Managing the Risk of Inequitable Conduct

Understanding and Avoiding Allegations of Inequitable

Conduct in Patent Prosecution

Duty of Candor

37 CFR 1.56: Duty to disclose information material to patentability.

18  U.S.C. 1001(a): Crime to make false statements to the government.

18  U.S.C. 1001(a)

Penalties– fines,– imprisoned not more than 5

years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both.

Inequitable Conduct

Inequitable conduct resides in failure to disclose material information, or submission of false material information, with an intent to deceive.

The intent element can be shown by circumstantial evidence.

Inequitable Conduct

Materiality is determined by whether the "reasonable examiner" would consider the information important to their decision regarding allowance of an application.

A practitioner who acts with reckless indifference to whether a representation is true or false is chargeable with knowledge of its falsity.

Intent to Deceive

Fraud in trademark prosecution is not necessarily identical to fraud in patent prosecution.

Subjective intent to deceive is not required.– Objective intent found from the facts

and circumstances.– Heavily influenced by materiality

Inequitable Conduct

Inequitable conduct can lead to– (1) invalidity or unenforceability of the IP,– (2) a Government suit to cancel the IP, – (3) an award of attorney's fees in an

infringement suit, or – (4) liability under the antitrust laws,

Federal Trade Commission Act or securities laws.

Fraud or inequitable conduct must be established by clear and convincing evidence.

Antitrust ClaimsWalker Process Equip v. Food Mach. &

Chem. 382 U.S. 172 (1965)

A party that asserts a fraudulently obtained patent may be subject to an Walker Process antitrust claim under §2 of the Sherman Act.

Patent fraud eliminates the exemption a patent holder has under antitrust law.

The heightened standard of materiality in a Walker Process case requires that the patent would not have issued but for the patent examiner's justifiable reliance on the patentee's fraud.

Hoffmann-La Roche v. Promega

323 F.3d 1354 (Fed. Cir. 2003) Materiality is not limited to matters reflected in

the claims of a patent. Past tense was used in a prophetic example,

thus indicating that the material was being offered as fact.

Applicant contended that prophetic example was included because it revealed the best mode.

The best mode requirement does not entitle the inventor to suggest that the best mode has been performed when it has not, and to report results that have not actually been observed.

Dayco v. Total Containment

329 F.3d 1358 (Fed. Cir. 2003)

The Fed. Cir. held that an office action from an application can be material to a different examiner inspecting a related patent application.

Two related applications contained substantially identical claims.

One examiner was not informed of other examiner’s rejections or the reference that supported the rejections.

Dippin’ Dots v. Mosey 476 F.3d 1337 (Fed. Cir. 2007)

Patent asserted in litigation. Patentee made statement in prosecution that

sales were evidence of commercial success but failed to mention earlier sales more than 1 year before the filing date.

Balance of the equities of materiality of the disclosure and evidence of intent led the court to find inequitable conduct.

Attorney fees of $676,675.46 awarded to defendant and the patent attorney was suspended for 2 years by OED.

McKesson v. Bridge Medical

487 F.3d 897 (Fed. Cir. 2007)

Material office actions from one application need to be cited to the other application. This hold true even if the same examiner is assigned to both applications.

The court indicated that even a notice of allowance in one application can be material and might need to be cited.

The court noted that, pursuant to the MPEP, information specifically considered and discarded as not material should be recorded, including the reason for discarding it.

Larson Mfg. v. Aluminart

559 F.3d 1317 (Fed. Cir. 2009)

Rejection in third office action was withdrawn in the fourth office action about 1 year later.

Even a withdrawn rejection might be material.

Materiality does not presume intent and non-disclosure, by itself, cannot satisfy the deceptive intent element.

Exergen Corp. v. Wal-Mart

575 F.3d 1312 (Fed. Cir. 2009) Heightened standard for pleading fraud

also required for pleading inequitable conduct.

Sufficient identification of the who, what, where, when, why, and how facts of inequitable conduct is needed.

Opinion cited in recent decision by Fed. Cir. to require a heightened pleading standard for false marking qui tam actions.

USPTO Rules of Practice

Patent and Trademark Office Code of Professional Responsibility found at 37 C.F.R. PART 10.

Breaches of these rules can be sufficient to support a charge of inequitable conduct.

False Statements

Client misrepresentations– If you have doubts about a

statement that your client is making, then you have an obligation to inquire further to avoid a misconduct charge.

– Rule 10.23

18  U.S.C. 1001(a)

Criminalizes the following in any communications to any branch of the federal government:

…knowingly and willfully – – (1) falsifying, concealing, or covering up by

any trick, scheme, or device a material fact;– (2) making a materially false, fictitious, or

fraudulent statement or representation; or– (3) making or using any false writing or

document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry;…

37 CFR 10.18(b) USPTO Rules

provides that, by presenting any paper to the USPTO, the party presenting such paper is making two certifications: – (1) the first certification is that the

statements made therein are subject to the declaration clause of 37 CFR 1.68;

– (2) the second certification is the certification required for papers filed in a federal court under Rule 11(b) of the Federal Rules of Civil Procedure.

37 CFR § 1.68 (Patent) & 2.2 (Trademark)

Willful false statements and the like are punishable by fine or imprisonment, or both and may jeopardize the validity of the application or any patent or trademark issuing from that application.

Federal Rule 11(b)

Representations to Court. By presenting to the court (whether by signing, filing, submitting, or later advo cating) a pleading, written motion, or other paper, an attorney or unrepresented party is certifying that to the best of the person’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances,…

Federal Rule 11(b)

(1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) the claims, defenses, and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

Federal Rule 11(b)

(3) the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief.

Prosecution Practice Tips

Memorialize all verbal disclosures to examiners.

Document the non-disclosure of potentially material references and the reasons for not disclosing.

Assign the prosecution of related applications to the same law firm and the same attorney within that law firm.

Prosecution Practice Tips

Disclose related patent applications early in prosecution, even if the same examiner is assigned to the related applications.

Disclose material references from related applications.

Disclose material office actions from related applications.

Give client written instructions regarding candor.

James M. FrancisGreenebaum Doll & McDonald, PLLCCo-Chair, Life Sciences TeamRegistered Patent Attorney

101 S 5th St., Suite 3500Louisville, KY 40202502-587-3661 (Office)502-540-2261 (Fax)jmf@gdm.com