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November, 14th, 2017
Patent prosecution attorneys are well aware of their duty of candor to the PTO. However, in Regeneron Pharmaceuticals, Inc. v. Merus N.V., No. 2016-1346 (Fed. Cir. July 27, 2017), the Federal Circuit seemingly expanded inequitable conduct to patent litigators. The Federal Circuit held that activities of a patent litigator that were carried out years after prosecution ended can infer inequitable conduct onto the prosecutor.
“Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent.” Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011). Inequitable conduct regarding a single claim renders the entire patent unenforceable. Id. at 1288. To show that an applicant engaged in inequitable conduct before the PTO, a party must show by clear and convincing evidence that “the applicant misrepresented or omitted material information with the specific intent to deceive the PTO.” Id. at 1287. That is, Therasense requires: (1) materiality of the misrepresentation or omission; and (2) intent to deceive.
The materiality requirement is but-for materiality. For example, a prior art reference is “but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” Id. at 1287. However, a reference is not but-for material if is merely cumulative, i.e., “when it teaches no more than what a reasonable examiner would consider to be taught by the prior art already before the PTO.” Slip Op. at 10.
To establish intent, a party “must show that the applicant made a deliberate decision to withhold a known reference.” Id. at 11. Therefore, the party must establish that the applicant knew that the reference was material and made a deliberate decision to withhold it. Direct evidence of intent is not required, and a court may infer intent from circumstantial evidence. An inference of intent to deceive is appropriate where the applicant engages in a pattern of lack of candor, including where the applicant repeatedly makes factual misrepresentations. Id. at 11.
Prosecution of the ’018 Patent
The ’018 Patent relates to using large DNA vectors to target and modify endogenous genes and chromosomal loci in eukaryotic cells. One practical use of this technology is that users may target and modify specific genes in mice so that the mice develop antibodies that can be used by humans. Days before the PTO issued its notice of allowance, a third-party filed a submission in the parent application of the ’018 Patent describing three references. These three references, plus a fourth reference (“Withheld References”), were known to Regeneron, but not disclosed to the PTO.
Litigation of the ’018 Patent
Regeneron sued Merus for patent infringement in the Southern District of New York. Merus counterclaimed that the ’018 Patent was unenforceable due to inequitable conduct alleging that the Withheld References were material to patentability and were withheld with intent to deceive. The trial was bifurcated to determine whether: (1) the Withheld References were material, and (2) Regeneron had intent to deceive. After holding that the Withheld References were in fact material, however, the district court decided that the second part of trial not necessary. Instead, the district court sanctioned Regeneron for litigation misconduct by drawing an adverse inference of specific intent to deceive.
Specifically, the district court sanctioned Regeneron for withholding documents related to conception and reduction to practice, refusing to provide detailed element-by-element infringement contentions, refusing to provide proposed claim constructions, and falsely representing to the court that it produced all privilege-waived documents it was compelled to produce relating to the prosecuting attorneys’ mental impression concerning the Withheld References.
On appeal, the Federal Circuit affirmed both the materiality of the Withheld References and Regeneron’s intent to deceive. The Federal Circuit noted that “Regeneron’s behavior in district court was beset with troubling misconduct” and held that a sanction of an adverse inference of inequitable conduct by Regeneron’s prosecution attorneys based on its litigation attorneys’ conduct was not an abuse of discretion. The Federal Circuit held,
Regeneron’s litigation misconduct…obfuscated its prosecution misconduct. In particular, Regeneron failed to disclose documents directly related to its prosecuting attorneys’ mental impressions of the Withheld References during prosecution of the ’018 Patent. The district court drew an adverse inference to sanction this litigation misconduct. The district court did not punish Regeneron’s litigation misconduct by holding the patent unenforceable. Only after Merus proved the remaining elements of inequitable conduct did the district court hold the patent unenforceable. In light of [Regeneron’s] widespread litigation misconduct, including [Regeneron’s] use of sword and shield tactics to protect [prosecution attorneys’] thoughts regarding disclosure of the Withheld References to the PTO during prosecution of the ’018 Patent, we conclude that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.
Slip Op. at 37-38.
Judge Newman’s Dissent
The majority’s decision in Regeneron appears to go against the Federal Circuit’s own precedent. Judge Newman offered a strongly worded dissent arguing that “[i]ntent to deceive cannot be inferred” from purported litigation misconduct and must be proven by clear and convincing evidence. Dissent at 2. “Here, no evidentiary record was developed on intent to deceive, with no testimony and no opportunity for examination and cross-examination of witnesses.” Id. Thus, Judge Newman concluded that the “panel majority…convicts Regeneron, its counsel, and its scientists, with no trial, no evidence, and no opportunity to respond in their defense. Dissent at 3.
Regeneron is a cautionary tale for both prosecution and litigation attorneys. Prosecution attorneys need to constantly be aware of how their actions may affect future litigation. Prosecutors should consider being overly inclusive when determining whether prior art references should be disclosed to the PTO. Indeed, when faced with multiple similar references, it’s better to disclose all the references rather than assume all are merely cumulative.
Litigation attorneys need to be more careful in developing litigation strategies. Their actions can now infer improper conduct onto the prosecutor rendering the patent unenforceable.
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