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Heightened Requirements for Inequitable Conduct Claims Provide Relief for Patentees
On May 25, 2011, the Federal Circuit Court of Appeals handed down its highly anticipated en banc opinion in Therasense, Inc. v. Becton, Dickinson & Co. (Case Nos. 2008-1511, -1512, -1514 and -1595), heightening the requirements to establish inequitable conduct in patent cases. Inequitable conduct is a defense based on a patentee's alleged fraud on the U.S. Patent and Trademark Office (USPTO) in prosecuting a patent, typically for failing to disclose material prior art.
The ramifications of a successful inequitable conduct defense are great since it renders the entire patent (or patent family) unenforceable. As a result, inequitable conduct is a popular allegation by defendants, and the Federal Circuit noted that 80% of patent cases contained claims of inequitable conduct—often on the "slenderest" of grounds. Unfortunately, the prevalence of inequitable conduct allegations has been counterproductive in patent prosecutions, motivating patentees to disclose "too much" prior art in prosecuting patents out of fear of being accused of inequitable conduct. The Federal Circuit's decision in Therasense was intended to address these issues.
Revised Requirements
The Federal Circuit eliminated the "sliding scale" or "balancing" test for the intent to deceive and materiality factors to show inequitable conduct. A defendant must now prove each factor independently by "clear and convincing evidence," and the court also raised the bar for each factor. For example, absent direct evidence, intent to deceive the USPTO must be the single most reasonable inference to be drawn from the circumstances—a very high threshold. In addition, materiality must now satisfy a "but-for" test; that is, the USPTO would not have allowed the relevant claim if it had been aware of the undisclosed reference. In adopting this but-for test, the court specifically rejected USPTO Rule 56 to define materiality, instead applying a "preponderance of the evidence" standard and giving the claim its broadest reasonable construction in the but-for analysis.
Finally, in an effort to retain some flexibility in the inequitable conduct analysis, the Federal Circuit acknowledged that inequitable conduct could be based on "affirmative egregious misconduct." This category was intended to capture "extraordinary circumstances" where but-for materiality did not apply, such as the submission of false affidavits and other affirmative misrepresentations.
The Impact
While it remains to be seen what the actual effects of Therasense will be on the plague of inequitable conduct allegations in patent litigation, patent infringement defendants should be well-advised to question whether to bring inequitable conduct claims and patentees should breathe a bit easier for both prosecuting patent applications and pursuing infringement claims without fear of being accused of inequitable conduct.
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Maslon's intellectual property litigation practice group has litigated IP cases on behalf of Fortune 500 companies and closely held companies involving trademarks, patents, copyrights, trade secrets, licensing, computer and Internet law. Please contact any member of Maslon's intellectual property litigation practice group for more information.
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