On May 25, 2011, in a split decision, the U.S. Court of Appeals for the Federal Circuit decided Therasense, Inc. et al. v. Becton, Dickinson & Co. et al, Case No. 08-1511 et al., which it heard en banc to address the law of inequitable conduct, and to consider in particular whether the materiality-intent balancing framework should be modified and, if so, how. (See http://tinyurl.com/3zsqat4). The court’s decision “tightens the standards” for proving inequitable conduct, holding that evidence of intent should be considered independently from materiality, and that materiality generally must be proven by a “but-for” test, except in cases of “egregious misconduct, such as the filing of an unmistakably false affidavit.”
The court issued three decisions: (1) the opinion of the court, filed by Chief Judge Rader and joined by Judges Newman, Lourie, Linn, Moore, and Reyna in full, and O’Malley in Part V; (2) an opinion by Judge O’Malley, concurring-in-part and dissenting-in-part; and (3) a dissenting opinion by Judge Bryson, joined by Judges Gajarsa, Dyk, and Prost.
This case arose from a patent suit in which Abbott Laboratories and its subsidiary, Therasense (collectively “Abbott”) alleged that Becton, Dickinson & Co. and other parties (collectively, “BD”) had infringed Abbott's patents relating to disposable blood glucose test strips. BD asserted a defense that Abbott's ‘551 patent-in-suit was unenforceable due to inequitable conduct because Abbott had failed to disclose to the USPTO arguments made by Abbott to the European Patent Office (EPO) in a proceeding regarding the European counterpart to another patent that was prior art to the ‘551 patent. BD alleged that Abbott's EPO statements contradicted the position Abbott took on the prior art during the ‘551 patent prosecution. Abbott presented evidence that it did not disclose the EPO statements because it reasonably believed them to be consistent with the arguments it made to the USPTO, and that the arguments were, therefore, not material.
The district court applied the two-pronged materiality and intent test for inequitable conduct and ruled the ‘551 patent unenforceable due to Abbott's inequitable conduct. The district court first found that Abbott's EPO statements were highly material and then inferred intent based on the court's own evaluations of materiality and testimony. A three-judge panel of the Federal Circuit upheld the district court's holding on inequitable conduct by a two-to-one majority. Abbott successfully petitioned for rehearing en banc, and the Federal Circuit ordered the parties to address questions relating to the current inequitable conduct standards, including whether the materiality-intent-balancing framework for inequitable conduct should be modified or replaced, and what the proper standard should be for materiality.
The En Banc Decision
Writing for the court, Chief Judge Rader’s decision traces Supreme Court precedent relating to “unclean hands,” and its influence on the doctrine of inequitable conduct. The court discusses the emergence of the materiality-intent balancing framework, and notes that it “conflated, and diluted, the standards for both intent and materiality.” While the balancing framework originally was “embraced” to “foster full disclosure to the PTO,” the Federal Circuit decision seeks to “tighten the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.”
Independent Consideration of Intent
The intent requirement is discussed in Part V of the court’s opinion, which is joined by Judge O’Malley. The opinion states that, in order “[t]o prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.” In the case of non-disclosure, “the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.”
The Federal Circuit emphasizes that intent and materiality are separate requirements, and expressly disapproves the use of a “sliding scale,” where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. Rather, “a [district] court must weigh the evidence of intent to deceive independent of its analysis of materiality.” The Federal Circuit explains that even “[p]roving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.” Thus the court requires specific evidence of intent and requires it to be analyzed separately from the materiality requirement.
The Federal Circuit also acknowledges that direct evidence of deceptive intent is rare, and reaffirms the principle that “a district court may infer intent from indirect and circumstantial evidence.” But, the court clarifies that, “to meet the clear and convincing evidence standard, the specific intent to deceive must be ‘the single most reasonable inference able to be drawn from the evidence.’” Thus, “when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.”
But-For Materiality Versus PTO Rule 56
The Federal Circuit expressly refused to “adopt the definition of materiality in PTO Rule 56.” Instead, the court adjusts the standard for materiality through adoption of a but-for materiality test: “[w]hen an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” A court assessing materiality therefore “must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference,” applying “the preponderance of the evidence standard and give claims their broadest reasonable construction.”
The Federal Circuit recognizes that this standard will mean that invalidity determinations may often coincide with materiality findings, but explains that it remains possible for a district court to uphold validity based on a deliberately withheld reference, but find materiality if the reference would have prevented allowance under the USPTO’s different evidentiary standards, e.g., preponderance of the evidence and broadest reasonable interpretation of the claims.
Affirmative Egregious Misconduct
The Federal Circuit also recognizes the ability to find inequitable conduct based on “affirmative egregious misconduct,” even if but-for materiality cannot be proved. The opinion draws on examples from prior Supreme Court precedent, such as “the filing of an unmistakably false affidavit” and “the intentional omission of declarant’s employment with inventor’s company.”
In the instant case, the Federal Circuit vacated the district court’s inequitable conduct finding and remanded for a new determination of materiality (not based on Rule 56, but instead on the but-for test) and for a new determination of “intent” in view of the “knowing and deliberate standard set forth in this opinion.” The decision will undoubtedly lead patentees, as well as litigants asserting inequitable conduct, to refocus their strategy and arguments regarding compliance with the duty of disclosure in a way that is consistent with the opinion. Potential implications could include patent practitioners reassessing their information disclosure statement (IDS) policies, which could relieve at some of the administrative burdens associated with IDS filings, as well as litigants reassessing bringing (or maintaining) inequitable conduct claims given the direct or circumstantial evidence of “intent” available. It however remains to seen whether this decision will solve the perceived problems associated with practitioners “disclosing too much prior art of marginal relevance” or lead to any reduction in the number of inequitable conduct claims that are made. While Congress has debated several possible legislative reforms aimed at inequitable conduct, the current outlook for any patent reform as to this particular issue remains murky.
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:
Courtenay C. Brinckerhoff
Vice Chair, Chemical, Biotechnology & Pharmaceutical Practice
Jeanne M. Gills
Vice Chair, IP Department