By Dennis Crouch
The USPTO has proposed a new set of proposed rules that would require recordation of patent ownership rights, including the ultimate parent entity of any patent owner. Some question whether the USPTO actually have the authority to make these rules. The basics of federal agency authority begins at zero. That is, an agency has no authority to act until given authority by Congress. Because the longstanding nature of Patent Office activities, some of these authorities may flow from explicit statutory authority while others may flow from very longstanding practice.
The USPTO has long-maintained a registry of patent ownership, although the Patent Act only implicitly suggests as much. 35 U.S.C. § 261 provides that an assignment of patent rights (or other conveyance) “shall be void as against any subsequent purchaser or mortgagee for a valuable consideration, without notice, unless it is recorded in the Patent and Trademark Office within three months.” Section 161 suggests that the USPTO must have authority to create and organize its system of recordation. However, there are no statutory provisions that particularly provide that authority.
The patent ownership records reach back well into the 19th century and are discussed by a handful of decisions by Justice Story. See, e.g., Pitts v. Whitman, 2 Story 609 (C.C.D. Maine 1843). Justice Story’s decisions focus on the effect of recordation-of-rights and also the failure to record. Justice Story reached the general conclusion that a patentee is under no legal duty record patent ownership and that a patent owner could enforce the patent even without ever recording his interest. According to Story, the one purpose of the recordation is to put potential subsequent bona fide purchasers on notice. In its proposed rulemaking, the USPTO rejects Justice Story’s principles and instead defends a broader purpose of recordation that also militates for a broader requirement of recordation. Justice Story’s perception of the law has continued to be considered the black-letter law. See, In re Cybernetic Services, Inc., 252 F.3d 1039 (9th Cir. 2001) (“Congress intended for parties to record their ownership interests in a patent so as to provide constructive notice only to subsequent holders of an ownership interest.”); John Tuman & Sons v. Basse, 113 F.2d 928 (2nd Circuit 1940) (“The only possible interest of … an infringer which deserves protection is the avoidance of the danger of being sued more than once for the same unlawful act.”). Now, the Tuman & Sons case does have some interesting statement regarding the pre-1952 patent act that only allowed a patent to an assignee “but the assignment must first be entered of record in the Patent Office.” (Quoting Section 4895 of the Old Act). The ’52 Act dropped the seeming requirement of assignee recordation and instead more simply states that patents be granted “to the assignee of the inventor of record.” 35 U.S.C. § 152. The 2011 America Invents Act (AIA) adds a bit of meat to PTO authority because of the restructuring that focuses on the “applicant” rather than on the “inventor.” See 35 U.S.C. § 118. Under the newly revised law, the PTO appears to be charged with determining whether the applicant qualifies to manage the applicant. I.e., the PTO must determine whether the applicant “shows sufficient proprietary interest.” Id.
In considering USPTO authority for its expansion of the recordation requirement, it makes sense to focus on 35 U.S.C. § 2. That provision provides for a set of general powers – giving the Office the power to establish regulations to “govern the conduct of proceedings in the Office.” §2(b)(2)(A). In its notice of proposed rulemaking, the USPTO identifies that general regulatory power as the source of its authority to regulate here. The USPTO’s position has substantial basis in law – especially when considered within the context of the fairly recent Federal Circuit decisions in Star Fruits S.N.C. v. U.S., 393 F.3d 1277 (Fed. Cir. 2005) and Cooper Techs. Co. v. Dudas, 536 F.3d 1330 (Fed. Cir. 2008). In those cases, the courts found that the USPTO has authority to promulgate “procedural” rules that require “submission of information that is reasonably necessary to proper examination or treatment of the matter at hand, provided that such requests are not arbitrary or capricious.” And, implicit in a submission requirement is that some form of punishment (such as abandonment) stems from failure to comply.
The proposed rulemaking was careful drafted by the USPTO to justify its demand for additional evidence in both (1) benefits to third parties (its implicitly primary reason) and (2) benefits for the examination process (its implicitly secondary reason). Although arguably a secondary motivation, the alleged benefits of recordation to the examination process are well within the core mission of the USPTO and thus provide better legal foundation for the rules under § 2(b).
The backstop here is Tafas v. Dudas, 559 F.3d 1345 (Fed. Cir. 2009) (vacated). That discussion will await a future post.