Therasense, Inc. and Abbott Laboratories v. Becton, Dickinson and Company

Raising The Bar for Proving Inequitable Conduct

Therasense, Inc. and Abbott Laboratories v. Becton, Dickinson and Company
Federal Circuit 2008-1511, -1512, -1513, -1514, -1595
May 25, 2011

In view of the unintended burdens placed on the entire patent system by the decades old “sliding scale” and “low standards” for establishing the requisite intent and materiality elements of inequitable conduct, a six judge majority of the en banc Federal Circuit announced new, tighter standards for proving the separate intent and materiality elements of inequitable conduct, based on the failure to submit a reference to the PTO during prosecution.

Writing for the majority, Chief Judge Rader rejected the “sliding scale” application of the inequitable conduct elements, whereby a strong showing of either intent or materiality decreased the required showing of the other element. Instead, intent and materiality “are separate requirements,” both of which must be proven in order to establish inequitable conduct.

The Court held that accused infringer must prove that the patentee acted with the specific intent to deceive the PTO, rejecting standards of gross negligence or negligence under a “should have known” standard. In the case of non-disclosure, it must be shown by clear and convincing evidence that the applicant made a deliberate decision to withhold a known reference. The patentee is not required to provide a good faith explanation for withholding a reference, and “[t]he absence of a good faith explanation does not, by itself, prove intent to deceive.” Thus, the accused infringer must show that the applicant knew of the reference, knew it was material, and made a deliberate decision to withhold it.

The Court rejected the former test for materiality, which focuses on whether a reasonable examiner would have considered the withheld reference “material” to patentability. The new test requires proof by a preponderance of the evidence that the PTO would not have allowed the claim if it knew of the withheld information (e.g., “but for” the withheld reference, the claims would not have issued). In applying the “but for” standard, claims should be given their broadest reasonable construction, since the test focuses on the allowability of claims rather than invalidity, and the presumption under Section 282 would not apply.

The Court also noted that inequitable conduct, as an equitable doctrine, hinged on basic fairness and should be applied only in instances where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.

Creating an exception to the doctrine based on acts other than the nondisclosure of a reference, the court held that “but for” materiality does not have to be shown in cases where the patentee engages in “affirmative egregious misconduct.” This exception accommodates instances such as the filing of an unmistakably false affidavit, and accords with early Supreme Court “unclean hands” cases, which dealt with deliberate and planned schemes to defraud the PTO and the courts.

A reasoned dissent by four of the court’s members urged that the correct standard for materiality should be defined by the PTO’s disclosure rule, 37 C.F.R. § 1.56, in inequitable conduct cases involving the failure to disclose material information. First, according to the dissent, the PTO is in the best position to know what information examiners need to conduct effective and efficient examinations, and second, the higher standard of materiality adopted by the court would not provide appropriate incentives for patent applicants to comply with the disclosure obligations the PTO places upon them.

A partial concurrence by Judge O’Malley posited that the appropriate test for materiality would be midground between the polarized tests of the majority and the dissent, e.g., “but for” materiality and PTO rule 1.56. Stating a calculated willingness to preserve a measure of flexibility for district court judges applying an equitable doctrine, she criticized the materiality standards of the majority and dissent as “black or white, while equity require[d] judicial consideration of shades of gray.”

To be sure, accused infringers have a greater burden of proving inequitable conduct under the new Therasense standard. It follows that the use of the defense in pleading, in discovery and as settlement leverage should decline based on the difficulty of ultimately proving the defense. An open question is whether the PTO will alter its standard of materiality under Rule 1.56 in any way based on the Court’s decision. Currently, the PTO is considering the Therasense in conjunction with its current Rules and practices.