Inequitable Conduct:
Getting to Therasense and Beyond
John D. Murnane
Melinda R. Roberts
October 18, 2012
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Overview
I.
Overview of Inequitable Conduct
II.
The Therasense decision
III. Pre-Therasense
IV. Post-Therasense
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I. Overview of Inequitable Conduct
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Inequitable Conduct, Generally
 Equitable defense to patent infringement
 Alleges misconduct at the Patent Office
– Usually predicated on a failure to disclose information during a
patent prosecution
 Evolved and expanded from the unclean hands doctrine
 Relates to Patent Rule 56 (37 C.F.R. § 1.56): “Each individual
associated with the filing and prosecution of a patent application has a
duty of candor and good faith in dealing with the [PTO], which includes
a duty to disclose to the [PTO] all information known to that individual to
be material to patentability.”
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Inequitable Conduct, Generally
 Can result in severe penalties:
– Entire patent or patent family may be deemed unenforceable even if
inequitable conduct only relates to one (even unasserted) claim
 Cannot be cured by reissue or reexamination*
– Recovery of legal fees
– Attorney’s reputation may be damaged
– Risk of other claims (e.g., antitrust)
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Pleading Inequitable Conduct
 Must be pleaded with particularity under F.R.C.P. 9(b) by identifying
“the specific who, what, when, where, and how of the material
misrepresentation or omission committed before the [Patent Office]”
Exergen Corp. v. Walmart Stores, Inc. 575 F.3d 1312, 1328 (Fed. Cir.
2009).
 “Moreover, although “knowledge” and “intent” may be averred generally,
a pleading of inequitable conduct under Rule 9(b) must include
sufficient allegations of underlying facts from which a court may
reasonably infer that a specific individual (1) knew of the withheld
material information or of the falsity of the material misrepresentation,
and (2) withheld or misrepresented this information with a specific intent
to deceive the PTO.” Id. at 1328-29.
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Inequitable Conduct Standard (Pre-Therasense)
 Inequitable Conduct required:
Materiality
Intent
– Materiality of alleged fraud
 Many different standards for materiality existed preTherasense: e.g., the objective and subjective “but for” tests;
the “but it may have” test; the “reasonable examiner” test;
Patent Rule 56 (1992) test)
– General intent to deceive based on totality of circumstances
 Satisfied with showing of gross negligence or even negligence
 Courts used a “sliding scale”: a strong showing of intent could
compensate for a weak showing of materiality and vice versa
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II. The Therasense Decision
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Facts of Therasense

Invention related to disposable blood glucose testing strips

Misconduct related to patent holder’s failure to disclose to
the PTO statements made to the EPO regarding a prior art
patent
Procedural History of Therasense


Patent originally filed in 1984
In the next 13 years, patentee faced multiple rejections and many
continuation applications were filed


Alleged misconduct occurred in 1997
District court found inequitable conduct in 2008

Divided Federal Circuit panel affirmed in 2010

Federal Circuit granted en banc review in 2010
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Sidebar: Importance of Federal Circuit
 Established under Article III of the U.S. Constitution
 Has nationwide jurisdiction in a variety of subject
areas including patents (28 U.S.C. § 1295)
 Appeals to Federal Circuit come from all federal
district courts and certain administrative agencies’
decisions, including the Board of Patent Appeals and
Interferences
 Intellectual property cases account for 31% of
Federal Circuit’s caseload
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Inequitable Conduct Under Therasense
 The Therasense court “now tightens the standards for finding both
intent and materiality in order to redirect [the inequitable conduct]
doctrine that has been overused to the detriment of the public.” 649
F.3d 1276, 1290 (Fed. Cir. 2011).
 Inequitable Conduct requires a separate showing of both:
– But-for Materiality
– Specific Intent to Deceive
 Each must be established by clear and convincing evidence
 Note: Therasense rejects the use of a sliding scale to offset weak
showing of intent with strong showing of materiality, and vice versa
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Materiality Under Therasense

But-for Materiality Standard:
– “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.”
– Note: If a district court invalidates a claim based on
undisclosed prior art, it is automatically material.

Evidentiary Standard:
– Party alleging inequitable conduct must show but-for
materiality by clear and convincing evidence
– In determining whether information is material, courts
should apply the preponderance of the evidence
standard give claims their “broadest reasonable
construction”
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Materiality Under Therasense, cont.

Exception: Affirmative Egregious Misconduct
–
Affirmative egregious misconduct before the PTO is material
(i.e., showing of but-for materiality not needed in these cases)
–
Rationale: “…a patentee is unlikely to go to great lengths to
deceive the PTO with a falsehood unless it believes the
falsehood will affect issuance of the patent.”
–
Example: Patentee files an unmistakably false affidavit
 But a failure to update a Petition to Make Special, after
circumstances underlying the petition changed, was not
affirmative egregious misconduct. Powell v. The Home
Depot, U.S.A. Inc., 663 F.3d 1221 (Fed. Cir. 2011).
 Likewise, an attorney's statement contained in a petition to
revive a patent after failure to pay a maintenance fee, while
false and material, was not affirmative egregious
misconduct because there was "insufficient evidence of
subsequent steps taken to deceive the USPTO or activities
rising to the level of paying witnesses to lie or creating false
articles with deceptive attribution to make such a finding.“
Network Signatures, Inc. v. State Farm Mutual Insurance
Co., No. SACV 11-00982 JVS, 2012 WL 2357307, at *8
(C.D. Cal. June 13, 2012)
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Intent under Therasense
 Intent Standard: Requires specific
intent to deceive
– Applicant knew of the reference,
knew it was material and made a
deliberate decision to withhold it
– “misrepresentation or omission
amount[ing] to gross negligence or
negligence under a ‘should have
known’ standard does not satisfy
this intent requirement.”
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Intent under Therasense, cont.
 Evidentiary Standard: Party alleging inequitable conduct 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.”
– May still be inferred from indirect or circumstantial evidence
– But inference must be “the single most reasonable inference
able to be drawn from the evidence”
 “…when there are multiple reasonable inferences that may be
drawn, intent to deceive cannot be found.”
 “The absence of a good faith explanation for withholding a material
reference does not, by itself, prove intent to deceive.”
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Outcome in Therasense Case
 Federal Circuit vacated District Court’s finding of inequitable conduct
and remanded for further consideration
 On remand, the District Court again found inequitable conduct and
struck down the entire patent as unenforceable
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III. Pre-Therasense
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The “Plague” of Inequitable Conduct
[T]he habit of charging inequitable conduct in almost every major patent
case has become an absolute plague. Reputable lawyers seem to feel
compelled to make the charge against other reputable lawyers on the
slenderest grounds, to represent their client’s interests adequately,
perhaps. They get anywhere with the accusation in but a small
percentage of the cases, but such charges are not inconsequential on
that account.
Burlington Industries, Inc. v. Dayco Corp.,
849 F.2d 1418, 1422 (Fed. Cir. 1988)
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The “Plague” Explained
 Overuse of inequitable conduct
 Increases complexity and duration of litigation
 Interferes with effective and efficient examination of patent applications
 Detrimentally impacts profession
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Overuse of Inequitable Conduct
 Alleged merely for value as a litigation tactic
– Offers pro-defendant narrative (patentee as bad actor)
– Disqualifies prosecuting attorney from litigation team
– Functions as an “atomic bomb” to render entire patent or patent
family unenforceable and risk other penalties
 Various studies show inequitable conduct was pled in somewhere
between 40% to 80% of patent cases pre-Therasense
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Inequitable Conduct Increases
Complexity and Duration of Litigation
 Expands scope of discovery
– Opens door to additional areas and time periods of
discovery (e.g., corporate practices before patent
filing)
– Pushes limits of attorney-client privilege and crimefraud exception
 Leads to increased discovery disputes and motion
practice
 Adds to contentiousness of litigation and discourages
settlement
 Deflects attention from validity and infringement
– Extreme nature of penalties requires vigorous
litigation of even weak allegations
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Inequitable Conduct Interferes With Examination of Patent
Applications
 Results in over-disclosure or “reference
flooding” or “data-dumping” – e.g., where
patent prosecutors end up disclosing every
piece of remotely relevant prior art
 Disincentivizes patent attorneys from helping
PTO understand the relevancy of references
during prosecution
 Results in issuance of more vulnerable
patents
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Inequitable Conduct Detrimentally Impacts Legal Profession
[Assertions of inequitable conduct] 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.
Burlington Industries, Inc. v. Dayco Corp., 849
F.2d 1418, 1422 (Fed. Cir. 1988)
The inequitable conduct finding in this case, for example, has destroyed the
career of Mr. Pope, who had 35 years of experience prosecuting patents
with highly respected law firms and companies, including appellee Bayer.
He had never previously even been accused of inequitable conduct. But
the finding of inequitable conduct in this case has put his license with the
Illinois and Patent Bars at stake. As a direct result, he has also been
terminated from his law firm and the only other legal job he could get.
Petition for Rehearing En Banc, Therasense, Inc. v. Becton,
Dickinson and Co., 04-CV-2123 at 15 (Feb. 24, 2010)
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IV. Post-Therasense
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Inequitable Conduct and the America Invents Act (2011)

The AIA creates a supplemental examination procedure for patents (35
U.S.C. § 257). Effective September 16, 2012, available to any patent
regardless of issue date
– A patent owner may request supplemental examination of a patent
any time after its issuance “to consider, reconsider, or correct
information believed to be relevant to that patent.”
 Can be based on any information – not just prior art patents and
printed publications
 If PTO finds a substantial new question of patentability is
presented, re-examination is ordered
– Patent may not be held unenforceable based on conduct relating to
the information considered or corrected during supplemental
examination.
 Except where inequitable conduct allegations were already
pending before the request for supplemental examination was
filed
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Inequitable Conduct and the America Invents Act, cont.
 Supplemental Examination can be used to amend claim, cure
inequitable conduct and improve value of a patent
– But it cannot be used to cure fraud
– PTO can still investigate and impose sanctions for misconduct
– Also, invoking supplemental examination risks the possible
revocation of an otherwise granted patent
– And re-examination may result in requirement to narrow claims
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Impact of Therasense on PTO



Therasense rejected PTO’s materiality standard
PTO’s proposed rule revises its materiality standard to
match the materiality standard as defined in Therasense
(Federal Register Vol. 76, No. 140, July 21, 2011)
PTO identified the following reasons to harmonize its own
standard with the Therasense jurisprudence:
– Therasense’s materiality standard should reduce the
frequency with which applicants and practitioners are
being charged with inequitable conduct, thereby
reducing the incentive to submit information
disclosure statements containing marginally relevant
information and enabling applicants to be more
forthcoming and helpful to the PTO
– Therasense’s materiality standard should continue to
prevent fraud on PTO and other egregious forms of
misconduct
– Harmonization of the materiality standards is simpler
for the patent system as a whole
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Impact of Therasense on District Courts
 Some evidence fewer inequitable conduct claims being brought
 Therasense’s impact at the pleading stage:
– Do pleadings that present “multiple reasonable inferences” violate
Therasense?
– Are “knew or should have known” pleadings no longer sufficient?
– Deadline to amend pleadings?
– More motions to dismiss?
 Therasense’s impact at the discovery stage:
– New boundaries of discovery?
– More discovery disputes?
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Impact of Therasense on District Courts, cont.
 Therasense’s impact at the trial stage:
– More motions for summary judgment?
– Separate claim construction for Inequitable Conduct and
Infringement/Validity phases?
 “broadest, reasonable interpretation” v. “correct” claim
construction
– Bifurcation of Inequitable Conduct and Infringement/Validity
phases?
– New role for experts?
– Resurgence of other defenses (e.g., unclean hands)?
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Questions?
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