Duty to disclose prior art extends to everyone substantially involved in patent application

In the past, the basis for claims of inequitable conduct in the US has been unclear. However, a recent decision by the CAFC appears to have clarified who has a duty to disclose information to the USPTO.

The case in point relates to a patent (US 5,235,326) for a device to detect microchips in animals. Dr Stoddard, the owner of Avid Identification Systems, hired three engineers to develop his idea for this product, which was subsequently patented. However, over a year before the patent application was filed, Dr Stoddard demonstrated some of Avid’s new technology at a livestock tradeshow.

In the US, everyone involved in the preparation and prosecution of a patent application has a ‘duty of candour’ to the USPTO. In practice, this means that all information material to examination (ie known prior art) must be disclosed. Failure to comply with this can lead to a charge of inequitable conduct with the result that the patent may be held unenforceable.

The District Court decided that the demonstration at the tradeshow was material prior art which had been withheld from the examiner with deceptive intent. The patent was therefore declared unenforceable.

Dr Stoddard appealed against this decision, not contesting the issue of deceptive intent but instead challenging whether the demonstration was material and whether he, as an individual, owed a duty of candour to the USPTO.
The court considered these points in turn. Firstly, regarding the materiality of the demonstration, the court considered that information is material where an examiner would find it important in determining patentability. They held that its usefulness in determining patentability is not affected by whether or not it is sufficient to invalidate the patent.

Next they considered whether Dr Stoddard had a duty of candour, ie whether he is one of the people defined in Rule 56(c):

(1) each named inventor, (2) each attorney or agent that prepares or prosecutes the application, and (3) every other person who is substantively involved in the preparation or prosecution of the application and who is associated with the inventor or assignee.

It was clear that Dr Stoddard did not fall into either of the first two categories. With regards to the third category, it was considered by a 2-1 majority that, due to Dr Stoddard’s involvement with all aspects of the company and the position he held as founder and president, as well as his involvement with the commercial side of product development, it is reasonable to assume substantive involvement in a patent application.

There was some discussion regarding whether knowledge of the materiality of the disclosure was necessary in order to find inequitable conduct. The majority maintained that it was not, and the patent was therefore held to be unenforceable.

With clarification of the scope of individuals who have a positive duty to disclose information material to patentability to the USPTO, this case has the potential to increase claims of a similar nature in the future.

3 June 2010