Patent Law's Falstaff: Inequitable Conduct, the Federal Circuit, and Therasense

• Citation: Vol. 7 No. 4
• Publication year: 2012

Washington Journal of Law, Technology and Arts Volume 7, Issue 4 Spring 2012

Patent Law's Falstaff: Inequitable Conduct, the Federal Circuit, and Therasense

John M. Golden (fn*) © John M. Golden

Abstract

For decades, the relationship between the U.S. Court of Appeals for the Federal Circuit and patent law's doctrine of inequitable conduct has resembled that between Shakespeare's Prince Hal and John Falstaff. The former recognizes the excess, the deservedly ill repute, even the at least occasional wickedness of the latter, but cannot tear away from his close companion. Likewise, for decades, Federal Circuit judges have criticized the excesses of the defense of inequitable conduct, which can render a patent unenforceable as a result of misrepresentation or nondisclosure to the U.S. Patent and Trademark Office. Nevertheless, U.S. patent law remains wedded to the defense's existence. Without a real option of repudiating the defense, the Federal Circuit has instead sought to guide and confine the defense's application in hopes of advancing legitimate aims at acceptable social cost. In this effort, the opinion for the en banc Federal Circuit written by Chief Judge Randall Rader in Therasense, Inc. v. Becton, Dickinson and Co. figures prominently. The background, content, and prospects for the Federal Circuit's legal rulings in Therasense are the focus of this Article.

Table of Contents

Introduction..............................................................................354

I.Background to Therasense.................................................356

A.Reasons for a Limited Inequitable Conduct Defense......356

B.Precursors to Therasense...............................................362

II.Doctrinal Retrenchment in Therasense...............................367

A.Therasense Facts...........................................................367

B.New Rules for Intent and Materiality.............................370

III.Epilogue.............................................................................375

Introduction

Why dost thou converse with that trunk of humours, that bolting hutch of beastliness, that swollen parcel of dropsies, that huge bombard of sack, that stuffed cloak-bag of guts, . . . that grey Iniquity . . . ?

-Prince Hal in Henry IV, Part 1(fn1)

For decades, the relationship between the U.S. Court of Appeals for the Federal Circuit and patent law's doctrine of inequitable conduct has resembled that between Shakespeare's Prince Hal and John Falstaff. The former recognizes the excess, the deservedly ill repute, even the at least occasional wickedness of the latter, but cannot tear away from his close companion. Likewise, for decades, Federal Circuit judges have criticized the excesses of the defense of inequitable conduct,(fn2) a defense that can render a patent unenforceable when, in applying for the patent, the prospective patentee made a material misrepresentation or nondisclosure to the U.S. Patent and Trademark Office with specific intent to deceive. (fn3) In language resonant of Hal's fusillade of insults to Falstaff, Federal Circuit judges have variously characterized the inequitable conduct defense or its attendants as "an absolute plague,"(fn4) "the 'atomic bomb' of patent law,"(fn5) and a potential cause of inequity itself.(fn6) Nevertheless, U.S. patent law remains wedded to the defense's existence despite other countries' demonstrated capacity to do without it.(fn7)

What can the Federal Circuit do about this unhappy marriage? King Henry V (formerly Prince Hal) ultimately repudiated Falstaff.(fn8) But absent some sort of miraculous enhancement of the Federal Circuit's authority, that court is essentially powerless to repudiate the defense of inequitable conduct. At least some version of the defense is enshrined in Supreme Court precedent.(fn9)

Arguably, the defense is implicit in statutory law. (fn10)

Without a real option of repudiation, the Federal Circuit has instead sought to guide and confine the defense's application in hopes of advancing legitimate aims at acceptable social cost. In this effort, the opinion for the en banc Federal Circuit written by Chief Judge Randall Rader in Therasense, Inc. v. Becton, Dickinson and Co.(fn11) figures prominently. The background, content, and prospects for the Federal Circuit's legal rulings in Therasense are the focus of this Article.

I. Background to Therasense

A. Reasons for a Limited Inequitable Conduct Defense

It is not hard to understand why the defense of inequitable conduct has been characterized as "the 'atomic bomb' of patent law."(fn12) Nor is it hard to understand why it is a difficult defense for an accused infringer to resist asserting. Even when unsuccessful, an assertion of inequitable conduct can inflict substantial discovery and other litigation costs on a patentee, thereby raising the cost of seeking to enforce patent rights.(fn13) The assertion can also help shift the moral undercurrents often implicit in litigation posturing and argument, with the accused infringer no longer being solely in the position of denying wrongdoing but also in position to accuse the patentee of being a wrongdoer.(fn14) Moreover, when successful, the inequitable conduct defense enables an accused infringer to render an entire patent-perhaps even an entire set of related patents- permanently and entirely unenforceable.(fn15) The accused infringer might also be able to recover attorney fees(fn16) or to pursue an antitrust claim against the patentee.(fn17) Thus, in multiple ways, the inequitable conduct defense is a way of turning the tables and taking the "offensive" against a patentee.

Should U.S. patent law rid itself of an infringement defense based on inequitable conduct? Should concerns with inequitable conduct instead be addressed separately through professional discipline or regulation of future relations between a patentee and the USPTO? These points can be argued,(fn18) but as Part I suggests, even aside from Federal Circuit precedent, both Supreme Court precedent and congressional action or inaction indicate that the United States will have a substantial inequitable conduct defense for the foreseeable future and thus that the debate is largely academic.(fn19)

In any event, retention of even a flawed inequitable conduct defense is not necessarily a bad thing. Reliance on inequitable conduct as a potentially powerful counterpunch to a suit of infringement might plausibly be viewed as an important and even critical part of the complicated system of checks and balances that constitutes U.S. patent law. There is reasonable cause to believe that an inequitable conduct defense can help correct for a combination of limitations of that system, including:(1) The USPTO's limited ability to check for deception or, more generally, to conduct thorough reviews of all material potentially relevant to a particular patent application's allowability;(fn20)(2) The substantial incentive for deception that an issued patent's strong presumption of validity in litigation(fn21) might provide;(fn22) and(3) The likely lack, even after relevant aspects of the recent patent reform act become effective, of administrative procedures to challenge the validity of another's issued or contemplated patent rights that are as robust as those found in other leading patent jurisdictions, such as Japan and the European Union.(fn23)

As long as these three features of the U.S. patent system remain, courts and policymakers might correctly believe that an inequitable conduct defense able to be asserted by private parties is a necessary measure to curtail opportunistic or abusive behavior in dealings with the USPTO.(fn24)

In short, the existence of an inequitable conduct defense can generate significant systemic benefits, but the defense has proven to be difficult to manage and also to generate significant systemic costs. How then should the Federal Circuit seek to regulate the defense's use? In principle, the court could take a relatively hands-off approach, leaving the doctrine's application as a matter of minimally guided equitable discretion, and giving district court judges relatively free rein to apply the doctrine in individual cases. But given the severe sanction of unenforceability currently associated with inequitable conduct as a matter of course, such an approach would seem to leave the defense's application intolerably unpredictable, raising the resulting systemic costs and defeating part of Congress's apparent purpose in promoting national uniformity and predictability in patent litigation through creation of a centralized court of appeals for patent infringement suits.(fn25) The Federal Circuit thus seems properly charged with trying to hammer out doctrinal contours for an inequitable conduct defense that is both substantial and limited, an effective deterrent for prospective patentees and remedy for accused infringers that avoids becoming too much of a vehicle for opportunistic and abusive behavior itself.

This last task of confining the inequitable conduct doctrine within sensible bounds is perhaps particularly hard because the United States' federal courts, by constitutional command, do not work in a vacuum; they cannot focus on defining Platonic ideals or even tracing shadows on walls. The meaning and application of judge-made law is hammered out in adversarial litigation, in which each side can be...