Inequitable conduct arises when a material reference was intentionally withheld by the patent applicant in order to deceive or mislead the examiner into granting a patent. Both materiality and intent must be proven by clear and convincing evidence.[1] In Therasense, the en banc CAFC stated that proving specific intent to deceive the U.S. Patent and Trademark Office (“USPTO”) requires clear and convincing evidence of:

(1) knowledge of the withheld material information;

(2) knowledge that the withheld information was material; and

(3) a deliberate decision to withhold the information.[2]

The court elaborated that “the specific intent to deceive must be ‘the single most reasonable inference able to be drawn from the evidence.’”[3] On July 24, 2017, the Federal Circuit issued their opinion in Regeneron Pharms., Inc. v. Merus, N.V., Appeal No. 2016-1346, affirming such an adverse inference of specific intent to deceive the USPTO.

In March 2014, Regeneron Pharmaceuticals, Inc. (“Regeneron”) filed suit in the Southern District of New York accusing Merus B.V. (“Merus”) of infringing claim 1 of U.S. Patent No. 8,502,018 (“’018 patent”). Merus asserted a counterclaim of unenforceability due to inequitable conduct.

In general, the ’018 patent relates to using large DNA vectors to target and modify endogenous genes and chromosomal loci in eukaryotic cells.[4] One practical use of this technology is that users may target and modify specific genes in mice so that the mice develop antibodies that can be used by humans. Claim 1 of the ’018 patent, the only claim at issue here, recites, in its entirety, “[a] genetically modified mouse, comprising in its germline human unrearranged variable region gene segments inserted at an endogenous mouse immunoglobulin locus.”[5]

In Merus’s counterclaim of unenforceability due to inequitable conduct, it argued that Regeneron’s patent prosecutors withheld four references (the “Withheld References”) from the USPTO during prosecution of the ’018 patent. According to Merus, these references were cited in a third-party submission in related U.S. patent prosecution and in European opposition briefs, were “but-for” material, and were withheld by Regeneron with the specific intent to deceive the USPTO. There was no dispute that Regeneron knew of the Withheld References during prosecution of the ’018 patent. Regeneron argued, however, that the references were not “but-for” material and instead that the references were cumulative to those that the USPTO actually relied on during prosecution. Regeneron also argued that it did not have specific intent to deceive the USPTO.

During litigation in district court, Regeneron listed a chart and memo prepared by Dr. Brendan Jones, Regeneron’s outside counsel, in connection with his review of whether to disclose the Withheld References to the USPTO. On the eve of the deposition of Dr. Jones, Regeneron disclosed both the chart and the memo. Merus asserted that this disclosure resulted in a broad privilege waiver and brought a motion to compel.

In association with the waiver of privilege, the district court determined that Regeneron needed to produce any documents that reflected additional thoughts, concerns, and considerations given to whether certain references should have been disclosed. The district court’s broad Order included any other memos or communications related to whether such references should have been disclosed to the USPTO. Included within the Order would have been drafts of Dr. Jones’s chart or memo, which might have contained a different conclusion, memos of others who questioned Dr. Jones’s conclusion, and the like. Regeneron disclosed certain limited documents resulting in the parties arguing as to the scope of the waiver and sufficiency of documents disclosed by Regeneron. In all, the district court concluded that there were three categories of documents that presented serious concerns of discovery misconduct:

  1. Non-privileged documents that were not produced and instead resided throughout litigation on the privilege log (e.g., numerous Excel spreadsheets with scientific test results, third party filings to the PTO, and fact statements by non-lawyers not seeking legal advice).
  2. Previously privileged documents as to which Regeneron affirmatively waived the privilege by disclosing the Jones Memo and that the district court ordered be produced pursuant to its Order.
  3. Documents on the privilege log relating to precisely those topics waived by Regeneron when Regeneron filed trial declarations of Drs. Smeland and Jones.

The third category was most troubling for the district court. In the third category, the district court concluded that many documents on the log were directly relevant to the topics as to which privilege has been waived. In particular, these documents were directly relevant to Drs. Smeland and Murphy’s mental impressions of the Withheld References during prosecution of the ’018 patent. The documents would therefore have been relevant to determining if Regeneron specifically intended to deceive the USPTO by failing to disclose the Withheld References during prosecution of the ’018 patent. Accordingly, the district court sought an alternative remedy and concluded that it was appropriate to draw an adverse inference against Regeneron from the undisclosed documents. The district court ultimately concluded that Regeneron failed to disclose the Withheld References to the USPTO during prosecution of the ’018 patent with the specific intent to deceive the USPTO.

The district court scheduled a bench trial on Regeneron’s inequitable conduct, but bifurcated the trials based on the two elements of inequitable conduct: a first bench trial on the materiality of the Withheld References, and a second bench trial regarding the specific intent to deceive the USPTO.[6] Following the first trial, the district court issued a lengthy opinion detailing the materiality of the Withheld References.[7]

Materiality

“[A]s a general matter, the materiality required to establish inequitable conduct is but-for materiality.”[8] A prior art reference is “but-for material if the USPTO would not have allowed a claim had it been aware of the undisclosed prior art.”[9] In determining the materiality of a reference, the court applies the preponderance of the evidence standard and gives claims their broadest reasonable construction.[10]

A reference is not but-for material, however, if it is merely cumulative.[11] A reference is cumulative when it “teaches no more than what a reasonable examiner would consider to be taught by the prior art already before the USPTO.”[12]

The district court in the Regeneron matter found that certain uncited references were “but-for material” to patentability even though the court did not find the ’018 patent claims invalid on the substantive content of these references.

Adverse Inference of Specific Intent

The district court never held a second trial to determine if Regeneron acted with the specific intent to deceive the USPTO during prosecution. Instead, the court sanctioned Regeneron for its litigation misconduct by drawing an adverse inference of specific intent. In particular, the district court discussed Regeneron’s repeated violations of the district court’s discovery orders and improper secreting of relevant and non-privileged documents. Based on this misconduct, the district court drew an adverse inference that Regeneron’s agents failed to disclose the Withheld References to the USPTO with the specific intent to deceive the USPTO.

For a finding of inequitable conduct, in addition to proving the materiality of withheld references, “the accused infringer must prove that the patentee acted with the specific intent to deceive the PTO.”[13] “[A] court must weigh the evidence of intent to deceive independent of its analysis of materiality. Proving that the applicant knew of a reference, should have known of its materiality, and decided not to not to submit it to the USPTO does not prove specific intent to deceive.”[14] “In a case involving nondisclosure of information, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference.”[15]. Direct evidence of intent is not, however, required. A court may infer intent from circumstantial evidence.[16] An inference of intent to deceive is appropriate where the applicant engages in “a pattern of lack of candor,” including where the applicant repeatedly makes factual representations “contrary to the true information he had in his possession.”[17]

Having determined the but-for materiality of the Withheld References and drawn an adverse inference of Regeneron’s specific intent to deceive the USPTO, the district court determined that Regeneron had committed inequitable conduct and held the ’018 patent unenforceable.

The CAFC concluded that substantial evidence supported the district court’s finding of but-for materiality of the Withheld References.[18] The CAFC further held that the district court did not abuse its discretion by drawing an adverse inference of Regeneron’s specific intent to deceive the USPTO.

Dissent

Judge Newman dissented chastising the majority that intent to deceive cannot be inferred., relying on Aptix Corp. v. Quickturn Design Systems, Inc., 269 F.3d 1369 (Fed. Cir. 2001), for the proposition that litigation misconduct cannot support a finding of  unenforceability of a patent for inequitable conduct. However, in addressing the dissent, the CAFC majority confirmed that neither the parties nor the district court relied on Aptix, and for good reason: Aptix is inapposite. The CAFC stated,

In Aptix, the district court declared a patent unenforceable as a “penalty” because Aptix engaged in litigation misconduct under the doctrine of unclean hands. 269 F.3d at 1378. We reversed that decision holding that “the doctrine of unclean hands [does not] provide a suitable basis for the district court’s judgment, as this equitable doctrine is not a source of power to punish.” Id. We did so because “the relief for unclean hands targets specifically the misconduct, without reference to the property right that is the subject of the litigation.” Id. at 1376. Essentially, we held that courts may not punish a party’s post prosecution misconduct by declaring the patent unenforceable. Here, Regeneron is accused not only of post prosecution misconduct but also of engaging in inequitable conduct during prosecution.[19]

Regeneron’s litigation misconduct, however, obfuscated its prosecution misconduct. In particular, Regeneron failed to disclose documents directly related to its prosecuting attorneys’ mental impressions of the Withheld References during prosecution of the ’018 patent. The district court drew an adverse inference to sanction this litigation misconduct. The district court did not punish Regeneron’s litigation misconduct by holding the patent unenforceable. Only after Merus proved the remaining elements of inequitable conduct did the district court hold the patent unenforceable. In light of Appellant’s widespread litigation misconduct, including Appellant’s use of sword and shield tactics to protect Drs. Smeland and Murphy’s thoughts regarding disclosure of the Withheld References to the PTO during prosecution of the ’018 patent, we conclude that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.

Practice Tip

Generally, it is a best practice to submit all references and associated litigation documents to the USPTO and to avoid making a determination of the necessity to submit art to the USTPO based on the materiality of the subject matter.

In circumstances where certain material art is inadvertently not submitted to the USPTO during prosecution, patentees should consider supplemental examination or ex parte reexamination to have the USPTO consider information and related issues that a challenger might raise against the patent during litigation.


[1] Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc).

[2] Id. at 1290.

[3] Id. (quoting Star Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)).

[4] See the ’018 patent at col. 1, ll. 17– 33.

[5] Id. at col. 29,  ll. 24–26.

[6] See Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011) (en banc).

[7] Regeneron Pharm., Inc. v. Merus B.V., 144 F. Supp. 3d 530 (S.D.N.Y. 2015) (“Regeneron I”).

[8] Therasense at 1291.

[9] Id.

[10] Id. at 1291–92.

[11] See Dig. Control Inc. v. Charles Mach. Works, 437 F.3d 1309, 1319 (Fed. Cir. 2006) (“However, a withheld otherwise material prior art reference is not material for the purposes of inequitable conduct if it is merely cumulative to that information considered by the examiner.”).

[12] Regents of the Univ. of Calif. v. Eli Lilly & Co., 119 F.3d 1559, 1575 (Fed. Cir. 1997).

[13] Therasense, 649 F.3d at 1290.

[14] Id. (citing Star Sci., Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)).

[15] Id. (quoting Molins PLC v. Textron, Inc., 48 F.3d 1172, 1181 (Fed. Cir. 1995)) (internal quotation marks omitted).

[16] Id.

[17] Apotex Inc. v. UCB, Inc., 763 F.3d 1354, 1362 (Fed. Cir. 2014).

[18] Regeneron Pharms., Inc. v. Merus, N.V., Appeal No. 2016-1346 (Fed. Cir. July 24, 2017), available at http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/16-1346.Opinion.7-24-2017.1.PDF.

[19] Cf. Dissent at 4 (“[I]n order to invalidate the patent, the inequitable conduct must have occurred in patent prosecution.”).