California - Reversing an earlier panel judgment, the Federal Circuit in Therasense, Inc. v. Becton, Dickinson and Company reviewed en banc the standards for inequitable conduct in patent infringement cases. A judge-made equitable defense that originated from the doctrine of unclean hands, proving inequitable conduct can completely bar the enforcement of a patent. To show inequitable conduct, an accused infringer needs to show that the patent applicant had "misrepresented or omitted material information with the specific intent to deceive the PTO."
The court sought to reduce inequitable conduct as a significant litigation strategy, as its use had led to undesirable consequences such as expanding discovery into corporate practices, discouraging settlement, and taking attention away from issues of patent validity and infringement, due to its focus on the moral character of the patentee. Describing inequitable conduct as "the atomic bomb of patent law," the court noted that where most defenses are claim specific, inequitable conduct is able to render entire patents unenforceable, with the potential to even endanger other patents in a patentee's portfolio. The en banc decision addressed both the "intent to deceive" and "materiality" elements of the defense.
While courts in the past have often used a gross negligence standard to determine the intent element for inequitable conduct, the Federal Circuit raised the bar to a clear and convincing standard. The patentee needs to be shown to have known of a reference, known that the reference was material, and made a deliberate decision to withhold it from the PTO. Due to the difficulty of finding direct evidence of intent, the Court held that intent could be inferred from indirect and circumstantial evidence, but the clear and convincing standard meant that the specific intent to deceive be "the single most reasonable inference" that could be drawn from the evidence.
In addition to intent, the Court also raised the standard of materiality. To satisfy the materiality standard, the misrepresentation had to be the but-for cause for the patent claim's issuance. The Court held that the preponderance of evidence standard would apply and that claims would be given their broadest reasonable interpretation when determining whether the PTO would have allowed a claim had it been aware of the undisclosed material.
The Court also rejected the intent-materiality sliding scale that had been used in earlier cases. No longer can a weak showing of intent be allowed based on a strong showing of materiality; the two elements must be determined independently.
In making its ruling, the Court hoped to achieve better proportionality between the violation and the remedy. Because the doctrine of inequitable conduct could render an entire patent, potentially even an entire family of patents, unenforceable, the Court sought to restrict its use and ensure that it would only be applied in situations where a patentee through its misconduct has gained an "unfair benefit."