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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2009

## Text

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0090%3A6. Public record. Not legal advice.