PTO Files Amicus Brief in Therasense Case

By Kevin E. Noonan --

Many of the amicus curiae briefs that have been filed in the en banc rehearing of Therasense, Inc. v. Becton, Dickinson & Co. have mentioned (if not bemoaned) the negative effects the Federal Circuit's inequitable conduct jurisprudence has had on the functioning of the U.S. Patent and Trademark Office.  So the content of the PTO's own brief, filed in support of neither party, is of great interest.  As might be expected, the Office also believes that how the Federal Circuit has developed the case law on inequitable conduct has increased the burdens on the Office and led to inefficiencies that have contributed to the current backlog of unexamined applications.  Unlike some of the other amici, however, the Office's brief takes a more Goldilocks approach to the question of how to remedy the situation, disagreeing with those who take the position that dramatic changes must be effected by the en banc Court.

Like other briefs, the PTO's brief argues that a large portion of the problems it faces stem from the "multiple formulations" for both the materiality and intent prongs that have arisen as the inequitable conduct case law was developed since the last time the Court considered the issue en banc (Kingsdown Medical Consultants, Ltd. v. Hollister Inc.).  As a consequence, and coupled with the sanction of unenforceability, the brief argues that patent applicants "with some regularity . . . [either] minimize their exposure to material information," for example by foregoing prior art searches, or "submit to the agency large numbers of prior art references of questionable materiality."  Neither alternative fosters the Office's mission, says the brief, and the situation has made the Office "deeply concerned."

The brief starts its legal (as opposed to policy) arguments by tracing the origins of the inequitable conduct doctrine to both common law fraud and the equitable principle of unclean hands.  The brief cautions against "adjusting" the standards for inequitable conduct in favor of either one over the other, asserting that the doctrine could become "murkier" (if predicated too heavily on unclean hands) or too rigid (if predicated too heavily on common law fraud principles).  The Office finds the Golden Mean between these two doctrines in its own Rule 56, which should be the standard of materiality applied by the courts.  One benefit of using Rule 56, according to the brief, is that the Office "is in the best position to know what information is essential to determining the patentability of a claimed invention," reflecting the Office's "expertise and experience."  The brief also says Rule 56 is "consistent with Supreme Court precedent and provides clear guidance to applicants" concerning the information that should be submitted to comply with the duty of disclosure.

In support of its argument on this materiality standard, the brief parses the now-familiar trilogy of Supreme Court cases that represent the genesis of the inequitable conduct doctrine:  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).  The brief also notes the role of the CCPA in crafting the modern inequitable conduct doctrine in Norton v. Curtiss, 433 F.2d 779 (CCPA 1970), saying that the Federal Circuit's predecessor court "blended" the earlier doctrines, "borrowing the materiality and intent elements from common law fraud; but expanding the type of conduct swept into each to account for the unclean hands doctrine."  The basis for the court's blending was, the brief asserts, to "make an applicant's duty of honesty and candor to the PTO meaningful."  In this milieu, honesty and candor, the court opines, are "necessary," even "essential" elements.  And in the Office's opinion, the CCPA achieved an "appropriate" blend, leading to a "sound" inequitable conduct basis.

In addition to being a product of the Office's own expertise, the Office argues that Rule 56 should be the standard of materiality applied by the courts in the face of the extant "five different standards for materiality" (objective "but for"; subjective "but for"; the "but it may have been" standard; the "reasonable examiner" standard; and, of course, Rule 56).

The brief argues that the Rule 56 standard is objective (as opposed to the reasonable examiner standard), and that it utilizes the Office's own competency in deciding what art is material to patentability.  In addition, the brief argues that Rule 56 "presents clear and straightforward guidance for applicants regarding what information they should submit to the PTO to satisfy [the] duty of disclosure."  The Office also distinguishes Rule 56 from the "but for" standards argued by other amici, on the grounds that the latter standard would permit applicants "to engage in a level of purposeful gamesmanship" regarding patentability.  In contrast, the Office argues, using Rule 56 "ensures that applicants deal honestly with the agency about all patentability matters."  Such a standard of honesty is consistent with the Supreme Court's recognition of the public interest aspects of patents.  Finally, with regard to materiality, the brief disavows the former "reasonable examiner" standard, which was too vague, ambiguous and difficult to consistently apply.

The brief further distinguishes its Rule 56 recommendation from the "but for" standard espoused by others by stating that the "but for" standard is too narrow, inter alia by requiring the accused infringer to prove invalidity before inequitable conduct, "leaving little work for the inequitable conduct doctrine to do."  The brief also cautions that using a "but for" standard would permit applicants to freely "engage in a wide variety of misconduct," provided that "it could not later be proven that the patent would not have issued "but for" the misconduct.  In addition, according to the brief, the "but for" standard is contrary to Supreme Court precedent, and it contends that a case used elsewhere to support the "but for" standard, Corona Cord Tire Co. v. Dovan Chemical Corp., did not fail to find inequitable conduct so much as fail to consider a defense that had not been asserted.

The brief also rejects the notion that inequitable conduct could be relegated to an administrative disciplinary proceeding.  The procedural circumstances are ill-fitted to the Office moving that quickly to bring a complaint.  Moreover, the Office does not have the resources to perform the kinds of investigations necessary for the Office's disciplinary actions to be much of an administrative remedy for a torrent of inequitable conduct cases.

Turning to the intent prong, the PTO's brief urges that deceptive intent be "judged by the single most reasonable inference" standard in view of the totality of the evidence.  Specific intent, the brief argues, is consistent not only with Supreme Court precedent but also the Federal Circuit's own earlier precedent in Kingsdown Medical.  While not foreclosing evidence of materiality to be used as one of the "circumstances" to be considered, the brief emphasizes that the intent prong must be separately proven by clear and convincing evidence.

The brief recognizes two conflicting (or at least not consistent) lines of precedent regarding the intent to deceive:  the first, exemplified by Ferring B.V. v. Barr Labs., Inc., regarding the "knew or should have known" standard, and Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., where the standard is closer to a inference being drawn than based on the evidence, but one representing "the single most reasonable inference to be drawn regarding intent."  The brief argues that the test in Ferring steps into some important priority questions with regard to the standard for intent.  The brief argues that the Ferring Court was over-inclusive by adding gross negligence to the intent prong of the test, something prohibited by both the Supreme Court (in Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976); securities fraud liability) and the Federal Circuit (Kingsdown Medical).  This inclusion is not warranted, as in any of the trilogy of cases discussed herein, which involved "affirmative deception and not negligence."  The brief also notes that in rejecting negligence as satisfying the intent prong, the Court should also reject the "should have known" standard.  In view of the severity of the sanction, the PTO argues that the "underlying mental state of the intent prong should be correspondingly high."  Citing Star Scientific, the brief argues that it is just as inequitable to "strike down an entire patent where the patentee only committed minor missteps or acted with minimal culpability" as it is to enforce a patent obtained through inequitable conduct.  The brief returns to its policy concerns by noting that "raising" the intent standard to require specific intent would reduce the incentive on applicants to (over) submit "an excessive number of prior art references that may or may not be material."

The Office's brief also breaks ranks with other amici over the question of equitable balancing of evidence in the materiality and intent prongs, trusting that it would be the "rare case" where a court would find materiality and intent both by clear and convincing evidence and then not hold that inequitable conduct had been proven.  The brief argues that, while both intent and materiality must be established independently, materiality can be used as evidence for intent.  The lynchpin of this argument is that the applicant must be shown to have been aware ("appreciated the materiality of the [withheld] information"), and that this is not applied according to a "sliding scale."  Indeed, the brief argues that the Court should consider the degree to which the "sliding scale" is "misunderstood" and that the Court should "clarify that a high degree of materiality does not mean that only a negligible amount of intent is desired."  But the brief accepts that the absence of a credible explanation of the failure to disclose material information can be considered when inferring intent.

Conversely, the brief argues that the way the Court balances intent and materiality should be "clarified."  The reasonable expectation is that a finding of both materiality and intent generally will lead to a finding of inequitable conduct.  But this cannot devolve into formula, according to the brief, in view of the equitable roots of the doctrine and Supreme Court precedent.  "Balancing" is not accurately represented as a sliding scale or a rigid rule.  "Rather, it simply requires a court to consider all of the evidence of record" in rendering a decision.

Finally, the brief argues that standards of materiality and intent from other agencies are not helpful in properly interpreting these factors with regard to inequitable conduct.

For additional information regarding this topic, please see:

• "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

Comments

[Patent Guy]

Where is the Brief?

[Donald Zuhn]

Patent Guy:

The brief is now available.

Don

[Skeptical]

"The brief starts its legal (as opposed to policy) arguments by tracing the origins of the inequitable conduct doctrine to both common law fraud and the equitable principle of unclean hands."

I think it important to stress that many views simply fail at the point that the doctrine was meant to cover more than common law fraud. This explicitly kicks out many of those that desire a strict but-for mentality.

However, the Office brief fails at trying to draw the distinction with its Rule 56 argument - the very things the Office complains about are because practicioners are following Rule 56. The objectivity is a phantom. The Reasonable Examiner is still buried in Rule 56.

While "the Office is in the best position to know what information is essential to determining the patentability of a claimed invention", it is still the applicant that must supply the information, and to a large measure, must supply that information before the Office has made any indication of what may be essential.

Since the applicant must protect herself and her client, it is always better to simply provide more and let the Office decide. Hence the flood.

Two ways to stop this flood: the but-for route with the loss of half of what the intended coverage was meant to be, or stop the requirement altogether. There is only a coarse adjustment mechanism available.

[Kevin E. Noonan]

Dear Skeptical:

The second remedy you propose just isn't going to happen - the Supreme Court counts inequitable conduct along with the doctrine of equivalents and the concept of obviousness as its contributions to patent law and in fulfillment of its role as the Constitutional gatekeeper, preventing monopolies except where they are warranted. So any attempt to do away with the inequitable conduct doctrine would last just as long as it took the Court to grant cert and reverse.

The "but for" route is one way, but there are other ways - for example, playing with the remedy such that "the punishment fits the crime" - as argued in PhRMA's and WSLA's briefs, focus the inquiry on the claims asserted in the lawsuit (or any claims reciting elements in common with those claims against which an inequitable conduct charge can be satisfied). This way the defense can be limited, and the consequences limited, to perhaps make assertion of the defense less attractive.

Just a thought. Thanks for the comment.

[Skeptical]

Kevin - thanks for the correction on the coarse adjustment mechanism.

In fact, that sounds exactly like something the Supremes would push for - the ultimate "each case must be decided on its own facts" rule.

The problem of course, is that such a rule would actually compound the current side effects. Currently, the prong that is typically dropped (the NON-"hard and fast"-"but for" prong) is what actually induces the "cover-your-_ss" behaviour - by adding an even more detailed "punishment fits the crime" aspect, you step even further from any one-size-fits-all brightline rule.

It comes down to the classic brightline/no brightline dilemma.

[patent litigation]

Hopefully, this brief will help patent law practitioners to eventually be free of the overuse of inequitable conduct charges. Yet another potential nail in the inequitable conduct coffin popped up last week, when Patently-O reported on a new article finding that "[p]atent examiners rarely rely on applicant-submitted prior art when making rejections" -- one potential implication being that "it likely does not make sense to find inequitable conduct when an applicant withholds prior art (since the art would not have been used in a rejection anyway)." The Federal Circuit would do well to pay heed to the chorus of voices criticizing recent inequitable conduct jurisprudence.
http://www.aminn.org/webcast-aipr-patent-reform-presentation-us-patent-and-trademark-office