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Friday, June 3, 2011

Inequitable Conduct Defense after Therasense

There have been many opinions expressed concerning the holding in last week's Therasense decision.

Patent Prospector believes that it eviscerates the duty of candor at the heart of Rule 56, entitling his opinion "Deep Six to Rule 56".

Dennis Crouch over at Patently-O is more circumspect and merely states that the Therasense decision "raises the bar" for proving inequitable conduct and, thus, invalidating a patent on which an infringement action is based.

****UPDATE: Jason Rantanen has a draft paper on the long-term fallout from Therasense here.

As a refresher, the inequitable conduct defense evolved from the doctrine of unclean hands.  As stated by the CAFC in Therasense:
As the inequitable conduct doctrine evolved from these unclean hands cases, it came to embrace a broader scope of misconduct, including not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts but also the mere nondisclosure of information to the PTO. Inequitable conduct also diverged from the doctrine of unclean hands by adopting a different and more potent remedy – unenforceability of the entire patent rather than mere dismissal of the instant suit.
In line with this wider scope and stronger remedy, inequitable conduct came to require a finding of both intent to deceive and materiality. Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008). To prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. Id. The accused infringer must prove both elements—intent and materiality—by clear and convincing evidence. Id. If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable. Id.
The CAFC decided to use the Therasense decision to correct what it perceived as a fluctuation in the standards of intent to deceive and materiality.  Accordingly, the CAFC set forth a new, bright line standard as follows:

Intent: For the element of intent to deceive the USPTO, the Federal Circuit now demands evidence of a “deliberate decision” to deceive.  Focusing on the failure to submit material prior art, the court held that the intent element requires “clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.” When circumstantial evidence is used, intent to deceive must be the “most reasonable inference".

Materiality: For the element of materiality, the Federal Circuit now demands evidence of “but-for materiality.”  In other words, the court must find that, but for the deception, the PTO would not [should not] have allowed the claim.  “In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.”

Exceptions: As a major exception, the court here held that in cases involving affirmative egregious misconduct, but-for material need not be proven.

Unenforceable:  Even when material and intent are proven, the court held that a patent should only be rendered unenforceable due to inequitable conduct “where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.”  As in eBay v. MercExchange, this equitable analysis is intended to serve as a substantial requirement that limits the discretion of district courts.


The upshot of the Therasense decision is that the new rules for inequitable conduct practically ensure that only egregious and careless practitioners will be held accountable.

International Standards:


Europe - Note that EPC Rule 141 (amended January 1, 2011) requires that the applicant provide a copy of the results of any search that was carried out on a priority application when filing a convention European application or when entering the regional phase in Europe. (If the results are unavailable they must be filed “without delay after such results have been made available”.)  As a practical matter, there are likely no consequences to not filing.


Japan - The official rules can be found at JPO web site. However, the JPO system requirements are not widely recognized so that many applicants do not follow it. This is because negligence of the duty to disclose prior art in practice has no effect on the validity of the patent.

How does this affect your IP strategy?

1.  It is unlikely that this decision will affect how most firms file and prosecute patent applications.  However, it is possible/likely that less scrupulous competitors (and/or those who are not based in the U.S. and have no existing processes in place to provide complete disclosures of known prior art) will be able to issue patents for applications that do not meet patentability requirements without the threat of cancellation of the patent to worry about.  Sloppiness and negligence will be excusable.

2.  This should instigate a discussion of your competitive intelligence processes and how competitive prior art is communicated within the organization.  For example, it is typical within many businesses to do an in-depth prior art search in advance of even putting together an invention disclosure.  This typically generates a large number of references that are then cited in the patent application.  Many references are included to avoid an allegation of failing to cite material prior art.  Application of the "but-for" standard may allow for the citation of fewer, more targeted references that require less discussion in order to distinguish the new application over the prior art.

3.  Where a firm is a defendant in an infringement action, assessments regarding the strength of one's litigation position should place less weight on the value of an inequitable conduct defense.  In turn, this will put a greater premium on finding references that invalidate all references, since the "nuclear" threat of complete patent invalidation is now highly unlikely.

4.  Reexaminations may become a more useful offensive tool for both litigants and the courts.  One can envision District Court judges ordering litigants to have an undisclosed reference go through a "Therasense hearing" similar to the Markman hearings for claim construction, before ruling on whether the "but-for" standard is met.

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