1. 1 1 AIPLA Firm Logo American Intellectual Property Law Association Inequitable Conduct: Update Mark Guetlich AIPLA Mid-Winter JP Practice Committee Orlando FL January 27, 2015

2. 2 2 AIPLA Firm Logo Equitable Defense to Patent Infringement Based in the doctrine of unclean hands. Developed over time through case law. The “atomic bomb” defense that can render a patent unenforceable from the outset of trial. Increasingly asserted in nearly every infringement case, until....

3. 3 3 AIPLA Firm Logo Therasense Inc. v. Becton, Dickinson & Co. Significantly tightened the defense to curb its overuse and negative impact on the practice. Established independent intent and materiality standards. –There was specific intent to deceive the USPTO; and –The claim(s) would not have been allowed “but for” the omission or misrepresentation of material fact(s) [– OR – unequivocally that “affirmative egregious misconduct” occurred].

4. 4 4 AIPLA Firm Logo Cases After Therasense District courts reject inequitable conduct outright, e.g., –Wyeth Holdings Corp. v. Sandoz, Inc., 2012 WL 600715 (D. Del. Feb. 3, 2012) FedCir is reversing district court findings on appeal, e.g., –Outside the Box LLC v. Travel Caddy, Inc., 695 F.3d 1285, 1292 (Fed. Cir. 2012) Courts agree in extreme cases, e.g., –Aventis Pharma S.A. v. Hospira, Inc., 675 F.3d 1324 (Fed. Cir. 2012) –Intellect Wireless, Inc. v. HTC Corp., 732 F.3d 1339 (Fed. Cir. 2013) –Ohio Willow Wood Co. v. Alps South, LLC, 12-1642, 13-1024 (Fed. Cir. Nov. 15, 2013) –Apotex Inc. v. UCB, Inc., 13-1674 (Fed. Cir. Aug. 15, 2014) –American Calcar, Inc. v. American Honda Motor Co., 13-1061 (Fed. Cir. Sept. 26, 2014)

5. 5 5 AIPLA Firm Logo Apotex v. UCB - Background  Dr. Bernard Charles Sherman Apotex founder & chairman Inventor and drafted ~100 applications Actively involved in directing prosecution of many patents UCB –Manufactures & sells hypertension drug Univasc. –Univasc is stabilized with a moexipril magnesium compound, a processing technique from ~1980’s.

6. 6 6 AIPLA Firm Logo Apotex Patent – US 6,767,556  Apotex files a patent application A pharmaceutical compositions comprising a meoxipril magnesium Antihypertensive-Converting Enzyme (ACE) inhibitor.  Persistent obviousness rejections during prosecution Stabilizing ACE inhibitor drugs using an alkaline magnesium compound is obvious in view of UCB’s process and an article by a Dr. Gu. Apotex provides test results and arguments to overcome non- obviousness. Apotex submits expert testimony that the cited references do not teach a reaction between moexipril hydrochloride with an alkaline stabilizing agent as Apotex is claiming. Patent is eventually granted.

7. 7 7 AIPLA Firm Logo District Court Results  Applying Therasense to find intent Dr. Sherman knew of the Univasc prior art, knew that the manufacturing process read on the claimed process, and was fully aware of misleadingly incomplete statements presented to the USPTO during prosecution.  Applying Therasense to find materiality Dr. Sherman affirmatively and knowingly directed counsel to support the misleadingly incomplete statements by submitting expert testimony by a 3 rd party who was deliberately shielded from knowing the cited art. The patent would not have granted “but for” the expert testimony. Apotex appealed.

8. 8 8 AIPLA Firm Logo Federal Circuit Results  Whether the district court's findings regarding materiality and intent of Apotex during prosecution were clearly erroneous? NO Evidence of intent existed throughout prosecution and trial - Dr. Sherman submitted test results from tests that were not performed. - Actual unfavorable test results were withheld once available. - Dr. Sherman knew enough to recognize he was crossing the line from legitimate advocacy to genuine misrepresentation of material facts. Evidence of “but for materiality” due to the expert testimony  Did the district court abused its discretion in determining that the patent is unenforceable due to inequitable conduct? NO

9. 9 9 AIPLA Firm Logo USPTO Rulemaking Respoinse  Revision of the Materiality to Patentability Standard for the Duty To Disclose Information in Patent Applications, 37 CFR Part 1 Federal Register Vol. 76, No. 140, July 21, 2011, 43631 Revision to Rule 56 et.al that information is material if it falls under “but-for-plus” test of Therasense.  September 16, 2011, American Invents Act (AIA) signed into law dealing indirectly with inequitable conduct.  USPTO postpones Rule 56 changes indefinitely.

10. 10 AIPLA Firm Logo Considerations for Patent Owners  Expect an inequitable conduct challenge – Rule 56 & Therasense.  Update inventor training, distinguish advocacy & overzealousness.  Update pre-litigation scrubs to identify post-Therasense conduct.  Remove chain-of-command conflicts to the extent possible Avoid fear of losing a job etc. as a trigger for overzealous prosecution.  Review patent prosecution guidelines, policies, and procedures. Consider periodic internal audits to watch for possible over- stepping, even with founders & C-suite decision makers involved. Build a plan to work closely with, but not offend, sophisticated inventors. Align in-house and outside counsel participants on the topic.

11. 11 AIPLA Firm Logo Considerations for Defendants  The defense is not dead, but aim for Therasense level of proof.  Treat “intent” and “materiality” separately, no sliding scale.  ”Affirmative egregious misconduct” such as an unmistakably false affidavit may satisfy materiality even if not the “but for” event.  Remember the FedCir made it clear that there is not duty for an Applicant to disclose possible interpretations or mere “suspicions or beliefs regarding the prior art.”  Look for patterns of extreme behavior and bad acts. Sloppy advocacy, clerical errors, and honest mistakes are not likely to satisfy Therasense / Apotex level criteria.

12. 12 AIPLA Firm Logo Thanks for your attention! Questions? Mark Guetlich Of Counsel Attorney at Law & U.S. Patent Attorney O: Seattle Washington, USA P: +1 425 417-9674 E: mark@lakshmisri.com W: www.lakshmisri.com