On May 25, 2011, the Federal Circuit issued its decision in Therasense v. Becton, Dickinson concerning what is required to prove inequitable conduct in a patent case. Michael P. Sandonato and Alicia A. Russo examine the implications of this decision.
Today, the Federal Circuit, sitting en banc, issued its decision in Therasense, Inc. v. Becton, Dickinson and Co., concerning what is required to prove inequitable conduct in a patent case. Referring to the doctrine as the “atomic bomb of patent law,” and with the express goal of "tighten[ing] the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public," Therasense holds that the intent prong requires knowledge and deliberate action on the part of the patentee, that the materiality prong requires but-for materiality and that a "sliding-scale" analysis may not be employed.
Chief Judge Rader delivered the majority opinion. The court reaffirms that intent and materiality are separate and distinct requirements, and finds that earlier decisions of the Federal Circuit which place them together on a sliding-scale unduly "conflated, and diluted" the standards for both prongs. In reaffirming that inequitable conduct requires that the patentee acted with specific intent to deceive the PTO, the court rules that the touchstone is proving, by clear and convincing evidence, actual knowledge of the undisclosed prior art, actual knowledge of its materiality and a deliberate decision to withhold it. In so doing, the court rejects the notions that negligence or even gross negligence is enough and that the intent prong may be satisfied by making a “should have known” showing or by inferring intent solely from a high level of materiality. The opinion recognizes that it is permissible to infer intent from circumstantial evidence, but only where a specific intent to deceive is “the single most reasonable inference able to be drawn."
As to materiality, Therasense creates a new but-for standard, which is satisfied only with a showing that the PTO would not have allowed a claim if it had known about the undisclosed prior art. In making this determination, district courts are directed to apply the same standards that the PTO applies, namely a preponderance of the evidence standard in which claims are given their broadest reasonable constructions. As a result, the opinion observes, a piece of withheld prior art which properly invalidates a claim in a court proceeding necessarily requires a finding of materiality, since the clear and convincing standard necessary for invalidation is higher than the standard in the PTO. By the same logic, the court notes that even where a piece of withheld prior art does not invalidate a claim it may still be material, given the lower standard applied in the PTO.
The court does provide for an exception to the but-for standard of materiality, specifically in the case of “affirmative egregious misconduct” on the part of the patentee. Rooting this exception in the early unclean hands decisions of the Supreme Court, the court offers the filing of an unmistakably false affidavit as one example of such conduct, but is express that this is an example only, and stresses that the purpose of the exception is to give the test for materiality “sufficient flexibility to capture extraordinary circumstances.”
In adopting its but-for standard, the Federal Circuit rejects the definition of materiality set forth in 37 C.F.R. § 1.56, which describes the parameters of a patent applicant’s duty to disclose. The court acknowledges that the Federal Circuit has looked to Rule 56 in prior decisions, but concludes that the fact that Rule 56 has changed from time to time has led to “uncertainty and inconsistency” in the law of inequitable conduct, and further finds the Rule in its current iteration – which turns largely on the undisclosed prior art establishing a prima facie case of unpatentability – to be overly broad for the purposes of an inequitable conduct analysis.
Both Judge O’Malley and Judge Bryson (with Judges Gajarsa, Dyk and Prost joining) provide dissenting opinions. Notably, all of the dissenting Judges generally agree with the majority on the strict application of the intent prong. Judge O’Malley, however, finds the but-for test for materiality to be unduly “immutable,” and favors a more flexible, unclean hands type approach, which she views as being more consistent with principles of equity. Judge Bryson and those joining him, on the other hand, find that the PTO “is in the best position to know what information examiners need to conduct effective and efficient examinations,” and accordingly favor a test that adheres to Rule 56.