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Inequitable Conduct: The Plague Reaches the Corner Office

by Orlando Lopez

The US is one of the few countries, if not the only, where the applicant/inventor and other persons involved in the filing or prosecution of a patent application, have a duty to disclose to the Patent Office any known material that could be important to the patent examiner’s determination for granting the patent application, referred to as material prior art (37 CFR 1.56). In a patent infringement case, if the judge or the jury can be convinced that the applicant/inventor and persons involved in the filing or prosecution of the patent application withheld material prior art, and did so with the intent of deceiving the Patent Office, the patent is declared unenforceable due to inequitable conduct. While the charge of inequitable conduct used to be rare, inequitable conduct is raised as a defense in about 40% of the patent infringement cases. This increase in use of the charge of inequitable conduct has been labeled by some as a “plague.” Typically, it was the actions of the inventor, his/her supervisor, and the patent attorney/agent that were examined to determine whether material prior art had been withheld. However, the definition of persons involved in the filing or prosecution of the patent application, was expanded in Avid Identification Systems v. The Crystal Import Corporation to include the President of the company.

In the subject case, Dr. Stoddard, Avid Identification Systems’ President, had demonstrated a precursor product at a trade show that did not contain all the elements of the claimed invention, but was related. The public demonstration was deemed to be material and intentionally withheld, and Dr. Stoddard was deemed to be a person involved in the prosecution of the patent application. Consequently, the patent was declared to be unenforceable.  As in most small companies, Dr. Stoddard was “involved in all aspects of the company’s operation, from marketing and sales to research and development.” He had been copied on two communications, one involving a European patent application and another asking him to check with the European patent attorney before making public disclosures. This was enough to declare him “a person involved.” For small companies, the plague has reached the corner office where the president resides. This expansion is important since it implies that a) the president of the company has to be queried as to what is disclosed, and/or b) inventors/managers have to be very selective as to what communications the president of the company is exposed to.

The connection between the importance of the withheld material prior art and intent, is being examined in the en banc rehearing of Therasense; however, that decision will not affect the expansion of the definition of “persons involved.”

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