Federal Circuit to Consider Inequitable Conduct En Banc

The United States Court of Appeals for the Federal Circuit earlier today decided to take up important issues relating to inequitable conduct en banc, vacating the earlier panel decision in Therasence, Inc. v. Becton Dickinson and Co., which issued January 25, 2010.  See en banc order.

The en banc appeal will be heard on the basis of the original filed briefs, additional briefing and oral argument, with the oral argument date and time to be determined. Appellees’ briefs are due within 20 days from today, and appellants’ en banc brief is due 45 days from today. The en banc response brief is due within 30 days of service of the appellants’ new en banc brief, and the reply brief within 10 days of service of the response brief. Briefs of amici curiae will be entertained, and any such amicus briefs may be filed without leave of court but otherwise must comply with Federal Rule of Appellate Procedure 29 and Federal Circuit Rule 29. The Court officially invited the United States Patent and Trademark Office to participate and submit an amici brief.

This inequitable conduct dispute originally came to the Federal Circuit following a bench trial where the district court determined that claims 1–4 of U.S. Patent No. 5,820,551 were invalid due to obviousness and that the entire ’551 patent was unenforceable due to inequitable conduct. The Federal Circuit panel of Judges Dyk, Linn and Friedman (with Dyk writing for the panel and Linn dissenting relating to the inequitable conduct ruling) affirmed.  The original, now vacated, panel decision gave great cause for concern to patent attorneys and multi-national companies with worldwide patent portfolios because it essentially created an obligation to turn over to the Patent Office any and all information relating to foreign prosecutions.  Judge Dyk would no doubt disagree with the breadth of this immediately preceding statement, but given the fact that Judge Linn in dissent found the foreign prosecution arguments helpful rather than hurtful in terms of patentability there was little doubt in the patent bar that the original panel decision created new, sweeping obligations.

The original application that led to the ’551 patent was filed in 1984. Over the next thirteen years, Abbott pursued the patent through half-a-dozen continuation applications that were repeatedly rejected for anticipation and obviousness, including repeated rejections over the ’382 patent. In 1997, Abbott formulated a new argument for patentability during a brainstorming session attended by Lawrence Pope, Abbott’s patent attorney, and Dr. Sanghera, Abbott’s Director of Research and Development. Thereafter, new claims were drafted including electrochemical sensors lacking a membrane. During an interview with the examiner, Pope presented the new claims with the argument that the claims of the application were not anticipated or obvious because the claims taught a new glucose sensor that did not require a protective membrane when testing whole blood. Pope and the examiner specifically discussed the “optionally, but preferably” language in the ’382 patent. In Pope’s own summary of the interview, he stated that the ’382 patent teaches that active electrodes designed for use with whole blood require a protective membrane. The examiner then agreed that if Abbott produced evidence showing that at the time of the invention such a membrane was considered essential it would overcome. Abbott produced such evidence and the USPTO issued the patent.

During litigation, however, the district court found that Abbott had made directly contradictory representations to the EPO concerning the teaching of the ’382 patent in European Patent EP 0 078 636 (“the ’636 patent”)—a counterpart to the ’382 patent with virtually identical specifications—and that Abbott had not disclosed those contradictory representations to the PTO. Judge Dyk wrote:

To deprive an examiner of the EPO statements—statements directly contrary to Abbott’s representations to the PTO—on the grounds that they were not material would be to eviscerate the duty of disclosure. Moreover, if this could be regarded as a close case, which it is not, we have repeatedly emphasized that the duty of disclosure requires that the material in question be submitted to the examiner rather than withheld by the applicant.

Judge Linn, dissenting, however, had a remarkably different view of the case, explaining that “[i]f anything, the EPO submissions bolster, rather than refute, Abbott’s argument to the PTO that a protective membrane was thought by persons of ordinary skill to be required for use in blood.”  Factual disputes aside, Judge Linn explained:

Even if this information were material, however, the individuals who owed a duty of disclosure to the PTO produced a good faith explanation as to why they withheld the EPO submissions. Far from a mere blanket denial of deceptive intent, the individuals’ explanation includes specific, detailed reasons as to why they subjectively believed that the withheld information was immaterial during prosecution. Such an explanation will defeat a charge of inequitable conduct if it is “plausible.” The question, thus, is not whether it is plausible that the information is immaterial—a question asked under the objective materiality prong—but rather, whether it is plausible that the individuals subjectively believed that the reference was immaterial at the time they withheld it—a question presented under the subjective intent prong.

Despite the stark differences of opinion, which in and of itself ought to conclusively demonstrate that no inequitable conduct occurred, the panel majority per Judge Dyk determined that the EPO submissions were highly material to the prosecution of the ’551 patent and that Pope and Dr. Sanghera intended to deceive the PTO by withholding those submissions were not clearly erroneous.  Therefore, the district court did not abuse its discretion in holding the ’551 patent unenforceable due to inequitable conduct.

Now, with the entire Federal Circuit to rehear this case sitting en banc, the previous panel decision is vacated and the appeal is reinstated.  The parties are requested to file new briefs addressing the following issues:

1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?

2. If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?

3. What is the proper standard for materiality? What role should the United States Patent and Trademark Office’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?

4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).

5. Should the balancing inquiry (balancing materiality and intent) be abandoned?

6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

Hopefully the entire Federal Circuit will be able to put to rest the nonsense that has become inequitable conduct, and if the questions presented are any indication we might be in store for a major re-write and settling of the law of inequitable conduct.

What is and what is not inequitable conduct should not be determined based on the make-up of the panel drawn, but we all know that it does.  I and others had hoped that patent reform would mandate a standard the Federal Circuit would have to follow, but that will not happen any time soon.  So lets hope the entire Federal Circuit can make sense of this like they did once upon a time in Kingsdown.  Let us also hope that the panels then follow the ruling, which was largely done by panels in the aftermath of Kingsdown, at least until recently.