United States: Misrepresentation Requires Higher Level of Materiality than Mere Omission

The U.S. Court of Appeals for the Federal Circuit, on rehearing, vacated its prior holding of inequitable conduct and withdrew its earlier opinion in Purdue Pharma LP et al. v. Enro Pharmaceuticals Inc. et al., Case Nos. 04-1189, -1347, -1357 (Fed. Cir. Feb. 1, 2006) (Plager, S. J.).

Purdue filed an infringement suit against Endo alleging that Endo’s proposed generic versions of controlled release OxyContin pain relief medicine would infringe three Purdue patents. The district court found the patents were infringed but held the patents were unenforceable due to inequitable conduct. In its earlier opinion, (see IP Update vol. 8, No. 6, June 2005) the Federal Circuit upheld the district court’s judgment of inequitable conduct and, consequently, did not consider Endo’s cross-appeal on the infringement issue. Now, in its decision on rehearing, the Federal Circuit vacated the district court’s inequitable conduct judgment and affirmed the district court’s judgment that the patents were infringed.

The issue that precipitated the inequitable conduct concern centered on the following statement in the Purdue patent specification:

It has now been surprisingly discovered that the presently claimed controlled release oxycodone formulations acceptably control pain over a substantially narrower, approximately four-fold [range] (10 to 40 mg every 12 hours—around-the-clock dosing) in approximately 90% of patients. This is in sharp contrast to the approximately eight-fold range required for approximately 90% of patients for opiod analgesics in general.

As it turns out, this was a prophetic statement as opposed to a statement of scientific fact. In fact, there was no scientific proof or clinical results of a four-fold dosage range for oxycodone as asserted in the specification. The statement was based on the "insight" of one of the inventors who "envisioned" a controlled release of the oxycodone product that would control pain over a four-fold dosage range in 90 percent of the patients. The trial court held that the failure to inform the U.S. Patent and Trademark Office (USPTO) that the assertion "finding," which Purdue heavily relied on in arguing for patentability, was a material omission. In its rehearing decision, the Federal Circuit relied on the amended rule 56 as the standard for materiality and held that the "failure to inform the USPTO whether a ‘surprising discovery’ was based on insight or experimental data does not in itself amount to a material omission." However, Purdue’s repeated reliance on that discovery "to distinguish its invention from other prior art opiods while using language that suggested the existence of clinical results supporting the reduced dosage range" does amount to a material omission (emphasis supplied).

The Court went on to note that while "Purdue’s actions met a threshold level of materiality, we stress that the level of materiality is not especially high" (emphasis supplied). According to the Court:

Purdue did not expressly misrepresent to the USPTO that it had obtained experimental results establishing a four-fold dosage range for oxycodone, an act that likely would have been highly material. Instead, Purdue made statements implying that an empirical basis existed for its discovery and then failed to disclose that the discovery was based only on insight. This omission of information was material, but not as material as an affirmative misrepresentation would have been.

As for the intent prong of the inequitable conduct defense, the Federal Circuit held that intent to deceive cannot be inferred solely from the fact that information was not disclosed. Rather, there must be a separate factual basis for finding deceptive intent and that "when the level of materiality is low [as in this case], the showing of intent must be proportionately higher" (emphasis supplied).

The Federal Court ruled that the district court failed to properly weigh the level of materiality when it inferred intent from materiality alone. Therefore, the Federal Circuit vacated the inequitable conduct judgment and remanded the case with instructions to the trial court to reconsider the evidence regarding intent and, should it find that a "threshold" level of intent has been established, to "reweigh its materiality and intent findings to determine whether the sanction of unenforceability due to inequitable conduct is warranted."

As the Federal Circuit made clear in this case, even if threshold levels of materiality and intent are present, the sanction of unenforceability is not automatic but requires a careful weighing process. Where the level of materiality is low, the showing of intent must be proportionally higher.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.