1. To Disclose, or Not to Disclose:
the Law after Therasense en banc
Adapted from a presentation made at the SF IP Inn of Court Meeting
on June 15, 2011
Liaoteng Wang, ArcSoft, Inc.

2. The Law Before Therasense: No Cure for
Pandemic Plague of Inequitable Conduct
•
“The habit of charging inequitable conduct in almost every major patent
case has become an absolute plague.” Burlington Indus., Inc. v. Dayco
Corp., 849 F.2d 1418 (Fed. Cir. 1988).
•
The 1988 en banc CAFC opinion, Kingsdown, has not been particularly
successful in curbing this “absolute plague.”
•
On April 26, 2010, the CAFC ordered rehearing en banc of the Therasense
case to address whether the materiality‐intent‐balancing framework for
analyzing inequitable conduct should be modified or replaced.
•
On May 25, 2011, the en banc CAFC issued an 88‐page 6‐1‐4 split decision,
attempting to redirect the law on inequitable conduct.

3. The Law Before Therasense:
Two Prongs with Balancing
Applicants for patents have a duty to prosecute patents in the PTO with candor and
good faith, including a duty to disclose information known to the applicants to be
material to patentability. 37 C.F.R. § 1.56(a) (2004); see also Molins PLC v. Textron, Inc.,
48 F.3d 1172, 1178 (Fed. Cir. 1995). A breach of this duty may constitute inequitable
conduct, which can arise from an affirmative misrepresentation of a material fact,
failure to disclose material information, or submission of false material information,
coupled with an intent to deceive or mislead the PTO. Molins, 48 F.3d at 1178. A
party asserting that a patent is unenforceable due to inequitable conduct must
prove materiality and intent by clear and convincing evidence. Kingsdown Med.
Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988). Once threshold
findings of materiality and intent are established, the trial court must weigh them
to determine whether the equities warrant a conclusion that inequitable conduct
occurred. Molins, 48 F.3d at 1178. This requires a careful balancing: when the
misrepresentation or withheld information is highly material, a lesser quantum of
proof is needed to establish the requisite intent. See N.V. Akzo v. E.I. DuPont de
Nemours, 810 F.2d 1148, 1153 (Fed. Cir. 1987). In contrast, the less material the
information, the greater the proof must be. See id.
Purdue Pharma L.P. v. Endo Pharm. Inc., 438 F.3d 1123 (Fed. Cir. 2006)

4. The Law Before Therasense:
Intent, Materiality, & Sliding Scale
Kingsdown Med. Consultants Ltd. v. Hollister, Inc., 863 F.2d 867 (Fed. Cir. 1988)
We adopt the view that a finding that particular conduct amounts to “gross
negligence” does not of itself justify an inference of intent to deceive; the involved
conduct, viewed in light of all the evidence, including evidence indicative of good
faith, must indicate sufficient culpability to require a finding of intent to deceive. See
Norton v. Curtiss, 433 F.2d 779 (C.C.P.A. 1970).
Digital Control, Inc. v. Charles Mach. Works, 437 F.3d 1309 (Fed. Cir. 2006)
Any one of the five standards for judging materiality would do.
Objective But For
Subjective But For
But It May Have
1977 Old Rule 56 (Reasonable Examiner)
1992 New Rule 56 (Not cumulative and concerns patentability)
Am. Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed. Cir. 1984)
Questions of ʺmaterialityʺ and ʺculpabilityʺ are often interrelated and intertwined, so
that a lesser showing of the materiality of the withheld information may suffice when
an intentional scheme to defraud is established, whereas a greater showing of the
materiality of withheld information would necessarily create an inference that its
nondisclosure was ʺwrongful.ʺ

5. The Law After Therasense:
a 6‐1‐4 Split en banc Decision
•
Majority opinion by Chief Judge Rader, joined in full by Circuit Judges
Newman, Lourie, Linn, Moore, and Reyna, and joined in part (part V) by
Circuit Judge OʹMalley (“This court holds that, as a general matter, the
materiality required to establish inequitable conduct is but‐for materiality.” “A
district court should not use a ‘sliding scale,’ … [and] may not infer intent
solely from materiality.”)
•
Concurring‐in‐part and dissenting‐in‐part opinion by Circuit Judge OʹMalley
(“I respectfully dissent from those portions of the majority opinion which
describe the test it directs lower courts to apply in assessing materiality and
which vacates and remands for further inquiry the materiality determinations
made by the district court in this case.” “[B]oth the majority and dissent strain
too hard to impose hard and fast rules.”)
•
Dissenting opinion by Circuit Judge Bryson, joined by Circuit Judges Gajarsa,
Dyk, and Prost (“I would adhere to the materiality standard set forth in the
PTO’s disclosure rule[ Rule 56.]”)

6. The Law After Therasense:
But‐For Materiality Is the Test
This court now tightens the standards for finding both intent and materiality in order to redirect
a doctrine that has been overused to the detriment of the public. [6]
[T]he accused infringer must prove by clear and convincing evidence that the applicant knew of
the reference, knew that it was material, and made a deliberate decision to withhold it. [6+1+4]
Intent and materiality are separate requirements. … A district court should not use a “sliding
scale,” where a weak showing of intent may be found sufficient based on a strong showing of
materiality, and vice versa. [6+1+4]
Because direct evidence of deceptive intent is rare, a district court may infer intent from indirect
and circumstantial evidence. … However, to meet the clear and convincing evidence standard,
the specific intent to deceive must be “the single most reasonable inference able to be drawn
from the evidence.” [6+1]
The absence of a good faith explanation for withholding a material reference does not, by itself,
prove intent to deceive. [6+1]
This court holds that, as a general matter, the materiality required to establish inequitable
conduct is but‐for materiality. When an applicant fails to disclose prior art to the PTO, that prior
art is but‐for material if the PTO would not have allowed a claim had it been aware of the
undisclosed prior art. [6]
Although but‐for materiality generally must be proved to satisfy the materiality prong of
inequitable conduct, this court recognizes an exception in cases of affirmative egregious
misconduct. This exception to the general rule requiring but‐for proof incorporates elements of
the early unclean hands cases before the Supreme Court, which dealt with “deliberately planned
and carefully executed scheme[s]” to defraud the PTO and the courts. [6]

7. The Law After Therasense:
Uncertainty Beyond the en banc Court
•
On June 1, 2011, Defendant Becton, Dickinson and Company (BD) filed a
motion at the Federal Circuit to stay the mandate pending the filing of a
petition for a writ of certiorari in the Supreme Court.
•
Petition for certiorari by BD will most likely be filed by August 23, 2011.
If granted, a Supreme Court decision is expected in 2012.
•
Meanwhile, what’s PTO going to do with its Rule 56 and Therasense?
What should patent applicants do? What should district courts, ITC, and
litigants do?

8. The Law After Therasense:
If Petition for Cert Is Denied by the SC
• Case will be remanded to the District Court
(Judge Alsup at the NDCA) under the majority
opinion in Therasense en banc for further
proceedings.
• Would inequitable conduct be found for the
patent‐in‐suit by applying Therasense en banc?
Probably Yes.
• Let’s look at the facts in Therasense.

9. Facts in Therasense:
What’s not Disclosed
US patent 5,820,551 being held unenforceable due to inequitable conduct. Therasense, Inc. v.
Becton, Dickinson & Co., 565 F. Supp. 2d 1088 (N.D. Cal. 2008).
The ’551 patent concerns disposable blood glucose test strips. It claims a test strip with an
electrochemical sensor for testing whole blood without a membrane over the electrode
(“wherein said active electrode is configured to be exposed to said whole blood sample without
an intervening membrane or other whole blood filtering member”).
US patent 4,545,382, which was also owned by Abbott and had to be overcome during the ’551
patent prosecution., makes the following disclosure: “Optionally, but preferably when being
used on live blood, a protective membrane surrounds both the enzyme and the mediator layers,
permeable to water and glucose molecules.”
Abbott filed a Rule 132 declaration stating that “optionally, but preferably” does not teach one
skilled in the art that a protective membrane is “optionally or merely preferred.” Abbott’s
patent attorney argued, while submitting the declaration, that “optionally, but preferably” is not
“technical teaching but rather mere patent phraseology.” Patent issued.
A few years earlier, while prosecuting the European counterpart to the ’382 patent, Abbott’s
European patent counsel opined on the same “optionally, but preferably” language, “It is
submitted that this disclosure is unequivocally clear. The protective membrane is optional,
however, it is preferred when used on live blood in order to prevent the larger constituents of
the blood, in particular erythrocytes from interfering with the electrode sensor.” The briefs
were not disclosed during the ’551 prosecution.

10. What Abbott Should Have Done During
the Prosecution of the European Patent
•
It may be true that words such as “optionally, but preferably” are mere
“patent phraseology” commonly used by patent prosecutors. But at the
outset it’s a hard battle to win insisting “optionally” actually means
“always” in the context of patents. However, the chance of avoiding the
finding of inequitable conduct could have been slightly improved by
paying attention to arguments made during the prosecution.
•
In hindsight, Abbott unnecessarily gave away too much while making
arguments during the prosecution of the European counterpart to the ‘382
patent.
•
To distinguish the German reference (labeled D1), which required a
diffusion‐limiting membrane, Abbott could have simply argued that no
diffusion‐limiting membrane is required, and said nothing more. Abbott
could have further stated that a protective membrane for keeping away
coarse particles in whole blood is required, which was probably the state‐
of‐the‐art at that time. There would have been less contradictions.