J. Newman: Inequitable Conduct Charges Again on the Rise

Ferring v. Barr Labs (Fed. Cir. 2006).

The Ferring decision seems to have again expanded the scope of inequitable conduct in patent cases.  In a twenty-page dissent, Judge Newman took issue with this expansion.

I agree with J. Newman that inequitable conduct is “a serious charge” that should not be taken lightly. In the past, the defense has been “grossly misused . . . with inequitable conduct charged in almost every case in litigation.”  Certainly, these charges do nothing to help the current popular distrust of the patent system.

After the CAFC decision in Kingsdown v. Hollister (requiring objective evidence of material misconduct + intent to deceive), charges of inequitable conduct were pushed to the background and taken-out of many cases. However, in this decision, Newman sees a revival:

My colleagues on this panel have regressed to that benighted era, rejecting the efforts of Kingsdown to bring objectivity to charges of inequitable conduct, instead 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.

Here, Newman argues, the panel has found materiality based on a “should have known ” standard:

The panel majority, steeped in adverse inferences, holds that good faith is irrelevant and presumes bad faith. Thus the court resurrects the plague of the past, ignoring the Kingsdown requirements of clear and convincing evidence of a misrepresentation or omission material to patentability, made intentionally and for the purpose of deception. I respectfully, but urgently, dissent.


6 thoughts on “J. Newman: Inequitable Conduct Charges Again on the Rise

  1. 6

    Let me try again. Given the severe penalties associated with the current inequitable conduct law, e.g. the revocation of the offender’s rights to practice before the PTO, I agree with Judge Newman that a clear showing of intent to deceive or mislead should be required. And given that some people will sometimes lie and cheat, the inequitable conduct law seems good.

    I had intended to propose a new law that would make it possible to invalidate a patent, or to render it unenforceable, based on a clear and convincing showing that the patentee either misrepresented a material fact, or failed the burden of candor. Let’s call it negligent conduct, not inequitable conduct. (Actually it was not my intent to propose a new law. I had recommended modifying the existing law. But since intent is so hard to prove it’s safe for me to lie about what my intentions were.)

    Under my proposal a negligent conduct violation would not result in the revocation of the practitioner’s right to practice before the PTO. There would, therefore, be no need to have a requirement to show intent to deceive. The only penalty assessed under my proposed negligent conduct law would be a finding of invalidity or unenforceability of the patent in question. It might make sense to also award costs and fees to a successful defendant, since suing someone for infringement of a patent that was obtained only through negligence implies “special circumstances.”

    The advantage of my proposed approach is that an accused infringer, who is able to show clear and convincing evidence of negligent conduct, would be spared the burden of proving non-infringement or invalidity on a claim-by-claim basis. The defendant would only need to show that there was negligent conduct and that it is material to at least one of the asserted claims. Negligence related to non-asserted claims could be ignored, as not material to the suit in question.

    The courts would also be spared the burden of deciding each and every claim. Such a law could greatly reduce the cost of patent litigation, not only to the plaintiff and the defendant but to society as well. It would likely become the preferred first defense of accused infringers. It would also give incentive to patent applicants to be as candid as possible, thereby improving the quality of granted patents.

    A negligent conduct law is also logical. How can the courts presume to enforce patent rights if the patenting process was tainted by misrepresentations or failures of candor? And if the process was tainted why add the arbitrary requirement of showing that the tainting was intentional? Misrepresentation or lack of candor are damaging to the patent process whether they are intentional or not.

    If you make an error on your income tax return, the IRS will charge you a penalty fee whether you did it intentionally or not. If intent to deceive were required before the IRS could access penalty fees, tax filers would quickly become very forgetful and negligent.

    It’s logical to look first to the application process, where evidence of a tainted process exists, to ensure that a patent was properly granted before looking at questions of obviousness, anticipation or infringement of asserted claims. If the prosecution process were tainted, assertions of claim enforceability would be moot.

    The statutory presumption of patent validity is based on an underlying assumption of validly of the patent application and prosecution process. Without the assumption of a valid process, the presumption of validity would be absurd. But examiners cannot be expected to ferret out each and every instance of material lack of candor or misrepresentation. Such a process would require investigatory powers that far exceed the scope of the US PTO. And since the large majority of patents never result in litigation such investigations would mostly be a waste of time.

    Given the strong incentive to cheat, and the lack of investigatory resources at the PTO, the application process can’t logically be presumed to be valid in every case. But the high bar that is set by the current inequitable conduct law (i.e. the requirement of a clear and convincing showing of intent) and the severe penalty for violation (potential loss of livelihood for patent prosecutors) make the law a difficult tool for courts and defendants to apply.

    Patent litigation has been grossly misused in the US. Litigation is so expensive that patent trolls, wielding obviously invalid patents, have been able to extort huge payments from corporations. And corporations have unfairly maintained inappropriate monopolies with the mere threat of litigation over patents that, again, are often invalid. Both cases are the result of poorly thought-out patent laws, which grant a patent holder a monopoly, backed by the full force and might of the US government, but without due process during the prosecution of patents.

    Readers (if there are any who got this far) have probably guessed I’m speaking from experience. Yes, I was the victim of very expensive patent litigation. I won but it cost me $3 million.

    Borrowing from the famous Greek general (Pyrrhus), “one more such victory and Thomas is undone.” So the next person who wants to sue me for patent infringement is likely to see me cave in. That’s just not right.


  2. 5

    Good comment Thomas. But just to be clear, I think the solution you proposed already exists. A defendant is free to provide any evidence, whether in the patentee’s possession or not, to attack the validity of the patent. Perhaps what you are saying is that if the patentee has some prior art in its possession that was not cited, then that fact alone should invalidate the patent. Unfortunately, that is a much much lower showing than the current inequitable conduct standard. A finding of inequitable conduct does nothing except render a patent unenforceable, which is effectively the same as invalid. It seems like your proposal is simply to eliminate the “intent” requirement altogether from the inequitable conduct defense. Is that accurate?

  3. 4

    I’m not a patent attorney.

    But intent is nearly impossible to prove in a clear and convincing way. One can’t get in the head of an attorney who failed to provide material prior art. And asking the accused attorney after the fact is not likely to get a truthful answer; no reasonable attorney would admit to inequitable conduct even if they were guilty.

    Consider this example: An attorney has possession of, but fails to give to the examiner, a highly material prior-art article. What evidence could one hope to find that the attorney intentionally withheld that article? No reasonable attorney would leave any smoking guns lying around.

    Perhaps the law should be changed so that failure to provide material prior art, which was in the patentee’s possession can be used to invalidate the entire patent. But failure to provide the prior art would not rise to the level of inequitable conduct.

    This would allow defendants in patent infringement litigation to retain this valuable method of invalidating patents that were unfairly prosecuted. But it would relieve patent attorneys of the possibility of being found guilty of potentially career-wrecking inequitable conduct, which may have resulted from mere negligence.

    Such a law would remove the element of intent from the equation.


  4. 2

    If intent is inferrable when the actor should have known of the materiality of the omitted information, has not the element of intent been sub rosa removed and replaced with a different element?


  5. 1

    This is the exact reason I do not trust the current proposed legislation to provide an almost criminal penalty for “inequitable conduct.” The standard to determine this conduct has become a nose of wax. It changes from a test for intentional misconduct to a test for negligent conduct. It infers intent or negiligence from the degree of materiality. The standard of proof seems to change as well. It seems like the Court wants to encourage that such charges get filed by lowering the standard, then later complains that too many times charges of inequitable conduct are made.

    It’s time to put this thing to rest. Set the standard and do not permit the courts to alter it.

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