An Up-Close Look at the Duty of Disclosure

Longstanding "Rule 56" (37 C.F.R. § 1.56) imposes on each individual associated with the filing and prosecution of a patent application a general "duty of candor and good faith" in dealing with the United States Patent and Trademark Office. This duty includes a specific "duty to disclose" to the Patent Office all information known to be material to patentability. At first blush, Rule 56 may seem easy to satisfy. However, other duties that the federal courts have read into Rule 56 require a greater degree of effort on the part of counsel. As such, it is possible that seemingly reasonable conduct by counsel at the time disclosure decisions are being made may later be found deceitful. Diligent counsel will therefore want to be well versed in the idiosyncrasies of Rule 56.

For example, the courts have held that Rule 56 imposes a duty to investigate on counsel. More specifically, where counsel knows of information and may readily determine the materiality of that information, he cannot intentionally avoid learning of its materiality. FMC Corp. v. Hennessy Industries, Inc., 5 U.S.P.Q.2d 1272, 1275 (Fed. Cir. 1987). Indeed, a court may infer deceptive intent from such cultivated ignorance. However, a duty to investigate does not arise where there is no notice of the existence of possibly material information. Rather, counsel must have sufficient information that suggests the existence of specific information, the materiality of which may be ascertained with a reasonable investigation.

Rule 56 has also been held to impose on counsel a duty to resolve "close cases" of materiality by disclosure and not by a unilateral decision of nondisclosure. LaBounty Mfg., Inc. v. United States Int'l Trade Comm'n, 22 U.S.P.Q.2d 1025, 1033 (Fed. Cir. 1992). Significantly, materiality is not limited to "prior art," but instead includes any information that a reasonable patent examiner would likely consider "important" in deciding whether to allow an application to issue as a patent.

A breach of Rule 56 duties typically comes to light only during a patent litigation, when an accused infringer raises an affirmative defense of inequitable conduct. If the court finds inequitable conduct, then the patent becomes unenforceable. A finding of inequitable conduct can also provide a basis for awarding attorney fees. Thus, given the proper set of facts, inequitable conduct can be a powerful defense.

To prevail on this defense, the defendant must prove by clear and convincing evidence that the patentee withheld or misrepresented material information with intent to deceive the Patent Office. As direct "smoking gun" evidence of deceitful conduct is seldom found, the intent element is typically proven by inferences drawn from facts, thereby permitting a confident judgment that deceit has occurred. When examining deceitful intent, a court must weigh all evidence, including evidence of good faith. This is one reason why counsel should ensure that good-faith efforts in complying with Rule 56 are evident, or at least provable.

Consider, for instance, the typical case where a client seeks patent protection for an invention that was on-sale or publicly disclosed (e.g., via a website, marketing literature, a standards body proposal, or a trade show demonstration) approximately one year prior to seeking patent protection. Such a sale or public disclosure is material because the U.S. Patent Code prohibits patenting an invention that was on-sale or publicly disclosed more than one year before the filing of an application claiming that invention. If the client clearly reports the dates such activities occurred, the counsel's task is fairly straightforward: file before the one-year grace period ends.

However, if the client reports unclear information, further probing by counsel is necessary. Even if the discovered information is inconclusive, having conducted a meaningful investigation will generally be perceived as a good-faith effort in attempting to satisfy the Rule 56 duty to investigate. Such good-faith efforts generally weigh against a finding of deceitful intent.

Further, investigations into the materiality of information often conclude with a finding that the information would not affect patentability. But in these cases, an examiner may still perceive the information as "important" and, therefore, material. Thus, once patent counsel investigates, the Rule 56 duty to resolve "close cases" of materiality by disclosure may still be triggered, despite the counsel's studied conclusion that the information does not affect the invention's patentability.

For example, counsel should disclose known information that establishes by itself a prima facie case of unpatentability even when the prima facie case can be successfully rebutted. In this sense, counsel should make disclosure decisions based on the information's prima facie materiality and not its studied materiality. This will avoid the mistake discussed in GFI, Inc. v. Franklin Corp., 60 U.S.P.Q.2d 1141 (Fed. Cir. 2001), where GFI did not disclose information about potential prior inventorship by another because counsel was satisfied that GFI invented first. As a result, GFI's patent was found unenforceable. Thus, it is better to give the examiner an opportunity to evaluate the information and, if necessary, to require additional facts or material so that he can render an informed decision. Although the courts afford an examiner's conclusion some deference, they afford counsel's unilateral conclusions none.

After conducting investigations and making disclosure decisions, there still remains the issue of how best to sufficiently communicate material information to the Patent Office. Information in the form of a publication, such as patents, books, articles, marketing material, online content and other readily printable information, can be easily disclosed in an information disclosure statement (IDS). Counsel need only provide copies of such material to the examiner without comment.

However, other material information, such as information on possible sales, offers to sell, public uses or disclosures, derived knowledge (e.g., learned from negotiations or discussions), prior invention by another and inventorship conflicts, must also be disclosed. This type of intangible information must be reduced to writing so that it too can be submitted in an IDS. Such a writing, however, can be difficult to properly research and draft.

For instance, while patent counsel prefer there to be no offers to sell and no public disclosures of the invention until a patent application is filed, businessmen are eager to make binding offers to sell, enter into joint development agreements and generate revenue. Given this direct tension between the imperatives of a robust patent program and the act of conducting successful business, a fertile field of material information is often left for harvest. In addition, realities of insufficient record keeping and the failing memories of those charged with informing counsel make the harvest that much more difficult.

Submitting such material information therefore presents an interesting dilemma for patent counsel. On one hand, providing too much information may unnecessarily disclose otherwise privileged and confidential information. On the other hand, counsel must provide the Patent Office with sufficient information for a reasonable examiner to intelligently consider the information in context.

By affirmatively selecting certain facts for disclosure while omitting other facts, patent counsel "runs the risk that, years later, a fact-finder might conclude that they intended to deceive." Molins PLC v. Textron, Inc., 33 U.S.P.Q.2d 1823, 1830 (Fed. Cir. 1995). If the natural consequence of counsel's acts leave the examiner with the impression that no further information is needed, then the submitted information best be sufficiently complete. In particular, counsel should provide the Patent Office with sufficient information for a reasonable examiner to consider the submitted information in context, not with a selective and misleading disclosure. Refac Int'l, Ltd. v. Lotus Dev. Corp., 38 U.S.P.Q.2d 1665, 1671-72 (Fed. Cir. 1996) (applicants submitted an affidavit devoid of a material fact to overcome a rejection). Omissions of material fact can support an inference of deceit.

Thus, complying with Rule 56 requires counsel to look beyond the low-hanging fruit of printed publications. It is a certainty that the complete defense to infringement afforded by a finding of inequitable conduct provides substantial motivation for opposing counsel to reach to the highest vine or the lowest tuber in search of omitted material information. Patent counsel must make good-faith efforts to harvest and disclose that information first, or face the risk of an inference of deceitful intent.