Managing Intellectual Property - IP Handbook
"Dimock Stratton has become the go-to firm for IP litigation"CAFC changes the course of inequitable conduct in patent prosecution
By: Jenna Wilson
A version of this article was published by LexisNexis in The Lawyers Weekly, 1 July 2011
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Inequitable conduct as a ground for unenforceability of a patent had gone viral in the U.S. in recent years. Last month, the Court of Appeals for the Federal Circuit in Therasense, Inc. v. Becton, Dickinson and Co. (May 25, 2011, 2008-1511, 1512, 1513, 1514, 1595) provided some relief for patentees by raising the standard for materiality required to establish this defence.
Originally, the defence of inequitable conduct in patent infringement actions had evolved from a set of U.S. Supreme Court cases applying the doctrine of unclean hands in the first half of the twentieth century. In those cases, the patentee had been involved in particularly egregious misconduct while prosecuting their patent application before the U.S. Patent and Trademark Office by deliberately manufacturing or overtly suppressing evidence relating to patentability. The consequence of the patentee’s conduct was dismissal of the case for infringement.
Since then, the available grounds for inequitable conduct came to include mere non-disclosure of “material” information to the PTO (based on Rule 56, 37 C.F.R. 1.56, which expressly imposes a duty on patent applicants to disclose information such as prior art to the PTO material to patentability), and the remedy for inequitable conduct was augmented from mere dismissal of the complaint to unenforceability of the patent-in-suit. In addition, the Federal Circuit created a judicial test for inequitable conduct, requiring a finding of a specific intent to deceive the PTO through misrepresentation or omission of information and a finding that the deception was material.
Over the years, the required threshold of intent and materiality was reduced to encourage full disclosure of relevant information by applicants to the PTO, and in some cases a “sliding scale” was applied such that the threshold for showing intent was reduced where there was a strong showing of materiality, and vice versa. The courts also looked to Rule 56—which itself was revised over time to broaden the scope of “material” information required to be disclosed—for guidance in setting the threshold for materiality. Rule 56, however, currently sets a standard for materiality that only takes into account the prima facie impact of the information, and ignores any evidence that might be submitted in rebuttal. The end result of the lowering standards and the uncertainty of the sliding scale was an increased burden on patent applicants, who took to submitting any documents even remotely relevant to an application to the PTO, even if not material to patentability; on the PTO, now forced to deal with an avalanche of applicant-submitted documents of marginal relevance; and on patent litigants, as defendants took any opportunity to allege prosecutorial misconduct.
In this context, Abbott Diabetes Care, Inc. (previously known as Therasense) found itself defending its U.S. patent for disposable blood glucose test strips (the ‘551 patent) against an inequitable conduct attack as a result of a failure to disclose to the PTO submissions made about the prior art in the European Patent Office. These submissions contradicted a position taken before the PTO.
The district court found that claims of the ‘551 patent were invalid due to obviousness in view of the prior art patent and another reference, and also held that the ‘551 patent was unenforceable for inequitable conduct because of the failure to disclose the EPO submissions. In making this ruling, the court applied a lower “should have known” negligence standard for intent and applied the Rule 56 materiality standard. After the decision was upheld by a panel of the CAFC, Abbott sought, and received, a hearing en banc before the CAFC. A majority of the full court reversed the finding of inequitable conduct, vacating the district court’s findings of intent and materiality, and remanded the case for redetermination.
In its reasons, the majority sought to redirect the inequitable conduct defence to try to reduce the rash of inequitable conduct proceedings and the resultant strain on litigant, court and PTO resources. It confirmed that the appropriate standard for intent was in fact that of clear and evidence that the patentee acted with specific intent to deceive the PTO—in this case, the patentee must have known of a prior art reference, known that it was material, and deliberately chosen to withhold it from the PTO. Further, while intent could be inferred from circumstantial and indirect evidence, the inference must be the single most reasonable inference available to be drawn.
As for materiality, the majority criticized the sliding scale methodology as conflating the two distinct factors of intent and materiality, and also rejected any deference to Rule 56 as guidance because of its failure to give any consideration to rebuttal evidence and the general overbreadth of the rule’s definition of materiality. Instead, the court stated that generally, the appropriate test was “but-for” materiality on the preponderance of evidence standard: if the PTO would not have allowed a claim had it been aware of the undisclosed information, then the failure to disclose is material. In addition, the court defined an exception to this general but-for rule for those cases where the patentee engaged in “affirmative acts of egregious misconduct” along the lines of the actions taken in the earliest Supreme Court cases.
The decision is still fairly fresh, so it remains to be seen what impact this will have on patent prosecution practice and litigation in the U.S. Hopefully, this decision will usher in an era of reduced inequitable conduct allegations in patent litigation. However, so long as the wording of Rule 56 remains in its current form, despite the CAFC majority’s views on its breadth, it is likely that patent applicants will continue to file as much prior art as they did previously until a visible drop-off in inequitable conduct allegations is observed.