Inequitable Conduct after Therasense
Austin Intellectual Property Law Association
August 16, 2011
Darryl Adams - Baker Botts
David Parker - Fulbright & Jaworksi
Michael Valek - Vinson & Elkins
1
©2011 Fulbright & Jaworski L.L.P.
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
2
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
3
Inequitable Conduct: A Brief History

Inequitable conduct arose from unclean hands

Early inequitable conduct cases involved egregious
misconduct



Suppression of evidence: Patentee paid a prior user to sign a
false affidavit (Keystone Driller Co., 290 U.S. 240 (1933))
Manufacture of false evidence: Patentee’s attorneys covertly
authored article touting the invention (Hazel-Atlas Glass Co.
322 U.S. 238 (1944))
Consequence: dismissal of the patent enforcement suit
4
Inequitable Conduct: A Brief History
The Early Egregious Affirmative Acts of Misconduct
Materiality + Intent and the Sliding Scale



Omission may constitute inequitable conduct
Sufficient evidence of intentional misconduct?
Does gross negligence suffice?


Orthopedic Equip. Co., 707 F.2d 1376 (Fed. Cir. 1983) (dicta: intent can be based on
finding of gross negligence)
Does standard negligence suffice?

Driscoll, 731 F.2d 878 (Fed. Cir. 1984) (applied “knew, or should have known”
standard to materiality)

Sliding Scale

Am. Hoist & Derrick Co., 725 F.2d 1350 (Fed. Cir. 1984)
Strong showing materiality  requires less evidence of intent

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Inequitable Conduct: A Brief History


The Downfall of Gross Negligence, Rise of Intent: FMC and Kingsdown

FMC: failure to disclose a “publication” that could have given rise to time bar.
Evidence that relevant persons did not appreciate it was a “publication.” Fed. Cir.
affirmed district court finding of “lack of knowledge” of materiality, thus no evidence of
intent. Gross negligence alone insufficient basis for finding intent.

Kingsdown: Applicant affirmatively stated that claim had been previously allowed when
it had not. District Court found gross negligence and inequitable conduct. Fed. Cir.
reversed. The Court, sitting in banc for this issue, held that a finding of gross negligence
does not compel or even justify a finding of intent to deceive.
The Struggle with Intent: Molins

Fed. Cir. aff’d district court finding of inequitable conduct. Applicant failed to disclose
“most relevant” reference from foreign prosecution. No overt evidence of intent. Court
found that reference was so relevant that there must have been intent.

Evidences the underlying problem – how do you show intent? Interesting side note:
reference was submitted during reexamination and not found to be relevant. Compare
with Life Technologies v. Clontech.
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Inequitable Conduct: A Brief History

New consequences: the “atomic bomb” of patent
law
Nilssen v. Osram (improper small entity payments)
 General Electro. v. Samick (improper petition to make
special)
 Ferring v. Barr (failure to advise of declarant’s interest)
 BMS v. RPR (failure to disclose post-published article as
evidence of non-enablement; was disclosed in reissue)
 Life Technologies v. Clontech (curing of inequitable
conduct?)
 Aventis v. Amphastar (failure to disclose different doses)

7
Inequitable Conduct: A Brief History
New consequences: the “atomic bomb” of patent law
 Aventis Pharma S.A., 525 F.3d 1334 (Fed. Cir. 2008) (Rader, J., dissenting)
●
●
●
●
Entire patent unenforceable
Infectious inequitable conduct
Incurable
Antitrust/unfair competition
Therasense: Led to “numerous unforeseen and unintended consequences”
● “Overplayed”: pled in nearly every case
● Worse patents?
 Patent applicants disclose too much prior art
 Patent applicants fear mischaracterizing the art
● “Absolute plague”
Therasense: “This 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.”
8
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
9
Therasense Decision




En banc decision
Unanimous decision to strengthen intent prong
Unanimous decision to eliminate "sliding scale"
Majority decision to strength materiality standard



Majority - Rader, Newman, Lourie, Linn, Moore
and Reyna (6)
Dissent - Bryson, Gajarsa, Dyk, and Prost
Concurrence - O'Malley
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Majority Opinion



Discussed the roots of inequitable conduct unclean doctrine
Standards for intent and materiality reduced to
encourage disclosure to the PTO
Unforeseen consequences in both litigation and
prosecution


"plagued not only the courts but also the entire patent
system"
Must “redirect a doctrine that has been overused to
the detriment of the public.”
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The Federal Circuit seems hostile
to inequitable conduct doctrine.
12
The Therasense Majority on Inequitable
Conduct Litigation . . .





“atomic bomb”
“overplayed”
“cluttering up the patent system”
“overused to the detriment of the public”
“metastasized”
13
Perceived Evils of the Inequitable Conduct
Standard
“[L]ow standards for intent and materiality have
inadvertently led to many unintended consequences[:]
• increased adjudication cost and complexity,
• reduced likelihood of settlement,
• burdened courts,
• strained PTO resources,
• increased PTO backlog, and
• impaired patent quality.”
14
Majority – Intent

Must show specific intent to deceive PTO


No sliding scale


High materiality cannot substitute for intent
Circumstantial evidence OK, but must be “single
most reasonable inference”


Negligence not enough
Multiple reasonable inferences - intent cannot be
found
Patentee need not offer good faith explanation
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Majority – Materiality

Rejected PTO Rule 56 standard


“overly broad” and set “a low bar for materiality”
Adopted “but-for” standard

Exception for “affirmative egregious misconduct”
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Dissent (Bryson, Gajarsa, Dyk, Post)

Would have maintained Rule 56 standard for
materiality



PTO in best position to determine materiality
PTO amicus brief rejected but-for as not providing
proper incentives for prosecutors
Majority “does not merely reform the doctrine of
inequitable conduct, but comes close to abolishing
it altogether.”
17
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
18
Materiality Standard

“But-for” Standard


Sounds Easy
Play-within-Play


Establish by clear and convincing evidence that
“But-for” the omission a reasonable examiner would not
have allowed the claims when applying:
A
preponderance of the evidence standard
 The broadest reasonable construction of the claims

Affirmative Egregious Misconduct
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Implications for Patent Litigation
Litigating materiality may be more
complicated.
20
The Scope of Materiality Has Shrunk
“reasonable examiner” standard
“but-for”
“affirmative
egregious
misconduct”
21
*
Note: not drawn to
scale!
“But-For” Materiality

PTO standards apply:




Preponderance of the evidence
Broadest reasonable interpretation of the
claims
Are two claim constructions necessary?
Reference may be “but-for” material even if
the claim is not invalid in light of the
reference.
22
The “But For” Materiality Process
NOT Material
NO
Reference
invalidates
claim?
NO
Unpatentable
applying PTO
standards?
YES
Material
YES
Material
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NO
Affirmative
egregious
misconduct?
YES
Material
Exception for “affirmative egregious misconduct”
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Affirmative Egregious Misconduct?

Submission of declaration in support of application that
omits fact of business relationship between declarant and
applicant.
See, e.g., Paragon Podiatry, 984 F.2d 1182 (Fed. Cir. 1993).

Application describes patent examples (relating to
unclaimed subject matter) as if they were actually
conducted, even though they were not.
See Hoffmann-La Roche, 323 F.3d 1354 (Fed. Cir. 2003).

False claim of entitlement to small entity status.
See Ulead, 351 F.3d 1139 (Fed. Cir. 2003).
25
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
26
Is the Information Material?

Yes

Submit information via an Information Disclosure
Statement (IDS)
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Is the Information Material?

No

No office action yet or non-final office action


Cost/benefit analysis favors submission of IDS
Final office action/notice of allowance/appeal

“Hence, when there are multiple reasonable inferences that
may be drawn, intent to deceive cannot be found”
Analyze issue and prepare memorandum confirming that
reasonable basis to conclude information is not “material”—Easier
under Therasense

A Request for Continued Examination (RCE) can affect Patent
Term Adjustment
28
USPTO Guidelines vs. Therasense Holding

PTO proposed revisions:



“Information is material … if material under … Therasense"
“…material…[u]nder Therasense if …Office would not allow a claim
if it were aware of the information, applying the preponderance of the
evidence standard and giving the claim its broadest reasonable
construction … or… the applicant engages in egregious misconduct
before the Office…”
But remember: Federal Circuit


“This court does not adopt the definition of materiality in PTO Rule 56.
As an initial matter, this court is not bound by the definition of
materiality in PTO rules.”
“While this court respects the PTO’s knowledge in its area of expertise,
the routine invocation of inequitable conduct in patent litigation has
had adverse ramifications beyond its effect on the PTO.”
29
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
30
“Specific intent to deceive the PTO”
Requires clear and convincing evidence that:



Applicant “knew of the [withheld materials]”;
Applicant “knew of their materiality”; AND
Applicant “made the conscious decision not to
disclose them in order to deceive the PTO.”
See Therasense, 2011 WL 2028255 at *16.
Negligence is not enough


Not enough - knew of the reference, should have
know of its materiality and decided not to disclose
Last en banc IC decision - Kingsdown (1988)
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What is the standard?

"On remand, the district court should determine whether
there is clear and convincing evidence demonstrating that
[1][Applicant] knew of the [references], [2] knew of their
materiality, and [3] made the conscious decision not to
disclose them in order to deceive the PTO."
Therasense, 2011 WL 2028255 at *16.

"In other words, the accused infringer must prove by clear
and convincing evidence that the [1] applicant knew of the
reference, [2] knew that it was material, and [3] made a
deliberate decision to withhold it."
Therasense, 2011 WL 2028255 at *9.
32
Intent will be hard(er) to prove.
33
Proving Intent


Direct evidence
Circumstantial evidence



Deceptive intent must be the “single most reasonable
inference”
“when there are multiple reasonable inferences that
may be drawn, intent to deceive cannot be found”
Discovery


Depositions – inventor/attorney
(non-privileged) documents
34
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
35
Inequitable Conduct after Therasense



History of Inequitable Conduct
Therasense Decision
Materiality Standard




Intent Standard



But-for
Affirmative Egregious Misconduct
Effects on Prosecution
Return to Kingsdown
Effects on Prosecution
Post-Therasense
36
Post-Therasense: What Can We Expect?

Fewer inequitable conduct trials



More bifurcation?


Exergen + Therasense = less IC allegations?
Increased summary adjudication against IC claims
Different standards raises risk of confusion and
reduces incentive to submit to jury of advisory verdict
Greater focus on early discovery re possible IC
37
Overall Effects on Prosecution

Generally business as usual

Perhaps we can sleep better at night

Appears to alleviate the McKesson dilemma
38