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En Banc Federal Circuit Appeals Court Tightens Materiality and Intent Prongs for Inequitable Conduct

June 2, 2011 in Patent Trademark & Copyright Journal · Leave a Comment

In a 6-5 en banc decision, the U.S. Court of Appeals for the Federal Circuit May 25 stiffened the standards for alleged patent infringers to assert an inequitable conduct defense ( Therasense Inc. v. Becton, Dickinson & Co., Fed. Cir., No. 2008-1511, 5/25/11 ).

“This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public,” Chief Judge Randall R. Rader said in the majority opinion.

Specific Intent Standard.

As to the intent prong, the majority affirmed that the challenger must prove that the patentee acted with specific intent to deceive the Patent and Trademark Office. The court specifically rejected that the intent prong could be satisfied with a charge that the patentee “should have known” a misrepresented or omitted reference would be material to the PTO examiner’s review of the patent application. Instead, the court said, “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.”

The majority acknowledged that direct evidence of deceptive intent is rare, and so allowed for the inference of intent from indirect and circumstantial evidence. However, it confirmed the court’s holding in Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365, 88 USPQ2d 1001 (Fed Cir. 2008) (76 PTCJ 666, 9/12/08), that the specific intent to deceive must be “the single most reasonable inference able to be drawn from the evidence.”

But-For Materiality Standard.

Turning next to the materiality prong, the majority adopted the high “but-for materiality” test. “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,” the court held.

Though the court recognized that the but-for test is “congruent” with a determination of invalidity, it noted the different evidentiary standards between a federal court’s requirement for clear and convincing evidence and the PTO’s preponderance of the evidence given the broadest reasonable construction of the claim. Thus, a district court could find a claim valid under the higher evidentiary standard while also finding inequitable conduct as to the same claim.

The majority did allow for one exception to the but-for standard, based on the unclean hands doctrine. “When the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material.”

Instant Finding Vacated.

In the instant case, the lower court had found inequitable conduct by Abbott Diabetes Care Inc., the successor to Therasense Inc. and a subsidiary of Abbott Laboratories as to patents (5,628,890; 5,820,551; 6,143,164; and 6,592,745) directed to a glucose home testing kit for diabetics, including disposable blood glucose test strips. The firm’s patent attorney and its head of research and development were found to have withheld from the PTO an arguably contrary position that they argued before the European Patent Office.

The majority vacated and remanded because the lower court had found materiality based on the PTO’s “Rule 56” standard, whereby new information is material if it establishes either a prima facie case of unpatentability or refutes, or is inconsistent with a position the applicant takes. The lower court had also relied on the “should have known” negligence standard, the court said, as it gave instructions to look for specific evidence that the attorney and head of research knew of the EPO briefs and that they were material, and subsequently made a conscious decision not to disclose so as to deceive the PTO.

Judges Pauline Newman, Alan D. Lourie, Richard Linn, Kimberly A. Moore, and Jimmie Reyna joined the majority opinion.

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