AIPLA

1. AIPLA Post Therasense Cases and Practical Tips Studebaker Brackett PC January, 2013

2. Table of Contents • Summary of Therasense Decision (May 2011) • Post Therasense (Fed Cir) Decisions • Powel v. Home Depot (Fed Cir: Nov. 2011) • Aventis Pharma v. Hospira (Fed Cir: April 2012) • 1st Media v. Electronic Arts (Fed Cir: Sep. 2012) • Summary • Practical Tips

3. Therasense v. Becton(Fed. Cir. May 2011: en banc) Summary of the Therasense decision: May 25, 2011

4. Summary of the Therasense decision: (cont’d) • To prevail on the defense of IC (inequitable conduct), the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the USPTO. • The accused infringer must prove both elements “intent and materiality” by clear and convincing evidence.

5. Summary of the Therasense decision: (cont’d) 1. INTENT: • For the element of intent to deceive the USPTO: evidence of “deliberate decision” to deceive must be proven by clear and convincing evidence. • Proving applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive. • When circumstantial evidence must be relied on, “intent to deceive” must be the single most reasonable inference.

6. Summary of the Therasense decision: (cont’d) 2. MATERIALITY: • For the element of materiality, Fed Cir demands evidence of “BUT-FOR Materiality”. The court must find that, but for the deception, the PTO would not have allowed the claim. • However, in making this patentability determination, the court should apply the preponderance evidence standard and give the claim it’s broadest reasonable interpretation.

7. Summary of the Therasense decision: (cont’d) 3. EXCEPTION: • As a major exception, the court held that in cases involving Affirmative Egregious Misconduct, “but for materiality” need NOT be proven. • Example of Affirmative Egregious Misconduct – unmistakably false affidavit

8. Post Therasense Decisions Powell v. Home Depot (Fed. Cir. Nov. 2011) Aventis Pharma v. Hospira (Fed. Cir. April 2012) 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012)

9. Powell v. Home Depot (Fed. Cir. Nov. 2011) Background: Powell sued The Home Depot for willful patent infringement of U.S. Patent No. 7,044,039, directed to a safety guard for a radial arm saw. While prosecuting his patent, Powell filed a Petition to Make Special in accordance with MPEP §708.02, seeking expedited review on the grounds that he was obligated to manufacture and supply to Home Depot devices embodying the claims he sought in his patent. "Mr. Powell believed that -- based on his ongoing negotiations and long-term business relationship with Home Depot -- he was obligated to supply it with saw guards for radial arm saws located in each Home Depot store."

10. Powell v. Home Depot (Fed. Cir. Nov. 2011) Background cont.: Ultimately the Patent Office granted Powell's Petition to Make Special and his patent application received expedited review. However, the negotiations with Home Depot had failed and Powell did not inform the USPTO that he was no longer qualified for the Special status under the prospective manufacture.

11. Powell v. Home Depot (Fed. Cir. Nov. 2011) District Court: • The district court determine that Mr. Powell, with intent to deceive, failed to inform the Patent Office that he was no longer obligated to manufacture products for Home Depot. • The court also determined that this intentional omission was material. • However, the district court concluded that Home Depot failed to establish, by clear and convincing evidence, that Powell's patent was unenforceable based in part on the balance of equities. • Specifically, while the district court (before Therasense en banc decision) held that the failure to inform the USPTO was done with the intent to deceive the USPTO, the intentionally non-informing information was not material to the patentability of the claim.

12. Powell v. Home Depot (Fed. Cir. Nov. 2011) Federal Circuit • During the pendency of Home Depot's appeal, the CAFC decided Therasence. • The Federal Circuit, affirmed the district court decision, and held that Powell’s failure to inform the USPTO “that the condition which supports a Petition to Make Special no longer exist” does not constitute inequitable conduct. Because Powell’s conduct (improper omission) fails the but-for materiality standard of Therasense. • The court further noted that this improper omission is not the type of act which rises to the level of “affirmative egregious misconduct”.

13. Aventis Pharma v. Hospira (Fed. Cir. April 2012) Background: • The two patents-in-suit, U.S. Patent Nos. 5,750,561 and 5,714,512, relate to Aventis Pharma’s chemotherapy cancer drug Taxotere, which was administered in an aqueous solution called a “perfusion”. • The prior art surfactant used to form the solution triggered allergic reactions, including anaphylactic shock. • To overcome the problems, the patented formulation uses a different surfactant and limits the amount of ethanol, as compared to prior art formulation.

14. Aventis Pharma v. Hospira (Fed. Cir. April 2012) District Court: • In their pre-Therasensedecision, the district court made separate and distinct findings on intent and materiality. • The district court found that the inventors had cited a prior art reference which identified the problem they sought to solve, but did not cite two other references which revealed the solution to the problem. • Consequently, the court found that the withheld references were material to patentability and that the inventor intentionally withheld them in order to deceive the USPTO.

15. Aventis Pharma v. Hospira (Fed. Cir. April 2012) Federal Circuit: • Affirming a Pre-Therasense judgment of inequitable conduct given after a bench trial, the court held that the references werebut-for-materialbecause the district court properly found that the claims were invalid over the references. • Regarding the inventor’s withholding of the references with the specific intent to deceive the USPTO, the Federal Circuit rejected the inventor’s contentions that there was more than one inference that could be drawn from his conduct and found that the inventor’s testimony, explaining why he withheld the prior art, was not credible.

16. Aventis Pharma v. Hospira (Fed. Cir. April 2012) Federal Circuit (continued) • Regarding inequitable conduct, the Court initially noted that “although the district court did not have the benefit of our Therasense opinion . . . , the court nevertheless found that the withheld references were but-for material to patentability and made distinct intent and materiality findings” • The Federal Circuit concluded that “the court’s inequitable conduct determination withstands even the more rigorous standard adopted in Therasense.”

17. Aventis Pharma v. Hospira (Fed. Cir. April 2012) Federal Circuit (continued) • Specifically, the Federal Circuit concluded that in view of a totality of the inventor’s testimony, which included his testimony that his prior experiments (recorded in the withheld reference) was one of the main factors that shaped his thinking in choosing a surfactant for the claimed invention, the district court was justified in finding the inventor’s explanation non-credible, especially because the inventor disclosed to the USPTO other prior art that shows the problem to be solved without disclosing those indicating a possible solution. • This case marks the first time that the appellate court has upheld an inequitable conduct finding since raising the standard of proof in Therasense.

18. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Field of Invention: The patent at issue relates to an entertainment system for use in purchasing and storing songs, videos and karaoke information.

19. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Background: • Dr. Scott Lewis was the inventor of US Patent No. 5,464,946 and Joseph Sawyer acted as Lewis' attorney during prosecution. Sawyer filed an application for the '946 Patent on November 13, 1992. The Examiner initially rejected all claims in the application as anticipated or obvious in view of certain prior art references. After Sawyer amended the application, the Examiner issued a Notice of Allowance. • While the '946 Patent was pending, Sawyer also prosecuted other patent applications for Lewis.

20. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Background: • The applications included: • International Patent Application No. PCT/US93/10930, which was identical to the '946 Patent application; • US Patent Application No. 07/975,824, which became US Patent No. 5,325,423 ('423 Patent); and • US Patent Application No. 08/265,391, which became US Patent No. 5,564,001 ('001 Patent).

21. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Background: • After receiving the Notice of Allowance but before payment of the issue fee, Sawyer received: • A supplemental International Search Report for the PCT Application from the European Patent Office with a “Y” reference (particularly relevant if combined with another reference); and • Office Actions for the related US Applications with two additional references (allegedly disclosing features similar to those of the patent at issue). • None of the 3 references were submitted to the USPTO for consideration in connection with the ‘946 Patent.

22. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) District Court: • The district court found that their (Sawyer and Lewis) explanations for non-disclosure, that they did not recognize the materiality of any of the references and the failure to disclose these references was due to an oversight, were not credible and that it was appropriate to infer that they intended to deceive the PTO. • The district court, before the Therasensedecision (en banc), concluded that Sawyer and Lewis had committed inequitable conduct and held that the patent was unenforceable given such inequitable conduct.

23. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Federal Circuit • The court reviews a district court’s determination of inequitable conduct under a two-tiered standard: • The court reviews the underlying factual determinations of materiality and intent for clear error; and • The court reviews the ultimate decision as to inequitable conduct for an abuse of discretion.

24. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Federal Circuit (continued) The court noted that in order to show that the patentee acted with the specific intent to deceive the PTO, a defendant must prove “that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” A failure to prove any one element precludes a finding of inequitable conduct.

25. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Federal Circuit (continued) • In this particular case, the court found that “ultimately, for all of the references, the evidence supports only that Lewis & Sawyer: • (1) knew of the references, • (2) may have known they were material, and • (3) did not inform the PTO of them. • That is not enough!

26. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Federal Circuit (Continued) • The defendant failed to prove that the applicant (1) knew of the reference, (2) knew it was material, and (3) made a deliberate decision to withhold it. • In this case, the last element (3) is missing. • Because court concluded that the defendant failed to prove that Sawyer and Lewis made a deliberate decision to withhold any of the references from the USPTO, the court did not decide whether any of the references were but-for material;

27. 1st Media v. Electronic Arts (Fed. Cir. Sep. 2012) Federal Circuit (Continued) • The panel distinguished Aventis v. Hospira, (Fed. Cir. 2012) as based on an “affirmative conduct by the applicants showing not only specific awareness of materiality [but-for materiality had been established at trial], but careful and selective manipulation of where, when and how much of the most material information to disclose….” • The court went on to state that “Evidence of such selective disclosure is not present here.”

28. Supplemental Examination Under the America Invents Act

29. Supplemental Examination • Effective: Sep. 16, 2012 with respect to any patent (issued before, on or after that date); • Patent owner may request Supplemental Examination to consider, reconsider, or correct information believed to be relevant to the patent. The request must include the fee of $21,260 with a possible refund of $16,120 available if the USPTO finds that no Substantial New Question of Patentability (SNQ) is exists.

30. Supplemental Examination (cont’d) • Once it is determined that a SNQ exists, then an ex-parte reexamination is commenced by the USPTO; • Immunity (amnesty) to defense of unenforceability based on inequitable conduct will be provided with respect to the issues resolved during the Supplemental Examination following completion of the reexamination proceeding. • Exceptions: • “Fraud”, if found by the USPTO, can be reported to Attorney General. • No immunity given if litigation is commenced before conclusion of Sup Exam.

31. Summary • Therasense (en banc) significantly raised the bar of proving inequitable conduct by a defendant. • 1st Media clarified just how high the bar has been raised by Therasense. • However, the defense of unenforceability based on Inequitable Conduct is still very much alive as seen from the Aventis decision. • Supplemental Examination provides the patent holder the ability to correct errors and cure IDS related problems, especially non-submission of the relevant references cited during the examination.

32. Practical Tips • Do not relax your existing IDS submission rules in view of Therasense and 1st media because defense based on inequitable conduct is still often asserted during litigation. That is, while the plaintiff may ultimately prevail at trial or on appeal, dealing with the inequitable conduct related defense at the trial court level and at the appellate court level will be burdensome (time and cost). • If you need to think about whether or not to submit the information for more than a minute, you probably should submit it. • Create a set of rules for the submission of information to the USPTO and routinely follow these rules.

33. Practical Tips • Particularly, since a “deliberate intent to deceive” the USPTO is very difficult for the accused infringer to prove, as noted from 1st Media, creating IDS submission rules and following the rules as routine practice virtually eliminates the “intent to deceive” factor. • It is best to remain diligent in efforts to comply with existing rules to reduce possible issues that may likely be the subject of an inequitable conduct defense. • A thorough review of any patents to be asserted should be conducted and the submission of a Request for Supplemental Examination should be considered to cure as many problems as possible before asserting the patent.

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