The FDA’s Inequitable Conduct Problem

In patent law, the term “inequitable conduct” describes misconduct by the applicant that deceives or misleads the examiner into granting the patent by omitting or misrepresenting information — and it is a claim that can invalidate patents if they are deemed to have been acquired by fraud or deceit. According to a recent paper in JAMA, about 50% of all cases where inequitable conduct was found were for FDA-regulated products.

In this video interview, Sean Tu, PhD, JD, a professor of law at West Virginia University in Morgantown, discusses his paper outlining the causes of inequitable conduct claims against FDA-regulated products, why the administration may have a disproportionate number of these cases, and ways to solve the problem.

The following is a transcript of his remarks:

You have three really crucial duties to the patent office. One is the duty of disclosure. That means that you cannot hide material references — “material” being stuff that really affects patentability. You have the duty of candor, which means that you have to tell the truth; you can’t lie to the patent examiner. And you have to act in good faith.

Countering this is inequitable conduct, which is an affirmative defense. That means that if the litigant, the defendant who’s getting sued, says, “Hey, wait a minute, these patents are actually no good because you lied or hid material references from the examiner.”

What’s interesting about inequitable conduct is that it’s considered the atomic bomb of patent law. These are not my words, this is actually Chief Judge Rader who called it “the atomic bomb of patent law.” And the reason why is not just one or two claims or the claims that you care about are invalidated via inequitable conduct, but the whole patent is killed if you committed fraud. Not only that, but any related patent that you got could also be invalidated based on fraud.

The most common reason for invalidation by inequitable conduct is material omissions. Eighty-eight percent of the time when inequitable conduct is found, it is due to material omissions. That is, hiding relevant journal articles, product or public use — that is somebody else had a product that was sold or hiding negative experiments — like, I did the experiments and 80% of the time it didn’t work, but I’m not going to disclose that to the PTO [Patent Trademark Office]. That’s a no-no.

The second most common reason for invalidation is active misrepresentations, telling the FDA one thing and then telling the PTO a completely different thing. One of them has to be a lie, right?

So, what is the scope of this problem? First of all, Congress and the PTO are really worried about this. Several letters were sent by congressmen and their senators to the PTO saying, “Hey, let’s try to stop this behavior.”

The first thing is, is this happening a lot? And my answer is: I don’t know. It’s really hard to tell. The reason why is we know that this behavior doesn’t get caught too often, right? Does that mean that it’s not happening? No. It could mean that we’re just not detecting it.

So what we did was we showed every inequitable conduct decision that was adjudicated by the [Federal] Circuit — which is the kind of Supreme Court of patents, it’s the only appellate court for patents — and looked at when they invalidated a patent, what was the product? [graph displayed] You can see here in the black lines it’s all inequitable conduct patents that were invalidated or lawsuits from those patents. Then in the hatched bars, those are the FDA products. You can see there are a lot of hatched bars compared to the black bars. We show that about 50% of all cases where the Fed Circuit found inequitable conduct was FDA-regulated product, whether that be food or drugs or biologics or devices or research tools. It has an outsized share compared to every other type of technology.

Take-home message here is: we could have an inequitable conduct problem when it comes to FDA-related products.

I think there are reasons why it might happen in FDA-regulated products a little bit more. One is that a lot of this information is held secret by the FDA. They try to protect it via trade secret, in which case it’s not disclosed, in which case I might feel a little bit more confident that I’m not going to get caught.

The second thing is drugs make a lot of money, right? There’s a real incentive to lie and cheat the FDA or the PTO because you know that you’re going to get some probably significant returns based on these patents. And patents are very important when it comes to the drug industry.

What are some policy solutions? One of the things that you might’ve seen is that, in 2011, the number of cases really went down. You normally have four or five a year, and then it went down to one a year. That’s because in 2011, there was a key case called Therasense [v. Becton, Dickinson and Co.] which kind of changed the standard for inequitable conduct.

First of all, it made it harder to plead inequitable conduct. That is, in my complaint before I can claim inequitable conduct, I have to point to something specific and say, “This is what the inequitable conduct was.” But a lot of times, I don’t know what you did until I can get discovery. So because of that, I can’t plead with particularity anymore, because of that I’m not going to get discovery, because of that I’m not going to be able to make those kinds of arguments to begin with.

Second of all, the standard for inequitable conduct was raised. It needs to be the “but-for cause.” What do I mean by that? But for your hiding a reference, the patent office would not have given you a patent. That’s a very difficult standard to meet, right? That’s why we see this real decrease post-2011 in the number of inequitable conduct cases.

So what are some solutions? Well, first we could solve this using just legal rules and say, “Let’s go back to a pre-Therasense world where it’s easier to plead inequitable conduct when it comes to FDA-regulated products.”

Second, we might flag those assignees that have inequitable conduct-invalidated patents for stricter review. So Amgen, you were caught with your finger in the inequitable conduct patent pot, we’re going to review your patents a little bit more closely now. They should maybe suffer some consequences for continued lies, right? If you get caught once, maybe we should treat you a little bit differently.

We can educate the in-house scientists who are the ones who are doing a lot of this stuff. Actually, the lawyers are not the ones who are committing inequitable conduct, for the most part. It’s the scientists who may not know what the legal ramifications of what they’re doing. Also, maybe they’re not doing it on purpose, but saying, “Oh, these references are duplicative, in that I’ve already disclosed a different reference that shows the same thing.”

Congress also could create a FDA reexamination process — I proposed this in a law review article that I wrote — where after they issue the patent, send all of the information that the FDA has back to the PTO for review to say, “Hey, was there stuff that was said here in the FDA that contradicts what they told you at the PTO?” You’re going to have to have some people sift through, because the FDA documents are very long and very specialized. You need to have somebody be able to consolidate the important information for patent examiners to go over.

So there are some basic things that we can do to enhance that kind of crosstalk between the PTO and FDA to stop this stuff from happening.

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