Federal Circuit Bolsters Inequitable Conduct Precedent

By Condo Roccia Koptiw LLP // September 23rd, 2014

Apotex Inc. v. UCB, Inc., No. 2013-1674 (Aug. 15, 2014 Fed. Cir.).

Since the Federal Circuit raised the standard for proving inequitable conduct in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc), there have been few affirmances of an inequitable conduct finding.  Although the Federal Circuit affirmed a finding of inequitable conduct in Apotex Inc. v. UCB, Inc., Apotex involved a fairly extreme set of facts in which factual misrepresentations were made about a prior art manufacturing process which was the same process that Apotex accused of infringement.  Thus, Apotex’s involves a rare instance of misrepresenting the prior art, accusing the prior art of infringement, and facts showing that the misrepresentations were known to be false and “but for” material.

Apotex’s Dr. Sherman was found to have committed inequitable conduct.  Dr. Sherman was the sole inventor of U.S. Patent No. 6,767,556, responsible for drafting the ’556 Patent, and actively involved in its prosecution.  Dr. Sherman founded Apotex and was Apotex’s chairman.  In addition, Dr. Sherman led the development of Apotex’s drug formulations and manufacturing, directed all of Apotex’s litigation, and had written approximately one hundred patent applications.  Thus, Dr. Sherman was knowledgeable about the art, involved in the ‘556 Patent’s prosecution, and knowledgeable about the patent system and asserting patents.

The ’556 Patent claimed a process of manufacturing a pharmaceutical composition, and Apotex brought the suit alleging that USB infringed by manufacturing two prior art products, Univasc and Uniretic.  USB manufactured the accused products in accordance with licensed U.S. Patent No. 4,743,450.  The ’450 Patent was prior art to the ‘556 Patent and was the main reference cited against the ‘556 Patent during its prosecution.  In order to overcome rejections over the ‘450 Patent during the Patent Office proceedings, Dr. Sherman had counsel represent to the Patent Office that the ’450 Patent failed to teach certain claimed limitations in the ’556 Patent because the accused product Univasc was manufactured according to the ‘450 Patent and its manufacturing process lacked those claim limitations.  In making these arguments, Apotex submitted an expert declaration from Dr. Lipps.  However, Apotex had tested Uinvasc when it applied for the ‘556 Patent, and its own testing showed that its representations regarding how Univasc was manufactured were false.  Apotex did not disclose its Univasc testing to the Examiner or to its expert, Dr. Lipps.  Ultimately, the Examiner allowed the ’556 Patent after considering Apotex’s assertions and Dr. Lipps’ declaration.  The District Court found Dr. Sherman’s assertions that he was unaware of the testing not credible.  In addition, it was found that Dr. Sherman had failed to disclose other art and had falsified examples in the ’556 by indicating that the patent examples had actually been made, when they had not actually made.

The Federal Circuit held that Dr. Sherman’s misrepresentations to the Patent Office regarding the prior art manufacturing processes and Dr. Lipps’s declaration satisfied Therasense’s “but for” materiality test because the Examiner allowed the ‘556 after considering Dr. Sherman’s and Dr. Lipps’ declarations.  Importantly, the Federal Circuit stated that “Dr. Sherman had no duty to disclose his own suspicions or beliefs regarding the prior art” and was free to advocate in good faith based on reasonable interpretations of the art.  But the Federal Circuit found that Dr. Sherman was not advocating in good faith because he “affirmatively and knowingly misrepresented material facts.”  Since the Court found that the misrepresentations regarding the ‘450 Patent satisfied the “but for” materiality test, the Court did not reach the issue of whether Dr. Sherman’s conduct was so egregious that “materiality” could have been presumed, and whether Dr. Sherman’s failure to disclose art and falsification of examples in the ’556 Patent satisfied Therasense’s materiality test.

In holding that there was ample evidence of intent to deceive, the Federal Circuit cited Dr. Sherman’s knowledge that factual assertions made during prosecution and in drafting the ’556 Patent were false.  The Federal Circuit stated that Dr. Sherman “knew, or at least had a strong suspicion, that he was seeking to patent the very same process used to obtain an already existing and widely available drug.”

Thus, Apotex involves a relatively rare instance where the patentee accused a process of infringement, that it had distinguished during patent prosecution, and for which it had testing in its possession, showing its prosecution arguments to be incorrect, which it withheld from the Examiner.


* Special thanks to CRK summer clerk, Michael C. Bonella, for his work developing this post


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