On December 26, 2017, the U.S. Court of Appeals for the Federal Circuit issued an order denying Regeneron Pharmaceuticals, Inc.’s combined petition for panel rehearing and rehearing en banc of a decision upholding a District Court holding of unenforceability due to inequitable conduct. Regeneron Pharmaceuticals, Inc. v. Merus N.V., No. 2016-1346 (Fed. Cir. Dec. 26, 2017). Of concern to many patent prosecutors, the District Court based its inequitable conduct holding on an adverse inference of specific intent to deceive the U.S.P.T.O. resulting from litigation misconduct before the District Court.
Although the District Court and Federal Circuit decisions reasonably cause concern among many patent prosecutors that the actions of a later attorney enforcing a patent during litigation could be used to establish an inequitable conduct ruling impugning the prosecuting attorney, we respectfully argue that Regeneron presents a rather nuanced fact pattern that should not be broadly applied—especially when the prosecuting counsel does not direct litigation strategy and tactics.
A helpful starting point is that the District Court ruling considered inequitable conduct only against Dr. Smeland (Regeneron’s in-house counsel responsible for prosecution and litigation of the patent-in-suit) and Dr. Murphy (a co-inventor of the patent-in-suit). Regeneron Pharmaceuticals, Inc. v. Merus N.V., 144 F.Supp.3d 530, 558 (S.D.N.Y. 2015). Although a memo by Regeneron’s outside then-patent-agent, Dr. Jones, set the stage for the District Court’s consideration of discovery misconduct, the District Court notably did not rule on inequitable conduct allegations against Dr. Jones raised in Defendant Merus’s Answer and Third Amended Counterclaims.
With regard to Dr. Smeland, the District Court found that, “Dr. Smeland has also been involved in litigation efforts against Merus—including the instant litigation—since 2011; he oversaw outside counsel on patent prosecution and litigation.” Id. at 562.
The District Court Proceedings
Under Therasense, a finding of inequitable conduct based upon an alleged failure to cite prior art references requires both “but-for” materiality and specific intent to deceive.
The U.S. District Court for the Southern District of New York bifurcated consideration of these elements into separate trials. A first trial found that the “Withheld References” were material to patentability of the claims. However, the District Court never held the second trial and, instead, issued an opinion detailing Regeneron’s discovery misconduct, drawing an adverse inference of specific intent to deceive, and holding that Regeneron’s patent was unenforceable.
The District Court’s adverse inference was based, in part, on a discovery dispute regarding a memo by Regeneron’s outside then-patent-agent Dr. Jones justifying Regeneron’s decision that disclosure of the withheld references to the U.S.P.T.O. was not required. After holding that Regeneron had waived attorney-client privilege surrounding the Jones Memo, the District Court issued two orders requiring Regeneron to produce associated materials and make several certifications regarding such production.
However, in preparation for the second trial regarding specific intent to deceive, Regeneron submitted trial affidavits from Dr. Jones and Regeneron’s in-house counsel Dr. Smeland, along with a privilege log indicating that it had “withheld many documents from Dr. Smeland’s files that he had authored or received on the basis of the attorney/client privilege and/or work product doctrine.” Id. at 589. After an in camera review of a portion of the previously unproduced documents revealed several types of discovery misconduct, the District Court considered several potential sanctions including allowing the trial declarations, which would have required “a top-to-bottom re-review of the Regeneron privilege log,” “additional document production, fact depositions, and revised expert reports and depositions.” Id. at 594-95.
How “Material” is Regeneron to Future Disputes?
Although the patent bar may have benefitted from the Federal Circuit’s reconsideration of Regeneron—even if just to clarify the circumstances under which litigation misconduct could lead to an adverse inference of specific intent to deceive—Regeneron represents a narrow fact pattern and that should not be applied to find inequitable conduct by prosecuting attorneys without control over litigation strategy.
Regeneron is best read as an example of a set of facts that led a district court judge to use the broad discretion available to judges in the face of litigation misconduct to apply an adverse inference sanction.
Again, neither the District Court nor the Federal Circuit found inequitable conduct based on the actions of Regeneron’s outside then-patent-agent. This should give considerable comfort to outside prosecution counsel although many other reasons remain to be wary of inequitable conduct allegations and to act accordingly to protect the client’s patent and the practitioner’s reputation.
Regeneron presents a mixed bag for in-house counsel or outside prosecuting counsel that also have control over litigation strategy. Although it is difficult to generalize in view of the various organization structures used for patent management, even the most narrow reading of Regeneron should give those controlling litigation involving patents that they personally prosecuted pause to consider whether litigation strategy may bolster inequitable conduct allegations against that attorney. However, the most equitable application of Regeneron would limit the finding of adverse inferences to situations in which the individual subject to the adverse inference had control over the litigation misconduct triggering the adverse inference.
Brian Landry is a partner and Justin Crotty is an associate in the Boston office of Saul Ewing Arnstein & Lehr LLP. Any views or opinions expressed in this article are solely their own and do not necessarily represent those of the firm or its clients.