Yesterday, the Federal Circuit handed down its anticipated en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., increasing the standards for inequitable conduct. The 6-5 majority held that:
- an omitted reference is material only if the claim or patent would not have issued, but for omission of the reference;
- specific intent to deceive must be shown by clear and convincing evidence;
- courts can no longer employ a "sliding scale" of intent and materiality, both must be showng by clear and convincing evidence; and
- courts should apply equity to ensure that the remedy is not based upon conduct "immaterial to the issuance of the patent."
Patent Docs has an excellent explanation of the opinion and the case background. And there is plenty of commentary about the opinion (see links below). My initial reaction was that the heightened standards will not actually reduce the number of inequitable conduct claims that are filed, although it may reduce the number of inequitable conduct findings.
So, while the overall outcomes may change, the general cost and complexity of patent litigation will likely remain the same. But when I said as much on Twitter (@rdd), I got an interesting reaction from what appears to be an anonymous patent lawyer. This anonymous person suggested that the heightened standard would actually embolden inventors and patent prosecutors to omit references and hide information from the Patent Office because they are now less likely to be charged with inequitable conduct. My inclination is to dismiss this theory based upon my operating presumption that most patent prosecutors, and most inventors, are, or at least intend to, zealously advocate for their clients, or themselves, within the Patent Office’s rules and the relevant ethics standards. Of course, I have seen exceptions, and they can be severe. But my experience is that those are the exceptions, not the rule. I am curious to hear what others think about this. Am I wrong?
Here is a round up of some of the blog posts about the decision:
Patent Compliance Group, Inc. v. Brunswick Corp., No. 10 C 4645, Slip Op. (N.D. Ill. Jan. 14, 2010) (Der-Yeghiayan, J.).
Judge Der-Yeghiyan denied defendant Brunswick’s Fed. R. Civ. P. 12(b)(6) motion to dismiss plaintiff Patent Compliance Group’s ("PCG") false patent marking claims regarding Brunswick’s exercise equipment. First, the Court held that Rule 9(b) heightened pleadings applied to the intent to deceive requirement of false patent marking, and anologized to the Federal Circuit’s inequitable conduct pleading requirements. While PCG’s first complaint alleging that Brunswick was a sophisticated company, PCG’s amended complaint attaching Patent Office documents identifying the expiration dates of the allegedly expired patents and identifying Brunswick’s in-house patent counsel was sufficient.
Avery Dennison Corp. v. Continental Datalabel, Inc., No. 10 C 2744, Slip Op. (N.D. Ill. Nov. 30, 2010) (Kennelly, J.).
Judge Kennelly granted plaintiff Avery Dennision’s ("ADC") Fed. R. Civ. P. 12(b)(6) motion to dismiss defendant Continental Datalabel’s ("CDI") inequitable conduct, Walker Process fraud and sham litigation counterclaims in this patent dispute regarding labels with a tear off liner to expose a portion of a label column for easy removal.
CDI alleged two bases of inequitable conduct. First, ADC allegedly intentionally failed to tell the examiner that certain limitations outlined in a series of bullet points were from a particular prior art reference. That claim filed because ADC had previously disclosed the prior art reference at issue to the examiner – once a reference is before an examiner, it cannot be found to have been withheld from the examiner. Second, ADC allegedly intentionally failed to disclose to the examiner that curling up of labels is an inherent characteristic of adhesive labels. But ADC had disclosed the inherent curling up by disclosing various prior art references regarding adhesive labels that taught the inherent curling up, combined with the examiner’s presumed experience in the art.
Walker Process Fraud Claim
Because CDI’s Walker Process claim was premised upon the alleged inequitable conduct, CDI’s Walker Process claim failed. The Court further noted that because inequitable conduct is a broader concept than Walker Process fraud, a party that fails to make its case for inequitable conduct, cannot make a Walker Process fraud claim.
CDI’s sham litigation claim was based upon allegations that ADC knew the patent was invalid based upon the Brady prior art reference, which was before the examiner, and because had ADC tested CDI’s accused labels, ADC would have realized its suit was baseless. Because the Brady reference was before the examiner, however, the Court could not find that the claim was "objectively baseless" as required for sham litigation. ADC could have reasonably believed that after the examiner considered Brady and granted ADC’s patent, ADC’s patent was in fact valid over Brady.
And ADC’s alleged failure to test the accused CDI product was not sufficient for a sham litigation claim. Sham litigation requires more than an unsuccessful suit. While CDI may eventually prove that it did not infringe, ADC’s failure to perform one test identified by CDI does "not permit the court to infer more than the mere possibility" that ADC’s suit was in bad faith.