Inequitable conduct is a defense to an allegation of patent infringement that renders a patent unenforceable due to misconduct by the patentee or the patentee's representative during procurement of the patent from the United States Patent and Trademark Office ("PTO").
Quick Case Highlights
- Inequitable conduct requires a two prong analysis: (1) was there an intent to deceive, and (2) was the misconduct material to obtaining the patent. Each prong must be proven by clear and convincing evidence. The use of a sliding scale between the two prongs has been discontinued.
- Intent to deceive requires a specific intent to deceive the PTO. If only circumstantial evidence is available (as is usually the case), then the intent to deceive must be "the single most reasonable inference able to be drawn from the evidence."
- Materiality is now defined by a but-for standard. A prior art reference is material if the PTO would not have allowed a claim had it been aware of the information.
- One major exception has been established for "affirmative acts of egregious misconduct." Such acts include the filing of a falsified affidavit. Where egregious misconduct is found, the subject of the misconduct is considered material.
Recently, in Therasense, Inc. v. Becton Dickinson & Co., ___ F.3d ___ (Fed. Cir. May 25, 2011) (en banc), the Federal Circuit revisited the standards for inequitable conduct. Inequitable conduct comprises two prongs: an intent to deceive and materiality. Both prongs must be proven by clear and convincing evidence. The court reaffirmed the standard for intent to deceive and raised the requirement for materiality while including an exception for egregious cases of misconduct. The use of a sliding scale—such as where a high level of materiality may permit a court to infer intent to deceive—has been discontinued.
Previously, the Federal Circuit held in Kingsdown Med. Consultants, Ltd. v. Hollister, Inc. that the intent to deceive prong required a specific intent to deceive the PTO—not just negligence or gross negligence. In reaffirming the Kingsdown standard, the majority stated that "[t]he accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew it was material, and made a deliberate decision to withhold it." While the court noted that direct evidence may not be available, the specific intent standard is satisfied by indirect or circumstantial evidence only if "the specific intent to deceive [is] 'the single most reasonable inference able to be drawn from the evidence.'" In addition, the lack of a good faith explanation from the patentee is insufficient to prove intent to deceive. A good faith explanation is not necessary unless the accused infringer first proves intent to deceive by clear and convincing evidence.
Turning to the materiality prong, the court established that the determination of materiality is a but-for standard. According to the new standard, an item is material only if the PTO would not have allowed a claim had it been aware of the undisclosed item. The court specifically noted that district courts should determine whether the claim would have been allowed under the PTO standard of by a preponderance of the evidence instead of the clear and convincing standard used for invalidity. The majority also included one specific exception for situations where the patentee has engaged in affirmative acts of egregious misconduct. Where such egregious misconduct is found, the egregious misconduct satisfies the materiality prong per se.
The Federal Circuit's decision will likely have the following impact:
- For Patent Practitioners, the PTO's Rule 56 standard still governs the submission of material to the PTO, but the likelihood of an allegation of inequitable conduct being levied against the practitioner or patentee in a later court proceeding will likely be reduced.
- For Patentees, the likelihood of a patent or family of patents being rendered unenforceable may also be reduced, and it may be possible to eliminate some allegations of inequitable conduct early on in a case under the new standard.
- For Accused Infringers, allegations of inequitable conduct based solely upon the nondisclosure of a prior art reference may be more difficult to maintain with the elimination of the sliding scale. While the invalidating reference will be judged under the PTO's preponderance of the evidence standard, pursuing invalidity may be a more effective route for such claims unless there is particularly strong evidence of intent to deceive. As a result, pursuing a claim of inequitable conduct will need to be carefully reviewed in light of the Federal Circuit's decision and alternative strategies may need to be considered while the case law surrounding the present decision develops.