Patent Docs: Federal Circuit Loosens Requirements for Finding Inequitable Conduct

Earlier this month, the Federal Circuit affirmed a decision by a district court that the patent at issue before it had been obtained through inequitable conduct.  However, contrary to prevailing standards the district court used litigation misconduct rather than malfeasance during patent prosecution to justify its decision, raising fears that lawyers involved in obtaining patents for their clients may be found liable for conduct of (other) lawyers representing their clients in litigation.

Distinct from all other patent systems, under U.S. patent law a patent applicant (which can include inventors, supervisors, managers, and assignees) and her counsel are under an affirmative duty of candor when interacting with the U.S. Patent and Trademark Office.  This duty includes as a requirement that these actors disclose to the Office any information, knowledge, or in particular prior art known to any of them.  The penalty for not doing so is that any patent obtained as a result of a violation of the duty can be held entirely unenforceable against any accused infringer. 

A violation must be established in two steps.  First, there must be undisclosed prior art that is material to patentability, i.e., art that would have precluded allowance and grant of at least one claim in a granted patent had the patent examiner been aware of the art.  This requirement excludes art that is cumulative to art that was disclosed, for example.  Second, there must be an intent to deceive the Office by not disclosing the art by someone who has the duty to disclose.  It is rare that there is direct evidence, a “smoking gun” establishing the intent.  The standard, established by the Federqal Circuit several years ago in Therasense v. Becton Dickinson, is that intent can be inferred if it is the most reasonable inference that can be drawn from an applicant’s behavior when viewed after the fact (i.e., from circumstantial evidence).  In view of the draconian nature of the penalty, the Therasense court held that each prong of the test for inequitable conduct needs to be established by clear and convincing evidence (a higher standard that the civil court preponderance standard).

This most recent case, Regeneron Pharmaceuticals v. Merus, arose over Regeneron's infringement suit against Merus involving U.S. Patent No. 8,502,018, which is directed to transgenic mice expressing human variable domain immunoglobulin (Ig) genes.  Claim 1 is representative:

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

The types of antibody molecules that can be produced in mice using modern immunological and molecular biological techniques ranges from completely murine to completely human, and also include chimeric antibodies (encoded by human constant region genes and mouse variable domain genes) and "reverse" chimeric antibodies (encoded by human variable region genes and mouse constant region genes), as illustrated in this diagram (where green portions of the antibodies are encoded by mouse genes and yellow portions are encoded by human genes):

It was undisputed that during prosecution of the patent in suit, four references were known to Regeneron and its counsel that were not cited to the U.S. Patent and Trademark Office.  Prosecution counsel’s position was that these references were cumulative to art already cited to the Office, and that defendant’s allegations of inequitable conduct failed the first prong of the Therasense test. The district court disagreed, finding these references to be material to patentability (and the Federal Circuit affirmed that determination).  Nothing about this portion of the decision was unduly surprising; reasonable people can differ on such matters.

What was surprising, and potentially damaging to the patent system, is that the district court did not follow the evidentiary assessment required under Therasense (determining by clear and convincing evidence that intent to deceive was the most reasonable inference to be drawn from the evidence).  Rather, the district court drew an adverse inference that there was an intent to deceive based on a litany of misconduct by litigation counsel. The court did not consider the prosecuting attorney’s testimony or any evidence that they did not have such an intent, which was based on their understanding that the art was cumulative.

The legal basis of the Federal Circuit’s decision affirming the district court was that the lower court had the discretion to draw the adverse inference, and doing so was not an abuse.  According to the Federal Circuit majority, “Regeneron's litigation misconduct . . . obfuscated its prosecution misconduct,”  and the fact that the district court had otherwise followed the rubrics for finding inequitable conduct  sanctioned the decision.  Judge Newman penned a strong dissent, based on her conviction that intent to deceive cannot be inferred but must be proven by clear and convincing evidence. In this case, she writes, “[t]he panel majority [] convicts Regeneron, its counsel, and its scientists, with no trial, no evidence, and no opportunity to respond in their defense."

Inequitable conduct based on a practitioner's intent to deceive is a serious allegation having deleterious consequences to a patent prosecutor's reputation and can also have such negative repercussions as an ethics inquiry by the Office's disciplinary officials.  Because intent to deceive is personal (insofar as it applies only to those individuals who have a duty to disclose), it seems inequitable to draw such an inference against the attorneys who prosecuted the patent based on the conduct (bad or just misunderstood) of litigation counsel who did not have a duty of candor and were not involved in prosecuting the patent to allowance. Accordingly, it is not unreasonable to require that patent prosecutors be placed in such jeopardy solely due to their own mis- or malfeasance rather than to be at the whim of conduct by litigation counsel taken for strategic reasons at trial (as the District Court's decision and Federal Circuit opinion alleged here) that are found to be subject to sanction. 

Kevin Noonan is a partner with the law firm McDonnell Boehnen Hulbert & Berghoff LLP and represents biotechnology and pharmaceutical companies on a myriad of issues. A former molecular biologist, he is also the founding author of the Patent Docs weblog, https://patentdocs.typepad.com/.