In a rare exercise of authority, the PTAB issued sanctions against a Patent Owner for failure to meet its duty of candor and good faith by withholding information relevant to the patentability of challenged and substitute claims in Spectrum Solutions LLC v. Longhorn Vaccines & Diagnostics, LLC, IPR2021-00847, IPR2021-00850, IPR2021-00854, IPR2021-00857, IPR2021-00860. The sanctions order resulted in the cancellation of all 183 challenged claims of the five instituted patents, which covered chemical compositions and methods for biological specimen collection including preserving biological samples, killing pathogens, and preventing degradation of nucleic acids.
The PTAB's decision to issue sanctions against Patent Owner arose during review of the Patent Owner's Motions to Amend ("MTA"), filed in each of the five instituted IPRs. After Patent Owner's filing of initial MTAs, the PTAB issued a Preliminary Guidance for each proceeding, indicating initial non-binding views that the Petitioner had established a reasonable likelihood that the proposed substitute claims were unpatentable. In response, Patent Owner filed revised MTAs and hired a third-party laboratory to conduct biological testing on nuclease inactivation and antimicrobial activity of compositions, to distinguish an asserted prior art reference.
After resolving a dispute regarding attorney work product objections during the Petitioner's deposition of the third-party lab employees, the PTAB ordered Patent Owner to serve additional testing documents with any relevant inconsistent information. The additional testing documents revealed that Patent Owner initially withheld test results that did not support Patent Owner's position. Moreover, Patent Owner intentionally intervened with the evidence of the third-party witnesses to "tailor" the test results and omit relevant results, which Patent Owner subsequently supplied to its declarant as support for his testimony.
Patent Owner made several arguments that the duty of candor and good faith was not violated because the withheld test results were not "inconsistent with any statement in the [third-party] witnesses' testimony" and was not "inconsistent with anything that the patent owner has said." Additionally, Patent Owner asserted that the withheld information was privileged as attorney work product. Patent Owner also relied on its claim construction position, arguing that the withheld test results were not relevant to its position and not necessary to disclose.
In its order granting sanctions, the PTAB Panel emphasized the applicability of the duty of candor, set forth in 37 C.F.R. § 42.11, in PTAB proceedings as to the patentability of both original and proposed substitute claims. The Panel refuted Patent Owner's arguments explaining that the withheld test results were directly relevant to the asserted purpose of the testing and the intervention of Patent Owner's counsel to omit results, evidenced that relevancy. Additionally, the Patent Owner's representation that "no other testing exists relating to the conclusions or results," was "wholly untrue" as to the stated purpose of the testing. The Panel also found no basis that the attorney work product privilege applied to the withheld results, because the results were "the very type of factual information—research, tests, and experiments pertinent to patentability—that cannot be hidden behind the work product doctrine." To the extent the Patent Owner misinterpreted that the testing results were privileged under the work product doctrine, the Panel instructed that a party may still file an exhibit under seal, allowing compliance with the duty of candor good faith and shielding the information, while the PTAB determined if the information was material to patentability or privileged.
The Panel also determined that Patent Owner's reliance on its claim construction position to avoid disclosure failed for multiple reasons. First, the PTAB set forth an interpretation of the claims which made these test results highly material to the issue of patentability. Second, the withheld test results met the requirements of claims in each IPR, including the proposed substitute claims. And third, the Patent Owner was aware of the PTAB's claim construction in the institution decisions, and therefore could not reasonably rely on its own contrary constructions to limit its disclosure. The PTAB's claim constructions, even if only preliminary, "convey the measure of what is reasonably material to patentability," and to the extent the Patent Owner disagreed, the Patent Owner may have challenged these constructions at trial, but the Patent Owner was not free to withhold the information.
The Panel concluded that the Patent Owner's intentional actions in these proceedings warranted sanctions against Patent Owner for "both its willful failures to comply with applicable rules...and for its unwarranted disregard relating to its duty of disclosure and fair dealing before this tribunal." As requested by Petitioner, the Panel entered adverse judgments on all challenged claims in the five IPRs, but declined to impose a sanction of attorney fees. The Panel majority reasoned that judgment alone created sufficient deterrence, although in a concurring opinion, Lead APJ Braden recommended attorney and laboratory fees as an additional sanction. To put the final nail in the coffin, the PTAB issued written decisions in each of the IPRs and concluded that all but seven of the 183 claims, as well as the proposed amended claims, were invalid on the merits.
Takeaway: The Panel's decision to impose sanctions against a party for failure to comply with the duty of candor and good faith reminds parties of the applicability and importance of 37 C.F.R. § 42.11 during PTAB proceedings. The PTAB holds this duty in high regard and this order serves as a warning for non-compliance. A party must disclose material information relevant to patentability of both original and substitute claims, regardless if the material is contrary to the party's position. When pursuing additional third-party testing, a party needs to consider whether the testing is truly essential to its argument, because all testing results, both good and bad, will need to be disclosed to the PTAB.
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.
