By Brandon Baum and Mary T. Nguyen[i]
In Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011),an en banc Federal Circuit raised the standard to prove inequitable conduct, holding that an accused infringer must prove by clear and convincing evidence that (1) the applicant misrepresented or omitted material information, (2) with the specific intent to deceive the PTO. This heightened standard was intended to limit inequitable conduct to instances “where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.”
In one of the first decisions to apply Therasense, the district court in Network Signatures, Inc. v. State Farm Mutual Automobile Insurance Co., declared that a U.S. Government-owned patent was unenforceable because an attorney at the U.S. Naval Research Laboratory (“NRL”) committed inequitable conduct.[ii] Although Network Signatures is only a district court opinion, the facts underlying the decision are instructive.
In early 2004, the NRL conducted its review of IP assets and decided to allow the patent-in-suit to expire rather than pay the 7.5 year maintenance fee that was coming due. Shortly after the patent expired, the NRL was contacted by Hazim Ansari of Metrix Services, a patent procurement company. Ansari expressed interest in licensing the patent and claimed that he had attempted to contact the NRL before the patent expired but was unsuccessful due to problems with the NRL’s email. Ansari offered to “take the lead” on pursuing a petition to revive the patent and promised the NRL 15% of all revenue generated from enforcing the patent.
The NRL’s attorney concluded that had the NRL known of Ansari’s interest, it would have paid the maintenance fee. On that basis, the NRL petitioned to revive the patent on the ground that the abandonment was “unintentional.” The PTO granted the petition and revived the patent, and the NRL exclusively licensed it to Ansari’s company, which thereafter began an enforcement campaign through a related entity, plaintiff Network Signatures.
Defendant State Farm sought summary judgment on the ground that the NRL’s petition for revival was materially false. State Farm argued that the statement that the abandonment was “unintentional” was a material falsehood, made with the intent to deceive the PTO into reviving the patent. Network Signatures argued that the statement was not false, since the NRL would not have abandoned the application but for the mistaken belief that there was no outside interest in the patent. The district court rejected the NRL’s explanation and found that the patent was intentionally abandoned, albeit for reasons that may have been mistaken. Therefore, reasoned the court, the petitioning attorney who stated that the abandonment was unintentional committed inequitable conduct. Accordingly, the court declared the patent-in-suit to be unenforceable.
This case serves as a good example of the factual scenario under which inequitable conduct may still be found in a post-Therasense world.
[i]Mary T. Nguyen is a third year law student at U.C. Hastings and a top student in Professor Baum’s patent litigation class.
[ii]Network Signatures, Inc. v. State Farm Mut. Auto. Ins. Co., No. SACV 11-00982 JVS, 2012 WL 2357307, at *12 (C.D. Cal. June 13, 2012).