Best Practices – Ethics Issues in the Patent Area

1. Best Practices – Ethics Issues in the Patent Area Presented by Thomas Franklin, Partner Kristopher Reed, Partner Eugene Bernard, Partner David Schaumann, Assistant GC IP, Covidien December 4, 2013

2. Overview • Introductory Remarks on Inequitable Conduct (IC) • Origins of Inequitable Conduct • Common Causes of Inequitable Conduct • Percentage of Patent Cases Alleging Inequitable Conduct • Litigation Perspectives on Inequitable Conduct • The Inequitable Conduct problem in Litigation • The Therasense Decision • Post-Therasense Decisions • Best Practice Tips for Litigators • Prosecution Perspectives on Inequitable Conduct • USPTO’s Duty of Disclosure (“Rule 56”) • Examples of Material Information that Should Be Disclosed • Tips for Satisfying the Duty of Disclosure • AIA’s New Supplemental Examination Procedure

3. Origins of Inequitable Conduct • Inequitable conduct (IC) is an equitable remedy that is an absolute defense to a finding of patent infringement • IC invalidates a patent procured by fraud • Supreme Court derived the defense from the equitable doctrine of unclean hands • Policy motivation was to discourage misconduct • Intertwined with duty of disclosure • Many Foreign patent offices have no such duty

4. Common Causes of Inequitable Conduct • Failure to comply with duty of disclosure • Fabrication of evidence • Applicant deception, misrepresentation or other misconduct committed during prosecution of a patent • Willful inventorship deception • Fraud in obtaining a temporary injunction to stop infringement

5. Percentage of Patent Litigations Alleging Inequitable Conduct TherasenseEn Banc Decision Source: Jason Rantanen, Recalibrating Our Empirical Understanding of Inequitable Conduct,3 IP Theory 98 (May 16, 2013)

6. Litigation Perspectives Kristopher Reed, IP Litigation Team

7. The IC Problem in Litigation • “[T]he habit of charging inequitable conduct in almost every major patent case has become an absolute plague.” Burlington Industries, Inc. v. Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988). • Requirement to plead with specificity leads to ample conjecture • Tarnishes reputation of prosecutor despite low likelihood of serving as a defense

8. Therasense – En BancDecision • No consensus – six judge majority, four judge dissent, and one concurrence/dissent in part. • Confirms “specific intent” required, i.e., “the accused infringer must prove by clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it.” • No “sliding scale” – although a district court may still infer intent from “indirect and circumstantial evidence”

9. Therasense – En BancDecision • The majority purports to “address the proliferation of inequitable conduct charges” by adjusting the “standard for materiality.” • “[T]he materiality required to establish inequitable conduct is but-for materiality.” • An “exception in cases of affirmative egregious misconduct” i.e., false affidavits.” • Dissent “would adhere to the materiality standard set forth in the PTO’s disclosure rule.”

10. Post-TherasenseCAFC Decisions • Federal Circuit scorecard post-Therasense: • 10 decisions affirming/finding no inequitable conduct • 3 decisions affirming inequitable conduct finding

11. Post-TherasenseCAFC Decisions • No inequitable conduct where: • Accused actions taken in conjunction with PTO formalities (late payments, wrong entity size, unintentional delay, petition to make special, etc.) • Subsequent argument/explanation renders omission irrelevant • Evidence of intent to deceive not clear and convincing, such as a “mistake or exercise of poor judgment” -- even where inventor explanation “strained credibility” / was “lacking credibility”

12. Post-TherasenseCAFC Decisions • Inequitable conduct found where: • Complete concealment from PTO of another company’s involvement in the invention • “Unmistakably false” declaration submitted by inventor to overcome prior art reference • Inventor testimony was “not credible,” as he was the editor on a material (and ultimately invalidating) prior art publication, and carefully reviewed the publication in conjunction with the PTO application but chose not to disclose it.

13. Litigation Best Practices • Don’t spread the plague. Refrain from alleging inequitable conduct until sufficient factual basis under Rule 9(b). Must meet but-for materiality standard. • “[I]dentifythe specific who, what, when, where, and how of the material misrepresentation or omission committed before the PTO.” Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009).

14. Litigation Best Practices (cont’d) • Do not allege inequitable conduct based on representations made in conjunction with PTO formalities that are not the basis for the patent grant. • More is more. Simply demonstrating that an inventor is “not credible” insufficient. At least need to show actions from which an affirmative intent to deceive can be inferred. • Know your court and judge. Do not waste time and client resources if low likelihood of getting to a jury.

15. Prosecution Perspectives Eugene Bernard David Schaumann

16. The Duty to Disclose Information to the USPTO • Each individual associated with the filing and prosecution of a patent application has a duty to disclose all known information that is material to patentability – 37 C.F.R. § 1.56 • Duty continues throughout prosecution until patent is granted • There is no duty to search for material information

17. What is Material Information? • Material Information is any information a “reasonable examiner” would be likely to consider important in deciding whether to allow a claim • Traditional “prior art” documents including publications and patents • Prior art cited in related foreign applications • Information from related litigation • Information related to claims copied from a patent • Information relating to or from co-pending U.S. applications • MPEP§ 2001.06

18. McKesson Opinion Reinforces Duty to Disclose Related U.S. Patent Prosecutions • There is a duty to disclose rejections in co-pending applications when the pending an rejected claims are substantially similar. • “Although examiners are not bound to follow other examiners’ interpretations, knowledge of a potentially different interpretation is clearly information that an examiner could consider important when examining an application.” • McKesson Information Solutions v. Bridge Medical, 487 F.3d 897 (Fed. Cir. 2007). • Suggests required disclosure of arguments where a potentially different interpretation of claimed subject matter is discussed

19. TherasenseClarifies Duty to Disclose Related Foreign Patent Prosecutions • Inequitable Conduct Found where statements made to USPTO were found inconsistent with statements made in prosecution of counterpart European patent application • Even though the European patent application was of record, the “highly material” inconsistent arguments were not made of record • Therasense, Inc. v. Becton, Dickinson and Co., 593 F.3d 1289 (Fed. Cir. 2010).

20. Current State of Rule 56 and CAFC Disclosure Standards • Unfortunately there is currently no safe harbor practice for fulfilling the Duty of Disclosure • MPEP§ 2004 Offers “Aids to Compliance” with Duty of Disclosure • Guidance is merely exemplary and suggestive • CAFC does not recognize Rule 56 or MPEP as controlling authority defining or satisfying the Duty of Disclosure

21. Optimal Tips for Satisfying the Duty of Disclosure • Disclose references that are even of questionable materiality. • Disclose rejections in co-pending applications, if the pending and rejected claims are substantially similar. • Even disclose to the examiner actions she has taken in a co-pending case • Disclose arguably inconsistent attorney arguments made in related/similar U.S. and foreign applications

22. Optimal Tips for Satisfying the Duty of Disclosure (Continued) • For particularly relevant references and arguments consider submitting two Information Disclosure Statements to buttress against the charge of burying a reference • First IDS has the most material reference(s) while Second IDS includes all other questionably material references • Be particularly diligent disclosing declarations and affidavits submitted in related U.S. and foreign prosecution

23. Realistic Duty of Disclosure • If it is realistic to follow the Optimal Tips, follow them • This will ensure the lowest level of risk • For many companies, it is impractical to search for relevant prior art, even in co-pending cases • The Duty of Disclosure does not require searching for prior art. • Be aware that the risk of an inequitable conduct finding increases with this option.

24. Realistic Duty of Disclosure – Two Rules • DO NOT Lie to the Patent Office • If you know it is not true – Don’t say it. • DO NOT Hide things from the Patent Office • If you know about it and know that it is relevant, disclose it.

25. New AIA Supplemental Examination Procedure – Safety Net • The America Invents Act Introduced new “Supplemental Examination” to allow Patent Owner to request USPTO to consider, reconsider, or correct information believed relevant to the patent • USPTO has three months to determine whether submitted information presents Substantial New Question of Patentability • With a few exceptions, a patent cannot be held unenforceable based on information submitted in Supplemental Examination • $4400 fee to request Supplemental Examination, additional $12K if Reexamination ordered

26. Questions?