Therasense, Inc. (now known as Abbott Diabetes Care, Inc.) and Abbott Labs. v. Beckton-Dickinson & Co., Nova Biomedical Corp., and Bayer Healthcare LLC, Nos. 2008-1511, -1512, -1513, -1514, and -1595 (Fed. Cir. May 25, 2011).
Yesterday the Court of Appeals for the Federal Circuit issued its long-awaited en banc decision in Therasense. As expected, the Court significantly altered its jurisprudence regarding the inequitable conduct doctrine. However, some of the ways in which it did so were unexpected. Moreover, the Court did not act unanimously. Instead, it issued a majority opinion (authored by Chief Judge Rader) in which five other judges fully joined, one judge issued an opinion concurring-in-part and dissenting-in-part, and four other judges dissented. The majority and the dissent appear to have different views of the Supreme Court precedent giving rise to the doctrine, which the Supreme Court has not revisited in decades, thereby potentially raising the odds that the Supreme Court will grant certiorari to review this decision.
When assessing inequitable conduct, courts apply a multi-prong test. One prong inquires into the materiality of the misrepresentation to the Patent Office, and a second prong evaluates the patent applicant’s intent to deceive the Patent Office. While the Court generally reaffirmed existing law regarding the doctrine’s intent prong, it effectively rewrote the materiality prong. A party claiming inequitable conduct must now show that the patent would not have issued “but for” a material omission or misstatement, while also setting forth several sub-tests (with differing burdens of proof) under that same “but for” standard in differing circumstances.
Interestingly, a panel of the Court had initially affirmed a lower court ruling that the Therasense patent at the center of this dispute (U.S. Pat. No. 5,820,551) was unenforceable due to inequitable conduct. The lower court concluded that individuals prosecuting the patent withheld information from the U.S. Patent Office concerning arguments they made before the European Patent Office while prosecuting a related application there. Subsequently, the Court vacated the panel’s decision and, after a rehearing en banc, vacated the lower court’s ruling on inequitable conduct. In other words, with this decision the Court has effectively reversed itself.
One reason for the Court’s change in direction relates to the recognition – by both the majority and the dissent – that earlier decisions on inequitable conduct have resulted in many unintended consequences. For example, the Court cited increased litigation cost and complexity flowing from all too common assertions of inequitable conduct as a defense to patent infringement. The Court also noted that patent prosecutors were straining Patent Office resources by routinely inundating it with prior art references, all to minimize the likelihood of inequitable conduct allegations.
In light of this background, a majority of the Court took steps to rein in inequitable conduct by clarifying the requirements to show intent and materiality. In addition, the Court specifically repudiated the so-called “sliding scale” test where a weak showing of one prong could be compensated by a strong showing of the other prong. The majority interpreted the two prongs as follows:
Intent: The Court reiterated its long-standing requirement of proof of specific intent to deceive the Patent Office. In so doing, it specifically approved the teaching of Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) that negligence or even gross negligence, under a “should have known standard,” does not satisfy the intent requirement. In cases 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 Court also acknowledged that intent may be inferred from circumstantial evidence, but again specifically approved its recent standard, articulated in Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357 (Fed. Cir. 2008), that intent cannot be inferred solely from materiality but must be “the single most reasonable inference able to be drawn from the evidence.”
Materiality: The majority formulated an entirely new materiality approach, rejecting the multiple, co-existing previous standards. Instead, it opted for the most stringent standard under consideration – “but for” causation – while attempting to introduce a degree of flexibility not previously associated with that approach. In cases of non-disclosure, the withheld prior art is “but for” material if: (1) the Patent Office would not have allowed a claim had it been aware of the undisclosed prior art, a subjective showing which need be made only by a preponderance of the evidence, or (2) if the district court finds the withheld reference to be invalidating by clear and convincing evidence (so-called “objective but for”). Thus, even though the withheld reference is not invalidating, it may nonetheless be sufficiently material to allow a finding that the patent may not be enforced due to inequitable conduct.
However, the majority crafted an exception to the “but for” materiality standard in cases of affirmative misconduct which is “egregious.” The filing of “an unmistakably false affidavit” (but not one which simply fails to disclose prior art) was held up as an example of egregious misconduct which is material.
Concurrence: Judge O’Malley concurred in part, but dissented as to the materiality standard, stating that “when addressing the types of conduct that should be deemed of sufficient concern to allow for a finding of inequitable conduct, both the majority and dissent strain too hard to impose hard and fast rules.” In her view, “both the majority and dissenting opinions eschew flexibility in favor of rigidity.” She would abolish the rule that inequitable conduct renders a patent unenforceable in its entirety, and would instead vest the district court with discretion to render fewer than all claims unenforceable, to dismiss the infringement suit, or fashion some other reasonable remedy commensurate in scope with the violation.
Dissent: Judge Bryson, joined by Judges Gajarsa, Dyk, and Prost, filed a 38-page dissent expressing “sharp disagreement” with the majority on the proper materiality standard. They would have instead followed the Patent Office’s Rule 56 standard, for two reasons: “First, the [Patent Office] is in the best position to know what information examiners need to conduct effective and efficient examinations, i.e., what information is material to the examination process. Second, the higher standard of materiality adopted by the majority will not provide appropriate incentives for patent applicants to comply with the disclosure obligations the [Patent Office] places upon them.” The dissenters expressed the fear that the majority’s new test would be so tough as to effectively “abolish [the doctrine] altogether.”
Outcome: The Court vacated and remanded to the lower (district) court for further proceedings consistent with the opinion. The dissenters would have affirmed.
An Open Question: It remains to be seen how the “but for” test will play out in litigation; e.g., will Patent Office experts be permitted to opine on whether the Patent Office would not have allowed a claim had it been aware of the undisclosed prior art?