A New Peril for Patent Owners: Inequitable Conduct for Legal Arguments on Appeal to the Patent Appeals Board

bethShaw-0580editConvertedProfile-e1360002102239Featured Expert Column

Beth Z. Shaw, Brake Hughes Bellermann LLP

Inequitable conduct is a defense to patent infringement. It is only used where the patentee has unfairly obtained an unwarranted patent through misconduct. To prove inequitable conduct, a challenger must show by clear and convincing evidence that the patent applicant (1) misrepresented or omitted information material to patentability, and (2) did so with specific intent to mislead or deceive the PTO. The U.S. Court of Appeals for the Federal Circuit tried to clarify the law of inequitable conduct in Therasense sitting en banc in 2011. Yet, once again, a panel of the Federal Circuit is retreating from the standards set forth in Therasense.

The Federal Circuit in The Ohio Williow Wood Co. v. Alps South, LLC reversed and remanded for a district court to review the issue of inequitable conduct. In the background leading to the judgment in this case, Alps had challenged a patent of The Ohio Willow Wood Company (OWW) in two reexamination proceedings at the USPTO. The patent is directed to cushioning devices that go over the residuals stumps of amputated limbs to make use of prosthetics more comfortable. Alps requested a first ex parte reexamination of the patent, and OWW amended the claims of the patent.

Alps requested a second ex parte reexamination of the patent, challenging the amended claims, and the examiner at the USPTO rejected the claims as obvious. OWW appealed to the Board of Patent Appeals and Interferences (BPAI). OWW argued that the examiner’s rejection was improper because it relied on the uncorroborated testimony of an expert whom OWW characterized as a highly interested party. The BPAI concluded that the testimony was insufficient to sustain the examiner’s rejection.

The case had been stayed at the district court pending the result of the reexamination. When the district court lifted the stay, the court granted summary judgment of no inequitable conduct by OWW. Yet, the Federal Circuit found genuine issues of material fact regarding whether OWW committed inequitable conduct during the two reexamination proceedings.

In the case, Alps argued that information made known to OWW’s counsel in the course of litigation was allegedly either withheld or misrepresented in order to improperly obtain issuance of a patent during reexamination proceedings. Specifically, Alps alleged that OWW was only able to overcome the PTO examiner’s final rejection in reexamination by withholding evidence that corroborated witness testimony and by falsely exaggerating the witness’s interest in the dispute, so that the BPAI would disregard his testimony.

The Federal Circuit stated that a party making an allegation of inequitable conduct before the PTO requires proof that the patentee withheld or misrepresented information that, in the absence of the withholding or misrepresentation, would have prevented a patent claim from issuing. Yet, the court held, a party “need not strictly demonstrate but-for materiality in all cases.” Rather, where the patentee has engaged in affirmative acts of egregious misconduct, such as the filing of an unmistakably false affidavit, materiality is presumed.

In this case, Alps had initiated two ex parte reexaminations of OWW’s patent. In the second reexamination, Alps had presented testimony from a Mr. Comtesse. In its brief to the BPAI, OWW had argued that the testimony Mr. Comtesse was inadmissible because he was an interested party supported by Alps. OWW also denied the existence of other evidence that would support his testimony.

The court held that OWW’s legal arguments in its brief to the BPAI, and its oral arguments in front of the BPAI, could be enough to constitute material misrepresentations leading to inequitable conduct.

The court acknowledged that OWW’s arguments on appeal to the BPAI were “entirely legal in nature.” Yet the court wrote that “viewing the foregoing facts in a light most favorable to Alps, we find OWW’s misrepresentations to the BPAI tantamount to the filing of an unmistakably false affidavit.” This statement includes no citation to precedent and appears to be the first holding or finding of its kind—equating legal arguments on appeal to the filing of an affidavit.

The court found that these statements, coupled with other pieces of withheld information and lack of explanation from OWW, supported a finding of intent as the single most reasonable inference.

The case includes many other factual issues that will need to be decided on remand, and it is important to note that this is merely a reversal of a grant of no summary judgment. Yet, this case is worth careful review. This appears to be the first case to equate an attorney’s statements on appeal to the BPAI as equivalent to an affidavit—potentially resulting in inequitable conduct by the lawyers writing the briefs.

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