Nilssen v. OSRAM Sylvania Inc.

(Fed. Cir. 2007)

Ferring B.V. v. Barr Labs., Inc.

(Fed. Cir. 2006)

When the patent practitioner has reached an impasse with the examiner regarding a disagreement over the proper interpretation of underlying factual issues and the presentation of new evidence, affidavits and declarations submitted under 37 C.F.R. §1.132 can be powerful tools to advance prosecution of a patent application before the U.S. Patent and Trademark Office. However, care must be taken to ensure that all necessary disclosures are made in Rule 1.132 declarations to avoid any potential inference by a court of law that the applicant has engaged in deceptive practices before the Office. A case in point is Nilssen v. OSRAM Sylvania Inc., 504 F.3d 1223, 84 U.S.P.Q.2d 1811 (2007), where the Federal Circuit panel indicated that whenever the relationship between the declarant/affiant and the applicant is not fully disclosed to the examiner during prosecution of a patent application as part of a Rule 1.132 declaration, any patents issuing therefrom may be held unenforceable under the doctrine of inequitable conduct.

In Nilssen, the inventor, Nilssen, and the exclusive licensee, the Geo Foundation, sued OSRAM Sylvania Inc. for the manufacture and sale of electronic ballasts that allegedly infringed on a large number of Nilssen’s patents relating to electrical lighting products. However, after a six-day bench trial, the District Court of Northern Illinois agreed with OSRAM in holding that Nilssen’s patents were unenforceable due to inequitable conduct on several grounds, including claims of a false priority date, improper payment of small entity fees, and failure to disclose prior art and identify ongoing litigation in another related case. It is of particular interest, however, that the District Court further held that Nilssen had engaged in inequitable conduct in submitting two affidavits, one during prosecution and reexamination of two patents, and another for not disclosing financial interests of the affiant and the personal and professional association of the affiant with the applicant. The court held that there was inequitable conduct even though the examiner had not raised an issue concerning any such relationship and had not requested an affidavit from a disinterested person.

On appeal, the Federal Circuit affirmed and concluded that the District Court did not abuse its discretion in holding that the applicant had engaged in inequitable conduct by submitting the affidavits in support of patentability without informing the examiner of the affiant’s relationship to the applicant. The court stated that “[e]ven though the examiner did not raise a question concerning any such relationship, it is material to an examiner’s evaluation of the credibility and content of affidavits to know of any significant relationship between an affiant and an applicant … failure to disclose that relationship violated [the patentee’s] duty of disclosure.” See Nilssen, 84 U.S.P.Q.2d at 1815-16 (citing Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181, 78 U.S.P.Q.2d 1161 (Fed. Cir. 2006)). The court dismissed applicant’s argument that the ‘345 and ‘690 patents should not have been considered because they were withdrawn from the suit just before the trial began. The Federal Circuit concluded that there was no abuse of discretion for the court to first determine whether there was inequitable conduct related to the withdrawn patents prior to determining whether any such inequitable conduct should be extended to render additional patents in suit unenforceable under the “doctrine of infectious unenforceability.”

In Ferring, cited in the Nilssen opinion, the Federal Circuit shed more light on the issue of inequitable conduct as it relates to Rule 1.132 declarations/affidavits and the apparent affirmative duty of the declarant/affiant to disclose any interests, as well as past relationships with the patent applicant. In that case, Ferring patented a known antidiuretic compound in a solid oral dosage form, as well as a method of orally administering the compound for gastrointestinal delivery. The claims were thought to be an improvement over the prior art since existing compositions containing the compound were limited to absorption through the walls of the patient’s mouth or nasal passages. During prosecution, the claims were rejected over the ’491 patent teaching the antidiuretic compound, and stating in a list of approaches that the compound may be administered by “peroral” application. Ferring argued, however, that the term “peroral” would not be considered to include oral delivery for gastrointestinal absorption. The examiners suggested that the applicants obtain evidence from a noninventor to support their interpretation. Applicants then submitted four declarations, two from the applicant, one from Dr. Miller and one from Dr. Czernichow, each stating in effect that “peroral” in the ’491 patent meant through the mouth (e.g., absorption through cheek or under tongue). As will be relevant below, the Czernichow declaration did not disclose that Czernichow had, in the past, received research funding from the applicant for about a year. There was no research or employment relationship between Dr. Miller and the applicant, and none was asserted. Despite these submissions, however, the examiner upheld the rejection.

On appeal, the Board of Patent Appeals and Interferences accepted the view of the declarants that the claims were not anticipated, but rejected the claims as obvious in view of an additional reference. With prosecution reopened before the examiner, the applicants submitted five additional declarations to address the suggested combination. Three of the declarations were made by the same individuals as before, whereas the other declarations were from two new individuals, namely Dr. Robinson and Dr. Barth. However, as will be relevant below, the Robinson declaration did not disclose that Robinson was a former research director at Ferring and had been an occasional paid consultant, and the Barth declaration failed to disclose his having worked with the applicant in the past on small research projects. After their submissions, the examiner allowed the previously rejected claims, and the subject ‘398 patent issued.

After issuance of the ‘398 patent, Barr Laboratories, Inc. filed a paragraph IV certification in connection with an ANDA before the Food and Drug Administration seeking approval of a generic version of the compound and stated therein that the ‘398 patent was invalid. In response, Ferring and Aventis Pharmaceuticals together filed an infringement action against Barr. The District Court for the Southern District of New York granted summary judgment to Barr on the basis of noninfringement and invalidity due to inequitable conduct. On appeal, the Federal Circuit affirmed the District Court’s decision and found the ‘398 patent unenforceable due to inequitable conduct.

Inequitable conduct may occur when either affirmative misrepresentations or omissions of material facts are made during patent prosecution with an intent to deceive or mislead. The questions of materiality and intent must be proven by clear and convincing evidence, and the question of intent refers to the intent of the applicant, not the affiant / declarant. A court must weigh the materiality and intent in light of all of the circumstances to determine if the conduct is so egregious that the patent should be held unenforceable. With regard to declarations submitted during patent prosecution, the majority opinion cites prior authority and states that “a declarant’s prior relationships with the patent applicant may be material, and that failure to disclose such relationships to the examiner may constitute inequitable conduct.” See Ferring 78 U.S.P.Q.2d at 1166. For example, in Refac Int’l, Ltd. v. Lotus Dev. Corp., 81 F.3d 1576, 38 U.S.P.Q.2d 1665 (Fed. Cir. 1996), affidavits were submitted from three individuals during prosecution, but they failed to disclose that at least one of the individuals worked for the inventor’s company for an eight-week period and was already familiar with the invention. In that case, the court held that there was a material omission that supported a finding of inequitable conduct. In Paragon Podiatry Lab., Inc. v. KLM Labs., Inc., 984 F.2d 1182, 25 U.S.P.Q.2d 1561 (Fed. Cir. 1993), the examiner requested “disinterested third party” declarations, but the applicants in that case failed to disclose that one of the inventors owned stock in the company and had, in the past, been a consultant. The court affirmed a finding of unenforceability due to inequitable conduct.

After reviewing these precedents, the court in Ferring rejected the applicant’s arguments that the omission was immaterial because the affiliations did not bear on the assertions made, and the declarants did not have a direct financial stake in the patent, stating that, with regard to the question of materiality, “a declarant’s past relationships with the applicant are material if (1) the declarant’s views on the underlying issue are material and (2) the past relationship to the applicant was a significant one.” See Ferring 78 U.S.P.Q.2d at 1167. Accordingly, the court reasoned that the declarations themselves were highly material and that the past relationships were significant. Thus, the court concluded that the declarants in Ferring were not disinterested and that failure to disclose of their relationship to the applicant was material as a matter of law.

On the question of intent, the Court summarized applicable case law and stated that “intent to deceive is generally inferred from the facts and circumstances surrounding a knowing failure to disclose material information” and that “a patentee facing a high level of materiality and clear proof that it knew or should have known of that materiality, can expect to find it difficult to establish ‘subjective good faith’ sufficient to prevent the drawing of an inference of intent to mislead.” See Ferring 78 U.S.P.Q.2d at 1169. The court continued by saying, “summary judgment is appropriate on the issue of intent if there has been a failure to supply highly material information and if the summary judgment record establishes that (1) the applicant knew of the information; (2) the applicant knew or should have known of the materiality of the information; and (3) the applicant has not provided a credible explanation for the withholding.” See Ferring 78 U.S.P.Q.2d at 1169 (emphasis added). On the basis of the summary judgment record, the court concluded that the applicant knew of the information (i.e., their relationship to the declarants), that the applicants knew or should have known that the information was material and that the applicants had not provided favorable evidence for the withholding during the summary judgment proceeding. The court concluded that a prima facie case of intent had been made, shifting the burden to appellants, and that this finding of intent was unrebutted.

Finally, on the basis of these underlying “factual” determinations, the court in Ferring affirmed the District Court’s ultimate finding of inequitable conduct. Importantly, as pointed out in Judge Newman’s dissent, the court’s holding of inequitable conduct in this case was made despite that (1) there was no evidence showing that the information contained in the declarations was inaccurate, (2) the declarants did not receive any direct compensation for their declarations, (3) there was no evidence that the declarants would receive any direct benefit from issuance of the ‘398 patent, (4) the declarations in question were from noninventors, as requested by the examiner during prosecution, and (5) the four declarants were each highly respected scientists in their respective fields. The court upheld the finding of inequitable conduct on appeal from a summary judgment ruling even though all inferences should be drawn in favor of the non-moving party. The court reached its decision by applying a per se rule of materiality when the relationship or affiliation in question is “significant,” and by finding intent if the applicant “should have known” that the information was material.

The Nilssen and Ferring cases, as well as cases cited therein, make clear that affidavits or declarations submitted under 37 C.F.R. §1.132 during prosecution of a patent application should always disclose in sufficient detail any direct or indirect relationship or affiliation between the declarant/affiant and the applicant. Indeed, the court provided an exhortation for all applicants and patent practitioners submitting affidavits or declarations during prosecution to “disclose the known relationships and affiliations of the declarants so that those interests can be considered in weighing the declarations.” See Ferring 78 U.S.P.Q.2d at 1172. Such affidavits or declarations should also expressly state in detail any direct or indirect financial or other interest that the declarant/affiant may have or receive from issuance of the patent. To exclude such information or to assume its immateriality carries too great a risk that a court may later find the entire patent unenforceable under the doctrine of inequitable conduct.

Practice Tip:

Affidavits and declarations submitted during patent prosecution should always state the direct or indirect interests of the affiant / declarant in the patent as well as any past relationships or affiliations between the affiant /declarant and the patent applicant.