Therasense v. Becton, Dickinson et al (CAFC 2008-1511, 1512, -1513, -1514, 1595) precedential; en banc; opinion by Chief Judge Rader, joined in full by Newman, Lourie, Linn, Moore, and Reyna; O'Malley dissents-in-part; dissent by: Bryson (author), Gajarsa, Dyk, and Prost

Prosecution backdrop -

Abbott filed the original application leading to the '551 patent in 1984. Over thirteen years, that original application saw multiple rejections for anticipation and obviousness, including repeated rejections over U.S. Patent No. 4,545,382 ("the '382 patent"), another patent owned by Abbott.

In 1997, Lawrence Pope, Abbott's patent attorney, and Dr. Gordon Sanghera, Abbott's Director of Research and Development, studied the novel features of their application and decided to present a new reason for a patent. Pope presented new claims to the examiner based on a new sensor that did not require a protective membrane for whole blood. Pope asserted that this distinction would overcome the prior art '382 patent, whose electrodes allegedly required a protective membrane. The examiner requested an affidavit to show that the prior art required a membrane for whole blood at the time of the invention.

To meet this evidentiary request, Dr. Sanghera submitted a declaration to the U.S. Patent and Trademark Office ("PTO") stating:

[O]ne skilled in the art would have felt that an active electrode comprising an enzyme and a mediator would require a protective membrane if it were to be used with a whole blood sample. . . . [O]ne skilled in the art would not read lines 63 to 65 of column 4 of U.S. Patent No. 4,545,382 to teach that the use of a protective membrane with a whole blood sample is optionally or merely preferred.

J.A. 7637. Pope, in submitting Sanghera's affidavit, represented:

The art continued to believe [following the '382 patent] that a barrier layer for [a] whole blood sample was necessary . . . . One skilled in the art would not have read the disclosure of the ['382 patent] as teaching that the use of a protective membrane with whole blood samples was optional. He would not, especially in view of the working examples, have read the "optionally, but preferably" language at line 63 of column [4] as a technical teaching but rather mere patent phraseology. . . . .

There is no teaching or suggestion of unprotected active electrodes for use with whole blood specimens in [the '382 patent] . . . .

J.A. 7645-46.

Several years earlier, while prosecuting the European counterpart to the '382 patent, European Patent EP 0 078 636 ("EP '636"), Abbott made representations to the European Patent Office ("EPO") regarding the same "optionally, but preferably" language in the European specification. On January 12, 1994, to distinguish a German reference labeled D1, which required a diffusion-limiting membrane, Abbott's European patent counsel argued that their invention did not require a diffusion-limiting membrane.

The instant litigation so far -

Following a bench trial, the district court determined that claims 1-4 of the '551 patent were invalid due to obviousness in light of the '382 patent and U.S. Patent No. 4,225,410 ("the '410 patent"). Trial Opinion at 1127. The central issue for obviousness was whether the prior art would have disclosed a glucose sensor without a membrane for whole blood to a person of ordinary skill in the art. The district court found that the '382 patent disclosed sensors in which "a protective membrane was optional in all cases except the case of live blood, in which case the protective membrane was preferred--but not required." Id. at 1103. Of primary relevance here, the district court held the '551 patent unenforceable for inequitable conduct because Abbott did not disclose to the PTO its briefs to the EPO filed on January 12, 1994 and May 23, 1995. Id. at 1127.

Abbott appealed the judgments of invalidity, unenforceability, and noninfringement. Therasense, Inc. v. Becton, Dickinson & Co., 593 F.3d 1289 (Fed. Cir. 2010), vacated, 374 Fed. Appx. 35 (Fed. Cir. 2010). A panel of this court unanimously upheld the district court's judgments of noninfringement and invalidity. Id. at 1311. On unenforceability, the panel also affirmed, but with a dissent. Id. at 1312-25 (Linn, J., dissenting).

Recognizing the problems created by the expansion and overuse of the inequitable conduct doctrine, this court granted Abbott's petition for rehearing en banc and vacated the judgment of the panel. Therasense, 374 Fed. Appx. at 35. This court now vacates the district court's inequitable conduct judgment and remands.

Some history of unsavory behavior unbecoming of patent prosecutors and litigators -

Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent. This judge-made doctrine evolved from a trio of Supreme Court cases that applied the doctrine of unclean hands to dismiss patent cases involving egregious misconduct: Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933), Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976), and Precision Instruments Manufacturing Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945).

The unclean hands cases of Keystone, Hazel-Atlas, and Precision formed the basis for a new doctrine of inequitable conduct that developed and evolved over time. Each of these unclean hands cases before the Supreme Court dealt with particularly egregious misconduct, including perjury, the manufacture of false evidence, and the suppression of evidence. See Precision, 324 U.S. at 816-20; Hazel-Atlas, 322 U.S. at 240; Keystone, 290 U.S. at 243. Moreover, they all involved "deliberately planned and carefully executed scheme[s] to defraud" not only the PTO but also the courts. Hazel-Atlas, 322 U.S. at 245. As the inequitable conduct doctrine evolved from these unclean hands cases, it came to embrace a broader scope of misconduct, including not only egregious affirmative acts of misconduct intended to deceive both the PTO and the courts but also the mere nondisclosure of information to the PTO. Inequitable conduct also diverged from the doctrine of unclean hands by adopting a different and more potent remedy - unenforceability of the entire patent rather than mere dismissal of the instant suit. See Precision, 324 U.S. at 819 (dismissing suit); Hazel-Atlas, 322 U.S. at 251 (noting that the remedy was limited to dismissal and did not render the patent unenforceable); Keystone, 290 U.S. at 247 (affirming dismissal of suit).

In line with this wider scope and stronger remedy, inequitable conduct came to require a finding of both intent to deceive and materiality. Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008). To prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. Id. The accused infringer must prove both elements--intent and materiality--by clear and convincing evidence. Id. If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant's conduct before the PTO warrants rendering the entire patent unenforceable. Id.

This court recognizes that the early unclean hands cases do not present any standard for materiality. Needless to say, this court's development of a materiality requirement for inequitable conduct does not (and cannot) supplant Supreme Court precedent. Though inequitable conduct developed from these cases, the unclean hands doctrine remains available to supply a remedy for egregious misconduct like that in the Supreme Court cases.

A touch of mea culpa for the court not being able to think through the inevitable dynamics of setting a low bar, and a lot of leeway, into the standard for inequitable conduct; for what basically has been the Dirty Harry standard of: "well, punk, are you feeling lucky?" -

As inequitable conduct emerged from unclean hands, the standards for intent to deceive and materiality have fluctuated over time. In the past, this court has espoused low standards for meeting the intent requirement, finding it satisfied based on gross negligence or even negligence. See Driscoll v. Cebalo, 731 F.2d 878, 885 (Fed. Cir. 1984) ("Where they knew, or should have known, that the withheld reference would be material to the PTO's consideration, their failure to disclose the reference is sufficient proof of the existence of an intent to mislead the PTO."); Orthopedic Equip. Co., Inc. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383-84 (Fed. Cir. 1983) (requiring only gross negligence to sustain a finding of intent). This court has also previously adopted a broad view of materiality, using a "reasonable examiner" standard based on the PTO's 1977 amendment to Rule 56. See Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984); see also 37 C.F.R. § 1.56 (1977) (a reference is material if "there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent"). Further weakening the showing needed to establish inequitable conduct, this court then placed intent and materiality together on a "sliding scale." Am. Hoist, 725 F.2d at 1362. This modification to the inequitable conduct doctrine held patents unenforceable based on a reduced showing of intent if the record contained a strong showing of materiality, and vice versa. In effect, this change conflated, and diluted, the standards for both intent and materiality.

This court embraced these reduced standards for intent and materiality to foster full disclosure to the PTO. See id. at 1363. This new focus on encouraging disclosure has had numerous unforeseen and unintended consequences. Most prominently, inequitable conduct has become a significant litigation strategy. A charge of inequitable conduct conveniently expands discovery into corporate practices before patent filing and disqualifies the prosecuting attorney from the patentee's litigation team. See Stephen A. Merrill et al., Nat'l Research Council of the Nat'l Academies, A Patent System for the 21st Century 122 (2004). Moreover, inequitable conduct charges cast a dark cloud over the patent's validity and paint the patentee as a bad actor. Because the doctrine focuses on the moral turpitude of the patentee with ruinous consequences for the reputation of his patent attorney, it discourages settlement and deflects attention from the merits of validity and infringement issues. Committee Position Paper, The Doctrine of Inequitable Conduct and the Duty of Candor in Patent Prosecution: Its Current Adverse Impact on the Operation of the United States Patent System, 16 AIPLA Q.J. 74, 75 (1988). Inequitable conduct disputes also "increas[e] the complexity, duration and cost of patent infringement litigation that is already notorious for its complexity and high cost." Brief and Appendix of the American Bar Ass'n as Amicus Curiae at 9.

Hand-wringing over the concept that actions have consequence [generally speaking, humans have a real problem with accountability for their acts, especially as here, most ironically, holding accountable solicitors of patents and "officers of the court" (lawyers) for bad acts and falsity] -

Perhaps most importantly, the remedy for inequitable conduct is the "atomic bomb" of patent law. Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334, 1349 (Fed. Cir. 2008) (Rader, J., dissenting). Unlike validity defenses, which are claim specific, see 35 U.S.C. § 288, inequitable conduct regarding any single claim renders the entire patent unenforceable. Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 877 (Fed. Cir. 1988). Unlike other deficiencies, inequitable conduct cannot be cured by reissue, Aventis, 525 F.3d at 1341, n.6, or reexamination, Molins PLC v. Textron, Inc., 48 F.3d 1172, 1182 (Fed. Cir. 1995). Moreover, the taint of a finding of inequitable conduct can spread from a single patent to render unenforceable other related patents and applications in the same technology family. See, e.g., Consol. Aluminum Corp. v. Foseco Int'l Ltd., 910 F.2d 804, 808-12 (Fed. Cir. 1990). Thus, a finding of inequitable conduct may endanger a substantial portion of a company's patent portfolio.

A finding of inequitable conduct may also spawn antitrust and unfair competition claims. See Dow Chemical Co. v. Exxon Corp., 139 F.3d 1470, 1471 (Fed. Cir. 1998) (unfair competition claim); Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 178 (1965) (antitrust action for treble damages). Further, prevailing on a claim of inequitable conduct often makes a case "exceptional," leading potentially to an award of attorneys' fees under 35 U.S.C. § 285. Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001). A finding of inequitable conduct may also prove the crime or fraud exception to the attorney-client privilege. See In re Spalding Sports Worldwide, Inc., 203 F.3d 800, 807 (Fed. Cir. 2000).

With these far-reaching consequences, it is no wonder that charging inequitable conduct has become a common litigation tactic. One study estimated that eighty percent of patent infringement cases included allegations of inequitable conduct.

Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system. Because allegations of inequitable conduct are routinely brought on "the slenderest grounds," Burlington Indus., 849 F.2d at 1422, patent prosecutors constantly confront the specter of inequitable conduct charges. With inequitable conduct casting the shadow of a hangman's noose, it is unsurprising that patent prosecutors regularly bury PTO examiners with a deluge of prior art references, most of which have marginal value.

Here we have a stark but inadvertent (and thus witless) attack on the competence of USPTO examiners -

This tidal wave of disclosure makes identifying the most relevant prior art more difficult. See Brief for the United States as Amicus Curiae at 1 (submission of "large numbers of prior art references of questionable materiality . . . harms the effectiveness of the examination process"). "This flood of information strains the agency's examining resources and directly contributes to the backlog." Id. at 17-18.

If examiners can't search their databases and determine the most relevant references, irrespective of cited art, then patent examination is a joke.

While honesty at the PTO is essential, low standards for intent and materiality have inadvertently led to many unintended consequences, among them, increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality. 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.

The above statement is wishful thinking in the quicksand of sophism.

The new 95 theses on inequitable conduct, weaving in bits and pieces from the past to provide an illusion of continuity, as the courts are so wont to do -

To prevail on a claim of inequitable conduct, the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO. Star, 537 F.3d at 1366 (citing Kingsdown, 863 F.2d at 876). A finding that the misrepresentation or omission amounts to gross negligence or negligence under a "should have known" standard does not satisfy this intent requirement. Kingsdown, 863 F.2d at 876. "In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference." Molins, 48 F.3d at 1181 (emphases added). In other words, 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.

Intent and materiality are separate requirements. Hoffmann-La Roche, Inc. v. Promega Corp., 323 F.3d 1354, 1359 (Fed. Cir. 2003). A district court should not use a "sliding scale," where a weak showing of intent may be found sufficient based on a strong showing of materiality, and vice versa. Moreover, a district court may not infer intent solely from materiality. Instead, a court must weigh the evidence of intent to deceive independent of its analysis of materiality. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive. See Star, 537 F.3d at 1366 ("the fact that information later found material was not disclosed cannot, by itself, satisfy the deceptive intent element of inequitable conduct").

Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect and circumstantial evidence. Larson Mfg. Co. of S.D., Inc. v. Aluminart Prods. Ltd., 559 F.3d 1317, 1340 (Fed. Cir. 2009). However, to meet the clear and convincing evidence standard, the specific intent to deceive must be "the single most reasonable inference able to be drawn from the evidence." Star, 537 F.3d at 1366. Indeed, the evidence "must be sufficient to require a finding of deceitful intent in the light of all the circumstances." Kingsdown, 863 F.2d at 873 (emphasis added). Hence, when there are multiple reasonable inferences that may be drawn, intent to deceive cannot be found. See Scanner Techs. Corp. v. ICOS Vision Sys. Corp., 528 F.3d 1365, 1376 (Fed. Cir. 2008) ("Whenever evidence proffered to show either materiality or intent is susceptible of multiple reasonable inferences, a district court clearly errs in overlooking one inference in favor of another equally reasonable inference."). This court reviews the district court's factual findings regarding what reasonable inferences may be drawn from the evidence for clear error. See Star, 537 F.3d at 1365.

Because the party alleging inequitable conduct bears the burden of proof, the "patentee need not offer any good faith explanation unless the accused infringer first . . . prove[s] a threshold level of intent to deceive by clear and convincing evidence." Star, 537 F.3d at 1368. The absence of a good faith explanation for withholding a material reference does not, by itself, prove intent to deceive.

Materiality goes to whether allowance would have been affected.

This court holds that, as a general matter, 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 aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference. In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction. See Manual of Patent Examining Procedure ("MPEP") §§ 706, 2111 (8th ed. Rev. 8, July 2010). Often the patentability of a claim will be congruent with the validity determination--if a claim is properly invalidated in district court based on the deliberately withheld reference, then that reference is necessarily material because a finding of invalidity in a district court requires clear and convincing evidence, a higher evidentiary burden than that used in prosecution at the PTO. However, even if a district court does not invalidate a claim based on a deliberately withheld reference, the reference may be material if it would have blocked patent issuance under the PTO's different evidentiary standards. See MPEP §§ 706 (preponderance of the evidence), 2111 (broadest reasonable construction).

As an equitable doctrine, inequitable conduct hinges on basic fairness. "[T]he remedy imposed by a court of equity should be commensurate with the violation." Columbus Bd. of Educ. v. Penick, 443 U.S. 449, 465 (1979). Because inequitable conduct renders an entire patent (or even a patent family) unenforceable, as a general rule, this doctrine should only be applied in instances where the patentee's misconduct resulted in the unfair benefit of receiving an unwarranted claim... After all, the patentee obtains no advantage from misconduct if the patent would have issued anyway... Moreover, enforcement of an otherwise valid patent does not injure the public merely because of misconduct, lurking somewhere in patent prosecution, that was immaterial to the patent's issuance.

Going from omission (to cite relevant prior art) to active bad acts -

Although but-for materiality generally must be proved to satisfy the materiality prong of inequitable conduct, this court recognizes an exception in cases of affirmative egregious misconduct. This exception to the general rule requiring but-for proof incorporates elements of the early unclean hands cases before the Supreme Court, which dealt with "deliberately planned and carefully executed scheme[s]" to defraud the PTO and the courts. HazelAtlas, 322 U.S. at 245. When the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, the misconduct is material. See Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1571 (Fed. Cir. 1983) ("there is no room to argue that submission of false affidavits is not material"); see also Refac Int'l, Ltd. v. Lotus Dev. Corp., 81 F.3d 1576, 1583 (Fed. Cir. 1996) (finding the intentional omission of declarant's employment with inventor's company rendered the affidavit false and that "[a]ffidavits are inherently material"). After all, a patentee is unlikely to go to great lengths to deceive the PTO with a falsehood unless it believes that the falsehood will affect issuance of the patent. See id. at 247 (pointing out that patentee's lawyers "went to considerable trouble and expense" to manufacture false evidence because they believed it was needed to obtain issuance of the patent). Because neither mere nondisclosure of prior art references to the PTO nor failure to mention prior art references in an affidavit constitutes affirmative egregious misconduct, claims of inequitable conduct that are based on such omissions require proof of but-for materiality.

Below is the onset of a defensive posture founded on wishful thinking, which dribbles on, symptomatic of the discord among the judges in the CAFC -

By creating an exception to punish affirmative egregious acts without penalizing the failure to disclose information that would not have changed the issuance decision, this court strikes a necessary balance between encouraging honesty before the PTO and preventing unfounded accusations of inequitable conduct.

Lip-service respect to the PTO by ignoring its Rule 56, declared "hair of the dog that bit..."

This court does not adopt the definition of materiality in PTO Rule 56. As an initial matter, this court is not bound by the definition of materiality in PTO rules. See Merck & Co., Inc. v. Kessler, 80 F.3d 1543, 1549-50 (Fed. Cir. 1996) ("[T]he broadest of the PTO's rulemaking powers . . . does NOT grant the Commissioner the authority to issue substantive rules."); see also 57 Fed. Reg. 2021 (Jan. 17, 1992) (The PTO stated that Rule 56 "do[es] not define fraud or inequitable conduct.").

This court declines to adopt the current version of Rule 56 in defining inequitable conduct because reliance on this standard has resulted in the very problems this court sought to address by taking this case en banc.

Applying the new rules to the matter at hand leaves nothing but a rather ridiculous remand -

In this case, the district court held the '551 patent unenforceable for inequitable conduct because Abbott did not disclose briefs it submitted to the EPO regarding the European counterpart of the '382 patent. Trial Opinion at 1127. Because the district court found statements made in the EPO briefs material under the PTO's Rule 56 materiality standard, not under the but-for materiality standard set forth in this opinion, this court vacates the district court's findings of materiality. Id. at 1113, 1115. On remand, the district court should determine whether the PTO would not have granted the patent but for Abbott's failure to disclose the EPO briefs.

The district court found intent to deceive based on the absence of a good faith explanation for failing to disclose the EPO briefs. Id. at 1113-16. However, a "patentee need not offer any good faith explanation unless the accused infringer first . . . prove[s] a threshold level of intent to deceive by clear and convincing evidence." Star, 537 F.3d at 1368. The district court also relied upon the "should have known" negligence standard in reaching its finding of intent. See Trial Opinion at 1113 ("Attorney Pope knew or should have known that the withheld information would have been highly material to the examiner"). Because the district court did not find intent to deceive under the knowing and deliberate standard set forth in this opinion, this court vacates the district court's findings of intent. Id. at 1113-16. On remand, the district court should determine whether there is clear and convincing evidence demonstrating that Sanghera or Pope knew of the EPO briefs, knew of their materiality, and made the conscious decision not to disclose them in order to deceive the PTO.

Affirmed in part, vacated in part, remanded in part.

The newest judge at the CAFC, Judge O'Malley, shows sagacity in her first minimalist dissent-in-part; definitely a sharp tack in the CAFC box.

[W]hen addressing the types of conduct that should be deemed of sufficient concern to allow for a finding of inequitable conduct, both the majority and dissent strain too hard to impose hard and fast rules... "Equity eschews mechanical rules; it depends on flexibility." Holmberg v. Armbrecht, 327 U.S. 392, 396 (1946).

The majority defines materiality under a but-for test, with an exception for intentionally false affidavits filed with the PTO.2 Maj. Op. at 27-30. The dissent, on the other hand, defines materiality according to Rule 56. Both tests fail to provide district courts with flexibility to find inequitable conduct in an extraordinary case where the conduct in question would not be defined as such under either test. This result is contrary to the very nature of equity and centuries of Supreme Court precedent. I cannot, accordingly, lend support to either of the immutable tests proposed by my colleagues.

While the majority states that, despite the strictures of the test it adopts, "the unclean hands doctrine remains available to supply a remedy for egregious misconduct like that in the Supreme Court cases," that statement does not address the concerns I express here.³ Maj. Op. at 20. Since, as the majority painstakingly explains, the doctrine of inequitable conduct we are defining grew out of those "unclean hands" cases, the asserted dichotomy is a false one.

³ Indeed, this language raises some additional concerns. If "unclean hands" remains available in cases of PTO misconduct, charges of unclean hands could simply supplant the very allegations of inequitable conduct the majority seeks to curb.

The district court's materiality conclusions were thorough and correct. They should be affirmed.

Judge Bryson penned a dissent which was joined by Gajarsa, Dyk, and Prost. The gist: stick with Rule 56; tweak maybe, but not this new rigidity.

[On] the proper standard to apply in determining whether the conduct at issue is sufficiently material to render the patent in suit unenforceable--there is sharp disagreement. That disagreement is what divides the court in this case. The majority takes the position that nondisclosures should be deemed sufficiently material to trigger the defense of inequitable conduct only if, had the matter in question been disclosed, the applicant would not have obtained a patent. That position, however, marks a significant and, I believe, unwise departure from this court's precedents. Since its first days, this court has looked to the PTO's disclosure rule, Rule 56, 37 C.F.R. § 1.56, as the standard for defining materiality in inequitable conduct cases involving the failure to disclose material information. In its current form, that rule provides that information is material not only if it establishes a prima facie case of unpatentability, but also if it refutes or is inconsistent with a position the applicant takes before the PTO with respect to patentability.

With respect to the issue of materiality, the majority has adopted a test that has no support in this court's cases and is inconsistent with a long line of precedents dating back to the early years of this court. The effect of the majority's new test, moreover, does not merely reform the doctrine of inequitable conduct, but comes close to abolishing it altogether.

The majority holds that a failure to disclose information is "material" for purposes of inequitable conduct only if it satisfies the "but for" test; i.e., the conduct must be such that, but for the conduct, the claims would have been found unpatentable. This is not a tweak to the doctrine of inequitable conduct; it is fundamental change that would have the effect of eliminating the independent role of the doctrine of inequitable conduct as to disclosure obligations except in limited circumstances. This court has repeatedly rejected the "but for" test as too restrictive in light of the policies served by the inequitable conduct doctrine. See Merck & Co. v. Danbury Pharmacal, Inc., 873 F.2d 1418, 1421 (Fed. Cir. 1989); see also Purdue Pharma L.P. v. Endo Pharms. Inc., 438 F.3d 1123, 1132 (Fed. Cir. 2006); Hoffmann-LaRoche, Inc. v. Promega Corp., 323 F.3d 1354, 1368 (Fed. Cir. 2003); Molins PLC v. Textron, Inc., 48 F.3d 1172, 1179-80 (Fed. Cir. 1995); A.B. Dick Co. v. Burroughs Corp., 798 F.2d 1392, 1396 (Fed. Cir. 1986).

The dissent punches a barn-door sized hole in the newly fashioned dime-store rule.

If a failure to disclose constitutes inequitable conduct only when a proper disclosure would result in rejection of a claim, there will be little incentive for applicants to be candid with the PTO, because in most instances the sanction of inequitable conduct will apply only if the claims that issue are invalid anyway. For example, under the "but for" test of materiality, an applicant considering whether to disclose facts about a possible prior use of the invention would have little reason to disclose those facts to the PTO. If the applicant remained silent about the prior use, the patent issued, and the prior use was never discovered, the applicant would benefit from the nondisclosure. But even if the prior use was discovered during litigation, the failure to disclose would be held to constitute inequitable conduct only if the prior use otherwise rendered the relevant claims invalid. The applicant would thus lose nothing by concealing the prior use from the PTO, because he would not be at risk of losing the right to enforce an otherwise valid patent. After all, it has long been recognized that "an open door may tempt a saint." Given the large stakes sometimes at issue in patent prosecutions, a regime that ensures that a dishonest but potentially profitable course of action can be pursued with essentially no marginal added risk is an unwise regime no matter how virtuous its subjects.

It is unrealistic to expect that other means will provide an effective deterrent to ensure that material information will not be withheld during patent prosecutions. The PTO advises us that the prospect of enforcing the duty of disclosure other than through the threat of inequitable conduct claims is not possible or practical. The prospect of agency disciplinary action for disclosure violations is unrealistic, the PTO explains, because the Office is required by statute to file any charges within five years, see 28 U.S.C. § 2462, and it seldom learns of inequitable conduct within that period of time. In addition, the PTO explains that it rarely has access to relevant facts regarding inequitable conduct, because it lacks investigative resources. As a result, the PTO has concluded that a court is the best forum in which to consider alleged breaches of the disclosure duty in the context of an inequitable conduct defense. See Patent and Trademark Office Implementation of 37 C.F.R. § 1.56, 1095 Off. Gaz. Pat. & Trademark Office 16 (Oct. 11, 1988).

Aside from its practical infirmities, the "but for" standard adopted by the majority is inconsistent with the duty that the Supreme Court and the PTO have both described as applying to those who seek patents in the ex parte application process.

Whereupon the dissent launches into a history lesson, which will come back to haunt if the Supreme Court takes this case on cert, which it may well.

The PTO has defined the disclosure obligation for those involved in patent prosecutions in its Rule 56, which the PTO has promulgated under its statutory authority to establish regulations that "govern the conduct of proceedings in the Office." 35 U.S.C. § 2(b). When Rule 56 was first promulgated in 1949, the portion of the rule that addressed inequitable conduct provided that "any application fraudulently filed or in connection with which any fraud is practiced or attempted on the Patent Office, may be stricken." 37 C.F.R. § 1.56 (1950).

In 1992, the PTO revised Rule 56, adopting what it called a "clearer and more objective definition of what information the Office considers material to patentability." Duty of Disclosure, 57 Fed. Reg. 2021, 2023 (Jan. 17, 1992). As revised in 1992, the current version of Rule 56 imposes a duty on individuals associated with the filing and prosecution of an application to disclose to the Office all information known to be material to patentability as defined in the rule. Rule 56(a). The rule then states that information is "material" if it is "not cumulative to information already of record or being made of record in the application" and

(1) It establishes, by itself, or in combination with other information, a prima facie case of unpatentability of a claim; or
(2) It refutes, or is inconsistent with, a position the applicant takes in:
(i) Opposing an argument of unpatentability relied on by the Office, or
(ii) Asserting an argument of patentability.

that the invention is unpatentable. The rule explains that a "prima facie case of unpatentability" is established "when the information compels a conclusion that a claim is unpatentable under the preponderance of the evidence, burden-of-proof standard, giving each term its broadest reasonable construction consistent with the specification, and before any consideration is given to evidence which may be submitted in an attempt to establish a contrary conclusion of patentability." In adopting the rule, the PTO explained that it intended for applicants to submit references, of which they were aware, that would render the pending claims unpatentable over the references. Proposed Rules, 56 Fed. Reg. 37,321, 37,324 (Aug. 6, 1991). The PTO added that it is the role of the examiner, not the applicant, to analyze the sufficiency and weight of a rebuttal argument. See id. The intent standard imposed by Rule 56 and adopted by this court answers the majority's concerns regarding the breadth of the first part of Rule 56(b). That provision applies only to applicants who act with the specific intent to deceive the PTO by withholding prior art that is so powerful as to render the pending claims invalid in the absence of further explanation.

It is the second part of the rule, Rule 56(b)(2), to which the appellants object. That part of the rule requires the applicant to provide information that is inconsistent with or refutes a position taken by the applicant before the office. Rule 56(b)(2) clearly goes beyond a "but for" test and is therefore the focus of the dispute in this case.

At the time it adopted the 1992 revision to Rule 56, the PTO considered the possibility of adopting a "but for" test of materiality of the sort that the majority has adopted today. The Office rejected that test, concluding that adopting such a narrow standard "would not cause the Office to obtain the information it needs to evaluate patentability so that its decisions may be presumed correct by the courts." The PTO added that if it did not have the needed information, "meaningful examination of patent applications will take place for the first time in an infringement case before a district court." Duty of Disclosure, 57 Fed. Reg. at 2023.

In the aftermath of that change, this court has frequently treated the PTO's new version of the rule as setting forth the proper standard for materiality, in cases involving claims of failure to disclose material information, at least for applications processed after 1992.

Because inequitable conduct is an equitable doctrine applied by courts, and not simply a mechanism for judicial enforcement of PTO rules, the scope of the court-made doctrine is not inseparably tied to the breadth of the PTO's disclosure rules. However, the basic purposes of both the inequitable conduct doctrine and Rule 56 are the same, and the disclosure duties that the PTO imposes on applicants, which are defined by Rule 56, are reasonably calculated to produce the disclosure necessary to promote efficient conduct of examinations and to discourage the types of omissions and misrepresentations that (if made intentionally) raise equitable concerns. In these circumstances, considerations of efficiency and economy encourage us to embrace the PTO's approach.

Under this court's new rule, an applicant who conceals information with the intent to deceive the PTO will be free to enforce his patent unless it can be proved by clear and convincing evidence that the patent would not have issued but for the fraud.

The four dissenters behind the dissertation would have affirmed inequitable conduct under preexisting standards.

Judge O'Malley was wisely economical, whereas the bridge-table foursome make endless bidding as to why the majority's decision was insensible. Which makes a clear-cut 6-5 division, and a dark day for the CAFC.

The new rules for inequitable conduct practically ensure that only egregious and careless miscreants will be held accountable.