The Federal Circuit's Therasense Decision Is Having Its Intended Effect Of Reigning In Inequitable Conduct Claims

August 18, 2011

The Federal Circuit's en banc decision in Therasense v. Becton, Dickinson & Co., is having its intended effect of reigning in inequitable conduct claims. In a recent decision, Judge Otero of the United States District Court for the Central District of California granted summary judgment of no unenforceability on defendant's inequitable conduct claim. Plaintiff U.S. Rubber Recycling, Inc. filed suit alleging, among other things, that Defendant Ecore International, Inc. fraudulently procured and wrongfully enforced its patent relating to rubber acoustical underlayment (insulating material for use with floor tile) in order to monopolize the market for such products. Specifically, the Plaintiff asserted that, "during the prosecution of the [patent], Defendant intentionally failed to disclose to the PTO material prior art that showed the claimed invention had been sold in the United States and described in printed publications more than one year prior to the [patent] application." In its summary judgment motion, the Defendant alleges "that the issuance of the reissue patent demonstrates that the alleged prior art are not material as a matter of law" and that the "Plaintiff cannot raise an issue of genuine fact that the Defendant failed to disclose any reference with bad intent."

The Court restated the Federal Circuit's holding in Therasense regarding the intent required to prove inequitable conduct:

"To prove specific intent to deceive, the Federal Circuit in Therasense held that 'the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it...Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence.' Nonetheless, 'the single most reasonable inference able to be drawn from the evidence' must be that the present applicant had specific intent to deceive. 'When there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found...The patentee need not offer any good faith explanation unless the accused infringer first....proves a threshold level of intent to deceive by clear and convincing evidence.'"

Regarding the materiality requirement, the Court again cited to the Federal Circuit's Therasense holding:

"As for the materiality requirement, the Court of Appeals held that 'the materiality required to establish inequitable conduct is but-for materiality...When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been had it been aware of the undisclosed prior art.' The appellate court instructed district courts to 'apply the preponderance of the evidence standard and give claims their broadest reasonable construction.'"

Focusing on the issue of materiality, the Court agreed with the Defendant that the "Plaintiff cannot prove but-for causation because the Examiner reviewed Plaintiff's alleged prior art and still allowed the original claims to be reissued." The Court explained that "[u]nder the Federal Circuit's recent en banc decision in Therasense, Plaintiff must show that 'the PTO would not have allowed the claims [of the patent] had it been aware of the undisclosed prior art...Because the PTO in the instant action allowed the claims after the disclosure of the alleged prior art, Plaintiff cannot prove 'but-for materiality.'"

Finally, the Court turned to the Federal Circuit's exception to the but-for materiality requirement for "cases of affirmative egregious misconduct." The Court explained that this "extraordinary circumstances" exception "appears to be an attempt by the Federal Circuit to provide some flexibility in the application of equitable principles." Notably, however, the Court cited the Federal Circuit's explanation of such extraordinary circumstances do not include the "mere nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit." Thus, even accepting Defendant's assertions that the Plaintiff failed to disclose certain prior art to the PTO, the Defendant could not show "any evidence of Defendant affirmatively committing perjury, manufacturing evidence, bribing individuals, and suppressing evidence" required to meet the extraordinary circumstances exception. As such, the Court ruled that the Plaintiff's declaratory judgment claim for unenforceability fails as a matter of law.

********************************

This case illustrates the difficulty of maintaining a claim for inequitable conduct in view of the Federal Circuit's new standard under Therasense. It appears that Therasense may indeed be the death knell for inequitable conduct claims that have "plagued" patent cases in recent years.

U.S. Rubber Recycling, Inc. v. ECORE International, et al., Case No. 09-CV-9516 (C.D. Cal. August 8, 2011)

The authors of www.PatentLawyerBlog.com are patent litigation lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Greg Cordrey at 949.623.7236 or GCordrey@jmbm.com.