February 15, 2013
By Courtney B. Casp, Ph.D.
Authored by Courtney B. Casp, Ph.D. and Sanya Sukduang
Over a year has passed since the Federal Circuit tightened the standards for proving inequitable conduct in Therasense.1 The court's intention was clear—to diffuse the "atomic bomb of patent law," and reduce the number of inequitable conduct allegations bogging down patent litigation.2 To do so, the Federal Circuit modified the standards for proving both materiality and intent—raising the bar on an already high evidentiary threshold.
Decisions subsequent to Therasense have shed light on how the Federal Circuit intends to apply its revised standards. For example, the Federal Circuit has signaled that the but-for materiality standard is necessarily intertwined with the validity analysis. Similarly, because deceptive intent must be the single most reasonable inference to be drawn from the evidence, the Federal Circuit has repeatedly stressed the importance of witness credibility in assessing allegations of inequitable conduct.
While the Federal Circuit has demonstrated that inequitable conduct is not dead,3 it is clear from its post-Therasense decisions that the court intends to enforce these more stringent materiality and intent standards.
To prove inequitable conduct, Therasense requires the asserting party to establish "but-for" materiality, defined as where "the PTO would not have allowed the claim had it been aware of the undisclosed prior art."4
Importantly, the Federal Circuit noted that materiality is often congruent with a validity determination—if a claim is invalidated based on the deliberately withheld prior art, "then that reference is necessarily material because a finding of invalidity in a district court requires clear and convincing evidence, a higher evidentiary burden than that used in prosecution at the PTO."5
The Federal Circuit has since reinforced this idea that but-for materiality is inextricably linked with validity. In Aventis Pharma S.A. v. Hospira Inc., the first and so far only post-Therasense Federal Circuit case to find inequitable conduct, but-for materiality was established because the two references withheld from the U.S. Patent and Trademark Office (USPTO) were also used to invalidate the claims at issue.6
In contrast, but-for materiality was not established in Powell v. Home Depot U.S.A. Inc., because the inequitable conduct claims centered on the patent applicant's Petition to Make Special seeking expedited review, which the Federal Circuit noted "obviously fails the but-for materiality standard."7 While the decision did not go into detail, it is safe to presume that an incorrect Petition to Make Special fails to satisfy but-for materiality because it would neither have prevented patentability nor been a basis for invalidating the patent.
Likewise, in Outside the Box Innovations L.L.C. v. Travel Caddy Inc., the Federal Circuit held that the but-for materiality prong had not been met with regards to the applicant's failure to inform the USPTO about a related litigation.8 The decision noted that the non-disclosed litigation contained "no citation of prior art, nor any pleading of invalidity or unpatentability" and, therefore, the omission was not material to patentability.9
The Federal Circuit, however, declined to rule on the materiality of the incorrect claim of small entity status because there was no evidence of deceptive intent. Moreover, while the panel noted that USPTO regulations "do not contemplate that an incorrect claim of small entity status, with no evidence of bad faith, is punishable by the loss of a patent," the panel also hypothesized that this might fall within the definition of an "unmistakably false affidavit," and might be per se material.10
Judge Pauline Newman vigorously dissented to the classification of an incorrect claim of small entity status as "per se" material noting that "[i]mmateriality of an affidavit that is not the basis of the patent grant was long ago established."11 She also noted that the en banc Therasense decision reiterates this doctrine by stating that inequitable conduct should only be found "in instances where the patentee's misconduct resulted in the unfair benefit of receiving an unwarranted claim."12
The Federal Circuit's recent decisions have made clear that the path to proving materiality runs through validity.13 That is, a finding of invalidity based on withheld references renders these references material. Conversely, it is also true that under the new standard a finding of validity in most instances precludes a finding of materiality.14 In practice, therefore, it is best to assume that validity and materiality analyses go hand in hand when preparing to assert or defend against claims of inequitable conduct.
Therasense reaffirmed the Federal Circuit's prior decisions requiring that specific intent to deceive be "the single most reasonable inference able to be drawn from the evidence," and that when "multiple reasonable inferences" may be drawn, intent to deceive cannot be found.15 Therasense goes further however, and now completely separates materiality from intent by eliminating the "sliding scale" analysis, where a strong showing of materiality could overcome weak evidence of intent, or vice versa.16
While the intent prong was important to the inequitable conduct analysis pre-Therasense, now that intent can no longer be inferred from a higher level of materiality, providing evidence of actual intent has become even more critical. In this regard, recent case law has highlighted the importance of witness credibility to the intent analysis.
For example, in Cordis Corp. v. Boston Scientific Corp., a material reference was not disclosed to the USPTO until prosecution of a continuation application.17 Despite having previously seen the reference during the pendency of the first application, the prosecuting attorney testified he did not recall having reviewed it.18
The district court found there was no specific intent to deceive,19 and, on appeal, the Federal Circuit noted that after "[r]eviewing the record . . . there is substantial evidence calling into question [the witness'] veracity," but conceded that the district court was better able to make these credibility determinations.20
Likewise, the credibility assessment of the district court was instrumental in the appeals court's finding of inequitable conduct in Aventis. There, the district court heard "extensive testimony" from the inventor concerning the withheld references,21 including a number of explanations for why the references were withheld. Like the district court, the Federal Circuit agreed that the inventor's testimony was "not credible."22 This, coupled with other corroborating documentary evidence, supported the findings of a specific intent to deceive.23
As these cases illustrate, Therasense's definitive split of materiality and intent makes the credibility of witnesses accused of inequitable conduct even more crucial to the issue of inequitable conduct. Indeed, when preparing a defense to an inequitable conduct allegation, it is important to remember that when "multiple reasonable inferences" may be drawn, intent to deceive cannot be found.24 This underscores the importance of preparing witnesses to testify credibly regarding any mitigating circumstances surrounding the withheld references.
While Therasense has not abolished the doctrine of inequitable conduct, recent case law reveals the shifting landscape on this issue before the Federal Circuit. Indeed, Therasense has ushered in an era of tightened scrutiny for the doctrine, making it easier to defend against spurious allegations of inequitable conduct.
The Federal Circuit's post-Therasense decisions emphasize the importance of both the invalidity analysis and the assessment of witness credibility to the doctrine of inequitable conduct. Focusing on these points, especially the proper preparation of witnesses accused of inequitable conduct, can assist practitioners in the development of an effective inequitable conduct defense.
Endnotes
1 Therasense Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 99 U.S.P.Q.2d 1065 (Fed. Cir. 2011) (en banc) (82 PTCJ 140, 6/3/11).
2 Id. at 1288.
3 See Aventis Pharma S.A. v. Hospira Inc., 675 F.3d 1324, 102 U.S.P.Q.2d 1445 (Fed. Cir. 2012) (83 PTCJ 868, 4/13/12). Aventis is the only post-Therasense case where the Federal Circuit has found inequitable conduct.
4 Therasense, 649 F.3d at 1291.
5 Id. at 1292.
6 Aventis, 675 F.3d at 1334.
7 663 F.3d 1221, 1235, 100 U.S.P.Q.2d 1742 (Fed. Cir. 2011) (83 PTCJ 85, 11/18/11).
8 695 F.3d 1285, 1290-95, 104 U.S.P.Q.2d 1890 (Fed. Cir. 2012) (84 PTCJ 913, 9/28/12).
9 Id. at 1291.
10 Id. at 1294.
11 Id. at 1306-7. (Newman, J., dissenting.).
12 Id. at 1307.
13 See, e.g., In re Rosuvastatin Calcium Patent Litigation, No. 2010-1460, 105 U.S.P.Q.2d 1437 (Fed. Cir. Dec. 14, 2012) (85 PTCJ 277, 12/21/12). (finding that although not invalidating, the withheld references were material as these same references formed the basis of USPTO rejections forcing applicants to choose narrower claims during a reexamination).
14 See, e.g., Triangle Software L.L.C. v. Garmin International Inc., No. 1:10-cv-1457, at *4 (E.D. Va. Feb. 14, 2012) (holding that, after a bifurcated trial, a reference could not be material because the jury found the same reference did not invalidate the patent).
15 Therasense, 649 F.3d at 1290.
16 Id.
17 658 F.3d 1347, 1352-3, 100 U.S.P.Q.2d 1329 (Fed. Cir. 2011) (82 PTCJ 767, 10/7/11).
18 Id.
19 Id. at 1354.
20 Id. at 1361 at n. 6.
21 Aventis, 675 F.3d at 1335.
22 Id. at 1335-6.
23 Id. at 1336-7.
24 Therasense, 649 F.3d at 1290.
Reproduced with permission from BNA's Patent, Trademark & Copyright Journal, Vol. 85, No. 522, 2/15/13. Copyright © 2013 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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