Patent Law | Expert Legal Commentary
October 25, 2011
Therasense v. Becton: Federal Circuit Narrows Scope of Inequitable Conduct
Therasense, Inc. v. Becton, Dickinson, and Co.
Olivier Taillieu of The Taillieu Law Firm and Jeff Zuber of Zuber Lawler & Del Duca
A divided Federal Circuit tightened the requirements on parties using an inequitable conduct defense in patent prosecutions. In Therasense, Inc. v. Becton, Dickinson, and Co., 649 F.3d 1276 (Fed. Cir. 2011), the Federal Circuit threw out the previous understanding of inequitable conduct, remarking that the broadness of its elements invited abuse of inequitable conduct in litigation and flooded the PTO with needless references in patent applications. As a replacement, the majority held that inequitable conduct now requires a party to separately prove specific intent and but-for materiality.
Abbot owns the ‘382 patent for a type of blood glucose test strip used in diabetes care. This patent specifies that within the strip, a membrane may be used “optionally, but preferably” when used on live blood. The membrane acts as a filter to let glucose pass to the sensor layer while preventing other blood components from affecting the sensor’s accuracy. Id. at 1282-83.
Abbot also prosecuted the ‘382 patent-equivalent in Europe. Abbot represented to the European Patent Office (“EPO”) that the “optionally, but preferably” specification had a plain meaning – that is, the membrane was not required. Id. at 1283-84.
Later, Abbot developed a new glucose test strip that never used a membrane and filed for a patent. The U.S. Patent and Trademark Office (“PTO”) initially rejected Abbot’s application because it felt that the application’s membrane-free specification was too similar to the ‘382 patent’s optional membrane. Thus, Abbot attempted to distinguish the ‘382 prior art by declaring that the “optionally, but preferably” specification in the ‘382 should be understood to require a membrane. The PTO eventually issued the patent as the ‘551 patent. Abbot did not alert the PTO to its previous (and contradictory) representation to the EPO. Id. at 1282-83.
In 2004, Abbot was involved in litigation surrounding its ‘551 patent, among others. A district court held the ‘551 patent unenforceable for inequitable conduct due to Abbot’s failure to disclose its EPO briefs to the PTO. Id. at 1285. Abbot appealed, and a panel of the Federal Circuit affirmed the unenforceability holding. Id. Abbot appealed again, and the Federal Circuit granted a rehearing en banc. Id.
The “Atomic Bomb” of Patent Law
The Federal Circuit granted a rehearing due to its concern that inequitable conduct was becoming problematic for the PTO and the courts. Previously, inequitable conduct analysis was driven by a “sliding scale” test between 1) intent to deceive the PTO; and 2) misrepresenting or omitting material information. The definition of “intent” included gross negligence and negligence. “Materiality” was similarly broad and used the “reasonable examiner” standard under PTO rules. Thus, combined with the sliding-scale nature of the test, the six-member majority found that the current test for inequitable conduct had a very low bar. Id. at 1288-89.
The majority felt that this low bar was slowing down the work of the PTO and the courts. For the PTO, the specter of inequitable conduct forced patent prosecutors to flood the PTO with prior art references in order to guard against any evidence of deception. The PTO, with its limited resources, could not effectively handle such applications. For the courts, increasingly frequent inequitable conduct charges in patent cases increased complexity and reduced the likelihood of settlement, as a finding of inequitable conduct rendered the entire patent unenforceable. Id. at 1289-90.
Thus, the majority significantly tightened the elements of “intent” and “materiality” to heighten the bar for inequitable conduct. Generally, a party 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.” Id. at 1290.
Specifically, a party must prove that the patentee acted with specific intent to deceive the PTO under a clear and convincing standard. This does not include negligence or gross negligence under the “should have known” standard. “Proving that 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.” Id. However, a court can infer intent from indirect and circumstantial evidence, but this inference must be the “single most reasonable inference able to be drawn from the evidence.” Id. Additionally, “a patentee need not offer any good faith explanation unless the accused infringer first…proves a threshold level of intent to deceive by clear and convincing evidence.” Id. at 1291.
For materiality, the majority chose to employ but-for materiality under a preponderance of the evidence. That is, “when applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” Id. at 1291. In addition to but-for materiality, instances of affirmative acts of egregious misconduct, such as filing of an unmistakably false affidavit, also meet the standard. Id. at 1292-93. This standard is distinct from the PTO’s Rule 56, which is broader than the but-for standard.
On application, the Court vacated the district court’s finding of inequitable conduct and directed the district court to use the new clear-and-convincing intent standard and the but-for materiality standard. Id. at 1296.
Concurrence and Dissent: Concerns over Practicability of Materiality Standard
The 11-member panel was divided on the test for materiality and produced concurring and dissenting opinions. Judge O’Malley, in his concurring opinion, voiced concern that the majority’s new framework was too narrow and would “eschew flexibility in favor of rigidity.” Id. at 1298. Thus, he proposed to “leave open the possibility that some form of intentional misconduct which we do not currently envision could warrant equitable relief,” and thus desired to expand the majority’s test. Id. Judge O’Malley also found fault with the severe remedy of total patent unenforceability, and proposed replacing it with less severe remedies, such as dismissal of the instant action or unenforceability of specific claims. Id. at 1299.
The four-member dissent, written by Judge Bryson, was concerned that the majority’s but-for materiality standard would not improve the PTO application process. The dissent notes:
If a failure to disclose constitutes inequitable conduct only when a proper disclosure 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.
Id. at 1305.
Thus, the dissent advocated for the adoption of PTO Rule 56 as the standard for materiality under inequitable conduct, which casts a broader definition of “materiality”. Id. at 1313. Generally, Rule 56 requires applicants to disclose information that would prove a prima facie case of unpatentability, in addition to any information that is inconsistent with positions taken in front of the PTO. Id.
The major changes in inequitable conduct analysis have wide implications for both patent prosecution and litigation. Applicants must be aware of possible changes in disclosure strategy due to the narrower but-for materiality standard, while litigants charging inequitable conduct now have a higher burden to meet. Patent applicants and litigants alike should contact experienced patent counsel to learn how Therasense affects your patent rights.
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