Denial of Institution Sinks Materiality Allegation

Inequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent. The standard for inequitable conduct was recalibrated in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1285 (Fed. Cir. 2011).  To prevail on the defense of inequitable conduct, an alleged infringer must demonstrate two elements—materiality and intent.  That is, demonstrate that the patent applicant misrepresented or omitted material information with the specific intent to deceive the PTO.  Materiality of information changed from the previous “reasonable examiner” standard to “but-for” materiality in Therasense.

Of course, the best way to prove such materiality is to demonstrate that the PTO is in the process of reconsidering its earlier decision based on this same prior art.

As a reminder, the standard enunciated in Therasense explains:

When an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art. Hence, in assessing the materiality of a withheld reference, the court must determine whether the PTO would have allowed the claim if it had been aware of the undisclosed reference.

In other words, if the PTO had been aware of the undisclosed reference and still would have allowed the claim, the prior art is not material.

In a recent decision in the Eastern District of Virginia, the court denied defendant’s motion to amend its pleadings to add an inequitable claim because the claim was futile after the PTAB’s decision to deny institution of an IPR challenging the patent-in-suit on the same prior art that defendant asserted was material.  Jaguar Land Rover Limited v. Bentley Motors Limited et al, 2-18-cv-00320 (E.D.Va. 2020-04-30, Order).  In that proceeding, the defendant represented that it has “relied on the exact same material as the primary reference” in the IPR.   It argued that “[t]o the extent that an IPR is instituted by the PTO in response to [defendant]’s Petition, the materiality of the [undisclosed prior art] is firmly established.”

However, the defendant’s argument unraveled when the IPR was denied.  The PTAB issued a decision denying institution of IPR based on the undisclosed prior art.  In determining the defendant’s motion for leave to amend its pleading to add an inequitable claim, the district court found that it was presented with a “unique situation” (here):

PTAB’s decision declining to institute IPR with respect to the [patent-in-suit] directly contradicts [defendant’s] assertion that the [undisclosed] prior art is material, and the Court need not accept it as true. . . . [Defendant] cannot meet the ‘but for’ materiality prong, because the PTAB has already considered the [undisclosed] prior art and found that it does not demonstrate a reasonable likelihood of showing that any claim of the [patent-in-suit] is unpatentable. . . . [E]ven assuming [plaintiff] withheld the [undisclosed prior art] with the requisite intent, [defendant] cannot demonstrate that but for [plaintiff’s] omission, the examiner would not have issued the patent, and therefore cannot demonstrate materiality.

Had the Board instituted, the motion may have succeeded, but presumably the ultimate question of materiality would have needed to await the final written decision of the agency.