Federal Circuit: Intentional Abandonment Equals Unintentional Abandonment?

Network Signatures v. State Farm (Fed. Cir. 2013)

Section 282 of the Patent Act lists the defenses to allegations of patent infringement. In recent years, the Federal Circuit has applied that statute somewhat strictly in finding that the section defines the complete list of defenses. In one case, the court held that the patent office's improper revival of an abandoned patent application could not justify fit as defense. See Aristocrat Technologies Australia v. International Game Technologies (IGT) (Fed. Cir. 2008) (erroneous revival not a cognizable defense under §282).

The present case also involves revival of an abandoned application. Trying a different tact, the defendant here (State Farm) argued that the patent is unenforceable because the patentee lied to the PTO regarding the "unintentional" nature of the abandonment. (Generally, abandoned patents and patent applications can only be revived if the abandonment was unintentional). The charge is inequitable conduct.

The patent at issue is owned by the US Government but currently exclusively licensed to the private company – Network Signatures. U.S. Patent No. 5,511,122. The patent issued in April 1996 and the second maintenance fee was due in October 2003. (7 ½ years after issuance). The PTO then gives patentees another six-months grace period to pay the fee. However, the Navy decided not to pay the fee because of there was no known "commercial interest" in the patent at that time. As a result, the patent was deemed abandoned and thus unenforceable in April 1996. Two weeks later, the predecessor of Network Signatures contacted the Navy IP folks to see whether it could license the patent. At that point, the patent suddenly became valuable and the Navy immediately requested that the PTO revive the patent based upon the "unintentional" abandonment of the application. Without requiring the submission of any evidence or explanation, the PTO granted the petition and revived the patent. Since obtaining the license, Network Signatures has filed almost 100 infringement lawsuits against a wide variety defendants. Now, I should mention here that the predecessor to Network Solutions had actually tried to contact the Navy prior to final expiration to express interest in the patent, but was not routed to the IP department until after the patent had been abandoned.

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Neither the patent statute nor the regulatory rules "unintentional," but the MPEP indicates that "[a] delay resulting from a deliberately chosen course of action on the part of the applicant is not an 'unintentional' delay within the meaning of [the code]." MPEP 711. Seemingly addressing the particular situation at issue here, the MPEP indicates that "a change in circumstances that occurred subsequent to the abandonment of an application does not render 'unintentional' the delay resulting from a previous deliberate decision to permit an application to be abandoned." Id. On the other hand, a "mistake of fact" appears to be a justified "unintentional" reason.

After reviewing this evidence, the district court sided with the defendant and held (on summary judgment) the patent unenforceable due to inequitable conduct based upon the patentee's statements that the abandonment was unintentional. On appeal, however, the Federal Circuit has reversed – finding that the patentee's action does not constitute "material misrepresentation with intent to deceive."

Mr. Karasek's compliance with the standard PTO procedure for delayed payment, using the PTO form for delayed payment, does not provide clear and convincing evidence of withholding of material information with the intent to deceive the Director. On matters unrelated to the substantive criteria of patentability, but within the authority of the Director, "it is almost surely preferable for a reviewing court not to involve itself in the minutiae of Patent Office proceedings and to second-guess the Patent Office on procedural issues at every turn." Laerdal Med. Corp. v. Ambu, Inc., 877 F. Supp. 255, 259 (D. Md. 1995) (citation and internal quotation marks omitted).

Judge Newman penned the opinion that was joined by Judge Wallach with the result of a reversal. With the complete reversal, it appears that the majority opinion result is a summary judgment of no inequitable conduct.

Writing in Dissent, Judge Clevenger argued that the unintentionality statement made by the patentee was clearly material but that the question of intent should go to trial. For Judge Clevenger, the issue of materiality is clear: "If the PTO had known the true facts, I have no doubt whatsoever that Karasek's revival petition would have been denied." However, from Judge Clevenger's perspective, the issue of intent is still up in the air. In particular, whether the Karasek knew that the circumstances of the revival were, and made a deliberate decision to withhold them.

Responding to Judge Clevenger's position in a footnote, Judge Newman explained that we could not expect further explanation from the attorney regarding the unavaoidability of the abandonment because PTO rules and the revival official form only require a statement that the abandonment was unavoidable. In essence, because the standard practice is to not explain the reasons for abandonment that we should not blame the filer for failing to provide reasons.

34 thoughts on “Federal Circuit: Intentional Abandonment Equals Unintentional Abandonment?

  1. All the discussion of being “under Oath” or not is a red herring. It doesn’t matter. The PTO sets a window for payment of maintenance fees and a procedure to pay if they were unintentionally not paid. If you want to change your mind about abandonment within the window for payment, great. If you intentionally do not pay the maintenance fees at the end of the window, you are intentionally abandoning the patent. (As the patent owner, you understand this at the most fundamental level.) Thus, at that point, the patent should be in the public domain. Any other conclusion is untenable. Even if this is not a “defense” under Section 282, the patent should be unenforcable as of that date. Someone could still be liable for damages in the abstract as past damages would be available, thus, the patent could still be licensed. The abandonment would only affect the value of the license, not its ability to exist. Without reading the prior cases, I don’t see why the unenforcability issue could not be raised as a counterclaim even if it cannot be a defense to infringement.As far as the representation being inequitable conduct, if there’s no Oath, then that doesn’t look viable. I just think it shouldn’t matter at all because the court should just rule the patent dedicated to the public as of date x, despite prior efforts to revive. In other words, the petition is de facto non-operative because underlying representations were proven inaccurate.

  2. When indegency is involved there is no such thing as abandonment there is only the inability to proceed with due diligence

  3. In Aristocrat, while foreclosing “improper revival by the PTO” as a defense to an assertion of patent infringement, the panel (which included Judge Newman, who penned the present decision) kept open the possibility of using such a defense if the defendant could prove that the revival was procured fraudulently. Here, the panel seems to have backtracked even from that – proof was brought that the patent was deliberately abandoned, hence the revival could not possibly have been unintentional, and it’s inconceivable that the representation made by the patentee to the PTO in reviving the patent was made in good faith. It seems that most CAFC judges would prefer not to have to deal with the (sometimes messy) details of PTO practice in this regard, and let’s administrative convenience carry the day, even when the facts are clearly aligned against the PTO. And yes, I realize that (a) Aristrocrat was about revival of an abandoned PCT application, whereas this case is about the revival of an abandoned patent, which the statute treats a bit differently, and (b) in Aristocrat, it was the PTO’s actions that were at issue, whereas here it is the patentee’s untruthful statement that is challenged as the basis for an inequitable conduct defense. Nevertheless, the basic thrust of the CAFC’s jurisprudence seems to be the same in both cases: the judges do not want the CAFC to be in the business of second-guessing certain PTO decisions, even when the facts are clearly against the PTO.I wonder what would would have happened if State Farm had brought suit in NDVa under the APA against the PTO for improper revival. Would the PTO’s willingness to rely on the word of the practitioner, without further inquiry, be considered arbitrary and capricious?

  4. I disagree with the majority decision for the reasons given by Judge Clevenger, among others. If the majority’s logic is applied broadly to other fact patterns (e.g., where a potential licensee/purchaser first attempts to contact an owner after intentional abandonment), this decision could be a boon to patent trolls, who regularly buy up a company’s slop. Either way, to correct course, the patent office should change its form and procedures to be more aligned with its statements in the MPEP and petition decisions involving similar fact patterns.

  5. 5,511,122It is therefore an object of the present invention to provide an authentication method which will provide for both intermediate authentication as well as host to host authentication in a datagram network that permits fragmentation of datagrams.In all of the above embodiments, it is an object to provide an authentication system which utilizes an asymmetric key system in the authentication system.1. A method for authenticating an originating host at a receiving host, said method comprising the steps of:(a) obtaining a network address and a public key of said receiving host;(b) utilizing said public key from said receiving host in combination with a private key from said sending host to generate a cryptographic signature;(c) transmitting said cryptographic signature along with data through a first subnetwork in at least one packet;(d) receiving said at least one packet at said receiving host; and(e) said receiving host utilizing a private key of said receiving host and a public key of said originating host to verify said cryptographic signature.Super complicated! Nobody could have imagined or predicted way back in 1994, just months after the first computer password was invented, that you could provide additional security by introducing more passkeys and verification steps into a process. What next? They’ll be using fingerprints or something. Just kidding! Computers can’t detect fingerprint information. Everybody knows that. It’s like real estate availability. Computers just choke when it comes to that stuff.

    1. 1994?Holy cow. Everything in that claim was thoroughly explored in the first years after Diffie-Hellman was proposed in the mid-1970s. Much more detail on various processes including all the process described was given in U.S. Patent 4,200,770 (1977).

      1. Owen, really? Using a public key of the receiver’s private key to encrypt and transmit seems to be known. What I didn’t know, and what I do not see in the ‘770 patent, is using both the receiver’s public key and the sender’s private key to encrypt. That seems highly secure, which is why, I think, the military came up with it.

        1. using both the receiver’s public key and the sender’s private key to encrypt. That seems highly secureMore keys = more secure. Wow. What an incredible insight.

          1. More keys = more secure. Wow. What an incredible insight.I don’t think you know what you’re talking about, MM. This is in the context of asymmetric encryption, so your analogy to “passkeys” doesn’t work very well. This claim is also about authentication, not encryption. Using a public key to create a cryptographic signature is counter-intuitive.

    2. Is there an ambiguity in the claim? When speaking of the receiver public key, step (a) says the key is “of” and step (b) says “from.” The latter implies some communication from the receiver to the originator, while the former does not. Thus, are we talking about the same thing?

  6. According to the indisputed facts, John Karasek told the USPTO that the patent was “unintentionally” abandoned. That was a false statement made under oath for the purpose of convincing the USPTO that what actually happened did not happen.The only thing that was “unintentional” here was the unforseen result of that indisputably intentional abandonment.Judge Newman explained that we could not expect further explanation from the attorney regarding the unavaoidability of the abandonment because PTO rules and the revival official form only require a statement that the abandonment was unavoidableRight, but the statement was false. Judge Newman just drove a truck through the “unintentional abandonment” rule because, apparently, she thought the patent was “neato” or perhaps she just really liked the hairstyle of the attorney who argued the appeal. There is no longer any such thing as “unintentional abandonment.” I guess the District Court judge should have figured that out, somehow.Another low point in Federal Circuit jurisprudence.

      1. See 37 CFR 1.4 and 37 CFR 10.18. “Oath” wasn’t the right term above, of course, but I’m sure you understand what they meant.

          1. Ned, I don’t quite get your point. Are you saying it is just fine for a patent attorney to tell the PTO that an application was unintentionally abandoned when the patent attorney knew (or should have known) that it was, in fact, intentionally abandoned?

            1. Dennis, the form can be filed by anyone, the attorney of record or the patent owner. The duty imposed should be the same regardless of filer.The form requires no explanation and is processed by a computer not by the petitions branch.The statute only requires that the Director be satisfied and it is at his discretion. Since the Director requires no explanation at all, he has effectively decided to accept late payments for people who simply have changed their minds.35 USC 41(c)(2) provides for both absolute an equitable intervening rights for the period between the grace period and acceptance of the late payment.No one is harmed. The government gets its fees. The patentee effectively has 2 years to change his mind.I find it almost offensive that the defendant here had the gall to suggest the patent attorney here had done something wrong. He did not, especially in view of lack of harm to anyone.People who would enjoy that this patent attorney be disciplined or that his client suffer the loss of their patent under these circumstances are exhibiting a kind of mentality that is scary.Now if the Director were to change his policy, require an explanation under oath, then I would have a different position..

                1. Dennis, I have no idea how to adequately respond to you. If there is a vice here, it is with the patent, not with the late payment.

                2. I understand what you are saying. The revival only restored the rights that were already in place and (presumably) none of the accused infringers even knew that the patent had ever been temporarily abandoned.

                3. Dennis, as well, the statute grants absolute and equitable intervening rights. No damages can be collected for activity while the patent was not in force. Activity that began when the patent was not in force may have equitable intervening rights.

      2. “Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office.”

        1. “Patent Application?”Read the fine print. Professor Hricik has a recent blog post on this.The form is for a patent, not an application. It can be filed by anyone connected with the patent, not just a practitioner. There is no explanation required. People who in good faith acted on the failure to pay have intervening rights.It is clear the Director does not want an explanation. Any change of mind is “unintentional.”

          1. “It is clear the Director does not want an explanation. Any change of mind is “unintentional.””Which is why he wrote what he wrote in the MPEP. Or not. Wait, maybe the opposite.

            1. And you think a secretary for a patent owner is going to read the MPEP when she fills out the form? Two years later, one may not even know why or who decided not to pay the fee or if there was a decision at all. Does that stop the secretary?6, if the Director really wanted an explanation, he would ask for one.

              1. if the Director really wanted an explanation, he would ask for one.If the Director wanted abandoned applications to be revivable for any reason, he wouldn’t require applicants who have a duty of candor to state that the application was unintentionally abandoned.

          2. It is clear the Director does not want an explanation. Any change of mind is “unintentional.””Changing your mind” is exactly what is not allowed under the rules, according to any reaosonable interpretation of those rules. You are not allowed to abandon an application and then “change your mind.” You are only allowed to make a mistake that results in the application becoming abandoned without any intent, i.e., accidentally. That is precisely the opposite of what happened in this case.Newman just took the rule and threw it in the trash. Why? Because she felt sorry for the patentee. Boo hooo hooo hooo!

    1. Everyone plumping for IE assumes the abandonment satisfied a legal standard of “intentional” because it happens to have satisfied their personal standards. But the problem is, as the article states, there is no binding authority that defines “intentional” or “unintentional” in this context. As the article further states, someone wanted the patent and told that to the Navy prior to expiration, but the Navy, being the Navy, did not convey the information to the correct office on time. The abandonment was thus a result of misunderstanding, poor communication, what have you, and on that basis arguably was unintentional (note that even the MPEP definition of “change of circumstances” does not apply since the “change of circumstances” in this case actually happened before, not after, the abandonment).To the reporter: one tries a different tack (appropriately enough, an expression derived from a nautical term). One hopes always to behave with unchanging tact.

      1. there is no binding authority that defines “intentional” or “unintentional” in this context.Oh, please. There is no dispute here that the abandonment was intentional. The Navy wanted the case to go abandoned. And then it didn’t. That’s not “unintentional” by any reasonable definition, in any context. That’s just an unfortunate case of timing. Too bad.the “change of circumstances” in this case actually happened before,Completely false. “Circumstances” change all the time. Every microsecond, in fact. And it’s impossible for anyone to take them all into account. That’s why “changed circumstances” can’t be used to reverse an intentional abandonment. Of course it doesn’t matter when the circumstances change.

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