On May 25, 2011, the United States Court of Appeals for the Federal Circuit (CAFC) evaluated the inequitable conduct defense asserted by the defendant in Therasense v. Becton, Dickinson & Co.1 and established a more stringent standard for determining inequitable conduct. In particular, the court established a knowing and deliberate standard for intent and a but-for standard for materiality as it relates to proving inequitable conduct.
The patent at issue, U.S. Patent No. 5,820,551 (“the ‘551 patent”), relates to a test strip with an electrochemical sensor for testing whole blood without a membrane disposed over the electrode. During prosecution of the patent before the U.S. Patent and Trademark Office (USPTO), Therasense argued that the sensor did not require a protective membrane for whole blood and contrasted that with prior art which included a membrane. While prosecuting European counterpart applications at an earlier date, Therasense made several representations related to this requirement to the European Patent Office (EPO). These representations, however, were not submitted to the USPTO during prosecution of the ‘551 patent. In March 2004, Therasense accused Becton, Dickinson of infringing the claims of the ‘551 patent. In addition to a finding of invalidity and noninfringement, the Northern District of California found the ‘551 patent unenforceable for inequitable conduct because Therasense failed to disclose to the USPTO its prior representations to the EPO.
To raise an inequitable conduct defense, an accused infringer must show both intent and materiality by clear and convincing evidence.2 If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant’s conduct before the USPTO warrants rendering the entire patent unenforceable.3 Over time, courts have placed intent and materiality together on a “sliding scale” such that a patent is held unenforceable based on a reduced showing of intent if the record contained a strong showing of materiality, and vice versa.4 Consequently, the majority opinion, authored by Chief Judge Rader, notes the problems created by the expansion and overuse of the inequitable conduct doctrine and specifically references one study in which eighty percent (80%) of patent infringement cases now include allegations of inequitable conduct.5 Other consequences related to the inequitable conduct defense include patent attorneys submitting cumulative and irrelevant prior art to the USPTO during prosecution, thereby increasing the backlog at the USPTO and reducing the quality of the patent system. Further, the costs of patent infringement litigation continue to increase in complexity and cost, and fewer cases are being settled.6
In its en banc decision, the CAFC responded to these concerns by increasing the burden on parties raising the inequitable conduct defense. To prevail on a claim of inequitable conduct, the accused infringer must now prove that the patentee acted with the specific intent to deceive the USPTO.7 In other words, the accused infringer must prove by clear and convincing evidence that the patentee made a deliberate decision to withhold a known material reference.8 Since direct evidence of deceptive intent is rare, a district court can infer intent from indirect and circumstantial evidence so long as under the clear and convincing standard, the specific intent to deceive is the single most reasonable inference able to be drawn from the evidence. Further, the absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.
As for materiality, the CAFC decided that to establish inequitable conduct an accused infringer must establish “but-for” materiality.9 When an applicant fails to disclose prior art to the USPTO, that prior art is but-for material if the USPTO would not have allowed a claim had it been aware of the undisclosed prior art.10 Thus, the district court must determine if the USPTO would have allowed the claim if it had been aware of the undisclosed prior art. The court’s patentability determination must be made based on a preponderance of the evidence standard while giving the claims their broadest reasonable construction.11
Further, a district court can no longer apply a sliding scale to infer either intent or materiality – each must be proved by clear and convincing evidence. One exception to these standards is when the patentee engages in affirmative acts of egregious misconduct, such as the filing of an unmistakenably false affidavit.12 In such an instant, a district court can infer materiality without applying the but-for materiality standard since it is assumed the prior art is material due to the egregious acts of the patentee.13
CAFC Judge O’Malley concurred in part and dissented in part. In particular, the concurrence prefers a more flexible approach to determining materiality compared to the more rigid but-for test set forth by the majority.14
CAFC Judge Bryson wrote a dissenting opinion, but like Circuit Judge O’Malley, agreed with the majority on two points. First, the dissent agrees that proof of inequitable conduct requires a showing of specific intent to deceive the USPTO. Second, a party invoking the defense of inequitable conduct should be required to prove both specific intent and materiality by clear and convincing evidence, thereby eliminating a sliding scale. The dissent, however, argues that materiality should be defined by 37 C.F.R. § 1.56 because (1) the USPTO is in the best position to know what information is material to the examination process and (2) the “but-for” materiality standard does not provide appropriate incentives for patent applicants to comply with disclosure requirements set forth by the USPTO.15 The majority countered this argument by suggesting 37 C.F.R. § 1.56 is overly broad.