Senate Patent Reform Bill on Inequitable Conduct

Thanks to Kevin E. Noonan at Patent Docs for discussing the inequitable conduct (and other) provisions of the 106-page draft report of the Senate Judiciary Committee on the Patent Reform Act of 2007 (S. 1145) which includes a new Section 298:

§298. Inequitable conduct

(a) IN GENERAL.—A party advancing the proposition that a patent should be cancelled or held unenforceable due to inequitable conduct in connection with a matter or proceeding before the United States Patent and Trademark Office shall prove independently by clear and convincing evidence that material information was misrepresented or omitted from the patent application of such patent with the intention of deceiving the Office.

(b) MATERIALITY.—Information shall be considered material for purposes of subsection (a) if—

(1) a reasonable patent examiner would consider such information mportant in deciding whether to allow the patent application; and
(2) such information is not cumulative to information already of record in the application.

(c) INTENT.—Intent to deceive the Office may be inferred under subsection (a), but the inference may not be based solely on the gross negligence of the patent owner or its representative, or on the materiality of the information misrepresented or not disclosed.

(d) PLEADING.—In actions involving allegations of inequitable conduct before the Office, the party asserting the defense or claim shall comply with the pleading requirements set forth under Federal Rules of Civil Procedure 9(b).

(e) REMEDIES.—If the court finds both that material information was misrepresented to, or withheld from, the Office and an intent to deceive, after balancing the equities, the court, using its discretion, shall impose 1 or more of the following remedies as it deems appropriate:

(1) Hold the patent unenforceable.
(2) Hold 1 or more claims of the patent unenforceable.
(3) Order that the patentee is not entitled to equitable relief and that the sole and exclusive remedy for infringement of the patent shall be a reasonable royalty.

According to the report,

The Committee heard several concerns about the doctrine as it has developed in the Federal Circuit. First, the Federal Circuit has failed to establish one clear standard of materiality for inequitable conduct purposes. . . . Second, direct evidence of an intent to deceive is uncommon, so some courts collapse the issue of intent into the issue of materiality, so that intent to deceive is often inferred from materiality. Third, if inequitable conduct is found, judges have no discretion as to the remedy – no claim of the patent can ever be enforced against anyone.

. . . The Committee noted that certain court decisions appear to emphasize improperly the first part of this definition (reasonably important to an examiner) without giving necessary consideration to the latter part of the definition (in deciding whether to allow the patent). See, e.g., Nilssen v. Osram Sylvania, Inc., 2007 WL 2937322 (Fed. Cir. 2007); McKesson Information Solutions, Inc. v. Bridge Medical, Inc., 487 F.3d 897 (Fed. Cir. 2007); Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1309 (Fed. Cir. 2006). As a result, when improperly applied, the materiality standard becomes essentially a relevancy standard. The codification of the definition makes clear the entire definition must be satisfied.

According to an opposition letter endorsed by more than 430 groups asserting that the bill "contains provisions that will create uncertainty and weaken the enforceability of validly issued patents," the proposed change on inequitable merely "codifies the current inequitable conduct doctrine rather than to make broadly supported reforms to eliminate litigation abuse of the doctrine and gain increases in patent quality."

Additional information on the draft report is available from Patent Docs:

• "First Inventor to File Provisions," Section 2, January 17, 2008
• "Assignee Filings, Mandatory Publication, and Third Party Submissions," Sections 3 and 7, January 16, 2008
• "Late Patent Filings," Section 13 January 15, 2008
• "Draft Report on Senate Patent Reform Bill Circulated," Sections 9 and 15, January 14, 2008