By Kevin E. Noonan --
The Federal Circuit delivered its en banc opinion on inequitable conduct last week in Therasense, Inc. v. Becton, Dickinson & Co. Judge O'Malley wrote separately, concurring in part with the majority while also dissenting in part, in an idiosyncratic opinion that reflects, in part, her experience. While a relative newcomer to the Federal Circuit, Judge O'Malley brings a distinguished career as a district court judge to the appellate bench, making hers a unique voice among her colleagues.
Judge O'Malley's (at left) focus is on what she terms "clear guidelines," for patent practitioners as well as the courts. However, Judge O'Malley recognizes that absolute precision or the kind of "defining rules [that can exist] in the scientific world" are not only impracticable in the law, but in fact that under equitable principles, law is actually "imprecise by design." This idea provides the basis for her disagreement with the majority, specifically with the Court's adoption of the "but-for" test for the materiality prong of their inequitable conduct analysis, as well as the parts of the decision that vacated and remanded the question of materiality to the District Court (while concurring with the decision to send the inequitable conduct question back to the lower court for reconsideration). She writes that the majority opinion's guidance and direction with regard to the intent question mandate this remand, since the District Court's decision "understandably referred to standards governing its intent determination drawn from our prior case law" and the Federal Circuit clearly set forth the standard that "a district court must find that the conduct at issue is of 'sufficient culpability to require a finding of intent to deceive,'" citing Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988). And like the other dissenters, she rejects any application of a "sliding scale" that would conflate or diminish the requirement that "intent to deceive and materiality must be found separately" (although like the dissent, albeit less broadly, in a footnote Judge O'Malley enunciates the type of "guidance" that has led to the conundrums and difficulties that the majority has tried to reduce in its opinion:
While I join this portion of the majority opinion (Part V), I do so with the understanding that the majority does not hold that it is impermissible for a court to consider the level of materiality as circumstantial evidence in its intent analysis. As in all other legal inquiries involving multiple elements, the district court may rely on the same items of evidence in both its materiality and intent inquiries. A district court must, however, reach separate conclusions of intent and materiality and may not base a finding of specific intent to deceive on materiality alone, regardless of the level of materiality.
Judge O'Malley's disagreement with both the majority and the dissent is that both, in her view, attempt to impose strict guidelines (or "hard and fast rules") on the inequitable conduct question that she finds incompatible with the equitable principles underlying the doctrine. She cites Supreme Court cases for the propositions that the Chancellor in equity is given the power to "do equity" and to "mould each decree to the necessities of the particular case," citing Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982) (quoting Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944)) and have the power to be flexible in "moulding" such decrees, citing Holmberg v. Armbrecht, 327 U.S. 392, 396 (1946). And she notes that the Supreme Court has not found patent law to be an exception to these general rules of equitable jurisprudence, citing eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393-94 (2006), as an example.
Both the majority opinion and the dissent err when they "eschew flexibility in favor of rigidity," suggesting "tests for materiality [that] apply in all cases." Judge O'Malley sees both opinions as being inquiries that are "black or white, while equity requires judicial consideration of shades of gray." Her concern is specifically directed at district courts, particularly in cases where neither of the tests (those proposed by the majority or the dissent) are met, yet equity "demands" that a patent not be enforced (albeit in "an extraordinary case"). She rejects the majority's panacea of using the "unclean hands" principle for "egregious misconduct," both because she objects to the majority's formulation that the inequitable conduct doctrine is distinct from "the unclean hands principles the Supreme Court described and explained in its trilogy of cases" (saying there is no authority to support this dichotomy" and noting that "[i]f 'unclean hands' remains available in cases of PTO misconduct, charges of unclean hands could simply supplant the very allegations of inequitable conduct the majority seeks to curb." She finds equal fault with the dissent's proposal to define materiality by PTO Rule 56, since this would "not allow, for in- stance, for a finding of inequitable conduct for conduct not encompassed by Rule 56."
She sets forth her view as follows:
We should adopt a test that provides as much guidance to district courts and patent applicants as possible, but, in doing so, we may not disregard the equitable nature of the inquiry at hand. Thus, we must make clear that, while we believe the test we offer encompasses virtually all forms of conduct sufficient to warrant a finding of inequitable conduct, we leave open the possibility that some form of intentional misconduct which we do not currently envision could warrant equitable relief.
This would be consistent with Supreme Court precedent and with "the flexible nature of equity jurisdiction."
Such flexibility should also extend to determination of the remedy for a finding of inequitable conduct, she argues, citing Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 386 (1970), for the proposition that "the lower courts should exercise the sound discretion which guides the determinations of courts of equity, keeping in mind the role of equity as the instrument for nice adjustment and reconciliation between the public interest and private needs as well as between competing private claims." Judge Rader's "atomic bomb" of complete unenforceability is "neither compelled by statute, nor consistent with the equitable nature of the doctrine," and Judge O'Malley would expressly "hold that, in the exercise of its discretion, a district court may choose to render fewer than all claims unenforceable, may simply dismiss the action before it, or may fashion some other reasonable remedy, so long as the remedy imposed by the court is "commensurate with the violation," citing Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 465 (1979). Judge O'Malley believes that this would "reduce the incentive to use inequitable conduct as a litigation tactic and address many of the concerns that trouble my colleagues and were expressed by Abbott and certain amici in these en banc proceedings"; she also opines that "[c]areful application of the pleadings requirements set forth in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)" can be used by district courts to address this problem.
The opinion also sets forth the judge's test for materiality:
(1) but for the conduct (whether it be in the form of an affirmative act or intentional non-disclosure), the patent would not have issued (as Chief Judge Rader explains that concept in the majority opinion);
(2) the conduct constitutes a false or misleading representation of fact (rendered so either because the statement made is false on its face or information is omitted which, if known, would render the representation false or misleading); or
(3) the district court finds that the behavior is so offensive that the court is left with a firm conviction that the integrity of the PTO process as to the application at issue was wholly undermined.
Finally, she joins the majority in rejecting the dissent's view that the proper materiality standard is PTO Rule 56, calling it "both too vague and too broad," particularly insofar as it would encompass acts that are "not sufficiently egregious to fall within the bounds of the Supreme Court trilogy from which the doctrine emerged." Of course, the judge also rejects the majority's test, saying it is too narrow, since "[g]iven the scope and complexity of PTO proceedings, misconduct can and does occur outside the context of written affidavits."
Turning to the case at bar, Judge O'Malley would affirm that the EPO arguments not submitted to the PTO during prosecution of the '551 patent were material (saying this information would satisfy her proposed test "or any reasonable test for materiality that comports with Supreme Court precedent" as well as the majority's "but-for" test), so that a remand on the materiality issue "is neither necessary nor appropriate."
The majority addresses Judge O'Malley's objections by asserting as a "mischaracterization" limiting "affirmative egregious acts" to the example of the case below -- filing a false affidavit. The majority states that its test provides "clear guidance to patent practitioners and the courts [in the general case regarding "but for" materiality], while the egregious misconduct exception gives the test sufficient flexibility to capture extraordinary circumstances." The majority contends that Judge O'Malley "appears to eschew the use of any test" due to the fact that for any test there may be instances that are not encompassed by the test. While acknowledging the flexibility required for applying equitable doctrines, the majority notes that "[c]ourts have long applied rules and tests in determining whether a particular factual situation falls within the scope of an equitable doctrine," citing Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008) (preliminary injunctions); eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (permanent injunctions); Gutierrez v. Waterman S.S. Corp., 373 U.S. 206, 215 (1963)(laches), and in particular, Lonchar v. Thomas, 517 U.S. 314, 323 (1996) (stating that "[c]ourts of equity must be governed by rules and precedents no less than the courts of law . . . [because] the alternative is to use equity chancellor's conscience as a measure of equity, which alternative would be as arbitrary and uncertain as measuring distance by the length of each chancellor's foot").
No doubt the differing views of majority, the dissent, and Judge O'Malley's objections to both will be useful for the parties in the expected petition for certiorari and plaintiff's opposition to the petition. Perhaps the most important party to be heard will be the Solicitor General, and his position is likely to depend on how the USPTO views the Federal Circuit's en banc opinion. Director Kappos has indicated that guidelines for implementing the Court's opinion will be forthcoming (see "USPTO Studying Therasense Decision, Will Issue Guidance Soon") and that may provide the first inkling of whether the PTO believes that the Court's decision will positively or negatively affect its ability to properly provide effective patent examination.
Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)
Before Chief Judge Rader and Circuit Judges Newman, Lourie, Bryson, Gajarsa, Linn, Dyk, Prost, Moore, O'Malley, and Reyna
Opinion by Chief Judge Rader, joined in full by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and joined in part by Circuit Judge O'Malley
Concurring-in-part and dissenting-in-part opinion by Circuit Judge O'Malley
Dissenting opinion by Circuit Judge Bryson, joined by Circuit Judges Gajarsa, Dyk, and Prost
For additional information regarding this and other related topics, please see:
• "USPTO Studying Therasense Decision, Will Issue Guidance Soon," May 26, 2011
• "Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc): The Dissenting Opinion," May 26, 2011
• "Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)," May 25, 2011
• "Abbott Files Reply Brief in Therasense Case," November 8, 2010
• "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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