“We agree with the USPTO, FDA and White House that inconsistent statements are unacceptable. Likewise, inconsistent laws and policies (e.g., the wording of Section 101 versus SCOTUS law; the wording of Section 103 versus double patenting law; and now the scope of the duty of inquiry versus Federal Circuit law) are also unacceptable.”
The United States Patent and Trademark Office (USPTO) issued a Notice on the “Duties of Disclosure and Reasonable Inquiry During Examination, Reexamination, and Reissue, and for Proceedings Before the Patent Trial and Appeal Board” on July 29, 2022 (87 FR 45764-67), without a big reaction from the IP community. Patent attorneys mostly scratched their heads wondering what it means, especially as it was created in the backdrop of an attack on drug companies and drug pricing. The attack was motivated by a now largely discredited disinformation campaign by the advocacy group I-MAK (Initiative for Medicines, Access and Knowledge; an oxymoron), based on non-peer reviewed erroneous patent data analysis (see supporting false analyses by Univ. of Calif. Hastings Law School “Evergreen Drug Patent Search” and R. Feldman, “May your drug price be evergreen” J. Law and Biosciences Vol 5(3) Dec 2018, 590-647). Notwithstanding, the White House and certain members of Congress picked up I-MAK’s “Overpatented, Overpriced” faulty advocacy piece (2018; updated Sept 2022), and without checking the integrity of the data, quoted to it, and got to work.
On October 4, 2022, the USPTO issued a Request for Comments on a broad range of issues, many of which focused on how to combat the horrors inappropriately alleged by I-MAK (responses now due Feb 3, 2023). A Joint Food and Drug Administration (FDA)/USPTO Listening Session has been announced for January 19, 2023. There are also one or more FDA/PTO working groups in the background, huddling on how to fix something that never broke, but appears to have been, by the I-MAK and UC Hastings believers. This post is intended to raise issues to consider for your submissions on Feb 3, 2023. The history and implications of the Fed. Reg. Notice are summarized and analyzed.
How We Got Here
On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy (86 FR 36987). Biden, practically quoting I-MAK’s discredited mantras, expressed concern that “too often, patent and other laws have been misused to inhibit or delay-for years or even decades-competition from generic drugs and biosimilars, denying Americans access to lower-cost delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law.”
On September 9, 2021, Senators Leahy and Tillis sent a letter to Andrew Hirshfeld as Acting PTO Director, that “[w]e are now requesting the PTO to take steps to reduce patent applicants’ making inappropriate conflicting statements in submissions to the PTO and other federal agencies.” It referred specifically to the FDA as another agency. The letter was almost certainly motivated by the case of Belcher Pharmaceuticals, LLC v. Hospira (Fed. Cir Sept 1, 2021) (see below).
In January 2022, Professor Adam Mossoff at the Hudson Institute published an excellent Policy Memo debunking the I-MAK data. Senator Tillis in February 2022 responded to the Mossoff memo with an excellent letter to the FDA and PTO requesting that they investigate the suspect I-MAK data, and gave them until Dec 2022 to respond, which we look forward to reviewing.
Despite Mossoff’s memo, and the letter from Sen. Tillis to the FDA and USPTO, the rolling snowball kept getting bigger. On June 8, 2022, six Senators sent a letter to the USPTO, demanding action to address “patent thickets”, one of I-MAK’s favorite terms. (see my IPWatchdog posts June 20 and Sept 6, 2022).
In July 2022, the USPTO issued the Fed. Reg. Notice on “Duty of Reasonable Inquiry” as “part of the USPTO’s efforts to put into effect the Administration’s goals and address the Senators’ concerns”. The USPTO said the notice “clarifies the “duty of disclosure” and the “duty of reasonably inquiry” owed to the USPTO and the American public”. It was classified as a Fed. Reg. “Notice” not a “Notice of Rulemaking”. This means that the publication does not amend the CFR, does not impose regulations with general applicability and legal effect and does not constitute a rulemaking. It was simply a statement of policy, but in fact the Notice made statements that did or could greatly confuse the patent bar as inconsistent with case law, and could be used in litigation to attempt to bootstrap obligations that don’t exist.
Did the Duty of Disclosure Become a Duty of Inquiry?
Let’s first agree on common ground. Parties that have a duty to disclose material information under 37 CFR 1.56 (c) and intentionally fail to do so; knowingly participate in inconsistent statements to government agencies; or practice intentional blindness should be held to account.
Before the July 2022 Fed. Reg Notice, I bet most practicing patent attorneys were not aware of a “Duty of Inquiry” much less its scope. Critically, this duty of Inquiry applies to the signatory, not to the range of people bound by the duty of disclosure.
37 CFR 11.18 is the USPTO version of Federal Rule of Civil Procedure Rule 11, with parallel language. It is titled “Signature and Certificate” and it applies to the person signing a paper that is submitted to the USPTO. The signature is a certificate that to the best of the party’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances, the paper is not presented for an improper purpose, the legal contentions are warranted under existing law or a nonfrivolous argument for extending or reversing it, the allegations and contentions have evidentiary support and the denials of factual contentions are warranted on the evidence (11.18(2)).
Rule 11 of the FRCP was amended in 1983 to add the language “formed after an inquiry reasonable under the circumstances” (without patent prosecution in mind). The Advisory Committee Note for the 1983 amendment stated that:
“The new language stresses the need for some prefiling inquiry into both the facts and the law to satisfy the affirmative duty imposed by the rule. The standard is one of reasonableness under the circumstances. This standard is more stringent than the original good faith formula and thus it is expected that a greater range of circumstances will trigger its violation.” “The rule is not intended to chill an attorney’s enthusiasm or creativity in pursuing factual or legal theories. The court is expected to avoid using the wisdom of hindsight and should test the signer’s conduct by inquiring what was reasonable to believe at the time the pleading, motion or other paper was submitted. Thus, what constitutes a reasonable inquiry may depend on such factors as how much time for investigation was available to the signer; whether he had to rely on a client for information as to the facts underlying the pleading, motion or other paper; whether the pleading, motion or other paper was based on a plausible view of the law; or whether he depended on forwarding counsel or another member of the bar.”
The 1993 Notes of the Advisory Committee on the Federal Rules reaffirmed the requirement of signatories to conduct a reasonable search before signing a document, however, provided greater constraints and flexibility in dealing with infractions of the rule, to reduce the number of Motions for Sanctions. The 1993 Notes specifically indicate that rule requires litigants to “stop-and-think” before initially making legal or factual contentions, while emphasizing the duty of candor by subjecting litigants to potential sanctions for insisting upon a position after it is no longer tenable and by generally providing protection against sanctions if they withdraw or correct contentions after a potential issue is called to their attention.
This suggests that FRCP 11, and by extension, 37 CFR 11.18 should be considered a “stop and think” test to prevent a signatory from signing a paper that states a position that is not tenable to the signatory.
The Duty of Reasonable Inquiry is not a Duty to Search
The Federal Circuit has stated multiple times that patent applicants do not have an affirmative duty to search. In FMC Corp v. Hennessy Indus., 836 F. 2d 521 (Fed. Cir. 1987), the court disagreed with FMC that Hennessy breached a duty to inquire more than they did about the earliest sale of a full-power machine at issue. “Assuming, without deciding, that there may be circumstances that would raise a duty to inquire, FMC’s web of conjecture, inference, and innuendo does not create those circumstances. We agree with the district court that ‘nothing known to [these individuals] created a duty to engage in the searching inquiry and investigation undertaken by [FMC] twenty years later. p. 525. See also footnote 6, which states that “As a general rule, there is no duty to conduct a prior art search and thus there is no duty to disclose art of which an applicant could have been aware.”
In Bruno v. Acorn, 394 F. 3d 1348 (Fed. Cir. 2005) the court found a patent unenforceable where a patent owner possessed actual knowledge of a prior art stairlift with an off-center pivot and used it in communications with the FDA to argue that its new stairlift was similar in design and function to that of an earlier manufacturer, yet did not give that information to the USPTO, and the same official was involved with communications to both agencies. The court in footnote 4 confirmed there is no general duty to conduct a prior art search and there is no duty to disclose art that the patent applicant is unaware of. See also Frazier v. Roessel, 417 F. 3d 1230, 1238 (Fed. Cir. 2005), “this court has repeatedly reaffirmed the proposition that “as a general rule, there is no duty to conduct a prior art search”.
Brasseler v. Stryker
The case of Brasseler v. Stryker, 267 F. 3d 1370 (Fed. Cir 2001) provides the most insight into where the line is drawn between a duty of reasonable inquiry and no duty to perform a patent search. In this case, the court confirmed a grant of attorney fees under 35 USC §285 where patentee Brasseler sought a patent application a few weeks after an on-sale bar event and asked its attorney to file a quick application to avoid the bar under conditions that were suspicious. The attorney and the inventor did not do any investigation to confirm the bar date. The court explained that “In Hennessy, we explained that a duty to investigate does not arise where there is no notice of the existence of material information…The mere possibility that material information may exist will not suffice to give rise to a duty to inquire; sufficient information must be presented to the attorney to suggest the existence of specific information the materiality of which may be ascertained with reasonable inquiry. Indeed, a finding of deceptive intent may not be based solely on gross negligence, including instances in which the patent attorney is completely unaware of the existence of specific information later discovered and found to be material. The district court in this case noted that gross negligence by the attorneys would be insufficient to support a finding of intent to deceive. Thus mindful of the correct law, the district court nonetheless determined that the attorney’s conduct surpassed gross negligence. We cannot find error in that determination.”
The court continued: “There is no need for an attorney to pursue a fishing expedition to obtain information. Counsel can reasonably rely on information provided by the client, unless as here, there is reason to question the accuracy or completeness of the information or to doubt the adequacy of the client’s own investigation into material facts. Thus, no duty to inquire arises unless counsel is on notice of the likelihood that specific, relevant, material information exists and should be disclosed.”
Applying Federal Circuit Law to USPTO July 2022 Fed. Reg. Notice
Let’s compare certain statements made by the USPTO in the July 2022 Fed. Reg. Notice to Federal Circuit law.
- Fed Reg: Under 11.18, each party presenting a paper to the USPTO, whether a practitioner or non-practitioner, has a duty to perform an inquiry that is reasonable under the circumstances. This may include reviewing documents that are submitted to or received from other Government agencies, including the FDA.
Response: The Fed Cir has confirmed there is no general duty to perform a search or review documents unless the signatory has reason to doubt the accuracy of the submission or is aware of inconsistent positions taken with gov’t agencies. Note also that the 11.18 duty applies to signatories only.
- Fed. Reg.: Failing to inquire when the circumstances warrant it could result in sanctions or other action under 11.18(c) which may include (1) striking the offending paper, (2) referring a practitioner’s conduct to the Director of Enrollment and Discipline for appropriate action (3) precluding a party or practitioner from submitting a paper or presenting or contesting an issue or (4) affecting the weight given to the offending paper; or (5) terminating the proceedings.
Response: The term “when the circumstances warrant it” is undefined, unbounded, and breeds confusion. It would fail muster under the Administrative Practices Act if it were promulgated.
- Fed. Reg.: Cites to Belcher Pharm. V. Hospira (11 F.4d 1345 (Fed. Cir 2021)) as example of a patent held unenforceable for inequitable conduct where Chief Science Officer made inconsistent statements to the FDA and USPTO and was directly involved with both submissions.
Response: The Federal Circuit held the patent at issue unenforceable in 2021, showing that the current framework for duty of disclosure works as intended and no fix is needed by trying to stretch the scope of a duty of reasonable inquiry.
- Fed. Reg.: Providing material information to other Government agencies, while simultaneously withholding the same information from the USPTO undermines both the intent and spirit of the duty of disclosure (Bruno v. Acorn, 394 F. 3d 1348 (Fed. Cir 2005)) (inequitable conduct where official involved in both FDA and USPTO submissions chose to disclose material prior art to the FDA but not to the USPTO).
Response: Again, Fed. Cir. held the patent at issue unenforceable in 2021, showing that the current framework of duty of disclosure works as intended and no fix is needed by trying to stretch the scope of a duty of reasonable inquiry.
- Reg.: Each individual with a duty to disclose, or party with a duty of reasonable inquiry, should review documents it receives from other Government agencies to determine whether the information should be submitted to the USPTO.
Response: While the Fed. Reg. Notice indicated that only inconsistent statements must be submitted to the USPTO, does the Notice suggest that all FDA documents must be reviewed without any preconceived notion of whether there is a potential inconsistent statement? The Fed. Cir. confirms there is no duty to review documents without a concern that an inconsistent statement exists or there is material information that a reasonable Examiner would want to see. Any suggestion that patent attorneys should review entire FDA submissions looking for inconsistencies without prior concern is not the law. Also, the Fed. Reg. statement again refers to a “party” with a duty of inquiry, whereas 11.18 applies to signatories.
Let’s Not Return to Attorney Fears Based on Lack of Clear or Inconsistent Rules
When patent attorneys are held to have violated the duty of disclosure or its 11.18 obligation, it can cost attorneys their job, career, reputation, license to practice law, threat of a malpractice lawsuit, and/or ability to support their family and self. It is a draconian and life-affecting event. When a punishment is that severe, the rules of the game must be crystal clear and set at a high bar. The problem with certain statements made in the July 2022 Fed. Reg Notice is that the purported guidelines are unclear, unbounded and vague, and in certain respects, inconsistent with Federal Circuit law.
What started out as a now discredited campaign against pharma companies can easily push patent prosecution in all fields back to the dark days of inequitable conduct alleged to be seen under every rock. Please use the submission of comments on February 3 or the USPTO/FDA “Listening Session” on January 19 to make your position known.
We all agree with the USPTO, FDA and White House that inconsistent statements are unacceptable. Likewise, inconsistent laws and policies (e.g., the wording of Section 101 versus SCOTUS law; the wording of Section 103 versus double patenting law; and now the scope of the duty of inquiry versus Federal Circuit law) are also unacceptable. A close review of the July 2022 Fed. Reg. Notice suggests that the USPTO published it to comfort Senators without actually going through a rulemaking process or assuring that the guidance complies with Federal Circuit law. This at best muddies the water for patent practitioners and at worst increases accusations of wrongdoing.
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2 comments so far. Add my comment.
Patrea PabstJanuary 4, 2023 01:00 pm
Anyone who is actively prosecuting US applications in the drug and life sciences field is aware we are in an “anti-patent” period. We have been there before. It requires everyone to aggressively assert the correct legal standard and remind the parties it has worked well for many years. This reminds me of the Lipitor litigation where inconsistent statements were made, and the court also invalidated the patent. The current system works. Dont turn it into another 101 fiasco.
BJanuary 4, 2023 12:26 pm
Great article, Sherry. In an environment of chaos created by incompetent court decisions (which you outline above), you lay out the potential for further disaster.
I suspect such disaster will be worse than most people contemplate. The CAFC is heinously bad with policy, reading statutes, and following precedent