Deceptive Intent for Patent Unenforceability Based on a Pattern of Conduct

The Federal Circuit Court of Appeal has just issued a significant ruling in Luv n’ Care, Ltd. v. Laurain (Fed. Cir., Apr. 12, 2024, No. 2022-1905) 2024 WL 1590593, at *8–9 (LUV) dealing with the standard for proving the intent element of inequitable conduct, which is a defense to enforcement of patent rights.  The question before the appeal panel was whether individual acts, which by themselves do not rise to the level of establishing the threshold intent, can nonetheless collectively be used to establish the requisite intent.  According to LUV, conduct which may not be “per se unreasonable when considered in isolation may still support a finding of deceptive intent in the aggregate.” The decision is significant in that it makes it easier to establish the intent element of inequitable conduct, which, in turn, makes it easier to defend against patent infringement lawsuits by challenging enforceability of an asserted patent in court or administrative proceedings.

Inequitable conduct is frequently raised by defendants in patent infringement lawsuits and in patent review proceedings before the U.S. Patent and Trademark Office (USPTO).  The defense is implicated in situations where someone with the duty of disclosure to the patent office during the patent examination process, e.g., the inventor or the attorney or agent representing the applicant before the USPTO, fails to disclose materialinformation to the patent examiner (non-disclosure) or submits false and misleading information to the examiner (mis-disclosure) with an intent to deceive the examiner.  Establishing inequitable conduct requires a conclusion that the USPTO would likely not have issued the patent claim but for the complained of conduct.  A finding of inequitable conduct can have grave consequences for the patent owner in that its finding as to even one claim in a patent will render the entire patent or even a patent family unenforceable.

Materiality and intent are the two elements of inequitable conduct, each of which must be proven by clear and convincing evidence. Norian Corp. v. Stryker Corp., 363 F.3d 1321, 1330–31 (Fed.Cir.2004).  Once the threshold requirements of materiality and intent have been met, the court proceeds to balance the particular facts and circumstances of the case to determine whether the alleged conduct was so egregious as to warrant a finding of inequitable conduct.  Optium Corp. v. Emcore Corp. (Fed. Cir. 2010) 603 F.3d 1313, 1320.  That balancing is done under a sliding scale standard according to which the more material the omission or the misrepresentation, the lower the level of intent required to establish inequitable conduct. Akzo N.V. v. United States Int’l Trade Comm’n, 808 F.2d 1471, 1481–82 (Fed.Cir.1986). 

The acts based on which the intent element of inequitable conduct can be established have not been consistent in court decisions, with older decisions divided between those holding that the requisite intent refers to the act of non-disclosure or mis-disclosure itself, while others requiring establishing an act of intent to deceive.  Then in 1988, the Federal Circuit issued an en banc ruling, Kingsdown Medical Consultants, Ltd. v. Hollister Inc., 863 F.2d 867, 876–77 (Fed.Cir.1988) (en banc ), which applied the latter standard, under which the act does not simply consist of the non-disclosure or mis-disclosure but to the act of misleading itself, with the result of the patent in issue being granted. In other words, “inequitable conduct requires not intent to withhold, but rather intent to deceive.” Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1367 (Fed.Cir.2003).

Despite its central role in determination of inequitable conduct, evidence of intent is rarely direct and is almost always proven by circumstantial evidence.  In that regard, although an adverse inference of intent can’t be drawn from a showing of gross negligence, Kingsdown Medical Consultants, Ltd. v. Hollister Inc. (Fed. Cir. 1988) 863 F.2d 867, 876, a showing of high materiality and proof of knowledge of that materiality by the culpable party may be sufficient to draw an inference of intent to mislead. Optium Corp. v. Emcore Corp. (Fed. Cir. 2010) 603 F.3d 1313, 1323.

As noted, the intent to mislead must be proven under a “but for” test, i.e., that but for the non-disclosure or misleading disclosure, the patent would not have issued.  However, an exception to this rule exists to cases of “egregious misconduct,” which refers to situations where there is strong evidence of a deliberate plan, carried forward to execution, to defraud the USPTO, for e.g., when a clearly false affidavit is filed.  In such cases the misconduct is deemed material by operation of law. See Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1571 (Fed.Cir.1983)

In LNC defendant contended that the district court had not applied the proper standard for establishing inequitable conduct in that it failed to consider the “overall conduct” of the inventor and others with a duty of disclosure to the USPTO, which, according to LNC’s indicated an unmistakable “pattern of deceit.” The appeal panel agreed and held that acts which per se are not of sufficient culpability to establish the requisite intent when considered in isolation may still demonstrate deceptive intent in the aggregate. The decision explains that “when a person having a duty of candor and good faith has engaged in serial misconduct during the prosecution of the same or related patents, it is not enough for a court to consider each individual act of misconduct without also considering the collective whole.”

The court of appeal found that the district court had not applied that legal standard and thus had abused its discretion by considering each of the individual acts of misconduct by those under a duty of disclosure in isolation but failing to address the collective weight of the evidence regarding each person’s misconduct as a whole. The appeal panel thus vacated and remanded the district court’s determination on deceptive intent and instructed the court, on remand, reevaluate deceptive intent for each of the individuals based on misconduct in the aggregate.  Luv n’ Care, Ltd. v. Laurain (Fed. Cir., Apr. 12, 2024, No. 2022-1905) 2024 WL 1590593, at *8–9.

Conclusion:

The appeal court decision in LNC is significant in that it will make it easier for patent challengers to prove intent through a lowered standard according to which intent can be based on a series of acts, each of which would otherwise not qualify for establishing intent, which, in turn, makes it easier to establish inequitable conduct.

DARIUSH ADLI

President, ADLI Law Group