United States: Where Patentee Made Affirmative And Knowing Misrepresentations Regarding The Prior Art, Materiality Element Of Inequitable-Conduct Analysis Was Met

In Apotex Inc. v. UCB, Inc., No. 13-1674 (Fed. Cir. Aug. 15, 2014), the Federal Circuit affirmed the district court's finding that Apotex Inc. and Apotex Corp.'s (collectively "Apotex") U.S. Patent No. 6,767,556 ("the '556 patent") was unenforceable due to inequitable conduct.

Dr. Bernard Charles Sherman, founder and chairman of Apotex, leads the development of Apotex's drug formulations and manufacturing processes, and has himself written approximately one hundred patent applications, including the patent-at-issue, the '556 patent.  The '556 patent is directed to a process for manufacturing moexipril tablets.  Moexipril is an angiotensin-converting enzyme ("ACE") inhibitor used to treat hypertension.  The '556 patent covers a process of making moexipril tablets consisting mostly of moexipril magnesium obtained by reacting moexipril or its acid addition salts with an alkaline magnesium compound.  The Background section of the '556 patent discusses U.S. Patent No. 4,743,450 ("the '450 patent") and Univasc, one of the accused products in the present action, both of which are prior art to the '556 patent. 

During prosecution, three times the examiner rejected the pending claims as obvious in view of a combination of prior art, including the '450 patent, which teaches stabilizing ACE inhibitor drugs with an alkaline magnesium compound.  At the direction of Dr. Sherman, Apotex's counsel repeatedly sought to overcome the rejections by arguing that the prior art merely combined moexipril hydrochloride with an alkaline stabilizing agent, but did not teach a reaction between them.  Also at the direction of Dr. Sherman, Apotex submitted the declaration of a third-party expert reinforcing Apotex's representations that the prior art did not involve a reaction and amended the independent claim to require "greater than 80%" conversion to moexipril magnesium, after which the examiner allowed the '556 patent claims.  Slip op. at 8.

Apotex filed suit, accusing the defendants of infringing claims 8-12 of the '556 patent by manufacturing and selling Univasc and Uniretic.  Prior to a jury trial on the issues of infringement and invalidity, the district court conducted a three-day bench trial on the issues of claim construction and UCB, Inc.'s equitable defenses.  The district court concluded that the '556 patent was unenforceable due to Dr. Sherman's inequitable conduct before the PTO.  Specifically, the district court found that Dr. Sherman's combined misrepresentations and withholding of prior art were material to the prosecution of the '556 patent application, and that Dr. Sherman engaged in egregious misconduct during prosecution with intention to deceive the PTO.  Apotex appealed.

"To be clear, we agree with Apotex that Dr. Sherman had no duty to disclose his own suspicions or beliefs regarding the prior art.  There is nothing wrong with advocating, in good faith, a reasonable interpretation of the teachings of the prior art.  The misconduct at issue, however, goes beyond failing to disclose a personal belief or alternative interpretations of the prior art; here, Dr. Sherman affirmatively and knowingly misrepresented material facts regarding the prior art."  Slip op. at 14-15 (footnotes omitted).

On appeal, the Federal Circuit held that the district court's findings regarding materiality and intent were not clearly erroneous.  Regarding materiality, the Court found that Dr. Sherman engaged in material misconduct for at least three reasons.  First, the Court found that Dr. Sherman was responsible for the alleged misconduct.  Particularly, the Court stated that Dr. Sherman directly instructed his counsel to continue pressing the arguments made in response, including the representation that the prior art did not involve a reaction, and to bolster them through an expert declaration.  Second, the Court found that Dr. Sherman made affirmative misrepresentations of material facts.  Specifically, the Court determined that despite Apotex's internal testing data showing the contrary, Dr. Sherman repeatedly asserted to the PTO that the process of the '450 patent used to manufacture Univasc did not involve a reaction that would produce moexipril magnesium.  Third, the Court held that Dr. Sherman's misconduct was "but-for material" to the issuance of the '556 patent.  Id. at 14.  The Court observed that the examiner's rejections were based on the very same prior art that was the subject of Dr. Sherman's misrepresentations.  The Court also found that "[t]he Examiner's erroneous belief regarding the prior art corresponds precisely with Dr. Sherman's repeated misrepresentations made through his counsel and the hired expert."  Id.  While the Court agreed with Apotex's contention that "Dr. Sherman had no duty to disclose his own suspicions or beliefs regarding the prior art," the Court explained that "[t]he misconduct at issue, however, goes beyond failing to disclose a personal belief or alternative interpretations of the prior art; here, Dr. Sherman affirmatively and knowingly misrepresented material facts regarding the prior art."  Id.  at 14-15.

While stating that it need not decide whether Dr. Sherman's conduct rose to the level of egregious misconduct or the materiality of Dr. Sherman to disclose certain prior art and his falsification of examples in the '556 patent, the Court further noted that Dr. Sherman's actions, at a minimum, came close to the type of affirmative misconduct that in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc), the Court held could justify finding inequitable conduct without showing but-for materiality.  The Court found "particularly significant and inexcusable the fact that Dr. Sherman arranged for the preparation and submission of an expert declaration containing false statements instrumental to issuance of the patent."  Slip op. at 15.

Regarding intent, the Court also affirmed the district court's finding of Dr. Sherman's intent to deceive the PTO.  The Court explained that "Dr. Sherman was aware that some of the assertions he made in the specification regarding the prior art were at least misleadingly incomplete, if not plainly inaccurate."  Id.  at 15-16.  The Court noted Dr. Sherman's admission that he did not actually perform the experiments in the '556 patent's specification even though he drafted the examples in the past tense.  The Court further noted that Dr. Sherman directed his counsel to bolster those misrepresentations by submitting a declaration on behalf of an expert who was never informed of the truth.  Based on the above findings, the Court agreed with the district court's finding that "deceptive intent is the single most reasonable inference that can be drawn from the evidence."  Id. at 16.

Accordingly, the Court held that the district court did not abuse its discretion by finding that the '556 patent was unenforceable due to Dr. Sherman's inequitable conduct.  Thus, the Court did not need to address the district court's findings pertaining to claim construction, indefiniteness, laches, or judicial estoppel.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.