In a case assessing inequitable conduct after Therasense, the U.S. Court of Appeals for the Federal Circuit reversed a lower court’s decision holding a parent patent and its continuation unenforceable.  The Court found that pending litigation involving the parent was not material to the continuation where the parent’s invalidity was not contested in the litigation and that it need not address the issue of whether an affidavit improperly claiming small entity status was material where there was no evidence of intent to deceive.  Outside the Box Innovations, LLC v. Travel Caddy, Inc., Case No. 09-1171 (Fed. Cir., Sept. 21, 2012) (per curiam) (Newman, J., dissenting). 

The case was a declaratory judgment suit filed by Outside the Box Innovations, which was seeking to invalidate two patents, a parent and a continuation thereof, owned by Travel Caddy.  The district court found that Travel Caddy’s failure to disclose the existence of litigation involving a parent patent during prosecution of a continuation application was a material omission.  Further, the district court inferred deceptive intent from the act of non-disclosure itself and found that the patentee’s assertion that it believed the prior litigation to be irrelevant to the continuation application lacked credibility.  The district court also found that Travel Caddy filed a false affidavit claiming small entity status that was material to patentability.  The district court also inferred intent to deceive from the act of filing the affidavit itself.

The Federal Circuit reversed the lower court’s inequitable conduct findings.  With regard to the failure to disclose pending litigation, the Federal Circuit found that the record lacked clear and convincing evidence that the litigation was material to patentability, since no allegations of invalidity had been provided in the litigation.  The Court noted that, although a later challenge to the parent patent’s validity was possible during the litigation, no validity allegations existed at the time the continuation was being prosecuted.  The issue was not relevance of the earlier litigation, but whether the existence of the litigation was material to prosecution of the continuation application.  The Federal Circuit also found no clear evidence of intent to deceive when the record lacked any suggestion of how the withheld information could have deceived the examiner.

Regarding the affidavit mistakenly claiming small entity status, the Federal Circuit found no clear and convincing evidence that small entity status was deliberately falsely claimed.  The Court did not squarely address whether a false small entity declaration is material, but noted that Therasense supported, generally, the rule that “a false affidavit or declaration is per se material.”

Judge Newman, writing in dissent, would have gone further.  Judge Newman argued that the filing of an incorrect small entity affidavit does not render the statement “per se material.”  According to Judge Newman, a patent should not be extinguished based on misrepresentations, such as incorrect small entity statements, that do not affect patentability.