US Federal Circuit raises materiality bar for proving inequitable conduct

The US Court of Appeals for the Federal Circuit has raised the requirements to demonstrate materiality when pleading ‘inequitable conduct’ to a but-for standard.

The en banc rehearing of Therasense (now known as Abbott Diabetes Care) and Abbott Labs v Beckton-Dickinson & Co, Nova Biomedical and Bayer Healthcare was decided on May 25.

Abbott’s patent is for a blood glucose test strip that is used to help manage diabetes. The US District Court for the Northern District of California found the patent to be unenforceable due to inequitable conduct in 2008.

The district court said that those prosecuting the patent at the US Patent and Trademark Office (USPTO) withheld information about arguments made during the prosecution of a related European patent at the European Patent Office.

A panel of judges sitting in the Federal Circuit affirmed the lower court’s decision in January 2010, but after a petition by Abbott for an en banc rehearing was granted in April 2010, the Federal Circuit reversed that decision.

US Federal Circuit Chief Judge Randall Rader was joined in the majority by five other judges, one judge concurred in part and dissented in part, and four others dissented in full.

In the decision, Chief Judge Radar called the remedy for an inequitable conduct finding the “‘atomic bomb’ of patent law”, because “inequitable conduct regarding any single claim renders the entire patent unenforceable”.

An inequitable conduct attack has become a “common litigation tactic”, he added. US courts apply a multifaceted test when assessing inequitable conduct. Plaintiffs must show the defendant’s intent to deceive and the relevance or materiality of any omission to the patent being granted.

Brian Gaff, a partner in the IP practice at Edwards Angell Palmer & Dodge LLP, said that the sheer volume of materiality tests in US case law lead to a “lack of consistency and lots of unintended consequences”. Chief Judge Radar said that the inequitable conduct doctrine was being overused “to the detriment of the public”.

The Federal Circuit decided to create a single and heightened test by adopting a but-for standard that will “redirect” the inequitable conduct doctrine in a bid to lower litigation costs, reduce complex inequitable conduct assertions and protect patent office resources.

Chief Judge Radar said: “[T]he materiality required to establish inequitable conduct is but-for materiality. When an applicant fails to disclose prior art to the [USPTO], that prior art is but-for material if the [USPTO] would not have allowed a claim had it been aware of the undisclosed prior art.”

The Federal Circuit also removed the ‘sliding scale’ test that allowed a poor showing of the intent prong to be compensated by a strong showing of the materiality prong, and vice versa. “That’s gone now—it’s dead,” said Gaff.

The USPTO has warned patent applicants that it will soon be issuing guidance on the disclosure of prior art and information in light of the Therasense decision. David Kappos, director of the USPTO, said in a statement:

“We are now studying the potential impact of [Therasense] on [USPTO] practice, and we expect to soon issue guidance to applicants regarding the materials they must submit to the [USPTO] under their duty of disclosure.”