Guest Post by Stephen R. Albainy-Jenei, Partner at Frost Brown Todd and Author of the Patent Baristas Bio/Pharma blog.
Dealing with the Patent Office is a lot like standing in front of the airline ticket counter where the agent keeps typing in endless strings of random numbers and letters and politely explains that you can’t possibly make a change in your reservation because your ticket is a A389X-27-Purple ticket and not the B347L-Triple-Lindy ticket.
Although nonprecedential, the U.S. Court of Appeals for the Federal Circuit laid into the Patent Office this week for behaving in what it said was an ” arbitrary and capricious” manner after it cashed a payment that was $10 short and then promptly let the patent expire. See Taylor v. USPTO (CAFC 09-1133).
Jorge Taylor had a patent for a chemical sealant device for repairing flat tires (U.S. Pat. No. 5,178,701) and had to pay the seven-and-a-half-year maintenance fee of $1040. But, Mr. Taylor sent a check for $1030, rather than $1040, in the mail and used the wrong form for transmitting his payment, and sent it to the Applications Branch rather than the Maintenance Fee branch – sort of a hat trick of errors.
Mr. Taylor marked in capital letters at the top of his transmittal form:
“NOTE: IF THIS IS NOT THE CORRECT FORM, PLEASE MAIL THE CORRECT FORM TO THE RETURN ADDRESS ON THE CHECK.”
The PTO employee who processed the form may not have recognized this filing as an attempt to pay a maintenance fee, and may have just processed it as a regular application filing fee. Whatever the thinking, the PTO deposited the check in its account.
Fast forward several years later when Mr. Taylor called the Office in preparation for paying the required eleven-and-a-half-year maintenance fee and the PTO says “Oops, your patent went abandoned for failure to pay the seven-and-a-half-year maintenance fee.”
Taylor asked the PTO for reinstatement of his patent saying that he was “not an attorney but a pauper disabled living on a fixed income (SSI) who cannot pay $200 to petition your office.”
The PTO dismissed the case (for not including $200) also helpfully pointed out that Mr. Taylor’s original payment had not included a certificate of mailing. Thus, because the Office received the payment on January 17, 2001, five days had passed beyond the window for accepting maintenance payments with a surcharge.
Taylor then sued in district court, alleging that the PTO had “misappropriated” his $1030, and sought $1 billion in damages, his estimation of the worth of his intellectual property “in the U.S. and world market.”
The district court dismissed the complaint saying that PTO regulations do not provide a waiver of petition filing fees for indigent applicants and that Taylor had not shown that the PTO’s actions were “arbitrary and capricious” for purposes of making out a claim under the Administrative Procedure Act.
Mr. Taylor appealed to Federal Circuit, which seemed perturbed that the case had to go all the way to the appellate level and was not happy that that the PTO cashed Mr. Taylor’s check and still proceeded to consider his patent expired.
The court said that the PTO’s actions were arbitrary and capricious in accepting Mr. Taylor’s deficient payment on the one hand, while on the other hand expiring his patent without notifying him under MPEP § 2531 (Notice of Non-Acceptance of Patent Maintenance Fee) that his payment was inadequate.
The PTO tried to weasel out of the suit saying it would refund the $1030 and said that Taylor could still file a petition — along with $200, of course — to have his patent reinstated for unavoidable delay. But, the USPTO then mused that even if the failure to properly pay the 7.5-year maintenance fee could be overlooked, Mr. Taylor has now also failed to pay the 11.5 year maintenance fee, and has also missed the deadline for reinstatement based on “unintentional delay” of that payment. Nice.
In the end, the Federal Circuit said that it wasn’t fair for the PTO to take Mr. Taylor’s payment without notifying him of the $10 shortfall and demanded an equitable remedy:
In this case, equity would counsel that the PTO should reinstate Mr. Taylor’s patent upon receipt of his payment for all outstanding maintenance fees. This relief will remedy, to this court’s best estimation, the PTO’s arbitrary and capricious actions.
While I feel bad for Mr. Taylor, the real issue here is why doesn’t the Patent Office put more procedures in place that make the application process more of a mutual partnership? Yes, Mr. Taylor paid the wrong amount. Yes, he used the wrong form. But, even very experienced attorneys make these kinds of mistakes.
The present case illustrated that the Patent Office needs to adopt more equitable rules and procedures for helping inventors correct mistakes in the first place so that valid patents issue. Shouldn’t the Patent Office be on the inventor’s side?
“lack of customer service (is’nt that why we pay the government fees?)”
Um, if you don’t like the customer service you’re getting at the PTO, you can take your application somewhere else.
Absolutely amazing story…but then, nothing amazes me about the mess that is today’s PTO…with its mediocre “upper” management. I am glad the CAFC sent a message to the PTO. Time for the current PTO brass to move over (yes, retire) for some much-needed new faces!!
Recently I have noticed that if a typographical error is made in an ADS and the PTO catches it they will leave the information off of the Filing Receipt completely and will not notify the Applicant. Thus, the Applicant’s priority data will not be listed, nor published. If the erroneous information was listed and then published it would at least put people on notice that a claim is being made which would seem to be better than leaving the information off completely. Of course a short phone call to the Applicant would be even better.
This type of action, similar to some extent to the above case should be troubling to Director Kappos. It would appear that few people at the Office are willing to go above and beyond the minimum required. Few are willing to take responsibility or be of great assistance.
“The USPTO needs to petition Congress to allow the USPTO to increase it’s fees to allow the USPTO to become a market partner with inventors in an effort to keep the United States competitive on the innovation front.”
I don’t mind fees being increased if that is what is needed.
But I thought that the fees (including maintenance fees) were sufficient to make the PTO self-supporting? What happened?
“…to allow the USPTO to become a market partner with inventors…”
It’ll take a whole lot more than just money. The entire established mindset was put in place before the money ran out, and is still in place.
Kappos and Godici have their work cut out for themselves.
Q: Why doesn’t the Patent Office put more procedures in place that make the application process more of a mutual partnership?
A: Because they don’t have the funds. The USPTO needs to petition Congress to allow the USPTO to increase it’s fees to allow the USPTO to become a market partner with inventors in an effort to keep the United States competitive on the innovation front.
These are the same type of bureaucrats soon to be in charge of our healthcare?!
Thanks for the laugh, Ghost. I almost spit my coffee on my keyboard!
If he couldn’t afford to pay the $200 petition fee, how can he afford to pay the $1000 for the 11.5 year maintenance fee?
What a gem Paul. Particularly the word “desired” in your:
the mindless application of inflexible rules permits the achievement of a desired machine-like state.
You suggest a universal subconscious ever-present human urge to ease the rate of burn of energy in its own brain. That makes sense, and is striking, in an age when we consciously think it a “good thing” to cut, cut, cut our aggregate energy consumption. But it might be another spur to Dave Kappos, to get in there and use his IBM nous to sort things out.
This is just a single example of PTO’s recent history of business screw-ups, apathy, lack of customer service (is’nt that why we pay the government fees?) and shear back door profiteering.
In his short story “A slip under the Microscope” H.G. Wells expressed the attitude of a Professor Bindon to the confession of an errent student in the following terms:
“I cannot consider anything. Professors in this College are machines. The Regulations will not even let us recommend our students for appointments. I am a machine, and you have worked me.”
The human brain consumes proportionately more energy than any other part of the human anatomy. Thay is why people try to get out of using their brains whenever possible. In the case of bureaucrats the mindless application of inflexible rules permits the achievement of a desired machine-like state. In litigation, the application of bright line rules also achieves the desired machine-like state and avoids those involved having to consider the complexities of human fallibility and the appropriate and equitable way of dealing with it.
It is hoped that the new Commissioner will thoroughly shake up the bureaucracy and rules to achieve more user-friendly and practical procedures.
Here is a more fundamental questions: WHY DOES EVERYTHING HAVE TO BE SO HARD?
The USPTO web site makes your head spring, the forms are ridiculous to use, and the procedures are written in language that is difficult to understand.
If PTO wants to collect more fees it might be a good idea to make it easier t understand what an inventor needs to do!!
Is there here anything that the USPTO could borrow from the EPO? Like the ages-old (and very pragmatic and helpful) Rule that allows payment of something more or less “right” to “count” as payment, with the residue being recovered later?
But wait. Maybe the EPO provisions “work” only for professionals (by which I mean those who maintain a deposit account at the EPO). Anybody here know if the EPO Rule would work for a pro se inventor paying an EPO maintenance fee?
“Just get rid of maintenance fees entirely and include the entire price in the initial filing fee.”
This man knows ‘sup.
Just get rid of maintenance fees entirely and include the entire price in the initial filing fee.
as an examiner, i empathize with the inventor. for the most part the Office is set up to handle the sunny day scenarios rather efficiently. the admin staff is basically provided with a cookie cutter procedure, usually in way of a checklist. however any deviation would derail the process wildly, causing frustration, waste of time and resources. any examiner may have his/her anecdotes of cases being kicked back for the simplest reasons (e.g., mischecking a checkbox) that can easily be fixed by the reviewer, but the bureaucracy requires tremendous of amount delay and additional resources involved to rectify. one time i had a problem with OACS which causes a wrong app. number to be generated in the header of the office action, and it took several months and several rounds of resubmissions and several people to finally bring the problem to closure.
in general the fed govt is well known for its bureaucracy, and the USPTO is no exception.
“Shouldn’t the Patent Office be on the inventor’s side?”
Ever since Doll & Dudas took office, the Office has become anti-patent and anti-inventor. I hope this changes with Kappos.
this is very amusing.
my intellectual property is worth 1 billion dollars and yet i cannot afford to pay the $200 petition fee???
considering that 11.5 yrs have already passed since the patent issued, you would assume that an intellectual property which is worth 1 billion dollars would have resulted in some income to this guy other than the SSI.
i also like the way this guy mails in his request. “i won’t bother following the directions, you figure it out and let me know where i have to send it, while giving me the slack in the resulting delays.”
a guy holding a 1 billion dollar patent living just on SSI… it still makes me laugh….
The question in the last sentence of the post struck me as odd.
I think the answer is generally no. The PTO is supposed to “promote the progress…” by granting legitimate patents and denying invalid patents. Being “on the inventor’s side” has nothing to do with it.
That said, theft, obfuscation, and arbitrary hurdles to keep applicants away don’t serve anyone’s interest. Good for the CAFC for catching this one.
I’m also a bit curious about why the PTO didn’t settle this, but remember that it takes 2 to settle. Taylor asked for $1 BILLION dollars.
Looking at the SDNY docket on PACER, it’s unclear whether the PTO even appeared in district court or filed anything at all. It looks as though the district court dismissed the complaint sua sponte. There’s no counsel listed representing the PTO.
If there’s nothing missing from the district court docket (and there may be — the CAFC opinion says that Taylor sued in June 2008, and the complaint doesn’t show up until October 2008), then it seems a bit more reasonable for the PTO to fight this on appeal.
The way it comes in the door is (1) a pro se applicant who wants $1 billion from you, (2) who made some mistakes in navigating the PTO bureaucracy, and (3) whose complaint the district court dismissed sua sponte, saying that “The Court certifies pursuant to 28 U.S.C. 1915 (a)(3) that any appeal from this order would not be taken in good faith.”
Under those circumstances, the PTO people can perhaps be forgiven if they didn’t immediately consider settling.
Huh? He paid an insufficient amount, unless there’s some detail not being explained correctly above. 37 CFR 1.366(b) says that if you pay an insufficient amount, the money paid will not constitute the payment of a maintenance fee. So after payment of the invalid amount, the guy has a credit of $1030 with the Office. He has two years to request a refund; the Office may choose to refund the money of its own accord, but isn’t required to per 37 CFR 1.26.
The patent was NOT actually expired, because he HAD paid the maintenance fee, and the PTO had cashed his check. The PTO never told him, as the MPEP required, that they thought he owed an additional 10$. So why should he have had to pay another 200$ for a petition fee and a petition to get the PTO to fix a problem caused by a PTO violation of its own proceedures, instead of wastefully refusing to settle the lawsuit?
one might ask why the SDNY sided with the USPTO in the first instance
“I’m saying the patent laws/rules should include more equity such that errors like this can be more easily corrected without resulting in litigation.”
I agree.
The real question is why didn’t Hal Wegner just assume that this was a shining example of the record breaking outstanding quality work done by the PTO under the direction of his partner Jon Dudas?
Wouldn’t it also have been arbitrary and capricious to say, “Hey, we know 37 CFR says you have to pay a $200 fee to petition for reinstatement of your expired patent, but we’re such nice folks here in the USPTO that we’re going to waive it”? Doesn’t that step on the toes of everyone who has ever paid that $200 fee in the past?
As Hal Wegner asked, why didn’t the Solicitor’s Office SETTLE this case? [Instead of wasting what must have been thousands of dollars in user-fee-paid attorney time fighting this ten-buck-screw-up at the D.C. and the CAFC, and only getting the PTO to look bad and get criticised?] Lets hope that when we finally get a PTO Director and G.C. from the real world that there will be less of this sort of thing.
To “make u holla”:
I admit that lawyers shouldn’t get away with endless errors. In the above statement, I only meant that these types of errors (i.e., a math error leading to a $10 shortfall) could be done by anyone. I also agree with you that the applicant in this case compounded his troubles many times over and the more you find out, the less sympathy you have for him. Committing a whole litany of errors is a little overboard.
The USPTO may be correct that they have to follow the rules so I’m not necessarily blaming the Patent Office employees. I’m saying the patent laws/rules should include more equity such that errors like this can be more easily corrected without resulting in litigation.
Stephen
EG said:
“The response by the PTO is also startingly given that the PTO (especially the Examiners) tend to treat pro se applicants with a much ‘kinder and gentler’ approach.”
The USPTO expends a lot of effort trying to persuade people that they are friendly to independent inventors, but the fact is that they treat us like crap, especially the Examiners.
“But, the USPTO then mused that even if the failure to properly pay the 7.5-year maintenance fee could be overlooked, Mr. Taylor has now also failed to pay the 11.5 year maintenance fee”
Was that a joke? Even the soliciter’s own arguments are arbitrary and capricious.
I need to quit reading these blogs and go back to working with blinders on.
It would be interesting to see how the PTO handles the eventual payment of all the late maintenance fees, whether they will insist on a surcharge for the 11yr6mo payment, and more importantly whether they will insist on the higher current fee amounts for calculating the deficiency owed rather than the amounts that would otherwise have been due if no one had messed up. E.g., does he owe just $10 for the 7yr6mo fee, or some higher amount based on the current maintenance fee? I could see this going one more round in the courts, if they can’t agree on how much is actually owed.
“In every way, the patent office insists that applicants be perfect while allowing themselves to be slipshod.”
They do not simply allow themselves to be slipshod. They strive for it. They exert maximum effort in reaching total slipshodiness. They revel in it. They exalt in it. They worship it like a god.
Do these “people” in the solicitor’s office have any professional self respect and integrity? At some point, shouldn’t somebody over there have said, “For Pete’s sake, give the guy a break!”?
I remember when Whelan was solicitor and would come to the various bar association meetings boasting of his office’s “winning percentage” at the Fed. Cir. Right. Beating up on pro se applicants. Real tough.
Oops. Looks like they picked the wrong pro se this time.
Disgraceful.
Shameful.
Pathetic.
Fire every GD one of them and start over.
Here’s an excerpt from a comment on this case over at patent prosecutor
“Unfortunately, this is precisely the sort of story one expects when numb-nuts pro se meets a-hole bureaucracy. It’s just very fortunate for this guy that the CAFC is very pro se friendly and bends over backwards to help the pro se litigant. Courts exercising equity powers almost always warm the cockles of my heart.”
[There’s a helpful thread going over there on getting judicial review of petitions.]
link to patenthawk.com
Win or lose, I think anyone who has done a pro se gig at the CAFC appreciates their efforts. I’ve also done one at 4CA, and they were equally helpful. Maybe it’s a US court of appeals thing. Good on ’em.
Not enough Government. That’s our problem.
Can’t wait for single payer health care:
“But sir, you didn’t fill out the correct form.”
“but MY CHEST HURTS.”
“Well then sir, you have to fill out the “My Chest Hurts” form – that’s form FU-678 – you can get one in the Registry of Forms on level 32.”
In every way, the patent office insists that applicants be perfect while allowing themselves to be slipshod.
An examiner issues an inappropriate restriction and refuses to withdraw…no problem, YOU live with it and pay to prepare and file a divisional or YOU pay to prepare a petition and YOU pay the petition fee and pray that the petition is decided by someone that knows the rules.
The whole process is through the looking glass.
“Some Examiners truly understand that the PTO was created to help inventors obtain valid patents, and it is wonderful working with them…”
I heard he retired.
I am rather happily surprised that Court came to the right decision.
As a patent attorney, I would love to see the PTO act as a partner “To promote the Progress of Science and useful Arts.” Some Examiners truly understand that the PTO was created to help inventors obtain valid patents, and it is wonderful working with them to get a patent issued that protects the idea while not including any prior art. (It does little good to have a patent issue that is invalid.)
Unfortunately, other Examiners seem proud and determined to never grant a patent. This does not help the next generation of research.
That may be the best Fed. Cir. decision I’ve read this year.
Let’s (“let us”) Patent Go Abandoned?
“then sues for a billion dollars on a patent that apparently wasn’t worth hiring a lawyer to take care of”
Actually, we know from his statements and payments to the Office that he valued the patent at somewhere between $1030 and $1239.99.
I commend Chief Judge Michel and Judges Lourie and Rader for not only chastising the PTO for its callous, grossly unfair and nonsensical treatment of this poor pro se patentee, but for coming up with an elegant and equtiable remedy. I suspect that the PTO thought it could gloss over its “arbitrary and capricious” behavior by simply entangling this poor pro se patentee in a web from which he couldn’t excape with his patent intact, and to get the courts to go along with this charade. Surprise! The response by the PTO is also startingly given that the PTO (especially the Examiners) tend to treat pro se applicants with a much “kinder and gentler” approach.
“I realize that the point of this article is to make the PTO look shady, but if you ask me, the applicant comes off as equally shady in this one.”
Actually, it’s the PTO that makes the PTO look shady. Heaven forbid we place some burden of fair dealing on the government as they take 1k+ from one of their unsophisticated citizens. “The USPTO: give us your money and then thank us for not abandoning your app.”
Pleased to see that the court came to the right result here for the right reasons. I don’t think there’s much anyone can argue about here.
“But, even very experienced attorneys make these kinds of mistakes.”
Experienced attorneys use the wrong form, underpay, send the correspondence to the wrong address, and then don’t check on the patent for 4 years, all on the same case? What exactly are we paying lawyers for then? I’m pretty sure I can screw things up sufficiently on my own much more cheaply if that is my desire.
I agree with the court that the PTO should reinstate his patent after he pays all of the fees that he owes (although I think they should also have to pay his court costs for making him appeal). However, I have trouble feeling sympathy for a guy who screws up in myriad ways, knew he may have screwed up (“IF ANYTHING IS INCORRECT, PLEASE HANDLE IT. THANX. SEE U IN 4 YEARS”), doesn’t follow up, then sues for a billion dollars on a patent that apparently wasn’t worth hiring a lawyer to take care of.
I realize that the point of this article is to make the PTO look shady, but if you ask me, the applicant comes off as equally shady in this one.
YES!
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