Amicus Curiae Brief — Aventis Pharma S.A. v. Amphastar Pharmaceuticals, Inc. (No. 08-937)

2 ia aes

e @) FEB 25 2009

OFFICE OF THE CLERK

No. 08-937

IN THE

Supreme Court of the United States

AVENTIS PHARMA S.A.

AND AVENTIS PHARMACEUTICALS INC.,

Petitioners,

Vv.

AMPHASTAR PHARMACEUTICALS, INC.

AND TEVA PHARMACEUTICALS USA, INC.,

Respondents.

On Petition for a Writ of Certiorari

To the United States Court of Appeals

For the Federal Circuit

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: February 25, 2009

WiLSON-EPES PRINTING Co., INC. — (202) 789-0096 - WASHINGTON, D.C. 20002

QUESTION PRESENTED

Whether a court may refuse to enforce an

otherwise valid patent on the basis of an inequitable

conduct determination premised on a sliding scale

between intent and materiality, with no weight

whatsoever given either to the magnitude of the patent

holder’s blameworthiness or to whether patent

examiners were ever misled.

il

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIZS 2... cc ccvwceccseces Vv

INTERESTS OF AMICUS CURIAE ............. ]

STATEMENT OF THE CASE .................. 3

REASONS FOR GRANTING THE PETITION ... 10

‘ REVIEW IS WARRANTED BECAUSE

THE DECISION BELOW CONFLICTS

WITH THIS COURT’S UNDER-

STANDING OF WHAT CONSTITUTES

“INEQUITABLE CONDUCT” ........... 13

A. Unenforceability Determi-

nations Should Be Limited

to Cases in Which Patent

Holders Have Committed

“Unconscionable” Acts That

Bear Some “Immediate and

Necessary Relation” to the

vo 2 aan 14

B. The Federal Circuit’s Inequi-

table Conduct Doctrine Does

Not Provide Any Mechanism

for Gradation of Penalties,

Nor Does It Require Consid-

eration of All the Equities.......... 19

II. REVIEW IS WARRANTED BECAUSE OF

THE TREMENDOUS UNCERTAINTY

BEING CREATED BY THE FEDERAL

CIRCUIT’S INEQUITABLE CONDUCT

oe 8 rr rrr rare ae

CI, se kk oy AY oe ees es ees

Vv

TABLE OF AUTHORITIES

Page(s)

Cases:

Air Freight System, Inc. v. NLRB

ee Se EE I) go eek ees eu tale wet annes 18

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

725 F.2d 1350 (Fed. Cir. 1964) ...........0060- 16

Burlington Industries, Inc. v. Dayco Corp.,

849 F.2d 1418 (Fed. Cir. 1988) ............. 9, 22

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

vo DER Ck.) re 17-18

Ferring B.V. v. Barr Labs., Inc.,

437 F.3d 1181 (Fed. Cir.),

cert. denied, 549 U.S. 1015 (2006) ..... i, 16, 22, 23

Hoffman-LaRoche, Inc. v. Promega Corp.,

323 F.3d 1354 (Fed. Cir. 2003) ............-0:. 16

Keystone Driller Co. v. General Excavator Co.,

BOO UB. BAP CIGSS) ow cc aces ccccces 17, 18

Kingsdown Medical Consultants. Ltd.

v. Hollister, Inc.,

863 F.2d 867 (Fed. Cir. 1988)(en banc) ......... 22

Merck & Co. v. Danbury Pharmaceutical, Inc.,

873 F.2d 1418 (Fed. Cir. 1989) ............... 16

Precision Instrument Manufacturing Co. v.

Automotive Maintenance Machinery Co..,

Bae ee. CCIE) 2 cee 13, 14, 15

Republic of Rwanda v. Uwimana,

274 F.3d 806 (4th Cir. 2001) ................. 18

Weinberger v. Romero-Barcelo,

406 UG. SOG, SIS (IGSZ) .. wc ccc. 20

Winter v. Natural Resources Defense Council,

Br Rt, PO NO) oc ut ee een caweeeean 20

vl

Page(s)

Statutes:

era Ce ont Src 28 er en de 4,5

I oe oe le es al Be ee ae 4,5

Miscellaneous:

National Research Council, A Patent System for the

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

patent system/0309089107.pdf................ 23

BRIEF OF WASHINGTON LEGAL FOUNDATION

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

INTERESTS OF AMICUS CURIAE

The Washington Legal Foundation (WLF) is a

non-profit public interest law and policy center with

supporters in all 50 States.' WLF devotes a substantial

portion of its resources to defending free-enterprise,

individual rights, 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 Manufacturers of America v. Walsh, 538 U.S. 644

(2003). WLF successfully challenged the constitu-

tionality of Food and Drug Administration (FDA)

restrictions on speech regarding off-label uses of FDA-

approved products. Washington Legal Found. uv.

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); Ferring B.V. v. Barr Labs., Inc.,

' Pursuant to Supreme Court Rule 37.6, WLF states that

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

thet no person or entity, other than WLF and its counsel, made a

monetary contribution intended to fund the preparation and

submission of this brief. More than ten days prior to the due date,

counsel for WLF provided counsel for Respondents with notice of its

intent to file this brief.

2

437 F.3d 1181 (Fed. Cir.), cert. denied, 549 U.S. 1015

(2006) (same).

WLF 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.

WLF also recognizes that Congress has imposed

limits on patent rij,hts and that those limits 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

judge-made inequitable ‘conduct grounds — have the

potential to undermine our nation’s patent system 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

3

eliminated, the public will quickly lose faith in the

viability of our patent system.

WLIF 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.

WLEF is filing its brief with the consent of all parties;

letters of consent have been lodged with the Court.

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 Cffice (PTO).

Petitioners Aventis Pharma S.A., et al.

(collectively, “Aventis”), developed (and for a number of

years have beer marketing) Lovenox®, a drug approved

by the Food and Drug Administration (FDA) for

prevention and treatment of thromboses (i.e., blood

clotting).

Because of Lovenox’s commercial success,

numerous generic drug companies are interested in

marketing a generic form of Lovenox. But federal law

prohibits a generic drug company from doing so, for so

long as Aventis’s patent on Lovenox (and on the process

of making it) remains in place. Accordingly, several

generic drug companies, including Respondents

4

Amphastar Pharmaceuticals, Inc. and Teva Pharma-

ceuticals USA, Inc., challenged Aventis’s patent (the

“’618 patent”) by including — in applications to FDA for

permission to market generic versions of Lovenox — an

allegation that the ’618 patent was invalid.

Aventis thereafter filed a suit for patent

infringement against Amphastar and Teva. It was

essentially forced into litigation by the invalidity

allegation; had it not responded to the allegation by

filing suit, Amphastar and Teva could have obtained

permission from FDA to begin generic marketing

immediately. Amphastar and Teva counterclaimed,

alleging that the 618 patent was invalid on several

grounds, including that it had been obtained through

inequitable conduct.

The inequitable conduct allegation centered

around Aventis’s omission of allegedly material

information from its patent application. In her initial

response to Aventis’s patent application, the patent

examiner (PE) had indicated that the application was

deficient both because the invention was anticipated by

prior art (and thus did not meet the patentability

requirements of 35 U.S.C. § 102) and because its subject

matter would have been obvious to a person having

ordinary skill in the art (and thus did not meet the

patentability requirements of 35 U.S.C. § 103). In

response to the PE’s concerns, Aveiitis submitted a wide

range of materials, including materials designed to

demonstrate that its invention had increased stability in

comparison to the prior art. ‘To demonstrate that

increased stability, Dr. Andre Uzon (acting on behalf of

Aventis) submitted material comparing the half-life for

its invention with the half-life of the prior art. The

5

submitted materials disclosed that the half-life for the

invention was measured using 40 mg and 60 mg

dosages, but they did not disclose the dosage at which

the half-life of the prior art was measured (it was 60

mg). Amphastar and Teva argue that the omitted

dosage was material because a reasonable PE would

have wanted to know that Dr. Uzon, in comparing the

half-life of a 40 mg dosage of the invention to the half-

life of the prior art, was comparing two substances at

different dosages.

By the time the PE issued the Third Office Action

on March 2, 1993 (id. at 43a), she had withdrawn her

anticipation objection under § 102, but she continued to

raise obviousness objections under § 103. Pet. App. 9a,

25a. The PE stated that the “[a]pplicant has failed to

provide evidence that the alleged difference between the

half-life of the [prior art] and that of the [claimed]

mixture is statistically significant.” Jd at 10a. In other

words, the PE could not have relied on evidence

regarding differences in half-lives in deciding to

withdraw her anticipation objection, but rather must

have relied on other types of evidence submitted by

Aventis to establish the absence of anticipation. See,

e.g., id. at 5a, 8a, 22a.”

2

The purposes for which Dr. Uzan submitted half-life

comparisons bears on the issues of materiality and intent. The

courts below and the parties agreed that a comparison between

half-lives of two substances is not relevant to §& 102 anticipation

issues if they are being compared at di®_srent dosages (see, e.g., id.

at 63a-65a), and thus a reasonable patent examiner when

evaluating anticipation would want to know if the dosages were

different. Aventis contends that Dr. Uzan was making those

comparisons for the purpose of demonstrating nonobviousness, not

for the purpose of refuting anticipation. Because Dr. Uzan

6

The PE ultimately withdrew the obviousness

objections as well, and the 618 patent was issued. In an

apparent effort to demonstrate that the half-life

comparisons contained in Example 6 were irrelevant to

patentability, Aventis resubmitted its patent application

without including Example 6. In response to that

resubmission, the PTO issued Aventis a new patent

with identical claims (the '743 patent) prior to any

substantive district court decision in this case.

On April 10, 2006, the Federal Circuit affirmed

the district court’s summary judgment determination

that Aventis’s omission of prior art dosage information

in connection with the half-life comparison was a

“material” omission. /d. 95a-109a. The appeals court

held that there was no genuine issue that “a reasonable

examiner would have considered [the dosage

information] important in deciding” whether to grant

the patent, and thus that Aventis’s omission was

“material” as a matter of law. Jd. 100a.

submitted his two declarations after the Third Office Action was

issued in March 1993 (and thus after the PE had withdrawn the

anticipation objection), there is no basis for concluding that the

statements regarding half-life comparisons contained in those two

declarations were made for the purpose of refuting anticipation. Dr.

Uzon’'s first declaration was submitted on March 29, 1993 (id. at

45a n.4), four weeks after the Third Office Action was issued —

albeit the Federal Circuit included language in its decision

suggesting that it believed that the anticipation issue might still

have been open at the time the first declaration was submitted. See

id. at 24a-25a. Although Example 6 in the ’618 patent application

(submitted several years prior to the Third Office Action) included

half-life comparisons while omitting dosage information for the

prior art, the language from the Third Office Action (quoted in the

text) makes plain that the PE did not rely on those half-life

comparisons in deciding to withdraw the anticipation rejection

7

On remand, the district court chose not to focus

on validity and infringement issues, but rather

conducted a trial that addressed only the “inequitable

conduct” defense. After trial, the district court

concluded that Aventis had, indeed, engaged in

inequitable conduct in pursuing its patent application

and thus it declared the ’618 and °’743 patents

unenforceable. Jd. at 39a-9la. Based on its finding that

Aventis did not. provide an adequate explanation for its

failure to include dosage information that it should have

known was material, the district court determined that

Aventis intended to deceive the PTO. Id. at 90a.’ See

also id. at 87a (intent to deceive can be inferred because

Aventis knew or should have known that highly

material information was omitted, and provided “no

credible excuse” for the omission).

The district court recognized that findings of

materiality and intent to deceive did not end the matter;

rather it still had to decide whether in light of all the

facts, “the severe sanction of holding the patent

unenforceable was warranted.” Jd. Thecourt held that

unenforceability was warranted based on a single

determination: “But for Dr. Uzan’s_ intentional

omissions, the probability is high that the 618 patent

* The court interpreted the Federal Circuit’s prior decision

as establishing that Aventis’s omission was “highly material,” id. at

46a, and thus that intent to deceive could be established based on

a lower level of proof. Citing Federal Circuit precedent, the district

court held, “The quantum of proof required to show intent is tied

to materiality; the more material the omission or the

misrepresentation, the lower the level of intent required to

establish inequitable conduct.” /d. at 49a (citation omitted).

8

would not have issued.” Id.*

A divided Federal Circuit panel affirmed. Jd. at

la-38a. It did so despite finding that the district court

had made several significant errors. For example, it

held that the district court erred in concluding “that

obviousness is subsumed by inherency” (i.e., that § 192

anticipation issues (“inherency”) predominated

throughout PTO proceedings and thus that the half-life

comparisons could only have been included for the

purpose of refuting anticipation, not for the purpose of

demonstrating nonobviousness). Id. at 2la.° It held

that the district court also clearly erred in determining

that the anticipation rejection was still pending at the

time that the PE issued the Third Office Action (i.e., at

a time prior to Dr. Uzan’s submission of his

deciarations). Id. at 25a. The appeals court determined

that those errors were insufficient to warrant reversal

because there was other evidence that Aventis had acted

with deceptive intent at earlier stages of the PTO

proceedings (i.e., prior to the Third Office Action). Jd.

* That determination was left unexplained. It is also

inexplicable, given that Aventis was granted the °743 re-issue

patent several years prior to the district court’s determination.

Because the PTO granted the ’743 patent despite the elimination of

all reference to half-life comparisons, there is no reason to conclude

that the ’618 would not have issued had it included more complete

dosage information.

° As noted above, there was no finding below that it would

have been inappropriate for Aventis to seek to demonstrate

nonobviousness by comparing the half-lives of Lovenox and the

prior art at different dosage levels. Thus, omission of the fact that

the half-lives were compared at different dosage level was material

only if the comparison was undertaken for the purpose of refuting

anticipation.

9

The panel majority upheld the district court’s

materiality and intent to deceive findings under a “clear

error” standard of review and its unenforceability deter-

mination under an “abuse of discretion” standard. /d.

at 17a. It recognized that, under Federal Circuit

precedent, a finding of “inequitable conduct” sufficient

to warrant an “unenforceability” determination should

be based on a sliding scale involving materiality and

intent. Jd. at 18a (“The more materia] the omission or

misrepresentation, the less intent that must be shown.

to elicit a finding of inequitable conduct.”). But the

majority upheld the unenforceability determination

without commenting on the district court’s complete

failure to engage in such a sliding scale analysis.°

Judge Rader dissented. Jd. at 3la-38a. He

concluded that Amphastar and Teva failed to present

clear and convincing evidence of intent to deceive. Jd at

3la. He complained that the Federal Circuit was

increasingly willing to hold patents unenforceable based

on meager materiality and intent showings, id. at 33a,

with the result that the once-ubiquitous “inequitable

conduct tactic” was being “rejuvinated” and was

returning to the “plague” levels that the court had

complained of in the 1980s. Burlington Indus. v. Dayco

Corp., 849 F.2d 1418, 1422 (Fed. Cir. 1988). He argued

that unenforceability determinations based on

inequitable conduct should be restricted “to only the

most extreme cases of fraud and deception.” Jd. at 3la.

*° Rather, as noted above, the district court engaged in a

sliding scale analysis only in connection with its initial finding of

deceptive intent — finding that “[t]he quantum of proof required to

show intent” is lessened when, as here, the trial court has made a

finding that the omission is highly material. /d. at 47a.

10

REASONS FOR GRANTING THE PETITION

The petition raises issues of exceptional

importance. This case is yet another example of the

willingness of the Federal Circuit to invalidate multi-

billion dollar patents based on findings of relatively

minor errors by patentees. WLF fully agrees with

Aventis that a major part of the problem is the “sliding

scale” adopted by the Federal Circuit, whereby patent

holders often are deemed to have intended to deceive

the PTO based on conduct that amounts to little more

than gross negligence.

WLIF writes separately to urge the Court to grant

review on the grounds that the entire “inequitable con-

duct” doctrine is in need of a major overhaul. The

Court created that doctrine 60 years ago for the purpose

of policing the conduct of parties that engage in

wholesale fraud before the PTO. But the doctrine has

morphed into a trap for the unwary, whereby hugely

valuable patents are overturned without regard to the

blameworthiness of the patent holder. Whenever a

patent challenger can identify information that was not

supplied to the PTO but that a PE might have found

useful in determining patentability, and whenever a

plausible case can be made that the patentee should

have known that a reasonable PE would have found the

information useful (and thus can be found to have

intended to deceive the PTO), the patentee now faces a

serious danger that its patent will be invalidated. That

danger exists irrespective of whether the patentee can

be deemed blameworthy to any significant degree; only

materiality and intent, not blameworthiness, enter into

the equation. The danger exists even if the PE was not

deceived and/or did not rely in any way on the

11

patentee’s omission; indeed, the Federal Circuit

explicitly held in this case that absence of 1eliance is

irrelevant in determining whether a patent should be

held unenforceable on inequitable conduct grounds.

The danger also exists without regard to whether the

patentee would have been granted its patent had it

supplied the PTO witn the omitted evidence.

Review is warranted to once and for all rein in a

doctrine that has accurately been termed a “plague”

that now infects virtually all patent litigation. As Judge

Rader noted in his dissent below, the inequitable

conduct doctrine was intended to apply “to only the

most extreme cases of fraud and deception.” Pet. App.

at 3la. Yet, it has expanded to the point that it is now

a potent weapon in virtually every patent lawsuit. This

case provides a particularly good vehicle for re-visiting

the doctrine. It is a case in which we know with

virtually 100% certainty (based on the grant of the ’743

re-issue patent) that the 618 patent would have been

granted even if Aventis had included the omitted dosage

information. It is a case in which the omitted

information, although deemed “material” to

patentability by the district court, was not an omission

whose natural tendency was to deceive — it would have

been readily apparent to a reasonably inquisitive patent

examiner that (s)he had not been given dosage

information for the prior art. Indeed, the record is clear

that the PE in this case was not deceived; she indicated

in the Third Office Action in March 1993 that she was

unpersuaded by the half-life comparison because the

claimed difference in half-lives was not “statistically

significant.” Jd. at 10a. Nor is this a case in which the

alleged deception was widespread or otherwise

particularly blamewerthy. While the PTO and the

12

federal courts quite obviously have an interest in

sanctioning any patent applicant, including Aventis,

that has been determined by a district court to have

engaged in deceptive behavior, the nature of the

deception in this case was sufficiently technical that

authorizing an unenforceability sanction here is

tantamount to a determination that unenforceability is

an appropriate sanction in virtually every case in which

materiality and intent to deceive are found.

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

inexorably expanding the definition of a “material”

omission, it is reducing the level of proof necessary to

establish intent to deceive. Review is warranted to

permit this Court to establish a readily comprehensible

inequitable conduct standard on which applicants can

rely. In the absence of such certainty, there is a very

real danger that investors will become far less willing to

risk the huge amounts of capital necessary to develop

new, life-saving therapies. Any such decrease in

research and development expenditures cannot bode

well for the future of health care in this country.

13

I. REVIEW IS WARRANTED BECAUSE THE

DECISION BELOW CONFLICTS WITH

THIS COURT’S UNDERSTANDING OF

WHAT CONSTITUTES “INEQUITABLE

CONDUCT”

Review is warranted because the Federal Circuit

has departed so fundamentaly 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. vu. 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.” Jd. 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 committed

by the plaintiff has immediate and necessary relation to

the eyuity 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

14

with the requisite intent. Once those findings are made,

trial courts are granted virtually free rein to declare the

patent unenforceable, without regard to the magnitude

of the patent holder’s blameworthiness or to whether

patent examiners were actually misled. All too fre-

quently, 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” based on

a relatively minor omission of information, despite the

absence of any evidence that the PE drew any inaccurate

inferences from the omission or that she relied on such

inferences to her detriment. By interpreting materiality,

intent, and inequitable conduct 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.

A, Unenforceability Determinations

Should Be Limited to Cases in Which

Patent Holders Have Committed

“Unconscionable” Acts That Bear

Some “Immediate and Necessary

Relation” to the Equity Sought

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)

15

Automotive, the applicant, learned that a 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 eqvity,” and it applied the “unclean hands”

dectrine to deny enforcement of any part of the patent.

Id. at 819.

As Petitioners note, in the ensuing decades the

federal appeals courts struggled to determine just how

relevant the omitted information must be to issues

raised in PTO proceedings before the omission can be

deemed material and intentionally deceptive, and just

how egregious the patent holder’s misconduct must be

to warrant application of the “unclean hands” doctrine.

Pet. 20-21. The appeals courts developed at least three

conflicting standards of materiality, intent, and unclean

hands. /d.

Following creation of the Federal Circuit, that

court adopted far broader standards. For example,

omitted data are deemed sufficiently material where

there is “a substantial likelihood” that a reasonable

examiner would consider them “important” in deciding

to allow the application to tssue as a patent. American

16

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

1350, 1362 (Fed. Cir. 1984). Intent and materiality are

considered on a sliding scale, so that the “quantum of

evidence required to show intent” is reduced when the

materiality of the omitted data is deemed high. Pet.

App. 49a. A patentee can be deemed to have intended to

deceive the PTO if the trial court deems insufficiently

credible the patentee’s explanation for failing to supply

the data. Ferring, 437 F.3d at 1191. The trial court is

to determine whether the patentee engaged in

inequitable conduct (and thus whether the patent

should be declared unenforceable) based solely on the

strength of the evidence regarding materiality and

intent. Hoffman-LaRoche, Inc. Promega Corp. , 323 F.3d

1354, 1372 (Fed. Cir. 2003). Thus, whether a patent is

declared unenforceable bears no relation to the

magnitude of its blameworthiness; if the evidence is

sufficiently clear that the patentee intended to deceive

the PTO by withholding material evidence, a

gargantuan penalty is imposed, regardless whether the

scope of the deceit was relatively minor. It is sufficient

that a reasonable patent examiner would have

considered the omitted material “important.”

Moreover, for purposes of determining inequitable

conduct, it does not matter whether a reasonable

examiner would have been misled by the omission or

whether the actual examiner was, in fact, misled: the

omitted material “‘need not be relied on by the

examiner ‘7 deciding to allow the patent. The matter

misrepresented need only be within a reasonable

examiner’s realm of consideration.’” Pet. App. 134a-

135a (quoting Merck & Co. v. Danbury Pharmacal, Inc.,

873 F.2d 1418, 1421 (Fed. Cir. 1989)).

Those standards of materiality, intent, and

17

inequitable conduct bear little resemblance to “unclean

hands” doctrine and conflict sharply with this Court’s

understanding of what constitutes “inequitable

conduct.” In particular, the Federal Circuit’s sliding-

scale approach 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. Jd, 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 Cord Tire Co. v. Donovan

Chemical Corp., 276 U.S. 358, 373-74 (1928) (applicant's

18

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 decisions below — as well as numerous other

inequitable conduct decisions arising out of the Federal

Circuit — cannot be squared with the “unclean hands”

standards set forth in Keystone Drilling. Review is

warranted to address that conflict.

19

B. The Federal Circuit’s Ineguitable

Conduct Doctrine Does Not Provide

Any Mechanism for Gradation of

Penalties, Nor Does It Require

Consideration of All the Equities

Review is also warranted because of a

fundamental deficiency in the Federal Circuit’s

inequitable conduct case law: when a patentee is

determined to have acted wrongly, the only sanction

provided for under that case law is an order declaring

the patent unenforceable. Such an all-or-nothing

approach inevitably biases the outcome in favor of

draconian penalties once the patentee has been

determined to have acted wrongfully. Moreover, the

Federal Circuit case law is deficient in not requiring

district courts to consider all the equities before

granting equitable relief.

Absent from the decision below or Federal Circuit

inequitable conduct case law is a recognition of the

extraordinary nature of equitable relief. Indeed, the

Federal Circuit in this case indicated that the district

court’s unenforceability determination was subject to

abuse-of-discretion review, Pet. App. 17a, and then it

omitted any discussion of such review from its decision.

Had it included such a discussion, it would have been

forced to concede that the district court explicitly

declined to engage in any sort of weighing of the

equities, Jd. at 9la (“The Court need not be detained by

intricate questions of weight.”).'

Instead, the district court based its unenforceability

determination on a single statement: “But for Dr. Uzon’s

intentional omissions, the probability is high that the '618 patent

20

Injunctive or declaratory relief “is a matter of

equitable discretion; it does not follow from success on

the merits as a matter of course.” Winter v. Natural

Resources Defense Council, Inc., 129 S. Ct. 365, 381

(2008). “[A) federal judge sitting as chancellor is not

mechanically obligated to grant an injunction for every

violation of the law.” Weinberger v. Romero-Barcelo,

456 U.S. 305, 313 (1982). Among the factors that

federal judges must take into account in determining

whether to grant injunction relief are the balance of

equities among the parties and the public interest.

Winter, 129 S. Ct. at 381.

The district court engaged in no such analysis,

nor was it required to do so by Federal! Circuit case law

would not have issued.” Jd. The court included no citation to

support that statement, and it cannot be taken seriously in light of

the PTO’s decision to grant the '743 re-issue patent several years

earlier. See supra at 8 n.4,

Indeed, the district co .rt’s seemingly cavalier attitude

toward the unenforceability determination well illustrates a major

problem caused by the Federal Circuit's lax inequitable conduct

standards. Patent cases can be extraordinarily complex, and it can

require considerable resources for a federal district judge to decide

whether a patent was validly issued and/or whether it was

infringed. As Judge Radar noted in his dissenting opinion, the

inequitable conduct doctrine provides district courts with an eusy

out — they can avoid addressing the more difficult invalidity and

infringement ‘sues by making an inequitable conduct finding. Pet.

App. 3la-32a (“The allegation of inequitable conduct... even offers

the trial court a way to dispose of a case without the rigors of claim

construction and other complex patent doctrines. This court has

even observed a number of cases, such as this one, that arrive on

appeal solely on the basis of inequitable conduct where the trial

court has apparently elected to try this issue in advance of the

issues of infringement and validity.”)

21

- which directs district courts merely to look at the

extent of materiality and intent to deceive, and to apply

a sliding-scale test involving those two factors. Based on

the factual findings that Aventis engaged in misconduct,

some type of sanction might be appropriate (e.g., a fine

or an order re-opening the patent proceedings). But,

given the evidence of Aventis’s rather limited culpability

(see, e.g., the discussion of the underlying facts set forth

supra at 4-8), the Federal Circuit would have a difficult

time explaining why it is equitable to determine that a

multi-billion dollar patent should be held unenforceable.

Amphastar and Teva, generic manufacturers who

played no role in the PTO proceedings and are merely

hoping to make a profit from Aventis’s misfortune,

would seem to have few equities in their favor.

it is unclear precisely where the public interest

would lie. On the one hand, there is a public interest in

providing an incentive for patent applicants to be honest

in their dealings with the PTO. On the other hand,

there is a public interest in maintaining public

confidence in the patent system; and if the public comes

to believe that valuable patents will be invalidated based

on minor transgressions, individuals will be less likely

to devote the extraordinary time and _ resources

necessary to develop new, potentially life-saving

products. But the :mportant point is this: the Federal

Circuit does not require any balancing of the public

interest in inequitable conduct cases. Review is

warranted to resolve the conflict between this Court’s

traditional equitable principles and the Federal Circuit’s

inequitable conduct case law.

22

II. 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. 24-28. 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 as

this case illustrates, Kingsdown has not been

consistently followed, and the Federal Circuit continues

to apply broad standards regarding what constitutes

materiality, intent to deceive, and inequitable conduct.

As Judge Newman argued in dissent in Ferring, the

Federal Circuit:

[NJot 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

23

intent, presumes inequitable conduct, and wipes

out a valuable property right, .. . on the theory

that the inventor “should have known” that

something might be deemed material.

Ferring, 437 F.3d at 1996 (Newman, J., dissenting).

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 21st Century (2004) at 123,

http://www.nap.edu/html/patentsystem/0309089107.pdf.

Review is warranted to prevent the Federal Circuit’s

inequitable conduct standards from further eroding

confidence in our patent system.

24

CONCLUSION

Amicus curiae Washington Legal Foundation

respectfully requests that the Court grant the petition

for a writ of certiorari.

Dated: February 25, 2008

Respectfully submitted,

Daniel J. Popeo

Richard A. Samp

Washington Legal Foundation

2009 Massachusetts Ave., NW

Washington, DC 20036

(202) 588-0302