Doctrine of Inequitable Conduct – A Necessary Tool for the Integrity of the United States Patent System

With its recent decision to deny certiorari in Sony Computer Entertainment America, LLC v. 1st Media, LLC, the Supreme Court missed an ideal opportunity to help ensure the integrity of the United States patent system by rescuing the doctrine of inequitable conduct from death’s door.  The Therasense standard for inequitable conduct that the Federal Circuit relied upon is much too stringent.  With the recent changes to the patent system under the America Invents Act, such standard for inequitable conduct is no longer necessary or appropriate.

Since its inception, the doctrine of inequitable conduct has been the source of much controversy.  The Supreme Court had established the doctrine nearly seventy-five years ago to ensure that patent applicants disclose all known prior art, relating to the patentability of their claimed invention.  Under this doctrine, any intentional misrepresentation or omission of material information can result in the unenforceability of the patent.  However, with little further guidance from the Supreme Court, the doctrine quickly took a life of its own, as the Federal Circuit continuously struggled with the proper application of the doctrine.

For instance, the early Supreme Court cases all involved “particularly egregious [affirmative] behavior,” but in J.P. Stevens & Co., the Federal Circuit held that mere gross negligence was sufficient to satisfy the intent element of inequitable conduct.  Additionally, in General Electro Music Corp., the Federal Circuit affirmed the lower court’s decision to invalidate the patentee’s entire patent because of inequitable conduct.  However, in its earlier decisions, the Supreme Court had held that that only the patent claims tainted with inequitable conduct were found “unenforceable in the present action.”

Critics have argued that such broadening of the standard and the remedy for inequitable conduct has led to the doctrine’s abuse.  One study, for example, has suggested that the doctrine is asserted in about “eighty percent of all patent infringement cases.”  Therefore, according to these critics, patent applicants err on the side of caution and overflow “the Patent Office with a ‘deluge of prior art references, most of which have marginal value,’ in order to avoid inequitable conduct allegation.”  Such over disclosure places “unnecessary strain on the Patent Office’s [already] limited resources . . . ultimately, hurt[ing] the quality of patents issued by the Office.”

In response to such criticisms, great judicial and legislative efforts had been exerted over the years in trying to bring the doctrine to its demise.  One such example is the standard for inequitable conduct that the Federal Circuit established in Therasense, Inc. v. Becton, Dickinson, & Co.  To prevail under such standard, the party asserting the doctrine of inequitable conduct “must show by clear and convincing evidence both that: (1) but-for the failure to disclose, the [Patent Office] would not have allowed a claim to issue, and (2) the patentee made a deliberate decision to [deceive the Patent Office by] withhold[ing] a known material reference.”

The stringency of this standard is apparent from the fact that it is much more rigorous and has a greater threshold than that even required by the Patent Office.  In addition, while the intent to deceive may be inferred from circumstantial evidence, the inference must be “the single most reasonable inference able to be drawn from the evidence.”  And “when there are multiple reasonable inferences that may be drawn [which is likely to the be case in most circumstances], intent to deceive cannot be found.”  The Federal Circuit reasoned that the doctrine of inequitable conduct causes more harm than good and such strict standard is necessary to curb the abuse of what Judge Radar has eloquently called the “atomic bomb” of patent law.

However, this is not necessarily so, especially with the recent changes to the U.S. patent system under the America Invents Act (“AIA”).  The AIA has made it more difficult to prevail on the grounds of inequitable conduct through the creation of the supplemental examination procedure.  With this procedure, if the patent owner becomes aware of a relevant prior art that he failed to disclose during the initial prosecution, he may “request [a] supplemental examination of [the] patent . . . to consider, reconsider, or correct information believed to be relevant to the patent.”

However, such request must be made before “an allegation [of inequitable conduct has been] pled with particularity in a civil action.”  This ensures that patentees with deceitful intent cannot simply sit back and wait until they are caught before seeking correction.  But to hold such patentees accountable for their intentional misconduct the doctrine of inequitable conduct is a necessary tool.  Because supplemental examination is only available to the patent owner, once a patent is issued, third-party members (e.g. accused infringers) have very limited options to make the Patent Office become aware of material prior art.

[W}ithout the threat of inequitable conduct, ‘[i]t is unrealistic to expect that other means will provide an effective deterrent to ensure that material information will not be withheld during patent prosecutions.’

In addition, the doctrine of inequitable conduct is not nearly as useless as the Federal Circuit suggests.  An empirical study by Professor Petherbridge noted that there is a direct correlation between the unenforceability of a patent under the inequitable conduct doctrine and the number of prior art citations included.  Patents that have been found unenforceable have “statistically significant fewer citations to prior arts than patents in other similarly tested groups.”  In other words, “serious breaches of the duty of candor [do] occur,” and the doctrine of inequitable conduct is a necessary part in ensuring the integrity of the United States patent system.

The doctrine of inequitable conduct is an important aspect of the United States patent system.  As Judge Bryson noted in his dissent in Therasense, without the threat of inequitable conduct, “[i]t is unrealistic to expect that other means will provide an effective deterrent to ensure that material information will not be withheld during patent prosecutions.”  Hopefully, the Supreme Court will agree next time.