By Dennis Crouch
The US Supreme Court has decided a number of patent cases that raise questions of unenforceability. Perhaps most notable among these are:
- Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933);
- Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944); and
- Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945).
This trio of cases explains that inequitable conduct fits within the scope of the traditional equitable doctrine of unclean hands.
Keystone involved a patentee paying another party to lie about its prior use of a patented invention where that use might have been a prior public use. Similarly, in Hazel-Atlas, the patentee wrote an article and had it published under the name of a well-known expert (with the expert's consent). After seeing how the article lauded the invention (and without knowing the connection), the PTO was willing to issue the patent. Precision involved perjury in the course of an interference proceeding. In each of these cases, the Supreme Court held that that the unclean hands doctrine could be used to render the patent unenforceable.
For many years, the doctrine of unclean hands (and, as we call it now inequitable conduct) was a powerful in-court tool for accused infringers to challenge patent enforcement. Almost since the Federal Circuit beginning, Federal Circuit judges have been on a crusade to limit the doctrine. The court's most recent pronouncement found in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc) continues this trajectory and strongly limits the scope of inequitable conduct allegations.
In Therasense, the Federal Circuit offers two pathways for proving inequitable conduct in the patent prosecution process. The first and primary pathway clear and convincing proof of (1) intentional misconduct and (2) that the misconduct is a but-for cause of the patent issuing. As shorthand, we speak of (1) intentionality and (2) materiality. The Therasense majority, also offered a second pathway for proving inequitable conduct based upon "egregious affirmative acts of misconduct." According to the court, the mere non-disclosure or omission of required information will always fit within the primary pathway while intentional affirmative misstatements that go beyond attorney argument could fit within the second pathway if sufficiently egregious. In reading the trio of Supreme Court cases, the Federal Circuit found that Keyston, Hazel-Atlas, and Precision all fit the definition of egregious misconduct.
Writing in dissent Judge O'Malley criticized the majority opinion as unduly rigid in its formulation of the unclean hands doctrine.
[B]oth the majority and [other] dissenting opinions eschew flexibility in favor of rigidity. Both opinions suggest tests for materiality to apply in all cases. Their respective materiality inquiries are black or white, while equity requires judicial consideration of shades of gray.
The majority defines materiality under a but-for test, with an exception for intentionally false affidavits filed with the PTO. The dissent, on the other hand, defines materiality according to Rule [37 C.F.R. 1.56]. Both tests fail to provide district courts with flexibility to find inequitable conduct in an extraordinary case where the conduct in question would not be defined as such under either test. This result is contrary to the very nature of equity and centuries of Supreme Court precedent. I cannot, accordingly, lend support to either of the immutable tests proposed by my colleagues.
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Sony Computer v. 1st Media LLC (on petition for writ of certiorari 2013)
In a recently filed petition for writ of certiorari, Sony and Viacom have asked the Supreme Court return the law to the flexible tests of its old precedent. Raising the following question:
Did the Court of Appeals for the Federal Circuit err in restricting district courts' equitable discretion in evaluating patent unenforceability, contrary to this Court's precedent in Keystone Driller, Hazel-Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO's duty of candor.
The Federal Circuit intended that the second pathway for egregious misconduct add sufficient flexibility to fit within the Supreme Court's doctrine. Sony responds that the limited carve-out "is flawed because it creates a rigid threshold [of an egregious affirmative act of misconduct] as a prerequisite to the equitable discretion called for by this Court's precedent. The flexibility embodied in this Court's precedent should apply in all cases, not just those involving affirmative egregious misconduct."
Read Sony's Petition: Download 1st Media Certiorari Petition
