Therasense, Inc. v. Becton, Dickinson & Company: New Standards for Proving Inequitable Conduct

Daniel Staley and Bruce Dahl[1]

On May 25, 2011, in Therasense, Inc. v. Becton, Dickinson & Co.,[2] an en banc Court of Appeals for the Federal Circuit tightened the materiality and intent standards for proving inequitable conduct as a defense against patent infringement. The court raised the standard for materiality to what is known as the “but-for-plus” standard. The court also held that to prevail on a claim of inequitable conduct the accused infringer must prove that the patentee acted with “specific intent to deceive” the Patent and Trademark Office (“Patent Office”). Moreover, the court emphasized that intent and materiality are separate requirements—intent may not be inferred from materiality. The following article briefly discusses the evolution of the inequitable conduct standards and the new tightened standards set forth in Therasense.

Inequitable conduct is an equitable defense to patent infringement that bars enforcement of a patent, typically as a result of a breach of the duty of candor. The judge-made doctrine of inequitable conduct evolved primarily from three Supreme Court patent cases: Precision Instrument Manufacturing Co. v. Automotive Maintenance Machinery Co.;[3] Keystone Driller Co. v. General Excavator Co.;[4] and Hazel-Atlas Glass Co. v. Hartford-Empire Co.[5]  Each case applied the doctrine of “unclean hands” to dismiss patent cases involving egregious misconduct, including perjury, the manufacture of false evidence, and the suppression of evidence.[6] 

As the inequitable conduct doctrine evolved from these unclean hands cases, it came to embrace a broader scope of misconduct, including not only affirmative acts of egregious misconduct, but also the mere nondisclosure of information to the Patent Office.[7] Inequitable conduct also diverged from the doctrine of unclean hands by adopting a different and more potent remedy—unenforceability of the entire patent rather than mere dismissal of the instant suit.[8]  In accordance with this wider scope and stronger remedy, inequitable conduct came to require a finding of both “intent to deceive” and “materiality.”[9] 

However, the standards for intent and materiality fluctuated over time. Early court decisions applied low standards for the intent requirement, finding it satisfied by gross negligence or mere negligence, although later courts raised this standard.[10]  The doctrine also evolved to include a “sliding scale,” in which intent and materiality were considered together.[11]  This allowed the courts to find inequitable conduct on a reduced showing of intent based on a strong showing of materiality, and vice versa.[12]

Yet, regardless of which standards were applied, patent holders suffered the same devastating consequences. A finding of inequitable conduct not only rendered the litigated patent unenforceable, it often spread like cancer to other related patents and applications in the same technological family—making entire portfolios worthless.[13]  Moreover, after a finding of inequitable conduct, patent holders often faced antitrust and unfair competition claims.[14]  In some instances, a finding of inequitable conduct led to an award of attorneys’ fees[15] or satisfied the crime or fraud exception to the attorney‑client privilege.[16] 

Attuned to the fluctuating standards and ground-leveling consequences, reputable lawyers have been quick to make inequitable conduct allegations on the slenderest grounds by focusing on the applicant’s nondisclosure of material information whether it was intentional or unintentional.[17] One study concluded that approximately eighty percent of patent infringement cases included such allegations.[18]  This led critics to argue that the fluctuating inequitable conduct standards inadvertently created many unintended consequences, such as increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained Patent Office resources, increased Patent Office backlog, and impaired patent quality.[19]

In Therasense, the court set out to quiet the critics and change the effects of inequitable conduct by tightening the standards for materiality and intent.[20] The court raised the standard for materiality to a “but‑for-plus” standard. The new materiality standard considers information material if the Patent Office would not have allowed a claim had it been aware of the undisclosed information.[21]  However, the court recognized that affirmative acts of egregious misconduct before the Patent Office may not be subject to the “but-for” materiality standard. The court reasoned that when dealing with egregious misconduct it is safe to assume that “a patentee is unlikely to go to great lengths to deceive the PTO with a falsehood unless it believes that the falsehood will affect issuance of the patent.”[22]  The court went on to clarify that neither the “mere nondisclosure” of information to the Patent Office nor the “failure to mention” material information in an affidavit constitute affirmative acts of egregious misconduct.[23] 

The new intent standard requires the accused infringer to prove that the patent applicant acted with the “specific intent to deceive the PTO.”[24]  A finding that the misrepresentation or omission amounts to gross negligence or negligence under a “should have known” standard does not satisfy the intent requirement.[25]  The court reiterated that intent and materiality are separate requirements and that a “sliding scale” should not be used—intent may not be inferred solely from materiality.[26] Evidence of intent to deceive must be weighed independently of materiality.[27] While the court recognized that direct evidence of deceptive intent is rare, thus allowing a district court to infer intent from indirect and circumstantial evidence, the court nevertheless stressed that in order to meet the clear and convincing evidence standard, the specific intent to deceive must be the “single most reasonable inference able to be drawn from the evidence.”[28]  Moreover, the court specified that “when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found.”[29]

In conclusion, the Court of Appeals for the Federal Circuit has swung the pendulum of inequitable conduct standards to prevent courts from inferring intent based on the materiality of a reference.[30]  The standards should help decrease adjudication cost and improve the patent system by allowing patent holders to rely on their issued patents with more certainty.

 


[1] Bruce Dahl is the managing director of the Denver office for the law firm of Fennemore Craig, P.C. Mr. Dahl has extensive experience in all aspects of intellectual property law, including U.S. and foreign patent prosecution, patent infringement studies, designaround efforts, and agreements relating to intellectual property. Daniel Staley is an associate with the law firm of Fennemore Craig, P.C. Mr. Staley practices intellectual property law with an emphasis on U.S. and foreign patent prosecution.

[2] 649 F.3d 1276 (Fed. Cir. 2011) (en banc).

[3] 324 U.S. 806 (1945).

[4] 290 U.S. 240 (1933).

[5] 322 U.S. 238 (1944).

[6] See Precision, 324 U.S. at 814–20; Keystone, 290 U.S. at 243; Hazel‑Atlas, 322 U.S. at 240–45 (noting “a deliberately planned and carefully executed scheme to defraud not only the Patent Office” but also the court).

[7] Therasense, 649 F.3d at 1287.

[8] See Precision, 324 U.S. at 819-20 (dismissing suit); Hazel‑Atlas, 322 U.S. at 251 (noting that the remedy was limited to dismissal and did not render the patent unenforceable); Keystone, 290 U.S. at 247 (affirming dismissal of suit).

[9] Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008).

[10] Id. at 1365; Driscoll v. Cebalo, 731 F.2d 878, 885 (Fed. Cir. 1984); Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1382 (Fed. Cir. 2001); Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309, 1315 (Fed. Cir. 2006).

[11] Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1363 (Fed. Cir. 1984).

[12] Therasense, 649 F.3d at 1288.

[13] See, e.g. Consol. Aluminum Corp. v. Foseco Int'l Ltd., 910 F.2d 804, 808–12 (Fed. Cir. 1990).

[14] See Dow Chem. Co. v. Exxon Corp., 139 F.3d 1470, 1471 (Fed. Cir. 1998) (unfair competition claim); Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 174 (1965) (antitrust action for treble damages).

[15] Brasseler, 267 F.3d at 1380; see also 35 U.S.C. § 285 (2012).

[16] See In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 807 (Fed. Cir. 2000) (discussing the circumstances under which the crime or fraud exception may be satisfied).

[17] Therasense, 649 F.3d at 1289.

[18] Id.

[19] Id. at 1290.

[20] See id. at 1290–96.

[21] Id. at 1291.

[22] Id. at 1292.

[23] Id. at 1292–93.

[24] Id. at 1290.

[25] Id.

[26] Id.

[27] Id.

[28] Id.

[29]  Id. at 1290–91.

[30] See Powell v. Home Depot U.S.A. Inc., 100 U.S.P.Q.2d 1742, 1750 (Fed. Cir. 2011); Cordis Corp. v. Boston Scientific, 658 F.3d 1347, 1360 (Fed. Cir. 2011).