Inequitable Conduct: Federal Circuit Places another Nail in the Coffin

By Dennis Crouch

1st Media v. Electronic Arts (Fed. Cir. 2012)

In a strong opinion, the Federal Circuit has rejected a district court holding of inequitable conduct in a failure-to-submit case. The appellate court held that the defendant had failed to prove that the failure to submit was a deliberate fraud on the PTO under the standard outlined in the court’s 2011 en banc Therasense decision.

Individuals sufficiently involved with the prosecution of a patent application bears a “duty of candor and good faith dealing with the [USPTO], which includes a duty to disclose to the Office all information known to that individual to be material to patentability.” 37 C.F.R. § 1.56 (Rule 56). This duty is particularly applied to each inventor named in the application and “each attorney or agent who prepares or prosecutes the application.” A patent attorney’s failure to comply with the duty of candor can lead to disciplinary hearings by the USPTO’s office of enrollment and discipline (OED) and, as a rule, the USPTO refuses to grant patents “on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct.”

The fiercely adversarial litigation system in the US is comparably quite good at rooting out (and thus discouraging) fraud. Whenever a patent is being enforced, accused infringers scour the records and available evidence to look for any way failures to comply with Rule 56. When those failures rise to intentional and material misconduct, a court has the equitable power to hold the patent (and its patent family) unenforceable due to inequitable conduct in the prosecution of the application. Of course, attorney fraud is a serious charge, and even false claims create difficulties for the accused wrongdoer. As such, the courts have taken some steps toward limiting those types of claims. The two key recent cases on this point are Excergen and Therasense.

Excergen: The Federal Rules of Civil Procedure (FRCP) as interpreted by the Excergen decision, inequitable conduct may only be alleged as a defense if it can be pled with particularity (as opposed to other types of claims that may be pled much more generally).

Therasense: Under Therasense, inequitable conduct requires proof that the alleged wrongdoing was deliberately and knowingly wrong and that the result of the wrongdoing during patent prosecution impacted the issuance of the eventual patent and that each element be proven with clear and convincing evidence. In the failure-to-disclose situation, the court writes that a defendant must prove “that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.”

In 1st Media, the asserted patent was part of a family of applications that had been filed in various countries around the world. Three references used to reject the foreign applications were never submitted for consideration by the US examiners. Nevada district court Judge Mahan considered this issue and found that both the patent attorney and the listed inventor were at fault for failing to submit the references and held the patent unenforceable.

On appeal, the Federal Circuit reversed – making clear (again) that in a failure-to-disclose situation, the defendant must prove that individuals with a Rule 56 duty “made a deliberate decision to withhold” the references. Further, that deliberate decision element must be proven with clear and convincing evidence and that proof cannot be inferred from the fact that the individuals had knowledge of the references and their materiality.

A court can no longer infer intent to deceive from non-disclosure of a reference solely because that reference was known and material. Moreover, a patentee need not offer any good faith explanation for his conduct unless and until an accused infringer has met his burden to prove an intent to deceive by clear and convincing evidence.

In the bench trial, Judge Mahan found the explanations given by the inventor and his patent attorney to lacking. On appeal, the Federal Circuit made clear that the burden is on the defendant to provide clear and convincing evidence.

The court provided a nice quite for patent attorneys:

Moreover, it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush.

Because one element of the inequitable conduct charge is missing, the court concluded that it cannot be proven. Of course, “carelessness, lack of attention, [or] poor docketing” will still lead to malpractice claims.


  • In its opinion, the Federal Circuit foreclosed any possibility for the defendants to re-open their inequitable conduct charges for a rehearing. However, the judge has not yet determined validity. Thus, if the withheld references are truly material then we’ll see the jury hold the asserted claims obvious.
  • Beginning September 16, 2012, patentees will also be able to request a supplemental examination at the USPTO to ensure that any references that had been previously withheld do not impact patentability. However, if the USPTO finds that the previously withheld references create a major patentability question then the Office will institute a reexamination.
  • We now have a situation where inequitable conduct is quite difficult to prove – meaning that patent owners will rarely be harmed by a violation of the duty of candor and good faith dealing. Consequently, patent attorneys will faced increased pressure to push the boundaries.

25 thoughts on “Inequitable Conduct: Federal Circuit Places another Nail in the Coffin

  1. 25

    Docket entries 119 and 120 on Pacer shows the consent — a proposed order and the signed order. I cannot say beyond this why, just that it seems to have happened.

  2. 24

    Dr. Roy, is still makes no sense as to why the cues patent owner would have ever consented to try the issue of inequitable conduct before a jury had an opportunity to determine whether the prior art was material in fact.

  3. 22

    If it is published, it is publicly available.  How does not disclosing that which is published and available fraud?  How can one intend to deceive if what is not disclosed is available to the examiner, to the public who can submit it if they see that it was not?  There has to be something more.

  4. 20

    I still don’t understand how someone can be guilty of inequitable conduct if he willfully fails to disclose prior art that is publicly available and easily found by anybody. The original cases on unclean hands had to do with suppression of evidence that was not publicly available at all. It had to do with suppression of evidence of prior invention by others, by perjury in an interference, and by fabricating false evidence for submission to the patent office. The common theme in all this is that evidence submitted or suppressed was not publicly available at all.

  5. 17

    Selective disclosure and egregious misconduct are two ways to get to IC other than a confession/nervous breakdown on stand

    thats it?

  6. 16

    If the material held establishes that the claimed invention is invalid why not deal with the matter straightforwardly? If there is a clear case of invalidity such that the person withholding the information was concious of wrongdoing, should it not be a simple matter to establish that the alleged invention lacked novelty, was obvious, had not been enabled or lacks utility? Why is poking about into peoples’ motives better than investigating the relevant technical facts?

    An inventor should be judged by the technical merit of what he has disclosed and not by his personal character. He may have halitosis. He may be a hunchback like Richard III. He may be very ugly and dirty. He may be a frequent liar, mistreat his wife and family and be a substance abuser. He may suffer from Tourette’s syndrome, as did the preacher John Bunyan. We may have many grounds for disliking him.
    Those who have read his biography know that Edison was no saint. But if an inventor has made an invention and disclosed it to the Patent Office he should be entitled to his patent if it meets the statutory requirements on other respects.

    In the UK we used to invoke considerations similar to inequitable conduct where a patent was only partially valid and required amendment. The enquiry into equitable issues added about 30% to litigation cost. Taking a lead from the EPO we no longer investigate such issues. The EPO never did, and opposition proceedings in the EPO are none the worse for that.

    Inequitable conduct is an aberration peculiar to the US. In my opinion you would be better off without it. The only justification that I can see is that it provides a route for collection of attorney fees – in other respects straightforward factual ivestigation is in the long run better and more cost-effective. The present decision is a step in a generally favorable direction. I am, however, only too aware of the level of disagreement amongsst US practitioners regarding these views.

  7. 15

    1) The PTO systems do not automatically let you know that an EP equivalent exists.

    2) The PTO systems do not have the up to date EPO data and do not have any of the EPO prosecution information.

    3) To find the EPO search report, the examiner would have to go to the Espacenet search engine and try to find the equivalent and then scoot over to the Register. Then they’d have to manually enter what they find into their own systems.

    4) The EPO does not have this problem. They have the implemented the common citation system and can automatically see the references involved in the US prosecution.

    5) Some day this will all change. The money is budgeted and the contractors are working on it. I’m sure the government contractors will do a wiz bang job even though they have never built a patent search engine before.

  8. 14

    Maybe this will be appealed to the Supreme Court. Right now, the bar for inequitable conduct is so high that a lot of malfeasance will go unpunished.

  9. 13

    I don’t understand why, in the interest of judicial economy at least, the court did not wait until after trial on validity to consider IC over allegedly material references. If the jury holds the patent invalid, the materiality is established. If it does not, just how is the court going to reliably establish materiality?

  10. 11

    Paul, I hope 6 responds to your observation about foreign searches and OAs. I think every examiner should be required to review them. It should not be optional.

  11. 10

    Agreed. Careful firms and corporations for years have had nearly fully automatic systems to insure that prior art coming in from equivalent foreign applications gets cited in the equivalent U.S. application if it is still pending. They are unlike to stop doing so because of this one panel opinion, which, BTW, demonstrates the increased litigation costs for not doing so.

  12. 9

    “Consequently, patent attorneys will faced increased pressure to push the boundaries.”

    Not sure this is the case, at least in our practice. We continue to cross-cite cases and file IDSs as if Therasense never existed. We don’t view Therasense as giving us wiggle room to push the duty to disclose envelope. Rather, we view it as a nice safety net that helps us sleep better at night.

  13. 8

    Without getting into the merits here, note that the USPTO has for many years considered it to be important and serious not to cite to the USPTO relevant references cited in a co-pending foriegn equivalent application, as here. So does OED still review and investigate IC cases like this? If so, that ought to still scare some practitioners even if the client’s patent gets off the IC hook.

    [Nor do I think that every Fed. Cir. panel will necessarily will take same IC views?]

    Which also leads to this question: Why do not USPTO examiner prior art searchs automatically include a quick check for the art cited against an EPO equivalent search report? Isn’t that quality and efficiency improvement the point of of the new formal search exchange programs?

  14. 7

    I wonder if there will be unforseen consequences of Therasense. One of the big whines from Rader et al. was that these infallible super-ethical scientists and their saintlike attorneys were being unfairly “smeared” during patent trials.

    Now that a virtual confession or credibility collapse is necessary to achieve success with the defense, I wonder if defense attorneys will turn up the heat even higher on inventors and their agents?

    Or will the Federal Circuit suddently discover Rule 11 and use it to thwart such behavior?

    I’m guessing the latter, in spite of the fact* that the majority of the least credible arguments made during litigation are made by patentees trying to defend claims which never should have been granted in the first place.

    *non-scientific survery

  15. 6

    The trick is for the declarant/witness to practice the lie often enough so that they actually start to believe that it isn’t a lie.


  16. 5

    Here’s the one example I know of for inequitable conduct surviving an appeal post-therasense.

    I’m not sure where the Therasense case itself stands these days but in that case the District Court judge also upheld the inequitable finding on remand.

    The most important thing to remember is that inequitable conduct never, ever happens and it’s even rarer for important cases, such as those that go to trial. It’s almost as rare as the PTO issuing a patent that is so obvious you don’t need to be “one of ordinary skill” to find the obvious faults with the claim. And we all know how rare that is.

  17. 4

    The trick is for the declarant/witness to practice the lie often enough so that they actually start to believe that it isn’t a lie.

    We basically have a “sweat test” for inequitable conduct now. No matter how gross the “negligence” appears and no matter how material the withheld information may be, unless someone admits to intending to deceive the PTO (good luck) or collapses on the stand in a pool of sweat during cross-exam such that their disavowal of fraud strains all credibility, there won’t be a finding of inequitable conduct.

    Isn’t that awesome?

  18. 1

    So, barring a smoking gun document, someone willing to deliberately and knowingly withhold material prior art from the PTO can avoid any consequences by lying in a declaration or deposition.

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