US Court of Appeals tightens standards for inequitable conduct in patents cases

On Wednesday, the US Court of Appeals for the Federal Circuit handed down a decision that will make it more difficult to establish that a patent is unenforceable because of the inequitable conduct of the patentee.  The decision has important consequences not only for the conduct of patent litigation in US courts, but also for the prosecution of patent applications in the US Patent and Trademark Office (USPTO).

The Court of Appeals decision

In the US, inequitable conduct is an equitable defence to patent infringement and, if established, precludes a patentee from enforcing a patent against an alleged infringer.  To establish inequitable conduct, the alleged infringer must show that the patentee misrepresented or omitted material information with the specific intent of deceiving the USPTO.  The two key requirements for establishing inequitable conduct are intent and materiality.

Allegations of inequitable conduct by litigants have become ubiquitous in US patent litigation in recent years.  In an effort to provide greater certainty, the Court of Appeals has clarified the key requirements in this week’s decision in Therasense v Becton.

  • In relation to intent, the Court of Appeals held there must be clear and convincing evidence that the patentee acted with specific intent to deceive the USPTO.  For example, in the case of prior art that is not disclosed, it must be shown that the patentee “knew of the reference, knew that it was material, and made a deliberate decision to withhold it”.  The Court of Appeals also held that intent may be inferred from indirect and circumstantial evidence only where it is “the single most reasonable inference”.
  • In relation to materiality, it held the “but-for materiality standard” applies − but for the patentee’s failure to disclose relevant information, would the USPTO have granted the patent?  The exceptions to this test are instances of “affirmative egregious misconduct”, such as “the filing of an unmistakably false affidavit”, which will be material without more.  Importantly, the majority did not accept the standard of materiality embodied by the USPTO Rules (and applied by the District Court).
  • The Court of Appeals also confirmed that intent and materiality are independent of each other, thereby rejecting a “sliding scale” approach where weak evidence in relation to intent may be offset by strong evidence on materiality (or vice versa).

In this case, the District Court had found that the patentee’s failure to disclose certain information was material under the USPTO Rules, and because the absence of a good faith explanation for failing to disclose the information formed the basis on which the District Court found intent, the majority of the Court of Appeals vacated the District Court’s finding of inequitable conduct and remanded the decision for re-consideration according to the requirements above.

What about Australia?

In Australia, a patent may be revoked if it can be shown that the patent was obtained by fraud, false suggestion or misrepresentation (section 138(3)(d) Patents Act).  There is no need to demonstrate an intention to deceive, however, the conduct or actions of the patentee must have materially contributed to the grant of the patent (it is not fatal that other circumstances may have played a part in the decision to grant the patent).

The US Court of Appeals decision sets a higher standard for a would-be infringer to establish inequitable conduct, and a standard that is now higher than that required to establish invalidity under section 138 in Australia.

About the Author

James Ellsmore
James is a senior associate with King & Wood Mallesons' Intellectual Property team in Sydney. James assists clients to resolve intellectual property disputes, with a particular focus on patents, pharmaceuticals and the life sciences. He has acted for a variety of clients in matters concerning patent infringement and revocation proceedings in the Federal Court of Australia, patent opposition proceedings before the Commissioner of Patents, and matters arising from patent licence and technology agreements. James also has experience in the preparation of commercial, R&D and IP agreements for leading universities, research organisations and pharmaceutical companies. He also advises clients on regulatory issues affecting clients in the industrials, consumer and health sectors.
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