A 6-4-1 federal circuit majority narrowed the classes of cases where courts may find a patent unenforceable due to inequitable conduct.[© ungureanusergiu - Fotolia.com]
For the past quarter-century or so companies trying to stymie new competition could succeed simply by accusing them of “inequitable conduct” whether any such conduct took place or not, bogging them down in patent litigation. The ability of biotechs and other businesses to use that argument has been crimped as a result of a recent en banc decision by the U.S. Court of Appeals for the Federal Circuit.
Writing in Therasense, Inc. and Abbott Laboratories v. Becton, Dickinson & Co., et al., the appellate court held that for litigants in patent cases to demonstrate inequitable conduct, they must persuade the courts to conclude that there is evidence of specific intent to deceive and that the deception was material. The two-part test is not needed however, where “affirmative egregious misconduct” can be shown to have taken place.
“Therasense will have a significant effect on cases, both to be brought and pending. Parties who would consider attacking a patent on inequitable conduct are going to have to base that attack on information they really believe to be important, as opposed to just throwing out an assertion and trying to make it stick,” Bruce M. Wexler, a partner with the law firm Paul, Hastings, Janofsky & Walker, told GEN.
Therasense is now known as Abbott Diabetes Care. The case revolved around U.S. Patent No. 5,820,551, issued in 1998 for a disposable blood glucose test strip with an electrochemical sensor. Among prior art cited by Abbott was a patent issued to the company in 1985, No. 4,545,382, for a sensor consisting of an electrode with an enzyme bound to its external surface. The earlier patent included the following claim: “Optionally 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.”
That prior art was cited in numerous rejections of the application for the ‘551’ patent stretching back to 1984. But in 1997, Abbott’s then patent attorney Lawrence Pope and the company’s then R&D director Gordon Sanghera, Ph.D., argued that a person of skill in the art, when the ‘382’ patent was issued would have concluded the sensor disclosed there required the use of a membrane, in spite of the “optionally but preferably” wording.
Abbott also obtained a European counterpart to its earlier ‘382’ patent after overcoming an objection from the European Patent Office (EPO), which cited as prior art against Abbott a German reference requiring the use of a diffusion-limiting membrane. Abbott said its patent covered a protective rather than diffusion-limiting membrane and that the protective membrane was optional. Abbott did not, however, submit that to the USPTO when it pursued the ‘551’ patent.
Becton Dickinson sued Abbott in 2004, seeking a noninfringement judgment on two other patents that Abbott held for a blood glucose test strip. Abbott responded by countersuing Becton Dickinson as well as Bayer, Roche, and one of its suppliers Nova Biomedical for infringement of the two other patents as well as the ‘551’ patent. Roche settled on the eve of the trial, but the remaining co-defendants are still in the case.
Becton Dickinson, Nova Biomedical, and Bayer prevailed in both the district court and before a panel of federal circuit judges, with both courts citing Abbott’s failure to disclose the EPO argument. The latest federal circuit decision, which came on May 25, vacates the panel’s finding, and remands the case back to the district court, which is to reconsider the case based on intent to deceive and materiality.
The decision came about a year after a panel of federal circuit judges, which had upheld the original decision by Judge William H. Alsup of the U.S. District Court for the Northern District of California, then agreed to have the appeal reheard en banc to consider the issue of inequitable conduct.
A 6-4-1 federal circuit majority narrowed the classes of cases where courts may find a patent unenforceable due to inequitable conduct. The dissenting judges warned that the decision will come “close to abolishing” the inequitable conduct doctrine and voiced support for the status quo, namely U.S. Patent and Trademark Office (USPTO) rule 56 , which sets forth the legal concept of ‘duty of candor.’ “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section.”
Judge Kathleen O’Malley agreed with the majority that intent to deceive should drive inequitable conduct findings but dissented from their “but-for” materiality standard, maintaining that district courts should have more say in shaping inequitable conduct remedies.
The USPTO expects to soon “issue guidance to applicants regarding the materials they must submit to the Office under their duty of disclosure,” said David Kappos, under secretary of commerce for intellectual property and director of the USPTO. That guidance ought to acknowledge that the rules of the patent game have been changed by the federal circuit’s decision, which will likely all but curb a practice that, according to one court decision cited by the majority, constitutes an “absolute plague.”
“With inequitable conduct casting the shadow of a hangman’s noose, it is unsurprising that patent prosecutors regularly bury PTO examiners with a deluge of prior art references, most of which have marginal value,” the majority, led by Chief Judge Randall Rader, wrote in an 88-page decision. “Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system.”
“The remedy for inequitable conduct is the ‘atomic bomb’ of patent law,” the majority added, noting that inequitable conduct regarding any single claim can render an entire patent unenforceable.
Becton Dickinson has 90 days from the May 25 decision, or Aug. 23, to file an appeal of the decision with the U.S. Supreme Court. No such petition had been filed at press time. Even if Becton Dickinson files for appeal, the Supreme Court is unlikely to consider such petitions before its next conference on Sept. 24.
Intent to Deceive
Wexler noted that the federal circuit court redefined the materiality standard to require that nondisclosed information have “but-for” materiality. That means the patent would not have been issued if the information was known to the examiner applying the standards they use in patent prosecution.
“This new definition eliminated the prior ‘important-to-a-reasonable-examiner’ standard, which was so amorphous and easy-to-satisfy that accused infringers routinely asserted the defense, clogging the patent system with burdensome litigation and casting aspersions on ordinary acts by patent practitioners,” Wexler said.
He added that the court also reaffirmed that specific intent to deceive is an independent element of the defense that cannot lightly be inferred merely because information was not disclosed, even if that information was important to patentability.
That’s a sea change from 1984, when the federal circuit ruled that “gross negligence” alone could support a finding of inequitable conduct. Over the next few years, patent litigants began charging their legal adversaries with inequitable conduct, leading the federal circuit to complain about the plague of litigation over patent claims just four years later.
The federal circuit’s 1988 decision in Kingsdown Med. Consultants Ltd. v. Hollister Inc. helped dampen inequitable conduct activity, only to heat up again after a broadly-worded 1997 ruling in Critikon Inc. v. Becton Dickinson Vascular Access Inc.
“There was a very amorphous test before Therasense, and everybody could just routinely charge inequitable conduct, and accuse people of doing bad things, and it led to a lot of wasteful litigation,” Wexler said.
Impact with Patent Reform
While Therasense and successor Abbott prevailed in the most recent en banc court case, in a sense all biotech companies can be viewed as winners in the decision, agreed Paul D. Ackerman and J. Thomas Vitt of Dorsey & Whitney in an e-mail exchange with GEN. Ackerman is a partner in the firm’s intellectual property (IP) group; Vitt is a partner in the firm’s trial department and co-chair of its IP litigation practice.
“Biotech companies do rely on patent protection to protect innovation and investments in R&D, and to that extent the Therasense decision will be viewed as a positive for innovative biotech companies,” Ackerman and Vitt concluded.
Yet Therasense is actually one of two reasons why fewer inequitable conduct suits are expected to be filed going forward. The other is the patent reform measure that has passed both chambers of Congress. The America Invents Act bills that passed the Senate on March 8 and the House of Representatives on June 22, both create a new supplemental examination procedure.
The new procedure will allow patent owners to return to the patent office to cite previously undisclosed prior art or correct errors and omissions made during the original prosecution. They would thus be able to resolve certain acts or omissions that would otherwise be the basis for an inequitable conduct claim. “In this way, the act may further reduce the opportunities for a well-founded inequitable conduct charge,” according to Ackerman and Vitt.
The change should benefit biotech companies that amend their claims voluntarily, Wexler added, since challengers cannot challenge patents using information presented voluntarily through a supplemental exam.
So the en banc decision in Therasense v. Becton Dickinson as well as the new patent bill give biotech companies more ammunition to fight inequitable conduct suits, at least for now. That could change, of course, if Becton Dickinson and its co-litigants not only appeal to the Supreme Court but somehow persuade the high court to consider their case. Given the business bent of the court as seen in recent decisions such as Stanford v. Roche that outcome is by no means certain.