In Therasense, Inc. v. Becton, Dickinson & Co., 2011 WL 2028255 (Fed. Cir. 2011), the Federal Circuit overhauled the doctrine of inequitable conduct in an en banc, 6-1-4 opinion. This opinion redefines the intent and materiality elements that a party must show to prove inequitable conduct. Specifically, the Court held that the party asserting a claim for inequitable conduct based on nondisclosure of information to United States Patent and Trademark Office (“PTO”) must prove by clear and convincing evidence that the applicant made a “deliberate decision to withhold a known material reference.” The Court further held that a reference is material if a claim of the patent would not have issued had the applicant disclosed the reference to the PTO. This opinion is expected to have far-reaching implications for patent prosecutors and litigators.
Therasense and Abbott Laboratories (collectively, “Abbott”) sued Becton, Dickinson & Co., Nova Biomedical Corp. (Becton, Dickinson’s supplier) and Bayer Healthcare in the Northern District of California, alleging that defendants’ blood glucose test strips infringed claims of three United States patents, including U.S. Patent No. 5,820,551 (“the ’551 Patent”). The district court held that the ’551 Patent was invalid in light of an earlier patent to Abbott, U.S. Patent No. 4,545,382 (“the ’382 Patent”). The court also held that the ’551 Patent was unenforceable due to Abbott’s inequitable conduct in prosecuting the application for the ’551 Patent. Specifically, the district court found that Abbott made representations to the PTO that contradicted earlier arguments that it made in briefs submitted to the European Patent Office (“EPO”) when Abbott prosecuted the European counterpart to the ’382 Patent.
Of particular relevance was a limitation of claim 1 of the ’551 patent, which provides that the active electrode on Abbott’s claimed test strip is configured “without an intervening membrane….” The PTO rejected claim 1 as unpatentable over the ’382 Patent, which disclosed test strips that “optionally, but preferably” included a protective membrane. To distinguish its claimed invention from the ’382 Patent, Abbott represented that the invention disclosed in the ’382 Patent required a membrane, despite the language in the ’382 Patent providing that a membrane was optional, but preferable. Abbott argued to the PTO that the “optionally, but preferably” language in the ’382 Patent was “mere patent phraseology.” In a declaration submitted to the PTO, Abbott’s Director of Research and Development represented that the ’382 Patent should be understood as disclosing a test strip that requires a membrane, whereas the invention claimed in the application for the ‘551 Patent did not require a membrane. Ultimately, the PTO allowed the claim.
Three years earlier, however, in prosecuting the counterpart to the ’382 Patent in the EPO, Abbott represented that the test strip claimed in the counterpart to the ’382 Patent did not require a membrane. There, Abbott argued that the “optionally, but preferably” language in that application was properly understood to mean that a membrane is optional but preferred when used with live blood. Accordingly, Abbott’s representations to the PTO concerning the scope of its ’382 Patent contradicted arguments that it made to the EPO three years earlier.
The district court concluded that Abbott’s briefs to the EPO were material and that Abbott acted with an intent to deceive the PTO when it failed to disclose those briefs to the PTO. Abbott appealed, and the Federal Circuit affirmed. The Federal Circuit, however, granted Abbott’s petition for rehearing en banc, “[r]ecognizing the problems created by the expansion and overuse of the inequitable conduct doctrine.”
In the majority opinion, Judge Rader began by tracing the origin of the inequitable conduct doctrine to pre-1950’s United States Supreme Court cases involving the equitable defense of unclean hands. The majority explained that each of those cases involved “particularly egregious misconduct, including perjury, the manufacture of false evidence…and deliberately planned and carefully executed schemes to defraud not only the PTO but also the courts.” According to the Majority, the inequitable conduct doctrine has “metastasized” by departing from these Supreme Court cases, and its overuse now “plague[s]” the courts and the entire patent system.
To curb abuse of the inequitable conduct doctrine, the Court tightened both the intent and materiality standards required to prove a claim for inequitable conduct. The Court held that cases involving nondisclosure of information requires proof by clear and convincing evidence that “the applicant made a deliberate decision to withhold a known material reference.” Courts must now weigh the intent and materiality elements independently and may no longer use a “sliding scale” to overcome a weak showing of intent by a strong showing of materiality and vice versa. Furthermore, the Court held that the materiality required to establish inequitable conduct is “but-for” materiality. Prior art “is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.”
The Court remanded the case to the Northern District of California with instructions that the district court determine whether Abbott’s failure to provide the EPO briefs to the PTO was material under the Federal Circuit’s new but for standard. The Court also instructed the district court to determine whether Abbott intended to deliberately deceive to PTO, that is, whether it “knew of the EPO briefs, knew of their materiality, and made the conscious decision not to disclose them in order to deceive the PTO.”
In a separate opinion, Judge O’Malley concurred with the Majority’s heightened standard for the intent to deceive element, but dissented concerning the new test for materiality. In her opinion, the materiality test adopted by the majority and the materiality test championed by the dissent are too inflexible, particularly because the inequitable conduct doctrine has its roots in equity. Referring to the majority and dissenting opinions, Judge O’Malley noted, “Their respective materiality inquires are black or white, while equity requires judicial consideration of shades of gray.”
In a lengthy dissent, Judge Bryson (joined by Judges Gajarsa, Dyk and Prost) criticized the majority’s new test for materiality. According to the dissent, the Majority, in adopting its new materiality standard, departs from decades of precedent and “comes close to abolishing the [doctrine of inequitable conduct] altogether.” The dissent also expressed fears that new test for materiality may result in applicants concealing information from the PTO, providing applicants with “little to lose by following a course of deceit.”
Time will tell how the Court’s opinion in Therasense will impact patent prosecution and litigation. Patent applicants may no longer feel compelled to submit marginally-relevant information to the PTO out of fear that their failure to disclose such information will lead to a claim for inequitable conduct. Taken too far, however, the Court’s opinion may result in the failure of patent applicants to disclose critical prior art to the PTO, which may result in the issuance of lower quality patents. Or, perhaps, applicants will continue to submit marginally-relevant prior art to the PTO in the hopes of burying more material prior art. In the litigation context, district courts should expect far fewer counterclaims and defenses of inequitable conduct. In any event, Therasense can be regarded as a significant “win” for patent holders and patent prosecutors.