Inequitable Conduct Post-Therasense: Two Important Recent Rulings

Inequitable conduct is a highly potent defense to patent infringement in the United States. As the Court of Appeals for the Federal Circuit has pointed out, the defense has the effect of an "atomic bomb" and can "endanger a substantial portion of a company's patent portfolio." Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288-89 (Fed. Cir. 2011). Unlike invalidity defenses, which pertain to particular claims of a patent, a finding of inequitable conduct renders the entire patent invalid and unenforceable, and may knock out continuations and divisionals of that patent as well. A finding of inequitable conduct in a patent protecting an important commercial product can also lead to antitrust and unfair-competition claims against the patent holder in subsequent suits, which are not only costly to litigate but can expose the patent holder to punitive damages. See id. at 1289. A significant risk of unenforceability can also severely diminish the value of a patent portfolio intended for licensing or sale.

To prove inequitable conduct, the defendant must show that the patent applicant: (1) withheld or misrepresented so-called "material" information, and (2) did so with intent to deceive the U.S. Patent and Trademark Office (USPTO). See id. at 1287. Due to concern over the harsh effects of inequitable conduct on the patent holder, the Federal Circuit in Therasense tightened the standards required for finding inequitable conduct. See id. at 1288-89. Specifically, the Federal Circuit held that "the materiality required to establish inequitable conduct is but-for materiality," meaning that if the USPTO had been aware of the withheld or misrepresented information, it would not have issued the patent. Id. at 1291. As to intent, the court found that the challenger "must prove by clear and convincing evidence that the applicant knew of the [material information], knew that it was material, and made a deliberate decision to withhold it." Id. at 1290. The court elaborated that "the specific intent to deceive must be 'the single most reasonable inference able to be drawn from the evidence.'" Id. (quoting Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)). Thus, "when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found." Id. at 1290-91. However, where there is proof of "affirmative egregious misconduct" such as a "'deliberately planned and carefully executed scheme[...