Patent Law Updates on the Invalidity
and Inequitable Conduct Standards
Shawn Kolitch and T.J. Romano
Intellectual Property Attorneys
Kolisch Hartwell, P.C.
July 13, 2011
© Kolisch Hartwell 2011 All Rights Reserved, Page 1
OVERVIEW
•
Invalidity Standard in view of Microsoft Corp. v. i4i Ltd. P’ship,
2011 U.S. LEXIS 4376 (S. Ct. June 9, 2011)
•
Inequitable Conduct Standard in view of Therasense, Inc. v.
Becton, Dickinson and Co., 2011 U.S. App. LEXIS 10590 (Fed. Cir.
May 25, 2011) (en banc)
•
Prosecution and Litigation Strategy and Recommendations
© Kolisch Hartwell 2011 All Rights Reserved, Page 2
INVALIDITY STANDARD
Microsoft Corp. v. i4i Ltd. P’ship,
2011 U.S. LEXIS 4376 (S. Ct. June 9, 2011)
© Kolisch Hartwell 2011 All Rights Reserved, Page 3
Microsoft Corp. v. i4i Ltd. P’ship
•
•
•
•
i4i filed a complaint in the Eastern District of Texas on
March 8, 2007, alleging infringement by Microsoft of
U.S. Patent No. 5,787,449
The ‘449 patent claims are directed to a word
processing program that separately stores a
document’s content and the meta-data that governs its
appearance on the page
Microsoft Word 2003 and 2007 were accused
37 attorneys appeared in the case (only 16 for
Microsoft)
© Kolisch Hartwell 2011 All Rights Reserved, Page 4
Microsoft Corp. v. i4i Ltd. P’ship
•
On May 20, 2009, a jury found that the patent was valid
and Microsoft was liable for willful infringement
•
The Court awarded an additional $40,000,000 for willful
infringement, an additional $39,000,000 for prejudgment interest, and granted a permanent injunction
© Kolisch Hartwell 2011 All Rights Reserved, Page 5
Microsoft Corp. v. i4i Ltd. P’ship
•
•
Microsoft appealed to the Federal Circuit on five
separate grounds:
 (1) claim construction,
 (2) the jury’s validity finding,
 (3) the jury’s infringement finding,
 (4) the damages award, and
 (5) the terms of the permanent injunction
The Federal Circuit modified the effective date of the
injunction, but otherwise affirmed
© Kolisch Hartwell 2011 All Rights Reserved, Page 6
Microsoft Corp. v. i4i Ltd. P’ship
•
•
•
•
Microsoft asserted invalidity based primarily on i4i’s
“S4” software, which i4i admitted it sold more than a
year before applying for its patent
The S4 software was not considered by the PTO
The jury found that S4 did not prove invalidity by clear
and convincing evidence
Microsoft asserted that the standard of proof should
be a preponderance of the evidence at least when
invalidity is asserted based on prior art not previously
considered by the PTO
© Kolisch Hartwell 2011 All Rights Reserved, Page 7
Microsoft Corp. v. i4i Ltd. P’ship
•
•
•
After the Federal Circuit affirmed the jury’s
finding of validity, Microsoft appealed to the
Supreme Court
The Supreme Court granted cert
Held: proof of invalidity must be clear and
convincing under all circumstances
© Kolisch Hartwell 2011 All Rights Reserved, Page 8
Microsoft Corp. v. i4i Ltd. P’ship
•
35 USC 282:
“A patent shall be presumed valid. . . . The burden of establishing
invalidity of a patent or any claim thereof shall rest on the party
asserting such invalidity.”
•Microsoft argued as follows:
(1)the statute only generally requires proof by a preponderance of
evidence, or
(2)the statute only requires proof by a preponderance when the
evidence was not considered by the PTO during prosecution
© Kolisch Hartwell 2011 All Rights Reserved, Page 9
Microsoft Corp. v. i4i Ltd. P’ship
•
Microsoft first argued that the statute only generally
requires proof of invalidity by a preponderance
because there is no explicit language in the statute
about the standard of proof
 But a common law term used by Congress is
presumed to have a common law meaning
 Here, “presumed valid” has a long history of use at
common law to require clear and convincing proof
 Cardozo (1934): the presumption of patent validity
is “not to be overthrown except by clear and cogent
evidence.”
© Kolisch Hartwell 2011 All Rights Reserved, Page 10
Microsoft Corp. v. i4i Ltd. P’ship
•
Microsoft next argued that the phrase “A patent shall
be presumed valid” should be disregarded because it
renders superfluous the subsequent phrase “The
burden of establishing invalidity of a patent or any
claim thereof shall rest on the party asserting such
invalidity.”
 But the canon of statutory construction against
superfluous language only applies when a
competing construction does not result in
superfluous language
 Microsoft offered no such competing construction
© Kolisch Hartwell 2011 All Rights Reserved, Page 11
Microsoft Corp. v. i4i Ltd. P’ship
•
•
•
•
Finally, Microsoft argued in the alternative that a preponderance
standard should apply when the evidence of invalidity was not
considered by the PTO
KSR: “the rationale underlying the presumption – that the PTO, in
its expertise, has approved the claim – seems much diminished.”
The Supreme Court agreed that the particular rationale is
diminished, but found other rationales for the presumption:
• First public contributor deserves deference
• Presumption protects patent owners “reliance interests” in
exchanging public disclosure for patent protection
Most importantly, the Court found that it must defer to Congress
© Kolisch Hartwell 2011 All Rights Reserved, Page 12
Microsoft Corp. v. i4i Ltd. P’ship
Conclusions:
•The presumption of patent validity can only be
overcome by clear and convincing evidence,
regardless of whether or not the PTO previously
considered the evidence of invalidity
•However, “new evidence supporting an invalidity
defense may carry more weight in an infringement
action than evidence previously considered by the
PTO.”
•The law of the Federal Circuit remains unchanged
regarding the presumption of validity
© Kolisch Hartwell 2011 All Rights Reserved, Page 13
INEQUITABLE CONDUCT STANDARD
Therasense, Inc. v. Becton, Dickinson and Co.,
2011 U.S. App. LEXIS 10590 (Fed. Cir. May 25, 2011) (en banc)
© Kolisch Hartwell 2011 All Rights Reserved, Page 14
Facts: The Patent-at-Issue, U.S. Pat. No. 5,820,551
•
Technology: disposable test strips using electrochemical biosensors to
measure glucose levels in blood
•
Claim 1 in relevant part: 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:
…
c) an active electrode on said strip in electrical contact with said first
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 . . .
© Kolisch Hartwell 2011 All Rights Reserved, Page 15
Facts: The Prior Art-at-Issue
•
U.S. Pat. No. 4,545,382 and its counterpart European Pat. No.
0078636 were filed by Abbot’s predecessor and are directed to
electrochemical sensors for measuring glucose levels
•
PTO cites US ‘382 as prior art against Claim 1 of US ‘551 application.
The key passage from US ‘382 / EP ‘636 reads as follows:
“Optionally, but preferably when being used on live blood, a
protective membrane surrounds both the enzyme and the
mediator layers, permeable to water and glucose membranes”
•
Abbott’s attorney argues this passage means that electrodes require
using a protective membrane with live blood. PTO examiner requests
affidavit from applicant supporting that prior art required as much at
the time of the invention
© Kolisch Hartwell 2011 All Rights Reserved, Page 16
Facts: Statements to PTO
•
During prosecution of US ‘551 application, Abbott submits declarations and arguments
supporting that the “optionally, but preferably” passage means that a membrane is
required for live blood
•
1997: Abbott states following in declaration to PTO from Abbott scientist (Sanghera):

•
[O]ne skilled in the art would have felt that an active electrode comprising an enzyme and a
mediator would require a protective membrane if it were to be used with a whole blood
sample. . . . [O]ne skilled in the art would not read [the passage from US ‘382] to teach that the use
of a protective membrane with a whole blood sample is optionally or merely preferred.
1997: Abbot’s attorney argues as follows to PTO:

The art continued to believe [following the ‘382 patent] that a barrier layer for [a] whole blood
sample was necessary . . . .
One skilled in the art would not have read the disclosure of the [‘382 patent] as teaching that the
use of a protective membrane with whole blood samples was optional. He would not, especially in
view of the working examples, have read the "optionally, but preferably" language at line 63 of
column [4] as a technical teaching but rather mere patent phraseology.
....
There is no teaching or suggestion of unprotected active electrodes for use with whole
blood specimens in [the ‘382 patent] . . . .
© Kolisch Hartwell 2011 All Rights Reserved, Page 17
Facts: Contradictory Statements to EPO
•
During revocation proceeding in Europe against EP ‘636 (counterpart to US ‘382), Abbott argues that the
“optionally, but preferably” passage means that a membrane is not required, but is optionally used for
live blood
•
1993: Abbott’s counsel distinguishes reference D1, which required a membrane, as follows:

Contrary to the semipermeable membrane of D1, the protective membrane optionally utilized with the
glucose sensor of the patent is [sic] suit is not controlling the permeability of the substrate . . . . Rather,
in accordance with … the patent in suit: “Optionally, but preferably when being used on live blood, a protective
membrane surrounds both the enzyme and the mediator layers, permeable to water and glucose molecules."
See also claim 10 … according to which the sensor electrode has an outermost protective membrane (11)
permeable to water and glucose molecules. . . . Accordingly, the purpose of the protective membrane of the
patent in suit, preferably to be used with in vivo measurements, is a safety measurement to prevent any course
[sic] particles coming off during use but not a permeability control for the substrate.
•
1995: Abbott's counsel again distinguishes D1 from EP ′636 as follows:

"Optionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme
and the mediator layers, permeable to water and glucose molecules.“

It is submitted that this disclosure is unequivocally clear. The protective membrane is optional, however,
it is preferred when used on live blood in order to prevent the larger constituents of the blood, in
particular erythrocytes from interfering with the electrode sensor. Furthermore it is said, that said
protective membrane should not prevent the glucose molecules from penetration, the membrane is "permeable"
to glucose molecules. This teaches the skilled artisan that, whereas the [D1 membrane] must . . . control the
permeability of the glucose . . . the purpose of the protective membrane in the patent in suit is not to control the
permeation of the glucose molecules. For this very reason the sensor electrode as claimed does not have
(and must not have) a semipermeable membrane in the sense of D1.
© Kolisch Hartwell 2011 All Rights Reserved, Page 18
Facts: Contradictory Statements in Summary
Passage from US ‘382 / EP ‘636: “Optionally, but preferably when being used on live
blood, a protective membrane surrounds both the enzyme and the mediator layers,
permeable to water and glucose membranes”
What does the passage mean to Abbott?
1997 Statement to USPO
1993/1995 Statements to EPO
membrane required with live blood
membrane preferred, but not
required, with live blood
Inequitable Conduct Issue: PTO accepts Abbott’s statement and grants ‘551
patent over ‘382 patent, but Abbot never disclosed to the PTO the contradictory
statements to EPO in EP ‘636
© Kolisch Hartwell 2011 All Rights Reserved, Page 19
Summary of Case History
•
N.D. Cal., after bench trial, rules in relevant part as follows:
 Claim 1 invalid as obvious over US ‘382 in view of another patent. Key
finding is US ‘382 teaches that "a protective membrane was optional in all
cases except the case of live blood, in which case the protective membrane
was preferred—but not required”
 US ‘551 unenforceable for inequitable conduct based on a failure to disclose
to PTO the prior contradictory statement to the EPO
•
Federal Circuit affirms N.D. Cal. in Therasense, Inc. v. Becton, Dickinson & Co.,
593 F.3d 1289 (Fed. Cir. 2010) (hereinafter “Therasense 2010”), but decision
vacated in favor of an en banc rehearing
•
Federal Circuit tightens the standards for inequitable conduct and remands to
N.D. Cal. in Therasense, Inc. v. Becton, Dickinson and Co., 2011 U.S. App.
LEXIS 10590 (Fed. Cir. May 25, 2011) (en banc) (hereinafter “Therasense 2011”)
© Kolisch Hartwell 2011 All Rights Reserved, Page 20
Therasense 2010: Prior Inequitable Conduct Standard
•
Challenger must prove by clear and convincing evidence:
 Materiality, defined as an affirmative misrepresentation of a material fact,
failure to disclose material information, or submission of false material
information,
Any misstatement or omission material under Rule 56 is material
Coupled with an intent to deceive
o Assess conduct in light of all evidence, including evidence of good faith,
which must indicate sufficient culpability to require a finding of intent to
deceive
o Can infer intent from indirect and circumstantial evidence
o

•
Sliding Scale: balance levels of materiality and intent, a greater showing of one
allows lesser showing of other for finding inequitable conduct
•
Applying this standard, the Federal Circuit affirms finding of inequitable conduct
against Abbott
© Kolisch Hartwell 2011 All Rights Reserved, Page 21
Therasense 2010: Prior Inequitable Conduct Standard
Materiality Standard from 37 CFR 1.56 (aka Rule 56)
[I]nformation is material to patentability when 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.
A prima facie case of unpatentability is established when the information compels a
conclusion that a claim is unpatentable under the preponderance of evidence, burdenof-proof standard, giving each term in the claim its broadest reasonable construction
consistent with the specification, and before any consideration is given to evidence
which may be submitted in an attempt to establish a contrary conclusion of patentability.
© Kolisch Hartwell 2011 All Rights Reserved, Page 22
Therasense 2011: Critique of the Prior Standard
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•
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Goal was to encourage full disclosure to PTO, but prior standard too low
because it led to unintended consequences
PTO consequences: applicants bury PTO in marginal reference disclosures
out of fear of inequitable conduct charges
Litigation consequences:
 Inequitable conducted asserted in ~80% of cases due to low standard
and possibility of attorney’s fees under 25 U.S.C. §285 if proven
 Increased litigation cost and complexity
 Disqualifies prosecuting attorney from litigation
 Casts cloud over patent’s validity and patentee as bad actor
 Discourages settlement
 “Atomic bomb” results: renders all claims of patent and even of related
patents unenforceable; reissue or reexamination can’t cure
Court’s Conclusion: tightening of standard needed
© Kolisch Hartwell 2011 All Rights Reserved, Page 23
Therasense 2011: A New, Tightened Standard
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Materiality: Court adopts “but-for” materiality standard and
specifically rejects use of Rule 56 to define materiality
•
Intent to Deceive PTO: must prove that applicant knew of the
reference, knew that it was material, and made a deliberate
decision to withhold it from PTO
•
Still must prove materiality and intent by clear and convincing
evidence, but must prove each separately and no more sliding
scale
© Kolisch Hartwell 2011 All Rights Reserved, Page 24
Therasense 2011: Tightening the Standard
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Inequitable conduct for “instances where the patentee's misconduct resulted in the unfair
benefit of receiving an unwarranted claim.” Id. at *38.
•
But not for minor missteps or misconduct that would not have blocked issuance of a patent
•
Tightened standard originates from Supreme Court cases where knowing and deliberate
action to defraud PTO and courts occurred, leading to remedies based on unclean hands:

Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933): Patentee knew of
possible prior use before filing app. but never informed PTO; paid prior user to sign
false affidavit that prior use was abandoned experiment. Remedy: dismissal of suit.

Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other
grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976): Patentee ghostwrote article signed by expert touting invention; pays expert to keep quiet. Never
informs PTO, which issues patent based on article. Remedy: vacated judgment.

Precision Instruments Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945):
Patentee purchased patent it knew was obtained based on false statements to PTO
about invention dates. Never informs PTO of this. Remedy: dismissal of suit.
© Kolisch Hartwell 2011 All Rights Reserved, Page 25
Therasense 2011: But-For Materiality
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The but-for test: “When 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.” Id. at *37.
•
To determine “but for” materiality, court must apply a preponderance of the
evidence standard and give claims their broadest reasonable construction.
See MPEP §§ 706, 2111 (8th ed. Rev. 8, July 2010).
•
Relationship between validity and but-for materiality:


Materiality necessarily found if any claim invalidated in district court over withheld
reference because validity finding in district court requires clear and convincing
evidence.
“However, even if a district court does not invalidate a claim based on a
deliberately withheld reference, the reference may be material if it would have
blocked patent issuance under the PTO's different evidentiary standards.”
Id. at *37-38.
© Kolisch Hartwell 2011 All Rights Reserved, Page 26
Therasense 2011: But-For Exception
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“Affirmative egregious misconduct” may be material, even if not “but for” material

“When the patentee has engaged in affirmative acts of egregious misconduct, such as the
filing of an unmistakably false affidavit, the misconduct is material.” Id. at *40.

Exception for extraordinary circumstances: think facts of the Supreme Court decisions in
Keystone, Hazel-Atlas, and Precision

Exception not for mere non-disclosure of prior art nor failure to mention prior art reference

Exception apparently not for mere “reckless” conduct
•
Corona Cord Tire Co. v. Dovan Chemical Corp., 276 U.S. 358 (1928).

Patentee submitted two false affidavits claiming invention had been used in production of
rubber when only test slabs of rubber had been produced

Supreme Court held these affidavits were immaterial as follows:
“Production of rubber goods for use or sale was not indispensable to the granting of the
patent. Hence the affidavits, though perhaps reckless, were not the basis for it or
essentially material to its issue. The reasonable presumption of validity furnished by the grant
of the patent, therefore, would not seem to be destroyed.”
Id. at 374 (emphasis added).
© Kolisch Hartwell 2011 All Rights Reserved, Page 27
Therasense 2011: Proving Intent to Deceive
•
•
•
•
Must prove by clear and convincing evidence that applicant knew of reference,
knew that it was material, and made a deliberate decision to withhold it
Gross negligence and negligence under a “should have known” standard fail to
satisfy intent requirement
Patentee need not offer any good faith explanation unless accused infringer first
proves a threshold level of intent to deceive by clear & convincing evidence
 Absence of good faith explanation, by itself, does not prove intent to
deceive
Can infer intent from circumstantial evidence, but “to meet the clear and
convincing evidence standard, the specific intent to deceive must be the single
most reasonable inference able to be drawn from the evidence.“ Id. at *34.
 If multiple reasonable inferences, then intent cannot be found
 Federal Circuit will review factual findings regarding reasonable inferences
for clear error
© Kolisch Hartwell 2011 All Rights Reserved, Page 28
Therasense 2011: Separate Considerations
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Intent and Material are considered separately
•
Rejects use of sliding scale
•
No inference of intent solely from fact that reference is
found material:
 “Proving that the applicant knew of a reference,
should have known of its materiality, and decided
not to submit it to the PTO does not prove specific
intent to deceive.” Id. at *33.
© Kolisch Hartwell 2011 All Rights Reserved, Page 29
Therasense 2011: Scorecard of Opinions
•
Majority: Judges Rader, Newman, Lourie, Linn, Moore, and Reyna

•
Concur- and dissent-in-part: Judge O’Malley




•
New standard and remands to district court to consider under new standard
Intent – concurs with majority
Materiality – dissents
o Does not agree with “but for” materiality nor with defining materiality based on Rule 56
o Test needs to be flexible
Separate test for intent and materiality and no sliding scale – concurs with majority
Would here remand regarding intent, but affirm finding of materiality
Dissent: Judges Bryson, Gajarsa, Dyk, and Prost




Intent – specific intent to deceive, negligence or gross negligence not enough
Materiality – keep Rule 56 as the standard
Separate test for intent and materiality and no sliding scale – concurs with majority
Would here affirm judgment that US ‘581 is unenforceable
© Kolisch Hartwell 2011 All Rights Reserved, Page 30
STRATEGY AND RECOMMENDATIONS
•
Patent Prosecution
•
Patent Litigation
© Kolisch Hartwell 2011 All Rights Reserved, Page 31
Strategy and Recommendations: Patent Prosecution
•
Microsoft does not meaningfully impact prosecution strategy under current law, but
could encourage closer monitoring of PTO activity if proposed opposition period is
enacted
•
Therasense 2011 may not stem “marginally relevant” submissions to the PTO, at
least initially
•
Arguments, including attorney arguments, that applicants make to other tribunals may
still require submission


•
An applicant, particularly one with multiple unconnected law firms in U.S and
abroad, will still need to monitor arguments across tribunals and firms
Applicant may still need to bear costs of translating non-English office actions,
search reports, responses, etc. for determining whether to submit to PTO
Relevance of Rule 56 unclear in view of Therasense 2011
Recommendation: continue submitting information to PTO without
consideration of these rulings. Let others define the boundaries of law,
particularly that of inequitable conduct…
© Kolisch Hartwell 2011 All Rights Reserved, Page 32
Strategy and Recommendations: Patent Litigation Part 1
•
Neither court ruling favors defendants
•
Prior invalidity standard still applies
•
Fed. Cir. already raised the pleading standards for inequitable
conduct prior to Therasense 2011, so surviving a Rule 12(b)
motion early in litigation may be more challenging
•
Claim construction just got even more complicated – one
term, potentially two different constructions
 For invalidity – clear and convincing applies
 For materiality but-for prong of inequitable conduct –
preponderance of the evidence and broadest reasonable
interpretation apply
© Kolisch Hartwell 2011 All Rights Reserved, Page 33
Strategy and Recommendations: Patent Litigation Part 2
•
Challenger must prove materiality by clear and convincing
evidence, yet but-for materiality judged under preponderance
of the evidence standard used by PTO – unclear how this will
work in practice
•
Defendants – be prepared – if discovery leads to support of
an inequitable conduct claim AFTER claim construction,
consider that plaintiff may oppose further claim construction
as untimely
•
“Egregious misconduct” exception is new – law must develop
around this exception to clarify
© Kolisch Hartwell 2011 All Rights Reserved, Page 34
Shawn Kolitch
shawn@khpatent.com
T.J. Romano
tromano@khpatent.com
Kolisch Hartwell, P.C.
Intellectual Property Attorneys
520 SW Yamhill Street, Suite 200
Portland, Oregon 97204
503-224–6655
© Kolisch Hartwell 2011 All Rights Reserved, Page 35