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