The New Duty of Disclosure in Post-Grant Oppositions

February 27, 2012

The Trial Rules proposed by the USPTO to implement post-grant oppositions under the America Invents Act would create a new duty of disclosure for parties, that is not limited to the materiality standard for inequitable conduct under Therasense. A violation of the proposed rules could result in sanctions including adverse judgment for the failure to disclose information that is not material, without a showing of specific intent to deceive the Office.

The Duty to Disclose “Inconsistent” Information

The proposed rules would require mandatory, affirmative disclosure of “noncumulative information that is inconsistent with a position advanced by the patent owner or petitioner during the proceeding.” 37 CFR § 42.51(b)(3). This information must be filed “as soon as practicable in a motion identifying supplemental information or as part of a petition, motion, opposition, reply, preliminary patent owner response to petition, or patent owner response to petition.”

There is little explanation of the scope of this routine “discovery” requirement, except for the comment that it “may differ from the proposed changes to § 1.56.” The requirement to disclose “inconsistent information” is derived from current Rule 56(b)(2), which defines “material” information to include noncumulative information that “refutes, or is inconsistent with, a position the applicant takes in: (i) opposing an argument of unpatentability relied on by the Office, or (ii) asserting an argument of patentability.”

This standard for materiality was rejected by the Federal Circuit in Therasense, which imposed a stricter “but for” standard for materiality of nondisclosed information in determining inequitable conduct. The USPTO has proposed to revise Rule 56(b) to conform the duty of disclosure to Therasense, by providing that information is material to patentability 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.”

The difference between “inconsistency” and “materiality” is illustrated by Therasense, where the alleged material information was a prior statement in a European opposition concerning the disclosure of a reference. Under the Therasense standard, the patent owner’s statement would only be material if the USPTO would not have allowed the claims to issue “but for” the failure to disclose the information. The inconsistency of the prior statement was clear to the court, and would appear to satisfy proposed Rule 42.51(b)(3) without any further showing.

The proposed duty of disclosure is broader than the duty of disclosure under current Rule 56(b), because it requires not merely disclosure of the inconsistent information, but also an explanation of its relevance including where the information is presented in a document and how it is pertinent to the claims. Rule 42.51(b)(3). A mischaracterization of the relevance of the inconsistent information, or its pertinence to the claims, could independently constitute “material” information as an affirmative “egregious” misstatement to the USPTO during the post-grant proceeding under proposed Rule 56(b)(2).

Sanctions for Failure to Disclose Inconsistent Information

The proposed Trial Rules indicate that sanctions under Rule 41.12(b) could be imposed for misconduct including the failure to comply with an applicable rule, and state that “an example of a failure to comply with an applicable rule includes failure to disclose a prior relevant inconsistent statement.” Sanctions authorized by the proposed rule include adverse judgment of unpatentability and an award of attorney fees. In interferences, APJs have been reluctant to consider issues of inequitable conduct, but have granted judgment for intentional violation of the duty of disclosure.

There is no express requirement that sanctions for failure to comply with the proposed rule would require a showing of intent to conceal withheld information, or to deceive the Office, as required for inequitable conduct. The commentary on the proposed rules does not discuss the factors that will be considered in distinguishing the range of sanctions provided by proposed Rule 41.12(b), but the discretion of the Board should be limited by equitable considerations applied to sanctions in district court.

Practical Effect of the Proposed Disclosure Requirement

The burden of complying with the duty to disclose inconsistent information will generally fall more heavily on the patent owner, who may possess information such as prior art, arguments, declarations or amendments in related applications, inventors’ publications, or statements or evidence submitted in corresponding foreign applications that could be characterized as inconsistent with an argument in support of patentability. The petitioner’s risk is probably more limited, for example, to issues of estoppel and its characterization of the real party in interest.

The standard of “inconsistency” is not defined, and is so amorphous as to preclude definition. Few patent owners will conclude that prior statements or other information are “inconsistent” with arguments made in a post-grant proceeding, while many opponents may well discover dramatically inconsistent information in the possession, or presumed possession, of the patent owner.

If a party does admit that it is aware of information that is “inconsistent”’ with a position it advocates, the result plainly will not be to avoid discovery, as the proposed Rules contemplate. The result will be immediate motions for additional discovery, to determine how the disclosing party discovered the information and concluded that it was “inconsistent” with a position which it advances. It is almost inconceivable that the proposed requirement will avoid motions for additional discovery, and very likely that it will precipitate disputes not only over additional discovery, but also time-consuming motions concerning protective orders, attorney-client privilege and work product, as the USPTO commentary seems to recognize.

If a post-grant opposition is instituted during district court litigation, the patent owner might be required by the proposed rule to disclose any “inconsistent” information identified by the petitioner-defendant. Whether or not the patent owner’s disclosure is considered to be a binding admission of “inconsistency,” the required explanation of its relevance, including where the information is presented in a document and how it is pertinent to the claims, could provide a harvest of admissions against interest. If the Board agrees with the petitioner that the “inconsistent” information requires cancelation of a challenged claim, “but for” materiality might be established during the course of the opposition. The proposed disclosure rule would provide an additional parallel path of attack for defendants in district court litigation.

This preliminary review of the post-grant opposition procedures is based on the comments and rules provided in the Practice Guide, Proposed Trial Rules, and proposed Inter partes Rules. It is intended to provide only a general overview of issues affecting the parties’ respective burdens during the preliminary and trial phases, and is not a commentary on specific rules, procedures, costs or statutory requirements. The information and analysis may be incorrect or incomplete, and these comments do not necessarily represent my own views as to the correct or desirable interpretation of the statute or rules.