Therasense, Inc. v. Becton, Dickinson & Co. (Fed. Cir. 2011) (en banc)
In a landmark en banc decision today, the Federal Circuit rewrote the law of inequitable conduct. This case was of great interest to the patent community, as evidenced by the 33 amicus briefs submitted. From the pharmaceutical industry, amicus briefs were filed by Apotex; Sanofi-Aventis; Eli Lilly & Co.; BIO; Eisai; Johnson & Johnson; PhRMA; Teva; and GPhA. In the decision, the Federal Circuit unabashedly states that it is reining in inequitable conduct because to do so is in the interests of patent prosecutors, inventors, courts and the public at large.
The patent-in-suit, U.S. Patent No. 5,820,551, claims disposable blood glucose test strips for diabetes management. The strips comprise an electrode configured to be exposed directly to whole blood--i.e., without a membrane covering the electrode. The patent application was filed by Abbott in 1984 and underwent a protracted prosecution over a period of 13 years. A key reference cited by the PTO for anticipation and/or obviousness was another Abbott patent (the '382 patent).
During prosecution, the prosecuting patent attorney and the Director of R&D both made contributions in order to overcome the art-based rejections. The attorney argued that the '382 patent required a membrane and the claims under examination did not. But the PTO was unconvinced. Thus, the Director of R&D submitted an affidavit analyzing the '382 patent and the patent attorney represented that the affidavit showed that the art cited required a membrane barrier for whole blood. Meanwhile, several years earlier in the European counterpart application, Abbott did not categorically deny that there was a membrane in the '382 prior art device, but instead characterized it as serving a different purpose. So in essence there was a discrepancy in how the patentee had characterized the prior art in two different jurisdictions--the EPO and the USPTO.
At the district court, the ‘551 patent was held unenforceable for inequitable conduct because Abbott did not disclose to the PTO the statements made in the prosecution of the European patent. There were also findings of invalidity and non-infringement. Abbott appealed the judgments of invalidity, unenforceability and noninfringement. Last fall, the Federal Circuit upheld noninfringement and invalidity. Abbott then petitioned for rehearing en banc.
In granting Abbott’s petition, the Federal Circuit “recognize[ed] the problems created by the expansion and overuse of the inequitable conduct doctrine.” In today’s decision, the court reviewed the “unclean hands” line of cases that initially spawned the inequitable conduct doctrine (Keystone, Hazel-Atlas and Precision). While the unclean hands doctrine remains for egregious acts of deliberate fraud, the inequitable conduct doctrine developed further to require a two-part test of intent and materiality, where the two tests were on a sliding scale. That is, a showing that withheld prior art was especially material would compensate if there were little evidence of bad intent. In today's decision, the court does away with this sliding scale, noting that that it “conflate[s] and dilute[s]” both the standard of materiality and intent.
Moreover, the Federal Circuit acknowledged that the doctrine of inequitable conduct has been left unfettered to become a monster which plagues not only the courts but the entire patent system. To guard against it, patentees are forced to disclose anything and everything, which has led to unforeseen and unintended consequences: (1) use of the doctrine as a significant litigation strategy; (2) casting a dark cloud on a patent's validity; (3) painting the patentee in a bad light; (4) pulling the focus of proceedings to moral turpitude of the patentee; (4) deflecting from the merits of validity and infringement; (5) discouraging settlement; (6)increasing the complexity, duration and cost of an already costly action. In addition, a finding of inequitable conduct can also have ruinous consequences for the patent attorney, who has a hangman’s noose around his neck that forces him to deluge the PTO with references regardless of relevance, and the tidal wave of such references makes identification of the prior art more difficult. But most importantly, the Federal Circuit noted that this doctrine is an “atomic bomb” of patent law (incidentally, one that cannot be defused through reissue) that not only sends up in flames the one patent at issue, but also scorches the entire portfolio.
The Federal Circuit states in today's decision that “to prevail on a claim of inequitable conduct 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. Moreover, 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.
The court went on to say that to “cure the problem of over-disclosure of marginally relevant prior art to the PTO . . . this court adjusts as well the standard for materiality.” To establish materiality the accused infringer must prove “but-for materiality,” to wit: undisclosed prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed art. The court has to review the evidence applying a preponderance of the evidence standard having given the claims their broadest reasonable construction. Because inequitable conduct renders the entire patent and often entire portfolio unenforceable it should only be applied where the patentee's misconduct resulted in an unwarranted claim. The court noted that enforcement of an otherwise valid patent does not injure the public merely because of misconduct lurking somewhere in the patent prosecution that was immaterial to the issuance.
An exception to the but-for test exists where the conduct of the patentee leading to the inequitable conduct was affirmative egregious misconduct. The court notes that by creating an exception that punishes egregious acts without penalizing failure to disclose information that would not have changed the issuance decision strikes the proper balance between encouraging honesty at the PTO and preventing unfounded accusations of inequitable conduct.
Further, the court laid to rest the line of argument that posits that the PTO Rule 56 definition of materiality should be used in inequitable conduct cases. First, the court notes it is not bound by procedural rules of the PTO. In addition, the court feels that tying inequitable conduct materiality to Rule 56 has led to uncertainty and inconsistency because understandably, PTO rules change from time to time. Further, the court's experience is that since 1992 the Rule has changed on a number of occasions and the court’s experience counsels against the court abdicating its responsibility for determining inequitable conduct to the administrative body which has no substantive rule making capacity. Finally, the court simply states that Rule 56 sets such a low bar for materiality that adopting that standard would inevitably result in prosecutors continuing to drown examiners with art of marginal relevance and litigators to continue charging inequitable conduct in nearly every litigation strategy.
So, what to make of it?
Litigators: The Federal Circuit is clearly highlighting its significant distaste for inequitable conduct allegations.
Courts: Even before the district court gets to looking at the inequitable conduct test clearly set out in a case, it had better determine the validity of each claim.
Prosecutors: There may be some relief to the fear-mongering caused by McKesson et al., but the question remains open--what do you cite to the patent examiner from other related cases and from other jurisdictions?
PTO: There may be sufficient guidance in this case for the current language of Rule 56 to be revisited and revised.
Congress and Patent Reform: This case finally puts to rest good and proper who should determine inequitable conduct--the court has no interest in “abdicating” its responsibility in that determination.
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