It’s clear from the brief Abbott Laboratories filed in advance of last November’s en banc hearing at the U.S. Court of Appeals for the Federal Circuit that the drugmaker regarded the proceeding as a chance to make some new law. And if you’re one of the patent lawyers breathing a sigh of relief at the strict new standards for establishing misconduct that a six-judge Federal Circuit majority handed down Wednesday, you can thank Abbott and its lead appellate advocate John Whealan for sticking with their position under some heavy judicial and fire. (Here’s the Reuter’s story on the ruling, and here’s analysis from Dennis Crouch at Patently-O.)

This case was entirely a matter of principle. The Abbott blood glucose test strip patent at issue in the underlying litigation with Becton Dickinson, Nova Biomedical, and Bayer was already dead by the time the en banc argument took place. Judge William Alsup found key claims in the patent invalid back in the federal district court proceeding, and a Federal Circuit panel affirmed Judge Alsup’s finding in 2010. When the appellate court ordered an en banc rehearing later in 2010, the Federal Circuit judges said they were only interested in the issue of Abbott’s alleged misconduct in obtaining the patent, which is known in IP cases as inequitable conduct.

The financial stakes on both sides were pretty low. After finding that Abbott had committed inequitable conduct in the district court, Judge Alsup had granted Becton Dickinson about $6 million in attorneys fees. (Bayer was also granted undisclosed fees.) The en banc rehearing put those fee awards in jeopardy.

But the real issue for the lawyers presenting arguments for Abbott, Becton, and Bayer was what the appropriate standard for inequitable conduct should be. By most accounts, including that of the Federal Circuit majority in Wednesday’s Therasense ruling, patent litigation has been swamped by a deluge of inequitable conduct claims, in which infringement defendants argue that patent holders deceived the U.S. Patent & Trademark Office in order to obtain their patents. One academic study the Federal Circuit cited contends that as many as 80 percent of federal patent suits include an assertion of inequitable conduct.

And why not? For the defense, an inequitable conduct finding is a veritable “atomic bomb,” in the words of the Federal Circuit. If a trial judge finds evidence the PTO was deceived, the entire patent is rendered unenforceable. Case over, defense wins.

In recent years, as an inevitable consequence of the flood of inequitable conduct claims, lawyers who prosecute patent applications have taken to dumping huge files on patent examiners, in the hopes that they won’t face subsequent accusations of hiding something from the PTO. “Left unfettered,” said Wednesday’s appellate majority opinion, written by Chief Judge Randall Rader, “the inequitable conduct doctrine has plagued not only the courts, but the entire patent system.”

Abbott and its lawyers decided to use the opportunity of the en banc hearing to put forth a new vision of appropriate standards for inequitable conduct. “We felt there was an important principle at stake,” said Abbott spokesman Scott Stoffel. “The inequitable conduct standard had become unclear, watered down, and inconsistently applied.”

Abbott had been represented in the first round of its Federal Circuit appeal by Munger, Tolles & Olson. For the en banc hearing, the company supplemented its team with appellate specialists from MoloLamken, as well as former PTO solicitor general John Whealan, who’s now an associate dean at George Washington University Law School. Abbott’s lawyers went back to the U.S. Supreme Court cases that led to the inequitable conduct doctrine. They concluded that all of high court inequitable conduct cases involved egregious lies to the PTO. The Court acted, in each instance, to protect the patent system and the public from outright patent fraud.

From those cases, Abbott developed the “but-for standard” Whealan argued eloquently at the Nov. 9, 2011 hearing: Inequitable conduct should only be found when the patent would not have been awarded but for intentional deception of the PTO. Any other instances of attorneys lying about a detail or omitting a piece of prior art, Whealan argued, can be handled through disciplinary proceedings.

Some of the appellate judges, according to the hearing transcript, questioned Whealan’s interpretation of the Supreme Court cases and challenged his assurances that the but-for standard would not result in a surge of lies to the Patent Office. Whelan stood firm, even occasionally contradicting the judges on the law.

He also reminded the court that well-intended lawyers have been running scared as a result of inequitable conduct accusation. “I don’t know why we don’t think patent lawyers tell the truth,” Whealan said. “People are presumed innocent until proven guilty. For some reason we think patent attorneys are guilty until proven innocent.”

All of the other lawyers who spoke at the Nov. 9 hearing—Raymond Chen of the PTO; Rachel Krevans of Morrison & Foerster for Bayer; and Jim Badke of Ropes & Gray for Becton and Nova—advocated a standard based on existing PTO rules, which say patent applicants cannot make material misrepresentations to the Patent Office.

“The rule was made after a lot of thought by an awful lot of people,” said Becton counsel Badke of Ropes & Gray in an interview Thursday. “You have to give deference to the agency that issues patents to determine what it needs to give its job.” Badke said the overpleading of inequitable conduct isn’t due to an unclear standard, but to inconsistent application of that standard by trial court judges. “It’s a matter of implementation, of enforcing a uniform standard,” he said.

But the Federal Circuit majority disagreed. The appellate court adopted the standard of intent that Abbott, Becton, and Bayer pretty much agreed on, finding that there has to be clear and convincing evidence of an intent to deceive the PTO. But on the question of materiality, the six judges in the majority (with one separate concurrence and four dissents) agreed with Abbott: To rise to the level of inequitable conduct, the fraud has to have been so serious that the patent wouldn’t have been issued without it.

The ruling sends the Abbott case back to the trial court for a determination of whether Abbott’s alleged inequitable conduct meets the but-for standard.

Whealan referred a call for comment to Abbott spokesman Stoffel. Badke said he believes his side will be able to show Abbott engaged in inequitable conduct even under the new standard, but says his client haven’t yet decided whether to appeal the Federal Circuit ruling to the Supreme Court. Krevans declined to comment.

(Reporting by Alison Frankel)