In Regeneron Pharmaceuticals, Inc. v. Merus N.V., No. 2016-1346, slip op. (Fed. Cir. July 27, 2017) (hereafter, “Slip Op.”), the Federal Circuit seems to have loosened the standards for finding a patentee culpable of inequitable conduct during patent prosecution. By affirming the district court’s finding of inequitable conduct, the court in Regeneron condones the use of circumstantial evidence arising during litigation to infer that the patentee had specific intent to deceive the Patent and Trademark Office (PTO) during prosecution. The opinion was authored by Chief Judge Prost and joined by Judge Wallach. Judge Newman dissented.
“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). 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. This analysis requires a showing of both materiality of the misrepresentation and intent to deceive. Id. The defense is most often wielded as an assertion by the accused infringer that the patent applicant knowingly withheld a material prior art reference from the PTO during prosecution.
Under Therasense, the standard for materiality 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.” Id. at 1291. Prior art is not but-for material, though, if it is merely cumulative of prior art already before the PTO. See Slip Op. at 10.
To show intent, the accused infringer must establish that “the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” Therasense, 649 F.3d at 1290. Importantly, circumstantial evidence can suffice to prove intent. See Slip Op. at 11. “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 representations ‘contrary to the true information he had in his possession.’” Id. (quoting Apotex Inc. v. UCB, Inc., 763 F.3d 1354, 1362 (Fed. Cir. 2014)).
The ’018 Patent Dispute and the Plaintiff’s Litigation Misconduct
Regeneron is the assignee of U.S. Patent Application No. 13/164,176 (the ’176 application), which issued as U.S. Patent No. 8,502,018 (the ’018 patent) on Aug. 6, 2013. Shortly after the ’018 patent issued, Regeneron sued Merus for infringement in the Southern District of New York. Regeneron Pharmas., Inc. v. Merus B.V., 144 F. Supp. 3d 530, 537 (S.D.N.Y. 2015).
Merus denied infringement and counterclaimed that the ’018 patent was unenforceable because of Regeneron’s inequitable conduct before the PTO. In particular, Merus asserted that four references cited in prosecution of the parent application were material to patentability of the ’176 application, and were withheld from the PTO with intent to deceive.
After a hearing on claim construction, the district court decided to bifurcate the trial, first to determine the materiality of the four withheld references, and in a later proceeding to determine whether Regeneron had the necessary intent to deceive the PTO by withholding the references. Id. at 595 n.51. In the first part of the trial, the district court determined that the withheld references were indeed material and not cumulative. Id. at 571-80. However, the second part of the trial, to determine intent, was never conducted because, according to the district court, Regeneron’s litigation conduct from the outset of the trial provided sufficient evidence to establish an adverse inference of intent to deceive the PTO. See id. at 582-96.
The district court detailed at length Regeneron’s “troubling” conduct, which included:
Patent Prosecution Misconduct
- Regeneron’s false assertion to the PTO that it had created the claimed transgenic mouse before Regeneron had actually done so
- Regeneron’s withholding of three references cited in a third-party submission in the parent of the ’176 application, just days before the ’176 application was allowed
- Regeneron’s withholding of a fourth reference, an international application that shared one common co-inventor with the ’176 application
- Withholding of documents in discovery
- Refusal to provide an element-by-element identity between the accused product and the ’018 claims
- Refusal to offer a proposed claim construction
- First concealing a prosecution-relevant memo by asserting it was privileged, and later waiving the privilege by producing parts of the memo and related papers, and finally obscuring the extent of related papers that a court order required to be produced
See id. Having considered Regeneron’s trial conduct, the district court explored potential sanctions to impose against Regeneron, including allowing certain evidence into the record and precluding expert testimony. Id. at 594-95. However, the court found that none of these remedies were adequate, and decided to draw from the plaintiff’s conduct an adverse inference of intent to deceive the PTO, which inevitably led to the conclusion that Regeneron had engaged in inequitable conduct in prosecuting the ’018 patent. Id. at 595-96.
The Federal Circuit’s Review of Inequitable Conduct
On appeal, the Federal Circuit reviewed the district court’s claim construction and the finding that Regeneron engaged in inequitable conduct based on an adverse inference of intent to deceive the PTO. The court affirmed the district court’s claim construction and adopted its factual findings of misconduct. See Slip Op. at 22. The only issue remaining for the three-judge panel to decide, then, was whether it was improper for the district court to draw from litigation conduct an adverse inference of intent in an inequitable conduct analysis. Id. at 35.
In answering this question, the court made clear that the district court’s application of an adverse inference of intent was not simply punishing bad litigation behavior by condemning the ’018 patent. Rather, the court agreed that Regeneron’s pattern of “sword and shield” tactics during litigation evidenced an attempt to obfuscate prior prosecution misconduct before the PTO. Id. at 36-37. According to the majority, drawing this inference to establish the intent required of a finding of inequitable conduct was not an abuse of discretion. Id. at 37.
Judge Newman’s Dissent
In a 19-page dissent, Judge Pauline Newman strongly objected to the application of litigation misconduct to infer an intent to deceive the PTO. The fact that a second trial on the element of intent was scheduled but never held weighed heavily in Judge Newman’s rationale. She explained that the majority’s affirmance of the district court offended “fundamental fairness and judicial process” because “no evidentiary record was developed on intent to deceive, with no testimony and no opportunity for examination and cross-examination of the witnesses.” Slip Op., J. Newman dissenting, at 2-3. Judge Newman further contested the materiality of the withheld references, stating that “they are not but-for material as compared with the references” cited by the examiner. Id. at 11.
Overall, Judge Newman maintained that “[i]ntent to deceive the examiner cannot be inferred from purported litigation misconduct several years later,” and that “[t]he premises of the law of inequitable conduct have not been established by clear and convincing evidence,” as required under Therasense. Id. at 19.
The Federal Circuit has recognized that the defense carries a very harsh penalty: unenforceability of the entire patent. Therasense, 649 F.3d. at 1287-88. Although the standards for intent and materiality “have fluctuated over time,” since Therasense courts have consistently required a showing, by clear and convincing evidence, of both prongs of inequitable conduct: materiality and intent. To some observers, Regeneron will cast doubt on this precedent and unsettle the consistency in application of inequitable conduct.
For patent prosecutors faced with multiple similar prior art references, this case cautions against assuming that the references are merely cumulative. Suppose two prior art references are material to the patentability of an application under prosecution. Reference A is of record and being considered by the PTO. The applicant is made aware of Reference B, but concludes that it is merely cumulative of Reference A and therefore elects not to disclose it. Prosecution continues, and the applicant is forced to make arguments distinguishing his invention over Reference A. In so doing, he construes Reference A as a limited disclosure that does not anticipate or render obvious his claims. The PTO allows the claims.
Later, during litigation, the infringement defendant asserts inequitable conduct because of the applicant’s failure to disclose Reference B. It’s clear that the reference is material, but can the plaintiff/patentee now maintain that it is cumulative? This may depend on how the applicant characterized Reference A during prosecution years earlier. Would the applicant have characterized Reference B differently than Reference A had it been asserted against the claims? Has the plaintiff/patentee now argued that Reference B is cumulative by asserting a rationale different from the rationale that established Reference A as non-invalidating during prosecution? If either answer is yes, then the defendant has a strong argument that the references are not cumulative. Thus, the safest tack for patent prosecutors is simply to disclose all known relevant art, even if it is cumulative of art already of record.
As for patent litigators, this case is another cautionary example of the risks of engaging in “sword and shield” tactics to obscure decisions made by the patent applicant during prosecution. Where certain strategic decisions were made during prosecution that could taint the patentee’s litigation strategy, the best approach for litigators may be simply to come forth, explain the strategic prosecution decisions and hope for the best.