Patent Unenforceable Based on Inequitable Conduct
Posted on Aug 23, 2017 in Articles
This article originally appeared in The Legal Intelligencer on August 22, 2017.
It’s been called the atomic bomb of patent law—inequitable conduct. It happens when a patent is applied for, but the duty of candor, disclosure and good faith toward the U.S. Patent and Trademark Office (USPTO) is violated. If proven to have occurred during patent procurement, then the entire resulting patent becomes unenforceable. Even if inequitable conduct affects a very limited aspect of a patent application, the consequences are catastrophic as the ability to assert the resulting patent vanishes.
Inequitable conduct took center stage last month in Regeneron Pharmaceuticals v. Merus N.V., 2016-1346 (Fed. Cir. 2017). While the opinion provides a stark reminder of the ethical duties required of practitioners during the patent application process, the basis of the decision is controversial.
Inequitable conduct is a concept that arose out of the doctrine of unclean hands. It requires that everyone participating in the procurement of a patent abide by the following rule (37 CFR 1.56): “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Patent Office, which includes a duty to disclose to the Patent Office all information known to that individual to be material to patentability.” Complying with this requirement can sometimes be difficult and time consuming. Applicants, their attorneys, and anyone else associated with a patent application must share with the USPTO any information that may be ”material.” To put it another way, and very generally speaking, if you are associated with a patent application filing, and you know of information that may affect whether the application becomes a patent, then you must share that information with the USPTO.
For example, if the inventor of a patent application is aware of a patent (or other published reference) that a USPTO examiner could use to reject his patent application, the inventor is required (generally speaking) to disclose that patent to the USPTO. Alternatively, imagine a patent attorney is handling two patent applications, and the first application is rejected based on information that might be used to reject the second application. In such a situation, the patent attorney might be required to submit that information in the second application. These are only examples. The withholding of other pertinent documents, such as publications, internal memos, declarations, and expert opinions may also be considered inequitable conduct.
Because the consequences of a finding of inequitable conduct are so severe, most patent attorneys are exceptionally diligent in disclosing to the USPTO any known documentation that may be material to the patentability of an invention. When in doubt, attorneys normally err on the side of caution and submit documentation that might be relevant.
The most significant, recent case on the law of inequitable conduct is Therasense v. Becton, Dickinson & Co. , 649 F. 3d 1276 (Fed. Cir. 2011) (en banc). Therasense clearly described how inequitable conduct during patent procurement may be proven. First, “but-for” materiality of a withheld document must be shown, i.e., had a USPTO examiner seen the withheld document, he would not have allowed the patent to issue. Second, the party asserting inequitable conduct “must prove that the patentee acted with the specific intent to deceive the PTO.” There is, however, an exception to this rule. A document is not “but-for” material if it is cumulative, i.e., when it “teaches no more than what a reasonable examiner would consider to be taught by the prior art already before the PTO,” as in Regents of the University of California v. Eli Lilly & Co., 119 F. 3d 1559, 1575(Fed. Cir. 1997).
Returning to Regeneron, Regeneron Pharmaceutical’s in-house patent attorney knew of three published papers and one international patent publication (the ”withheld references”) that were not provided to the USPTO even though they were relevant to its patent application. After the patent was granted and Regeneron filed suit for infringement, Merus asserted a counterclaim of unenforceability due to inequitable conduct based on the withheld references. The district court found in favor of Merus. On appeal, Regeneron argued that the duty of candor had not been violated because none of the withheld references were “but-for” material. Regeneron also argued that “the district court improperly concluded that the applicant’s possessed the necessary specific intent to deceive the PTO.”
First, the Federal Circuit reviewed Regeneron’s patent claims (from the asserted patent) and the content of the withheld references and concluded that the withheld references were indeed “but-for” material.
Second, the Federal Circuit reviewed Regeneron’s argument that the withheld references were cumulative with prior art already before the USPTO. The court compared the content of the Withheld References and the prior art that had been considered by the USPTO, and concluded that the withheld references were not cumulative.
The third conclusion reached by the Federal Circuit is the most interesting part of the opinion.
To reiterate, in order to support an accusation that inequitable conduct has occurred, it is necessary to show that the patent applicant had a specific intent to deceive the USPTO during patent procurement. The district court concluded that there had been intent to deceive the USPTO, but the conclusion was inferred based on Regeneron’s misconduct during litigation. “Regeneron’s behavior in district court was beset with troubling misconduct” wrote the Federal Circuit. According to the court’s opinion, Regeneron failed to produce a patent claim comparison chart (after being told to do so by the district court in its written decision and at hearing), failed to provide a claim construction chart (a necessary document that is prepared by the plaintiff when asserting a patent), and failed to provide other relevant documents (by arguing that those documents were excluded from submission due to attorney/client privilege even though privilege had been waived). Based on Regeneron’s “pattern” of misconduct, the district court concluded that Regeneron’s failure to disclose the withheld references was “with the specific intent to deceive the PTO.”
The Federal Circuit agreed with the district court’s decision, stating “In light of the appellant’s widespread litigation misconduct … the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.”
The decision is somewhat controversial because the finding of inequitable conduct was based on an “adverse inference.” Inequitable conduct is a patent procurement (i.e., prosecution) concept. Yet, the Federal Circuit held that inequitable conduct had occurred after analyzing litigation misconduct. The decision thus ties together patent procurement and litigation in an unusual way. Should the way a party behaves in litigation affect an analysis of whether inequitable conduct occurred during patent procurement? For the moment, the answer is “maybe.”
– By Lawrence E. Ashery