Source: https://patentlyo.com/patent/inequitable-conduct
Timestamp: 2019-04-25 06:26:17+00:00

Document:
Professor Lee Petherbridge, Ali Mojibi and myself are circulating a draft of our paper Inequitable Conduct and the Federal Circuit: An Empirical Analysis for comment. The underlying study examines the content of the entire body of Federal Circuit inequitable conduct jurisprudence, and the paper offers several interpretations of the reported data.
Among the most interesting are: that the Federal Circuit seems to apply a stricter standard for inequitable conduct than a substantial number of the tribunals it reviews; that the Federal Circuit’s inequitable conduct standard is applied primarily through the intent to deceive component of the analysis; and that while the apparent lack of clarity in the inequitable conduct standard may be a result of judicial variation on the court, it may also represent a preference by the Federal Circuit to effect a jurisprudential design, the purpose of which is to encourage good faith behavior on the part of patent applicants while only rarely finding inequitable conduct.
Inequitable conduct is unique judicially created doctrine designed to punish patent applicants who behave inequitably toward the public in the course of patent acquisition. Its name alone strikes fear into the hearts of patent prosecutors, and justly so – for when successfully asserted, inequitable conduct can have devastating consequences that reach far beyond a patentee’s case. The need for a systematic empirical study of inequitable conduct jurisprudence has become especially pressing now that the Federal Circuit is reviewing inequitable conduct en banc – in terms so broad as to be unprecedented in the history of the doctrine. This Article reports such a study.
The study reported here provides evidence, inter alia, that the Federal Circuit applies an inequitable conduct standard stricter than that applied by a substantial number of the tribunals it reviews. The Federal Circuit’s stricter standard manifests primarily through the intent to deceive component of inequitable conduct doctrine. For all intents and purposes the Federal Circuit has no substantive jurisprudence around the balancing component, and the materiality component is comparatively less impactful then intent to deceive. The court appears to have trouble communicating its stricter standard to lower tribunals. We offer some explanations for why this might be so, and offer some modest suggestions that might advance inequitable conduct doctrine.
The complete Article can be downloaded here. As this is a work in progress, we are particularly interested in any comments, including alternate explanations for the results we discuss. In addition to responding below, comments can be sent to us directly or to prm.icpaper@gmail.com.
Opinion by Judge Dyk and joined by Judge Friedman. Dissent by Judge Newman.
After trial, Judge Ward (E.D.Tx.) rejected the jury verdict of infringement and granted JMOL for the defendants — holding that no single party had infringed each element of the asserted claims. The lower court also held the asserted patent unenforceable due to inequitable conduct during prosecution.
Joint Infringement: EMS delivers web-based medical charting. Softtech’s software coordinates air-flight information. The two companies formed a “strategic partnership” and signed a distribution agreement that would allow their two products to combine as a package. The products were then sold as a package.
Inequitable Conduct: The court also addressed inequitable conduct. Golden Hour had failed to submit an un-dated brochure that included undisclosed information that contradicted statements made by the applicant regarding a prior art AeroMed system.
Golden Hour first suggested that it had no duty to disclose the brochure because it was not clearly prior art. The Federal Circuit rejected that argument because the duty of disclosure is not limited to prior art. As stated in the MPEP, “[t]here is no requirement that the [submitted] information must be prior art references in order to be considered by the examiner.” MPEP § 609 (2008).
On materiality, the court held that the brochure was clearly material because it contradicted a statement made by the applicant in the specification. In finding the contradiction, the court looked to English grammar. The specification stated that the AeroMed system “does not” provide comprehensive integration. According to the court, the present-tense representation indicates the applicant’s contention that the AeroMed system will not provide comprehensive integration at any time “throughout the pendency of the application.” (DDC Says: What is Judge Dyk thinking?).
On intent to deceive the PTO, the court held that intent could be inferred if there was evidence that either of the prosecuting attorneys actually read the brochure (but if they did not read the reference then they would only be guilty of gross negligence). Here, the court did not find evidence that the attorneys actually read the reference and therefore vacated the inequitable conduct decision for lack of intent to deceive. (The appellate court suggests that inequitable conduct will likely be found again on remand.).
As for materiality, I do not share the conclusion that the undated AeroMed brochure, obtained at a trade show (the Association of Aeromedical Services) a few weeks after this patent application was filed, and found not to be invalidating prior art, was so clearly and convincingly “material to patentability” that failure to provide a copy of the brochure while quoting its front page, invalidates the patent that was found valid over the entire content of the brochure. The record does not show that the brochure was published before the Golden Hour patent application was filed. The defendants provided no documentary evidence of any publication date, and the district court did not find the brochure to be prior art; their only evidence was the “uh-huh’s” of the brochure’s author, quoted at footnote 1 of the majority opinion.
The record showed that when the brochure came into Golden Hour’s possession at the trade show, it was given to Golden Hour’s patent attorney, who referred to it in the Invention Disclosure Statement filed with the PTO, including quotation of the cover page but not the inner page. At the trial, the full brochure was in evidence, and stressed by the defendants, and the jury found that it was not invalidating. In view of the majority’s ruling that deceptive intent was not established in the district court, and the jury’s verdict of validity despite the brochure, the charge of inequitable conduct should be laid to rest.
Early this week, I wrote about Leviton, former Chief Judge Michel's last opinion on inequitable conduct before leaving the bench. Advanced Magnetic Closures brings another perspective on the issue – this time in the form of a comment from the new Chief Judge about issuing inequitable conduct opinions while Therasense v. Becton, Dickinson is pending en banc.
In Advanced Magnetic Closures, the court reviewed a district court determination that U.S. Patent No. 5,572,773 is unenforceable due to inequitable conduct by the alleged inventor. The panel also reviewed the district court’s entry of attorney fees against both the patent holder (AMC) and its attorney.
Inequitable conduct: The focus of the inequitable conduct determination was on the district court’s finding that the alleged inventor falsely claimed to the PTO that he was the inventor of the claimed magnetic fastener when, in fact, he was not. Applying the Star Scientific standard, the panel concluded that the district court did not err by finding that “the single most reasonable inference able to be drawn from the evidence is that [the alleged inventor] intended to deceive the PTO.” Slip Op. at 19 (internal quotations omitted).
Attorney’s Fees: After concluding that the exceptional case determination was appropriate on the basis of both inequitable conduct and litigation misconduct (an issue that the appellant waived by failing to include it in its briefs), the court addressed the attorney sanctions entered against AMC’s attorney under 28 US.C. § 1927. Applying Second Circuit law, the Federal Circuit concluded that the district court abused its discretion by sanctioning the attorney. The court noted that attorney sanctions under 28 U.S.C. § 1927 require a finding of bad faith, as opposed to objective unreasonableness, and concluded that the district court’s single statement that the attorney “should have been aware” of the deficiency of AMC’s patent infringement claim was insufficient to rise to this level.
Although no Federal Circuit decisions involving inequitable conduct have issued since Advanced Magnetic Closures, only a short time has passed. It remains to be seen whether the Chief Judge’s proposed policy on inequitable conduct determinations will be followed for the coming months.
For the sake of full disclosure, I note that I previously represented Abbott Laboratories in connection with the Therasense litigation. I no longer represent clients, including Abbott.
In Leviton, Chief Judge Michel issued his last words as a judge on the subject of inequitable conduct, while Judge Prost provided some hints as to her views on the questions pending before the court in Therasense v. Becton Dickinson.
The district court's inequitable conduct determination in this case arose from two patent applications Leviton filed in 2003 and 2004. The applications contained virtually identical claims, but listed completely different inventors. The first application (the "Germain application") was filed in October 2003 and claimed priority to a February 2003 provisional application; the second, which led to the '766 patent (the patent in suit), was filed in 2004 as a continuation of an application filed on August 20, 1999. The prosecuting attorneys did not disclose the Germain application during the prosecution of the '766 patent.
After granting Leviton's mid-litigation motion to dismiss, the district court concluded that the case was exceptional based on inequitable conduct and vexatious litigation, resulting in an award of attorneys' fees.
Note: The majority treated the district court's inequitable conduct finding as a summary judgment, as there was no evidentiary hearing. The dissent would have reviewed the factual findings under the clear error standard because they arose in the context of an exceptional case determination.
The majority, written by then Chief Judge Michel and joined by Judge Moore, concluded that summary judgment of inequitable conduct should be reversed. With respect to materiality, they agreed with the district court that the Germain application constituted undisclosed material information. Although the copying of the claims was not per se material under 37 C.F.R. § 10.23(c)(7) (which relates to the interference context), it was relevant to double patenting and inventorship. They also agreed that the failure to disclose litigation involving the '766 patent's parents was material.
On intent, however, the majority concluded that the district court's inference of deceptive intent was not the only reasonable one based on the record. In particular, they noted that the explanation given by Leviton's litigation counsel was not unreasonable as a matter of law, thus precluding a grant of summary judgment. Rather, it could only be found implausible following an evidentiary hearing.
In her lengthy dissent, Judge Prost indicated that she would reach the opposite conclusion on intent. Particularly informative are her views on inferring intent. First, she explicitly adopted the Larson Manufacturing requirement that an inference of intent "must be the single most reasonable inference able to be drawn from the evidence." Dissent at 11. Second, she gave her thoughts on plausible explanations, reasoning that the prosecuting attorney's explanation (that he did not believe the Germain application was material because it was not prior art) was implausible because a veteran patent prosecutor would know that prior art is not the only type of information that is material to the examiner. Thus, she would "allow the district court to reject [the explanation] as "unreasonable" and "implausible" and therefore insufficient to create a genuine issue of material fact." Dissent at 17.
Comment: Judge Prost's logic would appear to be applicable to any situation in which the prosecuting attorney's explanation was incorrect – which generally necessarily follows once materiality has been found. All one needs to do is to point out that the attorney must necessarily have known better, and the explanation would be rendered implausible.
About Jason: After spending several years in practice as a patent litigator, Jason is now looking at law from the academic side and is currently a Visiting Researcher at UC Hastings. Although he does not currently represent clients, for the sake of full disclosure he notes that he has represented clients on both sides of inequitable conduct issues, including Abbott Laboratories in connection with the Therasense litigation.
Application of inequitable conduct jurisprudence continues to divide the Federal Circuit. Judge Rader has perhaps been the most outspoken critic of the current over-use of inequitable conduct allegations. In this case, Judge Rader was joined by Judges Mayer and Posner (by designation) in vacating a lower court finding of inequitable conduct.
The PET patent covers an apparatus for making drainage grooves at the edge of a roadway. Prior to litigation, PET had argued that the machines for making rumble strips at the side of the road also violate the patent rights. Subsequently, Dickson sued for declaratory relief.
The jury found the patent invalid and found the patent holder liable for $1.5 million for tortiously interfering with with Dickson’s business relationships. The court then also (1) found the patent unenforceable due to inequitable conduct during reexamination for failure to disclose material information and (2) awarded attorney fees to Dickson.
On appeal, the Federal Circuit affirmed the anticipation decision, but vacated the decision on inequitable conduct.
The case largely centered around one prior art reference – “Spangler” – which discloses an apparatus to make rumble strips. PET knew about Spangler during reexamination of its patent, but did not disclose that reference to the PTO.
Agreeing with the Jury, the Federal Circuit found substantial evidence indicating that Spangler discloses all the elements of PET’s patent – rendering the patent invalid.
Ordinarily, after finding the patent invalid, the court would not need to decide issues of inequitable conduct. Here, however, the appellate panel addressed inequitable conduct because that conduct served as the basis for the lower court’s award of exceptional case attorney fees.
Amending Pleadings to Add Inequitable Conduct Charges: Allegations of inequitable conduct are parallel to charges of fraud and ordinarily must be pled with specificity. Thus, in most cases the accused infringer does not have sufficient evidence to allege inequitable conduct in the initial filing of defenses. Here, the court initially denied Dickson’s motion to amend its complaint to add IC charges. However, at trial the court changed its mind and allowed the issue to be presented.
The district court’s contradicting positions undermine the legitimacy of its ruling on inequitable conduct. This court cannot say with confidence that the record regarding inequitable conduct is not incomplete. Thus, this court vacates the district’s decision on the issue of inequitable conduct and remands to provide an opportunity to fully develop the record regarding inequitable conduct. Further, this Court vacates the award of attorney fees premised on inequitable conduct as premature.
Given the severe consequences of unenforceability when it is imposed on a patent, it is paramount that the district court exercise necessary caution to ensure that the patent owner met its burden of proof with respect to both the materiality and deceptive intent.
Judges Mayer and Posner (sitting by designation) participated in the panel.
Update: I have fixed an important typographical error. Judge Rader indicated that inequitable conduct litigation is the problem (not inequitable conduct itself).

References: § 609
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 § 1927
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