Upon Further Review, the Ruling on the Field Stands – Federal Circuit Sustains PTO’s Refusal to Withdraw Terminal Disclaimer

Darrin Auito | December 10, 2014

Japanese Foundation for Cancer Research v. Lee

December 9, 2014 (Federal Circuit)

Panel:  Prost, Dyk, Taranto. Opinion by Prost

Summary

In Japanese Foundation for Cancer Research v. Lee (2014), the Federal Circuit reversed the district court’s determination on summary judgment that the United States Patent & Trademark Office (“PTO”) acted arbitrarily and capriciously, and abused its discretion, when it refused to withdraw a terminal disclaimer on U.S. Pat. No. 6,194,187 (“’187 patent”).  The Federal Circuit held that the PTO did not act arbitrarily or capriciously, or abuse its discretion in declining to use any inherent authority that it may have in withdrawing the terminal disclaimer on the ’187 patent that the Japanese Foundation for Cancer Research’s (“Foundation”) attorney of record filed in accordance with the PTO’s regulations.

Details

The ‘187 patent was issued and assigned to the Foundation on February 27, 2001.

Here’s a timeline of what followed – leading to Foundation’s December 13, 2011 and February 27, 2012 Petitions under 37 CFR 1.182 (“1.182 Petition”) to withdraw the statutory disclaimer.

PTO Rejects First Petition

Illustration from Japanese Founation v Lee (CAFC Dec 9 2014)

Illustration2 from Japanese Founation v Lee (CAFC Dec 9 2014)

 

 

 

 

 

 

 

 

 

 

 

 

On January 17, 2012, the Office of Petitions dismissed the Petition, stating:

  • Pursuant to 37 CFR 1.321(a), the assignee of the entire interest in the above-identified patent filed a statutory disclaimer, disclaiming the entire term of all claims in the above-identified patent. This terminal disclaimer included the required fee and was signed by patent attorney … on behalf of assignee.
  • There is no indication that the power of attorney was revoked or withdrawn.
  • The mechanisms to correct a patent … are not available to withdraw or otherwise nullify the effect of a recorded terminal disclaimer.
  • [T[]he policy of the Office is well-established. The USPTO will not grant a request to withdraw or amend a recorded terminal disclaimer in an issued patent on the grounds that the rules of practice and 35 USC 253 do not include a mechanism for withdrawal or amendment of such a terminal disclaimer.  See MPEP 1490.
  • The Terminal Disclaimer filed October 11, 2011 became part of the record on filing on October 11, 2011.
  • The fact that the Office has received but not fully processed this Terminal Disclaimer does not alter this conclusion.

Foundation’s Terminal Disclaimer subsequently appeared on PAIR.

PTO Rejects Second Petition

On February 27, 2012, Foundation filed a second Petition under 37 CFR 1.182 and 1.183, requesting the Office withhold from publication, in the Official Gazette, the Statutory Disclaimer in order to preserve the status quo while Patentee pursues reconsideration.

On March 16, 2012, Foundation filed a request for reconsideration of the Decision on Petition, or, alternatively, an exercise of the discretion of the Director and suspension of the rules under 37 CFR 1.182 and 1.183, in view of the “extraordinary events” surrounding the disclaimer.  In short, the argument was that “through an unfortunate misunderstanding from a telephone conversation between a representative of a licensee to the Patent and Japanese counsel in Tokyo on March 8, 2011, the Disclaimer was filed without Patentee’s knowledge, consent, or authorization, and in fact contrary to the Patentee’s wishes.”

PTO Rejects Supplemental Petition

In August 2012, Foundation’s attorney of record met with the PTO and thereafter filed a supplemental petition addressing its argument concerning whether the PTO had the “inherent authority” to grant relief.  On February 22, 2013, the PTO issued a final agency decision denying Foundation’s petition.

Foundation Appealed The PTO’s Ruling in District Court, and Won

Foundation thereafter filed an action in district court appealing the PTO’s decision under the APA.   In May 2014, the district court granted Foundation’s motion and directed the PTO “to withdraw the disclaimer, absent a finding that the Foundation actually authorized its filings.”

The Federal Circuit Reversed The District Court

The PTO appealed the decision to the Federal Circuit, which reviewed the PTO’s decision under the APA’s abuse of discretion standard, i.e., “set aside an agency’s action that is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’”  An agency acts arbitrarily or capriciously only if a decision was not based on the relevant factors or fails to “examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.”

On appeal, Foundation argued that the PTO is authorized under 35 U.S.C. 255 to issue a certificate of correction (“COC”) for the ‘187 patent to withdraw a “clerical error” in the Terminal Disclaimer.

Whenever a mistake of a clerical or typographical nature, or of minor character, which was not the fault of the Patent and Trademark Office, appears in a patent and a showing has been made that such mistake occurred in good faith, the Director may, upon payment of the required fee, issue a certificate of correction, if the correction does not involve such changes in the patent as would constitute new matter or would require re-examination.

  1. U.S.C. 255 (emphasis added).

“Errors” made by clerical employees are not necessarily a mistake of a “clerical” nature that can be corrected under Section 255

Foundation tried arguing that the mistake in this case qualifies as “clerical” because the foreign law firm’s paralegal was a “clerical employee performing clerical work.”  The Federal Circuit rejected this argument:

“[T]he terminal disclaimer in this case was actually filed by the Foundation’s attorney of record … [and] even if the Foundation’s reading of ‘clerical error’ was correct, it would be impossible for a subordinate who lacks the duty of exercising judgment to file a valid terminal disclaimer on his own.”

Therefore, the Federal Circuit held that there is no basis for withdrawing the terminal disclaimer on the ‘187 patent by means of a COC under §255.

The existence of a mistake by an attorney other than the type falling under Section 255 or a lack of actual authority from a client should not result in the withdrawal of the terminal disclaimer. 

Foundation also argued that the PTO has inherent authority to withdraw a mistakenly filed terminal disclaimer.  The argument succeeded at the district court, but was reversed by the Federal Circuit for the following reasons.

First, the Federal Circuit found that the PTO acted within its authority when deciding not to withdraw the terminal disclaimer after reconsidering its initial decision.

“The PTO’s denial of the Foundation’s petition expressed its position that, as to terminal disclaimers recorded under §253, there was no administrative determination to reconsider.  According to the PTO, the only ‘determination’ is whether the disclaimer satisfied the requirements of §1.321(b), i.e., was signed by the applicant or an attorney or agent of record, stated the applicant’s ownership interest and what portion of the term was being disclaimed, and was accompanied by a fee.”

Thus, the Federal Circuit held that the PTO sufficiently stated its reasoning that, in this case, “the existence of a mistake by an attorney other than the type falling under §255 or a lack of actual authority from a client should not result in the withdrawal of the terminal disclaimer.”

Patentees are “bound by the actions or inactions of their voluntarily-chosen representatives

Second, the Federal Circuit did not fault the PTO for not delving into the record and evaluating the merits of Foundation’s assertion that its attorney of record filed the disclaimer because of miscommunications between Foundation, KHK, foreign law firm, and U.S. law firm.  Rather, the Federal Circuit found sufficient the PTO’s decision that it need not examine alleged miscommunications between the patentee and its attorney of record because of the principle that it holds the patentee to be “bound by the actions or inactions of his voluntarily-chosen representative.”

Therefore, the Federal Circuit reversed the district court and held that the PTO did not act arbitrarily, act capriciously, or abuse its discretion in declining to use any inherent authority that it may have in withdrawing the terminal disclaimer on the ‘187 patent that the Foundation’s attorney of record duly filed in accordance with the PTO’s regulations.

Takeaways:

  • Not all mistakes can be corrected by paying a fee, filing a petition, or appealing to the courts.
  • A terminal disclaimer cannot be removed through reissue, even if the reissue proceeding concludes prior to expiration of the reissued patent.
  • The PTO will not withdraw a terminal disclaimer filed in compliance with 37 CFR 1.321 because a patentee later changes his mind or client instructions were misunderstood or incorrect. Plus, considering the high hurdle of the “arbitrary and capricious” standard applied to appellate review of agency decisions, it is unlikely that the courts will require the PTO to otherwise withdraw such a terminal disclaimer.
  • Request and receive draft document(s) for approval by applicant before instructing your U.S. attorney of record to file such document(s) at the PTO. If English is not your native language, then it is even more important to make this request early enough so that you have enough time to make sure that the document(s) accurately reflect your instructions.
  • AIA info – In an application filed after September 16, 2012, an assignee who is not the applicant cannot sign and file a terminal disclaimer. However, an attorney of record in the application may sign a terminal disclaimer on behalf of the applicant. 37 CFR § 1.321(b)(1).
  • AIA info – To be eligible to file a terminal disclaimer, a non-applicant assignee must request to be designated as the applicant by filing the following papers: (1) a request to change the applicant under 37 CFR § 1.46(c), (2) a corrected ADS under 37 CFR § 1.76 identifying the new applicant, and (3) a 37 CFR § 3.73(c) statement, which details how the assignee obtained title to the application. Manual of Patent Examining Procedure § 1490. The new assignee-applicant should also file a new Power of Attorney.

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