Twenty years ago, in the 1988 Burlington case, the Federal Circuit expressed its displeasure with the frequent assertion of the inequitable conduct defense in patent litigation, famously calling it a “plague.” Later that year, in the en banc portion of the Kingsdown case, the Federal Circuit took steps to narrow the defense by strengthening its intent element. Shortly thereafter, the PTO also amended Rule 56 to more clearly define the duty of disclosure. One would have expected that these reforms to have brought the inequitable conduct doctrine under control.
However, proliferation of the defense, particularly at the district court level, has proved difficult to stem. As the graph below shows, there has been a dramatic growth in the rate at which inequitable conduct is pled (measured as the ratio of [responsive pleadings filed in patent cases with the term “inequitable conduct”] / [total number of patent cases filed]). The trend is similar in data from both the Stanford IP Litigation Clearinghouse and Westlaw’s pleadings database (assuming each database’s coverage is more complete in later years than early years, a correction in the data would tend to flatten the curve upward, meaning that the pleading rates shown in the earlier years should actually be higher).
At the bottom of the graph is a green line, representing the percentage of Federal Circuit cases in which the Federal Circuit entered a holding of inequitable conduct. Although the green line is largely flat (and is generally within one standard deviation of the historical average), the substance of a number of the Federal Circuit’s inequitable conduct rulings-particularly those in the past three years-have signaled a broadening of the doctrine to pre-Kingsdown levels, thereby fuelling the growth in the rate at which the defense is pled at the district court level. Notoriously (though by no means exclusively):
- Ferring brought back “should have known” coupled with materiality as the standard for intent-before Kingsdown, which held that “gross negligence” alone could not support a finding of intent, the tests for “should have known” and “gross negligence” were tied together.
- Digital Control sidelined the PTO’s 1992 amendments to the definition of materiality in Rule 56, holding that the 1977 “reasonable examiner” standard for materiality would remain the predominant threshold test for materiality, even for patents prosecuted after 1992.
To be sure, the 2008 Star Scientific decision was a solid effort to restate and rein in the doctrine, though it also embraced the “reasonable examiner” standard rather than the 1992 version of Rule 56. And the Praxair case, decided shortly after Star Scientific, re-embraced the broad doctrine, suggesting that the Star Scientific restatement may be slow to proliferate.
Reform of the inequitable conduct doctrine is needed. I propose four key reforms:
- Materiality: The 1992 version of Rule 56 would suffice, although an objective “but for” standard would surely cure the “plague.” Both are more objective than the malleable “reasonable examiner” standard. However, in deference to the PTO’s presumptive expertise concerning the information that it needs to conduct effective and efficient examination, it would be appropriate for a patent reform statute to codify deference to the PTO’s definition of materiality, to permit possible future regulatory refinements.
- Intent: Ferring and its progeny should be abrogated and replaced with a standard that both affirmatively states what clear and convincing evidence of intent is sufficient and also prohibits certain methods of proving intent. Specifically-
• It should not be permissible to prove intent from materiality;
• The concepts of “gross negligence” and “should have known” should be abrogated entirely; and
• Circumstantial evidence should continue to be permissible in proving intent, but if it is used, to satisfy the clear-and-convincing burden of proof, an intent to deceive the PTO must be the single most reasonable inference, not merely a permissible or plausible inference.
- Balancing: Even with improved and clarified standards of materiality and intent, it will be important to stay true to the doctrine’s equitable roots and retain some degree of judicial discretion, so the balancing step-as articulated most recently in Star Scientific-should be retained.
- Narrowed Remedy: Unenforceability should be determined on a claim-by-claim basis, and only as to asserted patent claims. Rendering the whole patent unenforceable based on conduct relating to a single claim – even a claim that is not asserted in the litigation – creates significant incentives to roll the dice by broadly asserting unenforceability, spawning satellite litigation on non-asserted claims. A narrower remedy would strike a more appropriate balance of incentives and consequences. Even this narrowed remedy would be broader than the remedy for invalidity, since material information-under either the “reasonable examiner” standard or the 1992 version of Rule 56-is defined more broadly than information that could ultimately result in a finding of invalidity of a claim. Empowering the courts with a discretionary range of remedies should not be embraced, because the availability of a range of remedies merely increases incentives for litigants to assert weak claims of inequitable conduct, hoping that the weak claim will produce at least a limited remedy.
Separate from the questions whether inequitable conduct reform is needed, and if so, what those reforms should be, there is some dispute as to who should implement the reforms. Each of the patent reform bills introduced during the 110th Congress included language to reform inequitable conduct. Although these statutory proposals included several good ideas, they also contained ideas that lacked historical context, were insufficient to implement true reform, or, worse, would likely be counterproductive against the stated purpose of reining in abuse of the inequitable conduct defense. This year’s leading patent reform bills do not-yet-include inequitable conduct provisions. My forthcoming article contains specific proposals for statutory language.
In the absence of legislative reform, judicial reform is also possible, either via a Federal Circuit en banc ruling or a grant of certiorari by the Supreme Court. However, it is unclear when Federal Circuit en banc review might happen; in late 2008, the Federal Circuit declined a rehearing en banc in Star Scientific. And, although the Supreme Court denied certiorari in Ferring, it is possible that it will take up the issue, possibly in response to the pending certiorari petition in Aventis v. Amphastar. As Aventis concluded in its petition for certiorari, “Four decades of confusion are enough.” Congress, an en banc Federal Circuit, or the Supreme Court should implement the inequitable conduct reforms outlined above.
About the Author
With over a decade of experience as a patent litigator in San Francisco and Silicon Valley law firms, Dr. Christian E. Mammen maintains a solo practice in Berkeley, California. His article, “Controlling the ‘Plague’: Reforming the Doctrine of Inequitable Conduct,” is forthcoming in the Fall 2009 issue of the Berkeley Technology Law Journal. A pre-publication version of the article is available on SSRN.