Wright v. Renaldo, 279 Mich. App. 526 (Mich. Ct. App. 2008)

Wright sued Renaldo and her firm for legal malpractice involving the prosecution of his patent directed to an absorbent mat. Renaldo allegedly erred in (1) failing to remove the name of an originally listed co-inventor; (2) “improperly drafted documents submitted to the patent office, and (3) failed to recognize and take steps to correct the patent because it did not adequately protect Wright’s invention.”

Without reaching the merits of the malpractice claim, the court agreed that the claim was barred by a Michigan two-year statute of limitations. Under Michigan law, a plaintiff “must file a legal-malpractice action within two years of the attorney’s last day of service to the plaintiff or within six months of when the plaintiff discovered or should have discovered the claim, whichever is later.” Here, there was evidence that Wright had been planning a malpractice claim for over two years after White revoked her power of attorney and hired different counsel.

A dissenting judge argued that the two-year time line had not expired because Renaldo had not learned of the revocation of the power of attorney until much later.

Although the patent attorney won this case, it should serve as a reminder to counsel to promptly memorialize a disengagement.

[NEW RULES] The USPTO has announced final rules to implement an annual practitioner maintenance fee. According to the new rules effective December 17, 2008, a practitioner who fails “to pay the annual practitioner maintenance fee required under § 11.8(d) [will] be administratively suspended.” Easy to remember, the Fee under Section 11.8 is $118.

What is the point: The $118 fee will raise two or three million dollars for the PTO. Although that money is useful, the primary purpose of the fee is not to raise money. Rather, it an easy way to cull the list of registered practitioners by removing those who are not making money as patent attorneys. In the words of the office, the purposes of the fee include “protecting the public, preserving the integrity of the Office, and maintaining high professional standards.”

When folks forget to pay:

 Who can afford this?

In many ways, the high average incomes of patent attorneys and patent agents are due to the limits created by the PTO.  When only a few can practice patent law, those few are able to charge higher prices.  Under traditional protectionist thinking, the Bar would want to take steps that solidify the monopoly by encouraging further barriers to entry and take pains to show that the limits on practice lead to better results.

Notes:

• These final rules are based on a minor portion of a five-year-old 2003 notice of proposed rulemaking. [LINK]
• The proposed rules would have added continuing education requirements as well.
• At that time, the AIPLA stated that it was “conceptionally … not opposed to an annual fee for registered practitioners.” The organization was, however, concerned with the practicalities of paying and with the problems created by attorneys forgetting to pay.
• The following anonymous coment was submitted in response to the 2003 rule proposal:

Ron Katznelson has become a leading patent data guru. In a recent talk at UC Davis Law School, he presented is ideas that the next focus of patent reform should be on USPTO Operations. His focus remains on (1) pendency and (2) quality without limiting patentee rights. Katznelson calls for an optional deferred examination for those applicants willing to go slow. In his schema, a third party worried about a pending application could request examination of a deferred application. With some financial incentives (such as a substantial examination fee), many voluntary deferred applications may become voluntary abandoned claims due based on obsolescence or low market potential (creating a “substantial workload reduction”).

As shown below –the pendency problem is growing.

Katznelson also discussed the enjoined PTO continuation & claim rules. The beautiful graph below helps illustrate the significant number (about 30%) of patent applications having more than 5 independent or 25 dependent claims.

On the continuation side, Katznelson had to resort to a logarithmic axis to show the continuity chain distribution at the PTO.

Notes:

• These are reprinted with permission
• Download Ron Katznelson presentation

Based on the USPTO’s most recent numbers on examination, I created an updated table of the average delay until a first office action is mailed from the PTO. These numbers reflect an average for each technology center as it operates today.  The 3.7 year delay in Fuel Cell and Battery Technology (TC 1795) means that the applications receiving first office actions from that TC during the past three months were filed 3.7 years ago on average — taking us back to early 2005.  The numbers do not necessarily reflect how long it would take for an application filed today to make it through. (Although it is perhaps one of the better estimates that we have on hand.).

Earlier in the week, I wrote about Bilski in relation to the recent diagnosis patent case of LabCorp v. Metabolite. Metabolite’s claim 13 reads as follows:

I asked the following question to Patently-O readers and received a response from about 200 readers: It reads as follows:

The response can be broken down as follows: 31% of responses would find the claim to include patentable subject matter while the remaining 69% would reject the claim under Section 101. Of those who would find the claim patentable, the vast majority (89%) reason that the claim includes a transformation. In my discussion of the case, I indicated one argument for showing how the assay step could be considered a transformation. The remaining 11% of those who would find the claim patentable say that it is tied to a particular machine or apparatus. None of the responses indicated that the claim satisfied both the machine and transformation prongs of the test.

Of the 69% of “unpatentable” responses, the majority (72%) saw the claim unpatentable as neither a machine nor a transformation. 43% of those asserting unpatentability saw the claim as unpatentable under the revived mental steps doctrine of bilski. Included in these figures is the 16% who saw the patent violating both the revived mental steps doctrine and the machine-or-transformation test.

The survey did not ask demographic data. However, of those responses using a USPTO IP address, 86% would find the claim unpatentable under Section 101.

Prof. Paul Janicke at the University of Houston Law Center is an expert on patent litigation statistics. He recently sent me a note about some recent trends in the filing of patent complaints.

Patent Suits filed in September and October (all districts):

Eastern District of Texas patent suit filings in September and October:

Touchcom v. Bereskin & Parr (Fed. Cir. 2008)(non-precedential order)

This is an attorney malpractice case. The Canadian firm Bereskin & Parr prepared and prosecuted Touchcom’s US patents relating to fuel pumps. Touchcom then sued Dresser, Inc, but lost when the district court granted summary judgment of invalidity under 35 USC 112 (indefiniteness). After that loss, Touchcom sued the B&P for malpractice in preparing and filing the patent application.

Wildman Harrold represented Touchcom in the original infringement action and also in the malpractice case. During the original litigation, Wildman Harrold had also defended the deposition of the B&P patent agent who had filed the case.  Based on that conflict, B&P asked that Wildman firm be disqualified from arguing the appeal, and the Federal Circuit agreed.

In a non-precedential order, the Federal Circuit agreed to disqualify the Wildman Harrold firm. Because the malpractice case arose in the Eastern District of Virginia, the court applied Virginia Professional Conduct Rule 1.9.  That rule prohibits (without consent) an attorney from being adverse to a former client in a matter substantially related to the prior representation.

“A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless both the present and former client consent after consultation.” Rule 1.9.

Wildman agreed that it had represented the patent agent and that the matter was substantially related. However, Wildman argued that it could turn against its former client because the firm was representing both Touchcom and the B&P patent agent.  And, the nature of the litigation meant that the B&P patent agent had no expectation that Wildman would keep any secrets from Touchcom.

Following the only Virginia case on point (an unpublished opinion), the Federal Circuit disqualified the Wildman Firm — finding that Rule 1.9 establishes broad “standards of attorney loyalty” that go beyond client confidences.

Holding: The motion to disqualify is granted to the extent that attorneys from Wildman Harrold are disqualified from representing Touchcom in this case. Replacement counsel for Touchcom is directed to file an entry of appearance within 30 days of the date of filing of this order.

[Read Tim Wilson’s Paper] Tim Wilson (Senior IP Counsel at SAS US) has been concerned about patent quality for some time. In part, the sheer number of patent applications being filed creates a host of problems. Wilson’s solution is to raise patent fees – he says the fees should go as high as $50,000 for large corporate applicants. The result – according to natural tendencies of supply and demand – is that fewer applications will be filed and fewer patents will issue. In all likelihood, however, those that are filed will be better applications covering higher quality inventions.

Wilson did not simply pull his $50,000 figure out of his ear. Using the powerful computing resources of SAS, Wilson calculated an estimated demand curve for patent applications using both (1) historical filing reactions to increases in PTO fees and (2) an assumption that the budgets of corporate patent departments is fairly inelastic. Wilson then created his Figure 5 – showing the demand curve for patent applications drawn with respect to the patent application fees.

Wilson’s approach is admittedly only an estimate, but his intuition has to be correct that a dramatic increase in PTO fees would lead to a dramatic decrease in PTO filings.

DDC Comment: Wilson’s proposal has some merit, and his work on the demand curve is especially interesting. However, the proposal suffers from three fundamental problems: First, the proposal implicitly equates economic value with technologic value – the two are related but different. Many important technical advances have only limited economic value, but still serve as building blocks for future advances. (i.e., standing on the shoulders of giants). Second, the proposal greatly favors technologies where the economic value is well known up front. Again, many important technologies are eventually found valuable – but the very high up-front price will greatly limit those applications – and consequently, the upstream incentive to innovate in that area. Third, the proposal favors firms with cash – i.e., those that have performed well in the past and have saved their money. However, many innovation experts believe that most of the breakthrough work comes from these mainstream companies. To his credit, Wilson addresses this problem by stating that the high-price only applies to large companies. However, that approach would tend to allow the “non-practicing entities” to continue to obtain patents (against one of Wilson’s primary goals). In addition, the prospect of small entities paying only $500 while large entities pay $50,000 would surely lead to other political and practical problems.

• Tim’s paper is published in the recent edition of the International In-house Counsel Journal.

By Mark Reichel. Mark Reichel is a patent attorney at the Ice Miller firm and writes the “daily dose of IP.”

* * * * *

Following Mark’s lead, I also found this mark for Gov. Palin [also offensive] and a host “joe the plumbers” including several actual plumbers.

Plumley v. Mockett, 79 Cal. Rptr. 3d 822 (California Ct. App. 2008) 79 Cal.Rptr.3d 822

Interesting case from California state court. Plumley won an interference proceeding and then sued Mockett and Mockett’s attorney for “malicious prosecution.” The allegation was that Mocket and his patent attorney “filed the federal interference action with malice and without probable cause. In the malicious prosecution charges were dismissed, but case raises important cautions to third parties intending to request interference proceedings; request reexamination; or potentially even oppose European patent grants. In this case, both parties were located in California, and the court there did not appear concerned that the interference (the alleged malicious prosecution) was filed in a non-Californian administrative agency.

Note:

• The facts from the case are intriguing and detailed. Mockett originally sued Plumley in California court alleging that Plumley had stolen his idea. The California court, however, held that Mockett was lying and had fabricated evidence. Parallel to the original state court action, the PTO found for Mockett in the interference (noting that it was not bound by the California court’s holding). On appeal, the district court flipped BPAI’s holding – finding no evidence of derivation. Subsequently, the BPAI awarded the patent to Plumley. At that point, Plumley sued Mocket for malicious prosecution.

The patent at issue is a design patent covering a grommet for a desk that allows wires to pass through. U.S. Design Patent No. D 361711.

In another recent first office action, the Examiner complained of the “voluminous references” submitted by the applicant. In this case just over 75 references were submitted.

The Examiner here appears to only recommend more detailed statements about the submissions. Under 37 C.F.R. § 1.105 and Star Fruits, the Examiner could have instead officially requested such information.

Earlier in the year Shell Oil proposed an alternative rule that would allow an Examiner to “decline consideration of [a] reference” when the reference’s relevance could not be determined. In response, the “attorney could concisely point out the section or portion of the reference believed to be relevant or submit a concise statement of the relevance of the reference as a whole.” [Link]

In a recent first office action rejection, the examiner wrote the following:

I’m confused by this examiner statement. (Otherwise, this particular office action is exceptionally well written). What I don’t understand is the “obligation.” After receiving this (or even before) are the patent applicants under a duty to describe the ownership structure and invention dates?

Rothe Development Corp. v. Department of Defense (Fed. Cir. 2008)

Although not a patent case, Rothe raises an important Federal Constitutional issue. In Rothe, the Federal Circuit has held that the statutory quota for governmental contracts with “small disadvantaged business” is facially unconstitutional as a race-based violation of the right to equal protection (through the Due Process Clause of the Fifth Amendment).

10 U.S.C. § 2323 (“Section 1207”) sets a goal that “five percent of federal defense contracting dollars” be awarded to small businesses owned and controlled by “socially and economically disadvantaged individuals.” Under the Small Business Act, Black Americans, Asian Americans, Hispanic Americans, and Native Americans are presumptively socially disadvantaged individuals.

Statutes that that include explicit racial classifications are reviewed with “strict scrutiny.” Such provisions are only valid if they “serve a compelling governmental interest, and [are] narrowly tailored to further that interest.” In the race setting, general efforts “to alleviate the effects of societal discrimination” are not considered compelling interests under the Supreme Court’s 1996 Shaw decision. Congress reauthorized Section 1207 in 2006. Thus, to be constitutional, the evidence of a compelling governmental interest at that time.

On appeal, the Federal Circuit found that older Congressional evidence (from the original enactment of the provision) was “stale” by 2006 and thus not reliable. Additionally, the record did not reflect that newer evidence was officially considered by Congress.

Finally, the Federal Circuit found that the newer studies – even if considered by Congress – were inadequate because of the many methodology defects.

Upon these findings, the Federal Circuit held that congress did not have a compelling governmental interest in enacting Section 1207 and that the statute therefore is invalid as unconstitutional.

Note:

• Opinion written by Chief Judge Michel and joined by Circuit Judge Mayer and District Court Judge Stearns from Massachusetts sitting by designation. These judges were appointed by Presidents Reagan, Reagan, and Clinton, resptively.