The pharmaceutical industry has jumped at the opportunity to weigh in on a case that could change how courts determine whether patent owners deceived the U.S. Patent and Trademark Office in obtaining their patents.

The Pharmaceutical Research and Manufacturers of America, the Biotechnology Industry Organization and several companies filed amicus briefs this month in Therasense (now known as Abbott Diabetes Care) v. Becton, Dickinson.

In April the U.S. Court of Appeals for the Federal Circuit granted Abbott's request for an en banc review of the case. A three-judge panel had upheld a district court ruling that a patent covering technology used in disposable blood glucose test strips was unenforceable because Abbott withheld information from the PTO that it had submitted to the European Patent Office.

The Federal Circuit presented a series of questions it would address, indicating that it is re-evaluating what constitutes inequitable conduct - the misrepresentation or withholding of material information from the patent office - by a patent owner.

Parties sued for patent infringement commonly make this allegation as a defense. It is a major worry for companies because if there is a finding of inequitable conduct the patent is unenforceable. In their briefs, companies argue that the Federal Circuit has not applied the law uniformly or in accordance with Supreme Court precedent.

"This is an area of the law that would benefit from clarity," said Mark Perry, a partner at Gibson, Dunn & Crutcher who is counsel for Sanofi-Aventis and Microsoft in their joint amicus brief supporting Abbott. The fact the court took the case up en banc and is posing specific questions is "recognition that the law is muddled."

Lilly's Patent Team Make Personal Plea

Lilly, Apotex, Eisai and Johnson & Johnson also filed amicus briefs in August, advising the court on how to fix flaws in the law. Lilly's brief illustrates how significant the issue is to industry. It was submitted by the company's 43 patent practitioners responsible for filing and prosecuting patent applications for inventions and discoveries made by Lilly Research Laboratories. They cite the impact that inequitable conduct allegations have on their professional lives.

"During the past decade, those of us handling patents that Lilly has litigated have routinely been accused of misconduct," they state. "When deposed, the primary purpose of our interrogators has been to identify potential flaws in our work. Our every step has been microscopically analyzed for hints of omission or misstatement," they continue.

"Almost without fail, the allegations leveled against us are that we have withheld or misstated highly material information sufficient to support an inference of intent to deceive the office," they assert. "In sum, we should not face cavalier charges of misconduct that currently can be sustained even in the absence of any direct evidence of intended deceit, and that could unfairly and prematurely end our professional lives."

Courts have shot down inequitable conduct claims made against several Lilly patents. However, earlier this year a court declined to throw out inequitable conduct claims generic manufacturers made against Lilly's Straterra (atomexetine) (¹ Also see "Strattera Patent: Lilly Wins Infringement, But Inequitable Conduct Claims Continue" - Pink Sheet, 11 January, 2010.).

Companies have lobbied Congress for legislation to reign in these allegations. At the insistence of Sen. Orrin Hatch, R-Utah, the Senate version of the patent reform bill was modified to include a provision that would limit use of the defense (² Also see "Patent Reform Bill In Senate Could Reduce "Inequitable Conduct" Litigation" - Pink Sheet, 1 March, 2010.).

PhRMA, BIO Propose Parameters

Among the questions posed by the Federal Circuit are whether the balance between the materiality of information withheld or misstated and intent should be modified or replaced. The court also asked what the proper standard is for materiality and under what circumstance it is proper to infer intent from materiality.

PhRMA says in its brief that there are three fundamental flaws in existing law: the party asserting inequitable conduct can obtain complete absolution of liability for infringement of a valid patent; the court's varying standards for "materiality" have allowed advocates to portray essentially any type of undisclosed or misstated information as capable of influencing the examination of a patent and thus material; and decisions by the court that undermine the requirement for proof of a specific intent to defraud.

The association advises the Federal Circuit to take three steps to fix the problem. First, it said the court should only allow a finding of inequitable conduct for patent claims that have been asserted in litigation. Second, it should find information material only if the information establishes that one or more of the claims asserted in the litigation is invalid. And third, it should require "clear and convincing evidence" that a person acted with specific intent to defraud the PTO.

BIO also argues that three things should exist for a finding of inequitable conduct. It says there should be "clear and convincing evidence" of the misrepresentation or omission of a material fact, a specific intent to deceive the PTO, and "reasonable reliance" by the PTO on the misrepresentation or omission, to the public's detriment, in issuing an invalid claim.

Eisai, meanwhile, asks the court to articulate a clear legal standard for inequitable conduct that reserves the defense "for extraordinary instances of true intentional deception, but prevents routine assertions." The company describes its experience defending itself against an inequitable conduct claim Teva made in litigation over a patent for Eisai's Aricept (donepezil) Alzheimer's drug. A district court ruled in favor of Eisai.

Sanofi Teams Up With Microsoft

Sanofi-Aventis and Microsoft focus on what constitutes specific intent, asking the court to adopt a common-law standard. This standard "requires that the accused wrongdoer have knowledge of the unlawful consequences of its acts or omissions and the intention to bring about these same consequences," their brief states.

The companies contend that in recent years the Federal Circuit has departed from this standard "by holding that intent to deceive may be inferred from the materiality of a misrepresentation" when highly material information is withheld and the applicant knew or should have known of the materiality and did not provide a credible explanation for withholding the information.

The alliance between Sanofi and Microsoft is striking since the software and pharma industries have been on opposing sides in the patent reform debate. The two allude to these differences in their brief, saying it is sometimes said that the pharmaceutical industry needs a different approach to patents than do software companies. But in this case, they say "the consequences of perpetuating the 'plague' of 'inequitable conduct as a litigation strategy'" would be severe in both industries.

BP Oil Spill: Material But Not Intentional

Lilly argues in its brief that the fact that omitted or misstated information is highly material does not mean there was intent to deceive. "The high materiality of an act is, by itself, not necessarily probative of whether the act was one of deception, or one of mere inadvertence, negligence or mistake," Lilly's patent attorneys state.

They make an analogy to the Exxon Valdez and British Petroleum Deepwater Horizon oil spills. They say the materiality of these events - i.e., the quantity of oil released, the environmental damage and economic injury - is far more likely to show that the oil release was an act of negligence and not an intentional act.

BIO points to the prevalence of inequitable conduct claims in its brief. It cites statistics compiled by the University of Houston Law Center that show federal courts issued 334 reported inequitable conduct dispositions during 2005-2009. BIO analyzed decisions listed for 2007-2009 and found that 35 percent of all inequitable conduct dispositions involved biotechnology, drug or medical device patents. It also found that inequitable conduct cases involving these industries were decided in favor of the patentee approximately 85 percent of the time.

Response briefs by defendant-appellees Beckton, Dickinson, Nova Biomedical Corp. and Bayer Healthcare LLC are due by Oct. 8 and amicus briefs in their support are due seven days later. The briefs submitted by BIO, PhRMA, Lilly and Eisai are not in support of either party.

- Brenda Sandburg ( ³ b.sandburg@elsevier.com )

Inequitable Conduct: Drug Industry Implores Federal Circuit To Revise Standard For Finding Deception In Patent Prosecution

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