USPTO director’s decision highlights consequences of evidence suppression

In a rare exercise of authority through a sua sponte director review, US Patent and Trademark Office (USPTO) Director Kathi Vidal affirmed the Patent Trial and Appeal Board (PTAB)’s decision to sanction patent owner Longhorn Vaccines & Diagnostics LLC (Longhorn) in light of Longhorn’s misconduct in withholding and suppressing relevant evidence to the PTAB and petitioner, Spectrum Solutions LLC (Spectrum).

Background

Director Vidal sua sponte ordered a director review of the PTAB’s final written decisions on June 12, 2023, which was later limited to a review of the PTAB’s Sanctions Order. Director Vidal was especially interested in determining which parts of Section 37 of the Code of Federal Regulations are implicated when a party withholds factual evidence in an America Invents Act (AIA) proceeding, and whether the PTAB’s sanctions against Longhorn were appropriate.

Director Vidal’s decision stems from an inter partes review (IPR), wherein Spectrum argued that five patents owned by Longhorn were invalid based on a prior art publication. Following institution, Longhorn filed motions to amend the challenged claims. In response, the PTAB issued non-binding preliminary guidance, stating that Spectrum established a reasonable likelihood that the proposed substitute claims were unpatentable.

To distinguish over this prior art, Longhorn filed revised motions to amend, and engaged in third-party testing of solutions disclosed in the prior art. Longhorn then selectively submitted testing results from the third-party, contending that the prior art cannot anticipate the challenged claims. However, Longhorn withheld unfavorable results from both the PTAB and its own expert.

Revealing the withheld third-party test results

When Spectrum deposed the third-party lab employees about the testing, Longhorn repeatedly asserted attorney work product immunity. However, the PTAB determined that the doctrine does not excuse a failure to disclose material information – such as research, testing, and experiments – subject to the duty of candor and good faith. The PTAB then ordered Longhorn to produce the additional testing documents, which revealed that Longhorn withheld third-party test results inconsistent with its positions. Moreover, these documents revealed that Longhorn intentionally withheld the unfavorable results from its own experts to elicit favorable, yet misleading and incomplete, expert testimony.

As a result, the PTAB determined that sanctions were warranted against Longhorn 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” under 37 C.F.R. § 42.11. As requested by Spectrum, the PTAB entered adverse judgment against Longhorn, cancelling all 183 challenged claims. Separately, the PTAB issued final written decisions in each of the five IPRs, finding all but seven of the 183 challenged claims and the proposed amended claims were invalid on the merits.

Director Vidal’s decision

Following a review of all relevant briefing and the PTAB’s Sanctions Order, Director Vidal determined that Longhorn’s misconduct stemmed from intentionally misleading the PTAB through its third-party testing to keep unfavorable results out of its report, while concurrently providing an incomplete and misleading report to its expert. This conduct “misled the board and violated the duty of candor and good faith,” thereby violating 37 C.F.R. § 42.11, et seq.

In analyzing other sections of the Code of Federal Regulations, Director Vidal found that 37 C.F.R. § 1.56 does not apply directly to AIA proceedings, but rather patent prosecution, while reliance on regulations found exclusively in 37 C.F.R. § 1.11 is “best reserved for a disciplinary action against Patent Owner’s counsel if initiated.”

Separately, Director Vidal also affirmed the PTAB’s finding that the attorney work product doctrine could not shield Longhorn from being required to disclose its unfavorable results as Longhorn waived any immunity by selectively disclosing only the favorable test results. Director Vidal also found the PTAB’s sanction of an adverse judgment against all 183 challenged claims was appropriate to deter a patent owner from egregiously and intentionally misleading the PTAB by withholding evidence. “The difficulty of detecting withheld evidence further supports imposing a sanction that will deter future litigants from gambling that their evidentiary withholding will not be discovered.”

Director Vidal affirmed the PTAB’s decision against Longhorn, thereby cancelling all 183 challenged claims.

Key takeaways

Director Vidal’s sanctions against Longhorn appear intended to deter violations of the PTAB’s duty of candor and good faith, including selective disclosure of material information with intent to mislead. Practitioners implicated in misleading behavior may also face disciplinary action from the Office of Enrollment and Discipline.

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