Inequitable Conduct Decision Catches Many Off Guard

The recent Federal Circuit decision McKesson Info. Solutions, Inc. v. Bridge Med., Inc., No. 2006-1517 (Fed. Cir. May 18, 2007) has many patent prosecutors scrambling to file information disclosures after the court found inequitable conduct based on the all-too-common oversight of not cross-citing prior art from similar, co-pending applications and the even more common oversight of not cross-citing allowances and rejections from such applications.

Inequitable conduct occurs when a patent applicant, with the intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the Patent and Trademark Office during the prosecution of the patent application. A finding of inequitable conduct will render a patent unenforceable.

Information is material if a reasonable examiner would be substantially likely to consider the information important in deciding whether to allow an application to issue as a patent. Information may be material even though it would not invalidate a patent by itself, but information is not material if it is merely cumulative to the information already considered by the examiner.

The intent element of inequitable conduct requires not merely an intent to withhold information, but an intent to deceive. A finding of deceptive intent is usually based on a collection of inferences drawn from the totality of facts. Deceptive intent, however, cannot be inferred simply from a decision to withhold information if the reasons given for the withholding are plausible. Even gross negligence does not itself justify an inference of intent to deceive.

Both materiality and deceptive intent must be shown by clear and convincing evidence. Once that threshold is reached, however, a court may balance the two elements such that a greater showing of materiality allows a lesser showing of intent, and vice versa.

In McKesson, the Federal Circuit affirmed that each of three omissions rose to the level of inequitable conduct.

First Omission: Prior Art

First, the applicant failed to disclose a prior art reference, Baker, used by another examiner in a similar, co-pending application also belonging to the applicant. Although the applicant notified the examiner of the co-pending application's existence, an applicant also has a duty to specifically identify any material references in a co-pending application. And although the applicant initially disclosed the same body of prior art with both applications, the duty to disclose also includes material references that surface during the prosecution of an application, like Baker, even though those references may be material only to a remark that the applicant made several years earlier. Finally, although the Baker reference disclosed a feature that was also disclosed by another reference of record, Baker was not cumulative to the other reference because it disclosed the feature more clearly than the other reference did.

Of the three findings of inequitable conduct, the finding based on this omission is the least surprising because the typical example of inequitable conduct is failing to disclose material prior art.

Second Omission: Rejections

Second, the applicant failed to disclose the rejections of the examiner in the co-pending application (not just the prior art used in those rejections). Although failures to disclose are typically thought of with respect only to prior art, an applicant's duty to disclose extends to any material information, including material rejections in other applications. Whether a rejection in another application is material is determined under the 'reasonable examiner' standard from above. That standard is easy to satisfy for rejections ' the rejected claims need only be 'in some respects substantially identical' to the pending claims in order to be important to an examiner. McKesson, slip op. at 34-35 (emphasis in original).

In practice, disclosing rejections from co-pending applications is far less common than disclosing prior art, and may even be described as rare. Indeed, the Federal Circuit never addressed failure to disclose rejections in co-pending applications until 2003. See Id. at 40. Thus, a significant percentage of patents that were prosecuted with similar, co-pending applications are likely to contain omissions of this type.

Third Omission: Allowances

Third, the applicant failed to disclose the allowance of claims by the same examiner in a sibling application. An applicant's claim allowances may be important to an examiner because they may give rise to a double patenting rejection in the applicant's remaining applications. Indeed, claim allowances satisfy the 'reasonable examiner' test for materiality if they merely give rise to a conceivable double patenting rejection. Id. at 45. As with the materiality test for claim rejections, this is an easy standard to satisfy. Further, although the sibling applications in McKesson were assigned to the same examiner, an applicant cannot assume that an examiner 'retains details of every pending file in his mind when he is reviewing a particular application.' Manual of Patent Examination and Procedure ('MPEP') '2001.06(b).

In practice, disclosing claim allowances from an applicant's co-pending application is also rare, if only because a claim allowance is a positive event for an applicant and therefore may not be associated with the usually negative role of an examiner. In cases where the co-pending applications are before the same examiner, such disclosures are likely even more rare because applicants assume (wrongly) that the examiner has full awareness of the events in both applications. Thus, a significant percentage of patents that were prosecuted with similar, co-pending applications are also likely to contain this kind of omission.

These omissions alone, however, would not have been inequitable conduct without an intent to deceive. The McKesson court inferred an intent to deceive from a variety of facts, but it emphasized one fact in particular ' the prosecuting attorney testified that if he were prosecuting the same application today, he would make all the same nondisclosure decisions again. Thus, McKesson was 'not a case of mistake or negligence,' but of intentional acts. McKesson, slip op. at 2. Once that point was established, the court had little trouble in finding an intent to deceive. Had the prosecuting attorney characterized his actions as a mistake, the court's decision would likely have been different, especially because Judge Pauline Newman was already dissenting. In a short but biting dissenting opinion, Judge Newman refused to find deceptive intent based on a 'litigation-driven distortion of the complex procedures of patent prosecution' and accused the majority of encouraging the 'plague' of unwarranted charges of inequitable conduct. Id. at 1-2 (Newman, J., dissenting).

Although the court's finding of deceptive intent is debatable, its finding that each of three omissions discussed above was material is difficult to dispute. Accordingly, patent prosecutors should revise their disclosure practices to guard against omissions that may later be attacked as inequitable conduct. Specifically, patent prosecutors should follow these guidelines for pending and future patent applications:

• For co-pending applications directed to similar inventions, disclose the existence of each application, any material art, and any rejections or allowances in each application;
• The threshold for materiality is low. If there is any dispute as to whether something is material, err on the side of disclosing it. If something is truly immaterial, record that conclusion and the reasoning behind it in writing in the attorney's file, as suggested by MPEP '2004, ' 18;
• Remember to also disclose information from foreign co-pending applications. For search results from the European Patent Office, always disclose the cover sheet that assigns letter rankings such as 'X' and 'Y' to the prior art references;
• Be careful not to over-disclose. Excessive disclosure may irritate the examiner and result in a warning from the examiner or a later accusation of burying material information in violation of an applicant's duty of good faith and candor;
• When filing a continuation, divisional, or continuation-in-part of an earlier application, the applicant is not required to file an information disclosure statement in the continuing application that lists the prior art cited by the examiner in the parent application. MPEP ”609.02, 2001.06(b).

For patents, follow these guidelines:

• McKesson has opened the door for more charges of inequitable conduct. Thus, when reviewing the strength of a patent for licensing, litigation, or otherwise, consider how susceptible the patent would be to such attacks based on omissions of the type discussed above;
• If defending a charge of inequitable conduct, consider whether the omissions could be characterized as a mistake in light of the McKesson decision. Even grossly negligent conduct, by itself, cannot rise to the level of deceptive intent.

In short, the lesson to take away from McKesson is: When in doubt, disclose, disclose, disclose.

Robert Buergi practices patent litigation and patent prosecution in the Silicon Valley office of DLA Piper US LLP.

The recent Federal Circuit decision McKesson Info. Solutions, Inc. v. Bridge Med., Inc., No. 2006-1517 (Fed. Cir. May 18, 2007) has many patent prosecutors scrambling to file information disclosures after the court found inequitable conduct based on the all-too-common oversight of not cross-citing prior art from similar, co-pending applications and the even more common oversight of not cross-citing allowances and rejections from such applications.

Inequitable conduct occurs when a patent applicant, with the intent to mislead or deceive the examiner, fails to disclose material information or submits materially false information to the Patent and Trademark Office during the prosecution of the patent application. A finding of inequitable conduct will render a patent unenforceable.

Information is material if a reasonable examiner would be substantially likely to consider the information important in deciding whether to allow an application to issue as a patent. Information may be material even though it would not invalidate a patent by itself, but information is not material if it is merely cumulative to the information already considered by the examiner.

The intent element of inequitable conduct requires not merely an intent to withhold information, but an intent to deceive. A finding of deceptive intent is usually based on a collection of inferences drawn from the totality of facts. Deceptive intent, however, cannot be inferred simply from a decision to withhold information if the reasons given for the withholding are plausible. Even gross negligence does not itself justify an inference of intent to deceive.

Both materiality and deceptive intent must be shown by clear and convincing evidence. Once that threshold is reached, however, a court may balance the two elements such that a greater showing of materiality allows a lesser showing of intent, and vice versa.

In McKesson, the Federal Circuit affirmed that each of three omissions rose to the level of inequitable conduct.

First Omission: Prior Art

First, the applicant failed to disclose a prior art reference, Baker, used by another examiner in a similar, co-pending application also belonging to the applicant. Although the applicant notified the examiner of the co-pending application's existence, an applicant also has a duty to specifically identify any material references in a co-pending application. And although the applicant initially disclosed the same body of prior art with both applications, the duty to disclose also includes material references that surface during the prosecution of an application, like Baker, even though those references may be material only to a remark that the applicant made several years earlier. Finally, although the Baker reference disclosed a feature that was also disclosed by another reference of record, Baker was not cumulative to the other reference because it disclosed the feature more clearly than the other reference did.

Of the three findings of inequitable conduct, the finding based on this omission is the least surprising because the typical example of inequitable conduct is failing to disclose material prior art.

Second Omission: Rejections

Second, the applicant failed to disclose the rejections of the examiner in the co-pending application (not just the prior art used in those rejections). Although failures to disclose are typically thought of with respect only to prior art, an applicant's duty to disclose extends to any material information, including material rejections in other applications. Whether a rejection in another application is material is determined under the 'reasonable examiner' standard from above. That standard is easy to satisfy for rejections ' the rejected claims need only be 'in some respects substantially identical' to the pending claims in order to be important to an examiner. McKesson, slip op. at 34-35 (emphasis in original).

In practice, disclosing rejections from co-pending applications is far less common than disclosing prior art, and may even be described as rare. Indeed, the Federal Circuit never addressed failure to disclose rejections in co-pending applications until 2003. See Id. at 40. Thus, a significant percentage of patents that were prosecuted with similar, co-pending applications are likely to contain omissions of this type.

Third Omission: Allowances

Third, the applicant failed to disclose the allowance of claims by the same examiner in a sibling application. An applicant's claim allowances may be important to an examiner because they may give rise to a double patenting rejection in the applicant's remaining applications. Indeed, claim allowances satisfy the 'reasonable examiner' test for materiality if they merely give rise to a conceivable double patenting rejection. Id. at 45. As with the materiality test for claim rejections, this is an easy standard to satisfy. Further, although the sibling applications in McKesson were assigned to the same examiner, an applicant cannot assume that an examiner 'retains details of every pending file in his mind when he is reviewing a particular application.' Manual of Patent Examination and Procedure ('MPEP') '2001.06(b).

In practice, disclosing claim allowances from an applicant's co-pending application is also rare, if only because a claim allowance is a positive event for an applicant and therefore may not be associated with the usually negative role of an examiner. In cases where the co-pending applications are before the same examiner, such disclosures are likely even more rare because applicants assume (wrongly) that the examiner has full awareness of the events in both applications. Thus, a significant percentage of patents that were prosecuted with similar, co-pending applications are also likely to contain this kind of omission.

These omissions alone, however, would not have been inequitable conduct without an intent to deceive. The McKesson court inferred an intent to deceive from a variety of facts, but it emphasized one fact in particular ' the prosecuting attorney testified that if he were prosecuting the same application today, he would make all the same nondisclosure decisions again. Thus, McKesson was 'not a case of mistake or negligence,' but of intentional acts. McKesson, slip op. at 2. Once that point was established, the court had little trouble in finding an intent to deceive. Had the prosecuting attorney characterized his actions as a mistake, the court's decision would likely have been different, especially because Judge Pauline Newman was already dissenting. In a short but biting dissenting opinion, Judge Newman refused to find deceptive intent based on a 'litigation-driven distortion of the complex procedures of patent prosecution' and accused the majority of encouraging the 'plague' of unwarranted charges of inequitable conduct. Id. at 1-2 (Newman, J., dissenting).

Although the court's finding of deceptive intent is debatable, its finding that each of three omissions discussed above was material is difficult to dispute. Accordingly, patent prosecutors should revise their disclosure practices to guard against omissions that may later be attacked as inequitable conduct. Specifically, patent prosecutors should follow these guidelines for pending and future patent applications:

• For co-pending applications directed to similar inventions, disclose the existence of each application, any material art, and any rejections or allowances in each application;
• The threshold for materiality is low. If there is any dispute as to whether something is material, err on the side of disclosing it. If something is truly immaterial, record that conclusion and the reasoning behind it in writing in the attorney's file, as suggested by MPEP '2004, ' 18;
• Remember to also disclose information from foreign co-pending applications. For search results from the European Patent Office, always disclose the cover sheet that assigns letter rankings such as 'X' and 'Y' to the prior art references;
• Be careful not to over-disclose. Excessive disclosure may irritate the examiner and result in a warning from the examiner or a later accusation of burying material information in violation of an applicant's duty of good faith and candor;
• When filing a continuation, divisional, or continuation-in-part of an earlier application, the applicant is not required to file an information disclosure statement in the continuing application that lists the prior art cited by the examiner in the parent application. MPEP ”609.02, 2001.06(b).

For patents, follow these guidelines:

• McKesson has opened the door for more charges of inequitable conduct. Thus, when reviewing the strength of a patent for licensing, litigation, or otherwise, consider how susceptible the patent would be to such attacks based on omissions of the type discussed above;
• If defending a charge of inequitable conduct, consider whether the omissions could be characterized as a mistake in light of the McKesson decision. Even grossly negligent conduct, by itself, cannot rise to the level of deceptive intent.

In short, the lesson to take away from McKesson is: When in doubt, disclose, disclose, disclose.

Robert Buergi practices patent litigation and patent prosecution in the Silicon Valley office of DLA Piper US LLP.