Misleading prophetic examples only marginally relevant to materiality in inequitable conduct review

Purdue Pharma L.P. v. Endo Pharms. Inc. (Fed. Cir. 2006).

In a dramatic reversal of fortune, the Federal Circuit has reversed itself and the district court findings that Purdue’s Oxycontin patents-in-suit were unenforceable due to inequitable conduct that occurred during prosecution of the patents.

The district court found that Purdue repeatedly referred to its “surprising discovery” during prosecution, but did not inform the PTO that the “discovery” was based on “insight” without “scientific proof.”  In its initial decision, the Federal Circuit determined that the district court did not error in finding the two elements of inequitable conduct: materiality and intent.

On rehearing, the same three-member panel of Judges Gajarsa, Plager, and Linn came to a new conclusion — vacating the holding of inequitable conduct. 

The panel began by reviewing the law of inequitable conduct:

Applicants for patents have a duty to prosecute patents in the PTO with candor and good faith, including a duty to disclose information known to the applicants to be material to patentability. A breach of this duty may constitute inequitable conduct, which can arise from an affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive or mislead the PTO.  A party asserting that a patent is unenforceable due to inequitable conduct must prove materiality and intent by clear and convincing evidence. Once threshold findings of materiality and intent are established, the trial court must weigh them to determine whether the equities warrant a conclusion that inequitable conduct occurred.

The court applies a “careful balance:”

[W]hen the misrepresentation or withheld information is highly material, a lesser quantum of proof is needed to establish the requisite intent. In contrast, the less material the information, the greater the proof must be.

Regarding materiality, the CAFC agreed with the district court that “Purdue’s actions met a threshold level of materiality.” However, the panel found that the “level of materiality [was] not especially high” — thus requiring solid proof to establish intent. The trial court, however failed to “properly consider the [low] level of materiality.” 

Based on the lack of evidence intent presented in the trial court’s opinion, the CAFC vacated with instructions to reconsider the evidence of intent based on a low level of materiality.