Herbert Hovenkamp: Patent Exclusions and Antitrust After Therasense

While Therasense has received a significant amount of coverage due to its implications on the inequitable conduct defense, few have discussed its implications in other areas. In Patent Exclusions and Antitrust After Therasense, Professor Herbert Hovenkamp of the University of Iowa takes the opportunity to analyze the potential implications of Therasense on patent exclusion suits.

Reminding us that patent suits themselves may be used as anticompetitive weapons, he notes that litigants aware of their fraudulently acquired patents at the time of suit could be committing antitrust violations in addition to inequitable conduct. The antitrust violation is frequently alleged as a counterclaim by the infringement defendant. Such violations could enable defendants to not only invalidate patents that were acquired via inequitable conduct, but also to recover treble damages as a result of the patentee’s effort to exclude competitors by litigating. At bottom, Hovenkamp notes that patentees should not be able to use “sham litigation” as a tool to promote anticompetitive ends. Besides filing infringement suits using “inequitably obtained” patents, litigants may also file suits using a valid patent with the knowledge that the defendant did not actually infringe it. In either case, patentees use litigation to intimidate or suppress competitors.

To successfully raise an antitrust counterclaim, however, the infringement defendant must show that, at the time the lawsuit was brought, the infringement plaintiff had the specific intent to use the patent as a weapon to exclude competitors. Thus, there may be instances where, even under Therasense, a particular patent may be invalidated via inequitable conduct and, despite that, the same infringement plaintiff may not be guilty of anticompetitive patent exclusion. For example, a patentee who obtains a patent by fraud may transfer the patent to an “innocent infringer” who never had knowledge of the fraud. In such a case, the patentee does not bring the lawsuit with the intent to exclude—the infringement plaintiff believes that it has a bona fide patent. There may also be cases in which significant time delays between procuring patents and an infringement suit may render the litigant innocent for antitrust purposes—simply put, the lawyers litigating the infringement lawsuit may have had no connection—or knowledge—of the firm’s past inequitable conduct.

In his discussion of patent exclusions, meanwhile, Hovenkamp notes several thoughts triggered by the Therasense opinion. First, the subjective intent requirement of Therasense may conflict with antitrust norms established in patent exclusion cases. Thus, while Therasense called for a subjective intent standard in assessing inequitable conduct, he argues that an objective standard should apply when assessing patent exclusions—for example, “fairly clear carelessness leading to an indisputably material misrepresentation should itself be grounds for finding an exclusionary act, at least for equitable antitrust purposes.” This is in line with the objective test to determine whether a patent is “baseless” that the Supreme Court announced in PRE. In this sense, movement towards a more rigid intent requirement in Therasense has resulted in a slight divergence between the inequitable conduct and patent exclusion doctrines.

Nonetheless, Hovenkamp emphasizes that there is not necessarily a direct conflict between Therasense’s subjective intent requirement and the objective test established in PRE. He simply cautions that the Therasense opinion may have gone too far in requiring that infringement defendants show explicit intent to defraud on the part of the patentee. He notes that Therasense could have gone the other way—penalizing frivolous inequitable conduct claims rather than rewarding those charged with it. He does not believe that firms should be rewarded for their gross negligence during the patent prosecution process, and he expresses anxiety that factors such as a firm’s document retention policy should dictate the success of a defendant’s inequitable conduct claim.

As Therasense continues to shape future inequitable conduct inquiries, it will be interesting to see how it shapes future doctrine in the patent exclusion area. It seems that one implication of Therasense is that the patent exclusion doctrine may slowly converge with the inequitable conduct doctrine, even if only figuratively. Nonetheless, it also seems that the separate analyses of intent will continue to separate the doctrines—inequitable conduct’s intent will be assessed at the time of prosecution, while patent exclusion’s intent will be assessed at the time infringement suits are brought. But is this a distinction without a difference in some instances? It may be questionable to allow supposed “innocent infringers,” for example, to escape antitrust counterclaims completely. It is arguable that an “innocent infringer” should still be liable for an antitrust violation, despite its good intentions at the time of the suit. If it were liable, it could then be allowed simply to sue the firm from which it received the patent. Then, firms that transfer fraudulent patents to infringers would be put on notice that they may be liable for exclusionary suits that are subsequently brought by a transferee. In some sense, the initial transfer of the fraudulent patent was anticompetitive in and of itself, and there should arguably be a way to penalize that transfer.

Regardless of one’s thoughts on this area, Hovenkamp writes a piece that gives the Patent bar valuable insights in a complex area of law. It spurs a useful dialogue about patent exclusion suits, and provides a great primer for anyone who is unfamiliar with patent exclusion.