CAFC Affirms Patent-in-Suit Unenforceable by Drawing an Adverse Inference of Intent to Deceive the USPTO during its Procurement

On July 27, 2017, in a panel decision, the Court of Appeals for the Federal Circuit (CAFC) affirmed the district court’s ruling below (Southern District of New York) that Regeneron’s US Patent No. 8,502,018 is unenforceable due to inequitable conduct during the patent’s procurement. According to the majority panel, the district court did not abuse its discretion in sanctioning Regeneron for litigation misconduct by applying an adverse inference of specific intent to deceive the USPTO during prosecution. Regeneron Pharmaceuticals Inc. v. Merus N.V., 864 F.3d 343 (Fed. Cir. 2017).

As discussed fully in its earlier en banc decision, Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276 (Fed. Cir. 2011)(en banc), “[i]nequitable conduct is an equitable defense to patent infringement that, if proved, bars enforcement of a patent.” Therasense, 649 F.3d at 1285. While validity defenses are claim-specific, inequitable conduct regarding a single claim renders the entire patent unenforceable. Id. at 1288. Inequitable conduct has two separate requirements: (1) materiality and (2) intent. Id. at 1290. The materiality required to establish inequitable conduct is “but-for” materiality, meaning that a reference is “but-for material” if an examiner would not have allowed a claim had he or she been aware of the reference. Id. at 1291. It has long been established that a reference is not but-for material, if it is merely cumulative. Dig. Control Inc. v. Charles Mach. Works, 437 F.3d 1309, 1319 (Fed. Cir. 2006). 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 PTO.” Regents of the Univ. of Calif. v. Eli Lilly & Co., 119 F.3d 1559, 1575 (Fed. Cir. 1997).

Regeneron had argued to the district court that the four prior art references at issue were not material but were cumulative of other references the USPTO had relied upon during prosecution, and therefore, there was no duty to disclose the references to the USPTO. The CAFC majority panel (Chief Justice Prost with Judge Wallach joining), however, concluded that the district court did not clearly err in finding each of the withheld references but-for material.

Proving that an applicant knew of a reference, should have known of its materiality, and decided not to submit it to the USPTO does not amount to a specific intent to deceive. Therasense, 649 F.3d at 1290 (citing Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d 1357, 1366 (Fed. Cir. 2008)). Under Therasense and cases cited therein, it must be shown by clear and convincing evidence that an applicant made a deliberate decision to withhold a known material reference. Direct evidence of intent is not, however, required. A court may infer intent from circumstantial evidence but specific intent to deceive the USPTO must be the single most reasonable inference to be drawn from the evidence.

Notably, the district court canceled a trial to determine specific intent, the second prong of an inequitable conduct inquiry. In its place, the court sanctioned Regeneron for its litigation misconduct by drawing an adverse inference of specific intent to deceive the USPTO during patent prosecution.  In affirming the district court, the majority panel noted multiple instances of troubling litigation misconduct at the district court level. Such instances included Regeneron’s repeated violations of the district court’s discovery orders and failure to produce relevant and non-privileged documents. According to the panel majority, the district court did not punish Regeneron’s litigation misconduct by holding the patent unenforceable. Rather, the district court drew an adverse inference to sanction the litigation misconduct only after Merus proved the remaining elements of inequitable conduct.

Judge Newman, in her dissent, stated that intent to deceive the USPTO cannot be inferred but must be proven by clear and convincing evidence. Further, Judge Newman stated that it is not the role of an appellate court to “scour the Appendix to fill the gap” and make its own finding of intent to deceive. Since the district court never held a trial to determine if Regeneron acted with specific intent to deceive the USPTO, there was no evidentiary record developed on intent to deceive, no testimony, and no opportunity for examination and cross-examination of witnesses. According to Judge Newman, this absence of trial and trial findings on specific intent cannot be substituted by inference.

A petition for rehearing en banc should be expected.