The Monster in the Closet: Declawing the Inequitable Conduct Beast in the Attorney-client Privilege Arena

• Citation: Vol. 25 No. 3
• Publication year: 2010

Georgia State University Law Review

Volume 25 j 1

Issue 3 Spring 2009

4-1-2009

The Monster in the Closet: Declawing the Inequitable Conduct Beast in the Attorney-Client Privilege Arena

Alexis N. Simpson

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Recommended Citation

Simpson, Alexis N. (2008) "The Monster in the Closet: Declawing the Inequitable Conduct Beast in the Attorney-Client Privilege Arena," Georgia State University Law Review: Vol. 25: Iss. 3, Article 1. Available at: http://digitalarchive.gsu.edu/gsulr/vol25/iss3/1

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THE MONSTER IN THE CLOSET: DECLAWING THE INEQUITABLE CONDUCT BEAST IN THE ATTORNEY-CLIENT PRIVILEGE ARENA

Introduction

The monster rearing its ugly head in the nightmares of patent practitioners¹ goes by the name of "inequitable conduct"—and it has been sinking its claws into practitioners all too frequently in recent decades. Inequitable conduct occurs when a patentee, his attorney, or anyone associated with the prosecution of the patent, breaches his duty of candor and good faith by affirmatively misrepresenting or failing to disclose material information to the united States Patent and Trademark Office (PTO). "A charge of inequitable conduct typically arises as a defense to patent infringement. A defendant will allege that a plaintiffs patent is unenforceable because of improprieties carried out during the patent's prosecution."⁴

A finding of inequitable conduct has potentially devastating and far-reaching consequences for the patentee and the prosecuting patent

1. "Patent practitioners" include patent attorneys and patent agents (technically qualified non-lawyers) who draft and prosecute patent applications before the U.S. Patent & Trademark Office (PTO), have passed the patent bar examination, and have obtained licenses from the PTO. See 37 C.F.R. §§ 11.6, 11.7, 11.9, 11.10 (2007). This term has generated some controversy, and some question whether the attorney-client privilege should extend to patent agents. See generally Arnold D. Litt et al., Comment, The Patent Practitioner Attains Majority: An Examination of the Attorney-Client Privilege and Work Product Rule As They Pertain to the Patent Attorney and Agent, 4 Seton Hall L. Rev. 531 (1972-1973). That inquiry is outside of the scope of this Note.

2. See, e.g., Thomas L. Irving et al., The Inequitable Conduct "Plague" in U.S. Patent Litigation, IP Law & Tech. Programme (2006) available at http://www.finnegan.com/files/PDFs/ 200902041002333521848news1385.pdf (noting that "[f]or almost the last [twenty] years, 'the habit of charging inequitable conduct in almost every major patent case has [been] an absolute plague'") (internal citations omitted); Andrea Kamage and Deborah Sterling, The Patent Plague: Inequitable Conduct Findings Are on the Rise, with No End in Sight, IP L. & Bus. Aug. 2005 at 28 (noting that "[t]here's no end in sight for the profusion of inequitable conduct charges" and even though "the inequitable conduct plague might be less creepy than a pack of locusts, it's no less bothersome to those affected.").

3. 37 C.F.R. § 1.56 (2007); see also GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1273 (Fed. Cir. 2001) ("prov[ing] inequitable conduct in the prosecution of a patent requires evidence of affirmative misrepresentations of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive") (citation omitted).

4. Kamage, supra note 2; see also Dippin' Dots, Inc. v. Mosey, 476 F.3d 1337, 1345 (Fed. Cir.

2007).

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attorney.⁵ Because an inequitable conduct charge involves the patent attorney's intent, the patentee may wish to call the attorney who prosecuted the patent to testify at trial.⁶ Unfortunately, when the patent attorney testifies about his intent (or lack thereof) to deceive the PTO during the prosecution of the patent at issue, that testimony may waive attorney-client privilege.

Attorney-client privilege waiver in the context of inequitable conduct remains chaotic. Many district courts fumble with which law to apply; even when the courts choose the right law for attorney-client privilege in inequitable conduct cases, they inconsistently construe the scope of the waiver, compromising fairness and predictability.⁹ That uncertainty defeats the privilege's purpose; as Justice Rehnquist stated, "[a]n uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all."¹⁰

Further complicating matters, patent law has entered a major state of flux. The United States House of Representatives ratified a major patent reform bill in 2007,¹¹ two patent reform bills were under

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consideration in the United States Senate in 2008, the Supreme

5. See discussion infra Part I.A.

6. See, e.g., GFI, 265 F.3d at 1273; Murata Mfg. Co. v. Bel Fuse, Inc., No. 03 C 2934, 2007 WL 781252, *2, 6 (N.D. Ill. Mar. 8, 2007); Gen. Elec. Co. v. Hoechst Celanese Corp., 15 U.S.P.Q.2d (BNA) 1673, 1679-80 (D. Del. 1990).

7. See discussion infra Part I.B.2.b.

8. See discussion infra Part II.A. 1.

9. See discussion infra Part II.A.2.c.

10. Upjohn Co. v. United States, 449 U.S. 383, 393 (1981) (striking down a district court's test-basing availability of attorney-client privilege upon whether a corporation's officer played a "'substantial role' in deciding and directing the corporation's legal response"—because it was difficult to apply and caused "disparate decisions," revealing its unpredictability).

11. Patent Reform Act of 2007, H.R. 1908, 110th Cong. (2007); Christopher Faille, Patent Reform Clears Hurdle, Hedge World Daily News, 2007 WLNR 17684327 (Sept. 10, 2007). "The U.S. House of Representatives on Friday [Sept. 7] approved a sweeping patent law reform bill, in response to the concerns raised by industry groups that intellectual property claims and resulting litigation have become a bottleneck for innovation and growth. The vote was 220-175." Id.

12. GovTrack.us, S. 1145; Patent Reform Act of 2007, available at http://www.govtrack.us/ congress/bill.xpd?bill=s110-1145 (noting that S. 1145 was introduced in 2007 by Senator Patrick Leahy (D-Vt) and placed on the Senate Legislative Calendar in January of 2008 for consideration by the Senate); Patent Reform Act of 2008, S. 3600, 110th Cong. (2008) (proposed by Senate Minority Whip Jon Kyl (R-Az) in September of 2008, and specifically offering ideas for reform in the arena of

2009] CONDUCT IN THE ATTORNEY-CLIENT PRIVILEGE ARENA 737

Court has granted certiorari and reversed an unusually high number of patent cases appealed from the Court of Appeals for the Federal

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Circuit, and the PTO is proposing to revamp its rules to significantly shift the burden from its examiners back onto patentees and their attorneys.¹⁴ The first set of new PTO rules, promulgated in August of 2007 and originally slated to become effective November 1, 2007, met with a last-minute preliminary injunction and were found to exceed the scope of the PTO's rulemaking authority.¹⁵ Another new set of PTO rules, directly related to the duty of disclosure,¹⁶ were proposed by the PTO in 2006 and will become

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effective if approved. Now, with patent law in flux, and the new duty of disclosure rules hovering on the horizon, the perfect storm exists for litigation in inequitable conduct cases to run amuck.

This Note will address three main topics. Part I will provide a general primer on the patent law rules for inequitable conduct cases, including when attorney-client privilege is implicated, when it is waived, and how courts determine the relevant choice of law in those

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cases. Part II will analyze the inconsistency in the federal courts'

inequitable conduct) available at http://frwebgate.access.gpo.gov/cgi- bin/getdoc.cgi?dbname= 110_cong_bills&docid=f:s3600is.txt.pdf.

13. See, e.g., Quanta Computer, Inc. v. LG Elecs., Inc., 128 S. Ct. 2109 (2008), rev'g453 F.3d 1364 (Fed. Cir. 2006); Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007), rev'g 414 F.3d 1366 (Fed. Cir. 2005); KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007), rev'g 119 Fed. Appx. 282 (Fed. Cir. 2005); Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), rev'g 427 F.3d 958 (Fed. Cir. 2005).

14. See Robert Hulse, New Rules for U.S. Patent Applications, Mondaq, 2007 WLNR 16534630

(Aug. 24, 2007).

15. Tafas v. Dudas, 511 F. Supp. 2d 652, 656-57 (E.D. Va. 2007) (issuing a preliminary injunction, halting the implementation of the PTO's promulgated rules); Tafas v. Dudas, 541 F. Supp. 2d 805, 806 (E.D. Va. 2008) (finding the "rules promulgated by PTO were substantive rules, and thus exceeded scope of the PTO's rulemaking authority").

16. Dorothy R. Auth, Patent Application Disclosure Requirements and Inequitable Conduct for Failure to Disclose, 26 IPL Newsletter 1, 1 (No. 3, Spring 2008); John Gladstone Mills et al., Information Disclosure (Prior Art) Statements and Proposed Rules Modifying Information Disclosure Statement (IDS) Practice Before the USPTO, Pat. L. Basics § 13:19, pt. IV (Oct. 2007); see also 71 Fed. Reg. 38808 (July 10, 2006).

17. Some consider those rules drastic enough to warrant fleeing patent work altogether. See, e.g., Steven M. Nipper, New USPTO IDS Regulations a Litigator's Dream???????, http://inventblog.com/ 2007/08/new-uspto-ids-regulations-a-litigators-dream.html (Aug. 9, 2007) (lamenting that because "[t]he patent system is under massive attack from all three branches of government: judicial (KSR), legislative (the bogus 'patent reform' bill) and executive (this IDS rule and the...