CAFC Turns Its Attention From Trademark Fraud to Patent Inequitable Conduct

In its Bose decision last year, the U.S. Court of Appeals for the Federal Circuit knocked down the underpinnings of the TTAB's fraud jurisprudence (i.e., Medinol) and demanded a higher standard of proof for fraud. It now appears that the CAFC's focus on trademark fraud was only one facet of its current concern with the issues of intent and materiality in connection with USPTO transactions. On April 26, 2010, the court granted a petition for rehearing en banc in Therasense, Inc. v. Becton, Dickinson & Co., Appeal No. 2008-1511, in order to consider the parameters of the inequitable conduct doctrine in patent law. In particular, the court ordered the parties to address the six questions set out below [See the court's Order here].

1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?

2. If so, how? In particular, should the standard be tied directly to fraud or unclean hands? See Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944), overruled on other grounds by Standard Oil Co. v. United States, 429 U.S. 17 (1976); Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933). If so, what is the appropriate standard for fraud or unclean hands?

3. What is the proper standard for materiality? What role should the United States Patent and Trademark Office’s rules play in defining materiality? Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?

4. Under what circumstances is it proper to infer intent from materiality? See Kingsdown Med. Consultants, Ltd. v. Hollister Inc., 863 F.2d 867 (Fed. Cir. 1988) (en banc).

5. Should the balancing inquiry (balancing materiality and intent) be abandoned?

6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

The issue of inequitable conduct has been a hot topic in patent litigation for decades. It is a much more complicated determination than trademark fraud, as I tried to explain in this posting. The issue of materiality is particularly difficult in the patent context, and the consequences of a finding of inequitable conduct (loss of all rights) are substantial. Therefore a high standard of proof should apply.

But my question is, why should such a high standard apply to trademark fraud, where the materiality determination is straightforward (a "but-for" test), and the consequences of a finding of fraud (loss of an application or registration, but not common law rights in the mark) are considerably less severe?

Looking at question 6 in the court's Order in Therasense, it appears that the CAFC may look to the heightened trademark fraud standard to justify a higher standard on the patent side. Unfortunately, the CAFC believes that trademark fraud and patent inequitable conduct are twins, apparently because the issues arise in the same agency, the USPTO. But as I have argued, patents and trademarks have nothing to do with each other. Their location in a single government agency is an historical fact, but not a logical one. There is no reason why the two standards should be the same.

Here's my new question: was the demise of the TTAB's Medinol doctrine more the result of the CAFC's concern about its patent inequitable conduct doctrine than a real understanding of trademark law and practice? Inquiring minds want to know.

TTABlog note: If you want to read more about the Therasense case, I recommend the Patently-O blog, where you will find the briefs and much commentary as the case progresses.

Text Copyright John L. Welch 2010.