Adverse Inference of Intent to Deceive USPTO As a Sanction for Litigation Misconduct

Abstract

In a July 2017 decision, Regeneron Pharms., Inc. v. Merus N.V. (“Regeneron II”), a divided panel of the U.S. Court of Appeals for the Federal Circuit affirmed the Southern District of New York’s judgment that Regeneron’s asserted patent was unenforceable for inequitable conduct in its prosecution. The full Circuit denied rehearing en banc by a 10-2 vote in December 2017. The notable and troubling aspect of Regeneron II is the panel majority’s approval of the district court’s imposition of a sanction against the patentee for its misconduct in the infringement litigation with Merus. Much of that litigation misconduct involved Regeneron’s failure (having waived attorney-client privilege) to produce documents requested during discovery that pertained to its prosecuting attorneys’ decision not to submit certain prior art references to the USPTO. The Federal Circuit was not mistaken in reading Second Circuit precedent as conferring broad discretion on district courts to fashion appropriate sanctions, including imposing adverse inferences. Nevertheless, the substance of the district court’s adverse inference dealt with a key component of inequitable conduct—intent to deceive the USPTO—unquestionably a matter of substantive patent law on which Federal Circuit law controls. Although not without its critics, the Circuit’s 2011 en banc decision in Therasense is, for better or worse, the current defining framework for establishing inequitable conduct. Therasense tightened the standards for rendering patents unenforceable in an attempt to stem a perceived “plague” of inequitable conduct accusations. The en banc court required that the deceptive intent prong of inequitable conduct be independently proved based on clear and convincing evidence. By relying on Second Circuit law dealing with litigation sanctions and adverse inferences generally, the Regeneron II majority allowed satisfaction of Therasense’s substantial evidentiary burden of proof by a court imposing an adverse inference as a sanction for litigation misconduct, without conducting any evidentiary hearing or trial, on the fact question of intent to deceive the USPTO.