On May 23, 2011, the Federal Circuit issued an en banc ruling tightening the standards for proving both the “intent” and “materiality” elements of an inequitable conduct claim. Therasense, Inc. v. Becton, Dickinson and Co. (Fed. Cir. May 23, 2011). In language that drew broad consensus, the majority emphasized that a patent defendant must prove that the patentee had “specific intent to deceive. . . [that] must be the single most reasonable inference able to be drawn from the evidence.” By contrast, the majority’s ruling on materiality divided the court 6-5. The majority held that a defendant must prove that “but-for” the misrepresentation or omission, the patent would not have issued. Unless the Supreme Court takes on this case and reverses, the Therasense ruling is likely to make inequitable conduct claims less common, and will make them more difficult to prove.

In Therasense, the patentee submitted affidavits asserting that it had patentable claims to a blood testing sensor, because the key piece of prior art did not teach the use of a sensor without a protective membrane. The patentee’s affidavits directly contradicted statements it had made to the European Patent Office about the same reference, and the patentee did not disclose those submissions to the PTO. The district judge found inequitable conduct, and held the patent unenforceable.

The Federal Circuit reversed the district judge’s finding, remanding the case for further consideration in light of the tightened standards on materiality and intent. Some highlights of this "tightening" include:

With respect to intent:

  • Because an accused infringer must establish a “specific intent to deceive the PTO,…the 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.” Opinion at 24 (emphasis added).
  • “A district court should not use a ‘sliding scale,’ where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa.” Opinion at 25.
  • Because direct evidence of deceptive intent is rare, a district court may still use indirect and circumstantial evidence to establish intent. Opinion at 25.  
  • “The specific intent to deceive must be ‘the single most reasonable inference able to be drawn from the evidence.’…Hence, where there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.” Id.  
  • “The absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.” Id.  

With respect to materiality:

"[T]he materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” Opinion at 27.

  • But, in assessing materiality, the district court should apply the reference the way an examiner would, i.e., “the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.” Opinion at 28.  
  • The but-for test has an exception: “When the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material.” Opinion at 29.  
  • But “neither mere nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit” constitute affirmative egregious misconduct. Such omissions therefore require proof of but-for materiality. Opinion at 29-30.  
  • The majority rejected the definition of materiality from Rule 56 of the PTO’s rules of practice. Opinion at 32. Thus a reference is not "material" simply because it may be “inconsistent with a position taken by the applicant” or if it could “compel a conclusion that a claim is unpatentable…before any consideration is given to evidence which may be submitted in an attempt to establish a contrary conclusion of patentability.” Opinion at 33. The but-for materiality standard is harder to prove than the various incantations of Rule 56 used over the years, as a reference must compel a finding of invalidity after all relevant evidence is considered (such as secondary considerations of non-obviousness or arguments why the rejection is improper).

The Therasense decision will have immediate impact on patent litigation. Presumably, fewer claims of inequitable conduct will be filed. Patent plaintiffs are more likely to successfully challenge such claims at the pleadings stage, by combining Therasense’s tightened substantive standards with the existing pleading requirements of Exergen v. Wal-Mart, 575 F.3d 1312 (Fed. Cir. 2009)(requiring claims to be plead with particularity under Rule 9(b)) and Ashcroft v. Iqbal, 129 S.Ct. 1537 (2009) (requiring all claims to state sufficient non-conclusory facts to state a “plausible” claim for relief). Once past the pleading stage, it seems likely that district judges will be more willing to dispose of claims of inequitable conduct on summary judgment. Finally, the “affirmative egregious misconduct” exception is likely to be the subject of considerable litigation, as the lower courts struggle to define the contours of that exception.

Therasense also should allow patent prosecution attorneys to breathe a little easier. Inequitable conduct is far from a dead doctrine following Therasense, but by raising the standards for both materiality and intent, the Federal Circuit has limited the application of this doctrine.