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Locusts, cholera and inequitable conduct have something in common: All have been described as plagues. A charge of inequitable conduct typically arises as a defense to patent infringement. A defendant will allege that a plaintiff’s patent is unenforceable because of improprieties carried out during the patent’s prosecution. Patent proceedings carry with them a duty of candor and good faith that extends to every person substantively involved in the prosecution of a patent application. Any violation of this duty, including submitting false information or withholding material information, can lead to a finding of inequitable conduct. The U.S. Supreme Court first recognized inequitable conduct as a defense to patent infringement in 1945. By 1988, the U.S. Court of Appeals for the Federal Circuit had characterized the abundance of inequitable conduct charges as “an absolute plague.” At that time, inequitable conduct was estimated to be raised in about 80 percent of patent cases. The plague continues. Inequitable conduct findings have been rising over the past few years. In 2000-01, only nine patents were held unenforceable due to inequitable conduct (in reported decisions). For 2002 alone, that number was 11. And for 2003-2004, a whopping 30 patents were held unenforceable. Inequitable conduct used to be called fraud on the patent office. But the kinder, gentler name doesn’t take any bite out of the consequences. When a court finds inequitable conduct has occurred, the entire patent is unenforceable, even if the conduct occurred with respect to only one of the patent’s claims. And that patent is unenforceable against anyone — not only the person or company alleging inequitable conduct. An inequitable conduct finding can infect other patents. If a patent holder has come to the court with “unclean hands,” inequitable conduct can cause a whole family of patents to become unenforceable. Findings of inequitable conduct can also lead to enhanced damages and attorney fees. There is also the risk that antitrust charges will follow an inequitable conduct finding. Because a patent provides the right to exclude others from a market, patent holders are generally not subject to antitrust claims. However, if the patent was obtained by fraud and enforced to prevent others from entering the market, the court may strip the patent holder of antitrust immunity. In Nobelpharma AB v. Implant Innovations, for example, an inventor failed to disclose that he had published a book describing the patented invention. This inequitable conduct qualified as an antitrust violation, the court ruled. A jury awarded approximately $3.3 million in compensatory damages, which the court then trebled. Attorneys and patent agents found responsible for inequitable conduct may also face professional discipline. In Klein v. Peterson, the Federal Circuit affirmed a two-year suspension and five-year probation for an attorney who falsified entries in his office log, made up mailing certificates, and backdated checks to fake Patent Office filing dates. Everyone involved in the procurement of a patent has a duty to disclose information material to the patentability of the claimed invention to the PTO. Partly in response to the inequitable conduct epidemic, the rule regarding the duty of disclosure was narrowed in 1992, the theory being that the less information that is material, the less opportunity there is for inequitable conduct charges. Prior to 1992, information was deemed material when a reasonable examiner would find the withheld or false information relevant when examining a patent. Under this standard, an omission or misrepresentation can be material even if the patent would still have issued had the examiner known all the facts. Information is now material only if it establishes unpatentability, or refutes or is inconsistent with a position the applicant takes during prosecution. Even with this narrowed definition of materiality, the number of inequitable conduct findings continues to rise. The recent uptick probably isn’t due to a breakdown in the moral fiber of patent attorneys. It might be due to a higher number of patent cases filed, a higher percentage of inequitable conduct charges brought, or more sophisticated tactics by patent litigators. The increase in inequitable conduct findings is at least partly due to a lowered standard for finding deceptive intent. In the past, the burden was on the alleged infringer to show clear and convincing evidence of deceptive intent on the part of the patentee. Lately, the courts seemed to have lowered the bar. Instead of requiring positive evidence of intent, the courts have inferred intent because of an absence of a credible, good-faith explanation from the patent holder. For example, in 2003 the Federal Circuit inferred intent in Hoffmann-La Roche, Inc. v. Promega Corp. Roche’s patent was for a purified enzyme widely used in the polymerase chain reaction, a ubiquitous technique in molecular biology experiments. Roche drafted some working examples in its patent in the past tense, indicating that they had actually been performed. During prosecution, Roche used the results from the experiments to argue patentability. But Roche hadn’t actually performed the experiments as written. The court inferred intent to deceive because Roche did not provide a credible reason for using results from experiments that had not been performed. Roche’s patent to the enzyme, with annual sales in the hundreds of millions of dollars, was held unenforceable. A recent Federal Circuit case involving a stairlift also used the lowered standard. A stairlift is a chair that travels on a rail, used for transporting people with disabilities up and down stairs. In the movie “Gremlins,” little green critters propel dog-hating spinster Mrs. Deagle to her death on a stairlift. Because of the potential for dangers like this, stairlifts are considered medical devices and must be approved by the Food and Drug Administration. In order to get a stairlift approved, the patentee in Bruno Independent Living Aids, Inc. v. Acorn Mobility Services, Ltd. submitted a letter to the FDA, stating that Bruno’s stairlift was “similar in design and function” to a stairlift previously manufactured by another company. Bruno never submitted this information to the patent office. The court found that the omission was material to the prosecution. Because Bruno did not provide a credible, good-faith explanation for the lapse, the court inferred intent. Not only was Bruno’s patent held unenforceable, but attorney fees were awarded to the defendant. Both the Roche and Bruno cases suggest that, if a patentee wants to avoid a finding of inequitable conduct, then the patentee can’t rely on an accuser’s inability to provide evidence of intent. Instead, the patent holder better have a good explanation for his conduct. Providing an explanation can come with a cost. Waiver of attorney-client privilege may be necessary in order to produce documentation of a good-faith explanation. This in turn can lead to costly and invasive discovery. A recently promulgated PTO rule might expand the duty of candor: Examiners, under this rule, may require patent applicants to submit information deemed reasonably necessary to properly examine an application. Such information includes the existence of relevant searchable commercial databases, a copy of publications by any of the inventors, and a copy of literature used to draft the application. There’s no end in sight for the profusion of inequitable conduct charges. While the inequitable conduct plague might be less creepy than a pack of locusts, it’s no less bothersome to those affected. Andrea Kamage is an associate, and Deborah Sterling is a student associate, at Sterne, Kessler, Goldstein & Fox. The content of this article reflects the thoughts of the authors, and not the firm’s.

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