This article explains why an appeals court felt the need to reinterpret a disclosure rule that had caused an explosion of paperwork in patent-related cases. In May 2011, the Federal Circuit, in the case of Therasense Inc. v. Becton Dickinson & Co. involving blood glucose test strip technology, changed the standards for proving inequitable conduct. Following this change, a withheld reference must invalidate the patent in order to be material and support a charge of inequitable conduct. A withheld reference that merely presents an argument for invalidity fails as grounds for a charge of inequitable conduct. So long as the non-cited article does not disclose or render obvious the patented invention, the article is not material. Even if the article is material, that alone is not enough. The accused patent violator must also prove that the reference was knowingly and deliberately withheld. The patentee does not have to provide an explanation for the missing information.
“Inequitable conduct”: The phrase has a ring, suggesting something like scandal among the very proper. But for people in the business of technology, it's a term that has added labor, anxiety, and cost to the prosecution of patents. Now, as a result of a recent decision by the U.S. Federal Circuit appellate court, there is a possibility that some limits will be placed on exactly what conduct will be considered inequitable in the future.
According to one study, in 80 percent of all patent infringement cases, the defendant accuses the patent owner of inequitable conduct. If proven, inequitable conduct can render a patent unenforceable even in clear-cut cases of infringement.
What is inequitable conduct and why has the case law surrounding it led, according to the Federal Circuit in its recent decision, to “numerous unforeseen and unintended consequences” rendering inequitable conduct the “atomic bomb of patent law”? The dealings between a patent applicant and the U.S. Patent and Trademark Office, while somewhat adversarial, are a little one-sided. The PTO examiner, for example, doesn’t investigate the truth of every single statement made by the patent applicant. Thus, early U.S. case law established that if you lie to the PTO, any patent you obtain could be in jeopardy.
As a result, the concept of a duty of candor with the PTO was born (in 1949) resulting in a rule requiring all patent applicants (and their patent attorneys) to deal honestly with the Patent Office. So far so good, but the rule went further and required a disclosure of all information known to the applicant “material to patentability.” So, in a typical case, when a patentability or “prior art” search is conducted by the applicant, its results are forwarded to the PTO via a document called an “Information Disclosure Statement” in order to comply with the rule.
But, over time, the Federal Circuit developed a sliding scale analysis regarding the materiality of information and the state of mind of the applicant: if highly material information was withheld, proof that the applicant intended to withhold the information was not really needed; intent to deceive the PTO could be inferred.
Conversely, if there was proof the applicant intended to withhold certain information, the information didn’t have to be all that material. As a result, patents were held unenforceable for reasons no one could have predicted. A non-cited journal article, which didn’t necessarily affect the validity of the patent in question in a case, could render the patent unenforceable. Patents related to that patent could even be held unenforceable.
Consider a hypothetical company with 100 engineers working on A/D converters. The company files a patent application and later learns an article about A/D converters in one engineer's files was not cited. Even if the article is not material, the threat of an inequitable conduct claim could adversely affect the company's strategy for enforcing the patent. The value of the patent is surely affected.
Since patent attorneys are a little retentive by nature and because no one wants to be named in a court opinion as doing something wrong (“patent attorney Kirk Teska failed to disclose…”) and holding a patent he procured unenforceable, patent attorneys soon started citing everything to the PTO. It got so bad that even if a given patent application was allowed by the PTO, you often had to withdraw it if new “prior art” came to light—in a corresponding foreign patent application, for example. You also had to tell one examiner in charge of one patent application the decisions of another examiner in a related patent application.
You didn’t technically have to cite “cumulative” or repetitive information. You were also allowed to withhold prior art which didn’t establish a good argument supporting unpatentability of your invention. But, patent attorneys generally decided to cite it all instead of taking a position regarding what was cumulative or inapplicable to a given invention and then later having to suffer questions about their decisions.
At the end of the day, Information Disclosure Statements in some cases filled banker's boxes. At a conference on the topic of inequitable conduct, an examiner showed us a picture of a fairly large room the PTO had dedicated to cited documents. They were stacked to the ceiling. And this was for one patent application.
The stuff disclosed appears as a listing on the front of the patent when it's issued. I’ve seen patents where the listing goes on for five pages or better. You can ascertain for yourself whether examiners ever read any of that information.
Also, patent attorneys stopped making any kind of real assertions in patent applications or in response to PTO rejections lest they say something that turns out to be a mischaracterization. Incorrectly distinguishing an invention from a prior patent could lead to a charge of inequitable conduct. Patent applications lost any meaningful discussions of the state of the art or the improvements to it by the invention. Patent prosecution began to look like this—PTO examiner: “The invention is obvious”; patent attorney: “No, it's not.” Perhaps most importantly, the cost of Disclosure Statement submissions could, in some cases, eclipse the cost of the patent application itself.
A non-cited journal article, which didn’t necessarily affect the validity of a patent, could render it unenforceable.
This sad state of affairs may now be at an end. In May, the Federal Circuit, in the case of Therasense Inc. v. Becton Dickinson & Co. involving blood glucose test strip technology, changed the standards for proving inequitable conduct.
Now, a withheld reference, in order to be material and thus support a charge of inequitable conduct, must invalidate the patent. A withheld reference which merely presents an argument for invalidity fails as grounds for a charge of inequitable conduct. Returning to our A/D example, so long as the non-cited article doesn’t disclose or render obvious the patented invention, then the article is not material. Even if the article is material, that alone is not enough. The accused patent violator must also prove the reference was knowingly and deliberately withheld. The patentee doesn’t even have to provide an explanation for the missing information. So, if no one but this one employee knew about the A/D article, inequitable conduct would be difficult to prove.
Will charges of inequitable conduct now be only a historic artifact of the patent landscape? Unlikely. Five of the eleven Federal Circuit judges did not agree with the majority's definition of “materiality” and instead decided that a withheld reference that didn’t necessarily invalidate the patent could still be material. This division on what is and what is not material could trigger review by the Supreme Court which lately seems to favor patent cases (and overturning the Federal Circuit). Meanwhile, the PTO is revising its rules concerning the duty of candor.
My questions regarding applying the Therasense case to the real world are as follows. If a prior reference I know about renders a patent claim I am attempting to procure invalid, then I would change the claim. At that point, the reference is no longer material and need not be disclosed to the PTO. So, nothing ever gets disclosed to the PTO, right?
Or, think about it this way. If I disclose a reference to the PTO, the reference must be material, right? But, that's an admission the patent claim is invalid (based on the new definition of materiality) so, again, nothing ever gets cited to the PTO.
All this is overly simplistic for a number of reasons including the fact that the PTO determines “validity” differently from the courts. Still, in theory at least, disclosures after Therasense could go from everything to zero.
It will be interesting to see what patent attorneys actually do cite and if Information Disclosure submissions really do go down in size (even if not to zero) in light of Therasense. One thing is sure: charges of inequitable conduct will go down if the case stands, and the value of most patents will increase.