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Supreme Court Will Not Review Therasense Standards – Yet

On October 15, 2013, after reviewing the Government’s Amicus Brief (a copy is available at the end of this post), the Supreme Court denied the petition for cert. filed by Sony Computer Entertainment, one of the defendants in 1st Media, LLC v. Electronic Arts Inc., App. No. 2010-1345 (Fed. Cir. Sept. 13, 2012). Sony had alleged inequitable conduct due to the inventor’s and the patent attorney’s failure to disclose relevant references during prosecution of a chain of applications relating to multi-media entertainment systems. Pre-Therasense, the district court had tried the IC charges prior to the case-in-chief, and found IC without deciding if there was “but-for” materiality. The Federal Circuit reversed due to the failure of the district court to prove the element of specific intent to deceive the PTO. The Fed. Cir. decision contains this memorable quote: “Moreover it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent.” Slip op. at 12-13. [Ed.’s note: These factors are starting to sound like the elements of a defense against a charge of IC.]

Sony argued in its S. Ct. decision that the Therasense standard created a “rigid test” requiring a showing of an egregious affirmative act of misconduct before a court can apply equitable discretion, and that the court should be able to apply equitable remedies in other incidences of failure to disclose. As the Solicitor General summarized Sony’s argument: “[T]he Therasense standards unduly constrict a district court’s discretion of infer intent from circumstantial evidence.”

Sony may have felt it had a reasonable chance of success by using the buzz words, “rigid standard,” since the S. Ct. had criticized the use of hard-and-fast rules in both KSR (“Teaching, Suggestion and Motivation” Test) and in Bilski (“Machine or Transformation”) but it was not to be. The Solicitor General persuasively argued that it was both too early to review the effects of Therasense (the PTO has not finalized its revisions to Rule 56) and that this was a poor case to review since the question proposed by Sony had not been considered by the district court nor were they facially required by Therasense. The Solicitor General pointed out that the district court’s finding of materiality had not been appealed and that, in any case, the Fed. Cir. had recognized an exception to the but-for materiality standard “in cases of affirmative egregious misconduct” 649 F. 3d 1276, 1292 (2011). The Solicitor General also specifically noted that the Fed. Cir. had rejected the so-called “sliding scale,” in which a strong showing of materiality per se could permit an inference of specific intent to deceive, but that the degree of materiality could still be considered, with other evidence, in resolving the intent question. The Solicitor General argued that Therasense required that “a district court must also find, in addition to ‘[k]nowledge of the reference and knowledge of materiality,’ that the patentee made a ‘deliberate decision’ not to disclose that information to the PTO.”

Unfortunately for Sony and the other defendants, the district court had applied the “reasonable examiner” standard – discarded in Therasense – in finding the undisclosed information material, and had not issued a finding the required “deliberate decision” was present to withhold the references in question, but rather had inferred intent based on what it felt was a lack of a good faith excuse for not submitting the references – that may or may not have been material under Therasense. The Solicitor General felt that the Fed. Cir. should have remanded for further findings a la Therasense, but that this “case-specific error” did not warrant review by the Court. Interestingly, the Solicitor General noted that Sony’s brief “did not discuss the possibility that a different materiality standard might be used in pure nondisclosure [of prior art] cases than in cases involving affirmative misrepresentations or other affirmative misconduct.” This somewhat echoes Judge Newman’s recent comments in Network Signatures that suggest that material misrepresentations might not be found in acts unrelated to the substantive requirements of patentability.

But I digress, and please note that my continuing interest in Therasense and the post-Therasense landscape comes from my presentation last year at the AIPLA Annual Meeting on inequitable conduct and the fact that I have been asked to repeat and update the presentation at this year’s Meeting on October 26th in Washington, D.C.  James Carmichael will also be speaking on decisions in which I.C. findings were upheld. Y’all come.


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