Thursday, May 26, 2011

Therasense v. Becton, Dickinson: the death of Rule 56?

The en banc case of Therasense v. Becton, Dickinson was the "big deal" case on inequitable conduct. The Northern District of California had found U.S. Patent No. 5,820,551 (“the ’551 patent,” of Therasense (Abbott)) unenforceable due to inequitable
conduct. Therasense, Inc. v. Becton, Dickinson & Co., 565 F. Supp. 2d 1088 (N.D. Cal. 2008). Six judges of the CAFC voted to vacate the decision of ND Ca. Four dissented. Judge O'Malley filed a concurring-in-part and dissenting-in-part opinion.

The majority opinion was written by Chief Judge Rader. The majority opinion noted the changing nature of the case law:

As inequitable conduct emerged from unclean hands,
the standards for intent to deceive and materiality have
fluctuated over time. In the past, this court has espoused
low standards for meeting the intent requirement, finding
it satisfied based on gross negligence or even negligence.
See Driscoll v. Cebalo, 731 F.2d 878, 885 (Fed. Cir. 1984)
(“Where they knew, or should have known, that the
withheld reference would be material to the PTO’s consid-
eration, their failure to disclose the reference is sufficient
proof of the existence of an intent to mislead the PTO.”);
Orthopedic Equip. Co., Inc. v. All Orthopedic Appliances,
Inc., 707 F.2d 1376, 1383-84 (Fed. Cir. 1983) (requiring
only gross negligence to sustain a finding of intent). This
court has also previously adopted a broad view of materi-
ality, using a “reasonable examiner” standard based on
the PTO’s 1977 amendment to Rule 56. See Am. Hoist &
Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362
(Fed. Cir. 1984); see also 37 C.F.R. § 1.56 (1977) (a refer-
ence is material if “there is a substantial likelihood that a
reasonable examiner would consider it important in
deciding whether to allow the application to issue as a
patent”). Further weakening the showing needed to
establish inequitable conduct, this court then placed
intent and materiality together on a “sliding scale.” Am.
Hoist, 725 F.2d at 1362. This modification to the inequi-
table conduct doctrine held patents unenforceable based
on a reduced showing of intent if the record contained a
strong showing of materiality, and vice versa. In effect,
this change conflated, and diluted, the standards for both
intent and materiality.

Unintended consequences arose:

This court embraced these reduced standards for in-
tent and materiality to foster full disclosure to the PTO.
See id. at 1363. This new focus on encouraging disclosure
has had numerous unforeseen and unintended conse-
quences. Most prominently, inequitable conduct has
become a significant litigation strategy. A charge of
inequitable conduct conveniently expands discovery into
corporate practices before patent filing and disqualifies
the prosecuting attorney from the patentee’s litigation
team. See Stephen A. Merrill et al., Nat’l Research Coun-
cil of the Nat’l Academies, A Patent System for the 21st
Century 122 (2004).

Judge Rader self-cited:

Perhaps most importantly, the remedy for inequitable
conduct is the “atomic bomb” of patent law. Aventis
Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334,
1349 (Fed. Cir. 2008) (Rader, J., dissenting).

And, dire problems:

Left unfettered, the inequitable conduct doctrine has
plagued not only the courts but also the entire patent
system. Because allegations of inequitable conduct are
routinely brought on “the slenderest grounds,” Burlington
Indus., 849 F.2d at 1422, patent prosecutors constantly
confront the specter of inequitable conduct charges. With
inequitable conduct casting the shadow of a hangman’s
noose, it is unsurprising that patent prosecutors regularly
bury PTO examiners with a deluge of prior art references,
most of which have marginal value. See Brief for the
United States as Amicus Curiae at 17 (submission of nine
hundred references without any indication which ones
were most relevant); Brief of the Biotechnology Industry
Organization as Amicus Curiae at 7 (submission of eight-
een pages of cited references, including five pages listing
references to claims, office actions, declarations, amend-
ments, interview summaries, and other communications
in related applications).

PTO backlog is mentioned:

While honesty at the PTO is essential, low standards
for intent and materiality have inadvertently led to many
unintended consequences, among them, increased adjudi-
cation cost and complexity, reduced likelihood of settle-
ment, burdened courts, strained PTO resources, increased
PTO backlog, and impaired patent quality. This court
now tightens the standards for finding both intent and
materiality in order to redirect a doctrine that has been
overused to the detriment of the public.

Thus, proof of a "deliberate" decision to deceive will be

To prevail on a claim of inequitable conduct, the ac-
cused infringer must prove that the patentee acted with
the specific intent to deceive the PTO. Star, 537 F.3d at
1366 (citing Kingsdown, 863 F.2d at 876). A finding that
the misrepresentation or omission amounts to gross
negligence or negligence under a “should have known”
standard does not satisfy this intent requirement.
Kingsdown, 863 F.2d at 876. “In a case involving nondis-
closure of information, clear and convincing evidence
must show that the applicant made a deliberate decision
to withhold a known material reference.” Molins, 48 F.3d
at 1181 (emphases added). In other words, 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.

Intent and materiality are separate items:

Intent and materiality are separate requirements.
Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d
1354, 1359 (Fed. Cir. 2003). A district court should not
use a “sliding scale,” where a weak showing of intent may
be found sufficient based on a strong showing of material-
ity, and vice versa. Moreover, a district court may not
infer intent solely from materiality. Instead, a court must
weigh the evidence of intent to deceive independent of its
analysis of materiality. Proving that the applicant knew
of a reference, should have known of its materiality, and
decided not to submit it to the PTO does not prove specific
intent to deceive. See Star, 537 F.3d at 1366 (“the fact
that information later found material was not disclosed
cannot, by itself, satisfy the deceptive intent element of
inequitable conduct”).

But, as to proving intent:

Because direct evidence of deceptive intent is rare, a
district court may infer intent from indirect and circum-
stantial evidence. Larson Mfg. Co. of S.D., Inc. v. Alu-
minart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009).
However, to meet the clear and convincing evidence
standard, the specific intent to deceive must be “the single
most reasonable inference able to be drawn from the
evidence.” Star, 537 F.3d at 1366.

Inequitable conduct is a doctrine in equity:

As an equitable doctrine, inequitable conduct hinges
on basic fairness. “[T]he remedy imposed by a court of
equity should be commensurate with the violation.”
Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 465
(1979). Because inequitable conduct renders an entire
patent (or even a patent family) unenforceable, as a
general rule, this doctrine should only be applied in
instances where the patentee’s misconduct resulted in the
unfair benefit of receiving an unwarranted claim. See
Star, 537 F.3d at 1366 (“[j]ust as it is inequitable to
permit a patentee who obtained his patent through delib-
erate misrepresentations or omissions of material infor-
mation to enforce the patent against others, it is also
inequitable to strike down an entire patent where the
patentee committed only minor missteps or acted with
minimal culpability”).

The concurring opinion is discussed:

The concurrence mischaracterizes this exception for
affirmative egregious acts by limiting it to the example
provided – the filing of an unmistakably false affidavit.
Based on this misunderstanding, the concurrence asserts
that this court’s test for materiality is unduly rigid and
contrary to Supreme Court precedent. In actuality,
however, the materiality standard set forth in this opin-
ion includes an exception for affirmative acts of egregious
misconduct, not just the filing of false affidavits. Accord-
ingly, the general rule requiring but-for materiality
provides clear guidance to patent practitioners and courts,
while the egregious misconduct exception gives the test
sufficient flexibility to capture extraordinary circum-

Rule 56 arises:

This court does not adopt the definition of materiality
in PTO Rule 56. As an initial matter, this court is not
bound by the definition of materiality in PTO rules. See
Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1549-50 (Fed.
Cir. 1996) (“[T]he broadest of the PTO’s rulemaking
powers . . . does NOT grant the Commissioner the author-
ity to issue substantive rules.”); see also 57 Fed. Reg. 2021
(Jan. 17, 1992) (The PTO stated that Rule 56 “do[es] not
define fraud or inequitable conduct.”). While this court
respects the PTO’s knowledge in its area of expertise, the
routine invocation of inequitable conduct in patent litiga-
tion has had adverse ramifications beyond its effect on the
PTO. As discussed above, patent prosecutors, inventors,
courts, and the public at large have an interest in reining
in inequitable conduct.


This court declines to adopt the current version of
Rule 56 in defining inequitable conduct because reliance
on this standard has resulted in the very problems this
court sought to address by taking this case en banc.

Copyright law is invoked:

Moreover, if this court were to consider standards of
materiality in other contexts, the most analogous area of
law is copyright. See Sony Corp. of Am. v. Univ. City
Studios, Inc., 464 U.S. 417, 439 (1984) (finding it appro-
priate to draw an analogy between copyrights and patents
“because of the historic kinship between patent law and
copyright law”). But-for proof is required to invalidate
both copyrights and trademarks based on applicant

The Rule 56 business determined the outcome of this case:

In this case, the district court held the ’551 patent un-
enforceable for inequitable conduct because Abbott did not
disclose briefs it submitted to the EPO regarding the
European counterpart of the ’382 patent. Trial Opinion
at 1127. Because the district court found statements
made in the EPO briefs material under the PTO’s Rule 56
materiality standard, not under the but-for materiality
standard set forth in this opinion, this court vacates the
district court’s findings of materiality. Id. at 1113, 1115.

The "but for" standard will apply:

On remand, the district court should determine whether
the PTO would not have granted the patent but for Ab-
bott’s failure to disclose the EPO briefs.


Because the district court did not find intent
to deceive under the knowing and deliberate standard set
forth in this opinion, this court vacates the district court’s
findings of intent. Id. at 1113-16.

Judge O'Malley noted:

It is at this point that my views, respectfully, diverge
from those of both the majority and the other dissenters.
This is so because, when addressing the types of conduct
that should be deemed of sufficient concern to allow for a
finding of inequitable conduct, both the majority and
dissent strain too hard to impose hard and fast rules.
“The essence of equity jurisdiction has been the power
of the Chancellor to do equity and to mould each decree to
the necessities of the particular case.” Weinberger v.
Romero-Barcelo, 456 U.S. 305, 312 (1982) (quoting Hecht
Co. v. Bowles, 321 U.S. 321, 329 (1944)).


I do not weigh in on the policy debate between the ma-
jority and the dissenters. There are merits to the con-
cerns expressed by each, and they may be relevant, in
varying degrees, to the exercise of a court’s discretion in a
particular case. Policy concerns cannot, however, justify
adopting broad legal standards that diverge from doc-
trines explicated by the Supreme Court.
A desire to
provide immutable guidance to lower courts and parties
similarly is not sufficient to justify the court’s attempt to
corral an equitable doctrine with neat tests.

The dissent observed:

However, on the remaining issue—the proper stan-
dard to apply in determining whether the conduct at issue
is sufficiently material to render the patent in suit unen-
forceable—there is sharp disagreement. That disagree-
ment is what divides the court in this case. The majority
takes the position that nondisclosures should be deemed
sufficiently material to trigger the defense of inequitable
conduct only if, had the matter in question been disclosed,
the applicant would not have obtained a patent.
position, however, marks a significant and, I believe,
unwise departure from this court’s precedents.

A key point:

the higher standard of materiality
adopted by the majority will not provide appropriate
incentives for patent applicants to comply with the disclo-
sure obligations the PTO places upon them.


If a failure to disclose
constitutes inequitable conduct only when a proper disclo-
sure would result in rejection of a claim, there will be
little incentive for applicants to be candid with the PTO,
because in most instances the sanction of inequitable
conduct will apply only if the claims that issue are invalid
anyway. For example, under the “but for” test of materi-
ality, an applicant considering whether to disclose facts
about a possible prior use of the invention would have
little reason to disclose those facts to the PTO.

So, what are the consequences for violating Rule 56?

It is unrealistic to expect that other means will pro-
vide an effective deterrent to ensure that material infor-
mation will not be withheld during patent prosecutions.
The PTO advises us that the prospect of enforcing the
duty of disclosure other than through the threat of inequi-
table conduct claims is not possible or practical.
prospect of agency disciplinary action for disclosure
violations is unrealistic, the PTO explains, because the
Office is required by statute to file any charges within five
years, see 28 U.S.C. § 2462, and it seldom learns of ineq-
uitable conduct within that period of time. In addition,
the PTO explains that it rarely has access to relevant
facts regarding inequitable conduct, because it lacks
investigative resources. As a result, the PTO has con-
cluded that a court is the best forum in which to consider
alleged breaches of the disclosure duty in the context of
an inequitable conduct defense. See Patent and Trade-
mark Office Implementation of 37 C.F.R. § 1.56, 1095 Off.
Gaz. Pat. & Trademark Office 16 (Oct. 11, 1988).

The dissent brought up Hazel-Atlas Glass Co. v. Hartford-
Empire Co., 322 U.S. 238 (1944). The patentee, encounter-
ing resistance to issuance of the patent by the Patent
Office, arranged for the publication of an article in a trade
publication that described the invention as a remarkable
advance in the field. The article purported to be the
product of a disinterested party, even though it was
actually written by one of the patentee’s lawyers. The
patent ultimately issued. The article was also used in
court, where it assisted the patentee in obtaining a favor-
able judgment from an appellate court. The patentee
subsequently went to considerable lengths to ensure that
the truth regarding the authorship of the article would
not emerge. The efforts at concealment failed, however,
and the accused infringer sought relief in the lower court
based on the misconduct.

The dissent criticized the majority's reliance on Corona, which
was a swearing behind case:

Although the majority cites Corona as support for its
narrow interpretation of the materiality requirement for
inequitable conduct, Corona is of little relevance to that
issue. Corona predates the creation of the inequitable
conduct doctrine and has never been cited by the Supreme
Court in any case addressing unclean hands or inequita-
ble conduct. Apart from the fact that the decision ad-
dressed the issue of validity, rather than enforceability,
the Court’s decision was based on its conclusion that the
affidavit in question was not material because what
mattered was that the method had been used to vulcanize
rubber, not that it had been used to vulcanize rubber that
was in turn used to make particular goods.

The dissent noted:

Shortly after the decisions in the Keystone, Hazel At-
las, and Precision Instrument cases, the Supreme Court
made a further observation that bears directly on the
responsibilities of attorneys and applicants who appear
before the PTO. The Court endorsed the statement that,
“By reason of the nature of an application for patent, the
relationship of attorneys to the Patent Office requires the
highest degree of candor and good faith. In its relation to
applicants, the Office . . . must rely upon their integrity
and deal with them in a spirit of trust and confidence . . .
.” Kingsland v. Dorsey, 338 U.S. 318, 319 (1949). Because
the PTO lacks the investigative and research resources to
look behind representations by applicants and their
counsel, it necessarily relies on those representations as
to many facts that arise during the prosecution of patent
applications, including experimental results obtained by
the applicants, the state of the prior art, and the knowl-
edge of persons of skill in the art in the field in question.

**With respect to the comment below, a finding of inequitable conduct
renders claim unenforceable; it does NOT invalidate the claims.

The imagery of a "plague" goes back to Burlington v. Dayco,
849 F.2d 1418 (CAFC 1988) in an opinion written by
Senior Circuit Judge Nichols, with the relevant text:

We add one final word: the habit of charging
inequitable conduct in almost every major patent case has
become an absolute plague. Reputable lawyers seem to
feel compelled to make the charge against other
reputable lawyers on the slenderest grounds, to represent
their client's interests adequately, perhaps. They get
anywhere with the accusation in but a small percentage of
the cases, but such charges are not inconsequential on
that account. They destroy the respect for one another's
integrity, for being fellow members of an honorable
profession, that used to make the bar a valuable help to
the courts in making a sound disposition of their cases,
and to sustain the good name of the bar itself. A patent
litigant should be made to feel, therefore, that an
unsupported charge of "inequitable conduct in the Patent
Office" is a negative contribution to the rightful
administration of justice. The charge was formerly known
as "fraud on the Patent Office," a more pejorative term,
but the change of name does not make the thing itself
smell any sweeter. Even after complete testimony the
court should find inequitable conduct only if shown by
clear and convincing evidence.

Within the decision, one notes a reference to the examiner:

Mr. Robert A. Vanderhye, the patent attorney who
prosecuted the application, asserted in an affidavit that he
used the shorter formulation, as illustrated in Claim 3 as
"shorthand" for a "complicated concept." He
"unconsciously" inserted the word "bundles" after the
word "fiber." We do not have any explanation by the
examiner of his mental attitude, but it is difficult to
believe he did not share in the patent attorney's mistake.
He must be charged with notice of the actual contents of
the patent, as issued with his approval, and it is difficult
to believe he would not have noticed the confusion, and
demanded a clarification, if he had ever consciously
adverted to there being a difference in meaning between
impregnating an individual fiber and impregnating a
The trial court, after the controversy had arisen,
and with the "20-20 vision of hindsight," read the patent
entirely differently than did those concerned with its
issue, and we wonder how anybody skilled in patent
law and practice could have generated such
confusion without a sinister purpose. That is the
fascinating puzzle this case presents.


Rather than anyone being a crook, it is surely a
permissible inference that both the applicant's attorney
and the examiner were alike confused, not being
possessed of the analytical vision of hindsight.

Procedurally, in the Burlington case, a summary judgment
finding inequitable conduct was vacated, and the case remanded.
The CAFC was commenting on deciding this case on summary judgment,
wherein the the accused attorney denied the charge.

However, it is interesting to note that "but for" the attorney's
affidavit in Burlington, the claims were unpatentable. The Burlington
case would fall within the "but for" approach of Therasense. However,
the issue would still be the "intent" of the attorney, whether in
1988 or 2011.

Also of note in the decision:

In a classic statement, it is said the inventor may
be his own lexicographer. Autogiro Company of America
v. United States, 181 Ct. Cl. 55, 384 F.2d 391, 397, 155
USPQ 697, 702 (Ct. Cl. 1967). But he must use his words
consistently in the claims and in the specifications. Fonar
Corp., 821 F.2d at 632, 3 USPQ2d at 1113.


We cannot improve on the
discussion of this in KangaROOS, Inc., supra, and
incorporate what is there said by reference herein.

See also article by Hanft and Kerns


“Controlling the ‘Plague’: Reforming the Doctrine of Inequitable Conduct"


Blogger Gena said...

What good news that the CAFC is finally making a concrete effort to, as Dennis Crouch put it, "cure the 'plague' of inequitable conduct pleadings" in patent litigation. It's pretty major that a finding of inequitable conduct no longer automatically serves to invalidate a patent. That part of the ruling should itself prove quite effective in immediately reducing the number of IC pleadings. It's about time. Bravo.

5:03 PM  

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