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New standard for inequitable conduct in the US?

In a recent ruling in the case of Therasense, Inc. v. Becton, Dickinson & Co., the Federal Circuit has raised the standard of evidence needed to prove inequitable conduct in the US.

A charge of inequitable conduct is invariably brought in response to allegations of infringement, and relates to alleged misconduct in obtaining a patent. Most often, it relates to an alleged failure by the applicant or their representative to disclose to the USPTO all information which they know of that may be material to the patentability of the invention.

In order to prove inequitable conduct it must be demonstrated, by clear and convincing evidence, both that the withheld prior art reference was material to patentability and that the applicant withheld the prior art with an intent to deceive the USPTO. The practice of the courts was that stronger evidence that the prior art reference was material to patentability could be used to counterbalance weaker evidence that the applicant intended to deceive the USPTO, and vice versa. A finding of inequitable conduct was fatal, rendering the entire patent unenforceable.

The level of evidence required, coupled with the high penalty, meant that this allegation was an almost inevitable response to a charge of infringement, with one study cited by the Federal Circuit stating that up to 80% of federal patent suits contain an assertion of inequitable conduct.

In Therasense, the Court has attempted to strike a balance between encouraging honesty and preventing unfounded accusations of inequitable conduct. They have held that withheld prior art is only material if the USPTO would not have allowed one of the claims in the patent application had it been aware of the prior art. They have also rejected the practice of counterbalancing weaker evidence of one aspect with stronger evidence of the other.

The only exception to their new standard of proving materiality is in the case of “affirmative egregious misconduct”. The Court clarified that mere failure to disclose a prior art reference does not constitute affirmative egregious misconduct.

They additionally held that a finding of inequitable conduct should not automatically make a patent unenforceable, but that this should be determined on a case by case basis.

In their decision, the Court stated that:

…the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO…[and] must prove both elements – intent and materiality – by clear and convincing evidence. If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable.

Following this decision, the USPTO has published a notice of proposed rulemaking, announcing a proposed revision to the standard required for prior art to be considered material to patentability. The new rule would read as follows:

Section 1.56(b) Information is material to patentability if it is material under the standard set forth in Therasense, Inc. v. Becton, Dickinson & Co., — F.3d — (Fed. Cir. 2011). Information is material to patentability under Therasense if:
(1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or
(2) The applicant engages in affirmative egregious misconduct before the Office as to the information.

It is hoped that this will reduce the frequency with which applicants and practitioners are charged with inequitable conduct, as well as reducing the incentive to submit information disclosure statements to the USPTO which contain large amounts of only marginally relevant information. It should nonetheless continue to prevent fraud on the USPTO and other serious forms of misconduct.

The USPTO has requested comments on this proposed rule change, and is receiving them until the middle of September. However, Therasense may be appealed to the Supreme Court and, if so, the USPTO is likely to delay implementing any rule changes until the outcome of that is determined.

AdamsonJones has standard procedures in place to assist clients to comply with the requirement to disclose material information to the USPTO during prosecution of patent applications. We hope that any change in the law and practice on this subject will enable us to simplify those procedures, and will continue to monitor developments closely.


12 September 2011

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