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August 01, 2009 (Vol. 29, No. 14)

Ninth Circuit Rules on IP and Antitrust Issues

Sham Litigation and Willful Deceit of USPTO Were among the Allegations

  • USPTO Deception

    Kaiser also argued that Abbott committed Walker Process fraud by enforcing the ‘207 patent, which Abbott allegedly knew it had procured through fraud on the USPTO. In Walker Process Equipment v. Food Machinery & Chemical Corp., the Supreme Court held that enforcing a patent obtained by fraud on the USPTO is a form of exclusionary conduct and may violate Section 2 of the Sherman Act.

    To prove Walker Process fraud, a plaintiff must first be able to prove that the patentee obtained the patent by knowingly and willfully misrepresenting facts to the USPTO. The plaintiff must produce independent and clear evidence of deceptive intent on that part of the patentee, together with a clear showing that the patent would not have issued but for the fraudulent misrepresentation or omission. Further, the plaintiff must prove the standard elements of a Section 2 claim (e.g., dangerous probability of obtaining monopoly power).

    Kaiser made two separate claims in support of its allegation that Abbott willfully deceived the USPTO. First, Kaiser asserted that Abbott failed to provide an English translation of an earlier Japanese patent application involving a substantially similar crystal form as the one reported in the ‘207 patent. That translation, Kaiser argued, could cause Abbott’s ‘207 application to fail.

    Kaiser noted that Abbott had submitted English translations in connection with earlier patent applications in an effort to infer that Abbott’s failure to do so with its ‘207 patent was willful misconduct rather than an innocent oversight.

    Second, Kaiser claimed that Abbott’s in-house attorney failed to reference a key Federal Circuit decision that was harmful to Abbott’s position regarding an on-sale bar issue. In support of this assertion, Kaiser noted that Abbott’s attorney had included a citation to, and attempted to distinguish, the case in its brief for the related litigation. The same attorney, however, failed to include any reference to the decision in the documents submitted to the USPTO.

    In its defense, Abbott argued that approximately one year before it submitted the application for the ‘207 patent, the same patent examiner reviewed a similar patent using an English translation provided by Abbott. In fact, the patent examiner testified that he had seen the English translation in connection with the earlier patent.

    Therefore, during the period in which the examiner was evaluating the ‘207 patent, he had the English translation as part of Abbott’s earlier application. Further, Abbott argued that because the prior patent issued when the English translation was provided, the lack of a translation should not have affected the issuance of the ‘207 patent.

    The Ninth Circuit held that Kaiser presented sufficient evidence to allow its Walker Process claim to survive summary judgment—and reversed the lower court’s ruling. In reaching its decision the Ninth Circuit, citing the Federal Circuit’s 2006 decision in Purdue Pharma L.P. v. Endo Pharms. Inc., applied the Federal Circuit jurisprudence that “direct evidence of intent to deceive or mislead the PTO is rarely available but may be inferred from clear and convincing evidence of the surrounding circumstances.”

    This ruling raises several important issues. Settlement agreements between brand-name and generic pharmaceutical companies have received significant attention from the courts, the FTC, and Congress, which is considering legislation that would ban most pay-for-delay settlements. While most courts have upheld these settlements that are within the scope and term of the relevant patents, parties should proceed with caution when considering entering into such arrangements. Also, parties should take note of the fact that in this case the Walker Process fraud claim survived summary judgment despite a lack of direct evidence of an intent to deceive the USPTO.

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