Abbott Files Brief in Therasense Case

By Kevin E. Noonan --

The idea of a "golden age," almost always some time in the past, is a recurrent theme in history, literature, and myth. It is also the unspoken theme in Abbott's principal brief filed earlier this week in Therasense Inc. v. Becton Dickinson & Co., and that Golden Age has an exact date: right after the Federal Circuit rendered its en banc decision in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., the last time the Court took up the question of inequitable conduct en banc.

In an extensive (59 page) brief, Appellants argue that this case is not about whether the doctrine of inequitable conduct should be reformed, but whether it should be restored, specifically "to its origins in Supreme Court precedent; to the confines Congress intended in the 1952 Patent Act; to the standards this Court articulated en banc in Kingsdown Medical Consultants v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988); and to the standards that govern in other areas of law." This restoration is needed, the brief argues, because the Federal Circuit has "expanded" inequitable conduct "well beyond" the appropriate boundaries established by this earlier precedent and practice, and has resulted in an "'ongoing pandemic' of inequitable conduct charges," citing Judge Gajarsa's dissent in Taltech Ltd. v. Esquel Enterprises Ltd., 604 F.3d 1324, 1335 (Fed. Cir. 2010). Most provocatively, the brief charges that prevailing Federal Circuit precedent "has converted the federal courts into roving commissions to enforce standards of conduct before the PTO without regard to whether the alleged infractions had any impact." (And in an interesting strategic move, the brief cites extensively throughout to (now) Chief Judge Rader's many dissents and other pronouncements critical of the burgeoning expanse of conduct adjudged to be inequitable by the Court in recent years.)

The brief begins it argument by asserting that a court should render a patent unenforceable for inequitable conduct only when the patent has been obtained by fraud (or "conduct tantamount to fraud"). The brief cites the "holy trinity" of Supreme Court cases in this area -- 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); Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945) -- to support its argument that the inequitable conduct doctrine (that a court should not enforce a patent in equity that was obtained due to inequitable conduct) was developed under fact circumstances that amounted to actual fraud (including perjury, subornation of perjury, bribery and other egregiously prosecution misconduct). The brief contrasts this with "missteps in making the legally and factually complex decisions applicants regularly make (such as whether to submit marginal prior art or potentially cumulative material)" as are commonly used today to support inequitable conduct charges (if not findings). The brief cites analogous trademark (citing In re Bose Corp., 580 F.3d 1240 (Fed. Cir. 2009)) and copyright (Eckes v. Card Prices Update, 736 F.2d 859, 861-62 (2d Cir. 1984)) standards that require similarly egregious misconduct to cancel a mark or strike a registration, which standards include the requirement that a challenger establish a "subjective intent to deceive, however difficult it may be to prove." Appellants argue that patent law should follow this example (particularly in view of the parallels the Supreme Court has drawn between patent and copyright based on the parallel recitation of these forms of protection in the Constitution, citing Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439 (1984) and eBay Inc. v. MercExchange L.L.C., 547 U.S. 388, 391-93 (2006)). Turning to the statute, the brief argues that the inequitable conduct defense was incorporated into the 1952 Patent Act (codified at 35 U.S.C. 282) "against the immediate backdrop" of Supreme Court precedent equating inequitable conduct with "fraudulent procurement" according to contemporary Supreme Court opinions (the "trinity").  Finally, the brief asserts that the equitable principles underlying the inequitable conduct doctrine are only equitably applied under circumstances when a patent is procured by actual fraud.

Appellants next argue that the Federal Circuit's own precedent -- Kingsdown Medical -- requires "powerful proof of scienter" to support the "intent to deceive" prong of its inequitable conduct analysis:

[T]he involved conduct, in light of all the evidence, including evidence indicative of good faith, must indicate sufficient culpability to require a finding of intent to deceive.  863 F.2d at 876 (emphasis added).

The brief asserts that the intent requirement "cannot be inferred from materiality," and exhorts the Court to 'reinvigorate" the scienter requirement, that an applicant must be shown to have a "specific intent to deceive" the Office to support a finding of inequitable conduct (a standard not fulfilled by even "gross negligence"). Citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., the brief sets out precisely what should be required (in Appellants' view) to establish an intent to deceive:

The evidence must establish that, at the time, the applicant (1) knew of the information, (2) knew it was material to issuance of the patent, (3) made a deliberate decision to withhold or misrepresent it, and (4) intended to deceive the PTO.

Deceptive intent must be "'the single most reasonable inference able to drawn from the evidence,'" Appellants argue, citing Orion IP, LLC, v. Hyundai Motor Am., 605 F.3d 967, 979 (Fed. Cir. 2010). This interpretation of the standard for establishing the intent to deceive requirement, Appellants argue, is consistent with both Supreme Court precedent and trademark and copyright law standards, as well as "sound policy considerations," not the least of which is to "restore the inequitable conduct doctrine to its proper bounds" and "stem a 'plague' of inequitable conduct charges" reminiscent of the situation that prevailed before the Federal Circuit rendered its Kingsdown decision. It is the Court's failure to stay true to (or even affirmatively disregard) the standards enunciated in Kingsdown that has resulted in the instant situation according to Appellants' brief. This section of the brief ends with an enumeration of the several, negative consequences of this falling away from the Kingsdown standard, both before the Patent Office (such as citing thousands of pages of documentary prior art) and in the courts.

With regard to the materiality prong, the brief argues that "[i]n patent cases, 'materiality' is most properly interpreted to require proof that, 'if the Patent Office had been aware of the complete or true facts, the challenged claims would not have been allowed," citing the CAFC's predecessor court from Norton v. Curtiss, 433 F.2d 779, 794 (C.C.P.A. 1971). The brief argues in favor of a "but for" standard, wherein inequitable conduct should be found only where "the patent would not have issue[d] absent the misconduct." The brief says that Supreme Court precedent requires "but-for causation," citing Corona Cord Tire Co. v. Dovan Chemical Corp., 276 U.S. 358 (1928), where the Court reversed an inequitable conduct finding because the undisclosed information was "not the basis for [granting the patent] or essentially material to its issue."  But-for causation is also required under prevailing trademark and copyright law standards for analogous fraudulent procurement activity, the brief argues. When causation is unproven under this standard, the brief argues that courts (as opposed to the Office) should not render valuable patents unenforceable based on violations of PTO rules (as opposed to statutory requirements). And the brief argues that the court should not use Patent Office standards for assessing materiality, since these standards "serve a distinct purpose," being "necessarily . . . relatively broad" to serve their proper prophylactic function.

The brief also exhorts the Court to "eliminate sliding scale" balancing, which reduces the extent of the proofs required to establish both the materiality and intent prongs of the prevailing standards for proving inequitable conduct. Using the "sliding scale" has permitted courts to use a stronger showing of materiality to "lower the burden for proving intent, and vice-versa," with the result that both the required standards (and burden for establishing) both materiality and intent to deceive are "diluted." Specifically, the brief calls out the "should have known" standard applied in some inequitable conduct cases as particularly problematic, since it substitutes a fraud standard for one that "sounds . . . in negligence" but carries a far higher, fraud-based penalty. Appellants ascribe the recurrent "plague" of inequitable conduct squarely to this diminution of the Kingsdown standards (citing Judge Newman's dissent in McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 926 (Fed. Cir. 2007), in support). Interestingly, the brief does a little jurisprudential excavating on the origins of the sliding scale, and finds its genesis in American Hoist & Derrick Co. v. Sowa & Sons, Inc., which cited an earlier case, Digital Equipment Corp. v. Diamond, 653 F.2d 701, 716 (1st Cir. 1981), for the proposition:

Questions of "materiality" and "culpability" are often interrelated and intertwined, so that a lesser showing of the materiality of the withheld information may suffice when an intentional scheme to defraud is established, whereas a greater showing of materiality of withheld information would necessarily create an inference that its nondisclosure was "wrongful."  725 F.2d at 1363.

Ironically, this citation to the Digital Equipment case is the only support for this proposition in American Hoist & Derrick Co., and the brief notes that the only support for the assertion in Digital Equipment Corp. is a District of Massachusetts case, United States v. Standard Electric Time Co., 155 F. Supp. 949, 952-53 (D. Mass. 1957), that "contains no suggestion of an intent-materiality balancing test." As an illustration of how far off the rails the Federal Circuit has gone in misapplying the proper standard, the brief cites Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed. Cir. 2006), which held that "intent to deceive may be inferred -- indeed, inferred as a matter of law -- where '(1) the applicant knew of the information; (2) the applicant knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding.'" Such a standard "eviscerates Kingsdown" according to the brief, as it substitutes a mere negligence (not even a gross negligence) standard "that was expressly rejected in Kingsdown," citing Judge Linn's concurring opinion in Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317 (Fed. Cir. 2009).

Turning to the merits of the case at bar, the brief argues that the panel erred by substituting evidence of "high" materiality for a "diluted" intent standard. Specifically, the brief argues that the lawyer argument during U.S. prosecution was a reasonable interpretation of the argument made in a corresponding European application. Finally, the brief argues that the decision of the initial panel "abrogates the rule that lawyer argument is not material" evidence for (or against) patentability. In its analysis, the brief dissects the five reasons the District Court (and the initial CAFC panel) gave for supporting the determination of an intent to deceive, specifically arguing that at least one of the reasons -- failure to give a credible explanation for non-disclosure -- improperly "inverts the burden of proof" since the accused party "need not offer any explanation" unless the evidence establishes an intent to deceive clearly and convincingly.

Absent any extensions, appellee Becton Dickinson & Co.'s brief is due August 25, and amicus curiae briefs must be filed no later than 7 days (i.e., August 2) after the principal brief of the party being supported is filed, or no later than 7 days after the Plaintiffs-Appellants' principal brief is filed when an amicus curiae does not support either party.

Comments

[EG]

Kevin,

Nice summary of the Abbott brief.

That the Federal Circuit "went off the rails" on the standard for "materiality" became glaringly evident in the 2006 Digital Control v. Charles Machine Works case which noted there were at least 4-5 different "standards" for "materiality" including the PTO's various incantations of Rule 56. If you've got at least 4-5 different standards to choose from, how can you expect any consistency in rulings on "materiality?"

I remain convinced that IC should be dumped as an invalidity/unenforceability defense. Instead, as suggested by the Abbott brief, let's require real "fraud on the PTO" like was established in the trilogy of SCOTUS cases noted at the beginning of your article, and this "plague" will just about disappear (and rightly so).

[Derek Freyberg]

Good morning Kevin:
Could we have a link to the brief itself, please?