in the relevant prior art, and statements in the declaration and argument that a membrane was "required" were completely contradictory to arguments submitted to the European Patent Office and not disclosed to the U.S. examiner. The declarant and attorney knew about the information and its materiality and did not disclose it to the USPTO. These circumstances are particularly prone to inequitable conduct because a declaration comprises extrinsic evidence that an examiner cannot independently verify; this is in contradistinction with submitted art and attorney argument, both of which an examiner is capable of assessing on her own. The "excuses" proffered by the declarant and attorney to explain their conduct were "incredible," and the District Court found their testimony to be unbelievable. Under these circumstances, the District Court's determination that the '551 patent was obtained through inequitable conduct and thus should be unenforceable was not an abuse of discretion and would be the conclusion no matter what changes the en banc Court may make in how the inequitable conduct doctrine should be applied. Thus, appellees argue that the District Court's inequitable conduct determination should be affirmed.
For additional information regarding this topic, please see:
• "Bayer Submits Brief in Therasense v. Becton Dickinson," October 20, 2010
• "PhRMA Files Amicus Brief in Therasense Case," August 22, 2010
• "PTO Files Amicus Brief in Therasense Case," August 19, 2010
• "American Bar Association Files Amicus Brief in Therasense Case," August 17, 2010
• "Therasense, Inc. v. Becton, Dickinson & Co. -- Briefing Schedule Update," August 8, 2010
• "BIO Files Amicus Brief in Therasense Case," August 8, 2010
• "Pharma and Software Companies File Joint Amicus Brief in Therasense Case," August 3, 2010
• "IPO Files Amicus Brief in Therasense Case," August 2, 2010
• "Abbott Files Brief in Therasense Case," July 28, 2010
• "CAFC Sets Date for Oral Argument En Banc in Inequitable Conduct Appeal," June 9, 2010
• "Therasense, Inc. v. Becton, Dickinson & Co. -- Briefing Schedule Update," May 16, 2010
• "Therasense, Inc. v. Becton, Dickinson & Co. Briefing," May 13, 2010
• "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson," April 28, 2010