Enjoining Patent Prosecution

by Dennis Crouch

Steven Young and Carl Hewitt developed technology for monitoring infant biometrics.  Later, they began working with Sleep Number Corp. who eventually purchased their company.  The result was SleepIQ technology for Sleep Number smart beds.

Eventually Young & Hewitt decided to leave the company and start out on their own once again and founded a new venture UDP Labs–still focusing on sleep biometric data integrated into hospital/medical furniture. However, the pair had not fully exited from their Sleep Number contract.  Rather, they had both signed consulting agreements with Sleep Number that included quite a broad scope.  In particular, the agreement required disclosure and assignment of “any ideas, conceptions, inventions, or plans relating to sleep, mattresses, bedding, sleep monitoring, health or wellness as it relates to sleep (including biometric monitoring relating to sleep), or bedroom or sleep technologies.”  The agreement expressly excluded some areas: “monitoring technologies for sudden infant death syndrome” and “blood pressure.”

UDP Labs quickly filed a provisional patent application for Young and Hewitt’s new inventions. The pair tried (unsuccessfully) to get Sleep Number to agree that their UDP work wasn’t covered by the consulting agreement; and ultimately terminated the consulting agreement.  More patent applications filed rather quickly, all claiming priority back to that original application filed during the consulting agreement period. One complicating issue is that the patent applications list three other inventors who were (apparently) not subject to the agreements with Sleep Number.

Lawsuit: In 2020, Sleep Number sued Young & Hewitt along with UDP Labs seeking (1) declaration of “ownership of the inventions” as well as claims of (2) breach of contract and (3) conversion (by failing to disclose the information); (4) trade secret misappropriation; etc.

The lawsuit is ongoing, but in March 2021 Minnesota district court issued a preliminary injunction. Barring the defendants from prosecuting, amending, or abandoning any claims that claim priority to one of the early provisional applications.  The order further includes a mechanism for avoiding abandonment:

Defendants shall not respond or reply to any Office Action. . . After the fifth month but prior to the six‐month deadline to respond … Defendants shall (1) pay any and all necessary fees for a three‐month extension and (2) file a continuation … that does not remove or limit any claims of priority nor alter or abandon any claims.

Sleep No. Corp. v. Young, 532 F. Supp. 3d 793 (D. Minn. 2021), aff’d, 33 F.4th 1012 (8th Cir. 2022). On appeal, the 8th Circuit has affirmed. Sleep No. Corp. v. Young, 33 F.4th 1012 (8th Cir. May 11, 2022).  The appellate panel agreed that Sleep Number had a fair chance of prevailing since the contract “clearly and unambiguously places the inventions described in the patent applications within” its scope.

With regard to irreparable harm due to patent prosecution, the appellate panel agreed with the district court that the parties incentives are not aligned and, as such, UDP Labs “might respond to a future Office Action in a way that prejudices Sleep Number’s purported patent rights.”

The court noted that the potential for irreparable harm was demonstrated by “curiously timed” prosecution actions by UDP Labs to narrow certain claims and eliminate the priority claims.  The district court explained:

In November 2020, after this suit was filed, UDP filed several “Request[s] for Corrected Filing Receipt” with the United States Patent and Trademark Office (“USPTO”) seeking to amend the ‘087, ‘367, ‘385, and ‘848 Applications to eliminate their claims of priority to the ‘613 Application, leaving only the claims of priority to the ‘623 Application. As a result of UDP’s amendment to the applications’ claims of priority, the ‘087, ‘367, ‘385, and ‘848 Applications now only claim priority to an application filed after Young and Hewitt terminated their Consulting Agreements. Additionally, by moving the priority date forward, the applications are now subject to several additional months’ worth of potentially invalidating prior art.

Sleep No. Corp. v. Young, 532 F. Supp. 3d 793, 798 (D. Minn. 2021).

The court considered the balance-of-harms.  On UDP Labs side, it identified the only harm as “a mere delay in participation in the patent-prosecution process.”  That statement omits consideration of patent term and patent term adjustment. On February 2, 2022, the USPTO issued a non-final rejection in one of the pending actions.  The six-month date will come within the fortnight.

In May 2022, the district court also amended its preliminary injunction order to prohibit the defendants “from taking action-including selling, transferring, assigning, conveying, etc.-that would cause a change in ownership and/or interfere with Plaintiff’s asserted rights with respect to the Inventions-at-Issue.”

39 thoughts on “Enjoining Patent Prosecution

  1. 8

    This reminds me of a case of mine, decades ago. My firm took instructions from the Research Director of a small company and filed a patent application in the name of his company, naming him as sole inventor. Several months later he left the company, acrimoniously. Not long after, I received letters from two law firms, one representing the aggrieved inventor, the other representing the Applicant company. Both law firms informed me that they would bring suit against my firm if I were to act on instructions from the other side. Both instructed us to file PCT.

    What happened next? Did we file PCT within the Paris Convention year and if so, in what name?

    1. 8.1

      Tell me, tell me, tell me. I presume you did everything possible to withdraw from prosecution, and hopefully were successful. But if not, what happened?

      1. 8.1.1

        What happened? We went into the ongoing litigation between the ex-research director and his former employer as a so-called “interpleader”. The judge heard the parties on “our” issue and handed down a decision.

        So far, so unremarkable.

        What happened next, I don’t remember. Perhaps because i) it all happened more than 30 years ago and ii) with the intervention of the court all the heat had gone out of the issue. I guess that the judge decided (an easy call) that i) our client was the employer, not the ex-employee and ii) the invention, made in the UK, under UK patent law, by an employed Director of Research and in the field of endeavour of the employer, belonged ab initio to the employer not the employee.

        Am I right in saying that lawyers who are not faced with the patent prosecutor’s daily diet of inextensible official due dates (like retaining Paris Convention priority to an initial domestic filing date) in general don’t appreciate quite how inextensible these due dates are, or how much is at stake, if the due date is missed on, say, a “blockbuster” invention? Inventorship matters, but ownership far more.

        OT (but not unrelated): Has anybody yet noticed the decision the EPO Legal Board of Appeal just issued, on whether an AI can be named as inventor? An elegant brush-off of Dr Thaler, I think, rather than a crude face-palm. A beautifully pragmatic way of looking at the issue under the present law in Europe, where ownership can be put in dispute only by the aggrieved rightful owner. Here a Link:

        link to epo.org

        1. 8.1.1.1

          Thanks for the explanation. But it must have been fairly time consuming (and somewhat costly?) for your firm to get involved as an interpleader in that lawsuit, but it does seem like the proper approach for the difficult situation that your firm was put under.

    2. 8.2

      The answer depends on who is your client.

      1. 8.2.1

        ^^^ a sure sign that MCI is not an actual attorney.

        1. 8.2.1.1

          You’ll have to explain that because “Did we file PCT within the Paris Convention year and if so, in what name?” seemed to me a question for which the answer depended on who is the client: the company or the research director. I’ve been practicing law for three decades or so. There are professional liability and state (possibly USPTO) ethics issues involved. You need to always be clear as to who is the client, and who is the client’s agent (i.e., the person who is your main contact with the client).

          1. 8.2.1.1.1

            Yes, of course. I agree. We filed PCT in the name of the party that the judge confirmed was our client all along, the employer. We then billed that client, and received payment. We never heard again from the law firm acting for the ex-employee.

          2. 8.2.1.1.2

            ipguy,

            Yes – this is inline with my comment at 6.1.

        2. 8.2.1.2

          Your trollish comment only raises the question of whether you are an actual attorney, anon.

      2. 8.2.2

        Mea culpa – I read your post as if you were using snark (and impugning attorneys as having ‘situational’ ethics — as in, ethics were a function on money incoming.

        I do grant that there is a “depends on client” angle that does not smack of snark.

  2. 7

    “The order further includes a mechanism for avoiding abandonment:
    Defendants shall not respond or reply to any Office Action. . . After the fifth month but prior to the six‐month deadline to respond … Defendants shall (1) pay any and all necessary fees for a three‐month extension and (2) file a continuation … that does not remove or limit any claims of priority nor alter or abandon any claims.”

    When “abandonment” is not abandonment. Does that make court-ordered prosecution laches not “prosecution laches””?

    1. 7.1

      That was my thought at post 1 below.

      1. 7.1.1

        So it was. I immediately posted my gut reaction.
        Why is your avatar different from the one at #1? I thought avatars were set because I always get the one above my name.

        1. 7.1.1.1

          I have magic avatars.

          😉

          1. 7.1.1.1.1

            Are you the anon who posted at 1 or the other anon? Because the avatar thing threw me too.

            1. 7.1.1.1.1.1

              Lol – there is only one true anon – why would you let an avatar f00l you? That’s some serious lack of mental power there.

    2. 7.2

      It is a good question. Not surprisingly, I do not find cases on this point. My initial suspicion, however, is that laches is an equitable doctrine, and equity is flexible. I expect that if the PTO were to try to raise an equitable laches rejection (and the PTO almost never raises equitable laches), the courts would take the present injunction into account and overturn the rejection.

      1. 7.2.1

        “the courts would take the present injunction into account and overturn the rejection.”

        Sad, and expensive, if it requires going to a court if the USPTO holds it against an applicant that another court would not let the applicant proceed with prosecution.

        As a practical matter, the application would have to be extremely valuable to justify the cost.

        1. 7.2.1.1

          [I]f it requires going to a court…, the application would have to be extremely valuable to justify the cost.

          If. For better or worse, the PTO almost never makes prosecution laches rejections. Mercifully, in all likelihood this issue will never come up.

  3. 6

    A legal dispute over ownership or control of patent application prosecution can be a legal and ethical conflict landmine for patent application preparers and/or prosecutors. Especially if questions about prior invention assignment agreements or prior employment relative to invention dates were not asked about before even starting the application. Or, were only disclosed to the patent attorney or agent later. In some cases it may be safer for the patent attorney or agent to formally withdraw from representation and to assist the client to engage a law firm willing to handle such a potential litigation mess. Another such problem area is that some universities insist on joint ownership of inventions in agreements with R&D sponsors without sufficient clarity as to who has full authority for application content and prosecution decisions, including claim amendments and abandonments.

    1. 6.1

      Completely agree Paul — “who is the client” has a very real land mine potential.

  4. 5

    Greg, enjoyed your comment on Gene’s blog that:
    “The logic of the [Sup. Ct.] Arthrex case was that there was insufficient control of the PTAB by the politically appointed leadership. Now Congress [some in the Committee hearing just held] purports to be concerned that the politically appointed leadership is exercising that control? One grows dizzy trying to follow this farce.”

    1. 5.1

      Thanks!

    2. 5.2

      Notably, you were not the only one enjoying one of Greg’s rare shining moments.

  5. 4

    The court considered the balance-of-harms. On UDP Labs side, it identified the only harm as “a mere delay in participation in the patent-prosecution process.”

    This is clearly not correct. The immediate aspect of harm is an entire loss of control of certain aspects of innovation (for UDP).

  6. 3

    I see a number of related PCT cases. I wonder what the court will do wrt those deadlines.

  7. 2

    There are two further wrinkles that just crossed my mind:

    1) seeing as patents (and patent applications) have the nature of personal property, and that patent law has from its start embraced FULL alienability, is it even proper for the court to so restrict the nature of evolving of that personal property? For example, if the inventors wanted to drive a different Continuation (or a Continuation-In-Part) tied to the work of the other inventors, would this court’s order legitimately have the force of law?

    2) I am curious as to how my new pal Chrissy would inject his Res discussion into this case.

    1. 2.1

      Your pontification on property rights overlooks the only relevant issue which is who gets to decide how the patent applications are prosecuted.

      1. 2.1.1

        Who gets to decide…

        what – exactly?

        If I file something, and I do not have a right to file it, that is a matter that is simply taken up in due course.

        If I file something, and someone else comes in and wants what I filed, why should MY filing be affected?

        And by the way, your choice of the term “pontification” is not appropriate in regards to my statement of wrinkles as there was nothing pompous or dogmatic about the post.

        But you keep on being you.

      2. 2.1.2

        NS II – did this escape your attention in your haste upon seeing a post by anon:

        One complicating issue is that the patent applications list three other inventors who were (apparently) not subject to the agreements with Sleep Number.

        1. 2.1.2.1

          Not sure the facts support this, but it would be interesting to see if the prosecuting attorney could amend the claims to cover only those aspects of the invention conceived by the three other inventors (who are not subject to the agreements with Sleep Number).

          It would be then improper to list those inventors that are in dispute with Sleep number, and this application would be free and clear….

          1. 2.1.2.1.1

            Thanks xtian – but here, even THAT would be “locked out” by the Judge’s orders.

            1. 2.1.2.1.1.1

              Why? File a CON to the non-Sleep Member inventors, keep the other applications pending, i.e. no change to those applications. The order, as I understand it, is limited to “Defendants claims” The non-Sleep Member inventors are not named Defendants according to the complaint’s captions.

              The order doesn’t apply to non-named defendants, namely the non-Sleep Member inventors. The non-Sleep Member inventors should file an injunction preventing the Judge (clarifying the order) in this case from preventing them from obtaining their patent rights.

              1. 2.1.2.1.1.1.1

                As I understand it – the orders affect ALL prosecution of the existing body of work – and that would include any filings derived therefrom.

                I certainly see the point that you are aiming for: and this is a wrinkle that I noted for the NS II (gee,-anon-posted,-so-I-need-to-jump-into-the-weeds guy)

  8. 1

    Is there an argument for court-induced latches, given that the express purposed (extensions and continuations) is to NOT advance prosecution?

    I fully “get” the why the court has ordered that – but that “why” does not enter the factual determination that attempts ARE BEING MADE in good faith to advance prosecution.

    1. 1.1

      I don’t know whether any court-induced laches argument would apply, but there are still ethical considerations for the practionitioner non-‘prosecuting’ the cases, including whether the cases could be considered abandoned as non-responsive.

      E.g., 37 CFR 1.111(b): “… The applicant’s or patent owner’s reply must appear throughout to be a bona fide attempt to advance the application or the reexamination proceeding to final action. …”

      Or, 37 CFR 11.18(b)(2)(i): “By presenting to the Office… (whether by signing, filing, submitting, or later advocating) any paper, the party presenting such paper, whether a practitioner or non-practitioner, is certifying that—To the best of the party’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances, (i) The paper is not being presented for any improper purpose, such as to harass someone or to cause unnecessary delay or needless increase in the cost of any proceeding before the Office; …”

      These USPTO regulations are made in part in fulfillment of 35 U.S.C. 132(b):
      “The Director shall prescribe regulations to provide for the continued examination of applications for patent at the request of the applicant….”

      Although the parties are under court order, it would seem that any absolutely minimal response, such as filing one or more RCEs merely to the keep the case alive, would not be deemed a bona fide attempt to advance the case to final action, and would both cause ‘delay’ and increase the cost of proceedings before the Office.

      Alternative options, might be to use the procedure in 37 CFR 1.103(a) Suspension for cause:

      “On request of the applicant, the Office may grant a suspension of action by the Office under this paragraph for good and sufficient cause. The Office will not suspend action if a reply by applicant to an Office action is outstanding. Any petition for suspension of action under this paragraph must specify a period of suspension not exceeding six months. Any petition for suspension of action under this paragraph mustalso include:

      (1) A showing of good and sufficient cause for suspension of action; and

      (2) The fee set forth in § 1.17(g), unless such cause is the fault of the Office.”

      This option is not perfect because there is currently an outstanding Office action, and the suspension period may not exceed six months (although there is no apparent prohibition of subsequent requests for continued suspensions for cause).

      Another possible solution might be for the court to itself engage a practitioner to prosecute the application(s) as a neutral special master to preserve the rights of all parties as best as the Office actions and prior art allow. I don’t know if that was explored. Procedurally it might be a nightmare to manage both parties’ expectations in the alotted time frames for response.

      1. 1.1.1

        Well stated.

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