Therasense, Inc. v. Becton, Dickinson and Co

Brief Fact Summary. Therasense, Inc. (Plaintiff) and its parent company, Abbott (Plaintiff), petitioned for a rehearing following the court of appeals affirmation of the district court’s judgment that Plaintiff’s ‘551 patent was unenforceable as a consequence of inequitable conduct.  Plaintiffs argued that the court of appeals had applied an overbroad legal standard for inequitable conduct.

Synopsis of Rule of Law.The standard for inequitable conduct must be tightly drawn, where the standard for intent is that the applicant knew of the reference, knew that it was material, and made an intentional decision to withhold it, and the standard for materiality generally is but-for materiality except in cases of affirmative egregious misconduct, where such conduct is considered material.

Facts. Therasense, Inc.’s (Plaintiff) and its corporate parent, Abbott (Plaintiff), held several patents, including the ‘551 patent, for disposable blood glucose test strips for diabetes management.  Becton, Dickinson and Co. (Becton) (Defendant), a competitor, sued for a declaratory judgment that the patents were invalid.  Therasense (Plaintiff) and Abbott (Plaintiff) sued for a declaratory judgment that the patents were invalid.  Plaintiffs countersued for patent infringement.  The cases were consolidated, and the district court held that all of the litigated patent claims were either invalid or not infringed.  The court also ruled that the ‘551 patent was unenforceable because of Abbott’s (Plaintiff) inequitable conduct.  Specifically, the ‘551 patent claimed a test strip with an electrochemical sensor for testing whole blood without a membrane over the electrode.  For more than thirteen years after Abbott (Plaintiff) filed the original application leading to the ‘551 patent, that original application saw multiple rejections for anticipation and obviousness.  Some of the rejections related to there being a protective membrane over the sensor.  Then, Abbott’s (Plaintiff) patent attorney, Pope, and its director of research and marketing, Sanghera, presented new claims to the examiner based on a new sensor that did not require a protective membrane for whole blood.  Pope asserted that this distinction would overcome the prior art found in another Abbott (Plaintiff) patent (the ‘382 patent).  They submitted an affidavit supporting this assertion, showing that the prior art required a membrane for whole blood at the time of the invention.  However, several years earlier, while prosecuting the European counterpart to the ‘382 patent, Plaintiff made representations to the European Patent Office (EPO) that disclosed sensors in which a protective membrane was optional in all cases except the case of live blood (as distinguished from whole blood), in which case the protective membrane was preferred—but not required.  Abbott (Plaintiff) failed to disclose the briefs it had filed with the EPO to the U.S. Patent and Trademark Office (PTO) when it presented new claims for the ‘551 patent.  Accordingly, the district court found that this failure constituted inequitable conduct.  The court of appeals affirmed all of the district court’s rulings.  However, the court of appeals panel was divided on the inequitable conduct issue.  Plaintiffs petitioned for an en banc rehearing.  The court of appeals granted the petition.

Issue. Must he standard for inequitable conduct be tightly drawn, where the standard for intent is that the applicant knew of the reference, knew that it was material, and made an intentional decision to withhold it, and the standard for materiality generally is but-for materiality except in cases of affirmative egregious misconduct, where such conduct is deemed material?

Held. (Rader, C.J.)  Yes.  The standard for inequitable conduct must be tightly drawn, where the standard for intent is that the applicant knew of the reference, knew that it was material, and made an intentional decision to withhold it, and the standard for materiality generally is but-for materiality except in cases of affirmative egregious misconduct, where such conduct is considered material.  Inequitable conduct is an equitable defense to patent infringement that, when proven, bars enforcement of a patent.  This judge-made doctrine evolved over time from Supreme Court cases that applied the doctrine of unclean hands to dismiss patent cases involving egregious misconduct, including perjury, manufacturing false evidence, and suppressing evidence.  The doctrine was broadened to include not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts but also the mere nondisclosure of information to the PTO.  The remedy also became harsher:  unenforceability of the entire patent, rather than mere dismissal of an action.  In line with this wider scope and stronger remedy, the doctrine came to require a finding by clear and convincing evidence of both intent to deceive and materiality.  Therefore, for the accused infringer to prevail under the doctrine, it must be proved that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO.  However, the standards for intent and materiality have fluctuated over time, sometimes being drawn broadly, and at other times being drawn narrowly.  Since the remedy for inequitable conduct is so strong, the standards for these elements must be narrowly and tightly drawn.  Therefore, the standard for intent is that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.  In other words, the evidence must show that the applicant made a deliberate decision to withhold a known material reference.  A district court should not use a “sliding scale,†where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa.  Also, a district court may not infer intent from materiality only.  Rather, a court must weigh the evidence of intent to deceive independent of its analysis of materiality.  Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.  Intent may be inferred from indirect and circumstantial evidence, but only where such intent is the single most reasonable interpretation able to be drawn from the evidence.  Therefore, if there are multiple reasonable interpretations that may be drawn, intent to deceive cannot be found.  The standard for materiality generally 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 if it had known of the undisclosed prior art.  Therefore, in assessing the materiality of a withheld reference, the court must determine, based on a preponderance of the evidence, whether the PTO would have allowed the claim if it had been aware of the undisclosed reference.  Where a district court invalidates a claim on the basis of a deliberately withheld reference, then ipso facto that reference is material, since the court is applying a higher evidentiary standard than used by the PTO.  However, even if the court does not invalidate the claim on the basis of a deliberately withheld reference, the reference nevertheless may be material if it would have blocked patent issuance under the PTO’s lower evidentiary standards.  If the patent would have issued in spite of the deliberately withheld reference, the doctrine should not be applied, since no benefit would be gained by the patentee’s misconduct.  One exception to this general requirement of but-for materiality arises when there is affirmative egregious misconduct.  In such cases, the misconduct is material since it is not likely that the patentee will have tried hard to deceive the PTO with a falsehood unless it believes that the falsehood will affect issuance of the patent.  So, applying these standards, on remand the district court should determine whether the PTO would not have granted the patent except for Abbott’s () failure to disclose the EPO briefs.  In particular, the district court must determine whether the PTO would have found Abbott’s (Plaintiff) agents’ submissions unpersuasive in overcoming the obviousness rejection over the ‘382 patent if Abbott had disclosed the EPO briefs.  In addition, the district court should determine whether there is clear and convincing evidence demonstrating that Sanghera or Pope knew of the EPO briefs, knew of their materiality, and deceived the PTO with a conscious decision not to disclose them.  [Vacated and remanded as to the inequitable conduct issue.

Discussion. The remedy for inequitable conduct is the “atomic bomb†of patent law.  Unlike validity defenses, which are claim specific, inequitable conduct regarding any single claim renders the entire patent unenforceable.  Unlike other deficiencies, inequitable conduct cannot be cured by reissue.  Also, the taint of a finding of inequitable conduct can spread from a single patent to render other related patents and applications in the same technology family unenforceable.  Therefore, a finding of inequitable conduct may endanger a good size of a company’s patent portfolio.  A finding of inequitable conduct may also give birth to antitrust and unfair competition claims.  Plus, prevailing on a claim of inequitable conduct often makes a case “exceptional,†leading potentially to an award of attorneys’ fees under 35 U.S.C. § 285.  Lastly, a finding of inequitable conduct may also prove the crime or fraud exception to the attorney-client privilege.