Review of the Therasense En Banc Decision


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Review of the Therasense En Banc Decision

  1. 1. To Disclose, or Not to Disclose:  the Law after Therasense en banc Adapted from a presentation made at the SF IP Inn of Court Meeting on June 15, 2011 Liaoteng Wang, ArcSoft, Inc.
  2. 2. The Law Before Therasense: No Cure for  Pandemic Plague of Inequitable Conduct • “The habit of charging inequitable conduct in almost every major patent  case has become an absolute plague.”  Burlington Indus., Inc. v. Dayco  Corp., 849 F.2d 1418 (Fed. Cir. 1988). • The 1988 en banc CAFC opinion, Kingsdown, has not been particularly  successful in curbing this “absolute plague.” • On April 26, 2010, the CAFC ordered rehearing en banc of the Therasense  case to address whether the materiality‐intent‐balancing framework for  analyzing inequitable conduct should be modified or replaced. • On May 25, 2011, the en banc CAFC issued an 88‐page 6‐1‐4 split decision,  attempting to redirect the law on inequitable conduct.
  3. 3. The Law Before Therasense: Two Prongs with Balancing Applicants for patents have a duty to prosecute patents in the PTO with candor and good faith, including a duty to disclose information known to the applicants to be material to patentability. 37 C.F.R. § 1.56(a) (2004); see also Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty may constitute inequitable conduct, which can arise from an affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive or mislead the PTO. Molins, 48 F.3d at 1178. A party asserting that a patent is unenforceable due to inequitable conduct must prove materiality and intent by clear and convincing evidence. Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988). Once threshold findings of materiality and intent are established, the trial court must weigh them to determine whether the equities warrant a conclusion that inequitable conduct occurred. Molins, 48 F.3d at 1178. This requires a careful balancing: when the misrepresentation or withheld information is highly material, a lesser quantum of proof is needed to establish the requisite intent. See N.V. Akzo v. E.I. DuPont de Nemours, 810 F.2d 1148, 1153 (Fed. Cir. 1987). In contrast, the less material the information, the greater the proof must be. See id. Purdue Pharma L.P. v. Endo Pharm. Inc., 438 F.3d 1123 (Fed. Cir. 2006)
  4. 4. The Law Before Therasense: Intent, Materiality, & Sliding Scale Kingsdown Med. Consultants Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988) We adopt the view that a finding that particular conduct amounts to “gross  negligence” does not of itself justify an inference of intent to deceive; the involved  conduct, viewed in light of all the evidence, including evidence indicative of good  faith, must indicate sufficient culpability to require a finding of intent to deceive. See  Norton v. Curtiss, 433 F.2d 779 (C.C.P.A. 1970). Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006) Any one of the five standards for judging materiality would do. Objective But For Subjective But For But It May Have 1977 Old Rule 56 (Reasonable Examiner) 1992 New Rule 56 (Not cumulative and concerns patentability) Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984) Questions of ʺmaterialityʺ and ʺculpabilityʺ are often interrelated and intertwined, so  that a lesser showing of the materiality of the withheld information may suffice when  an intentional scheme to defraud is established, whereas a greater showing of the  materiality of withheld information would necessarily create an inference that its  nondisclosure was ʺwrongful.ʺ
  5. 5. The Law After Therasense: a 6‐1‐4 Split en banc Decision • Majority opinion by Chief Judge Rader, joined in full by Circuit Judges Newman, Lourie, Linn, Moore, and Reyna, and joined in part (part V) by Circuit Judge OʹMalley (“This court holds that, as a general matter, the materiality required to establish inequitable conduct is but‐for materiality.” “A district court should not use a ‘sliding scale,’ … [and] may not infer intent solely from materiality.”) • Concurring‐in‐part and dissenting‐in‐part opinion by Circuit Judge OʹMalley (“I respectfully dissent from those portions of the majority opinion which describe the test it directs lower courts to apply in assessing materiality and which vacates and remands for further inquiry the materiality determinations made by the district court in this case.” “[B]oth the majority and dissent strain too hard to impose hard and fast rules.”) • Dissenting opinion by Circuit Judge Bryson, joined by Circuit Judges Gajarsa, Dyk, and Prost (“I would adhere to the materiality standard set forth in the PTO’s disclosure rule[ Rule 56.]”)
  6. 6. The Law After Therasense: But‐For Materiality Is the Test This court now tightens the standards for finding both intent and materiality in order to redirect  a doctrine that has been overused to the detriment of the public. [6] [T]he 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. [6+1+4] Intent and materiality are separate requirements. … A 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. [6+1+4] Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect  and circumstantial evidence. … However, 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.” [6+1] The absence of a good faith explanation for withholding a material reference does not, by itself,  prove intent to deceive. [6+1] This court holds that, 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. [6] Although but‐for materiality generally must be proved to satisfy the materiality prong of  inequitable conduct, this court recognizes an exception in cases of affirmative egregious  misconduct. This exception to the general rule requiring but‐for proof 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. [6]
  7. 7. The Law After Therasense: Uncertainty Beyond the en banc Court • On June 1, 2011, Defendant Becton, Dickinson and Company (BD) filed a  motion at the Federal Circuit to stay the mandate pending the filing of a  petition for a writ of certiorari in the Supreme Court. • Petition for certiorari by BD will most likely be filed by August 23, 2011.   If granted, a Supreme Court decision is expected in 2012. • Meanwhile, what’s PTO going to do with its Rule 56 and Therasense?   What should patent applicants do?  What should district courts, ITC, and  litigants do?
  8. 8. The Law After Therasense: If Petition for Cert Is Denied by the SC • Case will be remanded to the District Court (Judge Alsup at the NDCA) under the majority opinion in Therasense en banc for further proceedings. • Would inequitable conduct be found for the patent‐in‐suit by applying Therasense en banc? Probably Yes. • Let’s look at the facts in Therasense.
  9. 9. Facts in Therasense: What’s not Disclosed US patent 5,820,551 being held unenforceable due to inequitable conduct. Therasense, Inc. v.  Becton, Dickinson & Co., 565 F. Supp. 2d 1088 (N.D. Cal. 2008). The ’551 patent concerns disposable blood glucose test strips.  It claims a test strip with an  electrochemical sensor for testing whole blood without a membrane over the electrode  (“wherein said active electrode is configured to be exposed to said whole blood sample without  an intervening membrane or other whole blood filtering member”). US patent 4,545,382, which was also owned by Abbott and had to be overcome during the ’551  patent prosecution., makes the following disclosure: “Optionally, but preferably when being  used on live blood, a protective membrane surrounds both the enzyme and the mediator layers,  permeable to water and glucose molecules.” Abbott filed a Rule 132 declaration  stating that “optionally, but preferably” does not teach one  skilled in the art that a protective membrane is “optionally or merely preferred.”  Abbott’s  patent attorney argued, while submitting the declaration, that “optionally, but preferably” is not  “technical teaching but rather mere patent phraseology.”  Patent issued. A few years earlier, while prosecuting the European counterpart to the ’382 patent, Abbott’s  European patent counsel opined on the same “optionally, but preferably” language, “It is  submitted that this disclosure is unequivocally clear. The protective membrane is optional,  however, it is preferred when used on live blood in order to prevent the larger constituents of  the blood, in particular erythrocytes from interfering with the electrode sensor.”  The briefs  were not disclosed during the ’551 prosecution.
  10. 10. What Abbott Should Have Done During  the Prosecution of the European Patent  • It may be true that words such as “optionally, but preferably” are mere “patent phraseology” commonly used by patent prosecutors. But at the outset it’s a hard battle to win insisting “optionally” actually means “always” in the context of patents. However, the chance of avoiding the finding of inequitable conduct could have been slightly improved by paying attention to arguments made during the prosecution. • In hindsight, Abbott unnecessarily gave away too much while making arguments during the prosecution of the European counterpart to the ‘382 patent. • To distinguish the German reference (labeled D1), which required a diffusion‐limiting membrane, Abbott could have simply argued that no diffusion‐limiting membrane is required, and said nothing more. Abbott could have further stated that a protective membrane for keeping away coarse particles in whole blood is required, which was probably the state‐ of‐the‐art at that time. There would have been less contradictions.