Comment: The Exergen and Therasense effects

Stanford Law Review

Volumn 66, Issue 3, 2014, Pages 695-724

  Swanson, Robert D ^a,b  

^a US District Court for the Northern District of California ^*  (United States)

^b STANFORD LAW SCHOOL   (United States)

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EID: 84897481827     PISSN: 00389765     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (145)

1. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288 (Fed. Cir. 2011) (en banc).
2. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288 (Fed. Cir. 2011) (en banc).
3. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1288 (Fed. Cir. 2011) (en banc).
4. In general, prior art is information available to the public before a patent application's filing date. For the precise definition, see 35 U.S.C. § 102 (2011). Such information must be disclosed to the U.S. Patent and Trademark Office in the patent application.
5. Therasense, 649 F.3d at 1289.
6. Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988) ("[T]he habit of charging inequitable conduct in almost every major patent case has become an absolute plague. Reputable lawyers seem to feel compelled to make the charge against other reputable lawyers on the slenderest grounds, to represent their client's interests adequately, perhaps. ").
7. 575 F.3d 1312 (Fed. Cir. 2009).
8. Therasense, 649 F.3d 1276.
9. See, e.g., Dennis Crouch, Inequitable Conduct: Federal Circuit Places Another Nail in the Coffin, Patently-O (Sept. 14, 2012, 11:06 AM), http://www.patentlyo.com/ patent/2012/09/inequitable-conduct-federal-circuit-places-another-nail-in-the-coffin.html.
10. Frederick Frei & Sean Wooden, Inequitable Conduct Claims One Year After Therasense, Managing Intell. Prop. (July 18, 2012), http://www.andrewskurth.com/ media/article/1620_Managing%20IP%20Article.pdf ("After the holding in Therasense, it was widely believed that the court had sounded the death knell to the inequitable conduct defence by imposing evidentiary requirements that could rarely be met."). For a view that inequitable conduct is still available in Abbreviated New Drug Application (ANDA) cases.
11. Inequitable Conduct Defenses Still Alive in ANDA Cases, ANDA Advisors (Feb. 8, 2013), http://andaadvisors.com/inequitable-conduct-defenses-still-alive-in-anda-cases.
12. 37 C.F.R. § 1.56 (2013). The PTO promulgates regulations pursuant to statutory authority. 35 U.S.C. § 2 (2011). These regulations govern proceedings before the PTO. Section 1.56 (also called Rule 56) defines parties' duty of candor to the PTO in administrative filings and proceedings. Rule 56 therefore outlines the information the PTO itself considers material in arriving at administrative decisions.
13. 35 U.S.C. § 101 (2011).
14. 35 U.S.C. § 101 (2011).
15. 35 U.S.C. § 101 (2011).
16. 35 U.S.C. § 101 (2011).
17. 290 U.S. 240 (1933).
18. 322 U.S. 238 (1944).
19. Standard Oil Co. v. United States, 429 U.S. 17 (1976).
20. 324 U.S. 806 (1945).
21. 290 U.S. at 243.
22. 290 U.S. at 243.
23. 290 U.S. at 243.
24. Peeler v. Miller, 535 F.2d 647, 653-55 (C.C.P.A. 1976).
25. Keystone Driller, 290 U.S. at 247.
26. 322 U.S. 238, 240 (1944) (internal quotation mark omitted).
27. Standard Oil Co. v. United States, 429 U.S. 17 (1976).
28. Standard Oil Co. v. United States, 429 U.S. 17 (1976).
29. Standard Oil Co. v. United States, 429 U.S. 17 (1976).
30. Standard Oil Co. v. United States, 429 U.S. 17 (1976).
31. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809 (1945).
32. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809 (1945).
33. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809 (1945).
34. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809 (1945).
35. Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 809 (1945).
36. Robert J. Goldman, Evolution of the Inequitable Conduct Defense in Patent Litigation, 7 Harv. J.L. & Tech. 37, 52-67 (1993).
37. Damages were usually unavailable to the defendant in unclean hands cases because courts of equity generally did not have jurisdiction to order legal remedies. Douglas Laycock, Modern American Remedies 5-6 (Vicki Been et al. eds., 4th ed. 2010).
38. Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 251 (1944).
39. Standard Oil Co. v. United States, 429 U.S. 17 (1976).
40. United States v. Am. Bell Tel. Co., 128 U.S. 315, 373 (1888).
41. 35 U.S.C. § 282(b)(1) (2011).
42. Patent Act of 1952, Pub. L. No. 82-593, 66 Stat. 792 (codified as amended at 35 U.S.C. §§ 1-376 (2011).
43. Orthopedic Equip. Co. v. All Orthopedic Appliances, Inc., 707 F.2d 1376, 1383 (Fed. Cir. 1983) ("Establishing that a patent was procured by fraud or with such egregious conduct as to render it unenforceable requires clear, unequivocal, and convincing evidence of an intentional misrepresentation or withholding of a material fact from the PTO. ").
44. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc) ("[I]nequitable conduct came to require a finding of both intent to deceive and materiality. ").
45. 37 C.F.R. § 1.56 (1977).
46. Harry F. Manbeck, Jr., The Evolution and Issue of New Rule 56, 20 AIPLA Q.J. 136, 140 (1992) ("I concluded that existing Rule 56 was indeed too imprecise, and could, and probably was, leading to unjustifiable charges of inequitable conduct in litigation. It should be changed. ").
47. Orthopedic Equip., 707 F.2d at 1383 ("[M]ere evidence of simple negligence, oversight, or an erroneous judgment made in good faith not to disclose prior art is not sufficient to render a patent unenforceable. ").
48. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
49. Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988) ("[T]he habit of charging inequitable conduct in almost every major patent case has become an absolute plague. ").
50. 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc).
51. 37 C.F.R. § 1.56 (1992).
52. 37 C.F.R. § 1.56 (1992).
53. Hoffman-La Roche Inc. v. Lemmon Co., 906 F.2d 684, 688 (Fed. Cir. 1990).
54. Kingsdown, 863 F.2d at 876.
55. Hoffman-La Roche, 906 F.2d at 688.
56. Kingsdown, 863 F.2d at 876.
57. 82 F.3d 394, 397 (Fed. Cir. 1996) ("Applicant must be chargeable with knowledge of the existence of the prior art or information, for it is impossible to disclose the unknown. Similarly, an applicant must be chargeable with knowledge of the materiality of the art or information.
58. yet an applicant who knew of the art or information cannot intentionally avoid learning of its materiality through gross negligence, i.e., it may be found that the applicant 'should have known' of that materiality. " (quoting FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1415 (Fed. Cir. 1987).
59. See, e.g., Brasseler, U.S.A. I, L.P. v. Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001).
60. 437 F.3d 1181, 1191 (Fed. Cir. 2006) ("[S]ummary judgment is appropriate on the issue of intent if there has been a failure to supply highly material information and if the summary judgment record establishes that (1) the applicant knew of the information.
61. (2) the applicant knew or should have known of the materiality of the information.
62. and (3) the applicant has not provided a credible explanation for the withholding. "). This intent standard was later replaced by a stricter one in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011) (en banc).
63. 537 F.3d 1357 (Fed. Cir. 2008).
64. 537 F.3d 1357 (Fed. Cir. 2008).
65. See, e.g., Ferring, 437 F.3d at 1194.
66. Star Scientific, 537 F.3d at 1366.
67. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1274 (Fed. Cir. 2001).
68. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1274 (Fed. Cir. 2001).
69. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1274 (Fed. Cir. 2001).
70. GFI, Inc. v. Franklin Corp., 265 F.3d 1268, 1274 (Fed. Cir. 2001).
71. 575 F.3d 1312 (Fed. Cir. 2009).
72. For an argument that Rule 9(b) should not apply to inequitable conduct, see David Hricik, Wrong About Everything: The Application by the District Courts of Rule 9(b) to Inequitable Conduct, 86 Marq. L. Rev. 895, 913-20 (2003).
73. Exergen, 575 F.3d at 1326.
74. Exergen, 575 F.3d at 1326.
75. Exergen, 575 F.3d at 1326.
76. Exergen, 575 F.3d at 1326.
77. Exergen, 575 F.3d at 1326.
78. 649 F.3d 1276 (Fed. Cir. 2011) (en banc).
79. 649 F.3d 1276 (Fed. Cir. 2011) (en banc).
80. 649 F.3d 1276 (Fed. Cir. 2011) (en banc).
81. 649 F.3d 1276 (Fed. Cir. 2011) (en banc).
82. 649 F.3d 1276 (Fed. Cir. 2011) (en banc).
83. 649 F.3d 1276 (Fed. Cir. 2011) (en banc).
84. Therasense, 649 F.3d at 1292.
85. Therasense, 649 F.3d at 1292.
86. In fact, in the short time since Therasense, the Federal Circuit has already reversed or vacated at least three findings of inequitable conduct by district courts. Outside the Box Innovations, LLC v. Travel Caddy, Inc., 695 F.3d 1285 (Fed. Cir. 2012) (reversing the district court's finding of inequitable conduct).
87. 1st Media, LLC v. Elec. Arts, Inc., 694 F.3d 1367 (Fed. Cir. 2012) (same).
88. Am. Calcar, Inc. v. Am. Honda Motor Co., 651 F.3d 1318 (Fed. Cir. 2011) (vacating district court's finding of inequitable conduct and remanding).
89. Although Exergen surely had a significant impact on Rule 12(b)(6) dismissals, the purpose of this analysis was to understand how Exergen and Therasense affected litigants' attempts to plead inequitable conduct and their ability to prove inequitable conduct based on the evidence in the case. Including Rule 12(b)(6) dismissals would have negatively impacted the results in two principal ways: First, dismissals for failure to state a claim do not bear on the accused infringer's ability to prove inequitable conduct based on the evidence in the case. Second, the resulting data would have included a large number of pleadings based on the pre-Exergen legal regime that were dismissed under Exergen. This would overstate Exergen's importance, and further, it only reveals that Exergen significantly raised the legal requirements for pleading inequitable conduct, which is readily apparent to anyone who reads the opinion.
90. Denials of summary judgment are not decisions on the merits because they do not definitively establish whether inequitable conduct did or did not occur. If summary judgment on inequitable conduct is denied, there is typically a later decision on the merits, absent the case settling or concluding on another dispositive issue.
91. The searches were run and the case list was compiled from April 20 to April 30, 2013.
92. Lee Petherbridge et al., The Federal Circuit and Inequitable Conduct: An Empirical Assessment, 84 S. Cal. L. Rev. 1293, 1319-21 (2011) ("[W]hen the Federal Circuit gives a single reason for patentee success, that reason is nearly two and a half times more likely to be lack of intent to deceive than it is to be lack of materiality. ").
93. Of course, intent may depend on witness credibility, which cannot be decided at summary judgment, whereas materiality is a legal determination well suited for summary judgment. But many inequitable conduct claims do not depend on witness credibility. More commonly, a court is presented with evidence that a reference was material and possibly that an applicant knew of a reference, but little more. The accused infringer asks the court to infer intent based on those facts, and courts can often fairly easily find that such evidence is legally insufficient based on their experience in other areas of law. Of course, as noted above, litigants often ask courts to infer intent based on few facts simply because it is so difficult to find further evidence of specific intent to deceive the PTO.
94. Lee Petherbridge et al., The Federal Circuit and Inequitable Conduct: An Empirical Assessment, 84 S. Cal. L. Rev. 1293, 1319-21 (2011) ("[W]hen the Federal Circuit gives a single reason for patentee success, that reason is nearly two and a half times more likely to be lack of intent to deceive than it is to be lack of materiality. ").
95. Another possible way to test this theory would be to only include cases with pleadings that survived a post-Exergen motion to dismiss. This dataset would potentially include a few cases in the "post-Exergen" category that were classified as "pre-Exergen" in the dataset actually compiled because they had filing dates that were pre-Exergen but were subjected to a later Rule 12(b)(6) motion. However, this methodology would exclude cases without Rule 12(b)(6) motions, which would likely bias the dataset because pleadings not challenged under Rule 12(b)(6) are more likely to be especially comprehensive. A slightly better version of this methodology would include all post-Exergen pleadings and pre-Exergen pleadings with a post-Exergen Rule 12(b)(6) motion in the "post-Exergen" category. But this methodology would suffer from the same problem, as it would exclude pre-Exergen pleadings that could have been subjected to a motion to dismiss based on Exergen but were not. The methodology actually used is, of course, imperfect as well, but it may be least likely to bias the results in either direction.
96. Note that the same time periods that were used in Part II. A were used here. Additionally, for clarity, the time periods were applied to the date the pleading was filed, not the date the case was filed, as the case filing date would not always accurately reflect the law applied to the pleading. Finally, the search was conducted on May 3, 2013.
97. Various points in the search results order were sampled to ensure that any errors would be detected. More specifically, I surveyed the first hits and the last ones, along with some in the middle.
98. Lex Machina returns a maximum of 2000 cases when searched in this manner. Therefore, the three time periods were broken into smaller time periods when collecting data to avoid reaching this limit.
99. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
100. Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct, 3 IP Theory 98, 101, 104 (2013).
101. Admin. Office of the U.S. Courts, Judicial Facts and Figures tbl.4.7 (2012), available at http://www.uscourts.gov/Statistics/JudicialFactsAndFigures/judicial-factsfigures-2012.aspx.
102. The rules prevent patentees from joining large numbers of defendants together in one case, which has resulted in some patentees filing many lawsuits, each against fewer defendants. Tracie L. Bryant, The America Invents Act: Slaying Trolls, Limiting Joinder, 25 Harv. J.L. & Tech. 673, 689-90 (2012).
103. Dennis Crouch, Patent Infringement Litigation: Filings on the Rise, Patently-O (Mar. 13, 2012, 3:12 PM), http://www.patentlyo.com/ patent/2012/03/patent-infringement-litigation-complaints-on-the-rise.html.
104. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011) (en banc).
105. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
106. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
107. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
108. Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct, 3 IP Theory 98, 101, 104 (2013).
109. Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct, 3 IP Theory 98, 101, 104 (2013).
110. Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct, 3 IP Theory 98, 101, 104 (2013).
111. Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct, 3 IP Theory 98, 101, 104 (2013).
112. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011) (en banc).
113. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1289 (Fed. Cir. 2011) (en banc).
114. Therasense, 649 F.3d at 1288.
115. Therasense, 649 F.3d at 1288.
116. Therasense, 649 F.3d at 1288.
117. Therasense, 649 F.3d at 1288.
118. Therasense, 649 F.3d at 1288.
119. Therasense, 649 F.3d at 1288.
120. Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334, 1349 (Fed. Cir. 2008) (Rader, J., dissenting).
121. Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334, 1349 (Fed. Cir. 2008) (Rader, J., dissenting).
122. Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334, 1349 (Fed. Cir. 2008) (Rader, J., dissenting).
123. Aventis Pharma S.A. v. Amphastar Pharm., Inc., 525 F.3d 1334, 1349 (Fed. Cir. 2008) (Rader, J., dissenting).
124. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177-78 (1965) (antitrust action).
125. Dow Chem. Co. v. Exxon Corp., 139 F.3d 1470, 1471 (Fed. Cir. 1998) (unfair competition claim).
126. Therasense, 649 F.3d at 1289.
127. Therasense, 649 F.3d at 1289.
128. Therasense, 649 F.3d at 1289.
129. Therasense, 649 F.3d at 1289.
130. Robert P. Merges & John F. Duffy, Patent Law and Policy: Cases and Materials 1103 (4th ed. 2007).
131. Therasense, 649 F.3d at 1289.
132. Ad Hoc Comm. on Rule 56 & Inequitable Conduct of the Am. Intellectual Prop. Law Ass'n, 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).
133. One possible argument is that low success rates in proving inequitable conduct are strong evidence that the defense is pleaded too often. However, with the changes in the law that made it more difficult to prove inequitable conduct occurring in this time period, it is no surprise that success rates are low. With inequitable conduct now being pleaded in only 8% of patent cases, it appears that litigants are adjusting.
134. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
135. Christian E. Mammen, Controlling the "Plague": Reforming the Doctrine of Inequitable Conduct, 24 Berkeley Tech. L.J. 1329, 1338 (2009).
136. Therasense, 649 F.3d at 1294-95.
137. Dennis Crouch, Citing Patent References, Patently-O (Jan. 10, 2013, 7:24 AM), http://www.patentlyo.com/patent/2013/01/citingreferences.html ("[T]he percentage of patents citing more than 100 references has risen from 3% in 2005 to more than 8% today.").
138. Dennis Crouch & Jason Rantanen, Citing References at the PTO, Patently-O (Oct. 23, 2012, 8:05 AM), http://www.patentlyo.com/patent/2012/10/citing-references-at-the-pto.html (showing that the average number of applicant-cited references per patent has risen from about seventeen in 2005 to thirty-six in 2012).
139. Christopher A. Cotropia et al., Do Applicant Patent Citations Matter?, 42 Res. Pol'y 844, 847 (2013) ("[O]f the references examiners use to reject claims, only 12.7% come from the applicants, while 87.2% come from examiners. ").
140. Christopher A. Cotropia et al., Do Applicant Patent Citations Matter?, 42 Res. Pol'y 844, 847 (2013) ("[O]f the references examiners use to reject claims, only 12.7% come from the applicants, while 87.2% come from examiners. ").
141. It may at first seem that this criticism of Therasense also applies to Exergen. But Exergen is only minimally directed to the overdisclosure problem. Rather, Exergen attempts to better filter out unmeritorious inequitable conduct claims at the pleading stage. Exergen theoretically reduces overdisclosure only as a secondary consequence of decreasing patent prosecutors' fears of inequitable conduct. Because overdisclosure was not an explicit consideration in formulating Exergen's doctrinal changes, inequitable conduct's pleading requirements were not unnecessarily perverted by overdisclosure concerns.
142. Lee Petherbridge et al., Unenforceability, 70 Wash. & Lee L. Rev. 1751, 1777-78 (2013) (suggesting that the doctrine of inequitable conduct discourages risky prosecution behavior, such as fewer citations to prior art and longer pendencies).
143. Thomas F. Cotter, An Economic Analysis of Patent Law's Inequitable Conduct Doctrine, 53 Ariz. L. Rev. 735, 735 (2011).
144. Technically, a reference could be but-for material for inequitable conduct purposes but still not invalidating due to differences in the burden of proof. To prove inequitable conduct, the accused infringer must establish that a reference is but-for material by a preponderance of the evidence, but to invalidate a claim, the reference must be but-for material by clear and convincing evidence. Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1292 (Fed. Cir. 2011) (en banc). The principal cost to withholding a key reference in prosecution is the difference in remedy between invalidity and inequitable conduct. Winning an invalidity defense only invalidates a particular claim, whereas inequitable conduct renders the whole patent unenforceable. Perhaps, then, Therasense still deters patent prosecutors from withholding references that invalidate more auxiliary claims-patent prosecutors would prefer to forego those claims and not risk rendering the core claims unenforceable. But this means that Therasense fails to deter patent prosecutors from withholding key references that read onto the basic technology claimed in the patent application-the chief conduct that must be discouraged.
145. Of course, courts can and should be free to deny leave to amend if they feel that litigants are using permissive leave to amend as a judicial license to sandbag their best arguments, presenting them at the last possible minute.