Asserting and proving inequitable conduct became extremely difficult after the Federal Circuit’s decision in Therasense in May 2011. After two years under the stringent Therasense standard, the Supreme Court may finally weigh in on the Federal Circuit’s decision.
In Therasense, a split en banc Federal Circuit ruled, 6 to 5, that accused infringers must show, by clear and convincing evidence, that patent holders intentionally withheld prior art from the United States Patent and Trademark Office (USPTO) and that the USPTO would not have allowed the patent claim if it would have been aware of the withheld material. Despite the narrow majority ruling, Therasense was never appealed to the Supreme Court. Since that time, many defendants have avoided the defense due to the inherent difficulty in establishing intentional misconduct and satisfying the “but for” standard for patent issuance.
A recent case, however, may provide the Supreme Court with the opportunity to offer its opinion on the Therasense standard. In a patent infringement suit 1st Media brought against Electronic Arts Inc., Harmonix Music Systems, Inc., Viacom, Inc. and Sony Computer Entertainment America, Inc., the defendants alleged that the asserted patent was unenforceable because the named inventor and prosecuting attorney withheld known material references with specific intent to deceive the USPTO. The District of Nevada agreed with defendants and concluded that both the named inventor and the prosecuting attorney engaged in inequitable conduct, rendering the patent-in-suit unenforceable. The district court’s decision was based, in part, on its evaluation of the inventor and attorney’s testimony and determination that both witnesses lacked credibility.
Last fall, the Federal Circuit reversed the District of Nevada’s decision. It found that the circumstantial evidence relied upon by the district court was insufficient and that “Appellees cannot prove on this record that either Lewis or Sawyer made a deliberate decision to withhold references from the PTO.” The Federal Court acknowledged that the inventor and his attorney may have known that certain references were material, but held that “[a]n applicant’s knowledge of a reference’s materiality, however, cannot by itself prove, let alone clearly and convincingly prove, that any subsequent non-disclosure was based on a deliberate decision.” The Federal Circuit indicated that some evidence of “careful and selective manipulation of where, when, and how much of the most material information to disclose” is necessary to prove inequitable conduct.
Defendants’ petition for writ of certiorari alleges that “a formula [for inequitable conduct] has emerged that divests equitable discretion from district courts and centralizes authority at the Federal Circuit. The doctrine is now both too rigid and too narrow.” Specifically, the petitioners argue that the Therasense standard does not allow district courts to consider relevant, circumstantial evidence, such as a witness’ credibility, unless and until there is clear and convincing evidence of intentional misconduct, even though the Federal Circuit has acknowledged that such evidence is rare. Thus, according to petitioners, establishing inequitable conduct based on the failure to disclose a known material reference is virtually impossible under Therasense. To remedy this alleged departure from Supreme Court precedent, the petitioners present the following question for review:
Did the Court of Appeals for the Federal Circuit err in restricting district courts’ equitable discretion in evaluating patent unenforceability, contrary to this Court’s precedent in Keystone Driller, Hazel-Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO’s duty of candor.
The Supreme Court has not yet decided whether to grant certiorari, but on May 13, 2013, indicated that it may be interested in hearing the appeal by asking the U.S. solicitor general to file a brief explaining the views of the government in the case. The Supreme Court has not reviewed the inequitable conduct standard in decades, but it is no stranger to striking down inflexible tests devised by the Federal Circuit. By focusing on the rigidity of the Therasense standard, the Sony petitioners may have successfully obtained the attention of the Supreme Court.