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April 2012

En Banc Federal Circuit Reins In Inequitable Conduct

In the recent case of Therasense, Inc. v. Becton, Dickinson & Co.,1 the Federal Circuit rewrote the law of inequitable conduct.  The patent-in-suit claimed disposable blood glucose test strips for diabetes management.  The strips had a membrane-less electrode that was to be exposed directly to whole blood.  During prosecution, a key reference cited by the PTO for anticipation and/or obviousness was another patent (the '382 patent) owned by the patentee.  The patentee argued that its '382 patent required a membrane barrier for whole blood while the patent in examination did not.  However, several years earlier in a European counterpart application, the patentee had characterized the membrane in the '382 prior art device as serving a different purpose.  In other words, there was a slight discrepancy in how the patentee had characterized the prior art, and the patentee did not fully disclose its prior position.  The district court held the patent unenforceable under the inequitable conduct doctrine because of the patentee’s failure to disclose its prior position to the examiner during prosecution.  A divided panel affirmed, but the in an en banc ruling, the Federal Circuit vacated the holding, and remanded the matter to the district court.

In so doing, the Court held the “accused infringer must prove both elements [of inequitable conduct] – intent and materiality – by clear and convincing evidence.”  Moreover, the Court held the “sliding scale” analysis, where a weak showing of intent may be found sufficient based on a strong showing of materiality or vice versa, could no longer be used.  Intent and materiality must be proved separately, a court “may not infer intent solely from materiality,” and the absence of a good faith explanation for withholding a material reference does not by itself prove intent.

As for the intent standard, the accused infringer must prove that the patentee acted with the specific intent to “deceive.”  In other words, by clear and convincing evidence, the infringer must prove: (1) the patentee knew of the reference; (2) knew it was material; and (3) made a deliberate decision to withhold it.  For materiality, the Court held “the materiality required to establish inequitable conduct is but-for materiality.”  In other words, prior art is only material “if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”

However, the Court did leave one carve out to its revised two-part inequitable conduct standard for “cases of affirmative egregious misconduct.”  The Court characterized this egregious misconduct as “deliberately planned and carefully executed schemes to defraud the PTO and the courts.”  The Court then gave as an example “the filing of an unmistakably false affidavit.”  However, the Court also noted the simple failure to mention (or nondisclosure) of prior art references in an affidavit are not egregious and require proof of but-for materiality.

The Federal Circuit noted two primary reasons for its reigning in of inequitable conduct.  First, “inequitable conduct has been overplayed, is appearing in nearly every patent suit, and is cluttering up the patent system.”  (citations removed).  Inequitable conduct is a power weapon which “unlike validity defenses, which are claim specific, inequitable conduct regarding any single claim renders the entire patent unenforceable.”  Moreover, it can lead to attorney fees awards, anti-competitive lawsuits, and the unenforceability of entire patent families.  Thus, “with these far-reaching consequences, it is no wonder that charging inequitable conduct has become a common litigation tactic.”  Second, the fear of an inequitable conduct charge is so prevalent that patent prosecutors were disclosing even the most marginally relevant prior art for fear of missing a reference.  This overbroad disclose was actually having an opposite effect on the patent examiners: they were so overwhelmed with irrelevant prior art, it might as well have been that no prior art was disclosed. 

In conclusion, in its opinion, the Federal Circuit stated its significant distaste for the abuse of the inequitable conduct doctrine that has occurred in the last few years.  Thus, although it still remains a powerful weapon, litigators should be wary of pushing and relying on marginal inequitable conduct defenses.  In addition, patent prosecutors can take some relief in the decision, but still must think long and hard about what to cite to the patent examiner from other related cases and from other jurisdictions.

1 Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)



Intellectual Property

Intellectual Property