Patent Docs

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc): The Dissenting Opinion

By Kevin E. Noonan --

The Federal Circuit delivered its en banc opinion on inequitable conduct on Wednesday in Therasense, Inc. v. Becton, Dickinson & Co.  Four judges dissented from that opinion, with Judge Bryson writing for his fellow Circuit Judges Gajarsa, Dyk, and Prost.  Judge O'Malley wrote separately, concurring in part and dissenting in part.  Despite coming in at slightly longer than the majority opinion, Judge Bryson's dissent differs from the majority on but one aspect of inequitable conduct, the standard for assessing materiality.  The dissenting judges argue that the best measure of a material reference is the one used by the U.S. Patent and Trademark Office, codified as PTO Rule 56 (37 C.F.R. § 1.56).  Otherwise, the dissenters agree with the majority that "[t]here is broad consensus that the law of inequitable conduct is in an unsatisfactory state and needs adjustment" due to "differing standards" having been applied in making inequitable conduct decisions.  There is also consensus with the majority that such "doctrinal uncertainty has had adverse consequences both for patent litigation and for the PTO," including an excess of inequitable conduct claims in litigation and the resulting tendency for "some patent prosecutors to err on the side of 'over-disclosure; in order to avoid the risk of rendering all claims of an otherwise valid patent unenforceable because of the omission of some marginally relevant reference."

There is "substantial agreement" on resolving the issues of intent to deceive and the application of the "sliding scale":  indeed, "the parties to this case and most of the amici agree that proof of inequitable conduct should require a showing of specific intent to deceive the PTO," and that "negligence, or even gross negligence, should not be enough."  There is also agreement, according to the dissenting opinion, that courts should not apply a "sliding scale" "whereby a strong showing as to one element [i.e., materiality or intent to deceive] can make up for weaker proof as to the other."

The question, then, is the materiality standard, for which there is consensus among neither the parties, the amici, or the Court.  The dissent believes the proper (and broader) standard should be Rule 56:

[I]nformation is "material" if it is "not cumulative to information already of record or being made of record in the application" and
    (1)  It establishes, by itself, or in combination with other information, a prima facie case of unpatentability of a claim; or
    (2)  It refutes, or is inconsistent with, a position the applicant takes in:
        (i)  Opposing an argument of unpatentability relied on by the Office, or
        (ii)  Asserting an argument of patentability.

The dissent believes this is the proper standard for two reasons:  first, that the PTO is in the best position to determine whether information is material to its purposes (examination), and second that the majority's higher materiality standard will not provide "appropriate incentives" for patent applicants to comply with the duty of disclosure.  Judge Bryson believes that this standard is consistent with the Court's precedent, particularly J.P. Stevens & Co. v. Lex Tex Ltd., 747 F.2d 1553 (Fed. Cir. 1984).  There, according to the dissenting opinion, a five-judge panel of the court decided that:

• Inequitable conduct is broader than common-law fraud, citing Norton v. Curtiss, 433 F.3d 779, 793 (CCPA 1970);

• Failure to disclose material information could be just as culpable as providing false information; and

• PTO Rule 56 "established 'the appropriate starting point' because that standard 'most closely aligns with how one ought to conduct business with the PTO,'" citing Norton and Driscoll v. Cebalo, 731 F.2d 878, 884 (Fed. Cir. 1984).

While the Court has "occasional[ly] depart[ed]" from the intent standard established by Kingsdown Medical Consultants, Ltd. v. Hollister Inc., the dissent argues that the materiality standard as established by this line of precedent has been consistently applied by the Court (albeit admitting that "there has been some variation" in which version of the Rule has been applied).

The dissenting judges would reaffirm this standard, and their opinion characterizes the majority opinion as "radical" and that it "does not merely reform the doctrine of inequitable conduct, but comes close to abolishing it altogether."  The dissent believes that proper application of the principles enunciated in Kingsdown and the other cited prior precedent would be sufficient to resolve the deleterious effects of widespread use of the inequitable conduct defense, in concert with heightened pleadings requirements (Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009)), use of Rule 11 sanctions, and the exercise of the court's "equitable judgment," all of which the dissent finds preferable to the majority's "Draconian" solution (and none of which have been particularly effective to date).

Citing the PTO's amicus brief, the dissent argues that the "but for" materiality test makes inequitable conduct a redundancy, since only those claims that are invalid anyway would be unenforceable for inequitable conduct.  Thus, the dissent argues, this test provides little incentive to promote the policy goals of the duty of disclosure before the PTO (discounting the disciplinary aspects in view of deficiencies in the PTO's ability to detect inequitable conduct and ignoring the unlikelihood that most practitioners would intentionally put their careers in jeopardy).  The dissent cites several cases where the Court has rejected the "but for" materiality test, including Merck & Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1421 (Fed. Cir. 1989); Purdue Pharma L.P. v. Endo Pharms. Inc., 438 F.3d 1123, 1132 (Fed. Cir. 2006); Hoffmann-LaRoche, Inc. v. Promega Corp., 323 F.3d 1354, 1368 (Fed. Cir. 2003); Molins PLC v. Textron, Inc., 48 F.3d 1172, 1179-80 (Fed. Cir. 1995); and A.B. Dick Co. v. Burroughs Corp., 798 F.2d 1392, 1396 (Fed. Cir. 1986).  The dissent argues that the incentives of Rule 56 are necessary because "an open door may tempt a saint" and the "large stakes sometimes at issue in patent prosecution[]" make "a regime that ensures that a dishonest but potentially profitable course of action can be pursued with essentially no marginal added risk is an unwise regime no matter how virtuous its subjects."

The dissent also argues that the "but for" materiality standard is inconsistent with the three canonical Supreme Court cases that were 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); Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945), a view directly opposed to the majority's reading of these cases.  For the dissenting judges, none of these cases involved a determination by the Court that the patents in question would not have issued "but for" nondisclosure of the undisclosed information.  In the dissent's view, the Supreme Court trilogy established the following principles:

(1)  the public has a special interest in seeing that patent monopolies "spring from backgrounds free from fraud or other inequitable conduct";

(2)  as a corollary to that public interest, patent applicants "have an uncompromising duty to report to [the Patent Office] all facts concerning possible fraud or inequitableness underlying the applications";

(3)  all facts relevant to such matters must be submitted to the Patent Office, "which can then pass upon the sufficiency of the evidence";

(4)  the intentional failure to disclose to the Patent Office that a patent application is tainted by fraud is sufficient cause to justify not enforcing the patent; and

(5)  the misconduct in question need not constitute actionable fraud; it is sufficient if the conduct constitutes a willful act that violates standards of equitable conduct in dealing with the Patent Office.

In addition, the dissent cites Kingsland v. Dorsey, 338 U.S. 318, 319 (1949), for the principle that "the relationship of attorneys to the Patent Office requires the highest degree of candor and good faith.  In its relation to applicants, the Office . . . must rely upon their integrity and deal with them in a spirit of trust and confidence . . . ," and accordingly that it falls to the courts to police applicants' (and their counsels') behavior.  This forms the predicate for the dissent's argument that the Court should adopt the PTO's materiality standard, Rule 56.

The dissent relies on the Norton decision, where the Court both endorsed the Commissioner's (now Director's) authority to "strike a patent application for fraud on the PTO in violation of the PTO's Rule 56" as well as defining "fraud on the PTO" to be broader than common-law fraud, due to the "relationship of confidence and trust" between applicants (and their counsel) and the agency.  Thus, the Norton court held that "the test for materiality 'cannot be applied too narrowly if the relationship of confidence and trust between applicants and the Patent Office is to have any real meaning,' and that findings of materiality should not be limited to those cases in which the true facts, if they had been known, 'would most likely have prevented the allowance of the particular claims at issue.'"  According to the dissent, this standard was consistently applied ever since, citing cases decided throughout the Federal Circuit's history (although the dissenting opinion does recognize that the standard has changed, from a "reasonable examiner" under the 1977 version of the Rule to the current Rule, adopted in 1992).  Of course, if that was indeed the controlling standard, the majority's decision has now overruled it.

Finally, the dissent cites to other areas of the law, specifically securities law regarding insider trading (where the existence of undisclosed information is "regarded as material without the need to prove reliance," citing Affiliated Ute Citizens v. United States, 406 U.S. 128, 153-54 (1972), and Matrixx Initiatives, Inc. v. Siracusano, No. 09-1156 (U.S. Mar. 22, 2011)) and proxy solicitations, citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438 (1976); mail and wire fraud, citing United States v. Olatunji, 872 F.2d 116; naturalization proceedings, citing  Kungys v. United States, 485 U.S. 759, 772 (1988); and even common law fraud, citing the Restatement (Second) of Torts  § 538, all for the proposition that materiality is not subject to a "but for" test in any of these instances.

The dissent summarizes its underlying policy objections succinctly:

Under this court's new rule, an applicant who conceals information with the intent to deceive the PTO will be free to enforce his patent unless it can be proved by clear and convincing evidence that the patent would not have issued but for the fraud.  Even though the majority justifies its new rule in part by asserting that it will improve the prosecution of patents before the PTO, I am convinced that the new rule is likely to have an adverse impact on the PTO and the public at large, a view that -- significantly -- is shared by the PTO itself.

As for the case at bar (which the dissenting judges believe "illustrate why the materiality standard of Rule 56 is a suitable test for inequitable conduct claims based on disclosure violations"), the dissent would affirm, believing that "the district court made all the findings necessary to support its holding that the '551 patent was unenforceable for inequitable conduct."

The majority opinion sets forth its views on the arguments made in the dissent.  The majority notes that the Federal Circuit "is not bound by the definition of materiality in PTO rules," citing Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1549-50 (Fed. Cir. 1996), for the proposition that the PTO does not have substantive rulemaking authority.  The majority also states that, with all due regard for "the PTO's knowledge in its area of expertise," the effects of inequitable conduct "ha[ve] had adverse ramifications beyond its effect on the PTO" (specifically, in litigation).  The opinion acknowledges that the Court has used Rule 56 in the past "as a starting point for determining materiality," and that the Rules standards have changed over time.  But this inconsistency in the PTO's definition of materiality "has led to uncertainty and inconsistency in the development of the inequitable conduct doctrine," citing Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1316 (Fed. Cir. 2006), for the application of the 1977 version of Rule 56, and Bruno Independent Living Aids, Inc. v. Acorn Mobility Servs., Ltd., 394 F.3d 1348, 1352-53 (Fed. Cir. 2005), for applying the 1992 version of the Rule.  The majority expressly states that it "declines to adopt the current version of Rule 56 in defining inequitable conduct because reliance on this standard has resulted in the very problems this court sought to address by taking this case en banc":

The first prong of Rule 56 is overly broad because information is considered material even if the information would be rendered irrelevant in light of subsequent argument or explanation by the patentee.  Under this standard, inequitable conduct could be found based on an applicant's failure to disclose information that a patent examiner would readily agree was not relevant to the prosecution after considering the patentee's argument.  Likewise, the second prong of Rule 56 broadly encompasses anything that could be considered marginally relevant to patentability.  If an applicant were to assert that his invention would have been non-obvious, for example, anything bearing any relation to obviousness could be found material under the second prong of Rule 56.  Because Rule 56 sets such a low bar for materiality, adopting this standard would inevitably result in patent prosecutors continuing the existing practice of disclosing too much prior art of marginal relevance and patent litigators continuing to charge inequitable conduct in nearly every case as a litigation strategy.

The majority also disagrees with the dissent's view that "but for" materiality is not required in other contexts, specifically common law fraud where the opinion cites its own section of Restatement (Second) of Torts (§ 525) for the proposition that reliance is required.  More generally, the opinion states that copyright and trademark law are more appropriate analogous areas of law for comparison, and there "[b]ut-for proof is required to invalidate both copyrights and trademarks based on applicant misconduct," citing 17 U.S.C. § 411(b)(1) (copyright) and Citibank, N.A. v. Citibanc Group, Inc., 724 F.2d 1540, 1544 (11th Cir. 1984) (trademarks).

It is interesting to note that Footnote 1 of the dissent, relating to prohibiting the "sliding scale," in fact would return this aspect of the inequitable conduct to status quo ante:

It is important to distinguish between relaxing the required proof of intent if the proof of materiality is strong, which is impermissible, as opposed to considering the degree of materiality as relevant to the issue of intent, which is appropriate, particularly given that direct evidence of intent, such as an admission of deceptive purpose, is seldom available.  See Cargill, Inc. v. Canbra Foods, Ltd., 476 F.3d 1359, 1366 (Fed. Cir. 2007); Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181, 1190-91 (Fed. Cir. 2006); GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1274 (Fed. Cir. 2001); Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 1189 (Fed. Cir. 1993); Merck &  Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989).

Permitting evidence of materiality to color the assessment of the intent to deceive has resulted in precisely the situation the majority opinion is intended to remedy, as evidenced by the cases cited in support of this principle, which constitute many of the cases where arguably "minor misconduct" has been bootstrapped into an inequitable conduct finding.

Judge O'Malley in her opinion, concurring in part and dissenting in part, "do[es] not weigh in on the policy debate between the majority and the dissenters."  Her views will be discussed in a future Patent Docs post.

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

Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)

By Kevin E. Noonan --

The Federal Circuit delivered its en banc opinion on inequitable conduct today in Therasense, Inc. v. Becton, Dickinson & Co.  In an opinion written by Chief Judge Rader and joined by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and by Judge O'Malley in part, the Court issued clear standards for establishing the inequitable conduct defense.  Simply put, first, an omitted reference is a material reference only if "but for" its exclusion the claim or patent would not have issued.  Second, there must be clear and convincing evidence of a specific intent to deceive by the applicant.  Third, a court cannot use a "sliding scale" to find inequitable conduct, i.e., it cannot find sufficient a weak showing of intent based on a strong showing of materiality; both materiality and intent to deceive must be supported by clear and convincing evidence.  And finally, in view of the severity of the remedy of unenforceability, courts should apply equity to ensure that the remedy is not imposed for misconduct that was "immaterial to the issuance of the patent."

To recap the factual background of this case, the technology involves disposable blood glucose test strips for measuring the amount of glucose in blood, where the amount of glucose in the sample is read using an electrode.  Specifically claimed are test strips without a membrane over the electrode:

1.  A single use disposable electrode strip for attachment to the signal readout circuitry of a sensor to detect a current representative of the concentration of a compound in a drop of a whole blood sample comprising:
    a) an elongated support having a substantially flat, planar surface, adapted for releasable attachment to said readout circuitry;
    b) a first conductor extending along said surface and comprising a conductive element for connection to said readout circuitry;
    c) an active electrode on said strip in electrical contact with said first conductor and positioned to contact said whole blood sample;
    d) a second conductor extending along said surface comprising a conductive element for connection to said read out circuitry; and
    e) a reference counterelectrode in electrical contact with said second conductor and positioned to contact said whole blood sample,
    wherein said active electrode is configured to be exposed to said whole blood sample without an intervening membrane or other whole blood filtering member . . . .

(U.S. Patent No. 5,820,551).  The prior art (including patentee's own prior patent, U.S. Patent No. 4,545,382) contained protective membranes to prevent electrode fouling.  This patent contained language wherein a membrane was "optionally, but preferably" included in the test strip.  Attorney argument, supported by expert witness declaration (from Abbott's Director of R&D) asserted that the "membraneless" feature of the '551 patent claim distinguished over the '382 prior art.  The Examiner required a declaration that the prior art required a membrane, and Abbott's R&D Director attested that the worker of ordinary skill would understand the "optionally, but preferably" language in the '382 patent to require a membrane.

Prior to submitting this argument, however, counsel before the European Patent Office had submitted a response, supported by the same expert's declaration, in the European counterpart of the '382 patent that was directly contradictory to the arguments presented to the U.S. Examiner during prosecution of the '551 patent.  Before the EPO, the expert attested and the European attorney argued that the membrane was not necessary to control permeability, an argument used to distinguish over another prior art reference that disclosed a test strip having a membrane.

Litigation ensued between the parties, with Becton, Dickinson ("BD") filing a declaratory judgment action that its disposable glucose strip did not infringe two other Abbott patents (U.S. Patent Nos. 6,143,164 and 6,592,745), and Abbott (successor in interest to Therasense) counterclaimed for infringement of the '164, '745, and '551 patents.  The District Court granted summary judgment of non-infringement of the '143 and '745 patents, that the '745 patent claims were invalid for anticipation, and that claims 1-4 of the '551 patent were obvious over the '382 patent in view of U.S. Patent 4,225,410.  The District Court also found that the '551 patent was unenforceable for inequitable conduct, based on the failure to submit the briefs filed in the EPO during prosecution of the '551 patent.  The en banc Court vacated a prior panel decision in order to address the inequitable conduct issue.

The majority opinion starts, as it must, with the three canonical Supreme Court cases that were 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); Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945).  The opinion characterizes each of these cases as involving "the manufacture or suppression of evidence," either before the U.S. Patent and Trademark Office, during litigation or both, and notes that the remedy was that the case was dismissed, i.e., the patentee was precluded from obtaining relief from the court due to unclean hands.  The majority opinion notes that these cases each "dealt with particularly egregious misconduct, including perjury, the manufacture of false evidence, and the suppression of evidence" and also involved "'deliberately planned and carefully executed scheme[s] to defraud' not only the PTO but also the courts," citing Hazel-Atlas Glass, 322 U.S. at 245.  However, from these origins the Court acknowledges that the inequitable conduct doctrine "came to embrace a broader scope of misconduct, including not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts but also the mere nondisclosure of information to the PTO."  The Court also notes that the remedy invoked also changed, from dismissal of the lawsuit to "unenforceability of the entire patent" involved in the lawsuit.

Along with "this wider scope and stronger remedy," the opinion states that a showing of both materiality and intent came to be required.  The opinion cites Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008), for the conventional requirement for establishing inequitable conduct:  a finding that "applicant misrepresented or omitted material information with the specific intent to deceive the PTO" and that "[t]he accused infringer must prove both elements -- intent and materiality -- by clear and convincing evidence."  Finally, "[i]f the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant's conduct before the PTO warrants rendering the entire patent unenforceable."

The majority opinion recognizes that the Supreme Court cases cited above did not contain any standard for materiality, and that those Supreme Court cases provide precedential support for a court to invoke the unclean hands doctrine "to supply a remedy for egregious misconduct."  The opinion also notes that the standards for establishing both materiality and intent have "fluctuated" over time, citing cases where the Court "espoused low standards for meeting the intent requirement," Driscoll v. Cebalo, 731 F.2d 878, 885 (Fed. Cir. 1984) (establishing a "knew or should have known" standard); Orthopedic Equip. Co., Inc. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383-84 (Fed. Cir. 1983) (finding gross negligence sufficient to establish intent to deceive), and "a broad view of materiality," citing Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984) (applying a "reasonable examiner" standard based on 37 C.F.R. § 1.56 (1977)).  "Further weakening" what was required to establish inequitable conduct, according to the opinion, was the practice of using a "sliding scale" that permitted a finding of inequitable conduct "based on a reduced showing of intent if the record contained a strong showing of materiality, and vice versa."

The rationale for lowering the standards, according to the majority was to "foster full disclosure to the PTO."  However, the opinion notes that "[t]his new focus" had "numerous unforeseen and unintended consequences," including "increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality."  Citing a Report from the National Research Council of the National Academies, the opinion states that charging inequitable conduct "conveniently expands discovery into corporate practices before patent filing and disqualifies the prosecuting attorney from the patentee's litigation team," and in addition "cast a dark cloud over the patent's validity and paint the patentee as a bad actor."  The opinion also cites the doctrine's focus on "moral turpitude" as a reason why it "discourages settlement and deflects attention from the merits of validity and infringement issues," citing a Committee Position Paper from the AIPLA.

"Perhaps most importantly," according to the majority, the remedy of complete unenforceability of the entire patent makes inequitable conduct the "atomic bomb" of patent law, citing Chief Judge Rader's dissent from Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334 (Fed. Cir. 2008).  Not only can't inequitable conduct be "cured by reissue," but the "taint . . . can spread from a single patent to render unenforceable other related patents and applications in the same technology family," citing Consol. Aluminum Corp. v. Foseco Int'l Ltd., 910 F.2d 804, 808-12 (Fed. Cir. 1990).  The opinion also notes that an inequitable conduct finding can be used to support claims sounding in antitrust and unfair competition, may invoke the "exceptional case" provisions of 35 U.S.C. § 285, and may be used to pierce the attorney-client privilege under the crime-fraud exception.  The opinion also asserts that the consequences of this state of affairs extends further than litigation and plagues "the entire patent system."  These negative effects include the practice of "patent prosecutors regularly bury[ing] PTO examiners with a deluge of prior art references, most of which have marginal value," constituting a "tidal wave of disclosure [that] makes identifying the most relevant prior art difficult."

In view of these negative and unintended consequences, the opinion directly states that "[t]his court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public."  (The section of the brief outlining how the Court has "tightened the standards" was joined by Judge O'Malley.)  First, the Court holds that an accused infringer "must prove that the patentee acted with the specific intent to deceive the PTO," citing Star Scientific.  Specifically, a finding of negligence, gross negligence, or the application of a "should have known" standard "does not satisfy this intent requirement," citing Kingsdown Medical Consultants, Ltd. v. Hollister Inc.  Rather, there must be clear and convincing evidence that an applicant "made a deliberate decision to withhold a known material reference," citing Molins PLC v. Textron, Inc. (emphasis in the opinion).  In the event that this standard remains unclear, the Court expressly set forth the requirement:  "the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it."  The opinion characterizes this standard as being consistent with the "origins in the trio of Supreme Court cases that set in motion the development of the inequitable conduct doctrine."

Second, the opinion states that "[i]intent and materiality are separate requirements," citing Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d 1354, 1359 (Fed. Cir. 2003), and thus "[a] district court should not use a 'sliding scale,' where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa."  In addition, "a district court may not infer intent solely from materiality."  Recognizing that "direct evidence of deceptive intent is rare," the opinion permits district courts to "infer intent from indirect and circumstantial evidence," citing Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009).  The opinion warns, however, that such an inferred intent "must be 'the single most reasonable inference able to be drawn from the evidence,'" citing Star Scientific, emphasizing that the evidence "'must be sufficient to require a finding of deceitful intent in the light of all the circumstances,'" citing Kingsdown Medical (emphasis in opinion).  Again leaving little room for doubt, the opinion states that "when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found," citing Scanner Techs. Corp. v. ICOS Vision Sys. Corp., 528 F.3d 1365, 1376 (Fed. Cir. 2008).  Finally, the absence of "a good faith explanation for withholding a material reference" by the patentee is not sufficient to establish an intent to deceive.

Acknowledging the failure of prior precedent to reduce the "proliferation of inequitable conduct charges" by focusing on the intent prong, the Court then addressed the materiality standard.  Once again stating the standard expressly, the Court holds that "as a general matter, the materiality required to establish inequitable conduct is but-for materiality," i.e., "[w]hen an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art"; the opinion cites Corona Cord Tire Co. v. Dovan Chem. Corp., 276 U.S. 358 (1928), as relevant and Supreme Court precedent consistent with this standard.  In the application of this materiality standard, the opinion states that a district court "must determine" whether the claim at issue would have been granted if the PTO was aware of the reference, using the preponderance of the evidence burden and giving the claims their "broadest reasonable construction," as would have occurred during ex parte prosecution.  The Court sets out an important indication of how this standard might be put into practice, stating that a "deliberately withheld reference" is "necessarily material" if a claim is "properly invalidated" by a court, since the clear and convincing evidence standard for invalidity is higher than the preponderance standard that the PTO applies.  The opinion does accommodate an exception to these principles in cases of "affirmative egregious conduct" as existed in the canonical Supreme Court precedential trio.  Such egregious misconduct is material per se, according to the opinion, and making this distinction "strikes a necessary balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitable conduct."

Turning to the remedy, the opinion notes that inequitable conduct is an equitable doctrine, and thus its application is rooted in "basic fairness."  Thus, a finding of inequitable conduct having a remedy of complete unenforceability "should only be applied in instances where the patentee's misconduct resulted in the unfair benefit of receiving an unwarranted claim," citing the statement in Star Scientific that "[j]ust as it is inequitable to permit a patentee who obtained his patent through deliberate misrepresentations or omissions of material information to enforce the patent against others, it is also inequitable to strike down an entire patent where the patentee committed only minor missteps or acted with minimal culpability."  While not expressly cited, cases where inequitable conduct has been found for improperly claiming small entity status (Nilssen v. Osram Sylvania, Inc.), improperly filing a petition to make special (General Electro Music Corp. v. Samick Music Corp.), failing to disclose that a declarant had been a paid consultant prior to filing an expert declaration under 37 C.F.R. § 1.132 (Ferring B.V. v. Barr Laboratories, Inc.), misjoinder of inventorship (PerSeptive Biosystems, Inc. v. Pharmacia Biotech, Inc.), and inaccuracies in an expert declaration (Aventis Pharma S.A. v Amphastar Pharma, Inc.) seem to be encompassed by this characterization.

The majority vacated and remanded the case to the District Court to consider the inequitable conduct question in light of the standards set forth in the opinion, while affirming without comment or discussion the invalidity findings below.

Most of the rubrics and principles on which the opinion's standards are founded upon can be found in earlier precedent cited liberally throughout the majority opinion; in this regard, the case is similar to the en banc Court's treatment of claim construction standards in Phillips v. AWH Corp. in 2005.  However, the adoption of the "but-for" standard (and an "objective but-for" standard at that) clearly indicates that the Court majority has been persuaded that inequitable conduct has once again become a sufficiently significant plague that its exercise can only be curbed by "tightening" the objective grounds upon which it can be proven (after similarly tightening the requirements for how it is plead in Exergen Corp. v. Wal-Mart Stores, Inc.).

The dissenting and concurring opinions will be discussed in subsequent posts, along with the majority's rejoinder regarding the arguments set forth in those opinions.

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

Top Stories of 2010: #8 to #5

By Donald Zuhn --

Reflecting upon the events of the past twelve months, Patent Docs presents its fourth annual list of top biotech/pharma patent stories.  For 2010, we identified a dozen stories that we covered on Patent Docs last year that we believe had (or are likely to have) the greatest impact on biotech/pharma patent practitioners and applicants.  Yesterday, we counted down stories #12 to #9, and today we cover stories #8 to #5.  Later this week, we will present our top four stories of 2010.  As with our other lists (2009, 2008, and 2007), links to our coverage of these stories (as well as a few links to articles on related topics) have been provided in case you missed the articles the first time around or wish to go back and have another look.  As always, we love to hear from Patent Docs readers, so if you think we left something off the list or disagree with anything we included, please let us know.

#8 -- Change Comes to Europe Patent Practice

For longtime patent practitioners, October 1, 2010 may have recalled June 7, 1995; the latter date marked the deadline for filing US applications that could secure a patent term of 17 years from grant under the Uruguay Round Agreements Act, and the former constituted the deadline for filing EP divisional applications in which a first communication or unity of invention objection had been issued more than two years prior to the October 1 deadline.  While the EPO announced this major rule change in 2009 (see "Changes Coming to Divisional Application Practice in Europe"), the impact of the rule was obviously felt in 2010.  Other important changes in Europe included the prohibition of Swiss-style claiming ("the use of compound X for the manufacture of a medicament for treating of disease Y"), and the modification of the requirements for supplying search results on priority applications.  Aside from the above rules changes, Europe also continued to move toward some type of unified patent system that would create a single EU patent.

For information regarding this and other related topics, please see:

 • "Several EU Members Push for Unified Patent System," December 30, 2010
• "EPO Prepares to Roll out New Prior Art Search Disclosure Rules," November 1, 2010
• "Swiss-type Claims Are No Longer Acceptable at the EPO," March 3, 2010
• "Europe Takes Step Closer to Single EU Patent and Patent Court," February 24, 2010

#7 -- Federal Circuit Finds Separate Written Description Requirement

In March, the Federal Circuit sitting en banc in Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co. determined that there is a separate written description requirement in 35 U.S.C. § 112, first paragraph.  The opinion of the en banc Court was written by Judge Lourie, who authored the Federal Circuit's landmark decision in Regents of the University of California v. Eli Lilly & Co.  While current Chief Judge Rader and Judge Linn each wrote dissenting-in-part opinions, then Chief Judge Michel and Judges Newman, Mayer, Bryson, Gajarsa, Dyk, Prost, and Moore joined Judge Lourie in finding a separate written description requirement.

For information regarding this topic, please see:

• "Ariad Pharmaceuticals, Inc. v. Eli Lilly & Co. (Fed. Cir. 2010) (en banc)," March 22, 2010

#6 -- Federal Circuit Reviews Inequitable Conduct Case En Banc

Having dispatched with written description in Ariad v. Lilly, the Federal Circuit turned its attention to the issue of inequitable conduct, deciding that the appeal in Therasense, Inc. v. Becton, Dickinson & Co. warranted en banc consideration.  The Court asked the parties to address ten questions involving the materiality and intent standards and materiality-intent-balancing framework for resolving inequitable conduct claims.  As with Ariad v. Lilly, Patent Docs provided extensive coverage of the briefs filed by the parties and various amici in Therasense (see links below).  Oral argument in the case took place on November 9, and practitioners now await the Court's decision.

For information regarding this and other related topics, please see:

• "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

#5 -- Federal Circuit Affirms District Court in Wyeth PTA Case

Coming on the heels of the Federal Circuit's March 2009 decision in Tafas v. Doll, the Federal Circuit's decision ten months later in Wyeth v. Kappos was somewhat unexpected.  In contrast with Tafas, the Federal Circuit in Wyeth affirmed a determination by the District Court that the U.S. Patent and Trademark Office had misconstrued a portion of the Patent Act (35 U.S.C. § 154(b)(2)(A)), and as a result, had denied Wyeth a portion of the patent term to which it was entitled.  In response to the Federal Circuit's decision, the USPTO announced that it was changing the manner in which it calculates Patent Term Adjustment (PTA) to conform with the Federal Circuit's decision (i.e., applicants would no longer receive only the greater of an application's A-delay or B-delay, but rather would receive the sum of A-delay and B-delay less any overlapping A- and B-delay).  Less than two weeks after the Federal Circuit's decision, the USPTO and Department of Justice announced that they would not be seeking further review of the case.  The USPTO subsequently implemented an interim procedure by which patentees could request PTA recalculations while the Office revised its procedures to comply with Wyeth.  Unfortunately, the interim procedure only applied to patents issued after August 1, 2009 and before March 2, 2010 (when the Office expected to complete the software modification necessary to comply with the decision).  However, as Wyeth led the way with its challenge to the Office's original interpretation of § 154(b)(2)(A), Novartis has since challenged the Office's PTA calculations for ten patents that issued prior to the August 1, 2009 deadline specified in the Office's interim procedure.

For information regarding this and other related topics, please see:

• "Novartis Challenges USPTO's Interim Procedure for Requesting PTA Recalculations," July 12, 2010
• "USPTO Continues to Modify System for Calculating PTA," May 25, 2010
• "USPTO Announces Interim Procedure for Requesting PTA Recalculations," January 28, 2010
• "USPTO and DOJ Will Not Seek Review of Wyeth v. Kappos," January 21, 2010
• "USPTO Posts Notice Regarding Wyeth Decision," January 11, 2010
• "The Federal Circuit's Wyeth v. Kappos Decision," January 10, 2010
• "Wyeth v. Kappos (Fed. Cir. 2010)," January 7, 2010

Cancer Research Technology Ltd. v. Barr Laboratories, Inc. (Fed. Cir. 2010)

By Donald Zuhn --

Last week, in Cancer Research Technology Ltd. v. Barr Laboratories, Inc., the Federal Circuit reversed the decision by the District Court for the District of Delaware holding U.S. Patent No. 5,260,291 unenforceable for prosecution laches and inequitable conduct.  Judge Lourie, writing for the Court and joined by Judge Newman, held that the unreasonable and unexplained delay requirement of the prosecution laches defense includes a finding of prejudice, and that an accused infringer must show evidence of intervening rights -- i.e., that either the accused infringer or others invested in, worked on, or used the claimed technology during the period of delay -- in order to establish such prejudice.  With respect to the District Court's finding of inequitable conduct, the majority determined that the District Court erred because it relied solely on its finding of materiality to infer intent.  Judge Prost dissented from the opinion of the Court.

Plaintiff-Appellant Cancer Research Technology Ltd. ("Cancer Research") owns the '291 patent, which relates to a genus of tetrazine derivative compounds and methods for treating cancer by administering those compounds.  The '291 patent identifies and characterizes thirteen tetrazine derivative compounds, including temozolomide (structure at left), which is the active ingredient in the cancer drug Temodar®, and mitozolomide, which the '291 patent describes as having "particular importance."  The '291 patent issued following more than eleven years of prosecution during which time eleven continuing applications were filed by the applicants.  With respect to most of the applications in the chain, applicants "responded" to the rejection of original claim 31 for lack of utility by filing a continuation application and abandoning the rejected application.  Cancer Research obtained ownership of the application for the '291 patent after ten of the eleven applications in the chain had been filed, filed one last continuing application, and challenged the utility rejection by arguing that animal data in the original specification sufficed to establish utility in humans.  The '291 patent subsequently issued.  In the eleven years during which the '291 patent was being prosecuted, one of the inventors co-authored several papers reporting animal and human clinical data for the tetrazine derivative compounds of the '291 patent, including data for mitozolmide, which showed the compound to have little activity against many cancers.

Seeking approval to market a generic version of Temodar®, Defendants-Appellees Barr Laboratories, Inc. and Barr Pharmaceuticals, Inc. ("Barr") filed an Abbreviated New Drug Application (ANDA) with the FDA.  In response to Barr's ANDA filing, Cancer Research brought suit against Barr for infringement of the '291 patent.  The parties stipulated to infringement and validity of claim 13, which is directed to temozolomide, leaving Barr's counterclaims of unenforceability for prosecution laches and inequitable conduct for trial.

Following a bench trial, the District Court held the '291 patent unenforceable for both prosecution laches and inequitable conduct.  With respect to the first issue, the Court determined that prosecution laches turned on whether Cancer Research's delay in prosecuting the '291 patent was unreasonable and unexplained under the totality of the circumstances, but did not require a showing of intervening rights.  The Court found that the delay caused by eleven continuation applications, ten abandonments, and no substantive prosecution for nearly a decade was unreasonable and a sufficiently egregious misuse of the patent system to bar enforcement of the '291 patent for prosecution laches.  With respect to the second issue, the Court determined that Cancer Research failed to disclose, inter alia, Phase I and II human data indicating that mitozolomide failed to treat numerous cancers to the Patent Office, and that this information was highly material because it directly contradicted statements in the '291 patent and directly contravened the patentability of claim 28.  The Court also determined that there was an intent to deceive because one of the inventors withheld highly material information, knew or should have known that the materiality contradicted the '291 disclosure, and did not provide a credible explanation for withholding the information.

On appeal, Cancer Research argued that the doctrine of prosecution laches requires both an unreasonable and unexplained delay in prosecution and prejudice based on the intervening rights of the defendant or the public during the period of delay, and that the District Court erred in holding the '291 patent unenforceable for prosecution laches because the Court failed to find any evidence of actual prejudice either to the defendant or the public.  Barr responded by arguing that the District Court correctly recognized that the defense of prosecution laches does not require a specific showing of prejudice.

In reversing the District Court's finding of unenforceability for prosecution laches, the majority determined that prosecution laches' requirement of an unreasonable and unexplained delay includes a finding of prejudice, and declared that "[w]e . . . now hold that to establish prejudice an accused infringer must show evidence of intervening rights, i.e., that either the accused infringer or others invested in, worked on, or used the claimed technology during the period of delay."  In support of this holding, the majority cited four Supreme Court cases which the majority stated "all rely on a finding that the applicant's delay in prosecution adversely affected others working in the same field":  Woodbridge v. United States, 263 U.S. 50 (1923); Webster Electric Co. v. Splitdorf Electrical Co., 264 U.S. 463 (1924); Crown Cork & Seal Co. v. Ferdinand Gutmann Co., 304 U.S. 159 (1938); and General Talking Pictures Corp. v. Western Electric Co., 304 U.S. 175 (1938).  The majority also pointed to Symbol Techs., Inc. v. Lemelson Med., 277 F.3d 1361 (Fed. Cir. 2002) ("Symbol Techs. I"), for support, stating that:

In first recognizing the doctrine, we relied on the above-cited Supreme Court cases and noted their reliance on intervening rights.  Symbol Techs. I, 277 F.3d at 1364-65.  For example, we stated that in Crown Cork, "the [Supreme C]ourt ratified the existence of the prosecution laches defense; it did not apply the defense there in the absence of intervening rights," and we noted that "in General Talking Pictures, the Court rejected the defense of prosecution laches because there was no evidence of intervening public rights."  Id. at 1365.  We then applied the doctrine in a manner that recognized the requirement for intervening rights.  We held that the district court had not abused its discretion in holding certain patents unenforceable for prosecution laches based on the applicant's unreasonable delay and "the existence of 'intervening private and public rights.'"  [Symbol Technologies, Inc. v. Lemelson Medical, 422 F.3d 1378, 1386 (Fed. Cir. 2005)].  We also extended the holding to all the remaining claims based on finding that the subject matter of all the asserted patents had been pending for eighteen to thirty-nine years, an unreasonably long time, and that "prejudice to the public as a whole has been shown here in the long period of time during which parties, including the [declaratory judgment] plaintiffs, have invested in the technology described in the delayed patents."  Id.

Applying its holding to the instant appeal, the majority stated that:

Barr . . . while entitled under the law to file an ANDA four years after the NDA approval, in this case in 2003, did not do so until 2007.  Thus, Barr filed its ANDA more than thirteen years after the issuance of Cancer Research's patent and more than seven years after approval of Cancer Research's product.  Barr was thus hardly prejudiced by the delay in the issuance of the '291 patent, in 1993.  Nor was anyone else.  There has been no evidence presented that anyone was deterred from entering the market for temozolomide because Cancer Research's patent issued in 1993 rather than several years earlier.  Thus, the delay had only limited consequences to Barr and the public.

The majority observed that "Cancer Research's delay in prosecuting and issuing its patent application, whatever the asserted justifications, and we do not appraise them here, caused it to run the risk that some other pharmaceutical company (e.g., Barr) would intervene and claim prejudice from the delay, but that did not happen."  The Court also noted that "the facts of this case are not likely to be frequently repeated, as patent terms are now measured from effective filing date, . . . subject to only limited extensions provided by statute, not by delaying issuance by refilling."

With respect to inequitable conduct, Cancer Research argued that the District Court erroneously relied solely on its finding of materiality to infer deceptive intent, and therefore, erred in finding that one of the inventors withheld studies on tetrazine derivatives with deceptive intent.  Barr argued in response that that the District Court correctly found that the inventor knew he possessed undisclosed data that contradicted the disclosure in the patent application, and knew he had a duty to disclose such material information to the Patent Office, but did not do so.  According to Barr, the only reasonable inference that could be drawn from this was an intent to deceive.  In reversing the District Court's finding of unenforceability for inequitable conduct, the majority determined that "the district court erred because it relied solely on its finding of materiality to infer intent."  In particular, the majority noted that:

[M]ateriality and intent are separate requirements, and intent to deceive cannot be found based on materiality alone.  Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009).  A court cannot simply infer that an applicant "should have known" the materiality of withheld information and thus intended to deceive the PTO because the applicant knew of the information and the information is material.  A district court must find some other evidence that indicates that the applicant appreciated the information's materiality.  See, e.g., Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997) (finding intent to deceive based in part on handwritten notes of prosecution counsel corroborating that counsel subjectively believed the undisclosed patent was material).  In this case, evidence that [an inventor] co-authored articles that contradict the disclosure of the '291 patent specification does not alone establish that [the inventor] withheld those studies intending to deceive the PTO.

As for other reasonable inferences that could be drawn from the inventor's publication of contradictory data, the majority surmised that "an equally reasonable inference to draw from the evidence is that [the inventor] viewed publication of all the data as important to his career as a scientist but did not appreciate their potential importance to the patentability of the tetrazine derivatives patent claims."

In her dissent, Judge Prost declared that "the majority propounds a new and unsupportable legal standard for prosecution laches" and "creates a new evidentiary standard [for inequitable conduct," while] it also ignores virtually unassailable credibility findings made by the district court after a four-day bench trial."  On the issue of prosecution laches, Judge Prost argued that the District Court "got it right" because the Court's precedent does not compel a showing of intervening rights, adding that "even if one could construe the case law as requiring prejudice, there is no basis, in the relevant case law or otherwise, for the majority’s further temporal limitation that the prejudice exists during the period of delay."  The dissent noted that:

By requiring this particularized prejudice, the majority sidesteps the real harm at issue in this case.  The Supreme Court has explicitly recognized that delaying a patentee's monopoly period harms the public by delaying its free use of the patented invention.  Woodbridge, 263 U.S. at 48-49.  Here, the applicant first filed the patent application disclosing temozolomide in 1982.  By stalling prosecution for its own business purposes for nearly a decade, Cancer Research obtained a patent which does not expire until 2014 -- almost thirty-two years after the first application in this chain was filed.  The majority downplays the public prejudice caused by this delay, Maj. Op. at 12-13; however, Cancer Research's conduct has prejudiced the public by extending its patent monopoly over temozolomide.

On the issue of inequitable conduct, Judge Prost stated that:

Again, in my view, the district court got it exactly right.  Here, an inventor . . . withheld important data from the U.S. Patent and Trademark Office ("PTO") that contradicted the disclosure in the patent applications.  The majority does not take issue with the district court's conclusion that this data was highly material.  Clearly, it could not, because at a minimum the disclosure would have affected the scope of the patent granted.  Rather, it rejects the district court's credibility determination that [the inventor's] explanation for not submitting this highly material data was belied by the facts that [the inventor] found the data conclusive enough (and sufficiently non-confidential) to publish the data and his conclusions of inactivity or toxicity to the scientific community.

The dissent concluded by arguing that "[r]equiring separate evidence for each prong [i.e., materiality and intent to deceive,] has no basis in our precedent."

Cancer Research Technology Ltd. v. Barr Laboratories, Inc. (Fed. Cir. 2010)
Panel: Circuit Judges Newman, Lourie, and Prost
Opinion by Circuit Judge Lourie; dissenting opinion by Circuit Judge Prost

Abbott Files Reply Brief in Therasense Case

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

Appellees File Reply Brief in Therasense v. Becton Dickinson

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

Bayer Submits Brief in Therasense v. Becton Dickinson

By Kevin E. Noonan --

Co-defendant Bayer Healthcare LLC has submitted its brief in the Federal Circuit's en banc reconsideration of inequitable conduct in Therasense Inc. v. Becton Dickinson & Co.  The brief's basic argument is that the Court's application of the inequitable conduct doctrine needs to be revised in keeping with traditional standards and that the Court should apply an "unclean hands" approach.  "The Court does not need the hatchet offered by Abbott and need only take a scalpel to a few targeted areas of the inequitable conduct doctrine," according to Bayer's brief.  The inequitable conduct doctrine is broader than common law fraud, and should be applied with flexibility to protect the public's interest.

While conceding that that the Court's application of the doctrine needs to be modified, the brief takes the position that "this Court's materiality-intent framework properly tailors the general requirements of the doctrine to the specific context of duty of candor inequitable conduct cases."  The modification Bayer suggests is that inequitable conduct should be returned to its roots in the equitable doctrine of unclean hands, which requires "an (a) intentional, (b) 'wrongful' act (c) connected to the patent that is the subject of the litigation."  While broad, this standard falls well below common law fraud or the "but for" tests proposed by Abbott and several amici, and Bayer argues that this is consistent with Supreme Court precedent.  According to Bayer's brief, the Supreme Court "trilogy" of inequitable conduct cases -- 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. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945) -- supports the argument that merely casting doubt on the validity of a patent can be sufficient, thereby negating the reliance requirement of fraud.  The brief accuses Abbott and amici with "mischaracterizing" the Supreme Court's precedent, saying that the unclean hands doctrine is adequate and is "sound policy" because the patent grant is a "special privilege" that the Supreme Court has held requires an "uncompromising duty" of candor.  The brief also contends that the special status of patents as "exception[s] to the general rule against monopolies" provokes a public interest that supports using the broader unclean hands doctrine rather than the common law standard advanced by Abbott and amici.  Bayer further argues that a higher standard of candor is demanded due to the ex parte nature of patent prosecution.  Paradoxically, however, (in view of the deleterious consequences for the Patent Office occasioned by the current inequitable conduct standard) the brief cites the "ever increasing" patent application burden as a reason applicants must be compelled to comply with a higher standard of disclosure.

Conveniently, Bayer rejects the rather well-defined requirements of common law fraud with the more "flexible" unclean hands doctrine, that is "not bound by formula or restrained by any limitation that tends to trammel the free and just exercise of discretion," citing Keystone.  Moreover, the brief argues that a significant distinction between common law fraud and inequitable conduct is that inequitable conduct does not require reliance, citing Morton Salt (a patent misuse case) in support of this argument.  In contrast, Bayer argues that the materiality-intent test "appropriately applies" the unclean hands doctrine in the context of inequitable conduct, saying that the test tracks the requirements for unclean hands:  intent (intent), a wrongful act (failure to disclose), and a connection (nexus) between the wrongful act and the cause of action (i.e., a lawsuit based on improperly-procured patent).

Materiality is what determines whether there is a wrongful act -- it provides the link, since withholding immaterial information does not create a harm to the public.  The brief cites Norton v. Curtiss, 433 F.2d 779 (CCPA 1970), and Molins PLC v. Textron, Inc. for the proposition that such withholding "constitutes the 'wrongful act' necessary to invoke unclean hands."  The brief also cites language relating to "fraud or other inequitable conduct" from the Supreme Court's Precision decision to suggest the wrong that occasions inequitable conduct must be broader than fraud.  Such an interpretation is consistent with the public interest, Bayer argues, since fraud is a wrong between private parties while inequitable conduct implicates a harm to the public (interestingly, citing a labor law case for this proposition).  The brief also notes (not for the first time) that including requirements from common law fraud (specifically, the "but for" reliance prong) is contrary not only to Bayer's reading of Precision Instrument, but also to prior Federal Circuit precedent (which is what the Court is reconsidering by rehearing this case en banc, after all).

Bayer's brief does acknowledge that "the materiality-intent test may not be appropriate for every inequitable conduct allegation," specifically the "arguably less egregious conduct" cases.  However, since intentional contravention of any PTO rule related to patentability should result in inequitable conduct, the brief suggests that such instances be subject to a different (and less draconian) remedy than complete unenforceability (although it does not suggest either where the line should be drawn nor any alternative remedies).

The brief does find a use for the common law fraud standard -- in Walker Process cases involving antitrust liability.  The brief supports this argument with its reading of the Precision Instruments decision, but again uses Federal Circuit precedent (which is what the en banc Court has put at issue) to support the use of the fraud standard in determining the existence of Walker Process fraud (specifically Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1070 (Fed. Cir. 1998)).  The brief also asserts that nothing in the 1952 Patent Act (as specifically codified at 35 U.S.C. § 292) mandates using a common law fraud standard for inequitable conduct (while recognizing that the statute does not provide any guidance on what standard should be used for finding inequitable conduct).

Bayer argues that the Court should adopt the PTO's Rule 56 as the proper standard for materiality.  This standard is fair to patentees, Bayer's brief argues, since it would not impose in litigation a higher standard than is applied for prosecution.  The brief specifically rejects the proposition by Abbott and some of the amici that materiality be required to rise to a "but for" standard, but agrees with "the near consensus of amici" regarding the uncertainties caused by the absence of a consistent standard for materiality and the inefficiencies that situation has created in the PTO.  Using Rule 56 as a standard would benefit from the "considered, expert judgment of the PTO" on the matter, Bayer argues; included in this "considered . . . judgment" was the PTO's rejection of a proposed "objective 'but for' test" during adoption of the current version of Rule 56.  Rule 56 provides an objective definition, according to Bayer, and is integrated into other PTO rules, like its disciplinary rules.  Moreover, the brief argues, Rule 56 "fosters disclosure of information the PTO needs to examine patent applications."  Bayer argues that Rule 56 properly puts the burden of disclosure (and deciding what gets disclosed) on the applicant; however, the brief attempts to support this position using arguments set forth by the Office in rejecting the objective "but for" test, "that the rule was unnecessary and would require prosecutors to scour the earth for any potentially inconsistent statement made by an applicant" (which arguably is exactly what now occurs).

Importantly for its arguments in this case, Bayer's brief rejects excluding attorney argument from the definition of material information, arguing that it should be treated like any other instance of argument "inconsistent with a position taken by an applicant."  This standard would also be consistent with an unclean hands standard, Bayer argues, analogizing to how courts handle these determinations in other contexts.  Again, Bayer argues that the Federal Circuit has "recognized that the materiality standard should reflect the PTO's standard," which begs the question of whether that precedent has been correctly decided.  The brief is clear that Dígital Control Inc. v. Charles Machine Works, 437 F.3d 1309 (Fed. Cir. 2006), should be overruled, if only because it revived the logic of American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984), that was repudiated by the en banc Court in Kingsdown Med. Consultants, Ltd. v. Hollister, Inc.  The brief also makes an administrative law argument on the grounds that Rule 56 "reflects the considered, formal, and expert judgment of the PTO and is therefore entitled to 'great respect' under United States v. Mead Corp., 533 U.S. 218 (2001)."  And any other standard "would not promote efficient and effective patent prosecution"; the "reasonable examiner" test would undermine efficient patent examination (because it is too vague and is responsible for disruptive applicant behavior)," and the "but for" test because it is inconsistent with Federal Circuit precedent (again, seemingly missing the point of en banc review) and "was rejected by the PTO" (which decision is not binding on the Court).  The brief also argues that the PTO needs a way to police applicant behavior that is broader than invalidity and that encompasses within its scope individuals outside the scope of PTO disciplinary proceedings.

With regard to intent, the brief asserts that "inequitable conduct requires proof of specific intent"  that cannot be inferred solely from the materiality of withheld information, and citing Kingsdown Medical, negligence or recklessness is not enough.  The brief argues that the en banc Court should repudiate those cases that adopted a "knew or should have known" standard, because intent requires "at least actual knowledge of ail three of the following:  (a) the reference or information at issue; (b) the omission or misstatement regarding the reference or information; and (c) the materiality of the reference or information," citing Molins.  However, intent can be inferred from the "totality of the circumstances," the brief argues, because there is no requirement for direct evidence of an intent to deceive (a "smoking gun," citing Paragon Podiatry Lab., Inc. v. KLM Labs. Inc., 984 F.2d 1182,1189 (Fed. Cir. 1993), because "[d]irect proof of wrongful intent is rarely available," citing LaBounty Mfg., Inc. v. U.S. ITC, 958 F.2d 1066, 1076 (Fed. Cir. 1992), so that "[i]ntent is generally inferred from the facts and circumstances surrounding the appiicant's overall conduct," citing M. Eagles Tool Warehouse, Inc. v. Fìsher Tooling Co., 439 F.3d 1335, 1340 (Fed. Cir. 2006).  Such determinations are within the expertise of district courts to perform, and courts should have "wide latitude" to consider evidence from the totality of the circumstances in making these determinations.  The brief also argues that the materiality of a reference can be one of the circumstances in the totality, somewhat diminishing any bright line between the two determinations.  The brief states that:

If an applicant fails to disclose a reference that it knows is highly material, the limited range of possible innocent explanations provides greater justification to infer intent.  The other facts and circumstances necessary to cross the threshold of clear and convincing evidence of specific intent to deceive are therefore less than if the information only barely crosses the materiality threshold.

In maiking this argument, the brief appears to come close to advocating a "balancing" test that it otherwise rejects.  It also cites Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008), for the proposition that, in inferring intent, that inference must be "the single most reasonable inference."  But Bayer argues that any such determination should be entitled to deference by the Federal Circuit, because the district court is entitled to such deference when the Court applies an "abuse of discretion" standard of review.

According to Bayer's brief, there should be no "balancing" between materiality and intent.  Any balancing by the trial court is properly performed to determine whether the court should exercise its discretion to render the patent unenforceable, but only after threshold determinations of materiality and intent are established by clear and convincing evidence.  Unenforceability is not an automatic consequence but should be imposed in the court's discretion after consideration of "all of the relevant circumstances."

Regarding the Federal Circuit's final question to the parties, Bayer argues that it does not think standards developed in other agencies or contexts are appropriate, "because of statutory, regulatory, and precedential differences" particularly with regard to copyrights and trademarks.

Turning to this case, Bayer argues that the district court's finding of inequitable conduct should be affirmed.  Here, the same people (Abbott's lawyer and scientist) were involved in arguing to the PTO something that was contradictory to what was argued to the EPO.  The existence of an inconsistent argument provides materiality, according to the brief, and the absence of an "innocent explanation" provides intent.  The brief also emphasizes that the statements at issue are not limited to attorney argument, but include the scientific declaration and under circumstances where the Examiner could not properly assess the evidence since the arguments made before the EPO were not in front of the Examiner.  In addition, the court's determination that the reference that was the "subject of inequitable conduct" was sufficient to invalidate Abbott's claims provided "but for" causation, so that the District Court's inequitable conduct decision should be upheld even should the en banc Court adopt a common law fraud standard for inequitable conduct.

For additional information regarding this topic, please see:

• "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

PhRMA Files Amicus Brief in Therasense Case

By Kevin E. Noonan --

Happy families are all alike; every unhappy family is unhappy in its own way.
Leo Tolstoy, Anna Karenina, Chapter 1, first line

The several amicus curiae briefs that have been filed in the en banc rehearing of Therasense, Inc. v. Becton, Dickinson & Co. bring this quote to mind, since none of them advocate that the Federal Circuit's inequitable conduct jurisprudence is anything other than dysfunctional.  However, the briefs are instructive in what and how they illustrate the different perspectives and interests each amicus brings to the issue.

In this regard, the brief from the Pharmaceutical Research and Manufacturers of America (PhRMA), submitted in favor of neither party, does not disappoint.  This brief's take on the issue is that the Court should "use this opportunity to reset the [inequitable conduct] doctrine firmly on its historical foundation of Supreme Court precedent."  How should this be achieved?  By correcting the "substantial drift" of the doctrine 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).

That precedent is grounded in fraud, according to the brief, and more particularly continuing fraud, where the fraudulent activity in obtaining a patent is compounded by then asserting the patent against an accused infringer.  Such an action attempts to make the Court complicit n the fraud, and courts can and should use their equitable discretion to refuse to be co-opted by the patent holder under these circumstances.

But this is not how the doctrine has been developed by the Federal Circuit, the brief argues, so that fraud need not be alleged nor proven but "any blemish" on the prosecution record can be used to allege misconduct.  This has led to three "fundamental flaws" in the existing law of inequitable conduct:  that there is an "overpowering incentive" on the accused infringer to assert the defense, even when it is unlikely to be successful, since such an action incurs no risks and has the benefits of rendering the patent unenforceable in toto, as well as harassing (or at least distracting) the patentee.  The brief next mentions the "varying standards of 'materiality'" that the Court has embraced and the inconsistencies therein.  Finally, the brief descries the lack of a requirement for proof of a specific intent to defraud, especially through the use of the "balancing test" where lesser proof of specific intent can be successfully asserted if the evidence of materiality is particularly strong.  The negative consequences are not limited to patent owners, the brief asserts, but squanders scare judicial resources, overburdens the PTO, and "weakens the patent incentive," thereby "depriving the American public of the tangible benefits of innovation," specifically "new products and services."

PhRMA's prescription to remedy the situation is similarly three-fold.  First, the groups says that inequitable conduct should be considered and found only to claims actually asserted in a litigation, which would "firmly anchor the doctrine on its common-law foundation as a mechanism to prevent the continuation of a fraud originally perpetrated on the PTO by an action in court to enforce a tainted patent claim."  Second, the Court must "articulate a clear formulation of materiality," which for PhRMA would be only such information that would "establish that one or more of the claims asserted in the litigation is invalid," i.e., an objective "but for" test as has been advocated by several other amici.  Third, and also in common with other amici, PhRMA urges that the Court adopt a specific intent requirement and abandon the "balancing test" or "sliding scale" wherein proof of greater materiality can compensate for lack of proof of specific intent.  Such "balancing" has not only "contributed substantially to the unpredictable behavior of the doctrine," the brief asserts, it is also "unsupported in the common law."

The brief recites statistics on inequitable conduct, particularly Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329 (2009).  These include that the frequency with which inequitable conduct has been plead rose from 20% of the cases (in 2003) to 40% (in 2008).  In contrast, the frequency with which inequitable conduct has been found has dramatically declined, from 1% in 2001 to 0.35% in 2008 (finding that the frequency has varied from 0.04% to 0.23% in any given year over the past 15 years).  In addition, Mammen is reported to show that the Federal Circuit affirms a district court's rejection of an inequitable conduct claim 92% of the time (and reversing in only 3% of cases), and reverses or vacates a district court's finding of inequitable conduct 59% of the time.  What do these statistics illustrate, according to the brief?  That the defense is plead almost regardless of its objective likelihood of success, as a litigation tactic aimed at securing the jackpot of finding a patent entirely unenforceable.  This high reward to accused infringers "perverse[ly]" offsets the small likelihood of success, and the brief asserts that merely raising the defense can provide "significant benefits" to an accused infringer, even if the defendant does not ultimately prevail.  Citing (now Chief) Judge Rader's dissent in Aventis Pharma S.A. v. Amphastar Pharms. Inc.:

The allegation of inequitable conduct opens new avenues of discovery; impugns the integrity of [a] patentee, its counsel, and the patent itself; excludes the prosecuting attorney from trial participation (other than as a witness); and even offers the trial court a way to dispose of a case without the rigors of claim construction and other complex patent doctrines.

525 F.3d 1334, 1349-50 (Fed. Cir. 2008) (Rader, J., dissenting).  The brief mentions the additional costs on the patent owner, the risk of a challenge to attorney-client privilege by assertion of the crime-fraud exception, and the pressures it can bring to bear on patent holders to settle "otherwise meritorious claims of infringement."  These additional costs and risks are borne almost entirely by the patentee, creating an "substantial asymmetry of risk" between the parties.  In a footnote, the brief notes the outcome of the Purdue Pharma L.P. v. Endo Pharms., Inc. case (No. 00-8029,2004 WL 26523 (S.D.N.Y. Jan. 5, 2004), where in the interim between the time the District Court found inequitable conduct and the Federal Circuit reversed, "nearly 70 lawsuits were filed, including putative class actions, alleging that the manufacturer's inequitable conduct had violated the antitrust laws. See, e.g., Complaint, City of New York v. Purdue Pharma, Inc., No. 04-3499,2005 WL 2873297 (S.D.N.Y., Aug. 15,2005)."  And, of course, the brief mentions the burdens on the Office occasioned by the prophylactic over-disclosure of not particularly material information in an attempt to avoid an inequitable conduct charge (and noting the Catch-22 nature of such an activity, which is just as likely to produce a charge of "burying" material references, citing Molins PLC v. Textron, Inc., 48 F.3d 1172, 1184 (Fed. Cir. 1995).

The brief's bases for limiting the scope of material information to what will invalidate a claim asserted in the litigation are both jurisprudential as well as practical.  Legally, the brief argues that a court "derives its authority to render a patent unenforceable from the patent owner's decision to extend the fraud into the court by enforcing a tainted patent claim."  "Only asserted claims continue the fraud perpetrated on the PTO into court, and thus give courts a proper basis for imposing sanctions against the patent," citing Precision Instrument Mfg. Co., which as a practical matter "appropriately shifts the focus away from matters that are collateral to the actual controversy before the court," citing Alcatel USA, Inc. v.DGI Techs., Inc.,166 F.3d 772, 797 (5th Cir. 1999).  The brief also argues (albeit more weakly in view of the expansive language of Genentech v. MedImmune) that considering unasserted claims raises jurisdiction (i.e., "case or controversy") issues under Article III, and conflates the role of the judiciary and administrative agencies in policing practitioner behavior.  Finally, the brief argues that there is some justice, and substantial public interest, in inequitable conduct arising in a claim a patentee asserts against an accused infringer, being "those most likely to have an impact upon competitors and the public, and thus [being] the claims as to which the incentive to commit fraud, and the public interest in deterring and punishing it, are greatest."

Regarding specific intent and the balancing test applied by the Federal Circuit, the brief says little not said by others except insofar as it forthrightly urges the Federal Circuit to abandon the balancing test.  "Having gone through a rigorous administrative process to obtain a patent, it is inappropriate to revoke a patent absent proof of intentional misconduct on the part of the patentee -- the need to restrict its scope to cases involving specific intent to deceive is crucial 'because the penalty for inequitable conduct is so severe, the loss of the entire patent,'" citing Star Scientific inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008), cert. denied, 129 S. Ct. 1595 (2009).

The brief notes that these negative consequences are particularly relevant to PhRMA and its members, because "this cloud of unpredictable risk and uncertainty caused by the current doctrine undermines the effectiveness of the patent incentive for PhRMA Members to make the huge investments necessary to discover, develop, and bring new medicines to market."

PhRMA includes some statistics in its "Statement of Interest," including that PhRMA members invested about $45.8 billion in new drug discovery in 2009 alone, as well as a "complete list" of PhRMA members (which can be found here).

For additional information regarding this topic, please see:

• "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

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

American Bar Association Files Amicus Brief in Therasense Case

By Kevin E. Noonan --

The American Bar Association (ABA) has filed a brief in the Therasense, Inc. v. Becton, Dickinson & Co. case, in support of neither party but arguing forcefully that the current state of the Federal Circuit's jurisprudence on inequitable conduct is in need of correction.  The brief follows a recommendation from the Intellectual Property Law (IPL) committee of the Association, identified as ABA Report with Recommendation #107B (Policy adopted August 2009), included with the brief as an appendix.  This recommendation stemmed from the work of a Task Force established by the ABA-IPL with instructions to "start from scratch" and "develop a comprehensive, consensus policy on the [inequitable conduct] defense for use in both legislative and judicial advocacy."  The brief states that the Report was the result of meetings with "diverse members of the legal profession and various ABA entities," including the Section of Administrative Law and Regulatory Practice, the Section on Science and Technology, the Business Law Section, and the Section on Litigation.

The ABA advocates the following requirements for establishing an inequitable conduct defense:

[I]nequitable conduct [is] shown only upon proof by clear and convincing evidence that: (1) a person having a duty of candor and good faith to the PTO misrepresented or omitted material information; (2) in the absence of such misrepresentation or omission, the PTO, acting reasonably, would not have granted or maintained in force at least one patent claim; and (3) the misrepresentation or omission was made with a specific intent to deceive the PTO, which intent cannot be established by the mere materiality of the misrepresentation or omission.

The brief also sets forth the reasons the ABA believes changing the current inequitable conduct standard is necessary.  These include themes common in Appellants' brief and several other amicus briefs (and indeed, frequently voiced by commentators and even Chief Judge Rader himself), that the defense is plead too often, with too little basis, and with deleterious effects on both patent litigation and prosecution before the PTO.  This belief is supported by statistics showing that the frequency of inequitable conduct appeals doubled between 2004-2008 (Rader, 2010, Always at the Margin: Inequitable Conduct in Flux, 59 Am. U. K. Rev. 777,779), but that inequitable conduct was found only 25% of the time (citing statistics from the University of Houston Law Center at http://patstats.org).  For example, in 2009, defendants established the defense only 6 out of 38 times it was plead (~15% success rate).

The brief asserts that the ABA has concluded, "after careful study," that this "excessive invocation of the inequitable conduct defense" is the result of the "vagueness" of the Court's current test for establishing inequitable conduct.  This "vagueness" includes the multiplicity of standards (5) that the Court has sanctioned, including the current PTO standard, the earlier PTO "reasonable examiner" standard, and the "objective but for," subjective "but for," and "but it may have" standards, citing Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309,1314-1316 (Fed. Cir. 2006).  In addition to these different tests, with different levels of materiality and proofs of materiality, the Court has also permitted a showing of materiality to reduce the required evidence of intent (citing American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984).  The brief particularly highlights the inherent subjectivity and imprecision of the "reasonable examiner" test, stating that "the fact that this standard is still applied after-the-fact in litigation leads to the untenable situation where a patentee may be found to have committed inequitable conduct even though he or she fully complied with the applicable PTO regulations."  Moreover, using this standard makes possible situations where "the entire patent (and possibly related patents) may be rendered unenforceable based upon the misrepresentation or omission of anything later deemed to have been 'important' even where every requirement for patentability has been met, and there is no injury to the public through the issuance of otherwise invalid claims."

The brief also asserts the Report's conclusion that the application of the inequitable conduct defense by the Court has "permitted inequitable conduct to found based on the mere fact that misrepresented or omitted information is material -- in the absence of any other evidence of deceptive intent," citing the Court's opinions in Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306, 1313-14 (Fed. Cir. 2008), Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181, 1191 (Fed. Cir. 2006), and Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1070-71 (Fed. Cir. 1998).  The brief cites a "circular overemphasis" on materiality that permits inequitable conduct to be found "largely on evidence of materiality with just a threshold showing of deceptive invent what may itself by largely inferred from the materiality of the alleged misconduct," citing Praxair quoting Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1257 (Fed. Cir. 1997).

In addition to distortions in patent litigation ("relentless discovery," and disputes over privilege and crime-fraud exceptions thereof that "tax the trial court's resources and unnecessarily multipl[ies] the contentiousness of the proceedings") and prosecution ("over-disclosure to avoid any alleged omission and under-representation to avoid any alleged misrepresentation," emphasis in original), the brief raises the point, originally expressed by Judge Nichols in Burlington Indus. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988):

[Lawyers asserting inequitable conduct] get anywhere with the accusation in but a small percentage of the cases, but such charges are not inconsequential on that account.  They destroy the respect for one another's integrity, for being fellow members of an honorable profession, that previously made the bar a valuable help to the courts in making a sound disposition of their cases, and to sustain the good name of the bar itself.

The brief argues that its proposed inequitable conduct standard, based on principles from common-law fraud ("reliance, injury and intent") would return the doctrine to its historical roots, specifically the triad of Supreme Court cases from which it arose (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. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945)).  These cases all involved actual fraud, wherein perjured testimony was presented, material information concealed, and specific intent to deceive established.  Importantly, the brief argues that these cases all involved detrimental reliance by the PTO on the misconduct to grant invalid patents.  The brief cites other, earlier Supreme Court cases, including Corona Cord Tire Co. v. Dovan Chem. Corp., 276 U.S. 358 (1928), where the Court refused to find the patent unenforceable even though misconduct was discerned, because the conduct "though perhaps reckless, [was] not . . . essential material to [the patent's] issue."  In contrast, the brief points out that the Federal Circuit has acknowledged that under its husbandry "the concept of inequitable conduct doctrine has expanded over time such that it no longer includes the principles of fraudulent intent and detrimental reliance as absolute requirements," citing Agfa Corp. v. Creo Prods. Inc., 451 F.3d 1366, 1375 n 3 (Fed. Cir. 2006).

The consequence of this departure from Supreme Court principles by the Federal Circuit, according to the brief, is "an overbroad and vaguely-defined inequitable conduct defense."  Under the ABA's proposal, the first two elements (a misrepresentation or omission and PTO action in granting a patent that would not have been granted absent the misrepresentation or omission) track the principles of detrimental reliance in common-law fraud.  This amounts to an "objective but for" test for materiality (which the brief contends it is "similar to"), assuring that "inequitable conduct will only be found where the PTO's reliance . . . has resulted in actual harm through the issuance of an otherwise invalid claim."  Beneficial consequences of adopting this standard would be to "eliminate assertion of inequitable conduct 'where the patentee only committed minor missteps,'" and would "reduce the burden on the PTO by removing the incentive to over-disclose information to the examiner."  The brief envisions standards of inequitable conduct that would be distinct between the Office and during litigation, wherein misconduct that would not be sufficient to support a finding of inequitable conduct during litigation could be sufficient to deserve sanctions before the PTO.  (The brief contends that the Office has sufficient sanctions in place, such as disciplinary proceedings against practitioners, to police any such misconduct.)

The third requirement of the ABA's proposed test for inequitable conduct, deceptive intent, would require an independent determination of specific intent to deceive, consistent with the common law fraud standard.  The brief argues that this requirement would require "independent and clear" evidence (direct or circumstantial) of specific intent that could not be substituted by "greater" showings of materiality.  The brief also argues that this requirement would be a "stronger gatekeeper" by specifically precluding assertion of the defense under Rule 11 when there is insufficient evidence to support it.

The brief concludes that the proposed standard is "a fair and balanced approach" to solving the problems that have arisen with current inequitable conduct doctrine:

[I]t preserves the defense as a deterrent and remedy for those relatively rare instances where it is proven that the applicant acted with fraudulent intent and the PTO detrimentally relied on such to issue otherwise invalid claims.  But it erects the defined boundaries missing from the current law, which has resulted in excess not only on litigation, but on the overall patent system.

For additional information regarding this topic, please see:

• "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

Therasense, Inc. v. Becton, Dickinson & Co. -- Briefing Schedule Update

By Donald Zuhn --

In April, the Court of Appeals for the Federal Circuit decided that the appeal in Therasense, Inc. v. Becton, Dickinson & Co. warranted en banc consideration, and asked the parties to brief ten questions concerning the issue of inequitable conduct (see "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson").  According to the Court's original Order, Defendants-Appellees had until 30 days from the date of service of Plaintiffs-Appellees' brief (which was filed with the Court on July 26, 2010) to file their response.  On June 1, the Federal Circuit issued an Order granting Defendant-Appellee Bayer Healthcare's motion to extend the deadline for all Defendants-Appellees to file their responsive en banc briefs to October 8, 2010.  Pursuant to Rule 29(e) of the Federal Rules of Appellate Procedure, amicus curiae briefs in support of Appellees-Defendants must be filed no later than 7 days after their brief is filed (amicus curiae briefs in support of Plaintiffs-Appellees or in support of neither party were due on August 2, 2010).

Patent Docs thanks Brian Kramer of Morrison & Foerster LLP for informing us of the revised briefing schedule.

BIO Files Amicus Brief in Therasense Case

By Kevin E. Noonan --

On August 2nd, the Biotechnology Industry Organization (BIO) filed an amicus curiae brief with the Federal Circuit in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of neither party ("BIO . . . has no interest in the ultimate disposition of this litigation") urges the en banc Court to "set aside its prior legal framework on which the inequitable conduct defense presently rests and adopt a more certain framework."

BIO's proposed "more certain framework" has three requirements for establishing inequitable conduct.  First, there must be either a "misrepresentation or omission of a material fact."  Second, the misrepresentation or omission must occur as the result of "a specific intent to deceive the PTO."  Finally, the PTO must "reasonabl[y] rel[y] on the misrepresentation or omission, to the public's detriment, in issuing an invalid claim."  As in the current framework, all of these elements must be established by clear and convincing evidence.  The en banc Court is not constrained by earlier precedent, either its own or from the CCPA, nor any rules or practices established by the PTO, the brief asserts.  The proposed framework is not inconsistent with binding Supreme Court precedent, according to the brief, because the current standard is based not on that precedent, but on CCPA precedent (specifically, Norton v. Curtiss, 433 F.2d 779 (CCPA 1970)) and PTO Rule 56.

The brief argues that its proposed "more certain framework" is necessary because no matter how "laudatory" the goal may be of promoting full disclosure during patent prosecution, in practice the inequitable conduct defense has been "damaging to the U.S. patent system."  This is the case because the Court's attempt to "apply the law on inequitable conduct in a fair and uniform manner" has been "without much success."  "Nonuniformity and unpredictability" are the hallmarks of the history of decisions regarding the defense, outcomes due in large part to the "nonuniform foundation from which [the inequitable conduct] doctrine developed," BIO argues:  decisions from the Supreme Court "concerned about patent 'monopolies"; "disparate" district court and CCPA precedent; and "rules designed to aid the PTO in conducting its business."  The result is an "unworkable and outdated framework for deciding inequitable conduct cases."  The brief contends that this situation was exacerbated by the Kingsdown Med. Consultants, Ltd. v. Hollister, Inc. case, because the abuse of discretion standard, coupled with "balancing" evidence of materiality and intent, "made uniformity of [an inequitable conduct determination] nearly impossible."

The results of this nonuniformity "creates more harm than good" for U.S. patents, according to the brief.  This is illustrated by practices before the PTO, such as "pressure on applicants to make prophylactic submissions of large amounts of information that examiners neither want nor consider material," which "hinders rather than promotes candid interactions between applicants and examiners."  The consequence:  "[v]oluminous information disclosure statements" are submitted, or searches and disclosure of search results are scrupulously avoided.  Examiners, having "10 hours or less to prepare a first Office action (including searching and IDS review) can expect little help from wary applicants" due to concerns about "future allegations of concealment or misrepresentation."  This creates the incentive, BIO contends, for patent prosecution to be focused on legal grounds only, and to limit any discussions of the prior art to examiner interviews "that leave essentially no trace on the prosecution history."  Current application of the inequitable conduct doctrine also inhibits applicants from submitting affidavits from experts or others (such as the inventors) that could be "helpful" to the Office, because such documents are "fraught with litigation risk."

Litigation statistics also provide ample evidence that the Court's application of the inequitable conduct doctrine has had a "negative impact."  For example, the brief cites studies performed at the University of Houston Law Center that show the frequency of inequitable conduct decisions between 2005-09 (334) is "on par" with decisions on invalidity due to obviousness (364).  This is a particular problem for patents on biopharmaceuticals, where "42% of all post-Kingsdown appeals to the Federal Circuit on the issue of inequitable conduct involved patents on biologics, drugs, medical devices, diagnostics or agricultural biotechnology products" by 2006 (with the trend continuing today:  in an analysis of primarily district court cases, 35% of the allegations of inequitable conduct involved biotechnology, drug, or medical device patents).  This is contrasted with the likelihood of successfully asserting the inequitable conduct defense:  for cases decided between 2007-09 the brief cites statistics that inequitable conduct was found only about 15% of the time.  The brief articulates the reason why defendants assert the defense so frequently when it prevails so rarely:  when found, "inequitable conduct is more likely to influence the ultimate disposition of the litigation because of it deep impact on the patent-in-suit and the patentee's business, and a less-than-encouraging prospect of appellate review under a deferential clear error/abuse of discretion standard."  The brief supplies a cogent example from the Purdue Pharma L.P. v. Endo Pharms. Inc. case (410 F.3d 690 (Fed. Cir 2005)), where the Court's reversal of its own earlier inequitable conduct holding "came too late to avoid irreparable harm to all those involved" (including $114 million in infringing sales and follow-on litigation over "allegedly fraudulently procured patents and allegedly sham litigation for their enforcement" for the patentee, as well as "serious business uncertainty and the possibility of substantial damages liability" for the infringers).  "[M]ost significantly," the brief states, "vacatur [of the Court's inequitable conduct determination] came too late to avoid layoff of half the patentee's R&D workforce," putting not only a human face on the consequences of the Court's motley jurisprudence in this area but (in these times) their negative economic consequences.

Patents protecting biotechnological products are "particularly attractive" targets for inequitable conduct charges, BIO asserts.  They are procured "against a backdrop of fast-moving science and competing business needs that make it virtually impossible" to "'keep an eye' on all potentially relevant information" that may be "circulating into and out of a company."  This information includes the professional activities the company's scientists, who "present their findings," "write scientific publications," and "exchange information" with colleagues outside the company without consulting their patent attorneys.  In addition, in the practice of a company's research activities "[l]arge numbers of [scientific and other] references are collected by research departments and become 'known' to [company] scientists," who don't have the responsibility to consider the company's pending patent applications and the relevance thereto of such information.  Personnel outside the scientific and patenting sections of a company can also obtain information that may be considered, in hindsight, to be relevant to patent prosecution, such as regulatory affairs employees or individuals involved in business development or investor relations.  This creates a situation where persons deemed by the patent law to fall under the duty of disclosure may become aware of such information (even if it merely "flicker[s] across the computer screen of a patent practitioner").  Added to this are:

[T]he selection of prior art for submission in light of shifting legal standards; the inclusion of experimental data to support enablement and best mode; the parsing of foreign office actions for references and examiner commentary; the coordination of opposition proceedings abroad; the disclosure of professional relationships with scientific experts; [and] communications to U.S. and foreign examiners in related applications.

(A litany clearly culled from various recent Federal Circuit decisions supporting the inequitable conduct defense.)  From all this, the brief maintains that "it will almost certainly be possible to find statements than an effective advocate can portray as inconsistent with representations made to the PTO, or uncited prior art that can be recast as material to examination."  And, the brief reminds the en banc Court, all these activities have occurred "in the remote past" in view of the timelines for product development, patent prosecution, and litigation in the biotechnology industry.  The potential for inequitable conduct allegations is particularly significant for down-stream licensees, who may be able to perform sufficient due diligence to "develop a reasonable level of confidence" about the validity of the patents they are licensing but cannot have "the same level of confidence that their patents . . . are also enforceable."  Since licensing is an important component of investment and technology transfer (inter alia, from universities) in biotechnology, the current manner by which the Court applies the inequitable conduct doctrine produces "business uncertainty" than is antithetical to conditions where the biotechnology industry can "flourish."

The brief also cites the recent approval of a biosimilars pathway for biologic drugs as creating "systematic litigation pressure" on biotechnology patents and a "strong likelihood" of litigation on those patents.  The "high commercial stakes" for both innovators and follow-on biologic producers "ensure that [patents] will be challenged by any means possible."  This reality can result in "innovations protected by such patents" to be left "idle" as the result of the uncertainty created by the current inequitable conduct regime.  "Nothing in the doctrine's historical roots compels such an outcome," the brief asserts.

Turning from these policy reasons for changing the current test for inequitable conduct, the brief expands on its own proposed standard.  The brief first distinguishes its proposed standard from common law fraud, a body of law from which BIO admits it has "borrow[ed]" but from which it is also distinct.  For one thing, common law fraud is a legal tort, whereas here inequitable conduct is a defense plead in equity.  "Even less clear" is the doctrine of "unclean hands" used, inter alia, but the Supreme Court as the basis of the inequitable conduct doctrine in the canonical modern trilogy of cases: 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. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945).  While the Supreme Court provided "no clear guidance" in these cases as to how the inequitable conduct doctrine should be applied, this very failure "leaves courts with a wide range of discretion" in applying the doctrine, a discretion supported by language from these cases themselves, according to the brief.  Indeed, the brief argues that both common law fraud and unclean hands "have very little to do with this Court's present inequitable conduct law," something BIO believes should preclude their use "to police prosecution misconduct," if only because of "their lack of clarity and applicability."

The hallmark of Supreme Court decisions on inequitable conduct, as well as BIO's proposed "more certain framework," is the public interest specifically "where unenforceability may be justified to remedy public harm."  This requires a balance:  striking down patents procured by inequitable conduct that harms the public interest, and avoiding striking down valid patents "because it causes more public harm than good."  The public is "entitled to rely on . . . the presumptive validity of patents," says the brief, and "[b]ad-faith applicants who deceive the PTO into issuing invalid claims indeed cause public harm."  Those harms include "wrongful commercial decision-making" that result in "inefficiencies and misallocations of resources."  In view of these harms, patent unenforceability may be the appropriate remedy, BIO contends.  But the "public interest" is a factor that "works both ways," the brief goes on to say, and it is not the case that the public interest "is advanced if valid patents are held unenforceable" (emphasis in the original).  This argument is the converse of the one made regarding invalid patents:  the commercial and investment utility of start-up biotechnology companies based on valid patents, and the reliance (and ability to rely) on such patents to garner investment.  There are issues of competition for scare resources, such as clinical data, scientific expertise, and regulatory agency attention that depend, in part, on whether a promising product has adequate patent protection.  Even for competitors, uncertainty about patent enforceability affects decisions on whether to market a competing product, to develop a "design-around," or to "redirect their business into a different market altogether."  "[E]very such decision is the right one to make if the patent is valid," according to the brief, but "[t]o affirm the validity of such patents in litigation -- and then hold them unenforceable -- undoes years of correct commercial decisionmaking and sends a message that businesses [patentees, their investors, their licensees and their competitors alike] cannot rely on patents.  This outcome does not 'promote the progress of the useful arts,' and causes more public harm than good," the brief concludes.  This argument supports BIO's position that, as one of the requirements for unenforceability, "the applicant must have caused the PTO to issue at least one invalid claim" in order to be guilty of inequitable conduct.

BIO's brief thus proposes a "but for" standard of materiality, cast in the terms of the present test under Kingsdown Medical.  The brief argues that a host of other factors that have been used recently to establish materiality, including "attorney argument, . . . past relationships with declarants, or noncompliance with small entity fee requirement," should not be material because they do not affect claim validity.  The brief also argues that whether a reference is material should be determined at the time of trial, to avoid (at least) "the need for certain discovery about what would have happened . . . in the distant past."  Rather, BIO argues that the Court should consider whether "an individual having a duty of disclosure engaged in misconduct that caused the PTO, acting reasonably, to issue at least one invalid claim."  The burden would thus be on an infringer to establish materiality, perhaps even "permit[ting] the parties to forego [discovery on intent] until materiality is established."  And by focusing the initial inquiry on materiality under a "but for" standard, whether the Office (and the public) materially relied on the "misrepresentation or omission" would take precedence, in accord with the idea that the public interest is damaged (and thus is a sufficient reason for a sanction) "where the applicant's misconduct caused the PTO to issue an invalid claim."  The brief argued that this "but for" standard would not be inconsistent with Supreme Court precedent outside the "unclean hands" context, such as U.S. v. Am. Bell Tel. Co., 128 U.S. 315 (1888) (inventorship) and Walker Process Equip. v. Food Mach. & Chem. Corp. (antitrust), stating that "[n]othing in these and other Supreme Court cases demands that this Court continue to apply a broad and inclusive materiality standard" (emphasis in original).  Such a result would be consistent with Kingsdown Medical, however; as the brief argues, former Chief Judge Markey noted in that case that the alleged misconduct "did not result in the patenting of anything anticipated or rendered obvious by anything in the prior art and thus took nothing from the public domain," i.e., caused no public injury.  863 F.2d at 873.

Turning to the intent element, the brief cites Kingsdown Medical for the requirement that both materiality and intent "must be independently proven and that gross negligence is not sufficient to establish intent" (emphasis in original).  However, the brief notes, the Court has strayed from these principles in recent cases, particularly citing Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008) with regard to the effects of evidence of materiality on intent:

[A]n inference of intent to deceive is appropriate when:  (1) highly material information is withheld; (2) the applicant knew of the information and knew or should have known of the materiality; (3) and the applicant fails to provide a credible explanation for withholding the information.

BIO's brief proposes that the current test be "set aside" and substituted with a requirement for "specific" intent:  "the evidence would have to show that the individual charged with inequitable conduct not only intended to make the representation or to withhold material information but that he or she intended to deceive the PTO" -- that is, "actual knowledge of the falsehood would be required."  This standard does not preclude intent from being inferred (or said another way, it does not require a "smoking gun" of direct evidence of intent to deceive), but it would not permit intent to be inferred merely on a finding of a "high degree" of materiality or gross negligence.  "Deception is of a different character and requires evidence of culpability, not ignorance," the brief maintains.  "More should be required" than simply gross negligence under a "should have known" standard, and gross negligence or even incompetence should not be mistaken for a specific intent to deceive using BIO's proposed standard.

The brief is much less agreeable to the "balancing" inquiry and the abuse of discretion standard under which it is reviewed, calling for the en banc Court to "eliminate" this part of the current inequitable conduct calculus.  The use of a "sliding scale" where "a high level of materiality can offset a low level of intent, or vice versa, has further muddled the present inequitable conduct analysis and contributed to the high costs" for both patentees and accused infringers, as well as inviting the parties "to place significant weight on the materiality prong . . . in effect ignoring the need for evidence of intent."  Balancing, the brief notes, is not mandated by any Supreme Court precedent, and BIO's standard would be straightforward to implement merely by finding "but for" materiality of a withheld reference and specific intent, each independently established by clear and convincing evidence.  The brief characterizes its approach as using "an objective patentability defect which establishes culpability if caused deliberately and in bad faith," a "simpler, more effective inquiry."

None of these changes need affect how the PTO conducts examination and other proceedings, the brief argues.  The Office has the authority "to adopt and enforce a materiality standard that best meets its administrative needs."  This could include a "more inclusive standard" for materiality than BIO advocates should be used by the courts, justified because the roles of the Office and the judiciary are different.  The Office must promulgate rules and practices that "advance its policy goals of timely, efficient and quality examination," which may include "incentivizing the submission of the most relevant information patent applicants regard as material."  The courts, on the other hand, act to "balance the interests of private litigants and protect the 'paramount' interest of the public," and thus how courts assess inequitable conduct should not "intru[de] into the operation of the agency," for example by providing incentives to over-disclose references while under-disclosing the relevance thereof.  "Much confusion in this area has arisen from an assumption that the administrative and judicial materiality standards somehow have to be the same," the brief asserts.  "They do not," and "[p]roblems only arise when conduct that is lawful under the agency's regulations is later found unlawful in private actions," citing Digital Control v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006).  The Court should recognize these differences and "adopt a standard [BIO's] where the public interest, not the PTO's administrative convenience, is paramount."

In its Statement of Interest, BIO asserts that represents "over 1,150 corporate, academic and non-profit members," the majority of which "are small and mid-size businesses that have yet to bring a product to market."  These businesses, working "in an environment of rapidly-evolving science, high rates of publication, and vibrant scientific and public discourse . . . face difficult choices about which information to cite to the PTO," and thus "the risk of misstatements and omissions is significant."  Patents are frequently a biotechnology company's "most valuable business assets," and are placed at risk by charges of inequitable conduct driven by hindsight, something that "is particularly evident in the biopharmaceutical area."  These circumstances, and the particular risk BIO's member companies face with regard to their patents because of the uncertainty created by the inequitable conduct defense as it is now applied by the courts, are the basis for BIO's interest in the questions presented by the en banc Court, despite BIO's lack of interest in the specific outcome of this case between the parties.

Pharma and Software Companies File Joint Amicus Brief in Therasense Case

By Kevin E. Noonan --

Last Friday, sanofi-aventis and Microsoft joined in filing an amicus curiae brief with the Federal Circuit in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of appellants and urging the en banc Court to reverse the three-judge panel's affirmance of inequitable conduct against Abbott, was limited to one of the "questions" posed to the parties and amici by the Federal Circuit when granting en banc review:  "[w]hether the specific intent element of the inequitable conduct doctrine is properly derived from the common law" (see "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson").

The brief's short answer is yes, particularly with regard to the specific intent standard.  Amici remind the Federal Circuit that the Supreme Court has spent a decade "[r]econciling patent-law doctrines with legal principles of general applicability," citing Microsoft v. AT&T Corp., 550 U.S. 437 (2007), and eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006); the brief could have cited half a dozen more instances representing the high court's decade-long assault on Federal Circuit jurisprudence.  The brief also cites one of the effects of this drubbing, that the Federal Circuit itself has been influenced in cases such as In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), and Knorr-Bremse v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc).  Here, the brief asserts that the CAFC has the opportunity to conform another area of its jurisprudence to the "same contours" as in other legal contexts.

Intent generally is not required for patent infringement, a strict liability tort.  It is only in "extraordinary situations," amici argue, that intent becomes an issue:  for infringers when the allegation is for inducing infringement, and for patentees when the allegation is inequitable conduct.  The brief argues that specific intent, defined as "[t]he intent to accomplish the precise act with which one has been charged" (reflecting the origins of the concept in criminal law) is the standard that a court should apply when establishing inequitable conduct.

Support for this standard is found, amici argue, in the Supreme Court cases establishing the inequitable conduct doctrine: Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945); and Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933).  These cases were defined by "extreme circumstances of 'deliberate,' 'corrupt,' 'sordid,' and 'highly reprehensible' conduct," the brief asserts.  The brief cites language from the cases relating to ''corrupt transaction[s]' that were 'highly reprehensible'" (citing Keystone Driller); "a 'deliberately planned and carefully executed scheme to defraud'' both the Patent Office and the Court of Appeals (citing Hazel-Atlas Glass); and a history that was "'steeped in perjury and undisclosed knowledge of perjury'" (citing Precision Instrument).  All these cases involved "intentional misconduct" (emphasis in original) -- actual wrongdoing -- and the brief argues that it is this level of culpability that justifies the "exceptional treatment" (i.e., unenforceability) occasioned by an inequitable conduct determination.

The brief also cites instances where the alleged conduct was not sufficient for the Supreme Court to refuse to enforce the patent, specifically U.S. v. American Bell Telephone Co., 167 U.S. 224, 239-40 (1897).  There, the brief maintains the Court 'derived from land patent cases a high standard for those who seek to challenge a patent for inequitable conduct."  Quoting the Court as stating that:

The dignity and character of a patent from the United States is such that the holder of it cannot be called upon to prove that everything has been done that is usual in the proceedings had in the land department before its issue, nor can he be called upon to explain every irregularity or even impropriety in the process by which the patent is procured.

Citing U.S. v. Marshall Mining Co., 129 U.S. 579, 589 (1889).  The brief makes the point that the Court did not cancel Bell's patent based on "extreme delay" in its issuance, on the grounds that the government's case depended on "the existence of a knowledge which no one had; of an intention which is not shown."  The brief also cites Corona Cord Tire Co., v. Dovan Chem. Corp., 276 U.S. 358 (1928), where "false, 'perhaps reckless,' affidavits [were] insufficient to render [a] patent unenforceable."

The brief proffers the argument that courts apply the common law where Congress has not spoken to the contrary, citing Dura Pharm. Inc. v. Broudo, 544 U.S. 336 (2005), and Neder v. U.S., 527 U.S. (1999).  With regard to specific intent, the common law standard is not "'volition' of 'knowledge' of one's acts."  Rather, what is required is that the "accused wrongdoer must have desired or purposefully sought not just its actions but the wrongful consequences of the actions taken," citing the Restatement (Second) of Torts (1965).  Amici argue that the "intention to cause unlawful consequences" is what "separates specific intent from negligence and recklessness."  Indeed, the brief argues that the Supreme Court has "expressly rejected theories of 'intent' predicated only on negligence or gross negligence," citing Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976).

The brief then cites multiple instances outside the fraud context where the common law requires specific intent, including conspiracy, secondary liability (such as "aiding and abetting"), and inducing infringement in patent and copyright cases, including Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005); DSU Med. Corp. v. JMS Co., 471 U.S. 1293 (Fed. Cir. 2006) (en banc); and Kyocera Wireless Corp v. ITC, 545 F.3d 1340 (Fed. Cir. 2008).  Returning to common law fraud, the brief again cites multiple cases that stand for the proposition that the Supreme Court "has repeatedly reiterated that '[f]raud means an intent to deceive,'" such as Lord v. Goddard, 54 U.S. (13 How.) 198, 211 (1851), among others.  The lack of immunity under the antitrust law for patents "procured by intentional fraud" under Walker Process Equip. Inc. v. Good Mach. & Chem. Corp., 382 U.S. 172 (1965), is also cited as an example where the common law standard requiring specific intent is applied in the patent law context.  And as the principle appellant's brief argued, specific intent is required for unenforceability in copyright, but not in the absence of an intent to defraud, S.O.S. Inc. v Payday, Inc., 886 F.2d 1081 (9th Cir. 1989).

The brief concludes from this precedent that inequitable conduct should also require a finding of specific intent.  "There is no reason for patent law to diverge from general law (or the antitrust or copyright laws in particular) on this most important question," according to amici.  The Federal Circuit has already held that negligence, even gross negligence, is not sufficient to satisfy the intent prong for inequitable conduct, Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc), the brief reminds the Court, consistent with a requirement for specific intent for inequitable conduct.

The brief notes, however, that the Court has "departed" from the (relatively) strict standard enunciated by the en banc court in Kingsdown, particularly citing Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), for its "intent inferred from materiality" holding; the brief not only states that this case was wrongly decided, but calls upon the en banc Court to overrule it, to "clarify that materiality and intent are separate requirements that must each be proved independently."  The brief argues that the "so-called sliding scale applied in some inequitable conduct cases is flawed at each of its steps."  According to the brief, the first step, that highly material information is withheld, "inserts materiality into the test for intent."  The second step, whether the applicant knew of the information and knew or should have known it was material, is "a mere negligence standard."  And the third step, that the applicant fails to provide a credible explanation for withholding the information, requires applicants "to disprove intent based on [this combination of] materiality and negligence."  In addition to wrongly establishing a test wherein "a highly material omission can satisfy both the materiality and intent test -- so long as the applicant should have known of the materiality," the brief argues that "[m]ere materiality coupled with negligence cannot be reconciled with the purposefully wrongful conduct required by [either] the Supreme Court's precedent or [the Federal Circuit's] decision in Kingsdown," citing (now) Chief Judge Rader's dissent in Aventis Pharma SA v. Amphastar Pharm. Inc., 525 F.3d 1334 (Fed. Cir. 2008).

The brief recites the familiar litany of deleterious consequences resulting from the inequitable conduct doctrine as applied by recent Federal Circuit decisions, including the "plague" in litigation, "in no small part due to an unduly permissive view of the intent element taken by some [Federal Circuit] decisions," and the "strong incentives" that the "proliferation of inequitable conduct charges" provide for patent applicants to "inundate the PTO with information in the hopes of forestalling a later inequitable conduct charge."  The brief reminds the Court that "perpetuating the 'plague' of 'inequitable conduct as a litigation strategy" would have consequences that are "particularly severe in the pharmaceutical industry, on which the American public depends for disease-curing, lifesaving innovations," as well as in the computer industry, "which has been a major engine of American economic growth since before the first microprocessor."  "[E]very conceivable policy counsels against allowing an inequitable conduct claim to proceed in any but the most extreme cases of fraud and deception," the brief asserts, reminding the Court that it "should not condone any measure of inequitable conduct that would produce a chilling effect on the 'Progress of . . . useful Arts.'"

This reining-in of inequitable conduct can be achieved by requiring a showing of specific intent, according to the brief, and the application of this "high standard" is warranted by the "dire consequences" that can result (patent unenforceability).  In addition to achieving desirable policy goals, adopting a specific intent standard would enable the Court "to reconcile this area of patent law with long-standing principles of general applicability," a goal sanctioned by the many recent Supreme Court decisions that have shaped patent law and Federal Circuit jurisprudence in that direction.  In so arguing, these amici further remind the CAFC that inequitable conduct, like obviousness and the doctrine of equivalents, are patent law doctrines ultimately flowing from Supreme Court decisions, and about which the Supreme Court may take a sufficient interest that it may decide to weigh in should the Federal Circuit not come to a decision consistent with the position the amici advocate.

For additional information regarding this topic, please see:

• "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

IPO Files Amicus Brief in Therasense Case

By Kevin E. Noonan --

The Intellectual Property Owners Association (IPO) filed an amicus curiae brief last week in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of neither of the parties to the underlying lawsuit, clearly stated the IPO's position that Federal Circuit jurisprudence on inequitable conduct had strayed, both from the CAFC's earlier precedents and, more importantly, from controlling Supreme Court precedent, and urged the en banc Court to correct this trend.

The IPO's brief begins by arguing that the Federal Circuit's "materiality-intent-balancing framework for inequitable conduct" was inconsistently applied and lacked clarity in its enunciation, and that the Court should modify how inequitable conduct is determined "to align the doctrine more closely with its equitable roots."  These roots lie in the Supreme Court standard of "unclean hands," which the brief argues is the proper standard for the Federal Circuit to adopt.  More specifically, the IPO argued that the intent prong must be established by clear and convincing evidence of an intent to deceive the Patent Office during prosecution.  With regard to the materiality prong, the brief argues that the Court should adopt a single, consistent, objective "but for" standard, wherein an issued claim in a patent asserted against an accused infringer would not have issued "but for" applicant's withholding the reference from the Office during examination.  Materiality should be assessed, according to the brief, consistently in both the Patent Office and before a court in patent litigation, which can be accomplished if the Federal Circuit were to adopt the objective "but for" test advocated by IPO.

The brief also argues that panels of the Court have erred in permitting intent to be inferred "solely" from a finding that the withheld reference was highly material.  What should be required is a specific intent to deceive the Patent Office based on clear and convincing evidence.  As for the "balancing" test, which permits a court in its discretion to balance the levels of materiality and intent to make a determination in equity whether a patent should be held unenforceable, the brief argues that balancing per se is not the problem with the current system.  Problems arise when such balancing is done before or in the absence of clear and convincing evidence of both materiality and intent.  The brief closes with the (perhaps) prescient argument that neither common law (presumably relating to fraud) nor federal agency law (presumably, also known as administrative law) "will prove as helpful" (or perhaps, should be resorted to) "as decisions addressing equitable issues," with particular reference to patent prosecution.  This portion of the argument seems to be directed to possible analogies with common law fraud or resort to regulations (such as Rule 56) and other Patent Office rules and policies, which the brief seems to indicate are neither particularly helpful nor appropriate in view of the equitable bases of the inequitable conduct doctrine as set forth in several Supreme Court decisions.

In specific arguments, the brief reminds the en banc Court that inequitable conduct is a creature of Supreme Court jurisprudence and equitable teachings, citing Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945); and Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933).  These cases all based the Court's refusal to enforce the patent-in-suit on equitable principles of "unclean hands," wherein "the scope of inequitable conduct may range from outright fraud, to deceit, to gaining an advantage by unfair means."  Behavior and activity amounting to inequitable conduct "that may render a patent unenforceable is broader than 'common law fraud,'" citing Norton v. Curtiss, 433 F.2d 779, 793 (CCPA 1970), as cited in J.P. Stevens & Co., Inc. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1559 (Fed. Cir. 1984).  While asserting that "unclean hands" should be the standard, the brief concedes that "the Supreme Court has not established a precise standard for the application of unclean hands."  However, the brief cites Keystone Driller for the proposition that "[t]he equitable powers of the court can never be exerted on behalf of one who has acted fraudulently, or who by deceit or any unfair means has gained an advantage," citing Keystone Driller, 290 U.S. at 245, to elucidate the proper underlying principles.

The brief supports its contention that the en banc Court should adopt the "objective but for" test for materiality on the grounds that "[a] single standard would provide concrete guidance to the district courts and bring a measure of increased predictability to the inequitable conduct issue."  The brief recites the varying standards applied by different panels of the Court, including "the objective 'but for' standard, the subjective 'but for' standard, and the 'but it may have' standard," citing Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309, 1315 (Fed. Cir. 2006).  The brief also notes that the Court with approval had relied on the "reasonable examiner" standard, which the brief asserts "permits a relatively low level of proof for establishing materiality," citing for support several cases including Leviton Mfg. Co., Inc. v. Universal Sec. Instruments, Inc., 606 F.3d 1353, 1358-59 (Fed. Cir. 2010); Advanced Magnetic Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 829 (Fed. Cir. 2010); Symantec Corp. v. Computer Assocs. Int'l, Inc., 522 F.3d 1279, 1297 (Fed. Cir. 2008); and McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 913 (Fed. Cir. 2007).  Use of this standard, the brief argues, has resulted in a resurgence of the "full-blown plague on the patent system, evidenced by "a ten-fold increase in the number of cases in which inequitable conduct has been pled as a percentage of total patent cases."  The negative effects on the patent system are not confined to litigation, according to the brief:  during patent prosecution applicants have an incentive to adopt a "cite everything, say nothing" practice.  As a result, "USPTO examiners are routinely buried under a paper avalanche of prior art references, most of which are of marginal value."  Moreover, applicants have an incentive not to disclose or put on the record "any statements about the cited references [that] may later be characterized in litigation as material misrepresentations."  The brief invokes the current backlog for examination as but one consequence of the inequitable conduct doctrine "distort[ing] the entire patent system."

The solution is adoption of the objective "but for" test, according to the brief.  In addition to being "closely [aligned] with the 'unclean hands' underpinnings of inequitable conduct as stated in Precision Instrument and Keystone Driller," this test would "[limit] application of inequitable conduct to those situations where the applicant has in fact 'acted fraudulently, or . . . by deceit or any unfair means has gained an advantage,'" citing Keystone Driller, 290 U.S. at 245.  In contrast, the "reasonable examiner" standard has extended the inequitable conduct doctrine to be applied "to situations where there is only the possibility of gaining an unfair advantage, and even to situations where no advantage was gained at all."  Finally, the brief argues that adopting the "objective 'but for' test" will result in bifurcation of invalidity and inequitable conduct determinations, which would either limit how frequently the defense was plead or how often it was plead successfully.

While stating black letter law that intent should not be based solely on a high showing of materiality, the brief argues that recent Federal Circuit decisions have not consistently required intent to be established by clear and convincing evidence.  Examples cited in the brief include Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223 (Fed. Cir. 2007), Aventis Pharma v. Amphastar Pharms., 525 F.3d 1334 (Fed. Cir. 2008), cert. denied, 129 S. Ct. 2053 (2009), and Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed. Cir. 2006).  "[A]n inference of intent to deceive is appropriate when: (1) highly material information is withheld; (2) the applicant knew of the information and knew or should have known of the materiality; (3) and the applicant fails to provide a credible explanation for withholding the information" is how the Court has enunciated this standard.  The IPO argues that the proper standard is the one enunciated in Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365-66 (Fed. Cir. 2008), specifically that intent should be "the single most reasonable inference able to be drawn from the evidence."

The brief then argues that balancing is appropriate for a court to determine in equity whether to find a patent unenforceable for inequitable conduct.  However, the brief reminds the en banc Court that the proper requirement is for both materiality and intent to deceive to be independently found by clear and convincing evidence, and only then should the court perform the balancing test, citing Monsanto Co. v. Bayer BioScience B.V., 363 F.3d 1235, 1239 (Fed. Cir. 2004).

The brief also contains a "Statement of Interest" for the IPO, which describes itself as "a trade association representing companies and individuals in all industries and fields of technology who own or are interested in U.S. intellectual property rights."  Its membership includes "200 companies and a total of over 11,000 individuals" and include "inventor[s], author[s], executive[s], law firm[s], or attorney members" who "receive about thirty percent of the patents issued by the U.S. Patent and Trademark Office to U.S. nationals."  The motivation for filing the brief is described as follows:

IPO submits this brief because of the frequency with which inequitable conduct issues arise in patent litigation and the resulting need for a clearly articulated and consistently applied standard for determining inequitable conduct.

In addition to filing the brief "on behalf of neither party," the IPO also declined to take a position on the facts or merits of the case between the parties.

IPO member Paul Berghoff, assisted by MBHB associate Kurt Rhode, were counsel for IPO on the brief.