A Look at Inequitable Conduct
By B. Collins
The days of shaking down patent holders for failing to cross some Ts or dot a few lower-case Js in patent applications may be over.
And maybe, just maybe, it will be cheaper and faster to file for and obtain a patent – that is, if a split ruling from the U.S. Court of Appeals for the Federal Circuit holds up.
Last May the appeals court ruled 6-4-1 in favor of Abbott Diabetes Care, saying the company didn’t commit “inequitable conduct” in its application for a disposable blood glucose test strip. See Therasense (nee Abbott Diabetes Care) v. Becton, Dickinson and Co.
In a nutshell, Abbott told European patent examiners one thing, and the U.S. Patent and Trademark Office another with regard to a membrane for the company’s test strip.
Medical technology company Becton, Dickinson Co. in its complaint said Abbott knowingly withheld information in its U.S. patent application, therefore the patent should be invalid under the so-called inequitable conduct doctrine.
For patent geeks, that’s § 1.56 – Duty to disclose information material to patentability, also known as Rule 56.
The appeals court overturned a lower court that had said Abbott’s patent was unenforceable because of missing information in the patent application. In the end, the appeals court found Abbott’s right hand was unaware of what its left hand was doing, so no harm, no real foul. (Unless, of course, you consider millions of dollars in legal fees to be no harm.)
Lee Johnston, a law partner at Dorsey & Whitney’s Denver office, applauds the appeals court ruling. Johnston doesn’t have a dog in this hunt and his firm was not among those that filed the 34 amicus briefs in the case.
“What you’ve seen is a proliferation of inequitable conduct cases that are essentially a sideshow with the intent to drive patent holders into settlement,” he says. “It has been abused in the past.”
Increasingly, many filing lawsuits were crying fraud, when in reality a patent applicant inadvertently omitted something in the patent application. The appeals court noted as many as 80% of patent infringement cases include inequitable conduct allegations.
A finding of inequitable conduct invalidates an entire patent and can upend related patents, not to mention lead to more litigation.
“Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system,” wrote Chief Judge Randall Rader, writing for the majority.
Moreover, Johnston says patent filers won’t need to bury the USPTO with prior art references, good news for an office that’s struggling with a backlog of some 707,000 applications.
“Over-disclosing previous patents adds a layer of expense,” he says. “I would argue that the little guy can’t afford this additional expense. And, it bogs down our patent office with reams and reams of boxes of paper submitted by attorneys so they won’t be charged with inequitable conduct.”
The appeals court ruling – drawing heavily from early 20th century case law – raises the bar for what constitutes inequitable conduct, particularly in regard to the so-called sliding scale formulation of materiality and intent.
Previously, a strong showing of materiality, that is, withheld or omitted important information, coupled with weak evidence of intent to withhold, could be enough to constitute inequitable conduct. The converse also was true – a small omission of important information, coupled with a strong showing of intent to willfully withhold that information, could establish inequitable conduct.
The appeals court ruling scraps the sliding scale formulation.
Chief Judge Rader wrote that to “prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO” and that, “but for” this misconduct, the patent would not have been issued.
Some legal observers say we’ll see fewer inequitable conduct claims from accused infringers. Meanwhile, patent holders who’ve been accused of inequitable conduct will demand to have the cases thrown out.
Yet for all the upsides that the appeals court ruling may offer, the inescapable fact remains that the court was highly divided on the issue. A 6-4-1 ruling is hardly a consensus. And as of this writing, the USPTO was still digesting the decision and had yet to offer guidance. The office may be waiting for a higher authority to intervene.
“I would be very surprised,” says Johnston, “if this case doesn’t go up to the Supreme Court.”
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