Federal Circuit Tightens Inequitable Conduct Standards

Yesterday, the Federal Circuit released its long-awaited decision in Therasense, Inc. v. Becton, Dickinson & Co.  The facts of the case were discussed in a previous post.  Briefly, the district court held a patent unenforceable for inequitable conduct because the patent applicant did not disclose to the PTO certain statements made in prosecution to the European Patent Office that may be contradictory to statements made to the PTO.  A divided Federal Circuit panel affirmed over a dissent by Judge Linn.

The Federal Circuit agreed to hear the case en banc to reconsider its inequitable conduct jurisprudence.  The case was decided by the 11 active members of the court.

Majority Opinion

The opinion of the court was written by Chief Judge Rader and joined completely by 5 other judges.  Judge O’Malley also joined the opinion regarding the standard for intent.

Intent.  On the issue of intent, the court held that to prove inequitable conduct, “the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.”

In other words, . . . the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.

The Federal Circuit has purported to use this intent standard for years, but has been permitting it to slide to gross negligence or even simple negligence (“should have known”) in recent years.  The court has now made clear that to prevail the accused infringer must prove a deliberate or specific intent to deceive the PTO.

The court also abolished its sliding scale treatment of intent and materiality.  Instead, the court held that “[i]ntent and materiality are separate requirements.”

[A] district court may not infer intent solely from materiality.  Instead, the court must weigh the evidence of intent to deceive independent of its analysis of materiality.

The court did hold that, because direct evidence of intent is rare, a court may infer intent from direct or indirect circumstantial evidence.  If multiple inferences can be drawn from the evidence, however, the court may not infer the specific intent to deceive.

[T]he evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances.” . . . [W]hen there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.

The burden of proof does not lie with the patent holder.  The simple absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.  The patent owner is not required to provide such an explanation.

Materiality.  Where the court had its biggest differences in opinion, and made the biggest change to the law, is regarding the materiality prong of inequitable conduct.

[T]he 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 art.

The majority opinion next provided guidance on how to conduct the new “but-for” test.

[T]he court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference.  In making this determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.

This sounds like the court needs to conduct two separate assessments of the claims compared to the prior art.  On the validity assessment, the court must construe the claims under Markman in light of the specification and prosecution history and see if the prior art invalidates the claims by clear and convincing evidence.  On the inequitable conduct assessment, the court must give the claims their broadest reasonable construction and determine whether the prior art invalidates the claims by a preponderance of the evidence.  As much as the bright line rule is appreciated, this sounds like a lot more work for district courts.

The court went on to note that inequitable conduct should not be applied unless the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.

The court did suggest one exception to its “but-for” test, probably in response to the concurring or dissenting opinions.  The exception is characterized as “cases of affirmative egregious misconduct.”  The example given is the submission of an unmistakably false affidavit.  In such cases, the misconduct is material regardless of the but-for standard.  The exception does not apply to omissions, but only to affirmative actions of misconduct.

The majority of the court specifically rejected the PTO’s materiality standard in PTO Rule 56.  The court held that it is not bound by PTO rules, the PTO standard changes too frequently, and the PTO standard has been what led to inequitable conduct abuse in the first place which required the present fix by the court.

Judge O’Malley’s Opinion

Judge O’Malley, the only member of the court to previously serve as a district court trial judge, filed a concurring opinion. 

She argued that inequitable conduct is an equitable doctrine and isn’t amenable to bright line rules.  Courts need flexibility to determine equitable remedies depending on the circumstances of the case.  She doesn’t believe that either the “but-for” test or the PTO’s Rule 56 standard provide the courts with such flexibility.

Judge O’Malley would find conduct to be material if:  (1) but for the conduct, the patent would not have issued; (2) the conduct constitutes a false or misleading representation of fact (false on its face or if so determined based on omitted information); or (3) the court finds that the behavior is so offensive that the integrity of the PTO process as to that application is wholly undermined.

The second prong of her test would seem to be no better than the current situation.  Litigation would ensue over whether the factual representation was false or misleading.  She seemed to disregard the policy considerations of too many allegations of inequitable conduct and the dumping of references on the PTO.  These considerations underlied the majority’s opinion.

Dissenting Opinion

Judge Bryson, joined by Judges Gajarsa, Dyk, and Prost, filed a dissenting opinion.

The dissent appears to agree with the other members of the court that the requisite intent should be a specific intent to deceive the PTO and there should be no sliding scale with materiality.  The dissent clearly disagrees with the majority, however, on the standard for materiality.

The dissent advocates following the PTO’s guidance as propounded in its Rule 56.  After all, we are talking about conduct before the agency.  The court should defer to its expertise in this matter.

The majority opinion goes too far as the “but-for” materiality standard will effectively demolish the inequitable conduct defense and permit lying to or withholding information from the PTO during prosecution. 

Other, simpler remedies to alleviate the glut of inequitable conduct allegations are available to the court.  These would include requiring that it be pled with specificity and not as part of a fishing expedition; sanctions to those alleging it without factual or legal basis under Rule 11; and because it is an equitable doctrine, the court could simply not impose a penalty even if the requisite intent and materiality are found.  The PTO argued in its brief that if the courts strictly adhere to the “clear and convincing” evidentiary standard, the problem of dumping references on the PTO could be alleviated.

The PTO does not have the ability to make inequitable conduct determinations on its own.  The majority’s new materiality standard will effectively abolish inequitable conduct.


This case represents a significant change to patent law and will affect both litigation and prosecution.  Accused infringers must now have evidence of misconduct and cannot simply use inequitable conduct as a litigation tactic.

The majority holds that a patent should only be held unenforceable due to inequitable conduct when the misstatement or omission is particularly egregious, while the dissent is more protective of the public and wants to hold applicants to a stricter standard.

Does this mean that attorneys and applicants will now be lying and withholding information from the PTO in most cases?  There will certainly be applicants and attorneys who do so.  In general, the rest of the world does not have a duty of disclosure or an inequitable conduct defense.  This could simply be another way to attempt to harmonize.

The lesson to take away from the opinion of the court is that as long as applicants disclose to the PTO all references that they know to be material, they should be shielded from inequitable conduct allegations.  This does not mean that material information can be deliberately withheld.

About these ads

6 Responses to “Federal Circuit Tightens Inequitable Conduct Standards”

  1. General Global Week in Review 30 May 2011 from IP Think Tank Says:

    [...] (271 Patent Blog) (IPBiz) (Holman’s Biotech IP Blog) (Orange Book Blog) (Patent Docs) (Inventive Step) (Anticipate This!) (Chicago IP Litigation) (IP [...]

  2. How Will the PTO Respond to Therasense? « INVENTIVE STEP Says:

    [...] INVENTIVE STEP A blog dedicated to a discussion of patent law issues and strategies « Federal Circuit Tightens Inequitable Conduct Standards [...]

  3. PTO to Match Materiality Standard to Therasense « INVENTIVE STEP Says:

    [...] Yesterday, the PTO published a Federal Register notice that it plans to conform its materiality standard for complying with the duty of disclosure to that set forth by the Federal Circuit in Therasense. [...]

  4. Supplemental Examination, Reexamination « INVENTIVE STEP Says:

    [...] PTO’s numbers also do not take into account the Federal Circuit’s recent decision that should cut the number of allegations of inequitable conduct dramatically.  The number of [...]

  5. Inequitable Conduct Now Extremely Difficult to Prove « INVENTIVE STEP Says:

    [...] every accused patent infringer may indeed be over.  After the Federal Circuit’s decision in Therasense, it seems that it will be extremely difficult to prove the defense.  The court showed that again [...]

  6. Filing a False Declaration Constitutes Inequitable Conduct | INVENTIVE STEP Says:

    […] the Federal Circuit’s opinion in Therasense, it is widely thought to be much more difficult to prove inequitable conduct than under the […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


Get every new post delivered to your Inbox.

Join 63 other followers

%d bloggers like this: