In 2011, the Federal Circuit provided a two prong framework for determining when inequitable conduct during prosecution renders a patent unenforceable.1 The Circuit characterized a finding of inequitable conduct as “the ‘atomic bomb’ of patent law” because the finding renders all claims of the patent unenforceable, the conduct cannot be cured by reexamination or reissue, and the finding may render other related patents unenforceable as well.2 Given the severity of the remedy, the Federal Circuit “tighten[ed] the standards for finding both intent and materiality” — the two elements of inequitable conduct.3

The Federal Circuit analyzed each of these elements in Regeneron Pharms., Inc. v. Merus N.V., based on an appeal by Regeneron Pharmaceuticals, Inc. (“Regeneron”) from a district court finding that U.S. Patent No. 8,502,018 (“’018 patent”) was unenforceable.4 The Circuit reviewed and ultimately affirmed the lower court’s application of the Therasense two-prong inequitable conduct analysis.5

Regarding the first prong, but-for materiality, the Circuit agreed with the lower court that “had the reference(s) been before the examiner at the time,” the claims of the ’018 patent would not have been allowed to issue.6 The Federal Circuit analyzed the disclosed references and held that the lower court did not clearly err in finding the references but-for material and not cumulative.7 Regarding the second prong, specific intent to deceive the PTO, the Circuit held that the lower court did not abuse its discretion in sanctioning Regeneron for litigation misconduct by drawing an adverse inference of specific intent to deceive the PTO.8 The Circuit held that sanctioning Regeneron in this manner was appropriate given that the litigation misconduct was closely related to the prosecution misconduct.9

Background

The ’018 patent issued on August 6, 2013 from a continuation application claiming priority from an application filed in December 2000.10 The ’018 patent relates to targeting and modifying endogenous genes and chromosomal loci in eukaryotic cells.11 Only claim 1 of the ’018 patent was at issue and recited “[a] genetically modified mouse, comprising in its germline human rearranged variable region gene segments inserted at an endogenous mouse immunoglobulin locus.”12 A mouse as described in claim 1 may have DNA coding for antibodies that is modified using human DNA.13 The figure below shows the various types of antibody configurations that can be achieved by modifying the mouse DNA.14 The different configurations have human DNA, shown in yellow, mouse DNA, shown in green, or a combination of the two.15 The amino acid chains that make up the antibodies include the variable region, shown at the upper portion of the “Y,” and the constant region, shown at the lower portion of the “Y.”16

In 2014, Regeneron filed the underlying infringement suit based on the ’018 patent against Merus B.V. (“Merus”) in the Southern District of New York, and Merus asserted a counterclaim of unenforceability due to Regeneron’s inequitable conduct.17 The alleged inequitable conduct involved four references (the “Withheld References”) that Regeneron undisputedly knew of and failed to disclose during prosecution.18 Regeneron argued that the Withheld References “were not but-for material, that they were cumulative of references the PTO actually relied on during prosecution, and that Regeneron did not have any specific intent to deceive the PTO.”19

After a bench trial, the lower court “issued a lengthy opinion detailing the materiality of the Withheld References.”20 In this opinion, the lower court also drew an adverse inference against Regeneron regarding specific intent to deceive the PTO based on “Regeneron’s repeated violations of the district court’s discovery orders and improper secreting of relevant and non-privileged documents.”21 Based on these findings, the lower court found that Regeneron had committed inequitable conduct and held the ’018 patent unenforceable.22

Materiality: Claim Construction, But-For Materiality, and Cumulativeness

On appeal, Regeneron argued that none of the Withheld references were but-for material to the prosecution of the ’018 patent. The Federal Circuit defined the materiality required to establish inequitable conduct as but-for materiality in Therasense.23 An alleged infringer can show but-for materiality “if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”24 To determine materiality, a court must “place itself in the shoes of a patent examiner” and therefore “applies the preponderance of the evidence standard and gives the claims their broadest reasonable construction.”25

As a threshold matter, the Federal Circuit determined the broadest reasonable construction of the claim that the PTO would have applied during prosecution.26 Although Regeneron argued that the claim language and the specification limited the scope of claim 1 to only cover a “reverse-chimeric mouse,” the Federal Circuit found that the language was written such that the broadest reasonable construction would cover a “reverse chimeric mouse” as well as a fully human or humanized mouse.27

This claim construction proved determinative as to the materiality of the first of the Withheld References considered.28 Regeneron argued that the first reference was not but-for material because it did “not disclose a reverse-chimeric mouse.”29 However, since the Circuit did not adopt Regeneron’s narrow construction and because the reference did disclose fully human and humanized mice, the Federal Circuit found that the district court did not clearly err in finding the first reference but-for material.

As to the other Withheld References, the Federal Circuit reviewed the references, the testimony of Merus’ expert witnesses, and the finding of the lower court before ultimately holding that “the references both individually and in combination teach one of skill in the art to genetically modify mice by inserting exogenous, including human, variable region gene segments endogenously into a mouse immunoglobulin locus.”30 The Circuit also found two of the Withheld References but-for material at least partially because they provided “the motivation to combine these references to develop the genetically modified mouse.”31

Regeneron argued that, even if the Withheld References were material, the references were cumulative of the other references considered by the Examiner — specifically U.S. Application No. 11/009,873 to Nils Lonberg et al. (“Lonberg”) and U.S. Patent No. 6,114,598 to Raju Kucherlapati (“Kucherlapati”).32 If a reference is merely cumulative, the reference cannot be but-for material.33 A patent owner can show that a reference is cumulative if the reference “teaches no more than what a reasonable examiner would consider to be taught by the prior art already before the PTO.”34 The Federal Circuit relied upon Regeneron’s own representations during prosecution and litigation and the testimony of Regeneron’s expert witness regarding the disclosures of Lonberg and Kucherlapati to find that the Withheld References were not cumulative.35

Intent: Specific Intent to Deceive, Litigation Misconduct, and Adverse Inference

On appeal, Regeneron also argued that the district court abused its discretion by sanctioning Regeneron for litigation misconduct by drawing an adverse inference of specific intent.36 Regeneron did not however dispute the lengthy and detailed recitation of litigation misconduct included in the lower court’s opinion and adopted by the Federal Circuit.37 This litigation misconduct was noted early in the case and included “gamesmanship” by Regeneron in filing inadequate infringement contentions, providing limited and incomplete evidence of conception and reduction to practice, and refusing to provide initial claim construction proposals.38

The lower court found that the more egregious misconduct involved Regeneron’s repeated “sword/shield use of the attorney client privilege.”39 The lower court identified three categories of documents that involved discovery misconduct: non-privileged documents that were included on a privilege log; documents to which Regeneron had waived privilege by disclosing an outside counsel’s memorandum prior to a deposition;40 and documents to which Regeneron had waived privilege by filing trial declarations relying upon privileged documents.41 Based on these activities, the lower court chose to sanction Regeneron.42 The lower court considered alternative options for sanctioning Regeneron and determined that “reopening discovery, striking the problematic affidavits, and/or shifting costs would not ensure fairness.”43 Ultimately, the lower court drew “an adverse inference against Regeneron from the undisclosed documents . . . [, i.e., an inference that] Regeneron failed to disclose the Withheld References to the PTO during prosecution of the ’018 patent with the specific intent to deceive the PTO.”44

While the majority at the Federal Circuit found that the lower court did not abuse its discretion in drawing this adverse inference, Judge Newman dissented.45 Judge Newman emphasized the requirement that intent to deceive be proven by clear and convincing evidence and would have drawn a bright line between litigation misconduct and misconduct during prosecution.46 However, the majority emphasized that direct evidence of intent is not required and intent may be inferred “where the applicant engages in a ‘a pattern of lack of candor,’ including where the applicant repeatedly makes factual representations ‘contrary to the true information he had in his possession.’”47

The majority also emphasized that the “widespread litigation misconduct” was tied directly to evidence relevant to the intent inquiry.48 The majority noted that the litigation misconduct directly affected the ability of the court and Merus to discover whether the patent prosecutors had the requisite intent to deceive.49 The majority also clarified that the sanction imposed only established the element of intent, and “[o]nly after Merus proved the remaining elements of inequitable conduct did the district court hold the patent unenforceable.”50

Conclusion

The Federal Circuit provides useful insights into both elements of inequitable conduct in Regeneron. The Federal Circuit’s approval of the lower court’s adverse inference also demonstrates that litigation misconduct may be relevant to the intent analysis, at least when the misconduct is relevant to the work of patent prosecutors. The decision demonstrates the importance of claim construction in the but-for materiality analysis and also highlights the importance of carefully reviewing references during prosecution and erring on the side of disclosure whenever deciding whether a reference is material or cumulative.