Patent Applicants Can Submit New Evidence to the District Court in Civil Actions Under §145 (IP Update, Vol. 15, No. 4, April 2012 - Part 1)

IP UPDATE: Edited by Paul Devinsky and Rita Weeks

Patents / Section 145

Patent Applicants Can Submit New Evidence to the District Court in Civil Actions Under §145 by Paul Devinsky and Charles J. Hawkins

In an unanimous decision, the U.S. Supreme Court affirmed the U.S. Court of Appeals for the Federal Circuit and held that 35 U.S.C. §145 imposes no special limitation on a patent applicant's right to introduce new evidence in a civil action involving district court appeals from final determinations of the U.S. Patent and Trademark Office (PTO). Kappos v. Hyatt, Case No. 10-1219 (Supr. Ct., Apr. 18, 2012) (Thomas, Justice). (Sotomayor, Justice and Breyer, Justice, concurring).

The case stems from a patent application filed by Gilbert P. Hyatt. During prosecution, the examiner issued a final office action rejecting all pending claims for a failure to comply with the requirements of 35 U.S.C. § 112. Hyatt appealed to the PTO Board of Patent Appeals and Interferences (Board). The Board reversed some of the examiner's rejections, but upheld others. Rather than pursue a direct appeal to the Federal Circuit via 35 U.S.C. §141, Hyatt filed a civil action at the District Court for the District of Columbia under §145.

In response to a summary judgment motion filed by the PTO, Hyatt submitted a declaration identifying portions of the specification that he claimed supported the rejected claims under § 112. The PTO objected to the declaration, arguing that the new evidence should not be considered because Hyatt did not raise it before the PTO, despite being able to do so.

The district court agreed with the PTO, ruling that Hyatt's failure to present the evidence to the PTO constituted a negligent act. With no new evidence submitted, the district court reviewed the Board's fact findings for substantial evidence and granted the PTO's summary judgment motion. Hyatt appealed to the Federal Circuit.

In a panel ruling (see IP Update, Vol. 12, No. 8), the Federal Circuit affirmed the lower court's ruling. The panel majority, while acknowledging that new evidence can be submitted in §145 proceedings under certain circumstances, concluded that new evidence should not be permitted if it could and should have been introduced at the PTO. The panel also held that the Administrative Procedures Act (APA) imposed limitations on the introduction of new evidence in §145 actions.

The Federal Circuit then heard the appeal en banc and ruled that applicants are free to introduce new evidence in § 145 proceedings subject only to the Federal Rules of Evidence and the Federal Rules of Civil Procedure, even if the applicant had no justification for failing to present the evidence to the PTO (see IP Update, Vol. 13, No. 3). The court also held that the district court must make de novo findings to take new, conflicting evidence into account during § 145 proceedings.

The Supreme Court Ruling

The Supreme Court began by analyzing the language of §145, concluding that the statute neither imposes unique evidentiary limits in district court proceedings nor establishes a heightened standard of review for factual findings by the PTO.

The Supreme Court then considered the PTO's argument that district courts should give administrative deference to its factual findings and only consider new evidence if the party did not have an opportunity to present it to the agency. The Supreme Court rejected the argument, finding that no matter how great its expertise, the PTO cannot account for evidence that it has never seen. Thus, the Court concluded, it makes little sense for the district court to apply a deferential standard of review to PTO factual findings that are contradicted by the new evidence. The Court further held that the principles of administrative exhaustion do not apply in a § 145 proceeding because, by the time such a proceeding occurs, the PTO's process is complete.

The Supreme Court concluded that when new evidence is introduced in a §145 proceeding, the district court, in its role as fact finder, must assess the credibility of new evidence, reconcile the new evidence with the administrative record and evaluate the weight the new evidence deserves. The Supreme Court explained that, "where new evidence is presented to the district court on a disputed fact question, a de novo finding will be necessary to take such evidence into account together with the evidence before the board." The Court moreover agreed with the Federal Circuit that the district court may, in its discretion, "consider the proceedings before and findings of the Patent Office in deciding what weight to afford an applicant's newly admitted evidence."

The Court found it unlikely that patent applicants would withhold evidence from the PTO intentionally with the goal of presenting that evidence for the first time to a non-expert judge, noting that an applicant that pursues such a strategy would be intentionally undermining his claims before the PTO on the speculative chance that he will gain some advantage in the §145 proceeding by presenting new evidence to a district court judge.

Concurring Opinion

In her concurring opinion, Justice Sotomayor noted that there may be situations in which an applicant's conduct before the PTO calls into question the propriety of admitting evidence presented for the first time in a § 145 proceeding before a district court. (Justice Breyer joined in the opinion.) In those situations, a district court maintains its authority to exclude evidence "deliberately suppressed" from the PTO or otherwise withheld in bad faith, consistent with "the ordinary course of equity practice and procedure." Otherwise, when a patent applicant fails to present evidence to the PTO due to ordinary negligence, a lack of foresight, or simple attorney error, the applicant should not be estopped from presenting the evidence for the first time in a §145 proceeding.

Practice Note: Patent applicants need not fear that if they fail to bear the financial burden of submitting essentially all possible evidence to the Board, they are foreclosed from using §145 as an effective vehicle for supplementation of the record on appeal. However, in cases in which no new evidence is introduced in a §145 procedure, the standard of review will be the same as that which applies in a §141 appeal, i.e., the "substantial evidence" standard. Thus, there is no reason to file a §145 appeal unless the introduction of new evidence is contemplated.

Given the similarity between §145 and its Lanham Act counterpart, 15 U.S.C. §1071(b), the standards set forth in the Hyatt v. Kappos decision are likely to apply to proceedings challenging decisions of the Trademark Trial and Appeal Board (TTAB).

Patents / Inequitable Conduct

To Quote Mark Twain "Reports of My (Inequitable Conduct) Death Have Been Greatly Exaggerated" by Paul Devinsky

Notwithstanding the rigorous test for proving inequitable conduct established by the en banc U.S. Court of Appeals for the Federal Circuit last May in its Therasense decision (see IP Update, Vol. 14, No. 6), the Federal Circuit upheld a district court decision finding that the patents covering Aventis Pharma's blockbuster anti-cancer drug Taxotere were unenforceable due to inequitable conduct. Aventis Pharma S.A. v. Hospira, Inc., Case No. 11-1018 (Fed. Cir., Apr. 9, 2012) (Prost, J.).

The patents in question cover intravenous formulations of Taxotere as delivered in a diluted aqueous solution called a "perfusion." The patented formulation was designed to overcome stability and toxicity problems in a prior formulation by use of a different surfactant and by limiting the amount of ethanol as compared to prior art formulations.

The district court concluded that specific claims of each of the Aventis patents were invalid for obviousness, not infringed and unenforceable. In terms of its decision on inequitable conduct, the district court (in a pre-Therasense ruling) made separate and distinct findings on intent and materiality, finding that two prior patents were material to patentability and that the inventor intentionally withheld them intending to deceive the U.S. Patent and Trademark Office (PTO). Aventis appealed.

In Therasense, the Federal Circuit rejected the "sliding scale" approach to proving inequitable conduct "where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa" and held that "[i]ntent and materiality are separate requirements." As for materiality, the Therasense Court held that "but-for materiality is the standard for evaluating the materiality prong of the analysis unless there is affirmative egregious misconduct." In affirming the district court, the Federal Circuit that "although the district court did not have the benefit of our Therasense opinion when it rendered its inequitable conduct decision, the [district] court nevertheless found that the withheld references were but-for material to patentability and made distinct intent and materiality findings rather than employing the now-abrogated sliding scale approach."

Aventis argued on appeal that the inventor had explained why he did not disclose the references to the PTO and that the district court's finding that he acted with the intent to deceive "was not the single most reasonable inference that could be drawn from the evidence." Additionally, Aventis contended that the withheld references were not material because they were duplicative of references already before the PTO.


After explaining that the standard for establishing "but-for materiality" in the inequitable conduct context requires only "a preponderance of the evidence, giv[ing] claims their broadest reasonable construction," the Court made short work of Aventis' materiality argument noting that, "when a claim is properly invalidated in district court based on the deliberately withheld reference, then that reference is necessarily material for purposes of the inequitable conduct...

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