United States Court of Appeals for the Federal Circuit
Decided on rehearing en banc: May 25, 2011
The Federal Circuit has changed the rules governing the patent infringement defense of inequitable conduct, or as it is sometimes called “fraud on the patent office.” Most importantly, it has elevated the standards, so that it will be more difficult to prove both the intent and the materiality required for this defense or claim to succeed. The main points of the court’s holding are outlined below. Because this area of the law is so contentious and so important, it is likely that the Supreme Court will be asked to review this case.
“This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.”
Outline of Main Points
Proof of inequitable conduct requires
clear and convincing evidence,
of Intent and Materiality.
In cases involving nondisclosure of information, the accused infringer must prove that the patent applicant:
- knew of the reference and
- knew that it was material (proving that the applicant should have known of the reference’s materiality is not sufficient to prove specific intent to deceive) and
- made a deliberate decision to withhold the reference.
A court may infer intent from indirect evidence, but:
- The specific intent to deceive must be the single most reasonable inference able to be drawn from the evidence.
- Because the party alleging inequitable conduct bears the burden of proof, the patentee need not offer a good faith explanation for non-disclosure unless a threshold level of intent is proven.
- The court may not use a sliding scale in which a strong showing of materiality is used to compensate for a weak showing of intent.
The materiality required to establish inequitable conduct is “but-for” materiality.
- Prior art is “but-for” material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. The court must therefore determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference, taking into account that:
- The PTO would apply a preponderance of the evidence standard.
- The PTO would give claims their broadest reasonable construction.
- Although but-for materiality generally must be proved to satisfy the materiality requirement of inequitable conduct, there is an exception in cases of affirmative egregious misconduct:
- When the patentee has engaged in affirmative acts of egregious misconduct, the misconduct is material.
- The egregious misconduct exception to but-for materiality gives the inequitable conduct test flexibility to capture extraordinary circumstances.
- This exception applies to deliberately planned and carefully executed schemes to defraud the PTO and the courts.