Haynes and Boone, LLP
May 31, 2011 - United States of America
But-For Materiality and Tightened Inequitable Conduct Standards: The Therasense v. Becton, Dickinson En Banc Federal Circuit Decision
by C. Kyle Musgrove
On May 25, 2011, the en banc Federal Circuit announced its decision in Therasense, Inc. v. Becton, Dickinson & Company regarding the appropriate standards for succeeding with an inequitable conduct defense. The majority decision by Chief Judge Rader requires separate findings of materiality and intent, but modifies these so that (1) “but-for” materiality is required to find inequitable conduct unless there is affirmative egregious misconduct, and (2) the intent to deceive the United States Patent Office (“Patent Office”) must be “the single most reasonable inference able to be drawn from the evidence.” The “but-for” materiality requires a court to consider whether the Patent Office would not have allowed a particular claim if the reference or information had been provided during examination. The analysis, however, is not the same as that applied by a court in determining invalidity because the legal standard applied in the “but-for” materiality determination is the preponderance of the evidence standard used in the Patent Office, and the claim construction applied is also the Patent Office standard of the broadest reasonable construction.
In the case, Therasense was asserting a patent to a blood glucose test strip with a sensor for testing whole blood that did not have a sensor over the electrode. The question before the Patent Office was whether the prior art disclosed such a system without a membrane. The patentees submitted attorney argument and an expert declaration relating to a prior art statement that indicated that “[o]ptionally, but preferably when being used on live blood, a protective membrane surrounds both the enzyme and the mediator layers, permeable to water and glucose molecules.” The patentees argued that, despite the common interpretation of the quoted language, one of ordinary skill in the art would not have read the language as teaching that the protective membrane was optional. The inequitable conduct argument by Becton Dickinson was based on the patentees’ assertions to the European Patent Office (“EPO”) that contradicted the arguments made to the U.S. Patent Office, i.e., the patentees argued in Europe that the sentence above was “unequivocally clear[,] [t]he protective membrane is optional. . .” (emphasis added). Both the district court and the earlier panel opinion had found the failure to disclose the European Patent Office argument to be inequitable conduct because the patentees’ argument in the U.S. directly contradicted its position in the EPO. After modifying the materiality and intent standards as indicated above, the en banc court vacated and remanded the case back to the district court for reconsideration of its earlier findings on materiality and deceptive intent.
While the Federal Circuit was divided 6-1-41 on the issue of the proper standard of materiality, all three decisions agree that inequitable conduct requires separate proof of materiality and intent, and that a specific intent to mislead the Patent Office is required. The majority position on materiality, which is set out above, also makes statements on materiality as to what can and cannot meet the exception of affirmative egregious misconduct. Initially, the majority notes that an unmistakably false affidavit or declaration during prosecution is an example of an affirmative act of egregious conduct. On the other hand, nondisclosure of prior art references to the Patent Office or failure to mention prior art references in an affidavit are not affirmative acts of egregious misconduct; thus, those nondisclosures require a showing of “but-for” materiality. The majority does not purport to identify what other acts do or do not meet the exception of affirmative egregious acts, rather, further characterization must await case law development.
The main dissenting opinion, in contrast, asserts that the proper test for materiality should be the Rule 56 standard applied by the Patent Office. Additionally, the dissent asserted that a “but-for” materiality standard is contrary to previous Supreme Court decisions regarding unclean hands in patent procurement and enforcement. Whether the dissent’s apparent invitation for the defendants to seek Supreme Court review in the present case (or a roadmap for such an assertion in a later case), and whether such review would be granted, remains for later determination.
The implication of this case for patent litigation is that the standard for showing inequitable conduct has been heightened, and thus, the defense will be harder to prove. Whether this decision will actually lead to fewer allegations of inequitable conduct, however, is unclear. At present, the differing standards for invalidity (i.e., clear and convincing evidence) and “but-for” materiality (i.e., preponderance of the evidence) may still provide sufficient incentive to allege materiality.2 Perhaps of more concern is that the Therasense standard will require a trial court to consider two different evidentiary standards for the same prior art information depending on which defense is being considered. Additionally, because a false affidavit is considered an affirmative egregious act, allegations of inequitable conduct based on inaccurate affidavits are likely not affected by the majority’s holding. If a goal of the majority was to lessen the number of assertions of inequitable conduct, the heightened pleading standards previously articulated in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) and cited by both the dissent and Judge O’Malley likely will have a larger impact.
With regard to the implications for patent prosecution, the present decision should not impact Rule 56’s applicability to what the Patent Office considers material. On the other hand, the Patent Office is reviewing this decision and may issue further guidance to patent practitioners.3 While the decision provides some reassurance that inequitable conduct allegations are less likely to be successful, the duty of disclosure remains unchanged. Full and complete disclosure to the Patent Office remains the standard to be applied, and particularly special care must still be taken when preparing and submitting affidavits and declarations.
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1 Judge O’Malley joined in the intent portion of the majority opinion (Section V) but did not join the portion of the majority or dissenting opinions relating to the requirements for materiality. Judge O’Malley stated that the test of materiality should encompass any of the following: (1) “but-for” materiality, (2) conduct constituting a false or misleading representation of fact, and/or (3) when “the district court finds that the behavior is so offensive that the court is left with a firm conviction that the integrity of the PTO process as to the application at issue was wholly undermined.” (Opinion Concurring-in-part and Dissenting-in-part at 9) (O’Malley, J.).
2 If, however, the Supreme Court revises the standard for invalidity in the presently pending i4i v. Microsoft case, this distinction would disappear and the reasons to raise inequitable conduct as a separate defense would appear to diminish.
3 See http://www.uspto.gov/news/pr/2011/11-36.jsp.
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