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The Effect of the Patent Reform Act on Inequitable Conduct

Kevin J Mack
 


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The Need for Patent Reform

In 1984 Judge Giles Rich proclaimed that the inequitable conduct defense “has been overplayed, is appearing in nearly every patent suit, and is cluttering up the patent system. " Four years later, Judge Philip Nichols pronounced that “the habit of charging inequitable conduct in almost every major patent case has become an absolute plague. " The Federal Circuit's ostensible hostility towards the inequitable conduct doctrine stems from its perceived effects: defendants employ inequitable conduct as a magic incantation against patentees, diverting the court's attention away from the statutory requirements of patent protection.

The Patent Reform Act of 2005

The Federal Circuit's long- standing hostility towards inequitable conduct sparked a series of proposals for its reform from the NAS, FTC, and AIPLA. On June 8, 2005, Rep. Lamar Smith introduced the Patent Reform Act of 2005. The bill is a wide-ranging reform package relating to the procurement, enforcement, and validity of patents. Specifically, the bill proposes a number of procedural and substantive changes to the duty of candor and good faith presently codified in 37 C. F. R. § 1.56. In general, the Patent Reform Act substantially increases the barriers to successfully pleading inequitable conduct as a defense to patent infringement and, in some cases, reduces the penalties for the commission of inequitable conduct. Thus, the Act cleanses the hands of some who would possess unclean hands under modern inequitable conduct doctrine.

A Heightened Culpability Requirement

The Patent Reform Act, like current rules and regulations, imposes a duty of candor and good faith on individuals associated with the filing or prosecution of a patent application. Under the Act, an individual is in violation of this duty when:

  1. the individual knowingly failed to disclose information or knowingly misrepresented information;
  2. the information not disclosed was material or, in the case of a misrepresentation, the misrepresentation was material;
  3. the individual had knowledge of the materiality of the information not disclosed or, in the case of a misrepresentation, had knowledge of the materiality of the misrepresentation; and
  4. the individual's intent was to deceive or mislead.

Accordingly, the basic elements of modern inequitable conduct-materiality and intent-remain under the proposed legislation. The Act, however, departs from the Federal Circuit's standard of culpability for inequitable conduct. Presently, the Federal Circuit employs a standard of culpability interrelated with the degree of materiality of the misrepresented or omitted information. The Patent Reform Act proposes a knowledge requirement substantially higher than the current standard. Thus, the subjective good faith of the accused would be dispositive of intent under the Act. The Act's heightened culpability requirement also substantially increases an alleged infringer's evidentiary burden when asserting inequitable conduct. Pursuant to the Act, the patent owner must knowingly fail to disclose or misrepresent in formation. This heightened requirement will deter alleged infringers from frivolously asserting the defense in court unless substantial evidence exists to satisfy the requirement. Since direct proof of wrongful intent is rarely available in inequitable conduct proceedings, this heightened requirement should drastically reduce the number of parties claiming inequitable conduct as a defense to patent infringement. By cleansing the hands of those who would be liable for inequitable conduct under modern inequitable conduct doctrine, the Act should reduce overall costs associated with patent litigation.

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Copyright © 2008 Kevin J Mack

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