US Federal Court Restricts Inequitable Conduct Challenges


An important decision on US patent law was handed down last week, greatly curtailing challenges against US patents on the basis of alleged inequitable conduct by patentees. An enlarged panel of judges in the Court of Appeals for the Federal Circuit (CAFC) delivered the judgment on 25 May 2011 in Therasense, Inc v Becton, Dickenson & Co. (Fed. Cir. 2011) (en banc).

Both patentees in the US and US judges have long decried the regular assertion that patentees have engaged in “inequitable conduct” in securing patent protection as a defence in patent litigation. Inequitable conduct might be alleged for failing to comply with the duty of disclosure owed to the USPTO where a patent applicant inadvertently but genuinely overlooked disclosing a prior art document to the USPTO. The document might be relevant to only a single claim of a US patent containing a large number of claims. If established, a finding of inequitable conduct can render an entire patent unenforceable, allowing an infringer to avoid all liability for infringing an otherwise valid patent. This has made inequitable conduct an attractive defence in US patent litigation, leading some critics to view the frequent use of the defence as an abuse of the legal proceedings, calling it “an absolute plague”. The sanction of unenforceability has also been likened to an “atomic bomb” penalty for cases of minor and serious transgressions alike.

A finding of inequitable conduct requires establishing both a “material” omission/misrepresentation and deceptive intent. The materiality standard under USPTO rules is low, encompassing potential prior art of marginal relevance. Direct evidence of deceptive intent often cannot be established, so findings of deceptive intent are based on inference from the facts. Materiality and deceptive intent have been placed on a sliding scale, where a reduced showing of intent could establish inequitable conduct if there is a stronger showing of materiality, and vice versa. Significant uncertainty about what constituted inequitable conduct ensued due to these earlier loose standards for materiality and deceptive intent.

The en banc CAFC decision has tightened the standards for materiality and deceptive intent. The court held that, as a general matter, the materiality standard required to establish inequitable conduct is a “but-for” materiality. Undisclosed prior art is “but-for” material, where, had the USPTO been aware of the prior art, it would not have allowed a claim. This significantly increases the level of materiality a prior art reference must have in comparison to earlier cases of “material” prior art. The court stated an exception to the but-for materiality test in cases of affirmative egregious misconduct of the patentee, such as the filing of an unmistakably false affidavit. Such misconduct is material. Regarding deceptive intent, the court held that the patent applicant must be shown to have known of the reference, known it was material, and made a deliberate decision to withhold it. Thus, the court has sought to redress the detrimental overuse of the inequitable conduct defence.

We will keep you abreast of developments regarding this important US patent law issue, but please note the matter is not yet settled. Press announcements today indicate that the CAFC’s decision is being appealed to the US Supreme Court.

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