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Inequitable Conduct

Posted Thursday, November 28, 2013 by Brian Apel

In Keystone Driller in 1933, the Supreme Court declared that patent owners who had perpetrated fraud against the PTO and who were seeking injunctive relief against alleged infringers were required to come to the court with “clean hands,” like most other plaintiffs seeking an equitable remedy. Since then, inequitable conduct has remained an affirmative defense for alleged patent infringers. If proven in just one claim, the patent owner is faced with the “atomic bomb” of remedies – the entire patent is held unenforceable. Furthermore, other patents in the owner’s portfolio could be held unenforceable as well.

Inequitable conduct can include acts of both misrepresentation and omission during prosecution. Omission of prior art is probably the most common accusation of inequitable conduct. To prove inequitable conduct, an alleged infringer must show (1) intent to deceive and (2) materiality of the information disclosed/withheld. The standards for intent and materiality have previously been relatively low. To prove intent to deceive, simple negligence sufficed. Materiality simply meant that which a “reasonable examiner” would consider important.

The availability of such a severe penalty for a relatively low standard of proof has resulted in some undesirable consequences. First, nearly every defendant in a patent infringement suit now alleges inequitable conduct by the patent owner. Second, patent applicants submit excessive amounts of information to the PTO with their applications knowing allegations of inequitable conduct are likely in any future litigation. This has “led to many unintended consequences, among them, increased adjudication cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality.”

The CAFC seems to be attempting to correct this by tightening the standard for inequitable conduct. In Kingsdown, the CAFC raised the bar for intent to deceive above a “should have known” gross negligence standard; “clear and convincing evidence” of a specific intent to deceive is now required. Apparently this was not enough. Just two years ago, in Therasense, the CAFC more narrowly defined materiality to be a “but-for” test; “prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” Issued patents are presumed valid and obtained without inequitable conduct. That presumption is now afforded increasing weight.

At the same time, the courts are more regularly refusing to grant injunctive relief as a matter of right in patent infringement cases. Instead, they require plaintiffs to show the traditional requirements for injunctive relief – primarily, no adequate remedy at law. This seems to be consistent with the courts’ trend in treating patents and other intellectual property more like liability rights than traditional property rights. Therefore, if courts are going to make it tougher for patent owners to obtain injunctive relief, perhaps it is only fair to make it tougher for alleged infringers avoid the same.

Ruttler Mills PLLC
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