The Upside-Down Inequitable Conduct Defense

“Inequitable conduct” is a patent law doctrine that renders a patent unenforceable when the patentee is found to have acted improperly before the U.S. Patent and Trademark Office. It is widely reviled and frequently criticized for being draconian: the Federal Circuit has famously called the doctrine an “absolute plague” that terrorizes patent owners. Responding to the concern about overdeterrence, the Federal Circuit has repeatedly narrowed the doctrine. This Article takes a different perspective.

The conventional wisdom is correct enough in arguing that the inequitable conduct doctrine sometimes produces overdeterrence. What has been overlooked, however, is the fact that the doctrine also produces underdeterrence. Specifically, as this Article will demonstrate, the unenforceability penalty creates too much deterrence against minor errors, but it also produces inadequate deterrence against the most serious patentee frauds. In this way, the doctrine is upside down.

Once we understand that there is an underdeterrence problem, it quickly becomes evident that conventional proposals to narrow liability (which the Federal Circuit has generally adopted) are misguided. Narrowing the inequitable conduct doctrine can mitigate the overdeterrence problem, but only at the price of exacerbating the underdeterrence problem. At the same time, the Article will demonstrate that expanding liability, as some have argued, is no better: it simply exacerbates the overdeterrence problem. Rather than focus on the liability standard, the proper solution is to reform the penalty in a way that addresses both the over- and underdeterrence effects.