No. 13
July 2010
International Association for the Protection of Intellectual Property
AIPPI General Secretariat |Toedistrasse 16 | CH-8027 Zurich
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Expanding Standards of Inequitable Conduct:
Increased Burden of Disclosure on Patent Applicants
James W. Edmonson, partner, Finnegan LLP Ming-Tao Yang, associate, Finnegan LLP, and Raymond M. Gabriel, associate, Finnegan LLP

Recent decisions from the Federal Circuit have left the impression that it is becoming easier to succeed on an inequitable conduct defense, which renders patents, not just certain claims, unenforceable. These decisions found inequitable conduct based on omission by a non-inventor corporate president (Avid Identification Sys., Inc. v. Crystal Imp. Corp., 603 F.3d 967 (Fed. Cir. 2010)) and contradictory statements made in foreign prosecution (Therasense, Inc. v. Becton, Dickinson & Co., 593 F.3d 1289 (Fed. Cir. 2010) (vacated by order to rehear en banc)). The Federal Circuit's recent order to rehear the Therasense case en banc, however, indicates that it could modify the current standard. Until that time, applicants operating under the current law and these decisions need to understand who is subject to the duty of disclosure and what needs to be disclosed.

Title 37 C.F.R. § 1.56 imposes a duty of candor and disclosure on patent applicants. The current standard for inequitable conduct requires proof that an individual with a duty of disclosure withheld or misrepresented material information with intent to deceive the USPTO. The Federal Circuit applies a materiality-intent “balancing” inquiry, under which a strong showing of materiality lowers the level of required intent. Section 1.56 extends the duty not only to each named inventor, attorney, or agent, but to “every other person who is substantively involved in prosecution and who is associated with an inventor or assignee.”

In Avid, the Federal Circuit held that “substantively involved” means involvement “relat[ ing] to the content of the application or decisions related thereto, and . . . not wholly administrative or secretarial in nature.” Applying this definition, the Federal Circuit upheld a finding of inequitable conduct where a non-inventor corporate president failed to disclose a prototype demonstration. While the president did not participate in actual prosecution, the court found substantial involvement based on his suggestions for new products, his contact with the inventors regarding patent matters, his prototype demonstration, and his signing of a small-entity-status affidavit. Avid expands the range of actors who are subject to the duty of disclosure beyond the previously understood scope, and, as the dissenting opinion suggested, to those having a general or financial interest in the invention or awareness of the application.

The panel decision in Therasense expanded the scope of highly material information to contradictory statements made in prosecuting a foreign counterpart. The applicant's attorneys submitted contradictory characterizations of a prior art reference to the USPTO and the EPO in related applications. While the Court's precedent considers attorney argument not material, the panel held that contradictory statements made in another forum are highly material, resulting in a lower intent requirement under the balancing inquiry and finding inequitable conduct.

Although the outcome in these cases might not seem harsh when limited to their facts, they suggest an increased burden on applicants. Under Avid, applicants should take a broad view on who is substantively involved in prosecution and shield non-inventor corporate actors from prosecution. Under Therasense, applicants must facilitate communications between U.S. and non-U.S. prosecution counsel or bring foreign prosecution statements to the U.S. counsel's attention.

In rehearing Therasense en banc, the Federal Circuit identified issues it may consider in November 2010, such as whether the materiality-intent balancing inquiry should be modified or abandoned, whether materiality requires that but for the conduct one or more claims would not have issued, and whether the standards of materiality and intent applied in other federal agencies or common law should be considered. Its decision could ease the burden on applicants. Until then, however, patent applicants need to document why certain information is not material or err on submitting related information.

This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm- s clients.
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