Fordham: Revisiting the Doctrine of Inequitable Conduct Before the Patent and Trademark Office

Moderator: Darryl Lim, fellow, Fordham Law IP Law Institute

Inequitable conduct towards the PTO is a defense to infringement—the patent should never have issued in the first place. Duty of candor applies to patentee and attorney. Has been called an “atomic bomb” and a plague, because patent litigants are more and more inclined to allege inequitable conduct to short-circuit the infringement case. Empirical study: up to 60% of litigations involve allegations of inequitable conduct. Federal Circuit next week will hear Therasense en banc and consider the doctrine afresh.

Speakers: Christian Mammen, resident scholar, UC-Hastings Law

Standards of materiality/effect of the omission on the reasonable patent examiner are at issue. Also at issue is intent—hard to prove; questions over what the standard is: “should have known”; intent to decieve as the “single most reasonable inference”; inference of intent from high materiality of the withheld reference; whether there is a good faith explanation.

If both elements are found by clear and convincing evidence, the court is supposed to go through a balancing test to figure out if the conduct is so egregious as to warrant a finding of unenforceability, but this step is often skimmed over in the caselaw. Only current remedy is unenforceability; maybe we should make lesser remedies available.

His research: Federal Circuit affirms 92% of no inequitable conduct findings, but only affirms about half of inequitable conduct findings. Led to a perception that something needs to be done to rein in the use of the doctrine.

Main issue in Therasense is a finding of inequitable conduct based on statements made to the European Patent Office that were not made to the PTO (directly contradictory to statements made to the PTO)—intent determined based largely on materiality and credibility of the attorney who testified. Questions include whether the standards for materiality and intent in other federal agency contexts or common law shed light on the appropriate standards for patent. (I find this funny, inasmuch as the Federal Circuit in Bose simply presumed that the standards for fraud for trademark should simply be imported from patent; but apparently now those standards aren’t good enough.)

What kind of doctrine would best serve patent prosecutors’ compliance interests? A bright-line rule for materiality that would be determinable at the time of prosecution.

Paul Keller, Allen & Overy LLP

Litigator’s perspective: defense is used in vast majority of his cases, though there’s been client-driven momentum away from asserting it. At least wait until later in the case, after initial pleadings, when additional facts have been developed. Complex series of facts—the court on the initial Therasense panel was divided on how to interpret them, including whether the facts were material and whether the standard for intent should be objective or subjective as the dissent argued.

James Bollinger, Troutman Sanders

Here’s a case: Early on, it’s not clear what the facts are. But the patent at issue is critical to the startup suing. Whether to bring inequitable conduct into the case: risk v. reward.

Risk: weak claim will be denied, but it’s not before a jury, so there’s no/limited credibility penalty. Incremental costs of experts/discovery; these are relatively small. Incremental delay, same deal.

Rewards: if you win, patent is unenforceable forever, freely copyable by anybody. Entire family of patents can become infected. You can get your attorneys’ fees if you win. And there’s a possible antitrust claim under Walker Process, though probably not with a startup example.

Pleadings: must plead with particularity sufficiently to satisfy Iqbal/Twombly. Presents a privilege dilemma: prosecuting attorney must be deposed, which waives privilege—opens the door for other issues that the attorney was working on that might lock the patentee into a particular claim construction. Patentee has choices to make at Markman hearing about breadth/narrowness of claim. A broad interpretation of claims may bolster a materiality argument.

Summary judgment: intent is difficult to dispose of as a matter of law; fact intensive inquiry.

Ethical guidance: you’re accusing an officer of the court of committing fraud. So don’t raise weak claims. Judicial activism could help: criticizing weak claims. Better legal framework might help.

More aggressive actions: change the risk/reward assessment—accuser pays expenses or other penalties for unsuccessful claims. Lower the reward: sliding scale of remedy based on level of misconduct. A patent misuse type remedy which would only lead to temporary loss of rights, or sending it back to the PTO. However, if you do this too much, you may get more inequitable conduct allegations.

Possibles: provide standing to third parties such as the patent prosecutor or the PTO. Change/guide the burden of proof.

Discussion period: There was some discussion of whether inequitable conduct was needed. Mention of Mark Lemley’s work that examiners don’t rely on the disclosures but on their own searches; we may have overdisclosure now.

Keller: but that may be an effect of having the doctrine in place. Don’t abolish it; try to fix it. In ED Texas, court may consider inequitable conduct defense while the jury deliberates; judges don’t give the issue much due and just wait until the end of the case—maybe fixing that would help.

Bollinger also pointed out that inequitable conduct is litigated years after the prosecution, and the prosecutor is unlikely to have focused on the issue that turns out to be the key; probably doesn’t remember all that well; will have to reconstruct what happened; there can be inconsistencies; these inconsistencies then turn into credibility problems, which are almost unreviewable on appeal.