© 2013 Kilpatrick TownsendDecember 4, 2013

Best Practices – Ethics Issues in the Patent AreaPresented by

Thomas Franklin, PartnerKristopher Reed, PartnerEugene Bernard, PartnerDavid Schaumann, Assistant GC IP, Covidien

Overview

• Introductory Remarks on Inequitable Conduct (IC)– Origins of Inequitable Conduct– Common Causes of Inequitable Conduct – Percentage of Patent Cases Alleging Inequitable Conduct

• Litigation Perspectives on Inequitable Conduct– The Inequitable Conduct problem in Litigation– The Therasense Decision– Post-Therasense Decisions– Best Practice Tips for Litigators

• Prosecution Perspectives on Inequitable Conduct– USPTO’s Duty of Disclosure (“Rule 56”)– Examples of Material Information that Should Be Disclosed– Tips for Satisfying the Duty of Disclosure– AIA’s New Supplemental Examination Procedure

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• Inequitable conduct (IC) is an equitable remedy that is an absolute defense to a finding of patent infringement– IC invalidates a patent procured by fraud

• Supreme Court derived the defense from the equitable doctrine of unclean hands– Policy motivation was to discourage misconduct

• Intertwined with duty of disclosure– Many Foreign patent offices have no such duty

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Origins of Inequitable Conduct

• Failure to comply with duty of disclosure• Fabrication of evidence• Applicant deception, misrepresentation or other

misconduct committed during prosecution of a patent• Willful inventorship deception• Fraud in obtaining a temporary injunction to stop

infringement

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Common Causes of Inequitable Conduct

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Percentage of Patent Litigations Alleging Inequitable Conduct

Source: Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct, 3 IP THEORY 98 (May 16, 2013)

Therasense En Banc Decision

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Litigation PerspectivesKristopher Reed, IP Litigation Team

• “[T]he habit of charging inequitable conduct in almost every major patent case has become an absolute plague.” Burlington Industries, Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988).

• Requirement to plead with specificity leads to ample conjecture

• Tarnishes reputation of prosecutor despite low likelihood of serving as a defense

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The IC Problem in Litigation

• No consensus – six judge majority, four judge dissent, and one concurrence/dissent in part.

• Confirms “specific intent” required, i.e., “the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.”

• No “sliding scale” – although a district court may still infer intent from “indirect and circumstantial evidence”

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Therasense – En Banc Decision

• The majority purports to “address the proliferation of inequitable conduct charges” by adjusting the “standard for materiality.”

• “[T]he materiality required to establish inequitable conduct is but-for materiality.”

• An “exception in cases of affirmative egregious misconduct” i.e., false affidavits.”

• Dissent “would adhere to the materiality standard set forth in the PTO’s disclosure rule.”

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Therasense – En Banc Decision

• Federal Circuit scorecard post-Therasense:–10 decisions affirming/finding no

inequitable conduct–3 decisions affirming inequitable

conduct finding

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Post-Therasense CAFC Decisions

• No inequitable conduct where:– Accused actions taken in conjunction with PTO

formalities (late payments, wrong entity size, unintentional delay, petition to make special, etc.)

– Subsequent argument/explanation renders omission irrelevant

– Evidence of intent to deceive not clear and convincing, such as a “mistake or exercise of poor judgment” -- even where inventor explanation “strained credibility” / was “lacking credibility”

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Post-Therasense CAFC Decisions

• Inequitable conduct found where:– Complete concealment from PTO of another

company’s involvement in the invention– “Unmistakably false” declaration submitted by

inventor to overcome prior art reference– Inventor testimony was “not credible,” as he was

the editor on a material (and ultimately invalidating) prior art publication, and carefully reviewed the publication in conjunction with the PTO application but chose not to disclose it.

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Post-Therasense CAFC Decisions

• Don’t spread the plague. Refrain from alleging inequitable conduct until sufficient factual basis under Rule 9(b). Must meet but-for materiality standard.

• “[I]dentify the specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.” Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009).

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Litigation Best Practices

• Do not allege inequitable conduct based on representations made in conjunction with PTO formalities that are not the basis for the patent grant.

• More is more. Simply demonstrating that an inventor is “not credible” insufficient. At least need to show actions from which an affirmative intent to deceive can be inferred.

• Know your court and judge. Do not waste time and client resources if low likelihood of getting to a jury.

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Litigation Best Practices (cont’d)

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Prosecution PerspectivesEugene Bernard

David Schaumann

• Each individual associated with the filing and prosecution of a patent application has a duty to disclose all known information that is material to patentability – 37 C.F.R. § 1.56

• Duty continues throughout prosecution until patent is granted

• There is no duty to search for material information

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The Duty to Disclose Information to the USPTO

• Material Information is any information a “reasonable examiner” would be likely to consider important in deciding whether to allow a claim– Traditional “prior art” documents including

publications and patents– Prior art cited in related foreign applications– Information from related litigation– Information related to claims copied from a patent– Information relating to or from co-pending U.S.

applications– MPEP § 2001.06

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What is Material Information?

• There is a duty to disclose rejections in co-pending applications when the pending an rejected claims are substantially similar.– “Although examiners are not bound to follow other

examiners’ interpretations, knowledge of a potentially different interpretation is clearly information that an examiner could consider important when examining an application.”

• McKesson Information Solutions v. Bridge Medical, 487 F.3d 897 (Fed. Cir. 2007).

• Suggests required disclosure of arguments where a potentially different interpretation of claimed subject matter is discussed

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McKesson Opinion Reinforces Duty to Disclose Related U.S. Patent Prosecutions

• Inequitable Conduct Found where statements made to USPTO were found inconsistent with statements made in prosecution of counterpart European patent application

• Even though the European patent application was of record, the “highly material” inconsistent arguments were not made of record– Therasense, Inc. v. Becton, Dickinson and Co., 593 F.3d

1289 (Fed. Cir. 2010).

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Therasense Clarifies Duty to Disclose Related Foreign Patent Prosecutions

• Unfortunately there is currently no safe harbor practice for fulfilling the Duty of Disclosure

• MPEP § 2004 Offers “Aids to Compliance” with Duty of Disclosure– Guidance is merely exemplary and suggestive– CAFC does not recognize Rule 56 or MPEP as controlling

authority defining or satisfying the Duty of Disclosure

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Current State of Rule 56 and CAFC Disclosure Standards

• Disclose references that are even of questionable materiality.

• Disclose rejections in co-pending applications, if the pending and rejected claims are substantially similar.– Even disclose to the examiner actions she has taken in a co-

pending case

• Disclose arguably inconsistent attorney arguments made in related/similar U.S. and foreign applications

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Optimal Tips for Satisfying the Duty of Disclosure

• For particularly relevant references and arguments consider submitting two Information Disclosure Statements to buttress against the charge of burying a reference– First IDS has the most material reference(s) while Second

IDS includes all other questionably material references

• Be particularly diligent disclosing declarations and affidavits submitted in related U.S. and foreign prosecution

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Optimal Tips for Satisfying the Duty of Disclosure (Continued)

• If it is realistic to follow the Optimal Tips, follow them– This will ensure the lowest level of risk

• For many companies, it is impractical to search for relevant prior art, even in co-pending cases

• The Duty of Disclosure does not require searching for prior art.– Be aware that the risk of an inequitable conduct finding increases

with this option.

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Realistic Duty of Disclosure

• DO NOT Lie to the Patent Office– If you know it is not true – Don’t say it.

• DO NOT Hide things from the Patent Office– If you know about it and know that it is relevant, disclose it.

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Realistic Duty of Disclosure – Two Rules

• The America Invents Act Introduced new “Supplemental Examination” to allow Patent Owner to request USPTO to consider, reconsider, or correct information believed relevant to the patent

• USPTO has three months to determine whether submitted information presents Substantial New Question of Patentability

• With a few exceptions, a patent cannot be held unenforceable based on information submitted in Supplemental Examination

• $4400 fee to request Supplemental Examination, additional $12K if Reexamination ordered

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New AIA Supplemental Examination Procedure – Safety Net

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Questions?