Important Inequitable Conduct Case: Hybrid Prosecution/Litigation Misconduct

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.

= = = = =

MouseChimeric

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.)

= = = = =

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.]

= = = = =

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.

Affirmed.

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.

[Read it here]

 

 

Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

42 thoughts on “Important Inequitable Conduct Case: Hybrid Prosecution/Litigation Misconduct

  1. I’m interested in more exploration of how, as a practical matter, the “but for” test is operated.

    We can’t re-play history, in order to watch what would have happened in prosecution, had the Examiner been referred to The Withheld References.

    So perhaps the “but for” is not an enquiry into what the PTO “would” in actual fact have done but rather nothing more complicated than a quality that a prior art reference possesses, a degree of relevance, materiality, as seen by the USPTOE-HOSITA, the notional PTO Examiner Having Ordinary Skill in the Art of examination.

    Notations on PCT written opinions of patentability (on any given claim)categorize individual prior art references as A (background relevance), X (prejudicial to novelty) and Y (together with another reference, rendering the claim obvious). An X reference for claim 1 might not be X for any of the dependent claims because all of them, unlike claim 1, exhibits novelty over that X reference.

    But of course, that same X reference is very likely to be a potent Y reference for all the dependent claims.

    So, gentle readers, can we agree on a workable “but for” test, a rebuttable presumption that, for any given claim, a mere A ref is no “but for” reference but all references that “would have” attracted an X or Y category in relation to the claim in suit certainly do exhibit “but for” quality. Yes?

    1. Max, I think the formula is fairly simple: had the examiner had the withheld reference(s) before him as opposed to the references he did have before him the application would not have issued. Secondly, the applicant must have known of this materiality and intentionally failed to disclose the references for purposes of obtaining allowance of the claims.

      In other words, the references must be more material in some respect than the references before the examiner so that they resolve open issues that were not resolved by the references before the examiner.

      So we have a claim to the better mousetrap with references A and B before the examiner, both Y. What they do not disclose is any motivation to combine them to produce the claimed mousetrap. But reference C also discloses the same subject matter as A and B and further discloses some suggestion to combine them. The failure to disclose C results in allowance of the claims.

      But that is not enough. You have to show that the applicant knew that reference C had this particular disclosure and that he intended to obtain allowance of the claims by not disclosing it to the examiner.

      I really have to wonder why any patent attorney would pull such a stunt. It is just beyond me. The whole point of prosecution is to get the client a valid and defensible patent that people will respect. Withholding references that are more material than those before the patent office is going to get the client into deep do do. Can anybody explain this kind of behavior?

      1. Explain it?

        Sure.

        Notwithstanding what you stated (and even though many would refuse to acknowledge that the aim of patent attorneys is to obtain a strong patent – and NOT one with such an obvious [sic] flaw), the explanation is that some attorneys will provide exactly what the client asks for: a granted patent to throw on a pile of granted patents so that the WHOLE PILE can be used as leverage.

        Think IBM.
        Think Microsoft.
        Think the “non-Tr011” practicing entities that created and vilified non-practicing entities with the “Tr011” moniker in the first place.
        Think of those that do not want patents as signs of actual innovation, but are merely interested in using patents along with their established market position to prevent disruptive innovation.

        Is it really that difficult to see situations where the marching orders from the client extends from a “we forbid our engineers to even look at patents” to a marching order of “we don’t care what you may be aware of, that is “merely cumulative” so do not disclose”…?

        Which is one reason why my forever antidote has been disclose everything and let the Office decide.

        Drive that dumptruck up to the Office and let loose those thousand reference IDS’s. Put the IDS in a logical order (for example, alphabetical), and you have done all that is required of you.

    2. Truly a mythical person: USPTOE-HOSITA, the notional PTO Examiner Having Ordinary Skill in the Art of examination.

      As to the “but for,” I think you have your bar a little low – it is not a “but for” being used in a rejection, but a “but for” against which a patent would have been granted.

      Pretty much anything can be (and is) used “for a rejection.” That’s just not the aim of “but for.”

    3. Max, a “but for” test is not the entire test for IC. IC can include, as here, litigation misconduct. Or, violation of the “duty of candor” with the PTO in application examination since it is an ex parte proceeding. Especially, an affirmative misrepresentation in a PTO-filed declaration.

  2. The problem with most of our CofA is the luck of the draw (of the panel).

    See: link to patentlyo.com

  3. Newman J. in her dissent invokes the EPO opposition papers. The issue is picked up in this thread by Ned and on PatentDocs by Paul Cole.

    But people, hang on a minute. The name of the game is the claim, right, and the claims opposed at the EPO were hugely narrower in scope than the claims in issue here (unless I have missed something).

    So, the patent owner at the EPO, battling against prior art that included The Withheld References, based itself on claims hugely narrower than the ones here. The claims in issue at the DC, the ones taken to issue at a USPTO ignorant of The Withheld References, were grossly wider than those defended at the EPO.

    To me, this looks like evidence on which one can draw exactly the opposite “but for” inference from the one Judge Newman draws.

    Or not? What do you say?

    1. MaxDrei, I was thinking about this myself and was expecting MM to reply along those lines. Thus if the claims are not of the same scope, the materiality of the references cannot be directly compared.

      Still there remains the lack of finding that the claim at issue would have been unpatentable but for the failure to disclose the references. As described by Newman, the Federal Circuit never actually answered this question by pointing to any teaching of the withheld references that disclosed an element not disclosed in the references before the examiner, nor fill in any gaps:

      The test for materiality is not whether references are
      directed to similar subject matter; the test is whether “the
      PTO would not have allowed a claim had it been aware of
      the undisclosed prior art.” Therasense, 649 F.3d at 1291.
      That standard is not met here.

      Neither the district court nor my colleagues find that
      any uncited reference was closer to the claimed subject
      matter than the cited references, or filled gaps in the cited
      references, or related to additional limitations in the
      claims. Nor did the district court find invalidity based on
      the uncited references; invalidity was based on the court’s
      finding of indefiniteness, not on obviousness over cited or
      uncited prior art.

      The uncited references do not provide additional information
      of but-for materiality with respect to the
      claimed technology.

      Id. at *10.

      What seems implied in this case is not so much the intent to withhold, that seems almost a given given all the evidence that they were intentionally withheld, but materiality the references. Materiality references seems to have been implied because of the desperate attempts by the litigation counsel to withhold from discovery discussion of the references among prosecution counsel . But is the belief by the patent attorneys involved in prosecution of the case that the references are but-for material substitute for a finding that they in fact are but-four material?

      Does a finding that I intended to steal a particular car prove that the car was stolen, or the car is not my car?

      1. “Materiality of the references seems to have been implied because of the desperate attempts by the litigation counsel to withhold from discovery discussion of the references among prosecution counsel .”

        Hi Ned. If you’ll check p. 15 et seq. you’ll see the review of materiality. It’s based on papers that the DC and the majority of the panel found to be material if the broad, BRI construction arrived at by the DC is correct.

        The majority doesn’t do a great job of connecting the dots, though. Mostly they take the position of saying Regeneron’s arguments of what the skilled person would understand from Ref-A (B/C/D) is wrong…. therefore the DC did not clearly err.

        I didn’t listen to the orals so I don’t know if that’s pretty much how Regeneron argued the case down the line.

        They get a little closer to saying why they think the references are material with this:

        As noted above, the references both individually and in combination teach one of skill in the art to genetically modify mice by inserting exogenous, including human, variable region gene segments endogenously into a mouse immunoglobulin locus. The references, in particular Taki and Zou, also provide the motivation to combine these references to develop the genetically modified mouse.

        which seems to be saying, “at minimum, a reasonable examiner would have made an obviousness rejection of the claims in the form they granted, had he these arts before him at the time of examination”.

        1. In other words, they should have concluded the positive statement that the claim was unpatentable over the references that were not disclosed and but that they were patentable over the references that were disclosed.

        2. which seems to be saying, “at minimum, a reasonable examiner would have made an obviousness rejection of the claims in the form they granted, had he these arts before him at the time of examination”.

          MaxDrei and you are in sync again – but that particular “seem” is not the level of “but for” that is required.

          1. “seems” in the part you quoted had nothing to do with “but for” materiality. I was indicating by “seems” that this was my interpretation of what was written in the opinion (correct or not).

            What does have to do with the “level of but for required” is the part that said I thought the panel was saying that “a reasonable examiner would have” rejected the claim that was granted.

            If that’s what the panel actually meant (and again, just my interpretation of it), then that meets the but for.

      2. Ned, how does one establish whether the PTO “would not have” allowed the claim? You suggest that the court can do it only by “finding” that the PTO would not have allowed. But how can the court “know” what the PTO “would have” not allowed, all those years earlier? It can form an opinion what it, itself, would not have allowed, had it, itself, been examining the claims in the PTO at the relevant date. But that to me seems a bit tenuous.

        But if it had solid evidence of the contemporaneous conduct of the Applicant at the PTO, consistent with a settled belief of Applicant that the PTO in a month of Sundays “would” not be allowing their claims, isn’t that, as evidence, more indicative of the relevant “but for” standard than even their own “finding” on the issue, years after the events under scrutiny?

        1. Max, the way I see it is that they have to find that the claims are patentable over the references before the office and not patentable over the references, perhaps combine the references before the patent office, that were not disclosed.

        2. But if it had solid evidence of the contemporaneous conduct of the Applicant at the PTO

          The problem you have maxdrei, is that the applicant is even more removed from being an examiner, thus your attempt to impugn any type of “but for” level from that source is even more prone to weakness on the argument that you yourself are attempting to use.

  4. Wow. Judge Newman, excellent dissent. Hopefully enough for an en banc review. Sounds like a D. Ct judge that wanted a patent case off his docket.

    1. Sounds like a D. Ct judge that wanted a patent case off his docket.

      Assuming that’s true (it isn’t), this would be an incredibly work-intensive approach to that problem.

  5. MM, how do you deal with this? From Newman’s dissent.

    It is noteworthy that the European Technical Board of
    Appeals ruled that EP ’287 was patentable over these
    allegedly withheld references. See Decision in Appeal No.
    T2220/14-3.3.08, at 67–68 (Taki); 71–72 (Brüggemann);
    72–77 (Wood); and 77–78 (Zou), available at
    link to epo.org
    142220eu1.pdf. These determinations negate but-for
    materiality, as well as the district court’s analysis. Perhaps
    this is why the panel majority chose not to discuss
    the European Opposition. Maj. Op. at 9 n.3.

    There is no support—legally or factually—for the district
    court’s reliance on the European opposition briefs to
    find these four references material to patentability. The
    European tribunal, with these references before it, did not
    find the claims unpatentable. Nor did the district court.
    The panel majority upholds a finding of but-for materiality without finding the claims invalid based on these
    purported but-for material references. It is not disputed
    that the information in those references did not solve the
    problem that was ultimately solved by the ’018 patent.

    1. I’m the wrong MM, I think, but still think I can answer your question.

      Judge Newman’s arguments vis-a-vis the EP procedures ignores the fact that the claims in the EP are much narrower than the US claims.

      Arguing that the European “did not find the claims unpatentable” begs the question of which claims she means when she says “the claims”. Why didn’t the patentee receive a US-like simple claim 1 during EPO prosecution?

      US claim 1:
      1. A genetically modified mouse, comprising in its germline human unrearranged variable region gene segments inserted at an endogenous mouse immunoglobulin locus.

      EP claim 1+14 (claim 14 is the first dependent, “mouse made by the method of a foregoing claim” claim).
      1. A method of modifying an endogenous immunoglobulin variable region gene locus in an isolated mouse embryonic stem (ES) cell by an in situ replacement of the endogenous locus with an orthologous human gene locus or by an 5 in situ replacement of one or more V and J, or V, D, and J gene segments of the endogenous locus with orthologous human V and J, or V, D and J gene segments, said method comprising:
      a) obtaining a large cloned genomic fragment greater than 20kb containing orthologous human V and J, or V, D, and J gene segments;
      10 b) using bacterial homologous recombination to genetically modify the cloned genomic fragment of (a) to create a large targeting vector for use in a mouse ES cell (L TVEC);
      c) introducing the L TVEC of (b) into a mouse ES cell to replace said endogenous immunoglobulin variable gene locus or said one or more V and J, or V, D, and J segments thereof in situ with the orthologous human gene
      locus or the orthologous human V and J, or V, D and J gene segments; and
      15 d) using a quantitative assay to detect modification of allele (MOA) in the mouse ES cell of (c) to identify a mouse ES cell in which said endogenous immunoglobulin variable region gene locus or said one or more V
      and J, or V, D and J segments thereof have been replaced in situ with the orthologous human gene locus or the orthologous human V and J, or V, D and J gene segments.
      14. A genetically modified eukaryotic cell or a mouse comprising a genetically modified immunoblobulin variable region locus obtainable by the method of any one of the preceding claims in situ in place of the endogenous immunoglobulin variable region gene locus.

      1. MM, got it. Max said the same thing as well.

        1. “Max said the same thing”

          Yeah, he’s a copycat, that one is.

          1. I regret I failed to thank Marsher for presenting at 4.1 the different claims, which of course was what prompted and enabled my comment at 6.

    2. MM, how do you deal with this?

      I can tell you how I *don’t* deal with it. I don’t take Newman at face value for anything because her view of reality is often warped beyond recognition.

      It is noteworthy that the European Technical Board of Appeals ruled that EP ’287 was patentable over these allegedly withheld references.

      No idea why that should be the case. EP law is different than US law.

      It is not disputed that the information in those references did not solve the problem that was ultimately solved by the ’018 patent.

      That’s not the standard for finding a reference material in this context.

      The panel majority upholds a finding of but-for materiality without finding the claims invalid based on these purported but-for material references.

      Again: a finding of invalidity of the asserted claims in view of Ref X is not required in order to conclude that Ref X was material at the examination stage.

      1. Ned, as MM observes, and as anon might like to remind you, despite the AIA, patentability is still different, on the opposite sides of the Atlantic Ocean.

        MM: EP law is different than US law.

        I agree.

        1. MaxDrei and I agree on something.

          Worth noting the occasion :-)

      2. MM, “Again: a finding of invalidity of the asserted claims in view of Ref X is not required in order to conclude that Ref X was material at the examination stage.”

        But a finding that the claims would be unpatentable is. That finding was not made according to Newman.

  6. This opinion is unclear on the concept of “adverse inference.” Typically, an adverse inference is rebuttable – after, for example, an adverse inference instruction is given to a jury. This was the form of the adverse inference that the Second Circuit talked about in the case the Federal Circuit relies on (the jury “should presume the emails from October to December of 1998, which have not been produced, would have disproved RFC’s theory of the case.”). Presumptions are typically rebuttable, but no opportunity to rebut was given in this case (in fact, there was not even a trial on the highly fact-intensive intent prong). An irrebuttable or conclusive presumption is basically a terminating sanction, which is what the plaintiff argued this was. And here, we not only have a terminating sanction but a result that destroys the whole right. This strikes me as a very serious error.

    1. here, we not only have a terminating sanction but a result that destroys the whole right. This strikes me as a very serious error.

      The patent is unenforceable because — after hearing all the evidence and reviewing the entire record– the district court exercised its discretion and harshly sanctioned the patentee.

      The “very serious” errors here were the numerous errors in judgment made by the patentee’s attorneys. Sometimes you can’t hide the ball.

      1. Your comment does not adress the difference between a rebuttable adverse inference (which is what the Second Circuit applied in the case the panel majority relies on, in the context of a jury instruction allowing the jury to presume intent unless it has been rebutted), and an irrebutable or conclusive inference, which amounts to a terminating sanction. The latter, as the panel itself admits, requires a finding of bad faith, which was not made here.

      2. And I’m not sure if the district court heard “all the evidence” because it doesn’t look to me like the court allowed the platinff to put evidence probative of no intent, which could have rebutted the adverse inference (or perhaps not). There was no trial on the intent prong.

  7. This is the equivalent to imputing intent for a murder charge to a defendant based on a second charge of jaywalk

    1. Were you there in the courtroom when these witnesses were being questioned?

      1. Your question misses the point.

        This panel (CAFC) is not (properly) empowered to go on its own frolic to impute anything.

        Intent has to be resolved in the manner set forth by prior controlling decisions. If the lower court did not do so (no matter how much it may have wanted to use the End it arrived at as punishment), then the correct thing for the panel (CAFC) was to correct the lower court’s application of the law.

        1. 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,

          Seems perfectly appropriate to make an adverse finding in this sort of situation.

          1. “Seems”

            No.

            It does not “seem” so – not when the law is clear (sort of like your replies above to Dmitry, which shows both your lack of understanding on the controlling law, posture and procedural aspects, as well as your (over-eagerness) to be against a person having a patent.

            You are captured by the Ends matching your desires, and fail to see, let alone understand, the real point here is the means to those Ends.

            This happens to you quite often.

  8. Somebody from the jurisdiction help me out here please.

    I read that the DC “did not abuse its discretion”. I suppose that if the DC had instead decided that the charge of inequitable conduct was not made out, the Federal Circuit Panel might also have declared (this time unanimously) that the DC did not abuse its discretion.

    One often supposes what is decisive to the case is what the FC thought of its merits. But isn’t it more frequently the case that what is decisive is what conclusion the DC comes to?

    1. No MaxDrei, the notion of “abuse of discretion” rests with the means to the ends – the epitome of the phrase “the Ends do not justify the Means” and the opposite of your inclination here.

      Separately, this decision strikes me as more reflective of the larger problem with panels of the Federal Circuit: the seeming inability to hew to res judicata, and, as the dissent of the Prime Dissentor once again indicates, a panel is off on a lark.

      Isn’t one of the duties of the Chief Judge to make sure that her court is disciplined in such matters? Is this not also a difficulty that Rader faced (witness his concurring thoughts via the Alice en banc….).

    2. Max, the trial judge, unlike the appellate judges, is the one more directly observing the litigation conduct and demeanor of the witnesses and attorneys, and thus accorded more discretion, i.e. respect, for its decision on such issues.

      1. Well, yes, I see that, Paul. Hence my question: Given the facts as they are, if (nevertheless) the DC had (in its discretion) decided that there was no IC, would not the appeal court panel have felt an urge to defer to that assessment by the DC?

        1. MD: Given the facts as they are, if (nevertheless) the DC had (in its discretion) decided that there was no IC, would not the appeal court panel have felt an urge to defer to that assessment by the DC?

          They are legally obliged to defer and they typically (although not always) do so in this context.

          1. “obliged to defer and they typically (although not always) do so in this context”

            The problem with most of our CofA is the luck of the draw (of the panel).

            I think many other panels would have found the DC should not have let litigation misconduct pinch-hit for the specific question of intent (assuming even that such other panels agreed with the materiality prong).

            I also think that if Regeneron gets an en-banc, it’ll flip the result.

            But what do I know. I’m just a figment of the imagination among a bunch of shadowless muppets.

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