MVS Filewrapper® Blog: Legitimate Advocacy and Genuine Misrepresentation of Material Facts

The Federal Circuit has issued a decision in Apotex Inc. v. UCB, Inc., upholding a district court's finding that Apotex's U.S. Patent No. 6,767,556 ("the '556 patent") is unenforceable due to inequitable conduct. 


Dr. Sherman, founder and chairman of Apotex, wrote the '556 patent application and is its sole inventor.  The '556 is based on Canadian application filed on April 5, 2000.  The ’556 patent is generally directed to a process for manufacturing tablets of moexipril tablets—an angiotensin-converting enzyme (“ACE”) inhibitor used to treat hypertension. The ’556 patent discloses a process of making moexipril tablets consisting mostly of moexipril magnesium obtained by reacting moexipril or its acid addition salts with an alkaline magnesium compound to improve stability and prevent degradation of the normally instable moexipril hydrochloride.


Two existing drugs— Univasc and Uniretic—were both cited as prior art in the prosecution of the '556 patent, and were also asserted to infringe the '556 patent after issuance.  During prosecution, Dr. Sherman, through his patent attorney, asserted that the prior drugs did not render the invention of the '556 patent obvious because the process for making them simply combined components, rather than reacting them.  However, evidence presented at trial indicated that Dr. Sherman suspected that the existing drugs were made by the process recited in his application at the time the application was filed, and later conducted experiments to confirm that the components in those existing drugs were reacted, rather than simply combined as he represented to the PTO.  The court also found that Dr. Sherman has misled or failed to inform a declarant, Dr. Lipp, regarding the true nature of the existing drugs in relation to the claimed invention, resulting in a declaration by Dr. Lipp that perpetuated Dr. Sherman's mischaracterizations of those existing drugs.  In addition, the court determined that Dr. Sherman withheld relevant prior art from the PTO.  The district court held the combined misrepresentations and withholdings were material to the prosecution of the '556 patent, and that Dr. Sherman intended to deceive the PTO based on his overall pattern of misconduct, and therefore the '556 patent was unenforceable due to inequitable misconduct. 


On appeal, Dr. Sherman argued that the conduct before the PTO was merely advocating a particular interpretation of the prior art.  However, the Federal Circuit determined that his statements were not mere advocacy for a preferred interpretation; his statements were factual in nature and contrary to the true information he had in his possession.  The court clarified that there is no duty to disclose suspicions or beliefs regarding the prior art, and that there is nothing wrong with advocating, in good faith, a reasonable interpretation of the teachings of the prior art.  However, affirmatively and knowingly misrepresenting material facts regarding the prior art goes beyond failing to disclose a personal belief or alternative interpretations of the prior art, and enters the realm of inequitable conduct, which may result in an unenforceable patent.


The full opinion is available here.  


New and Useful - January 23, 2013

·         In Wax v. Amazon Techs., the Federal Circuit upheld the TTAB’s denial of registration of the mark AMAZON VENTURES.  Applicant filed and intent-to-use application to register the mark for “investment management, raising venture capital for others, . . . and capital investment consultation.”  Amazon Technologies, Inc.—online retailer and owner of several AMAZON.COM marks—opposed the registration.  The TTAB concluded that Amazon Technologies, Inc. had priority in the AMAZON.COM marks, and that there was a likelihood of confusion between Amazon Technologies’ marks and those of the applicant.  The Applicant challenged the TTAB’s findings that (1) Amazon Technologies’ marks are famous, (2) the similarity of Amazon Technologies’ mark to AMAZON VENTURES, and (3) the similarity of the parties' services and channels of trade.  The Federal Circuit confirmed the TTAB’s findings, based in part on the wide latitude of protection afforded to Amazon Technologies’ on account of its fame within the buying public.  

·         The Eighth Circuit Court of Appeals affirmed a district court’s judgment and damages for Hallmark Cards, Inc. against a former employee for breach of contract and misappropriation of trade secrets.  The district court entered the jury’s award of damages in the amount of $860,000.  The Eight Circuit affirmed $735,000 of the damages as they related to breach of contract and disclosure of trade secrets, but overturned $125,000 the former employee earned in compensation from a competitor. 

·         The Federal Circuit has dismissed as moot an appeal from a patent infringement suit.  Allflex U.S.A., Inc. sued Avid Identification Systems, Inc. seeking a declaratory judgment that six of Avid’s patents were unenforceable due to inequitable conduct.  The district court granted partial summary judgment in favor of Allflex, at which time the parties entered into a settlement agreement that resolved all of the claims and issues between the parties upon payment of $6.55 million from Avid to Allflex, except for a provision that allowed Avid to appeal three specific issues.  The agreement further provided that Allflex could contest any appeal on the merits, but could not dispute the existence of a live case or controversy, and that if Avid were successful on any issue on appeal, the payment to Allflex would be reduced by $50,000.  The district court accepted the settlement agreement and entered a stipulated order of final judgment that stated the case was dismissed with prejudice with the exception of findings the court considered “final and ripe for appellate review.”  Avid then appealed to the Federal Circuit, but Allflex declined to file a brief defending the judgment of the district court. 

The Federal Circuit concluded that the appeal was moot.  Avid argued that, although the case would be moot if it were not for the $50,000 contingency payment, that payment ensured that there was a real controversy between the parties.  The court dismissed Avid’s argument, concluding that while the district court’s decision was effectively final and therefore appealable, Allflex no longer had a legally cognizable interest in any of the issues in the case, and the payment was insufficient to create any interest

·         The USPTO has announced the new fee schedule.  The changes, initiated under the Leahy-Smith America Invents Act, are set to take effect March 19, 2013.  Among the notable changes are:

o   A 75% reduction in most fees for micro entities, including Universities.

o   Increase in basic filing fee:  $1,600 (large entity); $800 (small entity); $400 (micro entity)

o   Increase in appeal fees, due in large part to a new “Appeal Forwarding Fee for Appeal in Examination or Ex Parte Reexamination Proceeding or Filing a Brief in Support of an Appeal in Inter Partes Reexamination”:  $2,800 (large entity); $1,400 (small entity); $700 (micro entity)

o   Decrease in issue fees:  $960 (large entity); $480 (small entity); $240 (micro entity)

o   Increase in maintenance fees:

§  First (3.5 years):  $1,600 (large entity); $800 (small entity); $400 (micro entity)

§  Second (7.5 years):  $3,600; $1,800; $900

§  Third (11.5 years):  $7,400; $3,700; $1,850

o   Decrease in supplemental examination fees:  $16,500 (large entity); $8,250 (small entity); $4,125 (micro entity)

The complete finalized rules are available here.

Federal Circuit Establishes New Standard for Inequitable Conduct

On May 25, 2011 the Federal Circuit released its en banc decision in Theresense, Inc. v. Becton, Dickinson & Co. , in which the Court articulated the appropriate standard for inequitable conduct before the PTO.  The majority wrote, “[t]his court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.”  


At issue in the district court was the 5,820,551 patent which involved disposable blood glucose test strips for diabetes management.  Protective membranes are often used on such glucose test strips to protect the veracity of the results.  The ‘551 patent disclosed a test unit without a protective membrane.  The Examiner cited the 4,545,382 patent, also held by Abbott, as disclosing a unit which could be used without a membrane.  A declaration and affidavit was submitted explaining the language of the ‘382 patent would not encourage one of ordinary skill in the art to use the device without a membrane, and the Examiner relied upon the statements for allowance of the ‘551 patent.  It came to light during litigation that Abbott had previously made representations to the European Patent Office that, in fact, “[the] disclosure was unequivocally clear:” the membrane of the ‘382 patent was optional.  At the district court level, claims 1–4 of the ‘551 patent were held invalid as obvious and the ‘551 patent was held unenforceable due to inequitable conduct.  

The majority undertook a discussion of the Keystone, Hazel-Atlas, and Precision cases which set forth the test for unclean hands, the precursor to inequitable conduct.  The Court continued, discussing the ways in which the inequitable conduct doctrine diverged from these original cases, expanding to include a broader scope of misconduct—“mere non-disclosure” to the PTO—and by adopting a more potent remedy—unenforceability of the entire patent.  This lead to the sliding scale test, the “reasonable examiner standard” and the standards articulated in 37 C.F.R. 1.56.

The Court continued, noting that these standards lack uniformity and encourage the use of the “atomic bomb” of patent law.  “Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system.”  The Court then proceeded to “tighten the standard.”  For purposes of the intent prong, the Court held, “the accused infringer must show the patentee acted with the specific intent to deceive the PTO.”  This requires “clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.”  No longer will the “should have known” analysis satisfy this standard.   Finally, the absence of a good faith explanation does not, by itself, prove the intent to deceive.  With respect to the materiality prong, the Court articulated a “but for” materiality standard.  Thus, “when an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”  Important to note, the decision articulates a preponderance of the evidence standard for the “but for” test, which is different than the clear and convincing evidence standard required for invalidity.  Finally the court notes an exception to the “but for” test—in cases of “affirmative egregious misconduct,” the materiality prong may also be satisfied.  The Court vacated the finding of materiality at the district court and remanded for application of the new test:

1.    Intent:  clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.
2.    Materiality:  preponderance of the evidence must show that the PTO would not have allowed a claim had it been aware of the undisclosed prior art—“but for” test.
a.    Exception:  affirmative egregious misconduct.


    The concurring opinion criticizes both the majority and the dissent for as sacrificing flexibility for rigidity.  The concurrence agrees with the majorities overall holding, but wishes to respect the equitable nature of the test.  This means leaving the decision of inequitable conduct to the decision of the lower courts.  The opinion notes this would help in the instance there is some intentional misconduct which does not fit within the rigid test, yet still warrants equitable relief.  This includes allowing the district court to “fashion some other reasonable remedy, so long as the remedy imposed by the court is ‘commensurate with the violation.’”  The concurrence articulates a materiality test including:

1.    But for the conduct (whether it be in the form of affirmative act or intentional non-disclosure), the patent would not have issued (as Chief Judge Rader explains in the majority opinion);
2.    The conduct constitutes a false or misleading representation of fact (rendered so either because the statement made is false on its face or information is omitted which, if known, would render the representation false or misleading); or
3.    The district court finds that the behavior is so offensive that the court is left with a firm conviction that the integrity of the PTO process as to the application at issue was wholly undermined.


    The dissent begins by noting that the “specific intent,” as articulated by the majority and the clear and convincing evidence standard.  The disagreement revolves around the materiality standard.  The dissent would prefer to continue to apply the standard as articulated in 37 C.F.R. 1.56 because “[f]irst, examiners need to conduct effective and efficient examinations, i.e., what information is material to the examination process.  Second, the higher standard of materiality adopted by the majority will not provide appropriate incentives for patent applicants to comply with the disclosure obligation the PTO places on them.”  Essentially, the dissent would re-affirm the standard articulated in Kingsdown Medical.  The test from the dissent would require:

1.    Inequitable conduct requires proof, by clear and convincing evidence, that the applicant or attorney intended to misled the PTO with respect to the material matter.
2.    Materiality is measured by what the PTO demands of those who apply for and prosecute patent applications.  The disclosure standard for the PTO expects those parties to comply with is set forth in the current version of the PTO’s Rule 56.  Under that standard, inequitable conduct requires proof that the information at issue either established, by itself or in combination with other information, a prima facie case of unpatentability, or was inconsistent with a position taken by the applicant before the PTO with respect to patentability.
3.    Intent to mislead and materiality must be separately proved.  There is no “sliding scale” under which the degree of intent that must be proved depends on the strength of the showing as to the materiality of the information at issue.

The dissent continues, describing the veracity of such a test for policy reasons and for reasons of deference to the PTO.  Further, the dissent articulates this standard as more historically accurate with the  Keystone, Hazel-Atlas, and Precision cases.  The dissent describes the majority test as “Draconian” and inappropriate within the context of history, precedent, and the public policy consideration of the inequitable conduct doctrine.

For the full opinion, click here .

Federal Circuit to consider overhaul of inequitable conduct standards en banc

In an order today, the Federal Circuit granted rehearing en banc in Therasense, Inc. v. Becton, Dickinson & Co.  The order indicates the court will be reconsidering its precedent on virtually the entire gamut of issues relating to inequitable conduct. Specifically, the questions presented are:

  1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?
  2. If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?
  3. What is the proper standard for materiality? What role should the United States Patent and Trademark Office's rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?
  4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).
  5. Should the balancing inquiry (balancing materiality and intent) be abandoned?
  6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

The court explicitly allows for the filing of amicus briefs without leave of court, and also specifically invites the USPTO to file such a brief.

For the order granting rehearing en banc, click here.

For the original panel opinion (affirming the district court's finding of inequitable conduct), click here.

More detail of the original panel opinion after the jump.


Disclosure of compounds without link to claimed method fails to meet written description requirement

In a recent decision, the Federal Circuit reversed a district court's denial of judgment as a matter of law after a jury determined the asserted claims of an invention were not invalid under the written description requirement.  The court, however, affirmed the district court's determination of no inequitable conduct.

The Federal Circuit held the jury lacked substantial evidence for its verdict.  Specifically, the court noted that vague functional descriptions are essentially invitations for skilled artisans to conduct further research and therefore are not sufficient description to meet the written description requirement of § 112.  The specification disclosed three classes of compounds that could be used in the claimed methods.  However, it only disclosed specific examples of one of the classes of compounds, and did not disclose any examples of the described compounds actually linked to use in the claimed method.  The patentee was further hampered in that the jury held the patent was entitled to a priority date of 1989, but most of the patentee's testimony and other evidence regarding the written description issue centered on the application's filing date in 1991.  The court held none of this evidence could support the jury's verdict, as it was directed to the wrong timeframe.  Therefore, the court held the written description requirement not met, and the asserted claims invalid.

The court affirmed the district court's holding of no inequitable conduct.  Neither party contested the relevant acts (failing to correct a figure and to disclose certain non-prior art references that were relevant to patentability) were properly held material.  The Federal Circuit agreed with the district court that there was insufficient evidence of intent to deceive to support a finding of inequitable conduct.

More on Ariad Pharms., Inc. v. Eli Lilly & Co. after the jump.


Failure to raise KSR post-trial but pre-judgment results in waiver

In a recent decision, the Federal Circuit affirmed a jury's verdict of infringement, no obviousness, and no inequitable conduct.  On appeal, the defendant for the first time argued the jury's verdict should be reversed in light of KSR

The Federal Circuit held the argument had been waived.  The jury reached its verdict on December 8, 2006.  Post-trial motions were fully briefed on February 20, 2007, and KSR was decided on April 30, 2007.  However, the district court did not rule on the post-trial motions until August 23, 2007, and final judgment was not entered until August 24.  Given the four month gap between the decision in KSR and the rulings on the post-trial motions, the Federal Circuit held the defendant was required to raise the issue before the district court.  As a result, the court considered the argument waived.

The Federal Circuit also rejected the defendant's arguments regarding noninfringement and inequitable conduct.

More detail of Rentrop v. Spectranetics Corp. after the jump.


High materiality without explanation for nondisclosure leads to inference of intent to deceive

In a recent decision, the Federal Circuit affirmed a district court's finding of inequitable conduct for one patent but reversed on a second, affirmed a finding of no invalidity of the second patent, but vacated the finding of infringement after modifying the district court's claim construction of a claim term.  The court also reversed the finding of indefiniteness of a third patent.

The court continued its recent discussions of when (if ever) an inference of intent to deceive is permissible to support an inequitable conduct finding where there is no independent evidence of such intent.  Here, the majority affirmed the district court's inference of intent based on high materiality, proof of knowledge of the withheld art, and a lack of credible explanation for the nondisclosure.  Judge Lourie dissented, arguing the majority conflated intent with materiality.  Given the apparent disagreement  on this issue, a case presenting the issue of when (or whether) such an inference is permissible seems to be a candidate for en banc review.

More detail of Praxair, Inc. v. ATMI, Inc. after the jump.


No evidence of intent to deceive, no inequitable conduct

In a recent decision, the Federal Circuit reversed a district court's grant of summary judgment of inequitable conduct against the patentee.  At issue was whether the patentee's failure to disclose a letter describing an aspect of the prior art constituted inequitable conduct.  The court reversed finding that the alleged infringer had failed to provide sufficient facts to support an inference of intent to deceive.

The defendant's theory involved a plan by the patentee to switch law firms once it appeared the first firm intended to disclose the letter, and preventing the second firm from discovering the existence of the letter.  The opinion provided a clear look of how the Federal Circuit will analyze inequitable conduct.  The court teed up its analysis by stating:

To successfully prove inequitable conduct, the accused infringer must present "evidence that the applicant (1) made an affirmative misrepresentation of material fact, failed to disclose material information, or submitted false material information, and (2) intended to deceive the [PTO]."  Further, at least a threshold level of each element -- i.e., both materiality and intent to deceive -- must be proven by clear and convincing evidence.  And even if this elevated evidentiary burden is met as to both elements, the district court must still balance the equities to determine whether the applicant's conduct before the PTO was egregious enough to warrant holding the entire patent unenforceable.  Thus, even if a threshold level of both materiality and intent to deceive are proven by clear and convincing evidence, the court may still decline to render the patent unenforceable.

Most important to the court was that an accused infringer proves threshold levels of intent to deceive the PTO and materiality with clear and convincing evidence. The clear and convincing standard requires that the evidence be strong enough to show that an inference of intent to deceive is the "single most reasonable inference able to be drawn from the evidence."  In this case, there was simply "no evidence, direct or indirect," to support the inference the defendant sought to draw.  As a result, the finding of inequitable conduct was reversed.

More on Star Scientific, Inc. v. R.J. Reynolds Tobacco Co. after the jump.


Finding of inequitable conduct without considering materiality vacated

In a decision on Friday, the Federal Circuit reversed a district court's summary judgment of invalidity and noninfringement and subsequent finding of inequitable conduct.  The court also vacated the district court's exceptional case finding and the associated award of attorney's fees.

The plaintiff was initially awarded partial summary judgment of infringement of six patents.  The district judge then assigned a special master to examine the remaining issues in the case, including invalidity and inequitable conduct.  The case was then transferred to a new judge who, without written opinion, overturned the plaintiff's ruling of summary judgment and awarded partial summary judgment of noninfringment and invalidity.  The judge then held a brief bench trial on the issue of inequitable conduct, where the plaintiff was only allowed to present inventor testimony regarding candor and good faith; all evidence of materiality was precluded.  After this trail, the court, from the bench, made a ruling of inequitable conduct against the plaintiff, ruled the case was exceptional under § 285, and awarded attorney's fees.

The Federal Circuit reversed, vacated, or remanded every ruling made by the trial court.  Specifically, the court held that in order to support a finding of inequitable conduct, there must be threshold findings of both materiality and intent to deceive.  Here, the district court only examined intent, rendering the record insufficient to support a holding of inequitable conduct.  The court also held the district court's findings regarding intent to deceive were clearly erroneous.  On top of that, the court held the summary judgment rulings "lack[ed] findings for judicial review," and that "the record show[ed] many potential issues of fact that would prevent entry of summary judgment."  Given the district judge's handling of the case, the court further ordered the case reassigned to a new trial judge on remand.

More on Research Corp. Tech., Inc. v. Microsoft Corp. after the jump.


Federal Circuit provides more post-KSR guidance for obviousness for chemical compounds

In a decision Monday, the Federal Circuit affirmed a district court's decision finding asserted claims of a patent valid and enforceable.  Specifically, the court affirmed a finding that the asserted claims were nonobvious as a matter of law, and that the evidence did not support a finding of inequitable conduct.  

The Federal Circuit, applying KSR Int'l Co. v. Teleflex Inc. in the context of similarly-structured chemical compounds stated: "[P]ost-KSR, a prima facie case of obviousness for a chemical compound still, in general, begins with the reasoned identification of a lead compound."  In this case, because there was no adequate explanation for why the defendant's asserted "lead compound" would actually be used by one of ordinary skill in the art, the patent was not shown to be obvious.

The defendants also brought several accusations of inequitable conduct, the court found none of them to be persuasive.  The court held that in order to have a finding of inequitable conduct there must be a clear intent to deceive the Examiner and this is a very high standard.  In this case, some questionable conduct had occurred, but ultimately the court said it was clear that no intent to deceive had existed.  Therefore, no inequitable conduct had occurred.  

More on Eisai Co. v. Dr. Reddy's Labs., Ltd. after the jump.


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