Runaway Jurisprudence: Has the "but For" Test for Proving Inequitable Conduct in Patent Cases Gone Awry, Gone Rogue, or Gone Quiet?
| Citation | Vol. 40 No. 2 |
| Publication year | 2015 |
| Author | GINO CHENG Winston & Strawn LLP |
GINO CHENG Winston & Strawn LLP
On May 25, 2011, the Federal Circuit set forth in its en banc Therasense opinion a new, heightened test requiring that a prior art reference, knowingly withheld by the applicant, be "but for" material to the patent's issuance in order to constitute inequitable conduct that would render the obtained patent unenforceable.1 On January 8, 2015, the Federal Circuit denied the combined petition for panel rehearing and for rehearing en banc2 in its decision in American Calcar, Inc. v. American Honda Motor Co., Inc. (hereinafter "American Calcar IT').3 The inequitable conduct claims at issue had been evaluated previously by the court in June of 20114 (hereinafter "American Calcar I"), on the heels of the Therasense decision, and had been remanded to the district court for more detailed determinations of materiality and intent. With the original Therasense majority currently occupying merely a third of the seats5 and with judge Prost, a member of the dissent, assuming the duties of chief judge, does American Calcar II break rank with post- Therasense precedent—including American Calcar I—and offer any clues as to what direction the court may be headed?
In the United States, a patent applicant owes a duty of candor and good faith to the U.S. Patent and Trademark Office (PTO).6 This duty may be breached whenever the applicant fails to disclose known material prior art references prior to the issuance of its patent.7 The Theasense court ruled 6-1-48 in favor of the adoption of a new, heightened standard for deciding the materiality of references withheld by an applicant seeking to deceive the patent office—a "but for" test.9 In other words, a reference is material "if it would have blocked patent issuance under the PTO's evidentiary standards."10 An applicant's failure to disclose such references, if coupled with a specific intent to deceive the PTO, could lead to every claim in the offending patent being held unenforceable.11 The majority also tempered its test with an exception for instances of egregious misconduct, which would be categorically material.12
Judge O'Malley argued in a concurring opinion that the new test was too inflexible13 and opted for the inclusion of a third, catch-all category to capture offensive behavior.14
The dissent argued for the same "prima facie case of unpatentability" standard applied by the PTO's examiners, which was a lower bar than the majority's but-for materiality standard and would include more references the applicant would be obligated to disclose.15 The dissent noted that the majority's new test provides a perverse incentive: when faced with the choice of (1) obtaining a problematic patent that competitors would have the burden of proving unenforceable in litigation, or (2) no patent at all, applicants would be likely to choose the "dishonest but potentially profitable course" and withhold those "material" references to obtain an otherwise unobtainable patent.16
The concurrence's and dissent's critiques of the majority's overly delimited and stringent method of evaluating materiality will prove to be a recurring source of tension that will manifest first in Outside the Box and later in American Calcar II, as described below.
One month subsequent to Therasense, a panel consisting of judges Lourie, Bryson, and Gajarsa decided American Calcar I, vacating the lower court's finding of inequitable conduct with respect to three related patents17—the '497, '465, and '795 patents. Conversely, the panel affirmed the finding that the admitted prior art Acura 96RL navigation system that was allegedly withheld by the lead inventor was material to the '497 patent.18 The jury had found the prior art system anticipated the asserted claims of the '497 patent, necessitating the conclusion that it was but-for material prior art.19 The case was remanded for further findings as to whether the same information was but-for material to the '465 and '795 patents20 and whether the applicant had the requisite, specific intent to deceive the PTO.21
Although the Acura navigation system was described as prior art in the common specification of the three patents,22 the model number
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was not specified and its 56-page manual not disclosed in an IDS until April 6, 2007 in the ex parte reexamination of the '497 patent.23 Photographs of the navigation system's display screen at various stages of use were taken by an unidentified Calcar employee.24 The lower court concluded that while preparing the drawings and other parts of the specification, the lead inventor copied and modified the illustrations and passages from the Acura manual.25 It was Calcar's employees' practice to copy owner manuals of vehicle navigation systems to prepare Calcar's booklets.26 The lead inventor had also spent about thirty minutes test-driving the Acura RL vehicle and using its navigation system.27 He acknowledged that he used the navigation system as the basis of his own invention.28
In parallel with the litigation, a third party, Crowell & Moring LLP, had brought an ex parte reexamination proceeding against the '497 patent, during which the patentee submitted the Acura 96RL manual to the PTO.29 At the conclusion of the reexamination proceeding in June of 2008, the PTO confirmed the patentability of claims 1-29.30 The applicant canceled claims 30-56 on April 6, 2007 in response to an office action rejection based on other prior art.31
On remand, the district court again concluded that all three patents were unenforceable for inequitable conduct, finding that the only reasonable inference was that the lead inventor had specifically intended to deceive the PTO, because he knew that the prior art was material to his invention and that he made a deliberate decision to withhold that information.32 Calcar again appealed. In American Calcar II, the appellate panel affirmed the holding against Calcar. Subsequently the Federal Circuit denied the combined petition for panel rehearing and for rehearing en banc.
How difficult would it be to find the votes needed to overturn the materiality test set by the Therasense opinion? In 2012, Judge Linn elected to take senior status.33 He was succeeded by Judge Chen to fill the Circuit's tenth seat. Former ChiefJudge Rader retired in June of 2014. Accordingly, given the current composition of the Court, the original majority's formulation may be embraced now by potentially no more than a third of the members on the active bench. To answer this question, it may help to compare the instances where post-2011 panel decisions have come out split over the proper determination of a material omission and then examine whether the disagreeing judges are divided along the familiar doctrinal battle lines drawn in Therasense.
Looking at the fourteen Federal Circuit panel decisions opining on inequitable conduct from American Calcar I up through American Calcar II, one can make at least three observations.
First, excluding two panel cases34 in September of 2012, there have not been any opinions decided by more than one judge from the original Therasense majority. Rather, each three-judge panel included two members from either the Therasense dissent or the concurrence (or their successors). For the most part—given the smaller number of separate opinions disputing the inequitable conduct ruling—the Federal Circuit members seem to have fallen in step with one another in their treatment of the but-for materiality inquiry. American Calcar II, however, may be a turning point, as described further below.
Second, Judge Newman of the original Therasense majority and ChiefJudge Prost of the original Therasense dissent have participated in the largest number of panel hearings from which opinions on inequitable conduct issued: each judge participated in five of the fourteen cases.
Third, although seven of those fourteen panel decisions included either a separate concurring or dissenting opinion, only four of those seven minority opinions were directed to conflicting conclusions about inequitable conduct issues. In addition, Judge Newman authored four of those seven separate opinions. Her minority opinions are two of the four that are directed to inequitable conduct. The third and fourth were authored by Senior Judges Mayer35 and Clevenger respectively, neither of whom took part in the Therasense decision.
The earlier of the two minority opinions by Judge Newman was Outside the Box Innovations v. Travel Caddy,36 where the friction between the Therasense factions resurfaced, albeit with respect to the per se materiality exception to the but-for materiality test (for an applicant's egregious misconduct), rather than with the application or scope of the but-for materiality test itself.37 Recall the naysayers in Therasense were critical of the majority's new test for being overly restrictive and would therefore cast too narrow a net when capturing inequitable conduct.38 The dissenters believed the majority's "but for" standard to be too high a bar.39 Meanwhile, the concurrence believed the majority's proposed Band-Aid to the overly stringent bar—the egregious misconduct exception—was too constricted to be a catch-all and therefore insufficient to provide the requisite elasticity to address the universe of potential inequitable conduct scenarios.40 In Outside the Box, the dissenting faction from Therasense would have both the upper hand in numbers and the opportunity to exploit the inutility and/or gaucheness of the majority's egregious misconduct exception.
There, the lower court had found egregious misconduct according to the letter of the law, i.e., the applicant's filing of a small entity status declaration with the PTO that proved to be untrue seemed to fall squarely within the Therasense majority's articulation of what would...
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