Amicus Curiae Brief — Ferring B.V. v. Barr Laboratories, Inc. (No. 06-372)

MOTION FILED

OCT 6 - 2006 Cy

No. 06-372

IN THE 7

Supreme Court of the United States

FERRING B.V. and

AVENTIS PHARMACEUTICALS, INC.,

Petitioners,

-

BARR LABORATORIES, INC.,

Respondent.

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Federal Circuit

MOTION FOR LEAVE TO FILE BRIEF AND

BRIEF OF WASHINGTON LEGAL FOUNDATION

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

Daniel J. Popeo

Richard A. Samp

(Counsel of Record)

Washington Legal Foundation

2009 Massachusetts Ave., NW

Washington, DC 20036

(202) 588-0302

Date: October 6, 2006

WiLSON-EPES PRINTING Co., INC. — (202) 789-0096 — WASHINGTON, D.C. 20001

IN THE

SUPREME COURT OF THE UNITED STATES

No. 06-372

FERRING B.V. and

AVENTIS PHARMACEUTICALS . INC.,

Petitioners,

Vv.

BARR LABORATORIES, INC.,

Respondent.

_ On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Federal Circuit

MOTION FOR LEAVE TO FILE BRIEF OF

WASHINGTON LEGAL FOUNDATION AS

AMICUS CURIAE IN SUPPORT OF PETITIONERS

Pursuant to Rule 37.2 of the Rules of this Court, the

Washington Legal Foundation (WLF) respectfully moves for

leave to file the attached brief as amicus curiae in support of

Petitioners. Counsel for Petitioners has consented to the filing

of this brief. Counsel for Respondent declined to consent,

thereby necessitating the filing of this motion.

WLF is a non-profit public interest law and policy center

with supporters in all 50 states. WLF regularly appears before

federal and state courts to promote economic liberty, free

enterprise, and a limited and accountable government.

In particular, WLF has appeared in numerous federal and

state courts in cases raising issues related to health care

delivery. See, e.g., Pharmaceutical Research and Manufac-

turers of America v. Walsh, 538 U.S. 644 (2003). WLF suc-

cessfully challenged the constitutionality of Food and Drug

Administration (FDA) restrictions on speech regarding off-

label uses of FDA-approved products. Washington Legal

Found. v. Friedman, 13 F. Supp. 2d 51 (D.D.C. 1998), appeal

dism’d, 202 F.3d 331 (D.C. Cir. 2000). WLF also has

participated in numerous court proceedings raising important

issues regarding the scope and validity of pharmaceutical

patents. See, e.g., Purdue Pharma, L.P. v. Endo

Pharmaceuticals, Inc., 438 F.3d 1123 (Fed. Cir. 2006)

(opposing efforts to invalidate patent on grounds of inequitable

conduct); SmithKline Reecham.Corp. v. Apotex Corp., 403

F.3d 1331 (Fed. Cir. 2005), cert. denied, 126 S. Ct. 2887

(2006); Pfizer, Inc. v Dr. Reddy’s Laboratories, Ltd., 359

F.3d 1361 (Fe Cir. 2004); Allergan, Inc. v. Alcon

Laboratories, Inc. *?4F.3d 1322 (Fed. Cir.), cert. denied, 540

U.S. 1048 (2003).

WLIF strongly supports providing patent protection to

pharmaceutical manufacturers that develop new and useful

drugs. WLF believes that if advances in health care are to

continue, it is vital that companies that develop new drugs and

medical devices be afforded a substantial period of exclusivity,

during which potential competitors are not permitted to market

the same product. That exclusivity period provides an

economic incentive for new product development by ensuring

that pharmaceutical companies that gamble the substantial

sums necessary for the development of new therapies will be

able to reap substantial rewards in those few instances in

which their research and development expenditures bear fruit.

WLEF also recognizes that Congress has imposed limits

on patent rights and that those Jimits must be strictly enforced

by the courts if competition is to be maintained. Nonetheless,

WLF believes that the Federal Circuit’s decisions in this and

similar cases — which have invalidated numerous important

patents on inequitable conduct grounds — have the potential to

undermine our nation’s patent svstem if allowed to stand.

WLF is concerned that the Federal Circuit’s “inequitable

conduct” case law has drifted far afield from its “unclean

hands” roots. By lowering the bar for those charging patent

invalidity due to inequitable conduct, the Federal Circuit has

considerably increased the risks to those asserting patent rights

and considerably reduced the market value of all patents.

WLF is concerned that if the property rights of patent holders

can be so easily eliminated, the public will quickly lose faith

in the viability of our patent system.

WLF fully supports Petitioners’ request that the Court

grant review of both of the Questions Presented in this

Petition. WLF writes separately in order to emphasize its

particular concern over the first Question Presented and the

Federal Circuit’s expansion of what constitutes a “material”

omission from a patent application.

WLF is filing this brief because of its interest in

promoting the stability of the nation’s patent system; it has no

interest, financial or other, in the outcome of this lawsuit.

Because of its lack of direct economic interests, WLF believes

that it can assist the Court by providing a perspective that is

distinct from that of any party.

For the foregoing reasons, the Washington Legal

Foundation respectfully requests that it be allowed to

participate in this case by filing the attached brief.

October 6, 2006

Respectfully submitted,

Daniel J. Popeo

Richard A. Samp

(Counsel of Record)

Washington Legal Foundation

2009 Massachusetts Ave, NW

Washington, DC 20036

(202) 588-0302

QUESTION PRESENTED

Amicus curiae addresses the following issue only:

Whether the U.S. Court of Appeals for the Federal

Circuit has improperly expanded the scope of the inequitable

conduct doctrine by lowering the threshold of what constitutes

“material” information that a patentee must disclose to the U.S.

Patent and Trademark Office so as to include information that

has no bearing on patentability.

ii

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ............2:..2000:. iv

INTERESTS OF THE AMICUS CURIAE ..........-.

STATEMENT OF THECASE................0000. 2

REASONS FOR GRANTING THE PETITION ....... 6

I. REVIEW IS WARRANTED BECAUSE THE

DECISION BELOW CONFLICTS. WITH THIS

COURT’S UNDERSTANDING OF WHAT

CONSTITUTES “INEQUITABLE CONDUCT” .. 8

II. REVIEW IS WARRANTED BECAUSE OF THE

TREMENDOUS UNCERTAINTY BEING

CREATED BY THE FEDERAL CIRCUIT’S

INEQUITABLE CONDUCT DECISIONS ...... 13

Ii. PETITIONERS HAVE NOT WAIVED THEIR

RIGHT TO CHALLENGE THE FEDERAL

CIRCUIT’S MATERIALITY AND INTENT

RD 555 nck ae cheske) Hee 16

CRP AMY oh c cb dvctreiesssescbieeeneee 18

iv

TABLE OF AUTHORITIES

Page

Cases:

Air Freight System, Inc. v. NLRB,

EE 11

American Hoist & Derrick Co. v. Sowa & Sons, Inc.,

eee me Bowe rea. CW. 19G4) 2... ccc ccccccccees 9

Anderson v. Liberty Lobby, Inc.,

CG 18

Burlington Industries, Inc. v. Dayco Corp.,

849 F.2d 1418 (Fed. Cir. 1988) .................. 13

Corona Cord Tire Co. v. Donovan Chemical Corp.,

I EE 1]

Harris Trust and Savings Bank v.

Salomon Smith Barney Inc.,

ND og ccc nsveccescvesesvesece 17

Keystone Driller Co. v. General Excavator Co.,

MENDED oc cycccesesecesess 10, 11, 12, 13

Kingsdown Medical Consultants. Ltd.

v. Hollister, Inc.,

863 F.2d 867 (Fed. Cir. 1988)(en banc) ......... 13,14

Lebron v. National Railroad Passenger Corp.,

re 17

Precision Instrument Manufacturing Co. v.

Automotive Maintenance Machinery Co.,

co Te

Republic of Rwanda v. Uwimana,

274 F.3d 806 (4th Cir. 2001) ............0........

Yee v. City of Escondido,

os Be 4: | Sa

Page

Rules and Regulations:

Rule 609, Federal Rules of Evidence ............... 15

Rule 26(b)(4), Federal Rules of Civil Procedure ...... 15

eee fGen eeriveRnn 15

pig he Rr ee me porns 12

Miscellaneous:

National Research Council, A Patent System for the

21st Century (2004), http://www.nap.edu/html/

patent system/0309089107. pdf ................... at

IN THE

SUPREME COURT OF THE UNITED STATES

No. 06-372

FERRING B.V. and

AVENTIS PHARMACEUTICALS, INC.,

Petitioners,

Vv.

BARR LABORATORIES, INC.,

Respondent.

On Petition for Writ of Certiorari

to the United States Court of Apreals

for the Federal Circuit

BRIEF OF WASHINGTON LEGAL FOUNDATION AS

AMICUS CURIAE IN SUPPORT OF PETITIONERS

INTERESTS OF AMICUS CURIAE

The interests of amicus curiae Washington Legal Foun-

dation (WLF) are set forth in the motion accompanying this

brief.'

' Pursuant to Supreme Court Rule 37.6, WLF states that no

counsel for a party authored this brief in whole or in part; and that no

person or entity, other than WLF and its counsel, contributed

monetarily to the preparation and submission of this brief.

2

STATEMENT OF THE CASE

This case raises important issues regarding the

circumstances under which it is appropriate for federal courts

to decline to enforce an otherwise valid patent, on the grounds

that the patent holder engaged in inequitable conduct before

the U.S. Patent and Trademark Office (PTO).

Petitioners filed suit against Respondent Barr

Laboratories, Inc. in 2002, alleging that Barr was infringing a

patent issued in 1992 (the “Ferring Patent”). The invention

_ describes a method for orally administering DDAVP (an

antidiuretic drug used to treat diabetes insipidus). Prior to the

invention, DDAVP was administered only through the nasal

passages. ~

During proceedings before the PTO, an issue arose

concerning whether the invention was anticipated by prior art.

The examiners suggested that the inventor, Dr. Hans Vilhardt,

submit “evidence from a non-inventor” regarding whether an

earlier patent (the “Zaoral Patent’) suggested oral

administration of DDAVP for gastrointestinal absorption. Pet.

App. 3a. In response, Vilhardt in 1986 submitted four

declarations on that issue — two from himself and one each

from Dr. Myron Miller and Dr. Paul Czernichow. Jd. 3a-4a.

Later, in response to additional concerns raised by the

Board of Patent Appeals and Interferences, Dr. Vilhardt in

1990 submitted five additional declarations to the effect that an

1973 article written by Ivan Vavra (the “Vavra reference”),

even when read in combination with the Zaoral Patent, would

not suggest the gastrointestinal absorption of DDAVP. These

declarations were sworn to by the three 1986 declarants, as

well as by Dr. Iain Robinson and Dr. Tomislav Barth. /d. 6a.

There has been no suggestion in these proceedings that any of

3

_ the declarations was false. The PTO issued the Ferring Patent

without elaboration in September 1991. Vilhardt assigned his

patent rights to Petitioner erring B.V., which in turn signed

an exclusive licensing agreement with Petitioner Aventis

Pharmaceuticals, Inc. Jd. 3a, 7a.

Petitioners filed suit after Barr announced in July 2002

that it intended to market a generic version of the compound

at issue. Jd. 7a. Barr moved for summary judgment, claiming

that its marketing plans would not infringe the Ferring Patent

and that the patent was invalid due to inequitable conduct

before the PTO. In February 2005, the district court granted

summary judgment on both grounds. /d. 50a-85a. The court

concluded that the PTO “must have relied substantially” on the

declarations of Drs. Czernichow, Robinson, and Barth in

allowing the Ferring Patent. Jd. 56a. The court noted that

those declarations did not disclose that each of those three

individuals had had prior business relationships with Ferring

(albeit they had no business relationships at the time they

signed their declarations): Dr. Czernichow had (unbeknownst

to Dr. Vilhardt) served as a consultant to Ferring, Dr.

Robinson had been employed by Ferring and was a friend of

Dr. Vilhardt, and Dr. Barth had intermittently worked on

Ferring-funded projects (albeit he was never compensated by

Ferring). The court determined that their declarations were

“highly material,” id. 68a, and that the three declarants’

relationships with Ferring were material as well. /d. 64a. It

also determined that the failure to disclose those relationships

was done with “an intent to deceive” the PTO. Jd. 67a. The

court then determined that the applicant’s misconduct was “so

culpable that the patent should be held unenforceable.” Jd.

68a.

A divided Federal Circuit affirmed. Jd. 1a-49a. The

appeals court explained that under established Federal Circuit

itd 4

case law a patent will be declared unenforceabie due to

inequitable conduct if the alleged infringer can demonstrate

that: (1) the applicant made an affirmative misrepresentation

of material fact, or failed to disclose material information to

the PTO; (2) the misrepresentation or omission was undertaken

with intent to mislead; and (3) the applicant’s conduct is

sufficiently culpable to warrant a determination that the patent

should be held unenforceable. Jd. 9a.? The court stated that

information is deemed “material” if there is “a substantial

likelihood that a reasonable examiner would have considered

the information important in deciding whether to allow the

application to issue as a patent.” Jd. 10a. The court said that

a declarant’s past relationship with a patent applicant meets

that materiality standard whenever: (1) the declarant’s views

on “the underlying issue” are material; and (2) the relationship

to the applicant “was a significant one.” Jd. 13a-14a. The

court determined that those standards had been met in this

case. Id. 14a.° The appeals court’s determination that the

omissions were “highly” material, id. 14a and 18a, included no

discussion of the declarations of Dr. Miller. Dr. Miller, whose

lack of a relationship with Ferring has never been disputed,

largely replicated the opinions contained in the disputed

declarations. aa —

The appeals court also determined that the applicant’s

omissions were made with an intent to deceive. /d. 18a-24a.

While conceding the absence of any direct evidence of such

intent, the court said that intent could be inferred, even at the

The appeals court stated that the district court’s materiality and

intent findings were subject to de novo review. Id. 10a.

> The court said that “the omitted affiliation with respect to

Robinson in particular was highly material since Robinson had actually

- been employed by Ferring.” /d. 25a.

5

summary judgment stage, when the omitted information is

“highly material” and: (1) the applicant knew of the infor-

mation; (2) the applicant knew “or should have known” of its

materiality; and (3) the applicant has not provided “any

credible explanation for the withholding.” Jd. 19a. The court

said that all those conditions had been met. /d.

The appeals court expressed no opinion regarding

whether the PTO’s decision would have been affected if Dr.

Vilhardt had disclosed the three declarants’ past relationships

with Ferring, stating: “While we will never know how the

examiners may have weighed the declarations differently, it

seems Clear to us that this stellar showing of support would

have, at the very least, been tarnished.” /d. 26a. Finally, the

appeals court held that the district court’s “ultimate finding of

inequitable conduct” was not an abuse of discretion. /d.*

Judge Newman dissented./d. 28a-49a. Disagreeing with

both the materiality and intent findings of the majority, Judge

Newman charged that the majority had “replac[ed] the need for

evidence with a ‘should have known’ standard of materiality,

from which deceptive intent is inferred, even in the total

absence of evidence.” Jd. 32a. She noted, “There is no

evidence, or even an allegation, that any of these scientists

[i.e., Drs. Czernichow, Robinson and Barth] had anything to

gain or lose as a result of issuance of the [Ferring] patent.” Jd.

35a.

“ The appeals court did not address the district court’s alternative

holding that Barr did not infringe the Ferring patent.

6

REASONS FOR GRANTING THE PETITION

This case raises patent law issues of exceptional

importance. While allegations of inequitable conduct are easily

made, any such ruling overturns the PTO’s decision to allow

a patent and has enormous practical and financial

consequences for the parties involved.© WLF agrees with

Petitioners that review is warranted on both of the questions

presented; we write separately to focus particular attention on

the need for this Court to address the types of “material”

omissions that warrant judicial refusal to enforce an otherwise

valid patent.

Review is warranted because the Federal Circuit has

departed so fundamentally from this Court’s rationale for

creating an “inequitable conduct” defense to a patent

infringement claim. As the Court explained more than 60

years ago, “[t}he guiding doctrine” in patent cases in which

inequitable conduct is alleged “is the equitable maxim that ‘he

who comes into equity must come with clean hands.”

Precision Instrument Manufacturing Co. v. Automotive

Maintenance Machinery Co., 324 U.S. 806, 814 (1945). The

“unclean hands” doctrine “closes the doors of a court of equity

to one tainted with inequitableness or bad faith relative to the

matter in which he seeks relief.” /d. An important limitation

on application of the unclean hands doctrine is that it has never

been applied to a plaintiff based simply on the fact that the

plaintiff has engaged in misconduct; rather, the doctrine is

strictly limited to situations in which some unconscionable act

* One non-obvious consequence is potentially ruinous litigation:

patent holders whose patents are overturned based on findings of

inequitable conduct routinely are hit with numerous antitrust class

actions alleging that they drove up prices by improperly restraining

competition.

-

committed by the plaintiff has immediate and necessary

relation to the equity he seeks.

One searches the Federal Circuit’s “inequitable conduct”

decisions in vain for any indication that that court is basing its

decisions on anything remotely resembling the “unclean

hands” approach mandated by Precision Instrument. Instead,

the Federal Circuit has developed an elaborate set of rules for

determining when omitted information should be deemed

material and when the patentee should be deemed to have

acted with the requisite intent. All too frequently, the result of

those rules has been travesties such as the decision at issue

here: a patent is struck down based on alleged “inequitable

conduct” despite the absence of even an allegation that any of

the information submitted in support of the patent was false or

misleading. By interpreting materiality so broadly, the Federal

Circuit in essence is attempting to write the rules of evidence

for the PTO; such rules have little relationship to the “unclean

hands” doctrine and — because they are being written after the

fact — have thrown into doubt the validity of numerous existing

patents. Review is warranted to resolve the sharp conflict

between this Court’s understanding of “inequitable conduct”

and the Federal Circuit’s recent “inequitable conduct”

decisions.

Review is also warranted because of the tremendous

uncertainty among patent holders being created by the Federal

Circuit’s inequitable conduct decisions. At the same time that

the Federal Circuit is inexorabiy expanding the definition of a

“material” omission, it has declined to provide precise

guidelines regarding what evidence must be submitted to the

PTO and has made absolutely clear that it does not deem itself

bound by any evidentiary rules established by the PTO. The

result is that applicants must guess regarding what evidence

must be submitted, with the potential penalty for a wrong

8

guess being the invalidation of an otherwise valid patent.

Moreover, given the Federal Circuit’s demonstrated

willingness to apply its broadened standards to patents issued

15 or more years ago, an applicant’s guessing game entails

determining not only what the Federal Circuit might deem

“material” today but also what it might deem “material” 15

years from now. Review is warranted to permit this Court to

establish a readily comprehensible inequitable conduct

standard on which applicants can rely.

Finally, there is no merit to Barr’s contention that

Petitioners have in some manner waived their right to

‘challenge the Federal Circuit’s materiality and intent

standards. Throughout these proceedings, Petitioners have

contested allegations that information omitted from the Ferring

Patent application was material and that those alleged

omissions were undertaken with an intent to deceive the PTO.

By raising those issues below, Petitioners have preserved the

right to raise them again in this Court — and to introduce any

and all arguments relevant to those issues, including arguments

that the Federal Circuit’s broad definitions of materiality and

intent are inconsistent with this Court’s approach to.

“inequitable conduct” cases.

I. REVIEW IS WARRANTED BECAUSE THE

DECISION BELOW CONFLICTS WITH THIS

COURT’S UNDERSTANDING OF WHAT

CONSTITUTES “INEQUITABLE CONDUCT”

It has now been more than 60 years since the Court last

addressed the circumstances under which an otherwise-valid

patent should be held unenforceable based on the applicant’s

inequitable conduct before the Patent Office. That case,

Precision Instrument, held a patent unenforceable based on

findings that: (1) Automotive, the applicant, learned that a

9

competing applicant had committed perjury during interference

proceedings; (2) Automotive used that information to |

blackmail the competing applicant into assigning his patent

rights to Automotive and agreeing never to contest the

resulting patent; (3) Automotive never revealed the patent’s

fraudulent ancestry to the Patent Office; and (4) the result of

its actions was that Automotive was issued a patent with

claims broader than those to which Automotive was actually

entitled. Precision Instrument, 324 U.S. at 818-19. The Court

held that those facts “‘all add up to the inescapable conclusion

that Automotive has not displayed that standard of conduct

requisite to the maintenance of this suit in equity,” and it

applied the “unclean hands” doctrine to deny enforcement of

any part of the patent. /d. at 819.

As Petitioners note, in the ensuing decades the federal

appeals courts struggled to determine just how close the

relationship between omitted information and issues raised in

PTO proceedings must be* before the omission can be deemed

sufficiently material to warrant application of the “unclean

hands” doctrine. Pet. 17-18. The appeals courts developed at

least three conflicting standards of materiality. Jd. But

following creation of the Federal Circuit, that court chose to

adopt none of the three competing definitions of materiality

and instead adopted its own, broader definition: information

is deemed material where there is “a substantial likelihood”

that a reasonable examiner would consider it “important” in

deciding to allow the application to issue as a patent.

American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d

1350, 1362 (Fed. Cir. 1984). In ensuing years, the Federal.

Circuit has repeatedly expanded its definition of the

© Or between an affirmative misrepresentation and issued raised

in PTO proceedings.

10

information a reasonable examiner would consider important,

so that now, as illustrated by the decision below, virtually any

information that bears on the credibility of any evidence

submitted to the PTO on a contested issue is deemed material.

That standard of materiality bears little resemblance to

“unclean hands” doctrine and conflicts sharply with this

Court’s understanding of what constitutes “inequitable

conduct.” In particular, the Federal Circuit’s materiality

standard fails to heed this Court’s admonition regarding strict

limits on application of “unclean hands” doctrine:

But courts of equity do not make the quality of suitors

the test. They apply the maxim requiring clean hands

only where some unconscionable act of one coming for

relief has immediate and necessary relation to the equity

that he seeks in respect of the matter in litigation.

Keystone Driller Co. v. General Excavator Co., 290 U.S. 240,

245 (1933) (emphasis added).

In Keystone Driller, the Court applied “unclean hands”

doctrine to dismiss a patent infringement action, where the

evidence showed that: (1) an individual may have engaged in

prior use of the claimed invention (a circumstance which, if

true, would have invalidated a patent); (2) following issuance

of the patent, the patentee paid the individual not to disclose

his prior use and to sign an affidavit stating that his use of the

device was merely an abandoned experiment; and (3) the

individual failed to disclose these arrangements in his

subsequent deposition. /d. at 243. But in other cases, the

court has declined to apply “unclean hands” doctrine where the

plaintiffs’ misconduct did not have a sufficiently “immediate

and necessary relation” to the equitable relief sought, to

warrant non-enforcement of the patent. See, e.g., Corona

11

Cord Tire Co. v. Donovan Chemical Corp., 276 U.S. 358,

373-74 (1928) (applicant’s submission of false affidavits to

Patent Office did not warrant non-enforcement of patent,

because the falsehoods were not crucial to issuance of the

patent).

In more recent times, the Court upheld the NLRB’s

decision not to apply the “unclean hands” doctrine to bar

reinstatement of a fired employee, despite the employee’s

perjured testimony regarding the reason he was late for work.

Air Freight System, Inc. v. NLRB, 510 U.S. 317 (1993). The

NLRB had reasoned that the perjury was not sufficiently

material to the issue of reinstatement, because (the NLRB

determined) the employee had actually been fired in retaliation

for union activity, not (as the company alleged) because of his

tardiness. Jd. at 321. Similarly, the Fourth Circuit declined to

apply the “unclean hands” doctrine-to bar an award of

equitable relief to a foreign government accused of persecuting

a political opponent, where there was no “close nexus between

a party’s unethical conduct and the transactions on which that

party seeks relief.” Republic of Rwanda v. Uwimana, 274 F.3d

806, 810 (4th Cir. 2001) (citing Keystone Driller).

The Federal Circuit’s determination in this case — that

‘virtually any evidence that bears on credibility of material

evidence should itself be deemed material for purposes of

adjudicating “inequitable conduct” claims — cannot be squared

with Precision Instrument and Keystone Driller. Such

credibility evidence can rarely, if ever, be deemed to bear an

“immediate and necessary relation” (Keystone Driller, 290

U.S. at 245) to whether the Ferring Patent should have been

issued. Even if the Federal Circuit were correct that a

reasonable examiner would have thought it “important” that

Drs. Czernichow, Robinson, and Barth had prior professional

relationships with Ferring, such evidence is sufficiently

12

tangential to the accuracy of their declarations that it cannot

meet Keystone Driller’s “immediate and necessary relation”

test. That is particularly true where, as here, there is no

evidence in the record seriously calling into question the

accuracy of their declarations.’

The declarants’ prior professional relationships with

Ferring is rendered all the more tangential when one considers

that their testimony was cumulative. Dr. Miller provided

declarations stating that neither the Zaoral Patent nor the

Vavra reference, nor the two of them in tandem, suggested oral

administration of DDAVP for gastrointestinal absorption. Dr.

Miller’s lack of a prior relationship with Ferring has never

been questioned. Because his testimony covered the same

ground covered by the Czernichow, Robinson, and Barth

declarations, there is little reason to suppose that an examiner

would have reached a different patenting decision even if he or

she had totally discounted the other three declarations for bias.

Indeed, the PTO explicitly excludes, from its own definition of

“material” information, any information that is “cumulative to

information already of record or being made of record in the

application.” 37 C.F.R. § 1.56(b), Pet. App. 96a.

The appeals court nonetheless made clear that it

considers a declarant’s past relationship with a patent applicant

” That assessment does not change simply because an examiner in

1986 recommended to Dr. Vilhardt that he obtain “non-inventor”

statements (a recommendation not repeated when Dr. Vilhardt collected

his second round of declarations four years later), Dr. Vilhardt literally

complied with that request: none of the declarants other than Dr.

Vilhardt was an inventor of the claimed invention. Moreover, the prior

relationships that Drs. Czernichow, Robinson, and Barth had with

Ferring made them far less interested witnesses than if, for example,

they were being paid for their testimony or if they stood to profit from

the patenting or marketing of the claimed invention.

13

to be “material” whenever the declarant’s views are material to

a contested issue in the application process and the relationship

is a “significant” one. Pet. App. 13a-14a. Indeed, the appeals

court for some unspecified reason determined that the past

relationships in this case (particularly Dr. Robinson’s) were

“highly material,” id. 18a and 25a, a determination that caused

the appeals court to apply a relaxed standard for finding

“intent” to deceive. The court made clear that this expansive

definition of “material” applies to any evidence of past

relationships between a declarant and a patent applicant,

regardless of whether the declarant’s statements are

cumulative. Review is warranted to resolve the conflict

between that Federal Circuit standard and this Court's

admonition that the “unclean hands” doctrine only applies

when Keystone Driller’s “immediate and necessary relation”

test is met.

Il. REVIEW IS WARRANTED BECAUSE OF THE

TREMENDOUS UNCERTAINTY BEING

CREATED BY THE FEDERAL CIRCUIT'S

INEQUITABLE CONDUCT DECISIONS

As Petitioners have well documented, the Federal

Circuit's expansion of the inequitable conduct doctrine far

beyond its unclean hands origins has led to inclusion of

inequitable conduct defenses in virtually all patent

infringement actions. Pet. 12-13. The Federal Circuit itself

has described the proliferation of such claims as “‘an absolute

plague” on the patent system. Burlington Industries, Inc. v.

Dayco Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988). The

Federal Circuit attempted to address that problem a number of

years ago by tightening somewhat the standards for

establishing that a patent applicant intended to deceive the

PTO. See Kingsdown Medical Consultants, Ltd. v. Hollister,

Inc., 863 F.2d 867, 876-77 (Fed. Cir. 1988) (en banc). But

14

Kingsdown did not address the Federal Circuit’s overly broad

materiality standard, and in the intervening years, the circuit’s

definitions of materiality and intent have only grown more

encompassing. As Judge Newman argued in dissent, the

majority:

[N]ot only ignore[s] Kingsdown and restore[s] a casually

subjective standard, they also impose a positive inference

of wrongdoing, replacing the need for evidence with a

“should have known” standard of materiality, from

which deceptive intent is inferred, even in the total

absence of evidence. Thus the panel majority infers

material misrepresentation, infers malevolent intent,

presumes inequitable conduct, and wipes out a valuable

property right, all on summary judgment, on the theory

that the inventor “should have known” that something

might be deemed material. |

Pet. App. 32a.

It is difficult to overestimate the chilling effect that such

decisions have on the research and development activities that

the patent system is intended to foster. If the business

community loses faith in the willingness of courts to uphold

patents, they are unlikely to be willing to continue to invest the

hundreds of millions of dollars typically required to bring a

new drug through research and testing and eventually to obtain

marketing approval. Indeed, the costs and uncertainties

associated with application of the inequitable conduct doctrine

led the National Research Council of the National Academies

of Science and Engineering in 2004 to recommend “the

elimination of the inequitable conduct doctrine or changes in

“its implementation.” National Research Council, A Patent

System for the 2]st Century (2004) at 123, http://www.nap.

15

edu/htm//patentsystem/0309089107.pdf. Review is warranted

to prevent the Federal Circuit’s inequitable conduct standards

from further eroding confidence in our patent system.

The practical problems created for patent applicants by

the decision below are readily apparent. Because the Federal

Circuit has made plain that it does not feel bound by the PTO’s

own evidentiary rules in determining what evidence is

“material” for inequitable conduct purposes, patent applicants

cannot seek guidance from the PTO’s rules — which, since at

least 1992, have defined materiality considerably more

narrowly than does the Federal Circuit. See 37 C.F.R. § 1.56,

Pet. App. 95a-97a. The decision below puts applicants on

notice that any evidence relevant to credibility might later be

deemed material for purposes of evaluating inequitable

conduct claims, because all such evidence might be deemed

likely to “interest” a reasonable examiner. For example, since

Rule 609 of the Federal Rules of Evidence states that evidence

of a criminal conviction is always admissible to impeach

witness credibility, applicants may be faulted in future Federal

Circuit inequitable conduct decisions for having failed to

disclose every criminal conviction of every individual whose

declaration is submitted to the PTO. Similarly, despite

Fed.R.Civ.P. 26(b)(4), applicants might be faulted for failing

to disclose the opinions of non-testifying experts.

While the court below stated that applicants must

disclose every “significant” relationship between a declarant

and an applicant, it provided little or no guidance regarding

what is meant by “significant.” Is a friendship between the

declarant and the inventor sufficient? What if the declarant

and the inventor once worked for the same company, but not

the company to whom the patent application has been

assigned? W. » ‘fthe inventor in the past signed a declaration

that assisted th. declarant in obtaining a separate patent of her

16

own? One might ordinarily think the answer to those

questions is “no”; but in light of the decision below — in which

a patent was invalidated on the basis of nondisclosure of past

relationships under which the declarants had nothing to gain

by issuance of the patent — applicants are left with a

tremendous amount of uncertainty. In areas of this type, a

bright-line rule of some sort — regardless of the form that rule

finally takes — is superior to the confusion sown by the current,

ill-defined rule. Review is warranted to permit the Court to

develop a bright-line rule that will provide clearer guidance to

patent applicants.

WLF is not suggesting that applicants need to be

provided greater leeway to hide damaging evidence from

patent examiners. Indeed, if the PTO determines that it would

‘like applicants to disclose the types of relationships that

existed between the declarants and Ferring in this case, WLF

would have no objection to the PTO’s adoption of an

evidentiary rule to that effect. What WLF finds objectionable

is the Federal Circuit arrogating to itself the power to write

after-the-fact evidentiary rules for the PTO. Review is

warranted to permit this Court to determine whether such after-

the-fact draftsmanship has a proper place in “unclean hands”

and inequitable conduct doctrine.

Ii]. PETITIONERS HAVE NOT WAIVED THEIR

RIGHT TO CHALLENGE THE FEDERAL

CIRCUIT’S MATERIALITY AND INTENT

STANDARDS

In its brief in opposition to the petition, Barr argued that

Petitioners have waived their right to challenge the federal -

circuit’s materiality and intent standards. Opp. Br. 13-16.

That argument is without merit.

17

Throughout these proceedings, Petitioners have contested

allegations that information omitted from the Ferring Patent

application was material and that those alleged omissions were

undertaken with an intent to deceive the PTO. By contesting

those issues below, Petitioners have preserved the right to

contest them again in this Court — and to introduce any and all

arguments relevant to those issues, including arguments that

the Federal Circuit’s broad definitions of materiality and intent

are inconsistent with this Court’s approach to “inequitable

conduct” cases. As the Court has repeatedly explained:

Our traditional rule is that “once a federal claim is

properly presented, a party can make any argument in

support of that claim; parties are not limited to the

precise arguments they made below.”

Lebron vy. National Railroad Passenger Corp., 513 U.S. 374,

379 (1995) (quoting Yee v. City of Escondido, 503 U.S. 519,

534 (1992)). See also Harris Trust and Savings Bank v.

Salomon Smith Barney Inc., 530 U.S. 238, 245 n.2 (2000).

A holding that Petitioners have waived materiality and

intent arguments would be pai ticularly inappropriate, because

the panel below was, by and large, applying existing Federal

Circuit law to the facts of this case and thus lacked authority

~ assuming it was so inclined — to overturn that existing law.

Accordingly, it would serve no purpose to require those in

Petitioners position — under threat of waiver — to raise below

a challenge to existing Federal Circuit materiality and intent

standards when that challenge would inevitably have been

denied. It is sufficient that Petitioners throughout this

li gation have contested claims that they failed *o present

material evidence to the examiners and that they did so with an

intent to deceive.

18

Nor is there any merit to Barr’s suggestion that the issues

raised by Petitioners should be permitted to continue to

percolate in the federal appeals courts before they are

considered by this Court. Under existing law, the only appeals

court that will ever hear patent law issues of this sort is the

Federal Circuit. That court has repeatedly rebuffed efforts to

scale back on its inequitable conduct case law to eliminate the

“plague” of inequitable conduct claims. Delay will not make

the issues raised by Petitioners any more suitable for review

than they are today. This case provides a particularly suitable

vehicle for addressing those issues: because the case comes to

the Court on a grant of summary judgment, there are no

disputed issues of fact. Rather, the evidence submitted by

Petitioners is accepted as true, and all reasonable inferences

are to be drawn in their favor. See, e.g., Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 255 (1986).

CONCLUSION

The Washington Legal Foundation respectfully requests

that the Court grant the petition for a writ of certiorari.

Respectfully submitted,

Daniel J. Popeo

Richard A. Samp

(Counsel of Record)

Washington Legal Foundation

2009 Massachusetts Ave., NW

Washington, DC 20036

(202) 588-0302

Date: October 6, 2006