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Dennis L. Schmirler, Plaintiff, v. Hon. David J. Kappos, In his official capacity as Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Defendant. Case No. 10-C-144
DEFENDANT’S REPLY MEMORANDUM IN SUPPORT OF CROSS-MOTION FOR SUMMARY J UDGMENT
Defendant David Kappos, Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (“Director”), by his undersigned counsel, respectfully submits this reply memorandum in support of Defendant’s cross-motion for summary judgment. SUMMARY OF THE ARGUMENT In his opening memorandum, the Director explained that Mr. Schmirler is not entitled to relief from this Court because: (1) Mr. Schmirler’s petition failed to comply with USPTO signature requirements; and (2) to the extent Mr. Schmirler is seeking “revival” of the vacated patent or abandoned patent application at issue here, he has failed to exhaust administrative remedies. Mr. Schmirler’s response fails to squarely address either the signature requirements or the exhaustion issue, and instead raises several peripheral issues that merit only a brief response. In short: (1) the Director’s statement that “a patent issued” does not make Mr. Schmirler a
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patentee; (2) even if it did, Mr. Schmirler would still not be entitled to proceed unilaterally before the USPTO; (3) in the absence of a new correspondence address submitted by the inventors, the USPTO’s mailing of the notice that the patent might be vacated to the official correspondence address on file – Mr. Essman’s address – was consistent with Office procedure and was neither arbitrary or capricious; and (4) the fact that Dr. Portman received a refund, rendering the issue fee unpaid, was not the result of “arbitrary and capricious” USPTO conduct. I. Mr. Schmirler Is an Applicant, Not a Patentee. A. The Patent Did Not Validly Issue and Was Rendered Void Ab Initio When It Was Vacated.
The Director’s position is that the ’374 patent never validly issued, and that when the USPTO vacated it, it became void ab initio. As previously explained, this was the result of Dr. Portman’s chargeback, which: (1) left the statutorily-required issue fee unpaid; and (2) caused the USPTO to withdraw its prior petition decision reviving the previously-abandoned application. Director’s S.J. Mem. at 15. Although the inventors might have been able to save the patent had they responded to the USPTO’s June 7, 2004, Notice in a manner that cured or otherwise addressed these defects (A230-31), the inventors did not so respond, and the USPTO vacated the patent. Once the patent was vacated for failure to meet the preconditions for receiving a patent, Mr. Schmirler and his co-inventors were returned to the status of applicants of an abandoned application. As explained in the opening memorandum, the USPTO’s regulations make clear that an applicant cannot proceed unilaterally without his co-inventors or co-owners. Director’s S.J. Mem. at 15-19. Mr. Schmirler contends that the Director has failed to explain how a chargeback occurring after patent issuance “effects a nonpayment of an issue fee on the date on which a patent issues.” Schmirler Reply Mem. at 3. This argument, however, is based on the flawed 2 Case 2:10-cv-00144-LA Filed 06/21/11 Page 2 of 10 Document 26
premise that an issue fee discrepancy will only be a problem if it exists on the date the patent issues. As explained previously (Director’s S.J. Mem. at 11, 15, 24), 35 U.S.C. § 151 requires that any “remaining balance of the issue fee shall be paid within three months of the sending of a notice thereof,” and provides that “if not paid, the patent shall lapse.” 35 U.S.C. § 151. Dr. Portman’s chargeback created a “remaining balance,” and the inventors’ failure to respond to the June 7, 2004, Notice caused the patent to lapse. 1 The fact that the issue fee remained unpaid after notice to the inventors gave the USPTO ample basis for voiding the patent and returning the inventors to applicant status. But the significance of Dr. Portman’s chargeback request is not limited to the issue fee deficiency it created. It also raised questions about the inventors’ previous assertions that the prior abandonment had been unintentional. Portman’s attempt to obtain a refund of the money that was intended to cover the issue fee of the patent could well have reflected an intention that the patent not issue, and thus gave rise to the inference that the abandonment may not have been unintentional after all. If that were the case, then the USPTO should not have revived the underlying application in the first place. In light of this new information regarding the inventors’ intent, the USPTO withdrew its decision granting the revival request, thereby undercutting the patent on a ground independent of the issue fee deficiency. The inventors’ failure to respond to the USPTO’s June 7, 2004, Notice with an explanation of the chargeback provided an independent ground for the USPTO to vacate the patent, and thereby restore the inventors to the
Contrary to Mr. Schmirler’s implication (Schmirler Reply Mem. at 3), the Director’s statement that “as a result of Dr. Portman’s chargeback . . . , the issue fee had never been paid” was not meant to suggest that the issue fee had not been paid at one time. Rather, as Mr. Schmirler acknowledges, the USPTO does not deny that the issue fee was paid. Schmirler Reply Mem. at 3. The USPTO’s point is merely that the chargeback left the fee unpaid, as if it had never been paid.
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position they were in prior to revival of the underlying application. applicants. 2 B.
Again, they were
The USPTO Acted Properly In Sending the June 7, 2004 Notice to Mr. Essman.
The USPTO reacted to Dr. Portman’s chargeback by issuing a notice informing the applicants: (1) that the issue fee was still outstanding; (2) that the Examiner’s December 21, 2000, decision reviving the patent application had been withdrawn; and (3) that a response explaining the circumstances of the chargeback would be required to avoid vacation of the patent. FF 19-24; A228-32. The USPTO mailed the notice to the correspondence address on file for the application – that of Mr. Essman, the attorney of record for the patent application. FF19. Prior to vacating the patent, the USPTO even spoke with Mr. Essman and confirmed with him that no response from the inventors was forthcoming. FF 26. Mr. Schmirler’s new argument that Mr. Essman had no valid power of attorney (Schmirler Reply Mem. at 3-5) is without merit. Although the attorney-client relationship between Messrs. Schmirler and Essman might have technically ended at the (invalid) issuance of the ’374 patent, Mr. Essman remained the attorney of record on the application and his address remained the official correspondence address for the application. Under the USPTO’s rules, Mr. Essman had a continuing duty to keep the inventors informed of significant Office correspondence. Indeed, an attorney receiving correspondence for a former client commits misconduct if he “fail[s] to inform [the] former client . . . of correspondence received from the Office . . . when the correspondence (i) could have a significant effect on a matter pending before the Office, (ii) is received by the practitioner on behalf of a client or former client and (iii) is As explained in the Director’s opening memorandum, even if Mr. Schmirler were a patentee, the USPTO’s rules do not permit him to proceed unilaterally before the Office. Director’s S.J. Mem. at 19-22. 4 Case 2:10-cv-00144-LA Filed 06/21/11 Page 4 of 10 Document 26
correspondence of which a reasonable practitioner would believe under the circumstances the client or former client should be notified.” 37 C.F.R. § 10.23(8). Likewise, it is misconduct for an attorney to fail to “timely notify the Office of an inability to notify a client or former client of correspondence received from the Office.” Id. Accordingly, even after a patent has issued upon an application, “[t]he Office will direct, or otherwise make available, all notices, official letters, and other communications relating to the application to the person associated with the correspondence address.” 37 C.F.R. § 1.33; see also id. (specifying procedures for changing the correspondence address); accord Manual of Patent Examining Procedure (“MPEP”) 2542 (“Unless a fee address has been designated, notices, receipts, and other communications relating to the patent will generally be directed to the correspondence address (37 C.F.R. § 1.33) used during the prosecution of the application. Practitioners of record when the patent issues who do not wish to receive correspondence relating to maintenance fees must change the correspondence address in the patented file or provide a fee address to which such correspondence should be sent.”) (emphasis added); MPEP 2222 (“If the patent owner desires that a different attorney or agent receive correspondence [in a reexamination proceeding], then a new power of attorney must be filed.”). The USPTO did not act arbitrarily and capriciously in following its own rules and mailing the notice to the correspondence address associated with the application. Even if Mr. Essman failed to notify Mr. Schmirler of the correspondence – and Mr. Schmirler has provided no evidence that Mr. Essman in fact failed to do so – if Mr. Schmirler has a remedy in these circumstances, it is against Mr. Essman, not the USPTO. 3
Given the USPTO’s clear rules regarding the correspondence address, Mr. Schmirler’s suggestion that the USPTO should have attempted to track down the individual inventors or publish a notice in the USPTO’s weekly gazette (Schmirler Reply Mem. at 4) is without merit. 5 Case 2:10-cv-00144-LA Filed 06/21/11 Page 5 of 10 Document 26
The Reasons for Requiring the Inventors To Act With one Voice Apply With Full Force to This Case. Mr. Schmirler next argues that there would be “no harm” in allowing Schmirler
“redress,” by which Schmirler appears to mean that there would be no harm done if this Court were to simply “reinstate” the patent as relief for Schmirler in this lawsuit. (Schmirler Reply Mem. at 6-7). The Director has already explained that this Court does not have the authority to reinstate the patent (Director’s S.J. Mem. at 23 n.7, citing Gould v. Quigg, 822 F.2d 1074, 1079 (Fed. Cir. 1987)), and that in any event Mr. Schmirler has failed to exhaust administrative remedies (Director’s S.J. Mem. at 22-23). But apart from these threshold problems with Mr. Schmirler’s requested relief, he is simply wrong in his allegation of harmlessness. The patent should not be reinstated absent some consideration of the facts and circumstances surrounding Dr. Portman’s chargeback. USPTO’s requirement that Dr. Portman participate in any
proceedings to revive the patent application ensures that this question would be answered prior to any reinstatement. Mr. Schmirler’s proposed course of action would bypass this question
entirely (Mr. Schmirler has made no attempt to answer it in any of his pleadings so far), and thus could result in a patent that did not meet the requirements for revival. Mr. Schmirler goes too far in suggesting that any desire on the part of his co-inventors or co-owners’ to donate the patent to the public domain could be satisfied by simply permitting them to disclaim their own rights in the patent. Obviously, if Mr. Schmirler were left as the sole patentee, the co-inventors’ purpose of donating the patent to the public domain would be thwarted. This again illustrates the need for patent applicants and patentees to proceed with one voice before the USPTO. The decision to donate to the public domain, or not to do so, is a decision that can only be effectuated by all the inventors, acting in unison, as contemplated by
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the USPTO rules. The USPTO rules are designed to prevent it from having to mediate this kind of conflict of interest between inventors. 4 Mr. Schmirler also appears to have misread the Director’s discussion of Rule 1.183, which permits the USPTO to waive its rules in an “extraordinary situation.” See Director’s S.J. Mem. at 18 (discussing 37 CFR § 1.183). Mr. Schmirler reads this discussion as suggesting that Schmirler is “under a duty to attempt to contact co-inventors/owners,” but complains that the USPTO’s final decision suggested that merely doing so would not be sufficient to revive the application. To clarify, as explained in both the Director’s memorandum and the final decision, the rules provide that Mr. Schmirler cannot proceed without his co-inventors and/or co-owners. Director’s S.J. Mem. at 16-22. An essential step for proceeding with those co-inventors/coowners would be to locate and contact them. Even after that, Mr. Schmirler would have to persuade them to join in his attempt to revive the patent application. If they were amenable to doing so, they could sign a power of attorney to Mr. Galster, after which Mr. Galster would have (finally) addressed the basis for the USPTO’s dismissal of his petition to revive the patent application, and proceedings in the USPTO could continue. With the other inventors involved in the revival application, the USPTO would be in a position to evaluate the inventors’ explanation of the chargeback, and to determine whether or not the chargeback fatally undermined the inventors’ past representations of unintentional abandonment. Although it is difficult to envision the precise circumstances under which it would be appropriate for the USPTO to waive its signature rules in this case, Mr. Schmirler’s failure to take the elementary step of attempting to An equally serious post-issuance conflict could arise if the revived patent becomes the subject of a reexamination under 35 U.S.C. § 302 et seq. A reexamination proceeds much like an initial examination (see 35 U.S.C. §§ 305, 314), and thus requires regular input from the coinventors and/or co-owners of the patent regarding prosecution arguments and claim amendments. Not surprisingly, the USPTO’s rules require co-owners to proceed with one voice in a reexamination. 37 CFR § 3.71(b). 7 Case 2:10-cv-00144-LA Filed 06/21/11 Page 7 of 10 Document 26
contact his co-inventors and/or co-owners renders any “extraordinary situation” argument a nonstarter. III. The Fact That Dr. Portman’s “Unilateral” Action Resulted in the Withdrawal of the Patent Does Not Support Permitting Mr. Schmirler To Now Take Unilateral Action. Mr. Schmirler’s final argument is that because the USPTO responded to Dr. Portman’s “unilateral” action in initiating the chargeback, it should now respond to Mr. Schmirler’s unilateral attempts to get the patent revived. Schmirler Reply Mem. at 7-8. The two situations are not comparable. Most obviously, the primary significance of the chargeback was that it appeared to show an intent on the part of the inventors to abandon the application, and thus contradicted the inventors’ joint representation to the USPTO that the abandonment was unintentional. This in turn undermined the USPTO decision reviving the application, and was the basis for the USPTO’s withdrawal of that decision. FF 19; A230. Thus, the facts of this case clearly demonstrate that the action of a single inventor can affect the USPTO’s treatment of an application (or even a patent issued on that application), even though to actually prosecute the application, cooperation between all inventors is required. 5 Likewise, for better or for worse, the attorney representing the inventors in the revival petition (i.e. Essman) relied on Dr. Portman’s payment of the issue fee. FF 10. The inventors thus ran the risk that Portman would attempt to obtain a refund, and thereby leave the issue fee
Co-inventors Schmirler or Christensen could likewise have affected the USPTO’s treatment of the application by unilaterally sending a letter to the USPTO stating that the abandonment was intentional. The fact that the USPTO would consider such a letter in the course of determining whether the abandonment was unintentional does not mean that the author of the letter would actually be prosecuting the application.
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unpaid. Had American Express sent the chargeback notice to the USPTO at the proper address, 6 the inventors would have been required to address the chargeback issue and any resultant fee deficiency prior to patent issuance. It thus strains credulity to argue that it was “arbitrary [and] capricious” for the USPTO to “allow . . . [Portman] to receive a refund.” (Schmirler Reply Mem. at 8). As the record makes clear, the refund occurred without any action being taken by the USPTO. FF 16-18. Dr. Portman sent a letter to American Express, American Express erroneously sent a letter to the USPTO at Dr. Portman’s address, and then, when it received no response from the USPTO, American Express took the money out of the USPTO’s account. FF 16-18. Under these circumstances, the USPTO cannot be said to have acted arbitrarily and capriciously; indeed, it did not act at all. CONCLUSION For the foregoing reasons, and for the reasons stated in the Director’s Opening Memorandum, the Director’s Motion for Summary Judgment should be granted, and Mr. Schmirler’s Motion for Summary Judgment should be denied.
Mr. Schmirler has acknowledged that American Express erroneously sent the chargeback form to Dr. Portman, and not the USPTO. See Petition Under 37 CFR § 1.182, Oct. 16, 2007 (Doc. 21-1), at 3, ¶ 14. 9 Case 2:10-cv-00144-LA Filed 06/21/11 Page 9 of 10 Document 26
Dated this 21th day of June, 2011. JAMES L. SANTELLE United States Attorney By: /s/ Chris R. Larsen CHRIS R. LARSEN Assistant United States Attorney Eastern District of Wisconsin 517 E. Wisconsin Ave., Room 530 Milwaukee, WI 53202 (414) 297-1700 Facsimile: (414) 297-4394 State Bar No. 1005336 firstname.lastname@example.org
Of Counsel: Thomas W. Krause Frances M. Lynch Office of the Solicitor United States Patent & Trademark Office 600 Dulany St. Alexandria, VA 22314 571-272-9035 email@example.com firstname.lastname@example.org
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