The Federal Circuit Revisits Inequitable Conduct: How the Best-laid Schemes of Mice and Men Go Often Awry

• Citation: Vol. 42 No. 4
• Publication year: 2017
• Author: Gino Cheng

The Federal Circuit Revisits Inequitable Conduct: How the Best-Laid Schemes of Mice and Men Go Often Awry1

Gino Cheng

Winston & Strawn LLP

On May 25, 2011, in the fragmented en banc Therasense opinion, the Federal Circuit set forth 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.² The pro-patentee decision tightened the standards for finding the materiality of withheld information and the applicant's specific intent to deceive the patent office, the result of which would render the obtained patent unenforceable. On the heels of the en banc decision, in June of 2011, the panel in American Calcar I remanded the inquiry of inequitable conduct to the district court for more detailed determinations of materiality and intent under the new standard.³ American Calcar II would be heard by the Federal Circuit in 2014,⁴ with Chief Judge Prost and Judges Wallach and Newman presiding. As discussed in my previous article, the split decision fell along doctrinal battle lines,⁵ with Judge Newman from the Therasense majority finding herselfin the minority.⁶ More recently, in Regeneron, again outnumbered by Chief Judge Prost and Judge Wallach, Judge Newman reprised her role from American Calcar II and penned another dissent that criticizes the shift away from the strictures of the Therasense framework. Does the same panel that decided American Calcar II merely retread the same jurisprudential ground, and if not, where does Regeneron leave patent practitioners?

BACKGROUND

In the United States, a patent applicant owes a duty of candor and good faith to the U.S. Patent and Trademark Office (PTO).⁷ This duty may be breached whenever the applicant fails to disclose known material prior art references prior to the issuance of its patent.⁸ The Therasense court ruled 6-1-4 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 inflexible.¹³ For example, the egregious misconduct exception formulated by the majority was too constricted to be a catchall and therefore insufficient to provide the requisite elasticity to address the universe of potential inequitable conduct scenarios.¹⁴ She opted for the inclusion of a third, catchall category to capture offensive behavior.¹⁵

The dissent argued for the same "prima facie case of unpatent ability" 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.¹⁶ 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.¹⁷

The concurrence's and dissent's critiques of the Therasense majority's overly limited and stringent method of evaluating the materiality prong proved to be a recurring source of tension that would manifest first in Outside the Box¹⁸ and later in American Calcar II.¹⁹ Regeneron²⁰ perpetuates the disagreement, but also shows the battle spreading to the intent prong as well. Judge Newman from the original Therasense majority would be the dissenting voice in each of these three opinions.

BRIEF OVERVIEW OF DISAGREEMENT IN POST-THERASENSE CASES

Looking at the nineteen Federal Circuit panel decisions opining on inequitable conduct²¹ from American Calcar I leading up to and including Regeneron, one can make at least four observations.

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• First, excluding two panel cases²² in September of 2012, there have not been any inequitable conduct 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).
• Second, ChiefJudge Prost²³ from the original Therasense dissent, has participated in eight ofthose nineteen panel decisions—more than any other Circuit Judge. The runner-ups areJudge Newman²⁴ of the original Therasense majority and Judge Wallach,²⁵ successor to Judge Gajarsa from the original Therasense dissent, each having participated in seven such panel decisions.
• Third, although eight of the nineteen panel decisions included either a separate concurring or dissenting opinion, only five (of those eight) minority opinions²⁶ were directed to conflicting conclusions about inequitable conduct issues—three of which Judge Newman authored.²⁷
• Fourth, up until American Calcar II—in view of the relatively small number of split opinions disputing the inequitable conduct ruling—the Federal Circuit members were generally in step with one another in their treatment of the but-for materiality inquiry. I previously suggested that American Calcar II may have been a turning point²⁸ and that Ohio Willow Wood II²⁹ subtly expanded the type of culpable behavior that could be deemed "but for" material.³⁰ Regeneron may take it one step further, sharpening the bite of the unenforceability defense that Therasense had left on life support.

The earliest of Judge Newman's minority opinions on inequitable conduct was Outside the Box,³¹ 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. In Outside the Box, which turned on the question of headcount and whether the patentee had improperly applied for a small entity discount,³² the dissenting faction from Therasense would have both the upper hand in numbers and the opportunity to point out a flaw in the majority's egregious misconduct exception for "unmistakably false affidavit[s]."³³ As a consequence, Judge Newman, who concurred in result, was nonetheless forced to write a separate opinion to defend and circumscribe the per se materiality exception—i.e., that it was not intended to capture an incorrect declaration of small entity status or meant to penalize the filer.³⁴

Soon thereafter, in American Calcar II,³⁵ Judge Newman found herselfat odds with ChiefJudge Prost again, but this time with respect to the application and scope of the contested "but for" inquiry itself. The jury in the three-patent American Calcar I case had found that the prior art Acura 96RL navigation system anticipated the asserted claims of the '497 patent, necessitating the conclusion that it was "but for" material prior art.³⁶ On appeal, the panel in American Calcar I remanded for further findings as to whether that same information was also "but for" material to the related '465 and '795 patents³⁷ and whether the applicant had the requisite, specific intent to deceive the PTO.³⁸ Although the Acura navigation system was nominally identified in the specification,³⁹ during the original prosecution the applicant withheld various photos of that system taken by its employee, the system manual, and information relating to the inventor's test-drive of the vehicle.⁴⁰ When the district court judge's inequitable conduct ruling found its way back to the Federal Circuit in American Calcar II, Chief Judge Prost's majority affirmed, inferring deceptive intent from the inventor's "intentionally selective" disclosure.⁴¹

Dissenting, Judge Newman faulted the panel majority's sua sponte pseudo-obviousness analysis that improperly singled out the point of novelty,⁴² oversimplified the claimed invention, and led to a finding of "but for" materiality.⁴³ She pointed out that the majority ignored the jury's verdict that the two patents were valid and that the PTO had already looked at the withheld information and confirmed the related '497 patent's patentability during its reexamination.⁴⁴ Next, on the intent prong, Judge Newman faulted the panel majority for disregarding the jury's ability to weigh the inventor's credibility and its advisory verdict of his lack of intent to deceive.⁴⁵ She concluded that the panel had veered off the reservation and improperly evaluated both materiality and intent without "the safeguards that this court adopted en banc."⁴⁶

NOTES ABOUT REGENERON IN THE FIRST INSTANCE

Mouse DNA can be manipulated, using human DNA, to create chimeric antibodies. The only patent at issue in Regeneron (U.S.P. No. 8,502,018 ("the '018 patent")) claims a genetically modified mouse whose genes are modified so that it may develop antibodies that can be used by humans. The '018 patent issued in 2013 but claims priority to a continuation-in-part application dating back to 2001.⁴⁷

The antibodies consist of four chains of amino acids, the upper tips of which constitute the "variable" region and the remaining, bottom portions of which are the "constant" region. The sole claim at issue of the '018 patent was an open-ended "comprising" claim whose key limitation specified human gene segments in the variable region for such antibody coding. Whether or not certain references were relevant to the claims turned on claim construction—i.e., whether the claim was limited exclusively to human variable region DNA and mouse...