Rethinking patent fraud enforcement in a reform era.

• Author: Murray, Kali

INTRODUCTION I. A COMPROMISED STANDARD: THE CURRENT DOCTRINE OF INEQUITABLE CONDUCT A. Compromised Implementation: Institutional Conflict in the Assessment of Inequitable Conduct B. Compromised Authority of the Public Interest II. RETHINKING THE PATENT FRAUD COMPROMISE CONCLUSION "As a political matter, piecemeal legislation to address inequitable conduct is not realistic. A call for simply relieving patent attorneys and applicants from the consequences of 'fraud' and 'inequitable conduct' will hardly evoke sympathetic attention from busy legislators and committee staffs." (1)

INTRODUCTION

A key element of our patent system is the desire to prevent a patentee from benefiting from potentially fraudulent behavior during the patent application process. Policing patent fraud prevents a patentee from obtaining a significant monopoly, either through active malfeasance or passive complicity, by disclosing incorrect or inaccurate information to the United States Patent and Trademark Office ("USPTO"). Beyond this equitable basis, the existence of legal mechanisms that prevent patent fraud serves to uphold the fundamental basis of the "patent bargain," which rests on the full and accurate disclosure of all relevant information relating to the invention. (2) Thus, the existence of policing mechanisms for fraud--in any form--is absolutely vital to uphold the transparency of any patent system.

A significant challenge exists, then, where, as in the United States, the policing mechanisms for fraud are deeply compromised by a jurisprudential standard that has created confusion for the patent community. We speak, of course, of the Court of Appeals for the Federal Circuit's ("Federal Circuit") recent re-examination of the materiality standard for the doctrine of inequitable conduct in cases such as eSpeed, Inc. v. BrokerTec USA, L.L.C., (3) McKesson Information Solutions, Inc. v. Bridge Medical, Inc., (4) Nilssen v. Osram Sylvania, Inc., (5) and Pfizer, Inc. v. Teva Pharmaceuticals USA, Inc. (6) The difficulty of policing fraud mechanisms arises from one particular jurisprudential choice: the Federal Circuit's failure to adopt the current materiality standard outlined in Rule 1.56(b). (7) This current standard replaced the earlier "reasonable examiner" standard, originally promulgated by USPTO in 1977. (8) While the Federal Circuit has affirmed findings of materiality based upon the 1992 Rule 1.56 standard, (9) it has declined to specifically address whether the 1992 Rule 1.56 standard replaced the 1977 "reasonable examiner" standard. Indeed, the Federal Circuit began to suggest that the sole standard should be the "reasonable examiner" standard. (10) These varying approaches have created a jurisprudential jumble that fails to offer significant certainty in assessing what standard will be applied to assess materiality during prosecution and enforcement of an issued patent.

The Federal Circuit's jurisprudential choice has proven once again to be controversial prompting new scholarly solutions (11) and new legislative proposals. (12) The controversy is organizing itself along familiar lines as everyone offers different ways of revising the materiality standard. One more stab at revising the materiality standard, at this point, may simply not work. In fact, instead of revising the materiality standard and the broader doctrine of inequitable conduct--of which the materiality standard is a key element--it might be time to revisit the implicit bargain represented by the entire doctrine of inequitable conduct.

This implicit bargain consists of three key assumptions. First, the doctrine of inequitable conduct itself rests in equity rather than an articulated statutory standard. (13) Second, the doctrine of inequitable conduct presumes only a competitor (and not other interested third parties or the government) can effectively police the patent fraud. (14) Third, the doctrine of inequitable conduct asserts the best way for a competitor to raise the issue of patent fraud is as a defense (and not through an independent private right of action). (15) These assumptions, however, have posed difficult problems. The equitable nature of the doctrine causes significant institutional conflict between the USPTO and the Federal Circuit. Patent practitioners are still waiting for guidance about the "material information" every person associated with a patent application is expected to disclose. Equally profound, these assumptions may be increasingly out of sync with the type of patent reform contemplated by congressional reform. The movement from a first-to-invent system to a first-to-file system will involve a significant reshaping of the current system. The implicit bargain may have to be revisited in light of the new priorities of a revised patent system.

Unlike in 1988, when Harold Wegner wrote the words that preface this Article, "busy legislators" and "committee staffs" are finally paying attention to re-evaluating the current structure of patent law. (16) With this reform in mind, this Article seeks to examine two issues. First, after reviewing the Federal Circuit's latest jurisprudence in this area, this Article will examine why the doctrine of inequitable conduct remains a deeply compromised and ultimately unworkable standard. Second, this Article explores the way in which the patent fraud mechanisms can be rewritten in light of current reform efforts. Any reform should begin with consciousness of two factors. First, the response to the existence of patent fraud is tightly correlated with the larger concerns of the relevant patent regime. Second, any enforcement should be cognizant of ameliorating institutional conflict between the USPTO and the Federal Circuit.

1. A COMPROMISED STANDARD: THE CURRENT DOCTRINE OF INEQUITABLE CONDUCT

   Often, complaints related to the doctrine of inequitable conduct focus on the fact that "too" many "spurious" inequitable conduct claims are made within the course of litigation. (17) The problem, however, may instead result from two key "compromises" that underlie how the doctrine is implemented. The first compromise--the equitable nature of the doctrine itself--may prompt significant institutional overreach on the part of the Federal Circuit. A court analyzing an accusation of inequitable conduct must often undertake its assessment of patentee behavior at a significant temporal remove from the administrative context in which the decision occurred. The Federal Circuit's refusal to adopt any given standard of materiality, then, reflects its attempt to maintain the optimal institutional flexibility in assessing how an examiner would react to varying decisions made by both the patentee and examiner. Of course, the Federal Circuit's attempt to maintain its institutional flexibility comes at a deep cost. The patentee is left with little guidance in understanding what kind of behavior will raise the specter of patent fraud. The USPTO's interest in maintaining clear guidelines concerning the prosecution of the patent is undermined. The significant institutional power enjoyed by the Federal Circuit to undertake its equitable analysis is exacerbated by compromised administrative authority of the USPTO. A weakened administrative actor simply may not be able to muster a response to a strong centralized actor, such as the Federal Circuit.

   The second compromise of the doctrine of inequitable conduct is perhaps, in the end, the most important and least understood compromise--the less than robust conception of the "public interest," one of the deepest legacies of the Patent Act of 1952. In particular, funneling the "public interest" through claims made by competitors may not be the optimal way of structuring assessment of fraudulent behavior. This Section considers each in turn.

   1. Compromised Implementation: Institutional Conflict in the Assessment of Inequitable Conduct

      Patent fraud enforcement in the modern era, as currently epitomized by the doctrine of inequitable conduct, can comfortably be analogized to a volcano: periods of stability punctuated by violent eruptions. The causes of these periodic eruptions are linked to the basic "DNA" of the doctrine of inequitable conduct. Initially, the doctrine of inequitable conduct is, at its core, an equitable determination. In its current form, the doctrine requires that a trial court first assess whether a patentee, acting with the intent to deceive, (18) failed to disclose or misrepresented material information to the USPTO. It then weighs materiality and intent to determine whether the equities warrant a conclusion that inequitable conduct occurred. (19) An equitable remedy, by its very nature, then, is a contextual determination that requires the court to assess the factual circumstances before it. (20)

      Moreover, this equitable remedy, through its requirement of materiality, necessarily depends on judicial assessment of complex administrative choices. Judicial fact-finders, thus, are confronted with a particularly acute dilemma: evaluating how an individual examiner may have reacted to a number of complex choices undertaken by the patent applicant. This position is not ideal position for any judge, and it is particularly problematic if the judge does not share the technical expertise of a patent examiner. This judicial assessment is made even more complex since the judge has to evaluate the patent applicant's behavior long after that behavior actually occurred. The difficulty of this assessment, perhaps, explains why no less than four standards (along with the current standard articulated in Rule 1.56(b)) have been used to evaluate this choice. (21)

      These two basic elements of the "DNA," which by themselves might be unobjectionable, together then operate to create significant conceptual uncertainty as to under what circumstances the doctrine will be triggered. This significant uncertainty inherent in the contours of the doctrine itself is exacerbated by the...