Court Raises Standards For Invalidating Patents

Court Raises Standards For Invalidating Patents

May 26th, 2011 // 2:01 pm @ jmpickett

Thanks to a federal appeals court, the standards have been raised for declaring that a patent is invalid due to so-called inequitable conduct. In a precedential ruling, the US Court of Appeals for the Federal Circuit decided that errors or omissions in patent applications could only be used to invalidate a patent if the withheld material was critical to whether a patent should have been granted.

The inequitable conduct standard is frequently alleged in lawsuits and, consequently, was one of several measures that some lawmakers have targeted for change in a patent reform. Allegations of inequitable conduct have become so routine that cases are backlogged. In its ruling, the court noted that one study estimated that 80 percent of patent infringement cases included allegations of inequitable conduct, which suggests an intent to deceive the US Patent and Trademark Office.

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“It’s a game changer,” Charles Shifley, a patent lawyer with Banner & Witcoff who submitted written arguments in the case on behalf of a group of lawyers, tells Bloomberg News. “The last place for a scoundrel who was found to infringe and couldn’t prove invalidity was to throw mud at the patent lawyer. This will rein that in.”

“We think the new standard lowers the already low probability (about 10 percent) of generics winning Paragraph IV challenges on the basis of IC arguments,” writes Leerink Swann analyst Jason Gerberry in an investor note this morning. “Because intent tends to be the harder prong to prove, we believe the net impact of the new rule will benefit brand drug makers.”

The ruling reversed a lower court ruling that declared an Abbott Laboratories patent to make disposable blood glucose test strips was unenforceable because of missing disclosures. “We are pleased that the Federal Circuit has tightened the standards for finding inequitable conduct, and reversed the decision that found our patent to be unenforceable,” an Abbott spokesman tells Reuters.

In explaining its decision, the court wrote “inequitable conduct charges cast a dark cloud over the patent’s validity and paint the patentee as a bad actor. Because the doctrine focuses on the moral turpitude of the patentee with ruinous consequences for the reputation of his patent attorney, it discourages settlement and deflects attention from the merits of validity and infringement issues.

“…Perhaps most importantly, the remedy for inequitable conduct is the ‘atomic bomb’ of patent law. Unlike validity defenses, which are claim specific, inequitable conduct regarding any single claim renders the entire patent unenforceable. Moreover, the taint of a finding of inequitable conduct can spread from a single patent to render unenforceable other related patents and applications in the same technology family…Left unfettered, the inequitable conduct doctrine has plagued not only the courts but also the entire patent system.

“While honesty at the PTO is essential, low standards for intent and materiality have inadvertently led to many unintended consequences, among them, increased adjudi-cation cost and complexity, reduced likelihood of settle-ment, burdened courts, strained PTO resources, increased PTO backlog, and impaired patent quality. This court now tightens the standards for finding both intent and materiality in order to redirect a doctrine that has been overused to the detriment of the public.”