What is inequitable conduct in patent law?

Inequitable conduct is a defense raised in patent infringement litigation that, if proven, renders the entire patent unenforceable. It arises when a patent applicant withholds material information from, or makes material misrepresentations to, the USPTO during prosecution with specific intent to deceive the Office.

The doctrine is not statutory. It is a judicially-developed defense rooted in the equitable doctrine of unclean hands, and it is enforced by courts, not by the USPTO. Unenforceability is available as a defense to patent infringement under 35 U.S.C. § 282(b).

The duty of candor: 37 CFR 1.56

The foundation of inequitable conduct doctrine is the duty codified in 37 CFR 1.56. Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the USPTO, and must disclose to the Office all information known to that individual to be material to patentability.

The duty applies to named inventors, attorneys or agents preparing or prosecuting the application, and any person substantively involved in the preparation or prosecution who is associated with the inventor, applicant, or assignee. The duty to disclose continues throughout prosecution until each pending claim is cancelled, withdrawn from consideration, or the application becomes abandoned.

Under 37 CFR 1.56(b), information is material to patentability if it is not cumulative and either establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim, or refutes or is inconsistent with a position the applicant takes in opposing an argument of unpatentability or asserting patentability.

The two-prong test: Therasense (2011)

The controlling standard for proving inequitable conduct in litigation is the Federal Circuit's en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011). In Therasense, the Federal Circuit held that to establish inequitable conduct an accused infringer must prove by clear and convincing evidence both that the applicant withheld or misrepresented material information, and that the applicant did so with specific intent to deceive the USPTO.

Both elements are independent. A district court may not use a sliding scale where a weak showing of intent is found sufficient based on a strong showing of materiality, and vice versa; both elements must independently meet the clear and convincing evidence standard.

Element one: but-for materiality

Therasense adopted a but-for materiality standard. Under this standard, prior art or information is material only if the PTO would not have allowed a claim had it been aware of the undisclosed prior art or information.

This is a different, and more demanding, standard than the regulatory materiality definition in 37 CFR 1.56(b), which turns on whether the information establishes a prima facie case of unpatentability. The but-for standard applies in litigation; the 37 CFR 1.56 prima facie standard defines the duty to disclose during prosecution. Practitioners should disclose everything that is arguably material under 37 CFR 1.56, not just information that would satisfy the litigation but-for standard.

Element two: specific intent to deceive

Mere negligence, gross negligence, or a knew-or-should-have-known standard is insufficient to establish the intent element. To prove specific intent, the accused infringer must show by clear and convincing evidence that the applicant knew of the withheld reference, knew that it was material, and made a deliberate decision to withhold it.

A district court may not infer intent to deceive solely from materiality; the intent element requires its own independent proof. In practice, if the most plausible explanation for a failure to disclose is oversight or error rather than calculated deception, the intent prong is not met even if the withheld information would have blocked the claim.

Exception: affirmative egregious misconduct

The but-for materiality standard has one exception. Therasense recognized an exception for affirmative egregious misconduct: when a patent applicant engages in affirmative acts of deception such as filing a false declaration, that misconduct is deemed material per se without requiring a but-for analysis.

The exception applies only to affirmative acts of misconduct, not to omissions. A patentee who fails to disclose prior art must satisfy the but-for standard; a patentee who files a fabricated experimental data declaration faces the per se rule.

The consequence: the entire patent

The stakes are all-or-nothing. A finding of fraud, inequitable conduct, or violation of duty of disclosure with respect to any claim in an application or patent renders all the claims thereof unpatentable or invalid. Once a court concludes that inequitable conduct occurred, all the claims, not just the particular claims in which the inequitable conduct is directly connected, are unenforceable.

Inequitable conduct has been described as the "atomic bomb" of patent law because a finding of unenforceability cannot be cured by reissue and can taint related patents in the same patent family. A single act of intentional misconduct touching one claim can defeat an entire portfolio of continuation and divisional patents.

Before Therasense: the prior standard

Therasense significantly tightened the doctrine. Prior to Therasense, courts applied a lower threshold: materiality was measured by a reasonable examiner standard from 37 CFR 1.56, intent could be established by gross negligence or a knew-or-should-have-known standard, and courts used a sliding scale that allowed a weak intent showing to be compensated by a strong materiality showing. That approach made inequitable conduct easier to plead and harder to defeat. Therasense raised the bar on both elements and eliminated the sliding scale.

The USPTO's role

The USPTO does not investigate or reject applications based on inequitable conduct; inequitable conduct is a judicial matter for courts to resolve rather than an administrative determination made during prosecution. Examiners will not reject claims on this basis. The defense is raised by an accused infringer in patent infringement litigation and decided by a court.

Practical notes for practitioners

• Disclose early and liberally. The cost of filing an information disclosure statement is trivial compared with the risk of a later finding of intentional withholding. When in doubt, disclose.
• Do not conflate the two standards. The 37 CFR 1.56 standard (prima facie unpatentability or inconsistency with applicant's position) defines what to disclose during prosecution. The Therasense but-for standard defines what courts apply in litigation. Use 37 CFR 1.56 as your working threshold during prosecution.
• Document decisions not to disclose. If a reference is considered and a reasoned decision is made that it falls outside the duty, document that reasoning contemporaneously. Contemporaneous records are the primary defense against a later intent-to-deceive argument.
• Declarations require special care. Filing a false declaration is affirmative egregious misconduct, deemed material per se. Any declaration submitted during prosecution must accurately and completely reflect the facts the declarant knows.
• Unenforceability is all-or-nothing. Because a finding of inequitable conduct renders every claim unenforceable, not just those connected to the misconduct, the consequences are far broader than invalidity of a single claim. A practitioner who discovers a potential disclosure problem after allowance should consult with litigation counsel before deciding whether to seek correction through supplemental examination or other means.