Ten Years Post-therasense: Closing the Gap Between Walker Process Fraud and Inequitable Conduct
| Publication year | 2021 |
| Author | By Anne Y. Brody and Elisabeth Ponce |
By Anne Y. Brody and Elisabeth Ponce1
Prior to 2011, inequitable conduct (a defense to a patent infringement claim) was considered and analyzed as a lesser charge than Walker Process fraud—an antitrust claim alleging unlawful monopolization through the enforcement of a patent obtained by fraud on the Patent Office. That distinction began to change, in practice, in 2011, when the Federal Circuit responded to an "absolute plague" of "charging inequitable conduct in almost every major patent case" by issuing Therasense, Inc. v. Becton, Dickinson & Co.2 The post-Therasense decade has crystallized that, although minor differences remain in the application of the two charges, the showing required for proving inequitable conduct and the fraud component of Walker Process liability "seems to be 'nearly identical.'"3 Indeed, today's courts largely treat Walker Process and inequitable conduct claims equivalently. The continual harmonization of these two charges recently culminated in Complete Genomics, Inc. v. Illumina, Inc., where the court suggested that a finding of inequitable conduct in an earlier patent case may have preclusive effect and may narrow or focus the issues in a later, separate antitrust Walker Process case.4 This emerging trend will likely have a significant impact in future patent and antitrust cases.
This article discusses recent case developments that illustrate the continual harmonization of the inequitable conduct and Walker Process fraud charges, and it analyzes both parties' arguments and the courts' opinions. Lastly, it examines whether the doctrine of infectious unenforceability has any role to play in proving Walker Process fraud and other antitrust theories.
By way of background, in Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., the Supreme Court set the standard for proving fraud on the Patent Office in an antitrust case. The Court held that in order "to strip [a patentee] of its exemption from the
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antitrust laws," an antitrust plaintiff must prove that the patentee "obtained the patent by knowingly and willfully misrepresenting facts to the Patent Office."5 In Nobelpharma, the Federal Circuit further explained that two elements—deceptive intent and a but-for material misrepresentation or omission—must be present for a finding of Walker Process fraud.6
In Therasense, the Federal Circuit clarified certain elements of proving inequitable conduct. With respect to the materiality of withheld information, the Federal Circuit held that "the materiality required to establish inequitable conduct is but-for materiality."7 This formulation exactly parallels the "but-for" materiality standard utilized by courts in assessing Walker Process antitrust claims. As such, the sole germane inquiry for materiality may arguably be the same in both inequitable conduct and Walker Process fraud cases: whether patent examiners would have allowed patent claims had they been aware of the allegedly undisclosed information. As for showing deceptive intent for inequitable conduct, the Federal Circuit in Therasense clarified that the patent challenger must show that intent to deceive is the "single most reasonable inference" that can be drawn from clear and convincing evidence.8 By comparison, the Supreme Court's recitation of the intent standard for Walker Process fraud was less instructive (i.e., "knowingly and willfully").9 Given this lack of clarity, it felt like only a matter of time before courts would begin analyzing deceptive intent for a Walker Process fraud claim in accordance with the Therasense intent standard.
Recent Walker Process fraud case law makes clear that, in analyzing deceptive intent for fraud on the Patent Office in an antitrust case, courts have adopted the Therasense "single most reasonable inference" standard of intent for inequitable conduct. Additionally, it appears that in cases where both claims of inequitable conduct and Walker Process fraud are asserted, courts are first analyzing the materiality and deceptive intent elements of the alleged inequitable conduct, and then, without further analysis, making the same findings on the materiality and deceptive intent elements of the Walker Process fraud claim. These cases indicate that courts are treating their evaluations of intent to deceive in the inequitable conduct context as also dispositive in the Walker Process fraud context, and they demonstrate that the single most reasonable inference standard is equally applicable to the deceptive intent element of a Walker Process claim.10
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A. TransWeb, LLC v. 3M Innovative Properties Co.1. Case Background & Walker Process Fraud Allegations
The Federal Circuit has acknowledged the harmonization of these two standards, having done so for the first time in TransWeb, LLC v. 3M Innovative Properties Co. There, 3M, a company offering aircraft, abrasive, animal, architecture, construction, and automotive products, accused TransWeb of allegedly infringing two claims of 3M's '458 patent.11
In response to 3M's infringement allegations, TransWeb contended that 3M's '458 patent and another of its patents, the '551 patent, were invalid. According to TransWeb, it had offered products (so-called T-Melt P products), which were prior art, that were publicly known, used, and/or offered for sale in the relevant time period before 3M filed the application leading to the issuance of the '458 and '551 patents.12 TransWeb additionally averred that the '458 and '551 patents were unenforceable due to inequitable conduct because 3M had deliberately misled the Patent Office regarding "the public disclosure, use, and/or offers for sale of TransWeb's prior art products."13 Lastly, TransWeb contended that 3M violated the antitrust laws by suing TransWeb for patent infringement with the intent to obtain monopoly power in the relevant markets and while knowing that its own patents were unenforceable.14
3M responded to these allegations by contending that TransWeb lacked the requisite clear and convincing evidence of both deceptive intent and materiality. Specifically, it contended that TransWeb had failed to prove two things: first, that anyone involved in prosecuting the '458 patent knew anything about the T-Melt P products prior to filing the application that gave rise to the issuance of the relevant patent, and second, that the only reasonable inference was that the individuals involved in prosecuting the patent acted with deceptive intent.15
After an 11-day trial, the jury found that the relevant claims of the patents at issue were invalid as obvious and that 3M's inventor and patent prosecutor had intentionally misled the Patent Examiner into issuing 3M's patents. As such, the jury found the inequitable conduct defense applicable and issued an advisory verdict in favor of TransWeb. Based on the exact same conduct, the jury also found that 3M had violated the antitrust laws and committed a Walker Process fraud violation by asserting fraudulently obtained patents in an anticompetitive manner.16
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2. Jury Instructions Delineated Different Standards
Though the TransWeb jury's finding—that 3M committed antitrust and patent violations—was based on the same conduct, the case's jury verdict form and instructions delineated rather different standards for making findings on inequitable conduct17 and
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fraudulent procurement of a patent.18 However, these forms and instructions did not attempt to further clarify the differences in the legal standards for these two charges.
In particular, on "materiality" for inequitable conduct, the jury instructions inexplicably asked the jury to apply the clear and convincing standard instead of the preponderance of the evidence standard as prescribed in Therasense in determining whether the withheld information was "material." And on Walker Process fraud, the jury instructions recited the less instructive (and potentially different) standard of "knowingly" enforcing a patent obtained by fraud and did not insist that intent to deceive be the single most reasonable inference.19 The germane questions on the jury verdict form simply asked: "Is the '458 patent unenforceable by virtue of inequitable conduct?", "Is the '551 patent unenforceable by virtue of inequitable conduct?" and "Did 3M violate the antitrust laws by enforcing or attempting to enforce fraudulently-procured patents?"20 After post trial-briefing and argument, the district court ultimately ruled in favor of TransWeb on the inequitable conduct defense, reaching identical conclusions as the jury on the issues of materiality and intent.21
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3. Appeal of the District Court's Ruling
On appeal, 3M did not attempt to argue that the materiality and intent elements of inequitable conduct did not mirror those elements of a Walker Process charge (or that a finding of inequitable conduct was not also dispositive in the Walker Process context).22 As TransWeb summarized in its appellee brief, "the jury's Walker Process finding is supported by the same evidence supporting the district court's inequitable conduct determination" and "3M does not meaningfully argue that the materiality and intent requirements for inequitable conduct are different from those requirements for a Walker Process claim."23
At that time, the Federal Circuit had not yet acknowledged the harmonization of Walker Process fraud and inequitable conduct. While a read of the jury instructions might have suggested an alternative ruling, the Federal Circuit in TransWeb ultimately concluded that "the showing required for proving inequitable conduct and the showing required for proving the fraud component of Walker Process liability may be nearly identical."24...
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