Regeneron Pharmaceuticals, Inc. v. Merus N.V. (Federal Circuit 2017)
In a split decision, the Federal Circuit has affirmed a S.D.N.Y. judgment – finding Regeneron’s U.S. Patent No. 8,502,018 unenforceable based upon inequitable conduct during prosecution. The inequitable conduct allegation here follows the typical pattern – the patentee failed to submit four relevant prior art references. The majority opinion was penned by Chief Judge Prost and joined by Judge Wallach. Judge Newman wrote in dissent.
Although the materiality portion of the discussion is important, the most interesting segment is intent. No intent to deceive was found – rather the court affirmed the district court’s adverse inference of bad intent as a sanction for litigation misconduct. The case may be a wake-up-call for some litigators who will read through the list of misconduct and see it as only business-as-usual.
The defense of inequitable conduct is not particularly spelled-out in the Patent Act. Instead, it is treated as a non-statutory equitable defense intended to punish fraudulent behavior. In Therasense, the Federal Circuit set-up a two step inquiry into the claim: materiality and intent.
On the materiality side, the district court is asked to determine whether the action (here withholding of prior art references) serve as a “but for” cause of the patent issuing. Would the patent have issued (in the same form and scope) if the references had been submitted — or would the patent examiner have rejected the claims and required amendments or abandonment. Because
Intent requires “specific intent to deceive the PTO.” Therasense. In the withholding-prior-art scenario (nondisclosure), the court has previously required clear and convincing evidence of “a deliberate decision to withhold a known material reference.”
An important kicker with inequitable conduct is that the usual remedy is to hold the patent unenforceable in its entirety and perhaps also find family members unenforceable.
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Mouse-Human Chimera: The subject matter of the case is interesting. Claim 1 is directed to “a genetically modified mouse.” The claim requires that mouse has “in its germline” a set of “human unrearranged variable region gene segments” that are “inserted at an endogenous mouse immunoglobulin locus.” The court writes “One practical use of this technology is that users may target and modify specific genes in mice so that the mice develop antibodies that can be used by humans.” In the complaint, the patentee alleged that “Merus’s sole busines spurpose appears to be directed to a genetically modified mouse that infringes Regeneron’s intellectual property.” (An approach that now looks successful.)
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The materiality prong here turns on BRI claim construction. Since the fraud-on-the-patent-office form of inequitable conduct asks “whether the patent application would have been denied,” the court gives claims their broadest-reasonable-interpretation or BRI. The patentee argued for a narrow construction – that the claim structure of sticking human variable region gene segments into a mouse germline implies that the rest of the mouse germline is “mouse” and not partially human.
The result of this interpretation is that it would have narrowed the claims such that the withheld prior art would not be but-for-material since they relate to further modifications of mice that are already transgenic.
Here, however, the Federal Circuit held that the claim is not so limited. Rather the Broadest Reasonable Interpretation of the claims requires that the germline include human variable region gene segments in a particular location, but the “comprising” transition would allow for human segments (variable or constant) in other regions of the mouse genome. The result then, is that the withheld prior art was material because it would have impacted prosecution under this broader interpretation. [The court includes substantial further discussions of its conclusion of materiality of each prior art reference as well as the combination of references.]
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Specific intent to deceive the PTO is typically quite difficult to find. Most do not have that intent, and those that do can be expected to avoid creating incriminating evidence. Here, the district court avoided the issue. Instead of deciding the specific intent question, the court sanction the patentee for litigation misconduct “by drawing an adverse inference of specific intent.”
On appeal, the Federal Circuit affirmed this holding as well – finding that the inference of specific intent was an appropriate sanction.
In light of Appellant’s widespread litigation misconduct, including Appellant’s use of sword and shield tactics to protect Drs. Smeland and Murphy’s thoughts regarding disclosure of the Withheld References to the PTO during prosecution of the ’018 patent, we conclude that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO. . . . Thus, the district court did not abuse its discretion in holding the ’018 patent unenforceable due to Regeneron’s inequitable conduct.
This is an important case for both patent prosecutors and patent litigators to consider and probably chart-out. I will leave a complete discussion of Judge Newman’s dissent and the particular litigation misconduct issues to a later post.