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Patent lawyers say the May 25 en banc ruling by the U.S. Court of Appeals for the Federal Circuit tightening the standards for inequitable conduct is likely to sharply curtail defense-side misconduct claims, in the long run. More immediately, it will result in a rash of summary judgment motions in pending cases. In Therasense Inc. v. Becton Dickinson & Co., the Federal Circuit ruled that to “prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the [U.S. Patent and Trademark Office].” Lawyers believe the 6-1-4 ruling is a likely candidate for U.S. Supreme Court review. In the underlying case, the Northern District of California held in June 2008 that Therasense successor Abbott Diabetes Care committed inequitable conduct by giving contradictory information to the European Patent Office and the U.S. Patent and Trademark Office and not disclosing the contradictory representations to the PTO. The lower court found the Abbott patent at issue, for disposable blood glucose test strips, unenforceable due to the company’s inequitable conduct. In its original ruling in the case on Jan. 25, 2010, a three-judge panel of the Federal Circuit affirmed. In an April 26, 2010, decision, the Federal Circuit vacated its earlier ruling, reinstated the appeal and agreed to hear the case en banc. In the recent ruling, the Federal Circuit, in an opinion authored by Chief Judge Randall Rader, “tighten[ed] the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.” He was joined by judges Pauline Newman, Alan Lourie, Richard Linn, Kimberly Moore and Jimmie Reyna. With regard to intent, the court held that “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. With regard to materiality, the court adopted a “but for” standard, which calls for courts to “determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference.” The court vacated the district court judgment and remanded the case. Circuit Judge William Bryson wrote a dissent, in which he wrote that the majority’s ruling is “contrary to the Supreme Court decisions that gave rise to the doctrine of inequitable conduct, to a long line of our own precedent, and to the principles of materiality that courts have applied in other contexts.” He was joined by judges Arthur Gajarsa, Timothy Dyk and Sharon Prost. “Under this court’s new rule, an applicant who conceals information with the intent to deceive the PTO will be free to enforce his patent unless it can be proved by clear and convincing evidence that the patent would not have issued but for the fraud,” Bryson wrote. Bryson advocated for the current so-called Rule 56 standard, which is based on the PTO’s disclosure rule. That rule defines information as material if it establishes a prima facie case of unpatentability or if it is inconsistent with a position the applicant takes before the PTO concerning patentability. Bryson wrote that “the PTO is in the best position to know what information examiners need,” and that a higher standard “will not provide appropriate incentives for patent applicants to comply with the disclosure obligations the PTO places upon them.” Judge Kate O’Malley concurred in part and dissented in part. She rejected both tests because they “fail to provide district courts with flexibility to find inequitable conduct in an extraordinary case.” “This result is contrary to the very nature of equity and centuries of Supreme Court precedent,” O’Malley wrote. “I would leave to district courts the discretion to apply this equitable doctrine to the unique circumstances with which they are presented, while encouraging them to keep in sight their obligation to guard against abuses of it.” Brad Wright, a Washington shareholder at Banner & Witcoff, who isn’t involved in the case, expects more summary judgment motions to be filed in cases with pending inequitable conduct claims. “Now you will have to have evidence, more than you did in the past,” to allege inequitable conduct, Wright said. “You have to show that, but for the omitted information, the patent never would have issued,” Wright said. “I think it is going to make it harder.” Wright also said that a lawyer or other professional who has been the subject of an inequitable conduct finding in a pending case could move to set it aside based on the recent ruling. Going forward, there are a lot of inequitable conduct claims that defense lawyers simply won’t be able to make, said patent litigator Jim Foster, a shareholder at Boston’s Wolf, Greenfield & Sacks, an intellectual property firm. Anything that has nothing to do with ultimate patentability of the invention, such as that the patent filer claimed small entity status when it was not entitled to, won’t pass muster, said Foster, who wasn’t involved in the case. “There have been a lot of inequitable conduct cases over the years that clearly wouldn’t meet this test,” Foster said. Although prior Federal Circuit panel rulings have attempted to rein in weak inequitable conduct claims, district court judges who don’t hear many patent cases have allowed such claims to move forward, Foster said. “I’ve been following the cases that have been reported, and a lot of judges are allowing inequitable conduct pleadings on fairly thin allegations,” Foster said. “I would think that after the Therasense [ruling], judges are going to be a little more aggressive in not allowing inequitable conduct to be pleaded excessively, and patent lawyers will be more aggressive in attacking inequitable conduct [claims].” On the other hand, Foster said he thought it was probably too late to open up past cases in which there were findings of inequitable conduct under the previous more lenient standard. Many lawyers believe a Supreme Court hearing on the case is a strong possibility. Becton counsel Bradford J. Badke, a partner at Boston’s Ropes & Gray, said the defense is considering whether to file a petition for certiorari to the high court. Badke noted that the PTO and the Justice Department argued in an amicus brief that Rule 56 should be the standard for materiality. “We have a situation where the Federal Circuit has adopted a different materiality standard than what the government has advocated, Badke said. He said he believes that’s a “factor that would enhance the possibility that the Supreme Court would take up the case.” John Whealan, a George Washington University Law School professor who argued for Abbott, referred questions to the company. In a statement, Abbott spokesman Scott Stoffel said the company is “pleased that the Federal Circuit has tightened the standards for finding inequitable conduct, and reversed the decision that found our patent to be unenforceable.” “We agree with the court that the misuse of this doctrine had become a plague on inventors, the public and the entire patent system,” Stoffel said. Another factor is the Supreme Court’s lack of receptivity to bright-line tests from the Federal Circuit, said Scott McBride, a shareholder at Chicago’s McAndrews, Held & Malloy, who isn’t involved in the case. “In the last 15 years, in patent law, they have shown a dislike for Federal Circuit rulings that have adopted a bright-line test,” McBride said. The lack of consensus on the court and in the patent bar, as evidenced by the various amicus positions, could also generate Supreme Court interest, he said. “This case drew so much interest last year in terms of amicus briefs, there were more in this case than in other cases in recent memory,” McBride said. Although patent litigation is likely to change right away, patent prosecution probably won’t change in the short term until the patent world knows whether the case will go to the Supreme Court, Wright said. In the medium term, patent attorneys are still bound by Rule 56 to submit information to the PTO that has a lower threshold of materiality. If the Federal Circuit’s “but for” standard ultimately prevails, Wright hopes the PTO will issue a request for comments asking practitioners whether the rule should be changed. The PTO issued a statement on May 26 indicating that the agency is “carefully studying” the Therasense ruling to “assess how it may impact agency practices and procedures.” The PTO also announced that it expects to soon issue guidance to applicants “related to the prior art and information they must disclose to the Office in view of Therasense.” If the PTO rule changes, the process of applying for a patent should be easier and cheaper, Wright said. Patent prosecutors, he noted, tend to inundate the PTO with paper, including everything from concurrent patent applications for the same technology in other countries. “There are all these burdensome costs that stem from the lack of certainty and ever-expanding creep into what is considered material.” Sheri Qualters can be contacted at [email protected] .

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