Addressing the issue of inequitable conduct during patent prosecution, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s holding that the patentee’s alleged acts did not rise to the level of inequitable conduct. The court also affirmed the district court’s findings of validity and infringement. Eisai Co. Ltd. and Eisai, Inc., v. Dr. Reddy’s Labs. Ltd. and Dr. Reddy’s Labs. Inc, and Teva Pharms. USA, Inc., Case No. 07-1397, -1398 (Fed. Cir., July 21, 2008) (Rader, C. J.).

Eisai Co., Ltd. and Eisai, Inc. (Eisai) own a patent claiming drugs for the treatment of gastrointestinal disorders. Eisai filed a suit against Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s Laboratories, Inc. (Dr. Reddy’s) and Teva Pharmaceuticals USA, Inc. (Teva) after they filed Abbreviated New Drug Applications to market generic versions. Dr. Reddy’s and Teva conceded infringement, but asserted that the patent is invalid due to obviousness and unenforceable for inequitable conduct.

The district court found the patent valid and enforceable on partial summary judgment. After a bench trial, the district court further found that the patent was enforceable because Dr. Reddy’s and Teva had failed to prove the allegations of inequitable conduct, and that Eisai had established that Dr. Reddy’s and Teva infringed. Dr. Reddy’s and Teva appealed the judgment of enforceability.

The Federal Circuit affirmed the finding of validity because the district court correctly determined that the patent was non-obvious over the proffered prior art, and it affirmed the finding that inequitable conduct was not established by clear and convincing evidence because the record did not show an intent to deceive the U.S. Patent and Trademark Office (USPTO).

Dr. Reddy’s and Teva alleged that Eisai misled the USPTO in five ways: failing to disclose Eisai’s co-pending application, which claimed the “ethyl homolog” of the drug; withholding rejections from that application’s prosecution that would have been applicable; failing to disclose a prior art patent; submitting a misleading declaration to the examiner; and concealing a prior art drug from the examiner. The district court rejected the fifth assertion on summary judgment.

The Court reviewed the district court’s findings of materiality and intent for clear error and its ultimate conclusion for an abuse of discretion. The Federal Circuit reiterated that inequitable conduct may take the form of an affirmative misrepresentation of material fact, a failure to disclose material information or the submission of false material information, but that in every case the communication or failure to communicate must be coupled with intent to deceive.

The Federal Circuit reviewed all allegations and, relying on the district court’s findings, affirmed the district court’s “thoughtful, thorough opinions.” In doing so, it affirmed that the ethyl homolog differed from the drug because Eisai’s scientists did not consider them “primarily in relation to each other” but considered the ethyl homolog separately patentable and, while disclosure of the co-pending ethyl homolog application would have been prudent, failure to disclose was not fatal because the materiality of the application was low and an obviousness-type double-patenting rejection could have been overcome by amending claims or filing a terminal disclaimer. The Court also affirmed that the record lacked any real suggestion, much less the clear and convincing evidence, of intent to deceive the USPTO.

The Court further affirmed that Eisai’s failure to disclose the co-pending application and the issued rejections did not rise to the level of inequitable conduct because there was insufficient proof of intent to deceive. In addition, it affirmed that the prior art patent was immaterial by definition because it was cumulative with the disclosed references, but even if the patent had been material, the lack of clear and convincing evidence of intent to deceive would have imposed an insurmountable bar to finding inequitable conduct.

The Court also affirmed that despite Dr. Reddy’s and Teva’s argument that the declaration Eisai submitted to overcome an obviousness rejection, demonstrating the drug’s superiority over the prior art compound, was misleading, the materiality of the ethyl homolog and the patent application claiming it was low, so Eisai did not commit inequitable conduct in failing to include them in the declaration because Eisai had no obligation to include additional, unnecessary data such as a comparison to the ethyl homolog.

Finally, the Court found that summary judgment was appropriate because Teva and Dr. Reddy’s presented neither direct evidence of deceptive intent to withhold a patent application for a prior art drug nor any evidence to support an inference of materiality since the strongest evidence—the comment of one Eisai insider that the similarity of Eisai’s drug and the prior art drug “bothers me”—was vague, subjective and insufficient to establish materiality, let alone intent.