DUTY OF DISCLOSURE AND INEQUITABLE CONDUCT RAISED AS AN AFFIRMATIVE - - PDF document

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DUTY OF DISCLOSURE AND INEQUITABLE CONDUCT RAISED AS AN AFFIRMATIVE DEFENSE

Abraham J. Rosner and Grant Shackelford Sughrue Mion, PLLC

In addition to the defenses of non-infringement and invalidity, an alleged infringer may also raise “inequitable conduct” as an affirmative defense to patent

• infringement. If inequitable conduct is found, the patent is rendered

unenforceable. Noncompliance with the “duty of disclosure” may give rise to inequitable

• conduct. The duty of disclosure and those subject to the duty are defined in 37

CFR §1.56. The burden of the alleged infringer charging inequitable conduct is to prove, by clear and convincing evidence, that the patentee misrepresented or failed to disclose material information, or submitted false material information, and that such was done with an intent to deceive the patent examiner. Recently, in Therasense v. Becton, Dickinson and Co., the Federal Circuit en banc raised the standards for proving the materiality and intent requirements for inequitable conduct. The issue of inequitable conduct is decided by the judge (not the jury) at the district court level. At the appeal level, various panels of the Federal Circuit have reviewed district court decisions on the issue of inequitable conduct. The standard of review is whether the district court’s finding was “clearly erroneous.” As you will see, decisions in cases involving inequitable conduct tend to “turn on their specific facts.” Lastly, the MPEP provides guidance for complying with the duty of

• disclosure. MPEP §2004 (but has not been updated since 2004).

Historical Context of Fraud 1. Common Law Fraud a. Basis for civil liability for damages (money damages) to the defrauded party in addition to criminal liability. Serious charge.

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b. Clear and convincing evidence standard. 2. Inequitable Conduct before the Patent Office a. Unenforceability of the patent and potentially an award of attorney's fees to the accused infringer. Breach of duty of candor and good faith to the PTO. Comparison of Inequitable Conduct and Common Law Fraud 1. Common Law Fraud a. misrepresenting a material fact to another; b. knowing the falsity of the misrepresentation, or with reckless disregard for its truth; c. for the purpose of inducing the other person to rely on that fact; and d. the other person reasonably relies on the misrepresented fact and is injured by having relied thereon. 2. Example of Common Law Fraud A sells to B a necklace containing stones that A specifically told B were

• diamonds. However, A knew that the stones were really topaz. Here, A's false

representation is for the purpose of inducing B to buy the necklace. B relies on A's false representation and is injured by reason of that reliance by having paid A money for a diamond necklace that was instead made of topaz. Thus, under the common law, A would be liable to B for B's damages, because A committed fraud against B. 3. Corresponding Elements of Inequitable Conduct a. the patentee (or agent or representative or anyone associated with filing or prosecution of the application) misrepresented or failed to disclose material information to the PTO in prosecution of the patent, b. the patentee knew or should have known that the information

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was material, c. the misrepresentation or failure to disclose was intentional, and d. the PTO relied on the material information that was misrepresented or omitted. Injury occurs when the patent issues (the public is injured by the existence

• f the fraudulently procured patent), or when the patentee licenses or attempts to

license the patent. Reliance is on the part of the examiner, namely, that the applicant and his attorney have not misrepresented or withheld anything material

• f which the examiner was not aware of before the patent issues.

Duty of Disclosure

• Applicants for patents are required to prosecute patent applications in the

PTO with candor, good faith, and honesty.

• 37 C.F.R. §1.56 “…Each individual associated with the filing and

prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose … all material known to the individual to be material to patentability.” Persons Subject to Duty of Disclosure

• All individuals associated with the filing and prosecution of a patent

application:

• Each attorney or agent involved in preparing or prosecuting the

application (including foreign agents); and

• Every other person who is substantively involved with the

preparation or prosecution of the application and who is associated with the inventor, assignee or with anyone to whom there is an

• bligation to assign the application (including company IP

professionals) (37 C.F.R. §1.56)

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What Must be Disclosed?

• Information that a reasonable examiner would be substantially likely to

consider important in deciding whether to allow an application to issue as a patent – MPEP §2001.04 (old Rule 56).

• Not limited to “prior art”

Examples of “Information”

• Prior art cited in search reports of a foreign patent office in a counterpart

application

• Prior art cited in related applications
• Information relating to or from co-pending U.S. patent applications
• Information from related litigation
• Closest information (prior art) which any pending claim is considered to

patentably define over

• Prior art from the inventor’s file
• Use or knowledge by others prior to the date of application
• Evidence that the applicant did not invent the subject matter sought to be

patented

• Information relating to enablement (failure to disclose how to make and

use the invention)

• Anything else that would show lack of compliance with the statutory

requirement for patentability

• Contrary decision of another examiner
• Relevant documents cited in previous and pending prosecution
• Relevant litigation documents
• Information about prior uses and sales

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• Information from trade shows and journal articles
• “Reasonable Examiner” standard
• Would a reasonable Examiner have found the submission relevant

to the examination of the claims?

• From the perspective of the Examiner, not the applicant

Compliance with the Duty of Disclosure

• In Therasense, the Federal Circuit narrowed the scope of conduct that can

rise to the level of inequitable conduct. However, given the uncertainty surrounding application of this decision, it would be reasonable to maintain pre-Therasense prosecution practices.

• The duty is discharged by bringing to the examiner’s attention information

that is “material to patentabiity.”

• Unless information is truly redundant or one has a good faith explanation

for why it need not be submitted, it remains prudent to submit information that could be relevant to patentability. However, eliminate clearly irrelevant and marginally pertinent cumulative information.

• Information Relating to or From Copending US Patent Applications
• Disclose the existence of related, copending applications.
• Make prior art references from one application of record in related

applications if such prior art references are “material to patentability”

• f the related applications.
• Disclose information from Related Litigation
• Collect and submit prior art from inventor’s file – inventor should

understand the duty of disclosure

• Submit ISR and Written Opinion, including English translation
• Submit references cited in ISR, together with an English language abstract
• For non-English language documents, in the absence of a Search Report

from a foreign patent office in a counterpart application (with English

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language version of the search report indicating the degree of relevance found by the foreign office), submit any of (i) a concise statement of relevance or (ii) an English translation of the pertinent portions of the reference (which may also happen to be an abstract).

• There is no need to translate every foreign reference. However, adequate

care must be taken so as not to submit partial translations and concise explanations that will misdirect the examiner’s attention from the reference’s relevant teachings (for example, where the untranslated portions contain a more complete combination of the claimed elements than other prior art before the examiner).

• Submit prior art cited in office actions of counterpart applications foreign to

the United States. Include English translation of office action, when

• available. Include English translation of portion of reference relied upon by

foreign patent office.

• Cross-reference prior art cited in applications where the examiner has

issued an obviousness-type double patenting rejection - if such prior art references are “material to patentability” of the subsequent application. Submit copies of office actions issued in the other application as might be appropriate.

• Same for “related” applications, related by priority as well as by subject

matter.

• Take care to see that prior art cited in the Background section of the

specification (or in an IDS for that matter) is properly described and that the information is not incorrectly or incompletely characterized.

• Be careful to take consistent positions (on the meaning of claim terms or

what the prior art discloses to one of ordinary skill) before the USPTO and foreign patent offices.

• Be careful not to introduce inaccurate statements into the specification,

and confirm that all statements relating to the presentation of comparative test data in a Rule 132 Declaration are accurate.

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Duration of the Duty

• Until:
• Abandonment
• Patent Grant (not just allowance)

Burden of Proof To prove that a patent is unenforceable due to inequitable conduct, the alleged infringer must provide clear and convincing evidence of (1) affirmative misrepresentations of a material fact, failure to disclose material information, or submission of false material information; and (2) an intent to deceive the

• examiner. Impax Laboratories, Inc.

Materiality

• A misstatement or omission is material to patentability if but-for the

misstatement or omission the patent examiner would not have allowed the

• claim. Therasense
• Affirmatve acts of egregious misconduct are material. The filing of an

unmistakably false affidavit would constitute an affirmative act of egregious

• misconduct. Therasense
• Under “old” Rule 56, information is material:
• where there is a substantial likelihood that a reasonable examiner

would consider it important in deciding to allow the application to issue as a patent.

• Under “present” 37 CFR §1.56, information is material to patentability

when it is:

• Noncumulative
• Gives rise to a prima facie case of unpatentability
• Refutes or is inconsistent with applicants’ position

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• Under “proposed” 37 CFR §1.56, information is material to patentability if it

is material under the standard set forth in Therasense. Information is material to patentability under Therasense if: (1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or (2) The applicant engages in affirmative egregious misconduct before the Office as to the information. Intent to Deceive

• Inequitable conduct also requires proof of an intent to deceive. Intent is a

state of mind in which a person seeks to accomplish a given result through a course of action.

• Proof of specific intent requires that an applicant (1) know of a reference,

(2) know that the reference was material and (3) make a deliberate decision to withhold the reference. Therasense

• Intent need not be proven by direct evidence. Rather, intent to deceive is

generally inferred from the facts and circumstances surrounding the applicant’s conduct. However, an inference of deceptive intent from circumstantial evidence must be "the single most reasonable inference able to be drawn from the evidence." Therasense

• Demeanor of witness before the judge is often key (credibility and

character). Molins PLC, McKesson Information Solutions Inc. Must Meet Thresholds of Materiality and Intent

• The withholding of information must meet thresholds of both materiality

and intent.

• Materiality and intent requirements are separate requirements that must

each be proven by clear and convincing evidence. These requirements can no longer be met using a sliding scale where a stronger showing of

• ne compensates for a weaker showing of the other. Therasense

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• Once threshold finding of materiality and intent are established, the court

weighs them to determine whether the equities warrant a conclusion that inequitable conduct occurred.

• In light of all the circumstances, an equitable judgment must be made

concerning whether the applicant’s conduct is so culpable (blameworthy) that the patent should not be enforced. Entire Patent is Rendered Unenforceable

• If inequitable conduct occurred with respect to one or more claims of an

application, the entire patent is unenforceable. Kingsdown Med. Consultants, Ltd. Supplemental Examination 35 U.S.C. § 257

• Supplemental examination was created under the America Invents Act and

became effective as of September 16, 2012. This procedure allows patent

• wners to cure omissions or misrepresentations that occurred during

prosecution.

• A patent owner may seek supplemental examination of an issued patent

based upon newly submitted information. The PTO will determine whether newly submitted information creates a substantial new question of patentability.

• If the PTO finds a substantial new question of patentability, it will order an

ex parte reexamination of the patent. Otherwise, the PTO will issue a certificate that the information presented in the request does not raise a substantial new question of patentability.

• A patent cannot be held unenforceable for a misrepresentation or omission
• f information during a prior examination once that information is

considered in a supplemental examination.

• Supplemental examination must be completed prior to the filing of a lawsuit

where inequitable conduct may be raised as a defense.

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• Supplemental examination must be filed before the inequitable conduct

being alleged in a pleading or Paragraph IV certification.

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Therasense Inc. v. Becton, Dickinson & Co. 99 USPQ2d 1065 (Fed. Cir. 2011) (en banc) Holding: In a 6-1-4 decision, the Federal Circuit en banc vacated the ruling of the district court that Abbott’s U.S. Patent 5,820,551 relating to glucose test strips (for monitoring blood sugar) is unenforceable due to inequitable conduct. Aiming to "redirect a doctrine that has been overused to the detriment of the public," the court heightened the standards for proving that a patentee's alleged misconduct was material to patentability and undertaken with intent to deceive the PTO. The court also rejected the sliding scale approach that allowed strong evidence of materiality to compensate for weak evidence of intent to deceive (and vice-versa). However, the court created a significant exception for "affirmative egregious misconduct," which is per se material. Finally, the court held that a finding of inequitable conduct should not immediately render a patent unenforceable. Rather, the district court must also "weigh the equities" to determine whether the applicant's conduct before the PTO warrants rendering the entire patent unenforceable. Subject Matter: Glucose test (electrode) strips for monitoring blood sugar. Prosecution History: Abbott pursued the ‘551 patent over a period of 13 years and half-a-dozen continuation applications that were repeatedly rejected for anticipation and obviousness, including repeated rejections over the ‘382 patent (Abbott’s own prior art). New claims were drafted to distinguish

• ver the ‘382 patent including electrochemical sensors lacking a membrane. Pope (Abbott’s

patent attorney) presented the new claims with the argument that the claims defined a new glucose sensor that did not require a protective membrane when testing whole blood. Pope and the examiner discussed a relevant passage in the ‘382 patent which characterized the membrane as “optionally, but preferably present.” In Pope’s summary of the interview, he stated that he “pointed out that [the ‘382 patent] teaches that active electrodes designed for use with whole blood require a protective membrane.” The examiner agreed that if Abbott produced an affidavit showing that at the time of the invention such a membrane was considered essential, it would

• vercome the ‘382 patent.

In accordance with that agreement, Dr. Sanghera (Abbott’s head of R&D) submitted an

• pinion Declaration to the effect that based on his knowledge, one skilled in the art would have

felt that a protective membrane would be required, and that he was sure that one skilled in the art

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would not read the passage of the ‘382 patent at issue as teaching that the use of a protective membrane with a whole blood sample is “optionally or merely preferred.” The examiner then allowed the application which issued as the ‘551 patent. However, Abbott was also involved in defending its EP 0 078 636, a counterpart of the ‘382 patent with virtually identical specifications, which was revoked as being obvious over a reference D1. Abbott’s patent counsel submitted to the EPO a brief distinguishing EP ‘636 from a reference D1 (said to require a membrane), stating “Contrary to the semipermeable membrane

• f D1, the protective membrane [is] optionally utilized with the glucose sensor …” and in

characterizing the subject passage of EP ‘636 stated: “It is submitted that this disclosure is unequivocally clear. The protective membrane is optional, however, it is preferred when used on live blood …” Abbott’s argument was that because the membrane in EP ‘636 (i.e., the membrane in the counterpart ‘382 patent) is optionally used, it was different from the type of membrane required by D1. Controversy: Becton, Dickinson & Co. brought a declaratory judgment action against Abbott, asserting that two of Abbott’s glucose test strip patents were not infringed. Abbott countersued, and also brought infringement suits against other defendants. The suits were consolidated. The district court issued a summary judgment order finding, among other things, that the ‘551 patent was unenforceable due to inequitable conduct. Abbott appealed. On appeal, the Federal Circuit upheld the district court's judgment of unenforceability. Abbott petitioned the court for rehearing en banc, which the court granted, "[r]ecognizing the problems created by the expansion and overuse of the inequitable conduct doctrine." Basis for Holding: (a) Materiality The Federal Circuit raised the standard for proving materiality. Previously, materiality was determined under the PTO's Rule 56 disclosure requirement, which defined material information as non-cumulative information that either (1) “by itself or in combination with other information…compels a conclusion that a claim is unpatentable" or (2) is inconsistent with “a position the applicant takes” arguing that the claim is patentable. The court found that this low threshold had contributed to what had become an "absolute plague" of charging inequitable conduct in almost every major patent case. Moreover, as an equitable doctrine, inequitable conduct should be applied only in instances where the patentee's misconduct resulted in the unfair benefit of receiving an

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unwarranted claim. In view of this objective, the court raised the materiality standard to "but-for materiality." Under this standard, prior art is considered material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. In determining whether the PTO would find evidence material to patentability, a court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction, as is done by the PTO during prosecution. The court also created an exception to its but-for standard for egregious misconduct. When the patentee has engaged in affirmative acts of egregious misconduct, the misconduct is per se material. As an example, the court noted that filing of an unmistakably false affidavit would constitute an affirmative act of egregious misconduct. However, the court stressed that such misconduct was not limited to the filing of false affidavits. Through this exception, the court sought to strike a balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitable conduct. In view of its heightened materiality standard, the Federal Circuit vacated the district court's finding of materiality. The district court was instructed to determine whether the PTO would not have granted the patent had it known of the EPO briefs that Abbott failed to disclose. Specifically, the court was to determine whether the PTO would have found Sanghera's declaration and Pope's accompanying submission unpersuasive in overcoming the obviousness rejection over the '382 patent if Abbott had disclosed the EPO briefs. (b) Intent The Federal Circuit also raised the standard for proving specific intent to deceive the

• PTO. A party asserting inequitable conduct must prove by clear and convincing evidence that

the patentee acted with specific intent to deceive the PTO. Under prior case law, this threshold was met upon a showing of gross negligence or simply negligence. Consequently, where a party knew or should have known that a reference would have been material to the PTO during prosecution, the failure to disclose the reference evidenced an intent to mislead. The Federal Circuit departed from this calculus. Clear and convincing evidence must show that an applicant made a deliberate decision to withhold a known material reference from the PTO. A misrepresentation or omission that results from negligence or even gross negligence cannot demonstrate intent to deceive. Proof of specific intent requires that an applicant (1) know

• f a reference, (2) know that the reference was material and (3) make a deliberate decision to

withhold the reference. The court further held that the intent and materiality requirements can no longer be met using a sliding scale where a stronger showing of one compensates for a weaker showing of the

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• ther. Intent and materiality are distinct requirements, and a district court must weigh the

evidence of each separately. When making a determination of specific intent, a court may rely upon direct and circumstantial evidence. However, an inference of deceptive intent from circumstantial evidence must be "the single most reasonable inference able to be drawn from the evidence." Further, the absence of a good faith explanation for withholding a material reference cannot, by itself, prove intent to deceive. A party alleging inequitable conduct has the burden of proving intent by clear and convincing evidence. Only then does the burden shift to the patentee to offer a good faith explanation of conduct. Based on this new "knowing and deliberate standard," the Federal Circuit vacated the finding of specific intent by the district court. The district court had based its finding of specific intent in part on the fact that Abbott failed to offer a good faith explanation for not disclosing the contradictory EPO briefs to the USPTO. Additionally, the district court relied upon the should have known standard. The case was remanded to the district court to determine intent based on the new knowing and deliberate standard. Comment: This decision by the Federal Circuit is the main guide on inequitable conduct and makes proving the inequitable conduct more difficult. Despite the heightened standards for materiality and intent, USPTO Rule 56 disclosure requirement remains unchanged. It therefore remains prudent to continue to submit prior art and other facts that might be relevant to patentability in the same way as before this decision.

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1st Media v. Electronic Arts, Inc.: 2012 U.S. App. LEXIS 19250 (Fed. Cir. Sept. 13, 2012) Holding: The Federal Circuit reversed finding of district that 1st Media's U.S. Patent 5,464,946 was unenforceable due to inequitable conduct. The Federal Circuit held that the district court never considered whether patent applicants made a deliberate decision to deceive the PTO. The failure to disclose a reference of known materiality is insufficient by itself to establish specific intent to deceive the PTO. Subject Matter: An entertainment system for use in purchasing and storing songs, videos and multimedia karaoke information Prosecution History: During prosecution of the '946 patent application, the named inventor Dr. Scott Lewis and his attorney Joseph Sawyer filed a number of patent applications for related inventions. These applications included International Patent Application No. PCT/US93/10930 ("PCT application"), U.S. Patent No. 5,564,001 and U.S. Patent No. 5,325,423. The PCT application was identical to the '946 patent, save for an additional claim 16 in '946 to a karaoke machine. The '423 and '001 applications had large portions of their specifications that were identical to the '946 patent. In particular, they shared identical descriptions of patentee terms interactive multimedia mastering system (IMM), multimedia call processing system (MCPS) and interactive multimedia devices (IMD). Controversy: Electronic Arts asserted that during prosecution, Lewis and Sawyer committed inequitable conduct by failing to disclose prior art references to the PTO. During prosecution of the PCT application, an examiner at the European Patent Office rejected the application in view

• f the "Bush" International Publication. Several claims in the '423 application were rejected as

anticipated by the "Baji" reference, which disclosed an IMM, MCPS and IMD, also found in claim 16 of the '946 patent. Similarly, during prosecution of the '001 patent, the Examiner asserted that the "Hoarty" reference disclosed IMM, MCPS, and IMD structures. Lewis and Sawyer never disclosed any of these references to the PTO, and the references were not considered during examination of the '946 application.

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Both Lewis and Sawyer testified that they did not appreciate the materiality of the Bush, Baji and Hoarty references. Lewis testified that nondisclosure of Bush was an oversight and not an intentional decision. Sawyer stated that Bush did not seem significant enough to warrant

• disclosure. Regarding the Baji and Hoarty references, Lewis and Sawyer each testified that the

technology in the co-pending '423 and '001 applications was so distinct from the '946 Application that it did not occur to them to disclose these references. The district court rejected these explanations. The court determined that Lewis and Sawyer knew that the references were material and that each failed to provide a credible good faith explanation for their non-disclosure of the references. Consequently, the court inferred that Lewis and Sawyer intended to deceive the PTO and committed inequitable conduct. Basis for Holding: On appeal, the Federal Circuit reversed the district court's finding of inequitable conduct. Citing Therasense, the court noted that "[i]n a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.'" "Knowledge of the reference and knowledge of materiality alone are insufficient after Therasense to show an intent to deceive." Upon reviewing the record from the district court, the Federal Circuit found that the court never considered whether there was a deliberate decision by anyone to withhold the Bush, Baji and Hoarty references from the PTO. Consequently, the record did not support an inference that Lewis and Sawyer deliberately chose to withhold the prior art references. At best, the record showed that Lewis and Sawyer knew that the references were material. However, the Federal Circuit reiterated that an applicant's knowledge of a reference's materiality cannot by itself prove that any subsequent non-disclosure was based on a deliberate decision. Moreover, the district court erred in inferring deceptive intent from Lewis's and Sawyer's inability to offer a good faith explanation for their failure to submit the references. "The patentee need not offer any good faith explanation unless the accused infringer first carried his burden to prove threshold level of intent to deceive by clear and convincing evidence." Ultimately, the evidence supported only that Lewis and Sawyer (1) knew of the references, (2) may have known that they were material and (3) did not inform the PTO of the references. But under Therasense, that is not enough. A defendant must make a deliberate decision to withhold a reference. Comment: This decision demonstrates the difficulties in satisfying the materiality and specific intent standards for inequitable conduct after Therasense. In particular, evidence must be presented

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showing that a patent applicant made a deliberate decision to withhold a material reference. Knowledge of materiality and failure to disclose alone are insufficient.

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Aventis Pharma v. Hospira, Inc. 102 USPQ2d 145 (Fed. Cir. 2012) Holding: The Federal Circuit affirmed finding of district court that Aventis Pharma and Sanofi- Aventis's U.S. Patents 5,750,561 and 5,714,512 were unenforceable due to inequitable conduct. The Federal Circuit agreed with the district court that applicants' selective disclosure of material prior art during prosecution evidences a deliberate intent to deceive the PTO. Subject Matter: The '561 and '512 patents cover administration of the chemotherapy cancer drug doectaxel with a polysorbate surfactant. Product Development: Doectaxel is a member of the taxane family of drugs, which exhibit low water solubility and precipitate out of solution. To improve solubility and avoid precipitation, taxanes are mixed with additives, like surfactants and ethanol. One surfactant disclosed in the prior art was Cremophor; however, Cremophor was known to trigger serious allergic reactions in some

• patients. The '561 and '512 patents claimed the use of a polysorbate surfactant to improve

solubility without the detrimental side effects from Cremophor. Controversy: The district court found that during prosecution of the '561 and '512 patents, the patent applicants committed inequitable conduct by failing to disclose the "Vidal" and "GV" references to the PTO. The Vidal reference disclosed use of polysorbate 80 as a surfactant with the cancer drug etoposide. The GV reference described the relationship between the structure and activity

• f cancer drugs, including docetaxel. In particular, the GV reference stated that "Taxotere (13a)

showed a better solubility in excipient system (polysorbate 80/ethanol, 1:1)." Basis for Holding: The Federal Circuit affirmed the lower court's finding of inequitable conduct. (a) Materiality The Federal Circuit based its finding of materiality on the fact that the district court had invalidated the '561 and '512 patents for obviousness in view of Vidal and GV. To invalidate a

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patent in district court requires clear and convincing evidence. But-for materiality for inequitable conduct requires only a preponderance of the evidence. Accordingly, the Federal Circuit held that where a claim is invalidated in district court based on a deliberately withheld reference, then that reference is necessarily material to patentability. (b) Specific Intent The Federal Circuit inferred specific intent to deceive from the applicants' selective disclosure of prior art. Applicants submitted the Rowinsky reference, which identified the problems associated with the use of Cremophore that the inventors were trying to solve. However, applicants did not cite the Vidal and GV references, which revealed the solution to the problem - the switch from Cremophor to polysorbate. Both of these references were key to the development of the claimed invention and required disclosure to the PTO. The court held that applicants' careful and selective decision of how much material information to disclose evidenced a deliberate intent to deceive. Comment: A prior art reference is material where it forms the basis for a finding of invalidity under §§ 102 or 103 at the district court. Evidence of selective disclosure of material prior art can support a finding of specific intent to deceive the PTO.

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Powell v. Home Depot: 100 USPQ2d 1742 (Fed. Cir. 2011) Holding: The Federal Circuit affirmed finding of district court that Powell's U.S. Patent 7,044,039 was not unenforceable due to inequitable conduct. The Federal Circuit disagreed with the district court that failure to inform the PTO of changes in circumstances for a Petition to Make Special constitutes a material omission. Subject Matter: Radial arm saw guard safety technology. Prosecution History: During prosecution, patentee Powell filed a Petition to Make Special, seeking expedited review on grounds that he was obligated to manufacture and supply devices embodying the claims sought. Although negotiations for the supply agreement fell through before the PTO granted the petition, Powell never informed the PTO that he no longer qualified for the Special

• designation. He instead continued to actively encourage the PTO to decide the petition.

Controversy: Home Depot asserted inequitable conduct on the basis of Powell's failure to update the PTO as to his change in circumstances regarding the Petition to Make Special. The district court held that this failure was material and done with intent to deceive the PTO. However, upon a balance of the equities, the district court determined that Home Depot failed to prove that the '039 patent should be unenforceable due to inequitable conduct. Basis for Holding: The Federal Circuit considered whether Powell's misconduct constituted an affirmative act of egregious misconduct. The court held that failure to update the record to inform the PTO that circumstances which support a Petition to Make Special no longer exist does not constitute inequitable conduct. This conduct fails the but-for materiality standard and is not the type of unequivocal act that would rise to the level of affirmative egregious misconduct. Comment:

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The scope of the affirmative egregious misconduct exception for but-for materiality remains unclear following this case. However, the Federal Circuit does make clear that not all misrepresentations to the PTO rise to the level of egregious misconduct.

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Outside the Box Innovations, LLC v. Travel Caddy, Inc. 2012 BL 24323 (Fed. Cir. 2012) Holding: The Federal Circuit reversed finding of district court that Travel Caddy's U.S. Patent 6,823,992 and its Continuation Patent 6,991,104 were unenforceable due to inequitable conduct. The Federal Circuit disagreed with the district court that (1) failure to disclose ongoing litigation was but-for material and (2) errant assertion small entity status was made with deceptive intent. Subject Matter: The '992 and '104 patents are directed to tool carry cases. Prosecution History: The '104 patent is a continuation of the '992 patent. During prosecution of the patents in suit, Travel Caddy asserted small entity status and paid reduced PTO fees. During prosecution

• f the '104 patent, Outside the Box Innovations filed the instant action for declaratory judgment,

seeking a finding of non-infringement of the '992 patent. Controversy: Outside the Box asserted that Travel Caddy committed inequitable conduct by failing to disclose the declaratory judgment action to the examiner of the '104 patent and wrongly paying small entity fees. Specifically, Outside the Box argued that although Travel Caddy met the small entity definition of having fewer than 500 employees, Travel Caddy had a commercial arrangement with a large entity, which precluded Travel Caddy from claiming small entity status. The district court found both the '992 and '104 patents unenforceable due to inequitable

• conduct. The court held that ongoing litigation of a patent that is related to an application

pending before the PTO constitutes material information. Even though only infringement of the '992 patent had been placed at issue, the court held that the issue of validity would likely arise. The district court also inferred specific intent on the basis that the prosecuting attorney for the '104 and '992 patents was also heavily involved in the concurrent litigation. The court further held that the claim for small entity status was an affirmative misrepresentation, made with an intent to deceive the PTO. Basis for Holding

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The Federal Circuit reversed the district court's findings of materiality and specific intent for both the failure to disclose ongoing litigation and the incorrect claim for small entity status. (a) Ongoing Litigation Despite the possibility that issues of patent validity could arise later in litigation, the Federal Circuit held that in the absence of a citation of prior art, or any pleading of invalidity or unpatentability, the litigation was not material to patentability of the '104 application. The court further held that the record contained no suggestion of how withholding the '992 litigation could have deceived the examiner or any deliberate action by the patent applicant to deceive the examiner. (b) Unjustified Assertion of Small Entity Status The Federal Circuit began by noting that affirmative egregious misconduct, such as submitting a false affidavit, is per se material. Moreover, a party that claims entitlement to small entity status does by submitting a sworn written declaration. However, the court decided not to determine whether an declaration for small entity status constitutes affirmative egregious misconduct. Instead, the court focused its analysis on the lack of specific intent to deceive. The court held that the record lacked any evidence that patent applicants knew they were not entitled to small entity status and deliberately withheld that information in order to pay small entity fees. Accordingly, absent evidence that small entity status was deliberately falsely claimed, a finding

• f unenforceability was inappropriate.

Comment: The holding in this case that ongoing litigation is not material to patentability appears limited to the narrow circumstance where patent invalidity has not been raised. Typical patent litigation will involve patent invalidity and will require disclosure to the PTO. Regarding the egregious misconduct exception, the Federal Circuit again avoids clarifying when submission of false affidavits constitutes egregious misconduct. This remains an important exception to consider during prosecution.

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Pre-Therasense Case Law

Impax Laboratories, Inc. v. Aventis Pharmaceuticals Inc.

81 USPQ2d 1001 (Fed. Cir. 2006) Holding: The Federal Circuit affirmed finding of district court that Aventis’ U.S. Patent 5,527,814 was not unenforceable due to inequitable conduct. The Federal Circuit agreed with the district court that certain comparative test data withheld by applicants during prosecution was not material to examination. Subject Matter: Method of treating mammal with ALS (a neural motor disease), which comprises administering to a mammal in need of such treatment an effective amount of riluzole or a pharmaceutically acceptable salt thereof. Product Development: The inventor tested 8 compounds for activity against ALS using rat spinal cord cells, finding that only riluzole produced positive results for each of three parameters that were tested. Prosecution History: Aventis submitted comparative test data for two of the eight compounds (Pharm 1006 and Pharm 1007) that were tested, as showing unexpected results, in response to a rejection over prior art including the ‘940 patent which disclosed those two compounds. The examiner did not find this showing to be persuasive (because Aventis did not demonstrate that there was a reasonable correlation between tests conducted on rat spinal cord cells and treatment of ALS), and maintained the rejection. The application was subsequently allowed, but for other reasons. Controversy: Impax filed an ANDA (Abbreviated New Drug Application), seeking approval to market and sell generic riluzole tablets for the treatment of ALS. In a Delcaratory Judgment action, Impax sought a ruling (by the court), that Aventis’ patent was unenforceable due to inequitable conduct, among other things.

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Specifically, Impax’s contention was that during prosecution, Aventis withheld comparative test data for other compounds that were evaluated. According to Impax, the withheld data was material because some of the compounds showed better results than Pharm 1006 and Pharm 1007, and was therefore inconsistent with an argument (that the invention was patentable because it showed unexpected results over two of the compounds) advanced by Aventis in support of patentability. Basis for Holding: The district court did not err in finding that Impax had failed to prove, by clear and convincing evidence, that Aventis’ patent was unenforceable due to inequitable conduct. (a) Withheld Test Data Not Material While (i) some of the other compounds evaluated by Aventis showed positive results in

• ne parameter, none of the Pharm compounds from the withheld tests produced significant

results in all of the tested parameters. Thus, there was no evidence that the withheld comparative test data (by itself or in combination with other information) would give rise to a prima facie case of unpatentability (of the claimed compound producing positive results for each of the three parameters that were tested). Additionally, (ii) the court found that there was no evidence that the withheld comparative test data refutes or is inconsistent with a position that Aventis took during prosecution. Namely, the comparative test data was submitted to demonstrate unexpected results over compounds disclosed in the ‘940 patent and that was relied upon by the examiner. Aventis never suggested that this was the only test data or that other compounds were not tested. Most importantly, (iii) there was no evidence that a reasonable examiner would have considered the withheld test data to be important in deciding whether to allow the application. This is because the examiner specifically rejected the subject test data (based on rat cells) as not being indicative of effectiveness in treating ALS. (b) No Intent to Deceive Aventis disclosed test data relevant to distinguishing the ‘940 patent (cited prior art), but did not disclose comparative test data irrelevant to distinguishing the ‘940 patent. These facts, standing alone, are not enough to establish an intent to deceive. Comment: The generic maker will typically assert any and all defenses that have at least some chance of success (including non-infringement, invalidity over prior art, invalidity under §112 and unenforceability due to inequitable conduct) in an attempt to take out the patent of the

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“ethical” pharmaceutical company. The basis for the charge of inequitable conduct here was tenuous (weak).

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Cargill Inc. v. Canbra Foods Ltd.

81 USPQ2d 1705 (Fed. Cir. 2007) Holding: Federal Circuit affirmed finding of district court that Cargill’s U.S. Patent Nos. 5,969,169 and 6,201,145 are unenforceable due to inequitable conduct. The Federal Circuit agreed with the district court that certain test data withheld from the Examiner during prosecution was material to patentability, and that the omitted data’s high degree of relevance also pointed to an intent to deceive. Subject Matter: A non-hydrogenated canola oil having a polyunsaturated fatty acid content of 7 to 17%,

• leic acid content of 74 to 80% and an oxidative stability from 35 to 40 AOM in the absence of

added antioxidants. Prosecution History: The pending claims were rejected over a prior art oil having a composition similar to one

• f Cargill’s examples (IMC-30). The examiner took the position that the prior art oil would

inherently have the claimed oxidative stability. In response Cargill pointed to test data in its specification for an oil IMC-129 having a composition similar to that of the prior art oil, but whose oxidative stability differed from that of IMC-130. The purpose was to demonstrate that fatty acid composition does not necessarily determine oxidative stability. After rejecting the application five times on the issue of whether the oxidative stability of IMC 130 was superior to that of oil having a similar fatty acid composition, the examiner ultimately accepted this argument and allowed the application. Basis for Holding: Cargill had done extensive testing on IMC-129. In some of these tests, bench refined IMC-129 was found to have an oxidative stability comparable to that of commercially refined IMC-130. Relying on two documents that contained Cargill’s internal testing data but that were not disclosed to the examiner during prosecution, the district court found that Cargill’s patents were procured through inequitable conduct and therefore unenforceable. The district court did not err in finding that Cargill’s patents were unenforceable due to inequitable conduct.

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(a) Materiality Because a crucial issue during prosecution was the oxidative stability of IMC 130 as compared to IMC 129, the court found that a “reasonable examiner” would consider such test data to be important in deciding whether to allow the patents to issue. Whether the examiner would have ultimately allowed the patents to issue is irrelevant. (b) Intent Intent to deceive was properly inferred where, due to the repeated rejections on the issue

• f oxidative stability, Cargill knew or should have known that the withheld information would be
• material. Further, there was no error in the district court’s finding of intent in that Cargill had a

motive to conceal test data showing that the improvement was no more than incremental (and therefore did not merit a patent). Lastly, the Federal Circuit agreed that the omitted data’s high degree of relevance also pointed to an intent to deceive. Comment: The issue of patentability was whether the prior art oil inherently had an oxidative stability within the claimed range, not whether the claimed oil was unobvious over the prior art

• il. Cargill pointed to test data in its specification to show that oxidative stability is not

necessarily determinative of oxidative stability. Thus, the withheld test data was not relevant to Cargill’s argument. However, that is not the test. The test is whether a reasonable examiner would consider the withheld test data to be important, and here the court found that to be the case.

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McKesson Information Solutions Inc. v. Bridge Medical Inc.

82 USPQ2d 1865 (Fed. Cir. 2007) Holding: The Federal Circuit affirmed finding of district court that McKesson’s U.S. Patent 4,857,716 is unenforceable due to inequitable conduct. The Federal Circuit agreed with the district court that McKesson’s patent attorney withheld information highly material to patentability with intent to deceive the examiner (case of two different examiners handling related applications) Subject Matter: Patient identification system and method for relating items with patients and ensuring that an identified item corresponds to an identified patient. Prosecution History: The activities found to constitute inequitable conduct occurred during prosecution of three related applications, two examined by one examiner (Trafton) and a third by a different examiner (Lev). The court found inequitable conduct arising from the failure of McKesson’s attorney to disclose three items of information deemed material to patentability. (1) The first item was a prior art patent (Baker reference), cited by Examiner Lev in the third application, which reference contradicted McKesson’s arguments in favor of patentability in the first and second applications. The reference disclosed “three-node means of communication,” whereas McKeson’s attorney represented to Examiner Traton that the prior art did not teach “three-node” communication means. This representation was made 17 days before a telephone interview with Examiner Lev to discuss Examiner Lev’s discovery of the Baker reference. (2) The second item of non-disclosed information was that McKesson’s attorney did not inform Examiner Trafton about the grounds of rejection of substantially similar claims pending before Examiner Lev (although McKesson’s attorney did inform Examiner Trafton of the third application being examined by Examiner Lev), where McKeson cancelled claims in the third application in the face of the Baker reference. (3) The third item of undisclosed material information was the allowance of one of the applications, where the allowance might have provoked an obviousness-type double patenting rejection. Specifically, McKesson’s attorney did not remind Examiner Traton that he had allowed the second, related CIP application prior to issuance of the original parent application.

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Controversy: Action by McKesson against Bridge Medical for patent infringement. McKesson appealed to the Federal Circuit after the district court found McKesson’s patent unenforceable due to inequitable conduct and dismissed McKesson’s infringement suit. Basis for Holding: The district court did not err in finding that McKesson’s patent was unenforceable. (a) Materiality The court found that the Baker reference was not cumulative and was highly material because it discloses three-way communication, because the claims of the third application were rejected over the Baker reference, and because one of McKesson’s primary arguments for patentability of the first application was the use of three-way communication. That is, the court found that “a reasonable examiner would have been substantially likely to consider the Baker patent important to the evaluation of the application” examined by Examiner Trafton. The court found Examiner Lev’s rejection in the third application to be material because the rejected claims were substantially similar to the claims pending before Examiner Trafton. Regarding this last point, the court pointed to its precedent in that a contrary decision of another examiner reviewing a substantially similar claim is material and must be disclosed to the PTO. Further, the court found that the allowance in the second application was material and should have been disclosed to Examiner Trafton because due to their similarity, the allowed claims could conceivable have given rise to a double patenting rejection. (b) Intent to Deceive The court found that McKesson’s attorney (Schumann) knew or should have known of the materiality of the Baker reference from Examiner Lev, and thus failure to disclose the Baker reference to Examiner Trafton evinced an intent to deceive Examiner Trafton. This inference was borne out when Schumann chose not to fight the rejection based on Baker, and instead cancelled the claims rejected by Examiner Lev based on Baker reference. As to the third item, the court did not find Schumann’s explanation, namely, that the claims of the allowed CIP application and the parent were not sufficiently similar to qualify the allowance of the CIP as material, to be credible. Other factors in finding intent to deceive were that Schumann submitted the same prior art references to both examiners (i.e., Schumann knew that the three applications were related) and Schumann’s statement to the court that he would have done nothing differently having the benefit of hindsight. The court interpreted this assertion as evidence of an intent to deceive.

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Comment: The ruling in McKesson calls for disclosure of the existence of related applications, disclosure of the course of prosecution of the related applications, and disclosure of all references cited in the related applications. This is done by submitting copies of office actions and references cited in the respective related applications. How do we know if applications are sufficiently related to require such treatment? The court’s finding as to the third item (failure of the applicant to remind Examiner Trafton that he allowed the second, related CIP application prior to issuance of the original parent application) seems unrealistic. Don’t we presume that the examiner is doing his job properly?

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Molins PLC v. Textron Inc. 33 USPQ2d 1823 (Fed. Cir. 1995) Holding: The Federal Circuit affirmed the finding of the district court that Molins’ U.S. patents 4,369,563 and 4,621,410 were unenforceable due to inequitable conduct. The Federal Circuit agreed with the district court that Molins’ attorney withheld highly material prior art with intent to deceive the examiner. Subject Matter: Batch and automated (system 24) machining systems. Molins, a UK corporation, filed a British patent application for the batch process and filed counterpart applications in a number of countries, including the U.S. Subsequently, Molins filed applications for the system 24 in the UK, U.S. and in other countries. The U.S. batch application (‘563 patent, issued January 1983) was combined with the U.S. system 24 application in a CIP. The ‘410 patent (issued November 1986) was directed to system 24 process. Prosecution History: Whitson, in Molins’ IP department, and during prosecution of Molins’ two U.S. applications, became aware of a “Wagenseil reference.” Whitson concluded that the Wagenseil reference anticipated the batch process claims that Molins initially filed in the UK and in many

• ther countries including the U.S. Whitson abandoned all of the foreign patent applications

directed to the batch process. However, Whitson decided not to abandon the pending U.S. application because it contained both batch and system 24 claims. Prosecution of the U.S. and foreign system 24 applications continued. Wagenseil was cited to and by several foreign patent offices, but was not cited by Molins to the USPTO. Eventually, Molins abandoned all foreign system 24 applications. However, the ‘563 patent including the system 24 claims issued in January 1983). Hirsh succeeded Whitson as Molins’ IP manager in 1983. In reviewing the system 24 foreign files that had been abandoned, he found that the Wagenseil reference had not been cited in the U.S. applications. Hirsh submitted the Wagenseil reference as a Prior Art Submission under Rule 501, even though the ‘563 patent had already issued. The ‘563 patent survived a third party reexamination request, where the Wagenseil reference was considered and made of record (1985). The ‘410 patent issued in 1986. Controversy: Subsequently, Molins filed suit against Textron, Inc. and others (1986), alleging infringement of its two patents. In its defense, Textron asserted that the patents were

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unenforceable due to inequitable conduct in connection with the prosecution of the ‘563 patent, and in particular, concealment of the Wagenseil reference. Further, the court also concluded that the inequitable conduct in prosecution of the ‘563 patent extended to the ‘410 patent, such that the ‘410 patent was unenforceable as well, since that patent “relied on the ‘563 patent.”. The district court agreed, holding that the ‘563 patent was unenforceable. The court also found the case to be “exceptional,” and ordered Molins liable for all of the defendant’s attorney fees, costs and expenses. Basis for Holding: The district court did not err in finding that Molins engaged in inequitable conduct, thus rendering both patents unenforceable. (a) Materiality The court found that the Wagenseil reference disclosed new combinations of features and new individual features not shown in the references before the examiner (i.e., the Wagenseil reference was not cumulative). Thus, the court found that Wagenseil was material, even though the examiner did not rely on this reference in reexamination. Further the court based its finding

• f materiality on evidence showing that Whitson indicated during foreign prosecution that

Wagenseil was the most relevant prior art to the foreign system 24 applications of which he was

• aware. Also of importance was that patent examiners in several foreign countries also

considered Wagenseil to be material to the system 24 claims, and that Whitson had amended and distinguished system 24 claims in foreign patent offices over Wagenseil. “We cannot say that the court clearly erred in finding that a reasonable examiner would have considered Wagenseil important in deciding the patentability of the pending system 24 claims in the U.S. application.” (b) Intent The court rejected Molins’ argument that Whitson had acted in good faith and simply

• verlooked Wagenseil, since Whitson had focused on that reference several times during 10

years of foreign prosecution yet never cited this reference to the USPTO. “We cannot say that the court improperly inferred that Whitson made a deliberate decision to withhold a known, material reference. Failure to cite to the PTO a material reference cited elsewhere in the word justifies a strong inference that the withholding was intentional.” Comment: The Molins decision highlights the importance of submitting prior art cited in foreign counterpart applications. Note “infectious” inequitable conduct which also rendered the ‘410 patent unenforceable.

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AstraZeneca Pharmaceuticals LP v. Teva Pharmaceuticals USA Inc. 92 USPQ2d 1481 (Fed. Cir. 2009) Holding: The Federal Circuit affirmed the finding of the district court that AstraZenca’s U.S. Patent 4,879,288 is not unenforceable due to inequitable conduct. The Federal Circuit agreed with the district court that AstraZeneca did not commit material withholding by failing to disclose existing test data for prior art compounds, since the compounds for which AstraZeneca did submit comparative test data were structurally closer to the claimed compound than the compounds for which test data was not submitted. Subject Matter: An “atypical” antipsychotic drug quetiapine having the formula: Unlike “typical” antipsychotics, atypical antipsychotics do not produce involuntary body movements such as spasms, tongue protrusions, etc. Prosecution History: During prosecution of the ‘288 patent, AstraZeneca submitted an IDS disclosing various prior art compounds having structures similar to that of the claimed antipsychotic. AstraZeneca also had test data for the various prior art compounds submitted in the IDS, as well as for many

• ther compounds. This was data generated in the course of research leading to quetiapine.

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The examiner rejected the claimed compound over structurally similar prior art compounds Schmutz X and the Horrom compound having the structures shown below. In response, AstraZeneca urged that the “atypical” property of antipsychotics was unpredictable, and that the prior art provided no reason to make the particular claimed compound for the purpose of obtaining atypical antipsychotic properties. The examiner maintained the rejection, requiring AstraZeneca to show that the prior art compounds Schmutz X and the Horrom compound did not possess the characteristics of the claimed compound: “… it must be overcome by a side-to-side comparison with the closest art compound(s). In this case, one would test both the prior art species (Horrom Compound and Schmutz X) and the claimed compound for their ability to avoid whatever undesirable side effect that applicant wishes to focus on.” In response, AstraZeneca submitted the Declaration of one of the inventors (Dr. Migler), with test data for the Horrum Compound and a Schmutz B compound. AstraZeneca’s attorney explained that AstraZeneca did not not have psychotic test data for Schmutz X, and that such data would be very expensive to generate. As a substitute, AstraZeneca offered pre-existing internal data for Schmutz B, which the inventors believed was structurally closer than Schmutz X because the hydroxyethyl side-chain of Schmutz B is more similar to quetiapine’s side-chain than is the ethyl side-chain of Schmutz X.

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The Declaration contained psychotic test data showing that the Horrom compound’s properties were “typical.” The Declaration also contained test data for Schmutz B, and showed that it too was “typical.” Controversy: Teva (and Sandoz) each filed ANDA’s (Abbreviated New Drug Application) for approval to sell generic quetiapine, certifying that the ‘288 patent is invalid and/or not infringed. AstraZeneca filed infringement suits against Teva and Sandoz. On appeal is the holding of the district court that there was no inequitable conduct in prosecution of the ‘288 patent application. Teva appeals from the decision of the district court. Teva’s inequitable conduct charge was based on the fact that AstraZeneca did not submit to the PTO its internal test data for other prior art compounds. Particularly, Teva alleged that it was a material withholding to provide test data only for the compounds relied upon by the examiner, stating that AstraZeneca’s internal test data showed that compounds other than quetiapine possessed potential “atypical” antipsychotic activity. Thus, Teva argued that AstraZeneca’s Declaration was deliberately misleading. Holding: The district court found that AstraZeneca properly addressed the closest prior art, and in response to the examiner’s specific requests (a) Materiality Teva failed to provide any evidence of its assertions that AstraZeneca made any material misrepresentations during prosecution (namely, that it was “too expensive” to provide test data for the Schmutz X compound, or that AstraZeneca did not have test data for the Schmutz X compound). Further, the court found that “a reasonable examiner would not have understood the Migler Declaration as stating that no prior art product had the atypical property shown by quitiapine … a reasonable examiner would have understood AstraZeneca’s statements to refer to the closest prior art compounds, not all prior art compounds.” Thus, the evidence did not support a finding that AstraZeneca misrepresented or omitted material information, despite AstraZeneca’s failure to disclose all its prior art compound data. (b) Intent The court also found that Teva did not establish deceptive intent by clear and convincing

• evidence. Teva argued that due to the “high degree of materiality” of AstraZeneca’s withheld

information, Teva therefore needed a proportionally less showing of intent to deceive to establish the requisite threshold level of intent. Teva’s only evidence of deceptive intent was the existence

• f undisclosed test data. The court noted, however, intent to withhold is not the same as intent to
• deceive. In the absence of any evidence of bad faith, the court found that AstraZeneca

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“presented plausible reasons for its presentation of arguments and data during prosecution” which did not support a finding of deceptive intent. Comment: Here, AstraZeneca provided test data for a compound that it argued was structurally closer to the claimed compound than the cited prior art compound, and the examiner accepted that argument. If Teva had uncovered evidence that AstraZeneca did have test data for the cited prior art compound, but instead withheld that test data and offered the substitute test data instead, then Teva would have had stronger grounds for its inequitable conduct charge.

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Exergen Corp. v. Wal-Mart Stores Inc. 91 USPQ2d 1565 (Fed. Cir. 2009) Holding: Defendant in an infringement lawsuit must plead a charge of inequitable conduct with particularity as to facts alleged (naming specific individual associated with filing of application, who knew of material information and deliberately withheld or misrepresented it, identifying patent claims and limitations to which the withheld reference is relevant, and where in those references material information is found – who, what, where, when and why), and allege sufficient facts from which a court may reasonably infer an intent to deceive or intent to withhold material information. Subject Matter: Infrared thermometers and methods for measuring human body temperature. Controversy: Exergen sued SAAT, Wal-Mart and others for infringement of its patents relating to infrared thermometers. SAAT moved the district court to add inequitable conduct as an affirmative defense. The district court denied SAAT’s motion, holding that SAAT’s pleading failed to allege inequitable conduct with particularity. Basis for Holding: Rule 9(b) – Rules of Civil Procedure 9(b) Fraud or Mistake; Condition of Mind. In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally. SAAT’s pleading included allegations that during prosecution, Exeregen was aware of material prior art that Exergen cited in prosecution of other patent applications, but failed to submit in prosecution of the application at issue. SAAT also alleged that information on its website was inconsistent with certain arguments made in the Remarks portion of an Amendment as to what had not been generally appreciated by those skilled in the art of temperature measurement. The court found SAAT’s pleadings to be insufficient, because the pleading referred generally to Exergen, its agents and/or attorneys, but failed to name the specific individual

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associated with prosecution of the application, who both knew of the material information and deliberately withheld or misrepresented it (noting that the duty applies to individuals, not to

• rganizations).

Second, the pleadings failed to identify which claims, and which limitations in those claims, the withheld references were relevant to, and where in those references the material information is found. Third, the pleadings did not explain “why” the withheld information was material and not cumulative. Further, the court found that the facts alleged by SAAT do not give rise to a reasonable inference of intent to deceive or withhold material information. For example, the pleading states that Exergen was aware of the subject prior art that was allegedly withheld during prosecution of Exergen’s other patent applications, but provides no factual basis to infer that any specific individual, who owed a duty of disclosure in prosecution

• f the application at issue, knew of the specific information in the prior art reference that is

alleged to be material. Particularly, the court noted that one cannot assume that an individual, who generally knew that a reference existed, also knew of the specific material information contained in that reference. “The mere fact that an applicant disclosed a reference during prosecution of one application, but did not disclose it during prosecution of a related application, is insufficient to meet the threshold level of deceptive intent required to support an allegation of inequitable conduct.” Comments: Allegations of infringement, noninfringement and invalidity may be pleaded generally “on information and belief” (e.g., patent claims 1-10 are invalid as being obvious over reference A in view of B) . However, inequitable conduct as an affirmative defense by the accused infringer must be pleaded with particularity. Although Rule 9(b) states that “Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally,” the law of the Federal Circuit “requires that the pleadings allege sufficient underlying facts from which a court may reasonably infer that a party acted with the requisite state of mind.” Some practitioners consider that the holding of this panel of the Federal Circuit is at odds with the holding in the McKesson decision, where another panel of the Federal Circuit found that patentee’s counsel “knew or should have known” of the materiality of a reference cited by one examiner and thus was under an affirmative obligation to disclose the reference to another examiner in a related application. However, all of these inequitable conduct decisions turn on their specific facts. In McKesson, the same attorney that cancelled claims in a second

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application before a second examiner in view of a reference disclosing X didn’t submit X to a first examiner in examination of a first application with substantially similar claims, and where the attorney had previously argued to the first examiner that the prior art did not teach X. There is plenty in the facts of McKesson which would allow a court to reasonably infer an intent to deceive.