Federal Circuit Raises Standards for Prevailing on Defense of Inequitable Conduct

5/25. The U.S. Court of Appeals (FedCir) issued its 5-1-4 en banc opinion [88 pages in PDF] in Therasense v. Becton, Dickinson and Co., a patent case regarding the defense of inequitable conduct.

The opinion of the Court, written by Judge Rader (at right), revises and raises the standards for both the intent to deceive and materiality prongs of the inequitable conduct defense.

Excerpts Regarding Intent to Deceive. "To prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO."

"A finding that the misrepresentation or omission amounts to gross negligence or negligence under a ``should have known´´ standard does not satisfy this intent requirement."

The opinion also states that "the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it."

"Intent and materiality are separate requirements. ... 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. Moreover, a district court may not infer intent solely from materiality. Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality."

"Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence. ... However, to meet the clear and convincing evidence standard, the specific intent to deceive must be ``the single most reasonable inference able to be drawn from the evidence.´´ ... Hence, when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found."

Excerpts Regarding Materiality. The Court also adjusted the standard for materiality. Six judges joined in setting a but for standard.

"This court holds that, as a general matter, the 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. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction."

"As an equitable doctrine, inequitable conduct hinges on basic fairness. ... Because inequitable conduct renders an entire patent (or even a patent family) unenforceable, as a general rule, this doctrine should only be applied in instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim." (Parentheses in original.)

"Although but-for materiality generally must be proved to satisfy the materiality prong of inequitable conduct, this court recognizes an exception in cases of affirmative egregious misconduct. This exception to the general rule requiring but-for proof incorporates elements of the early unclean hands cases before the Supreme Court, which dealt with ``deliberately planned and carefully executed scheme[s]´´ to defraud the PTO and the courts. ... When the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material."

"Because neither mere nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit constitutes affirmative egregious misconduct, claims of inequitable conduct that are based on such omissions require proof of but-for materiality. By creating an exception to punish affirmative egregious acts without penalizing the failure to disclose information that would not have changed the issuance decision, this court strikes a necessary balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitable conduct."

More Information. Numerous entities and persons filed amicus briefs with the Court. See, Dennis Crouch's (PatentlyO) web page with hyperlinks to pleadings, briefs, and opinions.

Several entities associated with the information and communications technology sectors participated as amici curiae. See, Conejo Valley Bar Association's brief, Dolby's brief, SAP's brief, and Verizon's brief.

On July 12, 2011, at 1:00 - 2:00 PM EDT, the law firm of Fulbright & Jaworski (F&J) will host a web seminar titled "Making Sense of Therasense: Past, Present and Future of Inequitable Conduct". See, notice and registration page.

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