The Defence of Inequitable Conduct in 2006: A Review of Inequitable Conduct Cases and a Preview of Proposed Changes

37 CFR §1.56; Manual of Patent Examining Procedure §2001.01 (2003).

35 USC §122(a).

Precision Instr. Mfg. Co. v Automotive Maint. Mach. Co., 324 U.S. 806, 818 (1945).

Ferring B.V. v Barr Labs. Inc., 437 F.3d 1181 (Fed. Cir. 2006) (remanded on other grounds).

Purdue Pharma LP v Endo Pharms. Inc., 438 F.3d 1123 (Fed. Cir. 2006).

Novo Nordisk Pharms. Inc. v Bio-Technology Gen. Corp., 424 F.3d 1347 (Fed. Cir. 2005).

Precision Instr. Mfg. Co. v Automotive Maintenance Mach. Co., 324 U.S. 806, 818 (1945); J.P. Stevens & Co., Inc. v Lex Tex Ltd., Inc., 747 F.2d 1553, 1559 (Fed. Cir. 1984).

See Precision Inst. Mfg. Co. v Automotive Maint. Mach. Co., 324 US 806 (1945); see also, Hazel-Atlas Glass Co. v Harford-Empire Co., 322 U.S. 238 (1944); Keystone Driller Co. v Gen. Excavator Co., 290 U.S. 240 (1933). In contrast, a Walker Process fraud claim is an antitrust action for affirmative misrepresentations or knowing and wilful fraud on the USPTO, which results in an award of antitrust damages. Walker Process Equip., Inc. v Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965). Notably, inequitable conduct, also known as common law fraud, is a more broad charge than Walker Process, and more easily proved. See FMC Corp. v Manitowoc Co., Inc., 835 F.2d 1411, 1417–18 (Fed. Cir. 1987).

J.P. Stevens & Co., Inc. v Lex Tex Ltd., Inc., 747 F.2d 1553, 1559 (Fed. Cir. 1984); see also, American Hoist & Derrick Co. v Sowa & Sons, 725 F.2d 1350, 1362 (Fed Cir. 1984).

The USPTO has also attempted to combat inequitable conduct by empowering the Office of Assistant Commissioner to investigate allegations of fraud, colloquially known as the ‘Fraud Squad.’ Begun in 1982, this attempt ended in 1988, when the USPTO announced that it would no longer investigate charges of inequitable conduct. The USPTO stated: ‘The Office is not the best forum in which to determine whether there was an “intent to mislead,” such intent is best determined when the trier of facts can observe the demeanor of witnesses subjected to cross-examination.’ USPTO Notice Regarding Implementation of 37 CFR §221.56, 1095 Off. Gaz. Pat. Off. 16 (8th September, 1988) (citing In re Harita, 847 F.2d 801 (Fed. Cir. 1988) and FMC Corp. v Manitowoc Co., Inc., 835 F.2d 1411 (Fed. Cir. 1987)).

The USPTO first promulgated Rule 56, explicitly prohibiting fraud before the USPTO, in 1949, but did not articulate a standard for materiality at that time. 37 CFR §1.56 (1951).

37 CFR §1.56(a)(1982).

Dayco Prods., Inc. v Total Containment, Inc., 329 F.3d 1358, 1363 (Fed. Cir. 2003).

37 CFR §1.56 (1992).

Hoffman La Roche, Inc. v Promega Corp., 323 F.3d 1354, 1366 n. 2 (Fed. Cir. 2003).

Molins PLC v Textron, Inc., 48 F.3d 1172, 1179 n. 8 (Fed. Cir. 1995).

Dayco Prods., Inc. v Total Containment, Inc., 329 F.3d 1358, 1365 (Fed. Cir. 2003).

Molins PLC v Textron, Inc., 48 F.3d 1172, 1178 (Fed. Cir. 1995).

Union Pac. Res. Co. v Chesapeake Energy Corp., 236 F.3d 684, 693 (Fed. Cir. 2001).

Kingsdown Med. Consultants, Ltd. v Hollister Inc., 863 F.2d 867, 876 (Fed. Cir. 1988) (en banc decision).

LNP Eng'g Plastics, Inc. v Miller Waste Mills, Inc., 275 F.3d 1347, 1361 (Fed. Cir. 2001); see also, Brasseler, USA I, L.P. v Stryker Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001).

Molins PLC v Texrtron, Inc., 48 F.3d 1172, 1184 (Fed. Cir. 1995).

Rohm & Haas Co. v Crystal Chem. Co., 722 F.2d 1556 (Fed. Cir. 1983).

Kimberly-Clark Corp. v Johnson & Johnson, 745 F.2d 1437, 1454 (Fed. Cir. 1984).

FMC Corp. v Manitowoc Co., Inc., 835 F.2d 1411, 1415 (Fed. Cir. 1987) (internal quotations omitted).

Burlington Indus., Inc. v Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988).

National Research Council/National Academy of Sciences (2004) ‘A Patent System for the 21st Century’, National Academies Press, Washington, and Federal Trade Commission (2003) ‘To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy’, October, available at http://www.ftc.gov.

Pharmacia Corp. v Par Pharm. Inc., 417 F.3d 1369 (Fed. Cir. 2005) (rehr'g en banc denied 6th October, 2005).

Novo Nordisk Pharms. Inc. v Bio-Technology Gen. Corp., 424 F.3d 1347 (Fed. Cir. 2005).

Ferring B.V. v Ban Labs. Inc., 437 F.3d 1181 (Fed. Cir. 2006).

M. Eagles Tool Warehouse v Fisher Tooling Co., 439 F.3d 1335 (Fed. Cir. 2006).

Bruno Indep. Living Aids, Inc. v Acorn Mobility Servs., Ltd., 394 F.3d 1348, 1352 (Fed. Cir. 2005).

See The Patent Reform Act of 2005, HR 2795, 109th Cong. §5 (2005) (proposing, as Representative Lamar Smith (R-Texas) stated, ‘without question, the most comprehensive change to US patent law since Congress passed the 1952 Patent Act’); see also Patents Depend on Quality Act of 2006, HR 5906, 110th Cong. (2006) (proposing no changes to the law of inequitable conduct).

Indeed, the US$5m penalty might be insignificant compared to the revenues earned during the time that an inequitably obtained patent delays competition from generics. Thus, it is possible that some branded companies might come to view the US$5m penalty as merely the purchase price of a patent that could not otherwise be obtained.