Authored by Esther H. Lim and Wenye Tan
Increasingly, accused infringers in U.S. patent litigations allege inequitable conduct by patentees. Inequitable-conduct allegations place substantial pressure and burden on the patentees to mount defenses and can render the entire patent unenforceable. As more Chinese companies become parties in patent-infringement actions in the United States, either as defendants or plaintiffs, they should be aware how the doctrine of inequitable conduct affects enforceability of U.S. patents.
Inequitable conduct occurs when a patent applicant breaches the duty of candor and good faith before the U.S. Patent and Trademark Office (USPTO) by failing to disclose material information or by submitting false material information, with an intent to deceive the USPTO. The duty of candor requires voluntary disclosure of all material information to the USPTO during the pendency of the application.
The scope of materiality, however, can be murky. The USPTO considers material all information relevant to patentability that is not cumulative to information already of record. And U.S. courts tend to impose high standards. For example, the Federal Circuit, in the case of Dayco Products, Inc. v. Total Containment, Inc., 329 F.3d 1358 (Fed. Cir. 2003), held as material claim rejections made by a patent examiner and a reference cited in a co-pending application. Further, in McKesson Information Solutions, Inc. v. Bridge Medical, Inc., 487 F.3d 897 (Fed. Cir. 2007), the Federal Circuit affirmed that failure to disclose material rejections and allowance of co-pending patent applications constituted inequitable conduct.
Facing the cloud of uncertainty, patent applicants should consider erring on the side of over-disclosure. As Chinese companies do not face similar requirements for Chinese patent applications, they should be aware of the difference for corresponding U.S. applications. The following are suggestions for effective management of information disclosure:
Good record keeping practice. It is critical for Chinese companies to maintain complete records of patents and pending applications of all countries, and pay attention to co-pending applications and foreign counterpart applications. Such information and prior art should be cross-cited in related applications.
Good information disclosure policy. The duty to disclose material information is imposed on anyone substantially involved in patent prosecution, such as inventors, patent managers, and patent attorneys or agents. Companies should establish a clear information-disclosure policy to educate their people and collect, record, and disclose all relevant information.
Early correction of any mistakes. Inequitable conduct cannot be cured once the patent issues. However, if an omission or misrepresentation is uncovered during the pendency of an application, prompt correction should be made. Corrective measures could include submitting omitted material information or affirmatively correcting misleading information or actions.
Seeking qualified patent counsel. Because of the complexities of patent-prosecution procedures, frequent changes in U.S. case law, and anticipated changes in information-disclosure regulation in the USPTO, Chinese companies should consider retaining qualified U.S. counsel to provide guidance and legal services. A patent application that is well prepared and carefully prosecuted may save millions of dollars in litigation fees and keep the patent alive.
As Chinese companies seek patent protection in more countries and regions, the burden of patent protection increases over time. Thus, sound patent policy and timely disclosure of material information can be critical to maintaining enforceability of patents.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes and is not intended to constitute legal advice. This memorandum may be considered advertising under applicable state laws.