We have previously reported on the Federal Circuit’s en banc decision in Therasense, Inc. v. Becton Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) issued on May 25, 2011. In that decision, the Federal Circuit heightened the standard required to show that a patent holder committed inequitable conduct during the prosecution of the patent at issue. Prior to Therasense, an accused infringer asserting inequitable conduct as a defense had to show that the withheld information or false statements were material and the patent applicant intended to deceive the USPTO. Materiality and intent were analyzed on a sliding scale, where intent could be inferred if the withheld information was considered highly material.
Under the new Therasense standard, a defendant must show “but-for” materiality, i.e., the USPTO would not have allowed a claim if it had been aware of the withheld information or false statement. The intent prong, which previously could be inferred depending on the materiality of the withheld/false information, now must be “the single most reasonable inference able to be drawn from the evidence.” A majority of the legal community feels that the new stringent standard is nearly impossible to prove and has affectively eradicated the defense under inequitable conduct.
Months after Therasense, the America Invents Act came into law. The new statutes contain a Supplemental Examination option, which became effective as of September 16, 2012, providing a venue for a patent holder to “cure” issues that arose during prosecution. Specifically, Supplemental Examination allows the patent owner to request the USPTO “to consider, reconsider, or correct information believed to be relevant to the patent.” Prior to the AIA, once inequitable conduct was committed during the original examination, it could not be cured either through reexamination or reissue. Without the ability to cure, a higher standard makes sense. However, with the passing of the AIA, we previously posed the question of whether the Federal Circuit would be willing to reconsider the stringent standard laid out in Therasense given that patentees now have an avenue to cure discrepancies in the file history.
Recently, Sony petitioned the Supreme Court for writ of certiorari to review the bar for establishing inequitable conduct, but the High Court denied Sony’s request. See Sony Compter Entm’t LLC et al. v. 1st Media LLC, No. 12-1086, 2013 U.S. LEXIS 7473 (U.S. 2013). In that case, 1st Media sued Sony for infringement of U.S. Patent No. 5,464,946 (“the ‘946 patent”). See 1st Media, LLC, v. Electronic Arts, Inc. et al., 694 F.3d 1367, 1370-71 (Fed. Cir. 2012). Defendants asserted inequitable conduct as a defense and also counterclaimed for declaratory judgment of inequitable conduct. The basis for the defendants’ inequitable conduct allegations were the patentees’ failure to cite prior art references and USPTO rejections from prosecutions of similar applications. Id. at 1371. The patentees argued that they did not appreciate the materiality of the references and that nondisclosure was not a “conscious decision.” See id. The District Court found the patentees’ explanations not credible, that they knew the references were material, and inferred that they intended to deceive the USPTO. The Federal Circuit reversed holding that after Therasense, “[k]nowledge of the reference and knowledge of materiality alone are insufficient . . . to show an intent to deceive.” Id. at 1374. “To sustain a charge of inequitable conduct, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.” Id. at 1375 (internal quotations omitted)(citation omitted).
In its petition to the Supreme Court, Sony argued that the standard for inequitable conduct is nearly impossible to meet. This is particularly true in cases alleging that material information was improperly withheld from the USPTO. However, in cases involving false declaratory statements, the Federal Circuit has recently clarified what circumstances constitute inequitable conduct. In Intellect Wireless, Inc. v. HTC Corp. et al., 2013 U.S. App. LEXIS 20529 (Fed. Cir. 2013), the Federal Circuit held that “the materiality prong of inequitable conduct is met when an applicant files a false affidavit and fails to cure the misconduct.” Id. at 7. In that case, the patent applicant submitted a declaration asserting that the claimed invention had been actually reduced to practice. The patentee subsequently submitted a declaration explaining to the examiner that that the applicant was relying on constructive reduction to practice. The Federal Circuit, affirming the District Court’s finding, held that “[w]hen an applicant files a false declaration, we require that the applicant ‘expressly advise the PTO of the misrepresentation’s existence, stating specifically wherein it resides.” Id. at 5 (quoting Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1572 (Fed. Cir. 1983). “It does not suffice that one knowing of misrepresentations in an application or in its prosecution merely supplies the examiner with accurate facts without calling his attention to the untrue or misleading assertions sought to be overcome . . . .” Id. at 5-6. In this regard, the Federal Circuit made it clear that Therasense did not alter the ruling in Rohm & Haas. Additionally, the Federal Circuit held that intent could be inferred from the failure to expressly admit that the prosecutorial record contains false information. Id. at 10.
The HTC case is an example where issues arising during prosecution that could bring the enforceability of an issued patent into question could potentially be cured through Supplemental Examination. The HTC case will likely have patent holders (and patent challengers) scanning prosecution histories for inconsistent declaratory statements and pursuing Supplemental Examination to the extent any are identified. However, those instances where a patentee uses the Supplemental Examination to correct inconsistent declaration statements may not be enough to influence the Federal Circuit to lesson the inequitable conduct standards. However, should there be an increase in the number of patentees utilizing the process to submit information that could have, and should have, been submitted to the USPTO during prosecution, that may cause the Federal Circuit to rethink the standard.
Gibbons will continue to track the status of these pending petitions, and will report any further developments as they arise.