Federal Circuit Find Inequitable Conduct For Failure to Submit Notes

In Monsanto Company v. Bayer Bioscience N.V., 85 USPQ2d 1582 (Fed. Cir. 2008), Bayer owns four patents related to Bacillus thuringiensis (BT) toxins, which are proteins produced by strains of the BT bacteria.  BT toxins are harmless to humans and most animals, but are toxic to certain crop-destroying insects.  In 1986, Plant Genetic Systems (a predecessor to Bayer) succeeded in obtaining insect-resistant plants that expressed a truncated form of a BT toxin, resulting in the four Bayer patents.  Specifically, U.S. Patent No. 5,545,565 (one of the four Bayer patents) claims artificial genes comprising: a truncated BT toxin gene encoding a BT toxin of a specific amino acid sequence; and the regulatory region of a gene naturally expressed in plant cells, which enables the gene to be transcribed in plants.

Monsanto, the alleged infringer, developed a genetically modified corn product that expressed a BT toxin with the same amino acid sequence claimed in the Bayer patents.  Accordingly, in December 2000, Monsanto filed a declaratory judgment action seeking a declaration that its product does not infringe the four Bayer patents: U.S. Patent Nos. 5,545,565; 5,767,372; 6,107,546; and 5,254,799.  Bayer counterclaimed alleging infringement.  After the District Court initially granted summary judgment to Monsanto, the Federal Circuit vacated the District Court’s initial findings of unenforceability and invalidity judgments in Monsanto Co. v. Bayer BioScience N.V., 363 F.3d 1235 (Fed. Cir. 2004)On remand, Bayer dropped its infringement claims to three of the four patents, and proceeded to trial on only U.S. Patent No. 5,545,565 (hereinafter “the ‘565 patent”).

Subsequently, the District Court held a four-day bench trial on the issue of Bayer’s inequitable conduct before the United States Patent and Trademark Office (PTO) in prosecuting the ‘565 patent.  The District Court found materiality and intent for acts relating to prosecution of the ‘565 patent due to Bayer’s failure to submit notes that contradicted its grounds for obviousness over an applied piece of art, thus rendering the ‘565 patent unenforceable due to inequitable conduct.  The Federal Circuit then reviewed the District Court’s holdings of inequitable conduct.

As its standard for review, the Federal Circuit first determined whether the District Court found “by clear and convincing evidence that a patent applicant breached its duty of candor and good faith to the United States Patent and Trademark Office by failing to disclose material information, or submitting false material information, with an intent to deceive the PTO.”  Bruno Indep. Living Aids, Inc. v. Acorn Mobility Servs. Ltd., 394 F.3d 1348, 1351 (Fed. Cir. 2005); Kingsdown Med. Consultants, Ltd. V. Hollister, Inc., 863 F.2d 867, 872 (Fed. Cir. 1988).  Furthermore, once the requisite materiality and intent is established, the District Court “must balance the equities to determine whether the patentee has committed inequitable conduct that warrants holding the patent unenforceable.”  Monsanto Co. v. Bayer BioScience N.V., 363 F.3d 1235, 1239 (Fed. Cir. 2004).

During prosecution of the ‘565 patent, Bayer disclosed as prior art an abstract by Dr. Wayne Barnes that had been prepared in 1985 for a scientific conference, during which Barnes presented his findings with a poster.  The Barnes abstract revealed that “the second half of the [BT] toxin is dispensable for the expression of an active insecticide,” but did not provide a complete description of the poster.  After the Examiner rejected all of the ‘565 claims using the Barnes abstract, Bayer argued that the Barnes abstract fails to identify which BT toxic gene should be utilized, and that the abstract fails to show that the fusion gene would work in plants.

Although Bayer disclosed the Barnes abstract, Bayer withheld notes taken by Dr. Celestina Mariani, a Bayer employee, regarding the poster.  The notes reveal in greater detail what was described on the poster and which was not included in the abstract, and specifically describe that Barnes had truncated a BT toxin gene at or near a specific enzyme site, that Barnes had created a chimeric gene which encoded a fusion of this truncated BT toxin and an NPT-II protein, and that Barnes demonstrated that the expressed protein was toxic to insects when applied to plants.  Furthermore, the notes were widely distributed among Bayer’s BT group.  Dr. Wouter Meulemanns, of Bayer’s intellectual property department, admitted that he saw the notes, but stated that Dr. Mariani was unable to remember anything about the presentation or the poster during a conversation on the notes.  In contrast, the District Court found that Dr. Mariani’s deposition demonstrated that she remembered a great deal about the notes and the poster.

The Federal Circuit affirmed the District Court’s holding of inequitable conduct based upon a conflict between the notes and the arguments presented to the Examiner during prosecution.  Specifically, the Federal Circuit determined that the arguments Bayer made in response to the Examiner’s rejection are not reconcilable with the notes.  Therefore, the notes are material under 37 C.F.R. 1.56(2)(i).  Furthermore, the Federal Circuit held that the intent to deceive the PTO can be inferred from the absence of a credible reason for withholding the material information.  As such, while cautioning that internal documents need not always be disclosed, the Federal Circuit affirmed the District Court’s finding of inequitable conduct by failing to disclose the notes during prosecution due to their high materiality in contradicting their arguments for patentability.

Further, while only the ‘565 patent was at issue on appeal, the District Court had found the remaining patents unenforceable since the inequitable conduct infected the remaining patents previously asserted.  Bayer had argued that the District Court lacked jurisdiction over these remaining patents.  In rejecting this argument, the Federal Circuit relied upon Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223 (Fed. Cir. 2007) in allowing the District Court to retain jurisdiction over related cases for purposes of inequitable conduct.  The Federal Circuit also noted that, unlike Nilssen, the District Court originally had jurisdiction over these patents when the case was originally filed under 35 U.S.C. §285.  As such, the Federal Circuit affirmed the District Court’s finding that the remaining three patents were also unenforceable since the District Court retained jurisdiction over these three patents for purposes of inequitable conduct.

Significance to Patent Applicants

Monsanto represents an extension of the McKesson Information Solutions v. Bridge Medical, Inc., 487 F3d 897, 82 USPQ2d 1865 (Fed. Cir. 2007) and demonstrates the importance of ensuring that attorney arguments in office actions are not contradicted by information known to the applicant.  In McKesson, this contrary information was known to the patent attorney due to his handling of a related case and his failure to account for known prior art while responding to an office action.  See, generally, Federal Circuit Finds Inequitable Conduct For Not Disclosing Material Prior Art In Related Application, pp. 10-13, Stein McEwen Newsletter, Volume 3, Issue 2 (June 2007).  In contrast, in Monsanto, the failure was on the part of the inventors to not bring to the attention of the prosecuting attorney information widely available and known to the inventors during prosecution.  As such, Monsanto serves as notice to inventors to carefully review an attorney’s arguments to ensure that the arguments are both technically accurate and not contrary to information known to the inventor.

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