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Inequitable conduct occurs when a U.S. patent applicant (or the attorney representing the applicant) violates the duty to prosecute a patent application with candor, good faith and honesty. Inequitable conduct may include actions such as the affirmative misrepresentation of a material fact to the USPTO, the failure to disclose material information to the USPTO, or the submission of false material information to the USPTO, coupled with an intent to deceive. If a party attacking a U.S. patent proves both "materiality" and "intent to deceive," then a U.S. district court may determine that inequitable conduct occurred during the patent application process and that the resulting patent is therefore unenforceable.

The risk of unenforceability due to inequitable conduct may be reduced by providing all material information to the USPTO during the patent application process. This is typically accomplished by providing the USPTO with an Information Disclosure Statement (IDS) identifying all relevant prior art patents and publications.

However, a recent decision by the U.S. Court of Appeals for the Federal Circuit ("the CAFC") [fn1] in the case of Dayco Products, Inc. v. Total Containment, Inc.[fn2] suggests that simply providing the USPTO with all of the known, relevant prior art may not be sufficient to reduce the risk of inequitable conduct. Instead, there are cases in which it may also be necessary to inform the USPTO of specific claim rejections based upon the prior art. The detailed analysis of the Dayco Products decision which follows provides some useful insight into the U.S. law of inequitable conduct and the evaluation of when it may be necessary to disclose such claim rejections to the USPTO.

The Trial

The Dayco Products case involved two different, but related, patent families. The first family of patents (referred to here as "the A patents")[fn3] all claimed priority from an application filed in September 1989. [fn4] The second family of patents (referred to here as "the B patents")[fn5] all claimed priority from an application filed in December 1992. [fn6] The A patents and the B patents were owned by a single entity. The applications that resulted in issuance of the A patents and the B patents (which applications are referred to here as the A applications and the B applications, respectively) were all prosecuted by the same attorney. The A patents and the B patents described what the CAFC referred to as "substantially similar" technology and contained "substantially similar" claims.

During prosecution, the A applications were assigned to a first examiner (referred to as "examiner A"). The B applications were assigned to a different examiner (referred to as "examiner B"). The B applications contained an explicit reference to the A applications. Consequently, examiner B was aware of the pendency of the A applications during the examination of the B applications. In contrast, however, the A applications did not contain any explicit reference to the B applications. Consequently, examiner A was not aware of the pendency of the B applications at any time during the examination of the A applications. Moreover, examiner A was not aware of: (1) an obviousness rejection of claims in the B applications based upon a prior art reference to Wilson, or (2) the existence of the Wilson reference itself. In other words, the applicant for the A patents had failed to disclose the Wilson reference to examiner A.

After the A patents and the B patents issued, the A patents were asserted in an infringement litigation. The alleged infringer responded by arguing that the A patents were unenforceable due to inequitable conduct. The alleged infringer asserted that during prosecution there were three specific actions which demonstrated the patentee's failure to disclose material information to examiner A. Those three actions were: (1) failure to disclose the pendency of the B applications, (2) failure to disclose the existence of the prior art Wilson reference, and (3) failure to disclose the obviousness rejection, based upon the Wilson reference, of substantially similar claims in the B applications.

The alleged infringer asserted that there were no facts in dispute regarding the patentee's failure to disclose material information, and that inequitable conduct could be decided as a matter of law, without the need for a trial. The district court agreed, and declared the A patents unenforceable as a matter of law. [fn7] The patentee appealed to the CAFC.

The Appeal

On appeal, the CAFC observed that the appropriate standard of "materiality" to be used in determining inequitable conduct is somewhat unclear. Prior to 1992 both the federal courts and the USPTO had applied the same standard of materiality. That standard, known as the "reasonable examiner" standard, required applicants to disclose to the USPTO all information that a reasonable examiner would have considered important in deciding patentability.

In 1992, however, the USPTO changed its rules and began to apply a different, more narrow standard of materiality. Under the 1992 USPTO rule, applicants are required to disclose to the USPTO only that information which (a) establishes a prima facie case of unpatentability, or (b) is inconsistent with the applicant's position taken during prosecution. [fn8]

The CAFC stated that, with respect to prosecution occurring after 1992, the CAFC has not yet decided whether the federal courts should apply the reasonable examiner standard or the narrower standard adopted by the USPTO in 1992. However, the CAFC further observed that in the Dayco Products case the same outcome is reached under either standard. The CAFC then examined each of the three alleged failures to disclose material information that led the district court to declare the A patents unenforceable.

Failure to Disclose the Pendency of the B Applications

Regarding the first alleged failure to disclose, the alleged infringer asserted that all patent applicants have a duty to bring to the attention of the USPTO information regarding co-pending U.S. applications that are material to patentability. If an applicant has co-pending applications in which similar subject matter and patentably indistinct claims are present, then the applicant must disclose such co-pendency to the examiner of each application. See MPEP §2001.06(b). This requirement is intended to prevent so-called "obviousness-type" double patenting which, if uncorrected, would result in the impermissible issuance of two patents having patentably indistinct claims but different patent terms.

The alleged infringer asserted that there was no patentable difference between claims in the B applications and claims in the A applications. Consequently, the B applications could have provided the basis for a double patenting rejection of the A applications. Therefore, according to the alleged infringer, the B applications were material to the prosecution of the A applications.

The patentee responded that if the B applications had been used as the basis for rejecting the A applications due to obviousness-type double patenting, then the rejection would have been overcome by submitting a terminal disclaimer. The terminal disclaimer would have shortened the term of the A patents, so that the term of the A patents was not greater than the term of the B patents. The patentee noted, however, that the term of the A patents was in fact shorter than the term of the B patents (due to the patentee's filing of a terminal disclaimer that was completely unrelated to the B patents). Therefore, the impermissible extension of the term of the A patents that MPEP §2001.06(b) was intended to prevent had, in fact, been prevented. The term of the A patents was in fact shorter than the term of the B patents. Therefore, according to the patentee, the B applications could not be considered material to the prosecution of the A applications.

The CAFC rejected the patentee's argument. The CAFC acknowledged that the term of the A patents was in fact shorter than the term of the B patents, and the term of the A patents would not have been further shortened even if the B applications had been used as the basis for rejecting the A applications. However, the CAFC pointed out that the materiality of the B applications did not depend solely on the shortened term of the A patents. The CAFC noted that a terminal disclaimer to overcome a double patenting rejection imposes two requirements on the owner of the resulting patents. The first requirement is an agreement to shorten the term of one of the patents. The second requirement is an agreement that the patents shall be enforceable only when co-owned.

In the Dayco Products case, the failure to disclose the B applications to examiner A resulted in the grant of patents A and B that were not subject to this second requirement of co-ownership. According to the CAFC, the mere fact that there had been a terminal disclaimer and a shortened life of the A patents did not, by itself, demonstrate that the B applications were not material. The CAFC therefore concluded that the B applications were material under the reasonable examiner standard.

Since the B applications could have theoretically provided the basis for a double patenting rejection of the A applications, the CAFC reasoned that the B applications established a prima facie case of unpatentability. The CAFC therefore concluded that the B applications were also material under the 1992 USPTO rule.

Although the CAFC concluded that the B applications ware material, the CAFC found that the alleged infringer had failed to demonstrate the necessary intent to deceive. The record showed that while the patentee had failed to disclose the co-pendency of the B applications to examiner A, the patentee had disclosed the co-pendency of the A applications to examiner B. The patentee had thereby made the USPTO aware of the co-pendency of both applications, but had done so only with respect to examiner B, not examiner A. According to the CAFC, the disclosure of co-pendency to at least one examiner suggested an absence of any intent to deceive. With respect to the patentee's failure to disclose the B applications to examiner A, the CAFC concluded that the required intent to deceive the USPTO had not been demonstrated as a matter of law.

Failure to Disclose the Prior Art Wilson Reference

Regarding the second alleged failure to disclose, the CAFC noted that determining the materiality of a prior art reference requires a detailed fact analysis of, and comparison among, the reference itself, the claims under consideration, and the other prior art references that may have been cited against the claims. In Dayco Products the CAFC found conflicting evidence on the materiality of the Wilson reference. Although examiner B had used the Wilson reference as a basis for rejecting claims in the B applications, this fact alone did not prove that Wilson was material. Rather, the materiality of Wilson required an analysis of the disputed facts. The CAFC concluded that it was therefore improper to conclude that Wilson was, as a matter of law, a material reference.

The CAFC pointed out that intent to deceive is not established merely by showing that the applicant knew of, and intentionally withheld, the Wilson reference. The attorney responsible for prosecuting the A applications testified that, in his opinion, the subject matter of Wilson was very different from the subject matter of the A applications. Based upon this difference, the prosecuting attorney had concluded that the Wilson reference was not material to the examination of the A applications. The CAFC found this explanation to be reasonable. The CAFC noted that an intent to withhold a reference is not automatically equal to an intent to deceive the USPTO. Nor can an intent to deceive be inferred from a decision to withhold a reference, where the reasons given for withholding the reference are reasonable. The CAFC therefore found no basis in the record for a conclusion that the withholding of the Wilson reference amounted to an act of inequitable conduct.

Failure To Disclose The Rejection Of "Substantially Similar" Claims In The B Applications

Regarding the third alleged failure to disclose, the question initially considered by the CAFC was whether a rejection of a "substantially similar" claim in a co-pending U.S. application is material under the reasonable examiner standard. The CAFC noted that prior to the Dayco Products case this question had never been considered or answered by the CAFC. In Dayco Products the CAFC concluded that the answer to this question is "yes" - a contrary decision of another examiner reviewing a substantially similar claim is material under the reasonable examiner standard.

The CAFC identified two reasons in support of this conclusion. First, although a USPTO examiner is not required to accept the interpretation of another examiner, the CAFC stated that "knowledge of a potentially different interpretation [by another examiner] is clearly information that an examiner could consider important when examining an application." Second, this decision reduces the risk that applicants might file repeated or multiple applications in an attempt to find a more favorable examiner.

The second question considered by the CAFC was whether a rejection of a "substantially similar" claim in a co-pending U.S. application is material under the materiality standard established by the USPTO in 1992. The CAFC concluded that the answer to this question is also "yes" - a contrary decision of another examiner reviewing a substantially similar claim is material under the materiality standard established by the USPTO in 1992.

The CAFC explained that a contrary decision of another examiner reviewing a substantially similar claim is inconsistent with the position an applicant takes in asserting an argument of patentability. For example, when seeking an allowance of the A applications, the patentee asserted that the claims in the A applications were patentable. The rejection of "substantially similar" claims in the co-pending B applications was inconsistent with the position taken by the patentee.

Consequently, the CAFC concluded that under either standard of materiality, the rejection of a "substantially similar" claim in a co-pending U.S. application is material.

Having concluded that materiality exists, the CAFC then addressed the issue of intent to deceive. The CAFC noted that the district court failed to address intent to deceive as it related to the failure to disclose the rejection of "substantially similar" claims in the B applications. Consequently, the CAFC decided that it was necessary for the district court to conduct a trial on the issue of the patentee's intent to deceive.

Remand

The CAFC withdrew the summary judgment and remanded the case to the district court for a trial. The CAFC stated that when the case returns to the district court, the parties should focus on the "real issues." To encourage such focus, the CAFC stated that on the present record there was no basis for patent unenforceability due to: (a) failure to disclose the pendency of the B applications or (b) failure to disclose the existence of the prior art Wilson reference. Therefore, absent the discovery of material new evidence, the CAFC encouraged the district court to grant summary judgment for the patentee on these two issues (thereby avoiding a need for a trial on these issues).

Significantly, the CAFC did not make the same suggestion regarding the failure to disclose the rejection of substantially similar claims in the co-pending B applications. With respect to that issue, the CAFC found the rejection to be material as a matter of law. The only question concerned the patentee's intent to deceive. The CAFC concluded that a trial was required to determine whether the patentee had intended to deceive the USPTO by failing to disclose the rejection of substantially similar claims in a co-pending application.

Conclusion

Those who are attempting to obtain or enforce a U.S. patent, as well as those who are seeking to have a U.S. patent held unenforceable due to inequitable conduct, are well advised to study the Dayco Products case and carefully consider the following guidelines:

(1) Material information that should be disclosed to the USPTO includes a rejection of a "substantially similar" claim in a co-pending application. Failure to disclose such a rejection may render the resulting patent unenforceable. Consequently, U.S. patent applicants must monitor rejections of "substantially similar" claims in co-pending applications, and must bring such rejections to the attention of the examiners of co-pending applications.

(2) The new duty of disclosure established by the CAFC in Dayco Products applies only to the rejection of claims that are "substantially similar." Although the CAFC identified the claims in the A applications as being "substantially similar" to the claims in the B applications, the CAFC did not define or explain the meaning of the term "substantially similar." Consequently, in the absence of such definition or explanation, there is some uncertainty about the scope and meaning of the term "substantially similar."

(3) According to the CAFC's reasoning, the materiality of the rejection of a substantially similar claim in a co-pending application is not related to the materiality of the prior art reference upon which the rejection is based. Instead, the materiality of the rejection derives from the potentially different interpretation of that reference by another examiner. Consequently, it is possible that a failure to disclose a rejection in a co-pending application might result in patent unenforceablity, even if a patentee fully discloses all references that provide the basis for the rejection. In other words, the full disclosure of all relevant references may not be sufficient to avoid a finding of inequitable conduct. This result is possible because, under the rationale established by the CAFC in Dayco Products, it is the examiner's interpretation of the reference, not merely the reference itself, that is considered material.

(4) The CAFC was unable to conclude that the Wilson reference was material as a matter of law. The CAFC was able to conclude that the rejection based upon the Wilson reference was material as a matter of law. Consequently, it is possible that a failure to disclose a rejection in a co-pending application might result in patent unenforceablity, even if the rejection is based on a reference that is not material to patentability. This result is possible because, under the rationale established by the CAFC in Dayco Products, it is the examiner's interpretation of the reference, not merely the reference itself, that is considered material.

Consideration of the guidelines suggested by the CAFC in the Dayco Products decision and expressed in this article should provide some useful insights into the requirements for patent unenforceability due to inequitable conduct.

 

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Footnotes

1: By law, the decisions of the U.S. Court of Appeals for the Federal Circuit are controlling in all U.S. patent disputes. See 28 U.S.C. § 1295(a). The U.S. Court of Appeals for the Federal Circuit (also referred to as the "Federal Circuit,"Fed. Cir." or "CAFC") is therefore generally recognized as being the most important U.S. court regarding patent law issues.

2: 329 F.3d 1358, 66 USPQ2d 1801 (Fed. Cir. 2003).

3: The A patents are USP 5,199,752; USP 5,297,822; USP 5,380,050 and USP 5,486,023.

4: The A patents claim priority from U.S. Application No. 408,161, filed September 15, 1989.

5: The B patents are USP 5,356,182 and USP 5,430,929.

6: The B patents claim priority from U.S. Application No. 993,196, filed December 18, 1992.

7: Dayco Prods., Inc. v. Total Containment, Inc., 218 F.Supp.2d 1129 (W.D. Mo. 2002).

8: See 37 CFR § 1.56.