Federal Circuit Affirms Inequitable Conduct Finding in Apotex v. UCB

The Federal Circuit's recent decision in Apotex, Inc. v. UCB, Inc., — F.3d —-, 2014 WL 3973498 (Aug. 15, 2014), confirms that the doctrine of inequitable conduct is not yet dead. The Federal Circuit significantly tightened the standard for proving a patent is unenforceable for inequitable conduct in Therasense, Inc. v. Becton, Dickinson, & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc). The doctrine had traditionally required proof of (1) a "material" misrepresentation or omission to the Patent Office, and (2) that the person responsible for the misrepresentation or omission did it with the intent to deceive. The significant change in Therasense was ratcheting up the standard for materiality, holding that conduct was material only if the examiner would not have issued the patent "but for" the conduct. Therasense allowed for only one exception to this high standard—"affirmative egregious misconduct," such as "the filing of an unmistakably false affidavit," is also material regardless of whether it would have changed the examiner's behavior.

Therasense was a concerted effort to eliminate most charges of inequitable conduct because the Court had observed too many defendants who tried to spin a patentee's innocent oversights into nefarious wrongdoing. Some speculated the doctrine had seen its last days, and most Federal Circuit decisions after Therasense have rejected inequitable conduct defenses. Novo Nordisk A/S v. Caraco Pharm. Labs., Ltd., 719 F.3d 1346 (Fed. Cir. 2013); In Re Rosuvastatin Calcium Patent Litig., 703 F.3d 511 (Fed. Cir. 2012); Outside the Box Innovations, LLC v. Travel Caddy, Inc., 695 F.3d 1285 (Fed. Cir. 2012); 1st Media, LLC v. Electronic Arts, Inc., 694 F.3d 1367 (Fed. Cir. 2012). But a couple decisions have continued to affirm inequitable conduct findings in outrageous cases. Intellect Wireless, Inc. v. HTC Corp., 732 F.3d 1339 (Fed. Cir. 2013); Aventis Pharma S.A. v. Hospira, Inc., 675 F.3d 1324 (Fed. Cir. 2012). And Apotex is another example.

Apotex dealt with a patent covering pharmaceutical compositions comprising meoxipril magnesium, an antihypertensive-converting enzyme (ACE) inhibitor, made by a wet granulation process. During prosecution, the examiner repeatedly rejected the pending claims as obvious in view of prior art that taught stabilizing ACE inhibitor drugs, including meoxipril, with an alkaline magnesium compound. To overcome those rejections, Apotex's counsel—upon the inventor's urging—repeatedly sought to distinguish the claims by arguing that the prior art did not teach a reaction between meoxipril hydrochloride with an alkaline stabilizing agent. The examiner allowed the claims only after Apotex both submitted the declaration of a third-party expert describing the prior art and concluding that, as Apotex's counsel had previously argued, it did not teach a reaction, and amended the independent claim to require "greater than 80%" conversion to meoxipril magnesium.

Following a 3-day bench trial, the district court concluded that the patent was unenforceable due to inequitable conduct. The district court found that the inventor of the patent (Apotex's founder and chairman, Bernard Charles Sherman) concealed from the PTO that a prior art product referenced in the specification—Univasc—was made by his claimed process and "misrepresented the nature of Univasc and the prior art through his counsel's arguments" and a declaration submitted by a third-party expert. Those findings were supported by evidence showing that the inventor knew the prior art Univasc product's wet granulation process involved a reaction, having conceded during trial he had a "strong suspicion" that was the case before filing his patent application, and because he was aware, during prosecution, of Apotex's own experimental data showing that meoxipril magnesium was present in Univasc. Further supporting evidence included continuing to misrepresent the prior art through the third-party expert's declaration, not providing full facts to the expert, and including within the patent example experimental examples that, although never conducted, were not presented as prophetic. The district court also found that the inventor withheld relevant art from the PTO.

Based on these facts, and in consideration of the Examiner's reasons for allowance, the district court found that these misrepresentations and omissions were but-for material. The district court alternatively concluded that the inventor engaged in egregious misconduct based on the numerous misrepresentations made during prosecution and for "abus[ing] the patent system by targeting a competitor's existing and widely available product [Univasc] and seeking to obtain a patent on it through lies and deception for the purpose of suing that competitor." On intent, the district court concluded that "the single most reasonable inference that could be drawn" was an intent to deceive the PTO, based on an overall pattern of conduct and poor credibility at trial.

On appeal, the Federal Circuit affirmed but-for materiality based on the inventor's affirmative and knowing misrepresentations of material facts regarding the prior art. Specifically, the Federal Circuit cited Apotex's misrepresentations about the prior art, including Univasc's composition, having in hand internal data demonstrating that it contained meoxipril magnesium. The Federal Circuit noted that the "Examiner's rejections were based on the very same prior art that is the subject of Dr. Sherman's misrepresentations," that Apotex's expert declaration was "instrumental" in changing the Examiner's mind, and that the "Examiner's erroneous belief regarding the prior art corresponds precisely with Dr. Sherman's repeated misrepresentations made through his counsel and the hired expert."

The Federal Circuit also affirmed intent to deceive the PTO based on the inventor's knowledge that assertions in the specification about the prior art "were at least misleadingly incomplete, if not plainly inaccurate," his description in the specification in past tense of experiments that were never performed, and insisting that his counsel perpetuate misrepresentations about the prior art in argument and through the submission of a third-party expert declaration where the expert "was deliberately shielded from the truth."

One interesting aspect of the opinion is the Federal Circuit relied on "but for" materiality rather than invoking the "affirmative egregious misconduct" exception. The court did note that the inventor's "actions, at a minimum, come close to the type of affirmative conduct that in Therasense we held could justify finding inequitable conduct without showing but-for materiality." Indeed, the inventor had arranged for an expert to file a false affidavit, which Therasense offered as the quintessential example of affirmative egregious misconduct, and a subsequent case held an inventor's submission of a false declaration was egregious misconduct. Intellect Wireless, Inc. v. HTC Corp., 732 F.3d 1339, 1343-44 (Fed. Cir. 2013) (affirming finding of egregious misconduct where declaration falsely suggested an actual reduction to practice and subsequent affidavits did not expressly inform PTO of misrepresentation). An additional wrinkle here, however, was that it was not the inventor himself who submitted the false affidavit—he arranged for an expert (who was seemingly oblivious to Apotex's internal data) to submit one. It would not seem that this should matter, but, perhaps the Federal Circuit decided not to deal with this additional complexity given that the misrepresentations were already "but-for" material. Nevertheless, the Apotex court's suggestion that the '556 inventor's conduct may rise to the level of egregious conduct provides a benchmark against which litigants may assess their facts and analogize.

The Federal Circuit's opinion also offers guidance on the line between advocacy and misrepresentation. The Court made clear that there is no duty to disclose mere "suspicions or beliefs regarding the prior art." However, when personal beliefs are substantiated by fact—as in this case where the inventor had data showing that the prior art process matched the claimed process—continuing to advocate contrary to those beliefs and facts amounts to a misrepresentation.