In a 38 page decision with a 19 page dissent by Judge Newman, the Federal Circuit determined that Regeneron’s transgenic mouse patent is unenforceable due to inequitable conduct. The decision was rendered in Regeneron Pharmaceuticals v. Merus N.V., where the requisite intent to deceive was inferred as a sanction for Regeneron’s “widespread litigation misconduct.” Chief Judge Prost and Judge Wallach agreed such a sanction was permissible, while Judge Newman urged otherwise.

The Regeneron Patent At Issue

The Regeneron patent at issue was U.S. Patent 8,502,018, directed to a transgenic mouse expressing human variable region immunoglobulin genes:

1. A genetically modified mouse, comprising in its germline human unrearranged variable region gene segments inserted at an endogenous mouse immunoglobulin locus.

As recited in dependent claim 7, the transgenic mice can be used to expresses a functional antigen-binding molecule encoded by the human gene segments.

The Prosecution Conduct At Issue

The basis for the inequitable conduct charges was the Applicant’s failure to disclose three references that were submitted by a third party in a related application.  According to the Federal Circuit decision, the submission was made in the related application a few days before a Notice of Allowance was issued in the ‘018 patent. The Applicant cited the references in other related applications, but “withheld them” from ‘018 patent.

The Federal Circuit summarized the issues raised on appeal as follows:

Merus asserts that Drs. Smeland and Murphy violated their duty of candor and engaged in inequitable conduct. Regeneron does not contest that both of these individuals had a duty of candor to the PTO … [but] argues that the duty was not violated because none of the Withheld References were but-for material and because the district court improperly concluded that the applicants possessed the necessary specific intent to deceive the PTO.

Inequitable Conduct: Materiality

The Federal Circuit first addressed whether the withheld references were “but-for” material. The court began that analysis by construing the claims under the USPTO’s “broadest reasonable interpretation” standard, and then evaluating whether the references were “but-for” material and not cumulative of other prior art considered by the examiner. This analysis spans 10 pages of the decision, and leads to the conclusion that “the district court did not clearly err in finding each of the Withheld References but-for material.”

Inequitable Conduct: Specific Intent To Deceive

The Federal Circuit addressed the second requirement for inequitable conduct, that “the patentee acted with the specific intent to deceive the PTO.” However, instead of reviewing the Applicant’s decision to withhold the references from the examiner, the court reviewed the district court’s findings on Regeneron’s litigation misconduct:

[T]he district court never held a second trial to determine if Regeneron acted with the specific intent to deceive the PTO during prosecution. Instead, the court sanctioned Regeneron for its litigation misconduct by drawing an adverse inference of specific intent. Contrary to Regeneron’s arguments, we determine that the district court did not abuse its discretion by sanctioning Regeneron in this manner.

The Federal Circuit “largely repeat[ed], and adopt[ed], the district court’s factual findings regarding Regeneron’s litigation misconduct,” detailing the findings over 14 pages of its decision. In this summary, the Federal Circuit highlighted Regeneron’s failure to disclose to Merus and the district court documents pertaining to its patent attorney’s decision to withhold the references. For example, the Federal Circuit noted:

The third category [of documents that “raised serious concerns of discovery misconduct”] was most troubling. In the third category, the district court concluded that many documents on the log were directly relevant to the topics as to which privilege has been waived. In particular, these documents were directly relevant to Drs. Smeland and Murphy’s mental impressions of the Withheld References during prosecution of the ’018 patent. The documents would therefore have been relevant to determining if Regeneron specifically intended to deceive the PTO by failing to disclose the Withheld References during prosecution of the ’018 patent.

After determining that “Regeneron’s behavior warranted sanctioning,” the district court determined that an appropriate remedy for Merus was “to draw an adverse inference against Regeneron from the undisclosed documents,” i.e., to “conclude[] that Regeneron failed to disclose the Withheld References to the PTO during prosecution of the ’018 patent with the specific intent to deceive the PTO.” Chief Judge Prost and Judge Wallach agreed such a sanction was permissible.

Can Intent Be Inferred As A Sanction?

In her dissent, Judge Newman’ cites Aptix Corp. v. Quickturn Design Systems, Inc. (Fed. Cir. 2001) for the proposition that litigation misconduct cannot support a finding of unenforceability of a patent for inequitable conduct. The majority distinguished the circumstances at hand from those before the court in Aptix:

Essentially, we held [in Aptix] that courts may not punish a party’s post-prosecution misconduct by declaring the patent unenforceable. Here, Regeneron is accused not only of post-prosecution misconduct but also of engaging in inequitable conduct during prosecution. …. Regeneron’s litigation misconduct, however, obfuscated its prosecution misconduct. In particular, Regeneron failed to disclose documents directly related to its prosecuting attorneys’ mental impressions of the Withheld References during prosecution of the ’018 patent.

Judge Newman bristled at the court’s reliance on an accusation to support its decision:

Our system of justice is bottomed upon proof, not upon bare accusation. Intent to deceive is not established by accusation and innuendo. It is only established by evidence. That evidence “must be sufficient to require a finding of deceitful intent in the light of all the circumstances.”

The majority explained its decision further, noting that the district court had “not punished Regeneron’s litigation misconduct by holding the patent unenforceable,” because it still required Merus to “prove[] the remaining elements of inequitable conduct.” Thus, the majority concluded:

In light of Appellant’s widespread litigation misconduct, including Appellant’s use of sword and shield tactics to protect Drs. Smeland and Murphy’s thoughts regarding disclosure of the Withheld References to the PTO during prosecution of the ’018 patent, we conclude that the district court did not abuse its discretion by drawing an adverse inference of specific intent to deceive the PTO.

Judge Newman came to a different conclusion:

Misconduct during litigation—as the district court viewed counsel’s actions concerning discovery and the privilege log—cannot substitute for evidence of intent to deceive by withholding but-for material prior art during patent prosecution.

Which do you think is correct?

Do you agree with the suggestion in this PatentDocs article that “a misapplication of the Therasense standard may amount to a 14th Amendment violation for taking property rights without due process”?