On May 25, 2011, an en banc U.S. Court of Appeals for the Federal Circuit issued its ruling in a seminal patent litigation inequitable conduct case, Therasense, Inc. (now known as Abbott Diabetes Care, Inc.) v. Becton, Dickinson and Company. The Court tightened the standards for inequitable conduct, making it harder for accused infringers to prove inequitable conduct and render a patent unenforceable. Inequitable conduct is an equitable defense to patent infringement. It has evolved into a doctrine that not only includes egregious affirmative acts of deceptive misconduct, but also the mere nondisclosure of information to the U.S. Patent and Trademark Office. Inequitable conduct typically has had an “atomic bomb” remedy: unenforceability of the entire patent rather than unenforceability of specific claims or the mere dismissal of the infringement suit.
A rundown of the changes wrought by the ruling follows.
Materiality and intent must each be proved with clear and convincing evidence
To prevail on the defense of inequitable conduct in a patent case, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the USPTO. The Court opined that each element—materiality and intent—must individually be proved by clear and convincing evidence. In contrast, prior decisions employed a “sliding scale” approach, wherein a strong showing on one element could bolster a weak showing on the other element. The Court eliminated this practice by holding that intent and materiality are separate requirements that should not be conflated or diluted, and so, a weak showing of intent cannot be found sufficient based on a strong showing of materiality, and vice versa. Moreover, the Court clarified that intent cannot be inferred solely from materiality; evidence of intent must be weighed independent of materiality.
If the accused infringer meets its burden with respect to both elements, the district court must then weigh the equities to determine whether the applicant’s conduct before the USPTO warrants rendering the entire patent unenforceable.
A reference is material only if its submission would have resulted in USPTO rejection, that is, a “but-for” standard
As for materiality, the Court adopted a more stringent standard. The current and lowest materiality standard of “a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent” was rejected. Moreover, despite it being advocated by the USPTO itself, the Court declined to adopt the current USPTO rule 1.56 duty of disclosure standard of prima facie unpatentable, calling it too ambiguous and too low a standard. Instead, the court sided with the “but-for” materiality standard, which is the highest materiality standard. When an applicant fails to disclose prior art to the USPTO, that prior art is “but-for” material only if the USPTO would not have ultimately allowed a claim had it been aware of the undisclosed prior art.
The materiality determination will now often be congruent with the validity determination at trial. If a claim is properly invalidated in district court based on a deliberately withheld reference, then that reference is necessarily material because the district court’s evidentiary burden (clear and convincing and narrow claim interpretation) is higher than the USPTO’s evidentiary burden (preponderance of the evidence and giving claims their broadest reasonable construction). Even if a district court does not invalidate a claim based on a deliberately withheld reference, the reference may still be material if it would have blocked issuance under the USPTO’s lower evidentiary standard.
The Court also crafted an exception to the “but-for” standard in cases of affirmative egregious misconduct. In cases such as the filing of an unmistakably false affidavit, the misconduct is deemed material, even if the patent would have issued without the misconduct.
Specific intent to deceive the PTO must be proved
As to the second prong of intent, the Court reaffirmed that the accused infringer must prove that the patentee acted with the specific intent to deceive the USPTO. The Court stated that a misrepresentation or omission amounting to negligence or even gross negligence under a “should have known” standard does not satisfy the intent requirement, thus sweeping away certain negligence language that had crept into Federal Circuit panel decisions. The Court emphasized that, “[i]n a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference. In other words, 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.”
Importantly, the Court stated with approval the prior Star Scientific test that to meet the clear and convincing evidence standard, the specific intent to deceive must be “the single most reasonable inference able to be drawn from the evidence.” Where there are multiple reasonable inferences to be drawn, intent to deceive cannot be found. The Court also reaffirmed the doctrine that the patentee need not offer any good faith explanation unless the accused infringer first proves a threshold level of intent to deceive by clear and convincing evidence. The absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.
This new standard is intended to tighten the inequitable conduct defense
In adopting a high standard for both materiality and intent, the Court raised the bar for proving inequitable conduct. In fashioning a higher standard, the Court explicitly stated that it was attempting to attenuate the current practice of patent prosecutors disclosing too much prior art of marginal relevance and patent litigators charging inequitable conduct in nearly every case as a litigation strategy.
This case is still subject to possible appeal to the U.S. Supreme Court. In view of the divided, 6-1-4 ruling, the age of the prior Supreme Court precedents, and the importance of the case, petitions for certiorari to the Supreme Court seem likely. Moreover, even without Supreme Court review, before making any changes in practice, it may be prudent to wait until further Federal Circuit cases are adjudicated under the new standard to determine where the line drawing on materiality and intent will take place. However, it is clear that the Court’s intent was to substantially tighten the standards for inequitable conduct, thereby reducing “reference flooding” to the USPTO in prosecution and reducing spurious charges of inequitable conduct in litigation.