Part of the complexity inherent in a patent infringement suit is that infringement (or noninfringement) and most defenses challenging the validity of a patent proceed on a claim-by-claim basis. This forces both the patentee and the alleged infringer to carefully consider how their proposed construction of terms can affect each individual claim of the patent for purposes of both infringement and invalidity.
But one affirmative defense sidesteps this complexity and promises a clean victory for an alleged infringer: inequitable conduct. In its simplest form, inequitable conduct is a straightforward application of equitable principles: A person found to have committed some form of wrongful conduct related to the issuance of the patent is barred from enforcing the patent. For example, if a patent applicant engages in deception by manufacturing false evidence, or suppressing material evidence during the prosecution process, the applicant may be found to have committed inequitable conduct and be barred from enforcing the patent.
As the doctrine developed, inequitable conduct came to require proof of two elements: (1) intent to deceive and (2) materiality. In part because the inequitable conduct defense is a judge-made doctrine, the standards for adjudging intent and materiality have never been clear or consistent. For example, intent to deceive—at times—was satisfied by a finding of gross negligence, or even negligence, while in other circumstances, proof of specific intent was demanded. Similarly, materiality in certain cases was determined by a broad “reasonable examiner” standard, namely, whether a reasonable examiner would consider it important, whereas other cases applied a more regimented materiality standard defined by Patent Office Rule 56. Further, courts often applied a sliding scale that allowed for a lesser showing of intent if a strong showing of materiality could be made, and vice versa.
The remedy for inequitable conduct has been called the “atomic bomb” of patent law. Not only is the patentee barred from enforcing the patent, but success on the defense also opens up patentees to a potential shifting of fees and counterclaims under the Sherman Act for its “sham” assertion of the patent in the lawsuit. Thus, the defense’s allure and leverage is obvious. It follows that the inequitable conduct defense became ubiquitous in the patent litigation world. But inconsistencies in its application and a host of other perceived ill effects caused it to catch the eye of the U.S. Court of Appeals for the Federal Circuit.
The Federal Circuit took up the issue en banc in Therasense v. Becton, Dickinson, 649 F.3d 1276 (Fed. Cir. 2011). The court reviewed the development of the inequitable conduct defense and highlighted that low standards for intent and materiality had “many unintended consequences.” For example, the court noted, “increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained [U.S. Patent and Trademark Office] resources, increased PTO backlog, and impaired patent quality” were all traceable to the defense.
“In order to redirect a doctrine that has been overused to the detriment of the public,” Therasense tightened the standards. As to intent, the court required proof that the patentee had a specific intent to deceive the PTO and demanded exacting evidence of this intent. As to materiality, the court required but-for materiality, as in but for the applicant’s actions, the PTO would not have allowed a claim. The court did, however, carve out one exception to its new but-for materiality requirement for affirmative egregious conduct. As an example, the court noted that the affirmative filing of a false affidavit would be material under the exception. The court also rejected application of a sliding-scale approach, requiring independent proof of both elements.
Following Therasense, the question emerged, was the inequitable conduct defense dead in the water? Did seemingly deceptive patent applicants now have a license to deceive? While the Therasense standard undoubtedly affected the patent law landscape, and raised the bar for a finding of inequitable conduct, the case law demonstrates the answer is “no.”
Admittedly, Therasense was an openly hostile attempt to limit the “toss-in problem” that the Federal Circuit saw the inequitable conduct defense to be. MySpace v. GraphOn, 672 F.3d 1250, 1261 & n.19 (Fed. Cir. 2012). And its post-Therasensecase law generally reflects this hostility, and properly so. (See, e.g., Novo Nordisk A/S v. Caraco Pharmaceutical Labs, 719 F.3d 1346 (Fed. Cir. 2013) (reversing district court’s finding of inequitable conduct even where district court had found inequitable conduct under both pre-Therasense and post-Therasense standards); Network Signatures v. State Farm Mutual Automobile Insurance, 731 F.3d 1239 (Fed. Cir. 2013) (reversing grant of summary judgment to alleged infringer on claim of inequitable conduct under Therasense standard); In re Rosuvastatin Calcium Patent Litigation, 703 F.3d 511 (Fed. Cir. 2012) (affirming district court finding of no inequitable conduct based on a lack of proof of specific intent).)
Nevertheless, the defense persists, and one would be remiss to ignore it as a viable option as part of a patent litigation strategy.
Indeed, the Federal Circuit has reversed a grant of summary judgment in favor of a patentee on the alleged infringer’s claim of inequitable conduct, and affirmed findings of inequitable conduct on at least two occasions.
In Intellect Wireless v. HTC, 732 F.3d 1339 (Fed. Cir. 2013), the district court held a bench trial on inequitable conduct, and ruled in favor of the alleged infringer. The patentee was found to have submitted a false affidavit to the PTO during the prosecution of the patent. Applying the Therasensestandard, the Federal Circuit concluded that this false affidavit alone established materiality. It then found that the submission of the false affidavit raised a strong inference of specific intent to deceive, and that the district court’s credibility determination, deciding not to credit the patentee’s explanation for the submission, was not in error. Thus, the Federal Circuit affirmed the district court’s judgment of unenforceability for inequitable conduct.
The Federal Circuit similarly affirmed a district court’s finding of inequitable conduct following a bench trial in Aventis Pharma v. Hospira, 675 F.3d 1324 (Fed. Cir. 2012). There, the inventor was found to have intentionally withheld certain prior art references. The Federal Circuit concluded that the withheld prior art was necessarily material because it had affirmed the district court’s finding of obviousness based in part on the withheld prior art. It also affirmed the district court’s finding of intent, similar to Intellect Wireless, based on the view that the district court was entitled to discredit the inventor’s explanation for a lack of credibility. The Federal Circuit, therefore, affirmed the judgment of unenforceability due to inequitable conduct.
The lasting impact of Therasense may still be hard to gauge. But despite the seemingly insurmountable burden it imposes, Intellect Wireless and Aventis make clear that a finding of inequitable conduct is still attainable and litigants should consider it as part of any patent litigation strategy. Moreover, it should be noted that the Therasense standard has already caught the U.S. Supreme Court’s eye, as it called for the views of the U.S. solicitor general in a petition challenging the standard. Sony Computer Entertainment America v. 1st Media, 134 S. Ct. 418 (2013).
While the court ultimately denied the petition, its actions signaled that Therasense was in its crosshairs, suggesting the Therasense standard could be relatively short-lived. In any case, the inequitable conduct defense lives on and figures to be a prominent feature of patent law for a time to come.•