Inequitable conduct is a charge made by defendants in a patent infringement lawsuit to avoid liability for infringement of a patent. Inequitable conduct occurs when an applicant or someone associated with the filing of a patent application misleads a patent examiner that it warrants the court to make the patent unenforceable.
Over a period of time, the courts have reduced the standards for winning on a charge of inequitable conduct to foster full disclosure to the PTO. Unfortunately, the lower threshold has had many unforeseen and unintended consequences. About 80 percent of all patent infringement lawsuits include a charge of inequitable conduct. Charges of inequitable conduct has become a significant litigation strategy, expands discovery, paints the patentee as a bad actor, etc.
The Federal Circuit, recognizing these unfortunate consequences, has now significantly raised the standard to win on a charge of inequitable conduct. This means that more patents will be enforceable and that the patentee’s position has become stronger during license negotiation, preliminary stages of a dispute, and litigation.
In Therasense v. Becton, the Federal Circuit held that to win on a charge of inequitable conduct, there must be a showing of specific intent to deceive and materiality. The intent to deceive requires a specific intent to deceive the Patent Office which cannot be shown by showing gross negligence, negligence under a should have known standard. Under the old standard, intent could be shown under the should have known standard. Defendant must now show that the applicant made a deliberate decision to deceive. The specific intent to deceive must be shown to be the most reasonable inference drawn from the evidence. There is no specific intent to deceive if there are multiple reasonable inferences based on the evidence.
As to materiality, the withheld information must be the but for cause of the patent’s issuance. If but for the withheld or misrepresented information, the patent office would not have granted the patent then the withheld or misrepresented information is material. In essence, before inequitable conduct will be found, the accused infringer must invalidate the patent using the wrongful act or withheld information.
The court further recognized an egregious misconduct exception to the materiality standard. When the patentee has engaged in affirmative acts of egregious misconduct, such as making false or misleading statements in a declaration under a penalty of perjury, then the misconduct is material the misconduct is material.
This new standard for materiality no longer corresponds to the Patent Office’s definition of material in Rule 56. The Court reasoned that the broader standard used by the Patent Office played a part in the unforeseen and untended consequences mentioned above.
Under the old standard, both intent and materiality were required to win on inequitable conduct. The intent and materiality prongs were previously viewed on a sliding scale. If the evidence for intent was weak but the information highly material or if the evidence on intent was strong but the information not as material, one could win on the charge of inequitable conduct. But under this new standard, there is no sliding scale. Also, the standards for both intent to deceive and materiality have been significantly raised.
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