Inequitable Conduct

In GS CleanTech Corp. v. Adkins Energy LLC, the Federal Circuit affirmed the district court's finding of inequitable conduct by GS CleanTech. The district court determined, and the Circuit confirmed that its discretion was not abused in holding:

1. the claimed invention was the subject of a pre-critical date offer for sale,
2. the claimed invention was ready for patenting prior to the critical date,
3. CleanTech and its lawyers made a deliberate decision to withhold material information with the specific intention to deceive the USPTO.
   1. CleanTech was aware (1) that the pre-critical date proposal (offer for sale) threatened its chances of patenting its ethanol oil recovery method and
   2. inventors and Cantor Colburn attorneys withheld evidence of successful testing in 2003 and made false representations by implying that the invention was not reduced to practice until 2004.
      1. Cantor Colburn knew by Sept. 2008 of testing in June and July of 2003, that the testing showed that “a sequence of evaporation followed by centrifugation allows for oil recovery” and that based on the testing, the inventors believed that the process would work on a commercial scale.
      2. Cantor Colburn was also in possession of the system diagram and test reports.
      3. Despite this possessing this information, Cantor Colburn did not provide it to the USPTO during prosecution of the patents in suit, and referenced it only to assert that hte claimed invention predated prior art reference Prevost cited by the Examiner.
      4. Furthermore, in June 2009, Cantor Colburn filed a letter with the USPTO stating that feasibility testing occurred in May 2004 with no mention of the documents dated a year earlier.
   3. In July 2009, Cantor Colburn sent Agri-Energy an offer to release liability and indemnification against any liability in return “for cooperating with CleanTech and for clarifying the use of hte corn oil system in 2004.” Notably, Cantor Colburn failed to request that Agri-Energy provide any documents regarding its interactions with the inventors.
   4. the inventors and Cantor Colburn made a “patently false” statement in the first Cantrell Declaration by claiming the JUly 2003 proposal was delivered after the critical date. The attorneys at Cantor Colburn testified that they themselves were skipteical of the veracity of the inventor's claim of hand delivering the proposal after the critical date, but filed the Cantrell declaration, notwithstanding the inventors' knowledge that the invention was practiced in June 2003 and they had offered to sell the invention to Agri-Energy in July or early August 2003 (before the critical date of August 17).
   5. the inventors and Cantor Colburn failed to correct the false declaration, and this is “strong evidence of intentional deceit.”

• 06/30/20: Petition for en banc hearing denied.
• 11/25/20: Petition for writ of certiorari filed
• 01/04/21: Amicus Brief of Michael McCabe, chairman of the ABA Section of Intellectual Property Law's ethics and professional responsibility committee. McCabe argues that the abuse of discretion standard applied by the Federal Circuit is unfair to attorneys accused of inequitable conduct.
• 02/22/21: Petition denied

Read more:

• Law360 (paywall)
• Supreme Court Petition

In Therasense v. Becton, the CAFC En Banc opinion authored by Chief Judge Rader, the court eviscerated the prevailing inequitable conduct doctrine replaced existing doctrine with a new, stricter doctrine that will severely limit the availablity of the inequitable conduct defense. Held by the court:

1. To prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with specific intent to deceive the PTO.
   • A finding that the misrepresentation or omission amounts to gross negligence or under a “should have known” standard does not satisfy this intent requirement.
   • In other words, the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.
2. Intent and materiality are separate requirements.
   • The district court should not use a “sliding scale,” where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. A district court may not infer intent solely from materiality.
3. As a general matter, the materiality required to establish inequitable conduct is but-for materiality. 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 (emphasis added).
   • Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction. . . . Often the patentability of a claim will be congruent with the validity determination–if a claim is properly invalidated in district court based on the deliberately withheld reference, then that reference is necessarily material because a finding of invalidity in a district court requires clear and convincing evidence, a higher evidentiary burden than that used in prosecution at the PTO.
   • This court does not adopt the definition of materiality in PTO Rule 56.
4. Although but-for materiality generally must be proved to satisfy the materiality prong of inequitable conduct, . . . an exception [is recognized] in cases of egregious misconduct.
   • This exception . . . incorporates elements of the early unclean hands cases before the Supreme Court, which dealt with “deliberately planned and carefully executed scheme[s]” to defraud the PTO and the courts.

Dissents:

Judge O'Malley dissented in part because he finds the but-for test “contrary to the very nature of equity and centuries of Supreme Court precedent.” O'Malley further stated that “We should adopt a a test that provides as much guidance to district courts and patent applicants as possible, but, in doing so, we may not disregard the equitable nature of the inquiry at hand. Judge O'Malley would have affirmed the district court in this case, in which the applicant made one statement to the EPO, and a contrary statement to the PTO

Judges Bryson, Gajarsa, Dyk, and Prost dissented in support of the Rule 56 standard for materiality, stating that the current standard serves important policy goals of incentivising applicants to submit prior art references and was persuaded by the PTO amicus brief that “The prosect of agency disciplinary action for disclosure violations is unrealistic . . . because the Office is required by statute to file any charges within five years . . . and it seldom learns of inequitable conduct within that period of time. In addition, the PTO explains that it rarely has access to relevant facts regarding inequitable conduct, because it lacks investigative resources.”

PTO response: On May 27, the PTO said that it is studying the impact of the court's decision on agency practice and procedures and will “soon” issue guidance to patent applicants.

• Synopsis and discussion
• Summary
• Article

In Exergen v. Wal-Mart, the CAFC, upheld the district court's refusal to consider inequitable conduct charges due to lack of particularity in defendant's pleading.

Background: Exergen asserted three patents directed to infrared thermometers for calculating internal or oral body temperature based on surface temperature, e.g., of the ear drum.

Inequitable Conduct: SAAT (Walmart's codefendant) filed a motion to add inequitable conduct as an affirmative defense and counterclaim against the '813 and '685 patents, which was denied by the district court, which denial was upheld by the CAFC. SAAT's proposed pleading argued that:

• Exergen was aware of a pending patent applications that was material to the '685 patent application, but did not disclose the application to the Patent Office.
• Exergen cited a material reference in an IDS for the '205 patent but never cited it in the '685 patent application.
• Exergen made arguments that it knew to be not true, i.e., that it was not obvious that reliable temperature measurements could be obtained from the forehead and that it had not been appreciated that the superficial temporal artery provides an exceptionally reliable temperature reading, despite statements in Exergen's own website to the effect that “the temporal artery area has a long history of temperature measurement, dating back to the early centuries before Christ…”

After summarizing the relevant case law, the CAFC notes that SAAT's pleading refers generally to “Exergen, its agents and/or attorneys,” but fails to name the specific individual associated with the filing or prosecution of the application issuing as the '685 patent, who both knew of the material information and deliberately withheld or misrepresented it, that is, the “who” of the material omission. Secondly, the pleading, according to the CAFC, fails to identify which claims, and which limitations in those claims, the withheld references are relevant to, and where in those references the material information is found–i.e., the “what” and “where” of the material omissions. Third, the CAFC found that the pleading states generally that the withheld references are “material” and “not cumulative,” but does not identify the particular claim limitations, or combination of claim limitations, that are supposedly absent from the information of record. Such allegations are necessary to explain both “why” the withheld information is material and not cumulative, and “how” an examiner would hav eused this information in assessing the patentability of the claims.

The CAFC went a step further, stating that, the facts that are alleged do not give rise to a reasonable inference of scienter, including both (1) knowledge of the withheld material information or of the falsity of the material misrepresentation, and (2) specific intent to deceive the PTO. The court, citing FMC Corp. v. Manitowoc Co., Inc. ¹⁾ stated: “one cannot assume that an individual, who generally knew that a reference existed, also knew of the specific material information contained in that reference.” As for the alleged misrepresentation, any knowledge of its alleged falsity is similarly deficient. No facts are alleged from which one can reasonably infer that, at the time of the allegedly false statement, the individual who made this statement to the PTO was aware of an allegedly contradictory statement on Exergen's website.

The CAFC instructs that “pleading on 'information and belief' is permitted under Rule 9(b) when essential information lies uniquely within another party's control, but only if the pleading sets forth the specific facts upon which the belief is reasonably based. […] The circumstances that SAAT has alleged, even if true, do not plausibly suggest any 'deliberate decision to withhold a known material reference' or to make a knowingly false misrepresentation–a necessary predicate for inferring deceptive intent.”

Anticipation: The CAFC reversed the denial defendants' motion for JMOL on validity of Claim 1 of Exergen's '205 patent. The claim requires “electronically detecting the peak radiation from the multiple areas to obtain a peak temperature signal.” The prior art reference shows an infrared temperature brobe that takes measurements seven times a second for ten seconds from the moment the user removes the probe from the “chopper” unit, and stores the maximum reading. The user is intended during the ten seconds to move the probe to an ear canal to take a temperature. During this time, testimony revealed that “peak radiation from multiple areas” is obtained. Therefore, the CAFC held the prior art reference inherently teaches each of the limitations of the '205 patent.

Infringement: The CAFC reversed the jury finding of infringement of the '813 patent, which claimed in part, “a display for providing an internal temperature.” The internal temperature is construed as the temperature beneath the area of surface temperature measurement, and is distinct from oral temperature, which is a standard location to take body temperature in the United States. Defendant-Appellant SAAT convinced the CAFC that since its device displays oral temperature and not internal temperature, it does not infringe the claim. The CAFC rejected arguments that oral temperature provides an indication of internal temperature, since the two have known correlations. Stated the court:

We observe that it is Exergen, not SAAT, which seeks to change the ordinary meaning of “indication” that was given to the jury. Exergent's own expert and coinventor on the '813 patent, Dr. Pompei, testified on direct examination that the phrase, “a display for providing an indication” in claim 7 means that ”[o]n the display it reads a temperature that is – you know, is the internal temperature.“

• Patents in suit: 5,012,813, 6,047,205, and 6,292,685

• Summary of inequitable conduct holdings, discussion
• Summary, commentary
• Summary of anticipation ruling
• Hal Wegner's take:
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| Exergen represents an important decision in the evolution of the law of inequitable conduct and deserves careful study.

In McKesson Information Solutions Inc. v. Bridge Medical, Inc., the Fed. Cir., in a lengthy opinion, affirmed a lower court's ruling that the reference "Baker" is not cumulative to other prior art, is material and must be disclosed if a different examiner, also aware of the other prior art, “treated the reference as an important addition to the prior art previously cited.” Intent to deceive is inferred because the second examiner brought the reference to the attorney's (Schumann's) attention, suggested cancellation of certain claims, and then rejected claims as obvious in view of the reference, including claim elements that were present in the other application, as well as a “mere seventeen-day gap” between Schumann's representation to Ex'r Trafton that the prior art does not disclose the three-node approach and the discussion with Ex'r Lev regarding the reference. Judge Newman dissented, stating that the record does present clear and convincing evidence of deceptive intent.

• Timeline
• Brief summary, opinion, and discussion

In eSpeed v. Brokertec, the Fed. Cir. upheld a lower court's ruling that eSpeed's patents are unenforceable because of inequitable conduct during prosecution. Citing Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc. ²⁾, Refac v. Lotus ³⁾, and Rohm and Haas Company v. Crystal Chemical Company, ⁴⁾, the Fed. Cir. noted that the declaration contains disingenuous statements and that, quoting Rohm & Haas, “The district court was free to draw an inference that these declarations were 'the chosen instrument of an intentional scheme to deceive the PTO.'”

• Summary
• Summary and analysis

In Cargill v. Cambra Foods, the Fed. Cir. upheld the lower court's finding that the patent at issue is unenforceable due to inequitable conduct. The patentee withheld material lab reports that refuted an argument made by Cargill during the course of prosecution. Cargill argued that “the data contained in the 1992 Report is not material because the tests underlying the Report were performed under unusual conditions and, thus, are not comparable to the data submitted to the examiner.” The Fed. Cir. stated that “Even accepting as true the factual premises of those arguments, the documents withheld during prosecution remain material. […] A reasonable examiner would certainly want to consider test data that is directly related to an important issue of patentability, along with the applicant’s interpretation of that data.”

• Brief summary and analysis
• Another brief summary

Despite Amicea briefs submitted by PhRMA, BIO, and the Washington Legal Foundation supporting certiorari, Ferring was denied cert., leaving the widely criticized Fed. Cir. decision in place. As mentioned previously, the Fed. Cir. upheld a lower-court ruling holding that Ferring's patent was unenforceable for inequitable conduct because it was not revealed to the PTO during prosecution that several non-inventor declarations were submitted by individuals who were previously paid consultants of the assignee. Read more.

• Ferring v. Barr (CAFC, Feb., 2006) –Blistering dissent by J. Newman
• Petition for a Writ of Certiorari.
• Status Of Writ.
• Amicus Curiae Brief filed by the Washington Legal Foundation
• Amicus Curiae Brief filed by the Biotechnology Industry Organization
• Order denying cert.

The CAFC upheld the lower-court's ruling that Ferring's patent was unenforceable for inequitable conduct because it was not revealed to the PTO during prosecution that several non-inventor declarations were submitted by individuals who were previously paid consultants of the assignee. Now Ferring has submitted a Petition for a Writ of Certiorari.

• Read more.
• Ferring v. Barr (CAFC, Feb., 2006) –Blistering dissent by J. Newman
• Status Of Writ.