Federal Circuit Increases Risk for Biotechnology Patent Prosecutors

    By Kevin E. Noonan —

In a decision that might not be noticed by most biotechnology patent prosecutors, McKesson Information Solutions, Inc. v. Bridge Medical, Inc., the Federal Circuit significantly increased the extent to which the duty of candor extends to activities occurring during prosecution of related applications.  At the same time, the Federal Circuit lowered the standard for deciding that activities during patent prosecution could be inferred to be intentional, making it easier for a patent to be found unenforceable due to inequitable conduct.  The effects of this decision are likely to be felt disproportionately by biotech patent applicants, in view of the high frequency with which applications in this technology area are required to file divisional and continuation applications.

In McKesson, the activities found to constitute inequitable conduct occurred during prosecution of three related applications, two examined by one examiner (Traton) and a third by a different examiner (Lev).  (One important point is that this separately-examined application was not explicitly related by priority to either of the other two applications.)  The District Court found, and the Federal Circuit affirmed, inequitable conduct arising from the failure of the applicant’s representative to disclose three items of information deemed material to patentability.  The first was a prior art patent, cited by Examiner Lev in the third application, where the reference appears to contradict (or at least call into question) the applicant’s arguments in favor of patentability.  The reference disclosed what the Court characterized as a "three-node means of communication," and contrasted this purported disclosure with affirmative statements by patentee’s counsel to Examiner Traton in the prosecution of the first two applications that the prior art did not teach "three-node" communication means.  None of the grounds of rejection were based on anticipation under 35 U.S.C. § 102; rather, the issue was whether the combinations of the reference or information would have affected the Examiner’s view of the non-obviousness of the claims under examination.

Both the District Court and the Federal Circuit focused on the purported disclosure in the Baker reference of "three-node" communication means and counsel’s assertions that the art did not teach the "three-node" means in support of its materiality determination.  Both Courts rejected the patentee’s assertions that the Baker reference was cumulative to other art of record, in part because Examiner Lev had added the Baker reference to the putatively cumulative art in making his obviousness rejection.  In addition, even though patentee’s counsel informed Examiner Traton of its third application being examined by Examiner Lev, counsel did not inform either examiner about the course of prosecution of any of the co-pending applications.  This was particularly striking in view of counsel making its "no three-node communication means" known in the prior art to Examiner Traton within 17 days of a telephone interview regarding the Baker reference with Examiner Lev; the Court stated that counsel "knew or should have known" of the materiality of the reference from Examiner Lev and thus counsel’s failure to disclose to Examiner Traton evinced an intent to deceive.  This inference was bolstered by counsel’s cancellation of claims before Examiner Lev in the face of the Baker reference where substantially similar claims were allowed by Examiner Traton.

The second item of non-disclosed information was that counsel did not inform Examiner Traton about the grounds of rejection of substantially-similar claims pending before Examiner Lev.  Supporting the Court’s determination that this was material information was counsel’s behavior during prosecution, specifically cancelling claims before Examiner Lev in the face of the Baker reference that counsel permitted Examiner Traton to allow without benefit of reviewing the Baker reference.  The Court rejected counsel’s reliance on Federal Circuit precedent – specifically, Akron Polymer Container Corp. v. Exxel Container, Inc. (Fed. Cir. 1998) – that disclosure to Examiner Traton of the existence of the application being examined by Examiner Lev was sufficient to discharge counsel’s Rule 56 duty of disclosure.

The third and final item of undisclosed material information was the allowance of one of the applications, where the possibility that the allowance might have provoked an obviousness-type double patenting rejection was the basis for determining the materiality of the allowance, citing Dayco Products, Inc. v. Total Containment, Inc. (Fed. Cir. 2003).  Here, counsel did not remind Examiner Traton that he had allowed the second, related continuation-in-part application prior to issuance of the original application as a patent, which oversight was enough to trigger unenforceability for inequitable conduct.  The Court mentioned the fact that the "entirety" of the specification of the earlier-filed parent application was contained in the continuation-in-part application in support of the purported likelihood of obviousness-type double patenting.  While this is a not-uncommon practice in preparing continuation-in-part applications, and the question of obviousness-type double patenting depends on the substance of the claims rather than the disclosure, the Federal Circuit here raised this similarity to greater significance in this case as evidence of an obviousness-type double patenting issue.

The Federal Circuit singled out a number of practices by patentee’s counsel in support of its materiality determinations and inferences of intent underlying its finding of inequitable conduct.  For one thing, counsel submitted the same prior art references to both examiners, indicating to the Federal Circuit that the inventions claimed in the applications were very similar.  Curiously, however, the District Court used this coincidence to determine that the undisclosed reference "must have been pretty material," a conclusion that at best is not supported merely by its assertion:  the materiality of a reference should depend on the relationship between what the reference teaches and what is claimed, not whether other art has been cited in common between two applications.  Particularly damning, however, in both the District Court’s and the Federal Circuit’s eyes, was the position of the prosecuting attorney, that he would have done nothing differently having the benefit of hindsight.  Both Courts interpreted these assertions as evidence of an intent to deceive.

The Federal Circuit (Judge Clevenger writing for the panel and joined by Judge Bryson) affirmed over Judge Newman’s dissent, basing its decision on substantial agreement with the District Court’s findings coupled with the patentee’s failure to show clear error in the District Court’s factual findings.  The majority agreed with the District Court that the Baker reference was highly material and not cumulative.  The Federal Circuit further stated that its precedent raised a duty to disclose more than just the existence of co-pending applications; grounds of rejection and art filed in one case must be communicated to an examiner in a second, related case.  Finally, the Federal Circuit affirmatively stated that patentee’s counsel "was not entitled to assume that Examiner Traton would recall his decision to grant the claims of the ‘372 patent when he was examining the ‘278 application in the absence of a written disclosure to that effect."

Judge Newman dissented, although less strenuously than has been her wont on other matters.  She simply did not believe that the evidence presented below was sufficient to satisfy the requirements of Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc) and Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995) concerning the quantum of proof required to support an inequitable conduct claim.  She further made the policy argument that the majority’s decision will encourage the "plague" of inequitable conduct charges in patent litigation that the Federal Circuit has descried almost since its installation.  See Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988) (stating that "the habit of charging inequitable conduct in almost every major patent case has become an absolute plague").

The Federal Circuit’s decision in this case has several important (and perhaps dire) lessons for patent practitioners, especially those prosecuting biotechnology claims.  The requirement to submit art, even art considered to be cumulative, cited by an Examiner in one case during prosecution of a related case is unremarkable and is an illustration of sound prosecution strategy:  not only does submission reduce the possibility of a successful unenforceability defense, it increases the quantum of evidence required to show invalidity by clear and convincing evidence.

The real mischief arises in the Federal Circuit’s affirmance of the principle that not only the existence but the course of prosecution of related applications should be disclosed to Examiners during prosecution.  The institution of the Patent Application Information Retrieval (PAIR) system makes it easier in practice to make note of developments in related cases.  However, the Federal Circuit’s decision is properly understood to impose the additional requirement that an applicant (or her counsel) take affirmative steps to bring such parallel prosecution to the attention of each examiner in related applications.  In view of the relatively larger number of divisional and continuation patent applications filed in support of biotechnology inventions, the burden and expense of this type of monitoring will be disproportionately borne by such applicants.

Even more burdensome is the requirement that an applicant remind an examiner of actions taken by that same examiner in related applications, with the concomitant proscription against assuming that the Examiner is aware of the relationships between the applications, even when said relationships have been explicitly made on the record.  This kind of handholding by applicants of Examiners appears unrealistic and unnecessary, in view of the supposed presumption that an Examiner has done his or her job properly.  Announcing a new requirement that applicants take affirmative steps to ensure that Examiners are aware of their actions is incompatible with this presumption.

Although the views of only one panel (and a divided one at that), this case should increase the patent bar’s apprehension regarding the Federal Circuit’s grasp of its role in bringing consistency to U.S. patent law, and its capacity to come to an agreement not only within particular panels but with its own precedent.  The inconsistency illustrated in the McKesson case can do nothing but make even more uncertain the value of U.S. patents, a result diametrically opposed to Congressional intent in establishing the Federal Circuit.

McKesson Info. Solutions, Inc. v. Bridge Med., Inc. (Fed. Cir. 2007)
Panel: Circuit Judge Newman, Senior Circuit Judge Clevenger, and Circuit Judge Bryson
Opinion by Judge Clevenger
Dissenting opinion by Judge Newman

Additional information regarding this case can be found at Patently-O.