Authored by Thomas L. Irving and Ningling Wang
Inequitable conduct is a unique, U.S., judge-made doctrine evolving from equitable principles -- much like “unclean hands” and fraud. There is no statute prohibiting inequitable conduct, but there is a regulation, 37 C.F.R. §1.56 (“Rule 56”), stating that “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office[.]”
If an asserted patent is found by a U.S. court to have been procured through inequitable conduct before the U.S. Patent and Trademark Office (USPTO or “the Office”), the patent will be held unenforceable in its entirety. The requirements for a finding of inequitable conduct are that an individual owing a duty of disclosure to the USPTO fails to disclose or misrepresents (1) material information with (2) an intent to deceive the USPTO. Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008). In the en banc decision of the Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed.Cir.2011) (en banc), the majority articulated standards for both materiality and intent that de-parted from earlier precedent.
The majority in Therasense defined materiality as “but-for” materiality. “But-for” materiality means that the USPTO would not have allowed the claim over the undisclosed (or misrepresented) information. The majority also provided an exception of “affirmative egregious misconduct.” “Affirmative egregious misconduct” means that even though the information was not “but-for” material, it would be unjust to allow the patentee to enforce the patent. An example of this exception was provided as the filing of an unmistakably false affidavit. Therasense, 649 F.3d. at 1292.
“But-for” materiality is a stricter requirement than the current Rule 56 definition of materiality. Current Rule 56 provides that information is material if it is not cumulative to known information and:
(1) It establishes a prima facie case of unpatentability of a claim; or
(2) It refutes, or is inconsistent with, a position taken by the applicant and relating to patentability.
37 C.F.R. § 1.56(b).
With respect to intent, the Therasense majority clearly eradicated the “should have known” standard, and expressly required a specific intent to deceive the USPTO. Moreover, the specific intent to deceive must be the “single most reasonable inference from all of the evidence.” The Federal Circuit explained that a finding of intent required that one with a duty of disclosure to the USPTO “knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Therasense, 649 F.3d. at 1290.
The Therasense majority also explicitly rejected a previously widely-used “sliding scale” of balancing materiality and intent, noting that intent and materiality are separate requirements. By rejecting the sliding scale, Therasense makes clear that a district court may not infer intent solely from materiality; the evidence of intent to deceive must be weighed independently.
On July 21, 2011, the USPTO issued proposed rules that would adopt the standard of materiality set forth in Therasense. But then on September 16, 2011, President Obama signed the American Invents Act (AIA), which sets forth sweeping changes in the U.S. Patent Law, but deals only indirectly with inequitable conduct. Officials from the USPTO then commented that there is so much rule-making required with the new AIA provisions that changing Rule 56 has been postponed indefinitely.
So for right now, the main guide for U.S. patent practitioners on inequitable conduct is the en banc Federal Circuit decision in Therasense.
It will be interesting to watch whether the Therasense majority's “tightening” of inequitable conduct law lasts. Court-led efforts at stricter standards in the past have lasted a few years, but then were gradually whittled down. For example, in Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 876, 876 (Fed. Cir. 1988) (en banc), the Federal Circuit held that intent could be found only when sufficient culpability was shown, renouncing the gross negligence standard of previous cases. However, by the early 2000’s, decisions were coming out of the court using a “should have known” standard, a standard even lower than the gross negligence standard overturned by Kingsdown. See, e.g., Hoffman-LaRoche, Inc. v. Promega Corp., 323 F.3d 1354, 1367 (Fed. Cir. 2003); Bristol-Myers Squibb Co. v. Rhône-Poulenc Rorer, Inc., 326 F.3d 1226, 1229 (Fed. Cir. 2003); Dayco Prods., Inc. v. Total Containment, Inc. , 329 F.3d 1358, 1367 (Fed. Cir. 2003).
The tightened standards of Therasense will be welcomed by the patent community, but may be unsuccessful in significantly impacting the volume of inequitable conduct allegations. As long as the cost of such an allegation is minimal, the burden on the patentee to respond to such an allegation is large, and the payoff is the atomic bomb, i.e., complete elimination of the patent and recovery of attorney fees if inequitable conduct is established, alleged infringers will no doubt continue to make the allegation.
On September 16, 2012, 35 U.S.C. §288 will be amended under AIA to eliminate deceptive intent. Section 288 will now read:
Whenever a claim of a patent is invalid, an action may be maintained for the infringement of a claim of the patent which may be valid.
Some argue that such a statutory change will overrule the case-law based inequitable conduct. It is unknown if the U.S. courts will agree with that argument.
Given all the uncertainty, it would be reasonable for U.S. practitioners to maintain pre-Therasense prosecution practices.