By Kevin E. Noonan --
Abbott has filed its reply brief in Therasense, Inc. v. Becton, Dickinson & Co., and it is timely to discuss this brief on the eve of oral argument before the en banc Federal Circuit.
The brief begins by noting the many areas of agreement between the parties, the U.S. Patent and Trademark Office, and several of the amicus briefs submitted to the Court. These are all directed generally to the proposition that the inequitable conduct doctrine is not being applied properly or consistently by the Federal Circuit, and that corrective action is needed. Citing portions of briefs from Bayer, the USPTO, and amicus the ABA, Abbott asserts that the inequitable conduct doctrine has "strayed beyond its origins in 'egregious cases,'" defined as patent procurement by "lying, cheating or stealing"; that it "harms . . . the patent examination process" because it motivates applicants to "bury the PTO in prophylactic disclosures"; and that it "diminishes 'respect for the legal profession and the patent system itself'" due to the propensity of inequitable conduct allegations to call into question the honesty of applicants and their counsel.
The brief also finds common ground between the parties, the USPTO and "almost all amici" as to what should be done. For the intent prong, the brief advocates a return to the standards enunciated by the court in Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988). Specifically, the brief argues that the "knew or should have known" standard be rejected, and that litigants arguing inequitable conduct should be required to show that an inference of intent to deceive be "the single most reasonable inference able to be drawn from the evidence," citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008). As for materiality, there is much less consensus, but "[a]lmost everyone" agrees that the Court should reject the "reasonable examiner standard," which the brief declares "overbroad" and contends "fails to provide meaningful guidance" to applicants and provokes them to file "mounds of information with questionable materiality." Regarding the "balancing" portion of the method by which the Court assesses inequitable conduct, "[v]irtually everyone" agrees that the "materiality-intent balancing" (by which it seems the brief means using a greater showing of materiality to be "balanced" by a lesser showing of intent) should be abandoned, and specifically states that the reasoning used in cases such as Aventis Pharma S.A. v. Amphastar Pharms., Inc., 525 F.3d 1334, 1344 (Fed. Cir. 2008) should be "retired." The brief argues that only after both intent and materiality have been established by clear and convincing evidence should a court be permitted to "balance" all the equities to decide whether the conduct merits the remedy of unenforceability.
Having set forth the areas of agreement, the brief then discusses the disagreements between the parties and amici. First and foremost is the proper standard for materiality, with Abbott and some of the amici arguing for a "return" to "but-for" causation as the test, citing Norton v. Curtiss, 433 F.2d 779, 794 (C.C.P.A. 1971). This standard "reflects Supreme Court precedent, historic practice, and the standards in other areas of intellectual property," rather than the PTO's Rule 56 "standard," which the brief argues "has no basis in law and would continue the deleterious practices everyone urges the Court to remedy."
The brief cites the Court itself for recognizing the problem with its inequitable conduct jurisprudence, citing the many recent instances where members of the Court have echoed Judge Nichols' complaint that inequitable conduct has become "a plague on the patent system" in Burlington Indus.., Inc. v. Dayco Corp., 849 F.2d 1418 (Fed. Cir. 1988). That situation had been remedied by the Kingsdown decision, but adherence to the "specific intent to deceive" standard adopted by the en banc Court has greatly declined in the interim, appellants argue. This standard is accepted "[a]lmost without exception" according to the brief, citing Bayer, the USPTO, the ABA, the AIPLA, and the Federal Circuit Bar Association's briefs for this consensus. "Near-universal agreement" is also shown for several "corollaries": these include abandonment of the "knew or should have known" standard used, inter alia, in Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997). Moreover, the brief argues that the proper standard for a "specific intent to deceive" is that: "at the time of the alleged misrepresentation, the applicant (1) knew of the information, (2) knew it was material to issuance, (3) deliberately decided to withhold or misrepresent it, and (4) intended to deceive the PTO to obtain the patent," citing Star Scientific, 537 F.3d at 1366 (emphasis in original). Star Scientific is also cited approvingly for the principle that mere inference cannot sustain a party's clear and convincing evidence burden unless that inference is "the single most reasonable inference able to be drawn from the evidence." Id. And the patentee need not provide any evidence or "good faith explanation" to rebut an inference of intent to deceive unless and until the party alleging inequitable conduct has proffered clear and convincing evidence to the contrary. In particular, the brief argues that "lack of a good faith explanation" cannot be sufficient to establish "culpable intent," citing M. Eagles Tool Warehouse, Inc. v. Fisher Tooling Co., 439 F.3d 1335, 1341 (Fed. Cir. 2006), whereas "a sufficiently plausible explanation should defeat the charge, citing Abbott's own opening brief. Intent "can be inferred from circumstantial evidence" (illuminating the applicant's "contemporaneous subjective mental state"), whereas materiality depends on fact -- evidence of the "information's objective importance or impact." In practice, the problem is that courts have taken to using high levels of materiality to infer deceptive intent, which the brief argues must be insufficient unless "the patentee appreciated the materiality of the information contemporaneous to the time of the alleged misconduct" and "knowingly withheld it."
Regarding the "but-for" test, the brief argues that "in every other area of intellectual property law, misconduct before the agency will not invalidate property rights unless it was the but-for cause of the agency's decision." Here the brief takes on one key area of disagreement with appellees, who have argued that the Court should use the PTO's Rule 56. The brief disagrees with the distinction raised by Bayer that Supreme Court precedent -- specifically, the canonical Supreme Court precedent of 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) -- is based in the equitable concept of "unclean hands" rather than in common-law fraud. What is required under both fraud and unclean hands standards is "proof of causation before property rights will be destroyed," says the brief. The facts of the three Supreme Court cases that are the genesis of the inequitable conduct doctrine certainly concern egregious behavior that amount to fraud; as the brief notes, "[t]hose cases speak for themselves." The application of the doctrine in Norton expanded the "types of covered misconduct," according to the brief (emphasis in original) but not the fraud standard: the Norton Court's definition of materiality was that "if the Patent Office had been aware of the complete or true facts, the challenged claims would not have been allowed" -- which sounds very much like a "but-for" standard. And the brief argues that this standard is consistent with other Supreme Court precedent, particularly Corona Cord Tire Co. v. Dovan Chemical Corp., that "refus[ed] to lift even the presumption of validity based on false affidavits that were not 'the basis for' or 'indispensible to the granting of the patent,'" 276 U.S. 358, 373-74 (1928). The brief also distinguishes the textual grounds cited by appellees for arguing that inequitable conduct is broader than fraud (specifically, the dicta in Precision regarding "fraud or other inequitable conduct"), saying that this statement was made with regard to the public's interest in proper patent procurement and not establishing a standard for rendering unenforceable patents for conduct that "had no impact" on whether a patent was granted. For Abbott, the phrase is properly interpreted as "fraud and fraud-like conduct." The brief also strongly argues that the "unclean hands" standard has, by appellees' reading, no standard (being "not bound by formula") and that a large part of the problems in how the Court currently applies the inequitable conduct doctrine can be laid at the door of just such a lack of clear standards. Even there the brief argues appellees are wrong: citing the Restatement (Second) of Torts for the proposition that "collateral" misdeeds are insufficient to invoke equity: "'[c]ollateral misdeeds . . . are not presently material' and will not bar relief."
The brief further distinguishes Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488 (1942), cited by appellees for the proposition that "injury to the public" is sufficient to invoke equitable principles since there can be no injury to the public unless a patent has granted as the result of the misdeeds (i.e., "if the patent would have granted anyway"). And the brief notes that, despite one of the questions presented by the en banc Court being for "briefing on related areas of law," appellees "scarcely address the issue" based on purported differences between patent law and other related areas of law (specifically, trademarks and copyrights). But these purported differences are in fact similarities, the brief argues, setting forth parallels between the law and citing Supreme Court approval of using law as developed in one area of intellectual property law to illuminate others, citing Sony Corp. of Am. v. Univ. City Studios, Inc., 464 U.S. 417, 439 (1984); eBay Inc. v. MercExchange L.L.C., 547 U.S. 388, 391-93 (2006); and Morton Salt.
Turning to appellees' proposal that the Court adopt the PTO's Rule 56, the brief declares it "contrary to law," arguing that the PTO lacks substantive rulemaking authority and thus is not competent to define inequitable conduct as recited in 35 U.S.C. § 282 since Congress has not delegated this authority to the Office. The brief also notes the impracticality of reversing the precedential axis between the PTO and the Court, including that the Court would have to change its standards if the Office did (especially in view of the fact that the Office has changed the Rule 56 standard three times since 1950; if the Court is to adopt any PTO standard, the brief argues it should be the "fraud-based" one extant in 1952 when the Patent statute was enacted).
The brief also discusses not only appellees' misguided arguments (by its lights) but how the Federal Circuit has misapplied the "balancing test" by permitting "balancing" to be done before the finding of inequitable conduct, on the grounds that "[t]he more material the omission or misrepresentations, the less intent that must be shown to elicit a finding of inequitable conduct." Aventis, 525 F.3d at 1344 (emphasis added in the brief). This has resulted in a "'sliding scale' where intent to deceive may be inferred from materiality" or where "proof of one may substitute for the other." "That tends to dilute the threshold requirements for both materiality and intent, leading to imprecision and unpredictability," the brief argues, whereby "courts end up balancing 'relatively weak evidence' of one element against 'strong evidence' of the other to 'find that on balance, inequitable conduct had occurred,'" citing Dippin' Dots, Inc. v. Mosey, 476 F.3d 1337, 1346 (Fed. Cir. 2007). The only way for this to be remedied, according to appellants, is for the en banc Court to hold that "courts balance the equities only when deciding whether to impose the unenforceability remedy, after all elements of inequitable conduct are shown."
Turning to the case at bar, the brief argues that appellees should not profit from a verdict imposed by the District Court using standards that even they agree were improper. Specifically, the District Court used the "knew or should have known" standard from Aventis to find intent regarding attorney Pope. The District Court expressly "balanced" the evidence of materiality and intent rather than require both be established by clear and convincing evidence, "an approach virtually everyone disavows." Further, the brief argues, there was no independent evidence of intent to deceive, which was all inferred from the materiality of the withheld evidence -- and on the question of materiality the brief argues the District Court's decision reflects "the court's disagreement with [attorney] Pope's and [declarant] Sanghera's views on materiality. Under these circumstances, appellants argue that the Federal Circuit cannot affirm, arguing that "[t]his Court cannot impose its own "discretion as if [it] were the first-line court of equity," citing Acumed LLC v. Stryker Corp., 483 F.3d 800, 811-12 (Fed. Cir. 2007). Citing Judge Linn's dissent from the panel decision, the brief argues that there was an "equally reasonable (if not more reasonable) inference" that the inconsistencies between applicant's arguments to the PTO and the EPO were "immaterial," and that it was an abuse of discretion for the District Court to hold the patent-in-suit unenforceable under these circumstances. The brief attacks the District Court's conclusion that there was evidence of intent to deceive, citing evidence of the objective reasonableness of declarant Sanghera's statements and attorney Pope's arguments. The brief maintains that the only defect in either was failure to submit to the PTO the briefs submitted to the EPO. Moreover, appellants argue that the relevant portions of the withheld EPO briefs were not material as being attorney argument, which has never been held to be material information. Accordingly, the District Court's decision was both substantively incorrect and an abuse of discretion and should be reversed, appellants argue.
The Federal Circuit will sit en banc to hear argument on Tuesday.
For additional information regarding this topic, please see:
• "Appellees File Reply Brief in Therasense v. Becton Dickinson," October 27, 2010
• "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
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