By Donald Zuhn —

In April, the Court of Appeals for the Federal Circuit decided that the appeal in Therasense, Inc. v. Becton, Dickinson & Co. warranted en banc consideration, and asked the parties to brief ten questions concerning the issue of inequitable conduct (see "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson").  According to the Court's original Order, Defendants-Appellees had until 30 days from the date of service of Plaintiffs-Appellees' brief (which was filed with the Court on July 26, 2010) to file their response.  On June 1, the Federal Circuit issued an Order granting Defendant-Appellee Bayer Healthcare's motion to extend the deadline for all Defendants-Appellees to file their responsive en banc briefs to October 8, 2010.  Pursuant to Rule 29(e) of the Federal Rules of Appellate Procedure, amicus curiae briefs in support of Appellees-Defendants must be filed no later than 7 days after their brief is filed (amicus curiae briefs in support of Plaintiffs-Appellees or in support of neither party were due on August 2, 2010).

Patent Docs thanks Brian Kramer of Morrison & Foerster LLP for informing us of the revised briefing schedule.

By Kevin E. Noonan —

On August 2nd, the Biotechnology Industry Organization (BIO) filed an amicus curiae brief with the Federal Circuit in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of neither party ("BIO . . . has no interest in the ultimate disposition of this litigation") urges the en banc Court to "set aside its prior legal framework on which the inequitable conduct defense presently rests and adopt a more certain framework."

BIO's proposed "more certain framework" has three requirements for establishing inequitable conduct.  First, there must be either a "misrepresentation or omission of a material fact."  Second, the misrepresentation or omission must occur as the result of "a specific intent to deceive the PTO."  Finally, the PTO must "reasonabl[y] rel[y] on the misrepresentation or omission, to the public's detriment, in issuing an invalid claim."  As in the current framework, all of these elements must be established by clear and convincing evidence.  The en banc Court is not constrained by earlier precedent, either its own or from the CCPA, nor any rules or practices established by the PTO, the brief asserts.  The proposed framework is not inconsistent with binding Supreme Court precedent, according to the brief, because the current standard is based not on that precedent, but on CCPA precedent (specifically, Norton v. Curtiss, 433 F.2d 779 (CCPA 1970)) and PTO Rule 56.

The brief argues that its proposed "more certain framework" is necessary because no matter how "laudatory" the goal may be of promoting full disclosure during patent prosecution, in practice the inequitable conduct defense has been "damaging to the U.S. patent system."  This is the case because the Court's attempt to "apply the law on inequitable conduct in a fair and uniform manner" has been "without much success."  "Nonuniformity and unpredictability" are the hallmarks of the history of decisions regarding the defense, outcomes due in large part to the "nonuniform foundation from which [the inequitable conduct] doctrine developed," BIO argues:  decisions from the Supreme Court "concerned about patent 'monopolies"; "disparate" district court and CCPA precedent; and "rules designed to aid the PTO in conducting its business."  The result is an "unworkable and outdated framework for deciding inequitable conduct cases."  The brief contends that this situation was exacerbated by the Kingsdown Med. Consultants, Ltd. v. Hollister, Inc. case, because the abuse of discretion standard, coupled with "balancing" evidence of materiality and intent, "made uniformity of [an inequitable conduct determination] nearly impossible."

The results of this nonuniformity "creates more harm than good" for U.S. patents, according to the brief.  This is illustrated by practices before the PTO, such as "pressure on applicants to make prophylactic submissions of large amounts of information that examiners neither want nor consider material," which "hinders rather than promotes candid interactions between applicants and examiners."  The consequence:  "[v]oluminous information disclosure statements" are submitted, or searches and disclosure of search results are scrupulously avoided.  Examiners, having "10 hours or less to prepare a first Office action (including searching and IDS review) can expect little help from wary applicants" due to concerns about "future allegations of concealment or misrepresentation."  This creates the incentive, BIO contends, for patent prosecution to be focused on legal grounds only, and to limit any discussions of the prior art to examiner interviews "that leave essentially no trace on the prosecution history."  Current application of the inequitable conduct doctrine also inhibits applicants from submitting affidavits from experts or others (such as the inventors) that could be "helpful" to the Office, because such documents are "fraught with litigation risk."

Litigation statistics also provide ample evidence that the Court's application of the inequitable conduct doctrine has had a "negative impact."  For example, the brief cites studies performed at the University of Houston Law Center that show the frequency of inequitable conduct decisions between 2005-09 (334) is "on par" with decisions on invalidity due to obviousness (364).  This is a particular problem for patents on biopharmaceuticals, where "42% of all post-Kingsdown appeals to the Federal Circuit on the issue of inequitable conduct involved patents on biologics, drugs, medical devices, diagnostics or agricultural biotechnology products" by 2006 (with the trend continuing today:  in an analysis of primarily district court cases, 35% of the allegations of inequitable conduct involved biotechnology, drug, or medical device patents).  This is contrasted with the likelihood of successfully asserting the inequitable conduct defense:  for cases decided between 2007-09 the brief cites statistics that inequitable conduct was found only about 15% of the time.  The brief articulates the reason why defendants assert the defense so frequently when it prevails so rarely:  when found, "inequitable conduct is more likely to influence the ultimate disposition of the litigation because of it deep impact on the patent-in-suit and the patentee's business, and a less-than-encouraging prospect of appellate review under a deferential clear error/abuse of discretion standard."  The brief supplies a cogent example from the Purdue Pharma L.P. v. Endo Pharms. Inc. case (410 F.3d 690 (Fed. Cir 2005)), where the Court's reversal of its own earlier inequitable conduct holding "came too late to avoid irreparable harm to all those involved" (including $114 million in infringing sales and follow-on litigation over "allegedly fraudulently procured patents and allegedly sham litigation for their enforcement" for the patentee, as well as "serious business uncertainty and the possibility of substantial damages liability" for the infringers).  "[M]ost significantly," the brief states, "vacatur [of the Court's inequitable conduct determination] came too late to avoid layoff of half the patentee's R&D workforce," putting not only a human face on the consequences of the Court's motley jurisprudence in this area but (in these times) their negative economic consequences.

Patents protecting biotechnological products are "particularly attractive" targets for inequitable conduct charges, BIO asserts.  They are procured "against a backdrop of fast-moving science and competing business needs that make it virtually impossible" to "'keep an eye' on all potentially relevant information" that may be "circulating into and out of a company."  This information includes the professional activities the company's scientists, who "present their findings," "write scientific publications," and "exchange information" with colleagues outside the company without consulting their patent attorneys.  In addition, in the practice of a company's research activities "[l]arge numbers of [scientific and other] references are collected by research departments and become 'known' to [company] scientists," who don't have the responsibility to consider the company's pending patent applications and the relevance thereto of such information.  Personnel outside the scientific and patenting sections of a company can also obtain information that may be considered, in hindsight, to be relevant to patent prosecution, such as regulatory affairs employees or individuals involved in business development or investor relations.  This creates a situation where persons deemed by the patent law to fall under the duty of disclosure may become aware of such information (even if it merely "flicker[s] across the computer screen of a patent practitioner").  Added to this are:

[T]he selection of prior art for submission in light of shifting legal standards; the inclusion of experimental data to support enablement and best mode; the parsing of foreign office actions for references and examiner commentary; the coordination of opposition proceedings abroad; the disclosure of professional relationships with scientific experts; [and] communications to U.S. and foreign examiners in related applications.

(A litany clearly culled from various recent Federal Circuit decisions supporting the inequitable conduct defense.)  From all this, the brief maintains that "it will almost certainly be possible to find statements than an effective advocate can portray as inconsistent with representations made to the PTO, or uncited prior art that can be recast as material to examination."  And, the brief reminds the en banc Court, all these activities have occurred "in the remote past" in view of the timelines for product development, patent prosecution, and litigation in the biotechnology industry.  The potential for inequitable conduct allegations is particularly significant for down-stream licensees, who may be able to perform sufficient due diligence to "develop a reasonable level of confidence" about the validity of the patents they are licensing but cannot have "the same level of confidence that their patents . . . are also enforceable."  Since licensing is an important component of investment and technology transfer (inter alia, from universities) in biotechnology, the current manner by which the Court applies the inequitable conduct doctrine produces "business uncertainty" than is antithetical to conditions where the biotechnology industry can "flourish."

The brief also cites the recent approval of a biosimilars pathway for biologic drugs as creating "systematic litigation pressure" on biotechnology patents and a "strong likelihood" of litigation on those patents.  The "high commercial stakes" for both innovators and follow-on biologic producers "ensure that [patents] will be challenged by any means possible."  This reality can result in "innovations protected by such patents" to be left "idle" as the result of the uncertainty created by the current inequitable conduct regime.  "Nothing in the doctrine's historical roots compels such an outcome," the brief asserts.

Turning from these policy reasons for changing the current test for inequitable conduct, the brief expands on its own proposed standard.  The brief first distinguishes its proposed standard from common law fraud, a body of law from which BIO admits it has "borrow[ed]" but from which it is also distinct.  For one thing, common law fraud is a legal tort, whereas here inequitable conduct is a defense plead in equity.  "Even less clear" is the doctrine of "unclean hands" used, inter alia, but the Supreme Court as the basis of the inequitable conduct doctrine in the canonical modern trilogy of cases: 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. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945).  While the Supreme Court provided "no clear guidance" in these cases as to how the inequitable conduct doctrine should be applied, this very failure "leaves courts with a wide range of discretion" in applying the doctrine, a discretion supported by language from these cases themselves, according to the brief.  Indeed, the brief argues that both common law fraud and unclean hands "have very little to do with this Court's present inequitable conduct law," something BIO believes should preclude their use "to police prosecution misconduct," if only because of "their lack of clarity and applicability."

The hallmark of Supreme Court decisions on inequitable conduct, as well as BIO's proposed "more certain framework," is the public interest specifically "where unenforceability may be justified to remedy public harm."  This requires a balance:  striking down patents procured by inequitable conduct that harms the public interest, and avoiding striking down valid patents "because it causes more public harm than good."  The public is "entitled to rely on . . . the presumptive validity of patents," says the brief, and "[b]ad-faith applicants who deceive the PTO into issuing invalid claims indeed cause public harm."  Those harms include "wrongful commercial decision-making" that result in "inefficiencies and misallocations of resources."  In view of these harms, patent unenforceability may be the appropriate remedy, BIO contends.  But the "public interest" is a factor that "works both ways," the brief goes on to say, and it is not the case that the public interest "is advanced if valid patents are held unenforceable" (emphasis in the original).  This argument is the converse of the one made regarding invalid patents:  the commercial and investment utility of start-up biotechnology companies based on valid patents, and the reliance (and ability to rely) on such patents to garner investment.  There are issues of competition for scare resources, such as clinical data, scientific expertise, and regulatory agency attention that depend, in part, on whether a promising product has adequate patent protection.  Even for competitors, uncertainty about patent enforceability affects decisions on whether to market a competing product, to develop a "design-around," or to "redirect their business into a different market altogether."  "[E]very such decision is the right one to make if the patent is valid," according to the brief, but "[t]o affirm the validity of such patents in litigation — and then hold them unenforceable — undoes years of correct commercial decisionmaking and sends a message that businesses [patentees, their investors, their licensees and their competitors alike] cannot rely on patents.  This outcome does not 'promote the progress of the useful arts,' and causes more public harm than good," the brief concludes.  This argument supports BIO's position that, as one of the requirements for unenforceability, "the applicant must have caused the PTO to issue at least one invalid claim" in order to be guilty of inequitable conduct.

BIO's brief thus proposes a "but for" standard of materiality, cast in the terms of the present test under Kingsdown Medical.  The brief argues that a host of other factors that have been used recently to establish materiality, including "attorney argument, . . . past relationships with declarants, or noncompliance with small entity fee requirement," should not be material because they do not affect claim validity.  The brief also argues that whether a reference is material should be determined at the time of trial, to avoid (at least) "the need for certain discovery about what would have happened . . . in the distant past."  Rather, BIO argues that the Court should consider whether "an individual having a duty of disclosure engaged in misconduct that caused the PTO, acting reasonably, to issue at least one invalid claim."  The burden would thus be on an infringer to establish materiality, perhaps even "permit[ting] the parties to forego [discovery on intent] until materiality is established."  And by focusing the initial inquiry on materiality under a "but for" standard, whether the Office (and the public) materially relied on the "misrepresentation or omission" would take precedence, in accord with the idea that the public interest is damaged (and thus is a sufficient reason for a sanction) "where the applicant's misconduct caused the PTO to issue an invalid claim."  The brief argued that this "but for" standard would not be inconsistent with Supreme Court precedent outside the "unclean hands" context, such as U.S. v. Am. Bell Tel. Co., 128 U.S. 315 (1888) (inventorship) and Walker Process Equip. v. Food Mach. & Chem. Corp. (antitrust), stating that "[n]othing in these and other Supreme Court cases demands that this Court continue to apply a broad and inclusive materiality standard" (emphasis in original).  Such a result would be consistent with Kingsdown Medical, however; as the brief argues, former Chief Judge Markey noted in that case that the alleged misconduct "did not result in the patenting of anything anticipated or rendered obvious by anything in the prior art and thus took nothing from the public domain," i.e., caused no public injury.  863 F.2d at 873.

Turning to the intent element, the brief cites Kingsdown Medical for the requirement that both materiality and intent "must be independently proven and that gross negligence is not sufficient to establish intent" (emphasis in original).  However, the brief notes, the Court has strayed from these principles in recent cases, particularly citing Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008) with regard to the effects of evidence of materiality on intent:

[A]n inference of intent to deceive is appropriate when:  (1) highly material information is withheld; (2) the applicant knew of the information and knew or should have known of the materiality; (3) and the applicant fails to provide a credible explanation for withholding the information.

BIO's brief proposes that the current test be "set aside" and substituted with a requirement for "specific" intent:  "the evidence would have to show that the individual charged with inequitable conduct not only intended to make the representation or to withhold material information but that he or she intended to deceive the PTO" — that is, "actual knowledge of the falsehood would be required."  This standard does not preclude intent from being inferred (or said another way, it does not require a "smoking gun" of direct evidence of intent to deceive), but it would not permit intent to be inferred merely on a finding of a "high degree" of materiality or gross negligence.  "Deception is of a different character and requires evidence of culpability, not ignorance," the brief maintains.  "More should be required" than simply gross negligence under a "should have known" standard, and gross negligence or even incompetence should not be mistaken for a specific intent to deceive using BIO's proposed standard.

The brief is much less agreeable to the "balancing" inquiry and the abuse of discretion standard under which it is reviewed, calling for the en banc Court to "eliminate" this part of the current inequitable conduct calculus.  The use of a "sliding scale" where "a high level of materiality can offset a low level of intent, or vice versa, has further muddled the present inequitable conduct analysis and contributed to the high costs" for both patentees and accused infringers, as well as inviting the parties "to place significant weight on the materiality prong . . . in effect ignoring the need for evidence of intent."  Balancing, the brief notes, is not mandated by any Supreme Court precedent, and BIO's standard would be straightforward to implement merely by finding "but for" materiality of a withheld reference and specific intent, each independently established by clear and convincing evidence.  The brief characterizes its approach as using "an objective patentability defect which establishes culpability if caused deliberately and in bad faith," a "simpler, more effective inquiry."

None of these changes need affect how the PTO conducts examination and other proceedings, the brief argues.  The Office has the authority "to adopt and enforce a materiality standard that best meets its administrative needs."  This could include a "more inclusive standard" for materiality than BIO advocates should be used by the courts, justified because the roles of the Office and the judiciary are different.  The Office must promulgate rules and practices that "advance its policy goals of timely, efficient and quality examination," which may include "incentivizing the submission of the most relevant information patent applicants regard as material."  The courts, on the other hand, act to "balance the interests of private litigants and protect the 'paramount' interest of the public," and thus how courts assess inequitable conduct should not "intru[de] into the operation of the agency," for example by providing incentives to over-disclose references while under-disclosing the relevance thereof.  "Much confusion in this area has arisen from an assumption that the administrative and judicial materiality standards somehow have to be the same," the brief asserts.  "They do not," and "[p]roblems only arise when conduct that is lawful under the agency's regulations is later found unlawful in private actions," citing Digital Control v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006).  The Court should recognize these differences and "adopt a standard [BIO's] where the public interest, not the PTO's administrative convenience, is paramount."

In its Statement of Interest, BIO asserts that represents "over 1,150 corporate, academic and non-profit members," the majority of which "are small and mid-size businesses that have yet to bring a product to market."  These businesses, working "in an environment of rapidly-evolving science, high rates of publication, and vibrant scientific and public discourse . . . face difficult choices about which information to cite to the PTO," and thus "the risk of misstatements and omissions is significant."  Patents are frequently a biotechnology company's "most valuable business assets," and are placed at risk by charges of inequitable conduct driven by hindsight, something that "is particularly evident in the biopharmaceutical area."  These circumstances, and the particular risk BIO's member companies face with regard to their patents because of the uncertainty created by the inequitable conduct defense as it is now applied by the courts, are the basis for BIO's interest in the questions presented by the en banc Court, despite BIO's lack of interest in the specific outcome of this case between the parties.

By Kevin E. Noonan —

Last Friday, sanofi-aventis and Microsoft joined in filing an amicus curiae brief with the Federal Circuit in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of appellants and urging the en banc Court to reverse the three-judge panel's affirmance of inequitable conduct against Abbott, was limited to one of the "questions" posed to the parties and amici by the Federal Circuit when granting en banc review:  "[w]hether the specific intent element of the inequitable conduct doctrine is properly derived from the common law" (see "Federal Circuit Grants En Banc Review in Therasense v. Becton Dickinson").

The brief's short answer is yes, particularly with regard to the specific intent standard.  Amici remind the Federal Circuit that the Supreme Court has spent a decade "[r]econciling patent-law doctrines with legal principles of general applicability," citing Microsoft v. AT&T Corp., 550 U.S. 437 (2007), and eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006); the brief could have cited half a dozen more instances representing the high court's decade-long assault on Federal Circuit jurisprudence.  The brief also cites one of the effects of this drubbing, that the Federal Circuit itself has been influenced in cases such as In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 2007) (en banc), and Knorr-Bremse v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004) (en banc).  Here, the brief asserts that the CAFC has the opportunity to conform another area of its jurisprudence to the "same contours" as in other legal contexts.

Intent generally is not required for patent infringement, a strict liability tort.  It is only in "extraordinary situations," amici argue, that intent becomes an issue:  for infringers when the allegation is for inducing infringement, and for patentees when the allegation is inequitable conduct.  The brief argues that specific intent, defined as "[t]he intent to accomplish the precise act with which one has been charged" (reflecting the origins of the concept in criminal law) is the standard that a court should apply when establishing inequitable conduct.

Support for this standard is found, amici argue, in the Supreme Court cases establishing the inequitable conduct doctrine: Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945); and Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933).  These cases were defined by "extreme circumstances of 'deliberate,' 'corrupt,' 'sordid,' and 'highly reprehensible' conduct," the brief asserts.  The brief cites language from the cases relating to ''corrupt transaction[s]' that were 'highly reprehensible'" (citing Keystone Driller); "a 'deliberately planned and carefully executed scheme to defraud'' both the Patent Office and the Court of Appeals (citing Hazel-Atlas Glass); and a history that was "'steeped in perjury and undisclosed knowledge of perjury'" (citing Precision Instrument).  All these cases involved "intentional misconduct" (emphasis in original) — actual wrongdoing — and the brief argues that it is this level of culpability that justifies the "exceptional treatment" (i.e., unenforceability) occasioned by an inequitable conduct determination.

The brief also cites instances where the alleged conduct was not sufficient for the Supreme Court to refuse to enforce the patent, specifically U.S. v. American Bell Telephone Co., 167 U.S. 224, 239-40 (1897).  There, the brief maintains the Court 'derived from land patent cases a high standard for those who seek to challenge a patent for inequitable conduct."  Quoting the Court as stating that:

The dignity and character of a patent from the United States is such that the holder of it cannot be called upon to prove that everything has been done that is usual in the proceedings had in the land department before its issue, nor can he be called upon to explain every irregularity or even impropriety in the process by which the patent is procured.

Citing U.S. v. Marshall Mining Co., 129 U.S. 579, 589 (1889).  The brief makes the point that the Court did not cancel Bell's patent based on "extreme delay" in its issuance, on the grounds that the government's case depended on "the existence of a knowledge which no one had; of an intention which is not shown."  The brief also cites Corona Cord Tire Co., v. Dovan Chem. Corp., 276 U.S. 358 (1928), where "false, 'perhaps reckless,' affidavits [were] insufficient to render [a] patent unenforceable."

The brief proffers the argument that courts apply the common law where Congress has not spoken to the contrary, citing Dura Pharm. Inc. v. Broudo, 544 U.S. 336 (2005), and Neder v. U.S., 527 U.S. (1999).  With regard to specific intent, the common law standard is not "'volition' of 'knowledge' of one's acts."  Rather, what is required is that the "accused wrongdoer must have desired or purposefully sought not just its actions but the wrongful consequences of the actions taken," citing the Restatement (Second) of Torts (1965).  Amici argue that the "intention to cause unlawful consequences" is what "separates specific intent from negligence and recklessness."  Indeed, the brief argues that the Supreme Court has "expressly rejected theories of 'intent' predicated only on negligence or gross negligence," citing Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976).

The brief then cites multiple instances outside the fraud context where the common law requires specific intent, including conspiracy, secondary liability (such as "aiding and abetting"), and inducing infringement in patent and copyright cases, including Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005); DSU Med. Corp. v. JMS Co., 471 U.S. 1293 (Fed. Cir. 2006) (en banc); and Kyocera Wireless Corp v. ITC, 545 F.3d 1340 (Fed. Cir. 2008).  Returning to common law fraud, the brief again cites multiple cases that stand for the proposition that the Supreme Court "has repeatedly reiterated that '[f]raud means an intent to deceive,'" such as Lord v. Goddard, 54 U.S. (13 How.) 198, 211 (1851), among others.  The lack of immunity under the antitrust law for patents "procured by intentional fraud" under Walker Process Equip. Inc. v. Good Mach. & Chem. Corp., 382 U.S. 172 (1965), is also cited as an example where the common law standard requiring specific intent is applied in the patent law context.  And as the principle appellant's brief argued, specific intent is required for unenforceability in copyright, but not in the absence of an intent to defraud, S.O.S. Inc. v Payday, Inc., 886 F.2d 1081 (9th Cir. 1989).

The brief concludes from this precedent that inequitable conduct should also require a finding of specific intent.  "There is no reason for patent law to diverge from general law (or the antitrust or copyright laws in particular) on this most important question," according to amici.  The Federal Circuit has already held that negligence, even gross negligence, is not sufficient to satisfy the intent prong for inequitable conduct, Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc), the brief reminds the Court, consistent with a requirement for specific intent for inequitable conduct.

The brief notes, however, that the Court has "departed" from the (relatively) strict standard enunciated by the en banc court in Kingsdown, particularly citing Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), for its "intent inferred from materiality" holding; the brief not only states that this case was wrongly decided, but calls upon the en banc Court to overrule it, to "clarify that materiality and intent are separate requirements that must each be proved independently."  The brief argues that the "so-called sliding scale applied in some inequitable conduct cases is flawed at each of its steps."  According to the brief, the first step, that highly material information is withheld, "inserts materiality into the test for intent."  The second step, whether the applicant knew of the information and knew or should have known it was material, is "a mere negligence standard."  And the third step, that the applicant fails to provide a credible explanation for withholding the information, requires applicants "to disprove intent based on [this combination of] materiality and negligence."  In addition to wrongly establishing a test wherein "a highly material omission can satisfy both the materiality and intent test — so long as the applicant should have known of the materiality," the brief argues that "[m]ere materiality coupled with negligence cannot be reconciled with the purposefully wrongful conduct required by [either] the Supreme Court's precedent or [the Federal Circuit's] decision in Kingsdown," citing (now) Chief Judge Rader's dissent in Aventis Pharma SA v. Amphastar Pharm. Inc., 525 F.3d 1334 (Fed. Cir. 2008).

The brief recites the familiar litany of deleterious consequences resulting from the inequitable conduct doctrine as applied by recent Federal Circuit decisions, including the "plague" in litigation, "in no small part due to an unduly permissive view of the intent element taken by some [Federal Circuit] decisions," and the "strong incentives" that the "proliferation of inequitable conduct charges" provide for patent applicants to "inundate the PTO with information in the hopes of forestalling a later inequitable conduct charge."  The brief reminds the Court that "perpetuating the 'plague' of 'inequitable conduct as a litigation strategy" would have consequences that are "particularly severe in the pharmaceutical industry, on which the American public depends for disease-curing, lifesaving innovations," as well as in the computer industry, "which has been a major engine of American economic growth since before the first microprocessor."  "[E]very conceivable policy counsels against allowing an inequitable conduct claim to proceed in any but the most extreme cases of fraud and deception," the brief asserts, reminding the Court that it "should not condone any measure of inequitable conduct that would produce a chilling effect on the 'Progress of . . . useful Arts.'"

This reining-in of inequitable conduct can be achieved by requiring a showing of specific intent, according to the brief, and the application of this "high standard" is warranted by the "dire consequences" that can result (patent unenforceability).  In addition to achieving desirable policy goals, adopting a specific intent standard would enable the Court "to reconcile this area of patent law with long-standing principles of general applicability," a goal sanctioned by the many recent Supreme Court decisions that have shaped patent law and Federal Circuit jurisprudence in that direction.  In so arguing, these amici further remind the CAFC that inequitable conduct, like obviousness and the doctrine of equivalents, are patent law doctrines ultimately flowing from Supreme Court decisions, and about which the Supreme Court may take a sufficient interest that it may decide to weigh in should the Federal Circuit not come to a decision consistent with the position the amici advocate.

For additional information regarding this topic, please see:

• "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

By Kevin E. Noonan —

The Intellectual Property Owners Association (IPO) filed an amicus curiae brief last week in the Therasense, Inc. v. Becton, Dickinson & Co. case.  The brief, filed in support of neither of the parties to the underlying lawsuit, clearly stated the IPO's position that Federal Circuit jurisprudence on inequitable conduct had strayed, both from the CAFC's earlier precedents and, more importantly, from controlling Supreme Court precedent, and urged the en banc Court to correct this trend.

The IPO's brief begins by arguing that the Federal Circuit's "materiality-intent-balancing framework for inequitable conduct" was inconsistently applied and lacked clarity in its enunciation, and that the Court should modify how inequitable conduct is determined "to align the doctrine more closely with its equitable roots."  These roots lie in the Supreme Court standard of "unclean hands," which the brief argues is the proper standard for the Federal Circuit to adopt.  More specifically, the IPO argued that the intent prong must be established by clear and convincing evidence of an intent to deceive the Patent Office during prosecution.  With regard to the materiality prong, the brief argues that the Court should adopt a single, consistent, objective "but for" standard, wherein an issued claim in a patent asserted against an accused infringer would not have issued "but for" applicant's withholding the reference from the Office during examination.  Materiality should be assessed, according to the brief, consistently in both the Patent Office and before a court in patent litigation, which can be accomplished if the Federal Circuit were to adopt the objective "but for" test advocated by IPO.

The brief also argues that panels of the Court have erred in permitting intent to be inferred "solely" from a finding that the withheld reference was highly material.  What should be required is a specific intent to deceive the Patent Office based on clear and convincing evidence.  As for the "balancing" test, which permits a court in its discretion to balance the levels of materiality and intent to make a determination in equity whether a patent should be held unenforceable, the brief argues that balancing per se is not the problem with the current system.  Problems arise when such balancing is done before or in the absence of clear and convincing evidence of both materiality and intent.  The brief closes with the (perhaps) prescient argument that neither common law (presumably relating to fraud) nor federal agency law (presumably, also known as administrative law) "will prove as helpful" (or perhaps, should be resorted to) "as decisions addressing equitable issues," with particular reference to patent prosecution.  This portion of the argument seems to be directed to possible analogies with common law fraud or resort to regulations (such as Rule 56) and other Patent Office rules and policies, which the brief seems to indicate are neither particularly helpful nor appropriate in view of the equitable bases of the inequitable conduct doctrine as set forth in several Supreme Court decisions.

In specific arguments, the brief reminds the en banc Court that inequitable conduct is a creature of Supreme Court jurisprudence and equitable teachings, citing Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 250-51 (1944); Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945); and Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933).  These cases all based the Court's refusal to enforce the patent-in-suit on equitable principles of "unclean hands," wherein "the scope of inequitable conduct may range from outright fraud, to deceit, to gaining an advantage by unfair means."  Behavior and activity amounting to inequitable conduct "that may render a patent unenforceable is broader than 'common law fraud,'" citing Norton v. Curtiss, 433 F.2d 779, 793 (CCPA 1970), as cited in J.P. Stevens & Co., Inc. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1559 (Fed. Cir. 1984).  While asserting that "unclean hands" should be the standard, the brief concedes that "the Supreme Court has not established a precise standard for the application of unclean hands."  However, the brief cites Keystone Driller for the proposition that "[t]he equitable powers of the court can never be exerted on behalf of one who has acted fraudulently, or who by deceit or any unfair means has gained an advantage," citing Keystone Driller, 290 U.S. at 245, to elucidate the proper underlying principles.

The brief supports its contention that the en banc Court should adopt the "objective but for" test for materiality on the grounds that "[a] single standard would provide concrete guidance to the district courts and bring a measure of increased predictability to the inequitable conduct issue."  The brief recites the varying standards applied by different panels of the Court, including "the objective 'but for' standard, the subjective 'but for' standard, and the 'but it may have' standard," citing Digital Control Inc. v. Charles Machine Works, 437 F.3d 1309, 1315 (Fed. Cir. 2006).  The brief also notes that the Court with approval had relied on the "reasonable examiner" standard, which the brief asserts "permits a relatively low level of proof for establishing materiality," citing for support several cases including Leviton Mfg. Co., Inc. v. Universal Sec. Instruments, Inc., 606 F.3d 1353, 1358-59 (Fed. Cir. 2010); Advanced Magnetic Closures, Inc. v. Rome Fastener Corp., 607 F.3d 817, 829 (Fed. Cir. 2010); Symantec Corp. v. Computer Assocs. Int'l, Inc., 522 F.3d 1279, 1297 (Fed. Cir. 2008); and McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 913 (Fed. Cir. 2007).  Use of this standard, the brief argues, has resulted in a resurgence of the "full-blown plague on the patent system, evidenced by "a ten-fold increase in the number of cases in which inequitable conduct has been pled as a percentage of total patent cases."  The negative effects on the patent system are not confined to litigation, according to the brief:  during patent prosecution applicants have an incentive to adopt a "cite everything, say nothing" practice.  As a result, "USPTO examiners are routinely buried under a paper avalanche of prior art references, most of which are of marginal value."  Moreover, applicants have an incentive not to disclose or put on the record "any statements about the cited references [that] may later be characterized in litigation as material misrepresentations."  The brief invokes the current backlog for examination as but one consequence of the inequitable conduct doctrine "distort[ing] the entire patent system."

The solution is adoption of the objective "but for" test, according to the brief.  In addition to being "closely [aligned] with the 'unclean hands' underpinnings of inequitable conduct as stated in Precision Instrument and Keystone Driller," this test would "[limit] application of inequitable conduct to those situations where the applicant has in fact 'acted fraudulently, or . . . by deceit or any unfair means has gained an advantage,'" citing Keystone Driller, 290 U.S. at 245.  In contrast, the "reasonable examiner" standard has extended the inequitable conduct doctrine to be applied "to situations where there is only the possibility of gaining an unfair advantage, and even to situations where no advantage was gained at all."  Finally, the brief argues that adopting the "objective 'but for' test" will result in bifurcation of invalidity and inequitable conduct determinations, which would either limit how frequently the defense was plead or how often it was plead successfully.

While stating black letter law that intent should not be based solely on a high showing of materiality, the brief argues that recent Federal Circuit decisions have not consistently required intent to be established by clear and convincing evidence.  Examples cited in the brief include Praxair, Inc. v. ATMI, Inc., 543 F.3d 1306 (Fed. Cir. 2008), Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223 (Fed. Cir. 2007), Aventis Pharma v. Amphastar Pharms., 525 F.3d 1334 (Fed. Cir. 2008), cert. denied, 129 S. Ct. 2053 (2009), and Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed. Cir. 2006).  "[A]n inference of intent to deceive is appropriate when: (1) highly material information is withheld; (2) the applicant knew of the information and knew or should have known of the materiality; (3) and the applicant fails to provide a credible explanation for withholding the information" is how the Court has enunciated this standard.  The IPO argues that the proper standard is the one enunciated in Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365-66 (Fed. Cir. 2008), specifically that intent should be "the single most reasonable inference able to be drawn from the evidence."

The brief then argues that balancing is appropriate for a court to determine in equity whether to find a patent unenforceable for inequitable conduct.  However, the brief reminds the en banc Court that the proper requirement is for both materiality and intent to deceive to be independently found by clear and convincing evidence, and only then should the court perform the balancing test, citing Monsanto Co. v. Bayer BioScience B.V., 363 F.3d 1235, 1239 (Fed. Cir. 2004).

The brief also contains a "Statement of Interest" for the IPO, which describes itself as "a trade association representing companies and individuals in all industries and fields of technology who own or are interested in U.S. intellectual property rights."  Its membership includes "200 companies and a total of over 11,000 individuals" and include "inventor[s], author[s], executive[s], law firm[s], or attorney members" who "receive about thirty percent of the patents issued by the U.S. Patent and Trademark Office to U.S. nationals."  The motivation for filing the brief is described as follows:

IPO submits this brief because of the frequency with which inequitable conduct issues arise in patent litigation and the resulting need for a clearly articulated and consistently applied standard for determining inequitable conduct.

In addition to filing the brief "on behalf of neither party," the IPO also declined to take a position on the facts or merits of the case between the parties.

IPO member Paul Berghoff, assisted by MBHB associate Kurt Rhode, were counsel for IPO on the brief.