Patent Ignorances Shows Regarding Inequitable Conduct

Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: Jun 4, 2009 @ 8:30 am

Those who are not familiar with patent law should not comment on patent law as if they are experts, announcing ridiculous propositions that they don’t understand. It is silly for the many commentators and journalists out there to think that they can read a little about patent law and become conversant in the intricacies, offer opinions and suggestions and portray themselves as experts. It is one thing for a journalist on a deadline to jump in over their head, but quite another when a “scholar” from a think tank who has a grand total of zero experience with patents takes a policy position and urges Congress to do something that is not only unwise, but which is reckless and completely irresponsible. Yet, that is exactly what happened when Alex Brill of the American Enterprise Institute wrote his recent article for Forbes titled What Should Congress Do with Liars and Cheats? His solution is to make inequitable conduct rules more strict and he tells companies worried about inequitable conduct to basically grow up and be glad they don’t go to jail for lying to the Patent Office. Wow… another person who would benefit from President Lincoln’s advice: “It’s better to keep your mouth shut and be thought a fool than to open it and remove all doubt.”

Here is a little bit of Mr. Brill’s article:

Congress, engaged in an ambitious process to reform the patent system in the U.S., is contemplating changing the rules with regard to inequitable conduct. Shockingly, however, they are being asked to weaken, not strengthen, the deterrent against fraud. Opponents of current law–companies holding complex but valuable patents–claim that inequitable conduct is asserted too freely and the cost of defending themselves against false claims of lying and cheating are too great. They also claim that rendering a patent unenforceable is too severe a punishment for firms found to have deceived the PTO.

But as is the case with executives who lie to the SEC, forceful punishment is the best deterrent against fraud at the PTO. A strong deterrent is necessary to produce confidence in the entire patent system so that investors are willing to risk their capital to develop new innovations. In fact, losing protection for one’s patents may be an inadequate deterrent in many circumstances, such as when it occurs near the end of a patent’s life.

Companies that feel overly burdened by current law should take solace in the fact that the government does not throw patent holders that lie and cheat behind bars. While an orange jumpsuit may be overkill when it comes to crimes at the PTO, let’s hope Congress recognizes that there is no basis to defang the inequitable conduct defense and perhaps should consider putting some more teeth into it.

If you read Mr. Brill’s profile on the American Enterprise Institute you realize quickly how and why it is that he has little or no knowledge on patent matters. Apparently he is a former senior adviser and chief economist to the House Ways and Means Committee, served on the staff of the President’s Council of Economic Advisers, where he worked on economic and legislative policy issues, including dividend taxation, the alternative minimum tax, international tax policy, social security reform, defined benefit pension reform, and U.S. trade policy. So according to his bio he has no experience with patent law or the patent system, but that didn’t seem to deter him from showing is ignorance in patent matters, and simply not understanding the inequitable conduct matter.

You see, Mr. Brill, the reason inventors and corporations are upset about inequitable conduct is because the Federal Circuit refuses to acknowledge the Patent Office definition of the duty of candor owed by those substantively involved in the prosecution of a patent application. The Patent Office wants only information submitted to the Patent Office that would support a valid rejection. Some of the judges on the Federal Circuit think that applicants should be required to disclose everything that is interesting or potentially related in any way to an application, even if those references can be distinguished and would not justifiably be capable of use for a valid rejection. You see, Mr. Brill, the problem is the ever moving standard and the refusal of the Federal Circuit to understand that what they are doing is requiring patent applicants to bury the Patent Office with loads of unrelated references out of fear of inequitable conduct. At the same time, the Director of the Office of Enrollment and Discipline is on record as saying that attorneys who submit volumes of information are subject to investigation for a breach of ethics despite that is exactly what some of the Federal Circuit judges mandate. So patent applicants and their representatives are damned if they do and damned if they don’t. Of course you thought about this before you wrote your brilliant article, right?

Also, Mr. Brill, I am sure that you realize that the same Federal Circuit that ignores Patent Office rule 37 CFR 1.56, is also the same Federal Circuit that recently decided that the Patent Office is owed great deference and practically everything they announce and require by way or rules is procedural and MUST be allowed and followed. You see, the problem is that patent applicants are forced to follow the rules enacted by the Patent Office, but yet the Federal Circuit is not so burdened by listening to the Patent Office and following what are clearly procedural rules.

Another thing, Mr. Brill, inequitable conduct is not about lying or cheating. If a material reference is known and not disclosed there can be inequitable conduct found even without a showing of intent. The Federal Circuit decided about two decades ago that gross negligence could not lead to inequitable conduct, but that en banc ruling has largely been ignored with various panels and judges deciding that negligence can lead to inequitable conduct. Are you really suggesting that people go to jail or be found to have engaged in criminal conduct as a result of making a mistake where there is no intent? I am willing to give you the benefit of the doubt and belief you are just clueless when it comes to inequitable conduct and what can lead to inequitable conduct findings, because if you are actually suggesting that negligence lead to criminal sanctions I would have to simply conclude you have lost your marbles.

Finally, Mr. Brill, let me explain to you why inequitable conduct is believed to be a scourge to patent litigation. If inequitable conduct is found all of the claims in a patent application are determined to be unenforceable, and it is possible that in some cases the taint would contaminate related patent applications. The penalty is severe, and it is a silver bullet defense, so it gets alleged constantly even when there are no facts to support it. Although it is a fraud based defense district courts routinely allow it to be plead as a defense when there is absolutely no evidence of fraud. In every other context in the law fraud needs to be plead with specificity, but not with inequitable conduct. It is alleged as a defense and the infringer goes on a fishing expedition trying to find fraud, or more recently negligence, that could be the basis for a finding of unenforceability.

Inequitable conduct need reform, and that is the only thing I agree with Mr. Brill on. The reform that is needed must mandate that the Federal Circuit follow Rule 56, and must also mandate that inequitable conduct can be raised as a defense if and only if it can be plead with specificity. Of course, at the beginning of a litigation that would mean inequitable conduct can never be plead, which is the way it should be. If, however, during discovery evidence is uncovered defendants should be allowed to amend their Answer and raise the defense, but only if there is evidence. This is the reform that is needed, and we do not need to make it any easier or throw people in jail, not at least until we have a single, unwavering definition of what is the duty of candor. Without a concrete definition that even the Federal Circuit has to accept the target would be a moving one, which would mean any criminal prosecution would fail because the law is not certain.

About the Author

Eugene R. Quinn, Jr.
President & Founder of IPWatchdog, Inc.
US Patent Attorney (Reg. No. 44,294)
Zies, Widerman & Malek

B.S. in Electrical Engineering, Rutgers University
J.D., Franklin Pierce Law Center
L.L.M. in Intellectual Property, Franklin Pierce Law Center

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Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Known by many as “The IPWatchdog,” Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.