The U.S. Court of Appeals for the Federal Circuit has now set out a concise primer on inequitable conduct in its latest, and most comprehensive, decision in a series of decisions emphasizing that the inequitable conduct analysis must be performed thoroughly and that a challenger wishing to show inequitable conduct must strictly adhere to the test's high evidentiary burdens. Lest would-be challengers despair, however, the severity of the Court's conclusions was tempered by its provision of an in-depth analysis precisely articulating how to meet the test's evidentiary burdens. Star Scientific, Inc. v. R. J. Reynolds Tobacco Co., Case No. 07-1448 (Fed. Cir., Aug. 25, 2008) (Michel, C.J.).
The inequitable conduct charges at issue in Star stem from prior art information the inventor shared with Star's original prosecution counsel and the conveyance to, and handling of that information by, subsequent prosecution counsel. Star holds two patents on tobacco curing technology aimed at producing cured tobacco with reduced levels of certain carcinogens. While the application for the first patent was being prepared, the inventor wrote Star's original prosecution counsel with information about prior art in the field. The original prosecution counsel deemed the information immaterial. Soon thereafter, Star obtained new prosecution counsel, who continued prosecuting the first patent, but did not disclose the inventor's communications or conclusions about the prior art to the U.S Patent and Trademark Office (USPTO) before the first patent issued. Star's new prosecution counsel also filed an application for the second patent. After the first patent issued, Star's new prosecution counsel had learned of the inventor's communications about the prior art. Still, the new prosecution counsel did not disclose the actual communications to the USPTO during the prosecution of the second, though it did disclose similar information. The district court held that Star had committed inequitable conduct and held both patents unenforceable. Star appealed.
The Federal Circuit held that the district court clearly erred—R.J. Reynolds failed to prove the intent prong of the inequitable conduct analysis with respect to the first patent and failed to prove the materiality prong with respect to the second patent. Still, the relevance of the Federal Circuit's opinion lies less in the outcome or rules of law articulated and more in the way it sets out a comprehensive inequitable conduct roadmap for practitioners.
There are two steps to the inequitable conduct analysis and they must proceed in sequence. First, one must show clear and convincing evidence of both materiality and deceptive intent. As to the former, the Federal Circuit repeated the well-known rule that cumulative information is not material. As to the latter, the Federal Circuit delved deeper into the significance of indirect evidence and the burden on the patentee to provide a good faith explanation for their failure to disclose information to the USPTO. Specifically, while indirect and circumstantial evidence may be used to infer intent, the clear and convincing standard requires that the inference that intent exists be "the single most reasonable inference" based upon the evidence. Thus, where indirect evidence is susceptible to two reasonable interpretations, it cannot meet the clear and convincing evidence standard as to either interpretation. Similarly, given that the burden to show inequitable conduct falls on the challenger, the absence of a patentee's good faith explanation for their failure to disclose material information to the PTO can not—by itself—provide the requisite clear and convincing evidence of intent. Only after both materiality and intent have been shown by clear and convincing evidence should the court turn to the balancing step. Therefore, while a stronger showing of materiality may lessen the burden to show intent—and vice-versa—neither burden falls below the threshold clear and convincing evidence standard.
Interestingly, the Court's analysis of the evidence suggests that RJR might have been able to meet its burden had it pursued key discovery one or two steps further. For instance, RJR based its intent arguments on the theory that Star conspired to deliberately prevent original prosecution counsel from disclosing the inventor's communications to the USPTO by replacing them with new prosecution counsel and purposely keeping new prosecution counsel ignorant of the inventor's communication. Yet, the Court found a major gap in RJR's theory: "RJR failed to elicit any testimony or submit any other evidence indicating that Star knew what the [inventor's communication] said prior to replacing [old prosecution counsel], or that the [communication] was a reason for changing firms."
Practice Note: While Star reinforces the high threshold that must be met to render a patent unenforceable due to inequitable conduct, the Federal Circuit's admonition in last year in Cargill that "[c]lose cases should be resolved by disclosure, not unilaterally by the applicant" stands firm. Those alleging inequitable conduct must be diligent during discovery to extract all evidence necessary to meet their clear and convincing evidence burden in a manner that minimizes reliance on indirect and circumstantial evidence.
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