Raising the Bar for Establishing “Inequitable Conduct”
Therasense v. Becton Dickinson (decided 5/25/11)By: James J. Foster
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What This Means to You
- Significantly harder now for accused infringers to establish that patents are unenforceable based on "inequitable conduct" by patent applicant.
- However, inequitable conduct claims unlikely to go away.
- Still critical to disclose all important references.
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Overview
The May 25, 2011 decision by the US Court of Appeals for the Federal Circuit (Federal Circuit) in Therasense, Inc. v. Becton Dickinson & Co. makes it more difficult to prove “inequitable conduct” as a defense to patent infringement. Inequitable conduct renders an entire patent, and sometimes even related patents, completely unenforceable.
Inequitable conduct occurs when a patent applicant misrepresents or omits “material information” during prosecution with a “specific intent” to deceive the U.S. Patent and Trademark Office (“PTO”). Therasense establishes new, more restrictive standards for proving both materiality and intent.
Case Background
Inequitable conduct has long been a battleground, with different courts (and even different panels of Federal Circuit judges) applying previous precedent in conflicting ways. Many cases maintained that inequitable conduct findings should be highly unusual – a rare remedy for unmistakable misconduct. Yet courts sometimes found patents unenforceable even in “close calls” – situations in which a patent applicant or attorney made a suspect decision, but did not clearly come across as a bad actor. The frequency of these allegations added to the cost and difficulty of patent litigation.
In Therasense, the trial court had found a patent unenforceable after concluding that a patent applicant had taken contrary positions in front of the PTO and the European Patent Office (“EPO”), yet had failed to disclose the earlier EPO statements during prosecution of the relevant U.S. patent application.
A divided Federal Circuit panel affirmed the finding of inequitable conduct. Two judges agreed with the trial court, but the third dissented and essentially reasoned that (1) the case presented a close call and (2) the trial judge had wrongly second guessed good-faith explanations as to why the EPO statements had not been disclosed.
Following the panel decision, the Federal Circui voted to rehear the case "en banc," with all active judges participating.
Decision Analysis
The Federal Circuit changed the standards for proving both materiality and intent. As a result, the court vacated the trial court’s inequitable conduct finding and remanded the case for consideration of the evidence under the new rules.
Materiality. Therasense holds that prior art or other content is normally material if and only if the PTO would have rejected at least one of the claims had it been aware of the reference. This “but for” rule is stricter than previous approaches for assessing materiality. However, it must be applied from the PTO’s own perspective. That means giving claims their “broadest reasonable construction” and assessing validity under a “preponderance of the evidence” standard.
Accused infringers face a higher bar when challenging validity in court. In some cases, prior art references may satisfy the Therasense materiality test but prove insufficient at trial to invalidate any of the patent claims.
The Federal Circuit made an exception for “affirmative acts of egregious misconduct,” such as filing an undeniably false affidavit.
Intent. To prove intent, accused infringers must now prove by clear and convincing evidence that the applicant (1) knew of the prior art or other undisclosed content, (2) knew that it was material, and (3) nevertheless made a deliberate decision to withhold it. Therasense emphasizes that it is not enough simply to show that the applicant “should have known” of the reference’s materiality.
Indirect or circumstantial evidence can be enough to prove intent to deceive the PTO, but only when such intent is the only reasonable inference to draw. Unless the accused infringer comes forward and proves at least a “threshold” level of intent, the patent owner does not need to offer any explanation for the failure to disclose.
The court also abolished the “balancing” test, under which a strong showing of “materiality” could compensate for a weak showing of intent, or vice versa.
Takeaways
Therasense makes it significantly more difficult to prove that patents are unenforceable. This is particularly true in the common scenario where a patent applicant knew of significant prior art and never disclosed it to the Patent Office, but years have passed and memories have faded.
Some courts nevertheless may continue to give defendants considerable latitude in taking discovery and trying to develop the record so as to carry their burden under Therasense. They may do this to undermine witness credibility. A court that concludes that an inventor or prosecuting attorney is not being truthful would more likely conclude that s/he intended to deceive the PTO as well.
For these and other reasons, patent applicants and their lawyers nevertheless must continue to be vigilant to disclose to the PTO all potentially relevant materials of which they are aware.
