Federal Circuit Grants a Petition for Rehearing en banc to Consider the Standards for Inequitable Conduct

26 April 2010 Publication
Authors: Cynthia J. Rigsby Jeanne M. Gills

Legal News Alert: IP Litigation

On April 26, 2010, the U.S. Court of Appeals for the Federal Circuit agreed to reconsider the standards currently being used to decide whether patents should be declared unenforceable due to misconduct during prosecution. The Court issued an Order granting a petition for rehearing en banc of appeals to the Federal Circuit on the issue of inequitable conduct that could have a potential impact on future patent enforcement and litigation.1 In today’s Order, the Federal Circuit has signaled a willingness to consider a modification to the standards applied in an inequitable conduct defense to patent litigation.

A court’s finding of inequitable conduct during the prosecution of a patent application in the USPTO renders the issue patent unenforceable and potentially affects the enforceability of patents issued from continuing patent applications. Inequitable conduct thus has long been a fairly common defense asserted by accused infringers. Under the current state of the law, inequitable conduct must be proven by clear and convincing evidence and includes affirmative misrepresentation or omission of a material fact, failure to disclose material information, or submission of false material information, coupled with intent to deceive. Innogenetics, N.V. v. Abbott Labs., 512 F.3d 1363, 1378 (Fed. Cir. 2008). Currently, the party asserting inequitable conduct must prove a threshold level of materiality and intent by clear and convincing evidence. Thereafter, the court must determine whether the questioned conduct amounts to inequitable conduct by balancing the levels of materiality and intent, “with a greater showing of one factor allowing a lesser showing of the other.” Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309 1313 (Fed. Cir. 2006)(citations omitted). However, in today’s Order, the Federal Circuit questions whether the current standards for inequitable conduct are appropriate and has requested briefs from the parties on the following six issues:

(1) Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?

(2) If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See, Precision Instrument Mfg., Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?

(3) What is the proper standard for materiality? What role should the USPTO’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?

(4) Under what circumstances is it proper to infer intent from materiality? See, Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).

(5) Should the balancing inquiry (balancing materiality and intent) be abandoned?

(6) Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

Close attention to this case is necessary as changes to the current framework of an inequitable conduct could have a significant impact on presently pending litigation and future prosecution and enforcement efforts. Thus, it would be unsurprising if several entities now seek to file amicus briefs in this matter. We will continue to monitor this case and alert you again with any significant developments.

1Federal Circuit consolidated cases of Therasense, Inc. et al. v. Becton, Dickinson and Co. et al., Case Nos. 2008-1511, -1512, -1513, -1514, -1595, which are based upon appeals taken from the U.S. District Court for the Northern District of California in consolidated case nos. 04-cv-2123, 04-cv-3327, 04-cv-3732, and 05-cv-3117.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:

Debra D. Nye
Del Mar, California

Jeanne M. Gills
Chicago, Illinois

Cynthia J. Franecki
Milwaukee, Wisconsin