Federal appeals court restricts inequitable conduct defense for patent law

[JURIST] The US Court of Appeals for the Federal Circuit [official website] on Wednesday restricted [opinion, PDF] the use of the "inequitable conduct" defense for invalidating patents. Inequitable conduct previously allowed the judge to use his or her discretion in invalidating an otherwise valid patent if he or she believed the patent-holder had engaged in unfair practices when applying to the US Patent and Trademark Office (PTO) [official website], contrary to Rule 56 [text] of patent law. If it could be shown with clear and convincing evidence that the patent-holder withheld information, the patent would be found unenforceable. Sitting en banc, the court in Therasense, Inc. v. Becton, Dickinson and Co limited this defense to when the patent-holder's bad acts were related directly to the patent, and they had the intent to deceive others.

This court holds that, as a general matter, the materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.
Proving the intent requirement was also elevated to a "but-for" test. The court left an exception for egregious conduct not requiring the but-for standard that would render patents unenforceable.

This case builds on the 2009 decision, Exergen Corp. v. Wal-Mart Stores Inc. and SAAT Systems [text, PDF], which forced allegations of inequitable conduct to be pleaded specifically rather than generally. Any allegation must detail individuals' guilty inequitable conduct, the knowledge or information withheld or hidden from the PTO and how that conduct affected the patent application or the subsequent patent itself. This term, the US Supreme Court [official website] heard oral arguments [JURIST report] in Global-Tech Appliances, Inc. v. SEB, SA [oral arguments transcript, PDF]. The court will determine whether the state of mind necessary for for a finding of inducing patent infringement is "deliberate indifference of a known risk" as proposed by the US Court of Appeals for the Federal Circuit or "purposeful, culpable expression and conduct", as stated by the court in MGM Studios, Inc. v. Grokster, Ltd. [Oyez backgrounder].

 

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