Merrill Matthews

The problem arises from the fact that the standards currently used to determine inequitable conduct are vague and inconsistent. On the issue of what information needs to be disclosed, the law says that an applicant needs to provide any information that would be expected by a "reasonable examiner." Needless to say, that leaves far too much for interpretation.

And what constitutes an indicator of "intent to deceive" varies from court to court — sometimes from judge to judge.

That vagueness is being exploited by generic drug manufacturers. Every so often, they hit a jackpot when a judge with an especially broad definition of "relevant material" decides to invalidate a patent.

The result is an epidemic of frivolous inequitable-conduct claims. In the words of one federal circuit court judge, "the habit of charging inequitable conduct in almost every major patent case has become an absolute plague."

That drives up the cost of patent litigation, wastes the scarce resources of government regulators, clogs up the courts, and destroys the incentive for people to invent new cures.

Jon Dudas, director of the U.S. Patent and Trademark Office, which oversees all patent applications, says that "inequitable conduct allegations are frequently made but not often found, and thus add substantially to litigation cost and duration."

Much like ambulance-chasing lawyers, patent-challengers don't need to win every lawsuit. If they win just one inequitable-conduct ruling, the original patent holder loses the right to exclusively sell a drug. And most drugs cost about $1 billion to develop these days.

Generic manufacturers can take the drug's billion-dollar formula, produce copycat pills on the cheap, flood the market, and siphon away a hefty chunk of the profits.

Even if an inventor is found innocent of an inequitable-conduct charge, the arbitration process itself is expensive and time-consuming.

Obviously, we should expect full disclosure from anyone trying to patent a product. But the patent-approval process is breathtakingly complex — an honest mistake shouldn't spell disaster. And the people filing frivolous charges need to be held accountable.

With Congress currently debating how to update our patents laws, policymakers should consider reforming the rules governing inequitable conduct. There would still be no guarantee that the ultimate cure for hangovers would be invented in your neighbor's garage, but stranger things have happened.


Merrill Matthews

Merrill Matthews, Ph.D., is a resident scholar with the Institute for Policy Innovation.