Federal Circuit Clarifies Evidentiary Requirements for Inequitable Conduct
According to the opinion by Chief Judge Michel,
If a threshold level of intent to deceive or materiality is not established by clear and convincing evidence, the district court does not have any discretion to exercise and cannot hold the patent unenforceable regardless of the relative equities or how it might balance them. See Nordberg, Inc. v. Telsmith, Inc., 82 F.3d 394, 398 (Fed. Cir. 1996) (holding that the district court properly refrained from balancing materiality and intent when a threshold showing of intent to deceive was not clearly and convincingly made). Only after adequate showings are made as to both materiality and deceptive intent may the district court look to the equities by weighing the facts underlying those showings. "The more material the omission or the misrepresentation, the lower [the] level of intent [is] required to establish inequitable conduct, and vice versa." Critikon, Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997). At this second stage, however, the question is no longer whether materiality and/or intent to deceive were proven with evidence that is sufficiently clear and convincing. While the facts of materiality and intent to deceive must be proven by clear and convincing evidence, the district court must balance the substance of those now-proven facts and all the equities of the case to determine whether the severe penalty of unenforceability should be imposed. It is this balancing that is committed to the district court's discretion. Molins, 48 F.3d at 1178.
Here, the district court's finding of deceptive intent as to both patents-in-suit was based primarily on its acceptance of RJR's theory that Williams and Star conspired to deliberately prevent Delmendo and his colleagues at the Sughrue firm from disclosing the Burton letter to the PTO by replacing them with the Banner firm and purposely keeping the Banner firm ignorant of the Burton letter. We hold that this "quarantine" theory was not supported by clear and convincing evidence. As a result, we hold that the district court's finding of deceptive intent with regard to the '649 patent was clearly erroneous. . . .