Inequitable Conduct: Ferring Asks for Supreme Court Review

Ferring v. Barr (on petition for certiorari).

In February 2006, the CAFC affirmed a lower court ruling that Ferring’s patent was unenforceable due to inequitable conduct.  During prosecution some 15 years earlier, Ferring had submitted several non-inventor declarations to support patentability, but did not disclose to the PTO that the some of the declarants had been paid consultants for the patentee in the past. Of course, this information was not requested by the PTO. Nonetheless, the CAFC found that the patentee’s non-disclosure created a material potential for bias because the “witness’s interest is always pertinent to his credibility” and that the intent could be inferred from the negligence in failing to disclose.

Judge NewmanJudge Newman penned a strong dissent in the case, arguing that the decision revives “reviving the culture of attack on inventor rights and attorney reputations based on inference and innuendo.”

My colleagues, endorsing several novel and unsupportable presumptions of wrongdoing, do injury to the reasonable practice of patent solicitation, even as they defy the rules of summary judgment.

Now, Ferring (along with its co-plaintiff Aventis) has filed a petition for certiorari, requesting that the Supreme Court hear the case — asking whether the CAFC improperly lowered the standards for materiality and intent in its finding of inequitable conduct.

Inequitable conduct jurisprudence is interesting because it is virtually all judge-made law coupled with the rules of Patent Office practice (37 C.F.R. xxx), and the only Supreme Court case on the topic is the 1945 Precision Instrument decision that found inequitable conduct based on a joint-effort of fraud on the PTO and on the courts.  (It was an interference and both parties wanted to make sure that somebody got rights to the patent).  The facts in Precision Instrument involved some seemingly extreme conduct, although the court ruled generally that the doctrine of unclean hands “gives wide range to the equity court's use of discretion in refusing to aid the unclean litigant.” (finding that the lower court is not bound by any formula in exercising its discretion).

If we fast-forward to today, many if not most patent cases involve charges of inequitable conduct. (1998 AIPLA study showed that 80% of cases included such charges).  The charges are thrown in almost every responsive pleading because they just might stick.  In its petition for certiorari, Ferring argues that this permissive environment has been created by the CAFC’s “aggressive use of inherent judicial power.”

Ferring point to a number of failures of the CAFC’s methodology and suggests as an alternative that the test that return to the PTO’s rules under 37 C.F.R. 56 and simply ensure that those rules are followed. A 2004 report by the National Academies of Science (NAS) came to a similar conclusion:

In view of its cost and limited deterrent value the committee recommends the elimination of the inequitable conduct doctrine or changes in its implementation. The latter might include ending the inference of intent from the materiality of the information that was withheld, de novo review by the Federal Circuit of district court findings of inequitable conduct, award of attorney’s fees to a prevailing patentee, or referral to the USPTO for re-examination and disciplinary action. Any of these changes would have the effect of discouraging resort to the inequitable conduct defense and therefore reducing its cost.

I agree that it is time for a change — evidence of fraud should certainly be considered by the courts.  Fraud, however, comes with a higher standard of pleading.  Failure to follow PTO rules should be considered by the PTO in post-grant reviews. 

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27 thoughts on “Inequitable Conduct: Ferring Asks for Supreme Court Review

  1. Does anyone have a copy of the Brief of respondent Barr Laboratories, Inc. in opposition?

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  2. Highly entertaining, Mr. Hildebrand. I pity, Mr. Wiggle. Well, not really. ;)

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  3. Expert witnesses??? Give me a break…more like hired guns. My case involved said 132 declarations as well, which innitially resulted in the examiner disallowing my patent..(until we took a look into said declarations, and they turned out to be fabricated nonsense). The protest declarations were thrown out of examination once we exposed their disengenuous nature, (including evidence of inequitable conduct). Lets face it, experts and these types of declarations go hand in hand to a great extent.
    In addition, the “so-called” experts always have an answer at trial for who hired them, but as for being questioned by the adverse party its a whole different game then, talk about evasive/disengenuous/incompetent all in one package.
    Ask Mr. Charles Shane (and co-council Mr. David Greer of Dayton Ohio), who attempted to defraud a Colorado Jury with 2 said experts (in addition to a third lawyer/witness Mr. Joseph Nauman).
    After 7 years of litigation and their use of lie/deny tactics, they LOST…..they were beat by a pro-se litigant, with no college education whatsoever.
    Although the defendants opinion of counsel had already been presented in the form of rule 132 affidavits filed with the PTO and overcome, these lawyers thought they would just ignore this fact and attempt to un-colorfully adjust there “Story”, and use the same rule 132 protest material at trial.
    (Inequitable conduct was evidenced by the declarations themselves, and we presented case law to the PTO on the issue and thus overcame the fabricated 132 documents).
    Inequitable conduct issue’s should be reveiwed by the PTO rather then a court, as the PTO would be somewhat more familiar with what is or is not relevant.
    Interestingly enough, one of these “so called” expert/lawyers at trial were asked if filing for a re-exam would of been cheaper then going to trial(due to a newly found piece of prior art) the answer from defendants Mr. Naumans was “No, I cant say that”. Not surprising considering he worked for one of the infringing defendants.
    This is just the kind of incompetence common with patent litigation and use of “so called” experts,etc.
    Reliance on declarations and or testimony, needs to be accompanied by knowledge of the association between the people involved (in order to evaluate if its truly competent, or merely fabricated favors, or fraud, as in my case).
    I dont necessarily think the cost of the expert means a whole lot, but in my case one of the alleged experts (Mr. William Wiegl from Ohio) only charged defendants $125/hr. This indicates to me that low cost equates to low quality and incompetence. Your probably asking yourself (as I did) how to pronounce his name??
    Yes, it looks like it could posibly be “Weegle” or “Waggle”, or more appropriatly (and one of my personal favorites)”Mr.Wiggle”.
    After questioning him for about a half hour over an issue (he repeatedly wouldnt answer because it hurt the defendants), I recieved a well earned $1600.00 fine for contempt (and a very useful 15 minute rescess as well) after calling this so-called expert yet another creative name (which I’ll leave to your imagination).
    This turned out to be quite interesting, as following this unscheduled recess the Honorable Judge Johnson informed me that he thought I had asked Mr. Wiggle enough questions. I agreed, but under one condition; that he ask the same question I had leading up to the contempt fine, and get a clear yes or no answer from him.
    The Judge proceeded with my request, and after Mr. Wiggle looked over at defense counsel like a lost pup, he finally answered the $1600.00 question, UNFAVORABLE for defense.
    The answer was well worth the $1600.00 fine I recieved, so hold your ground with these so called experts, and if necesarry, cause some drama at trial to elicit the proper answer, someone has to be humerous. D.L.Hildebrand. Hildebrand v. Steck et al. (PRO41WILLYS@aol.com if you need any further details)

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  4. “I assume you mean a relationship oth[er] [th]an than simply being reimbursed for time spent writing the declaration.” No, this would be included in the relationship I’m talking about. I fail to see any meaningful distinction between getting paid for preparing a declaration in the matter in QUESTION and getting paid as a consultant in an UNRELATED matter. I think you are wrong about equating “relationship” with “interest in the outcome.” One has interest in the outcome if he would obtain financial gain as a result of the outcome. For example, the patent owner.

    In all my years, I have never seen a case where an expert submits a 132 declaration for another person out of intellectual courtesy. If it ever happens, it would be rare – and stupid in my opinion, especially in view of the possible criminal sanctions for what may even be innocent misstatements.

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  5. “The examiner presumes that the facts are correct because it is a sworn statement.”

    I should be more clear. It’s not so much an issue of “presuming the facts are correct” as determining what statements in the declaration are “facts” and what statements are “the expert’s OPINION,” and what “probative value” to assign those opinions.

    For example, whether “anyone in the field knew” about some feature of a material is a matter of opinion. Whether a chemical has a molecular weight of 144.34 grams is a question of fact. Expert declarations are not needed, typically, to get the latter sort of information into the record.

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  6. “I cannot imagine why anyone would submit a declaration unless there was some sort of relationship.”

    I assume you mean a relationship othan than simply being reimbursed for time spent writing the declaration.

    I think non-related experts are routine in those cases where the patent is important and expected to be asserted against others. If I need an expert declaration on, say, the frequency of SNPs in the human genome, would it be more persuasive if it was written by the inventor, an employee of the company, or LeRoy Hood (assuming he’s not an investor or on the Board)?

    “The examiner presumes that the facts are correct because it is a sworn statement.”

    Then the Examiner isn’t doing his job. Read MPEP 716.01(c) again, with attention to the terms I highlighted.

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  7. “The reason for requiring evidence in declaration or affidavit form is to obtain the assurances that any statements or representations made are correct, as provided by 35 U.S.C. 25 and 18 U.S.C. 1001.” MPEP 716.02(g).

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  8. “I think MPEP 716.01(c) says otherwise, quite plainly.”

    I believe you are confusing many different issues. The examiner presumes that the facts are correct because it is a sworn statement. Sufficiency of the facts to rebut the rejection is another matter. It is weighed against other evidence. If an assertion is outright false, then there are criminal penalties under 18 USC in addition to unenforceability. That is a different issue relative to whether a declaration cn be discounted solely because of a relationship. I cannot imagine why anyone would submit a declaration unless there was some sort of relationship. Such relationship is presumed on the part of the examiner.

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  9. “I’m also still confused but as to what you are trying to argue.”

    Obviously, I was addressing comments from several people who seemed confuse about what Examiners must consider when presented with a declaration of alleged facts that were submitted by the applicant to support patentability of pending claims. Do you need me to list those coments for you?

    “It really does not matter whether the Rule 132 was submitted by an employee of the assignee, or even the inventor. That proves nothing as to the truthfulness or falsity of the facts of the declaration. ”

    I don’t know what you mean by “prove” in this context but you are wrong when you say it “does not matter.” It does matter, or at least it SHOULD MATTER.

    “Having sworn to the statement, it is presumed that the statements are correct and the nature of the relationship of the declarant to the inventor/assignee no relevance.”

    I think MPEP 716.01(c) says otherwise, quite plainly. Do Examiners in practice take these relationships into account? I’m guessing they do sometimes, and most often in the instance where the applicant is already on bald tires and the declaration amounts to little more than a thinly disguised plea for allowance.

    To prevent any additional confusion, I’m not arguing that the district court judge in this case made the “TRUE” “CORRECT” decision. I’m saying that the *reasoning* of the judge and of the Federal Circuit is sufficiently grounded (i.e., not “absurd”) and the topic sufficiently uninteresting to the Supremes that I predict they’ll deny cert.

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  10. In Ferring, there was no allegation that the information contained in the declaration was false or incorrect. Indeed, as an excuse for relying on other evidence, the examiner held that the information was irrelevant. There was nothing to prove that the declarant had any interest in the outcome of the case. The Ferring case was obviously decided without any consideration of the niceties of patent prosecution. In many chemical applications, Rule 132 declarations are common. It really does not matter whether the Rule 132 was submitted by an employee of the assignee, or even the inventor. That proves nothing as to the truthfulness or falsity of the facts of the declaration. Having sworn to the statement, it is presumed that the statements are correct and the nature of the relationship of the declarant to the inventor/assignee no relevance.

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  11. Yes, I’m also still confused but as to what you are trying to argue. All the case law you list has nothing to do with the credibility of the experts vis-a-vis their getting paid or not. Nice citations but bizarrely irrelevant. Factual support is entirely a different issue.
    Of course, the Ferring declarant was not paid for his declaration, lest one forgets this. What, was he trying to suck up to get future work, or maybe he was returning a favor for past over payment? Maybe he and Ferring simply earned the respect of each other in the past association and he simply offered his services to help. Ridiculous that this could result in inequitable conduct. Summary judgment is alive, yes, but not well with these kinds of rulings.

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  12. 716.01(c)

    In assessing the probative value of an expert opinion, the examiner MUST consider the nature of the matter sought to be established, the strength of any opposing evidence, the INTEREST OF THE EXPERT IN THE OUTCOME OF THE CASE, and the presence or absence of factual support for the expert’s opinion. Ashland Oil, Inc. v. Delta Resins & Refractories, Inc., 776 F.2d 281, 227 USPQ 657 (Fed. Cir. 1985), cert. denied, 475 U.S. 1017 (1986). See also In re Oelrich, 198 USPQ 210 (CCPA 1978) (factually based expert opinions on the level of ordinary skill in the art were sufficient to rebut the prima facie case of obviousness); Ex parte Gray, 10 USPQ2d 1922 (Bd. Pat. App. & Inter. 1989) (statement in publication dismissing the “preliminary identification of a human b-NGF-like molecule” in the prior art, even if considered to be an ex- pert opinion, was inadequate to overcome the rejection based on that prior art because there was no factual evidence supporting the statement); In re Carroll, 601 F.2d 1184, 202 USPQ 571 (CCPA 1979) (expert opinion on what the prior art taught, supported by documentary evidence and formulated prior to the making of the claimed invention, received considerable deference); In re Beattie, 974 F.2d 1309, 24 USPQ2d 1040 (Fed. Cir. 1992) (declarations of seven persons skilled in the art offering opinion evidence praising the merits of the claimed invention were found to have little value because of a lack of factual support); Ex parte George, 21 USPQ2d 1058 (Bd. Pat. App. & Inter. 1991) (conclusory statements that results were “unexpected,” unsupported by objective factual evidence, were considered but were not found to be of substantial evidentiary value).
    ——————

    Still confused?

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  13. I still do not see an answer to the question “does a PTO examiner evaluate the credibility of declarations submitted to the PTO?” The answer is: NO. A PTO examiner does not evaluate the credibility of declarations submitted to the PTO (for one, there’s no points in it). Since a PTO examiner does not evaluate the credibility of declarations submitted to the PTO, why is it inequitable prosecution conduct for a declarant to not identify that he had been paid a consultant for the patentee in the past? I just don’t get it.

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  14. Well, guys, okay, paid experts should have no weight at all, expert testimony is bogus, so let’s have the same standard when assessing validity and enforceability in the PTO as in the courts during litigation, after all, isn’t the existence of the patent at stake in both?
    So, what, do you propose that no hired experts should be allowed at trial? If asking the expert in front of the jury how much he is getting paid is going to excise his credibility, then why not hire the lowest paid expert? Won’t that increase his credibility (an interesting paradox). Of course either he’s doing it for moral reasons or is not competent enough to get decent fees, take your choice.
    Please, get off the litigator chair here, the PTO proceedings are not supposed to be adversarial with “standard techniques” to butcher credibility for most likely a valid,neutral and well thought out declaration. Practically everyone involving patents is in it for the money so why believe anyone? My point being you need the same standard in both forums.
    One could easily have each declarant sign a declaration, similar to an amicus brief, as to any financial connection (or otherwise)and in the absence of one the examiner could discount it. Same as a cross examination. No one does these declarations for nothing, there has to be some motive of some sort to do it.

    Of course,having said all this, the first thing I would ask a paid expert at trial is not how much he is getting paid but rather how many clients did he turn down (or was turned down) because he could not support their side as his initial study of the case. As the usual answer would be zero, what luck that expert has, to have always had the party in the right come to him…

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  15. “Would the jury (and in turn the PTO) believe these hired guns more if they weren’t paid?”

    As anon noted, establishing a motive for the declarant to be less-than-forthcoming is a standard technique.

    Again, that is why post-filing declarations from, e.g., inventors are correctly assumed to be self-serving and should not be given much weight by Examiners (if they are doing their jobs properly).

    “The only thing that smells here in dutch oven proportions is the decision that excoriated both inequitable conduct and summary judgment law.”

    I think summary judgment law is alive and well and Ferring will have little impact on the way in which inequitable conduct charges are addressed by courts. We’ll see what the Supremes think.

    “I’ll say it again, why do so many bizarre rulings by the Fed Cir have these great dissents by Judge Newman?”

    Maybe she’s atoning for the bizarre rulings she herself authored (e.g., Elan v. Mayo).

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  16. “Would the jury (and in turn the PTO) believe these hired guns more if they weren’t paid?”

    Well, umm, yes. That is why the first question out of a cross-examiner’s mouth is “how much are you being paid to be here today?” Unfortunately, the PTO examiner does not get a chance to cross-examine a declarant.

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  17. Sorry all,in prior comments, meant to say being paid for your opinion (not decision)the premise is it is biased….

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  18. The premise of this decision, in a nutshell, seems to be if you being paid (or actually were once paid) for your decision, it is most likely biased and cannot be relied upon. Ipso facto, that fact is critical to credibility and must be disclosed.
    Well, I must have missed that during trial when both sides paraded their paid experts as “evidence” of whatever that side was arguing for. “Evidence”. And they were paid. Is there a contradiction? Would the jury (and in turn the PTO) believe these hired guns more if they weren’t paid? If not, where then could one base the materiality to Ferring’s inequitable conduct?

    True, inequitable conduct has been the bane of patent litigation for many years. Patent trolls, beware, you’re under attack again, make sure you dot those i’s and cross those t’s and do background checks on anyone you enlist so that he doesn’t turn out to be a long lost second cousin once removed.

    As to the “smell” factor in this case, which allowed the Fed Cir to weasel out of a de novo review, what, was the plaintiff winking at his lawyers during some hearing about this? The only thing that smells here in dutch oven proportions is the decision that excoriated both inequitable conduct and summary judgment law.

    I’ll say it again, why do so many bizarre rulings by the Fed Cir have these great dissents by Judge Newman? Maybe she’ll take Judge Moore under her wing? Let’s hope.

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  19. I want to acknowledge the good points made by the commenters who disagree with the Federal Circuit’s (and the lower court’s) decision. I haven’t read the papers filed at the lower court so I admit to be being less familiar with all the details of the case than I could be.

    But I do not think it is “absurd” to infer that *paid consultants for the patentee* have a conflict of interest that affects the credibility of any declarations submitted by the consultants to the PTO, just as a self-serving declaration by an inventor is subject (or should be subject) to skepticism by the Examiner.

    I would argue that information about such relationships is PER SE material for the purposes of determining what weight to accord a declaration. Failure to disclose such a known relationship is simply malpractice.

    “Need practitioners disclose that the affiant is the brother-in-law of the inventor? Former co-worker? Father’s college roommate?”

    I’d say no, but if you KNEW of the relationship, it wouldn’t hurt to do so.

    Personally I’ve always avoided filing declarations like the plague. That’s just red meat for defendants to chomp on if/when the patent is litigated.

    “any defendant would be crazy not to plead it now based on the Feds apparent willingness to consider it.”

    They would be crazy not to plead it BEFORE the Ferring case unless the patentee did a competent job during prosecution. But let’s face it: quite a few patents are prosecuted incompetently or with excessive zeal.

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  20. Lets assume the PTO examiner knew that the some of the declarants had been paid consultants for the patentee in the past. How could that possibly change the opinion of the examiner during prosecution? The “witness’s interest information might be relevant to litigation, but is it pertinent to prosecution? I do not see any inequitable prosecution conduct.

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  21. The Ferring decision by the lower court was a joke, but the Federal Circuit should know better. The Feds completely ignored the burden of proof in the summary judgment context and, despite the “plague” that inequitable conduct is on the patent system, any defendant would be crazy not to plead it now based on the Feds apparent willingness to consider it.

    Also, the so called reliance on the district court judge position to smell the wrongdoing is belied by the summary judgment context. The lower court had nothing but the paper record to draw conclusions. The inferences he drew were absurd even under a clear and convincing standard, but on summary judgment? A travesty.

    How can IP litigators in good faith advise their clients on the law when the judiciary shoots from the hip like this?

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  22. Ferring: Supreme Court, please help us.

    Supreme Court: No.

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  23. “Remember: the Fed Cir *affirmed* the lower court’s ruling and they did that in part because they felt that the district court judge was in the best position to smell the wrongdoing.”

    You appear to reference the normally valid principle that an appellate court should defer to the triar of fact when analyzing a question of fact. I do not agree with you in this instance. Both the trial court and the federal circuit were reviewing a paper record and ruling concerning what should have been disclosed to the Examiner under 1.56. This is a question of law, not of fact, and should be reviewed de novo by the appellate courts.

    I certainly question how a “taint” caused by past association, versus a conflict of interest caused by present employment or association, can be said to be material to credibility and thus material to patentability, such that failure to disclose establishes intent to commit fraud. Need practitioners disclose that the affiant is the brother-in-law of the inventor? Former co-worker? Father’s college roommate?

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  24. I read the cert. petition, and it’s quite reasonable. Still, this just isn’t the time to be asking the Supreme Court to make it more difficult to challenge patents.

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  25. My prediction: the Supremes won’t touch this with a twenty foot pole.

    Remember: the Fed Cir *affirmed* the lower court’s ruling and they did that in part because they felt that the district court judge was in the best position to smell the wrongdoing.

    You think the Supreme’s are going to try to sniff it out from where there sitting? To save a rather boring patent that won’t even affect consumers’ ability to watch satellite TV?

    No way.

    I wouldn’t worry too much about the Ferring decision and its impact either way. I think inequitable conduct cases are always best limited to their facts, in spite of efforts to read them more broadly. The district court judge made his decision based on a number of factors, including some that were not discussed in the decision (for better or worse) but nevertheless served to amplify the bad smell in the judge’s nose.

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  26. The recent PTO OG Notice on the proposed IDS rules had an excellent discussion on Rule 56 recently. I’m not sure why Ferring did not cite to it, as it is helpful to the petitioner’s cause. That notice stated that there is no duty to disclose marginally relevant information and explained that citation of such information impedes, rather than helps, the examination process. Inequitable conduct does occur in some rare cases. But I abhor the culture of attack against honest and hardworking inventors and lawyers who were doing the best that they can to help in the examination process by getting facts as best understood before the examiner. Under the pre-1992 test, it’s easy to question every detail in hindsight and make a federal case as to what should or should not have been done and say that something was “important,” (and thus fraud inferred). Unless intent is proven, I think that these charges should be thrown out absent a showing that it would have affected patentability.

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