• Make a List, Check it Twice

    by  • February 5, 2009 • patent

    Of the four types of intangible property typically characterized as “intellectual property,” that is, patent, trademark, copyright and trade secret, only one, the patent, is a true grant of rights from the government. If the government says you don’t have it, you don’t have it. Which brings me to a sorry tale of oversights and errors that caused the expiration of nine patents for failure to pay maintenance fees.

    Twelve patents were acquired by the plaintiff Hi/fn. The docketing clerk at the law firm Irell & Manella, LLP docketed the change of ownership for only one of the patents. Then, the Irell lawyer, Bruce Kuyper, left to go to Latham & Watkins and took all of the original owner’s files with him, which incorrectly included the Hi/fn patents. At the same time, Hi/fn told Irell that Hi/fn was transferring some, but not all, of its files to Latham and asked for a list of its matters that Irell was handling. The patents were not on the list, because they were in the docketing system as having been sent to Latham.

    The maintenance fees on two of the patents not at issue here came due. Latham asked if Hi/fn wanted the fees paid, and to “disregard the notice” if Irell was handling it. Hi/fn asked that Latham pay the fees, then later sent a list of its patents, including the patents-in-suit, to Latham to confirm that Latham’s and Hi/fn’s records were in agreement on the due date of the maintenance fees. Latham didn’t respond. A few months later Hi/fn told Irell that Latham would be handling the files in Latham’s possession, but didn’t advise Latham of the same.

    The date the maintenance fee was due for the exemplar patent in suit, the 308 patent, was September 26, 2002, so the patent expired at the end of the grace period on March 26, 2003. Hi/fn was told by one of its licensees 3 1/2 years later, in November, 2006, that the 308 patent had expired. In December, 2006, “Latham was ‘notified’ of the decision Hi/fn had made in December 2002 that Hi/fn, at that time, had directed Irell not to handle the files in Latham’s possession.”

    Hi/fn filed its Petititon to Accept Delayed Payment of Maintenance Fees with the PTO on March 23, 2007. The PTO denied both the initial petition and a petition for reconsideration. Hi/fn then filed suit in federal district court under the Administrative Procedures Act, on the basis that the PTO’s denial of the petition was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.

    The PTO may accept a late payment of a maintenance fee within two years after the six-month grace period if the delay was “unintentional.” Here, where the delay was longer, the standard for accepting payment is that the delay must have been “unavoidable.” In both its decisions the PTO found, and the district court agreed, that the delay was not “unavoidable.” Assuming that the docketing clerk’s error was the reason for the non-payment, the error was not “unavoidable.” The docketing clerk erred in recording the assignment of 11 of 12 patents and there was no declaration from the clerk herself explaining her usual practices, her training, or her supervision, so that she could be credited as competent. Even assuming the the clerk’s error was unavoidable, though, Hi/fn itself knew the proper dates and communicated them to Latham only months before the maintenance fees were due, but didn’t take any steps to ensure that they were paid. To the extent that it Hi/fn was relying on Latham, Hi/fn had never expressly communicated to Latham that it should pay the maintenance fees, plus Hi/fn is bound by any errors that its counsel commits. The PTO’s dismissal was not arbitrary and capricious, and the patents are expired.

    And that’s why malpractice insurance for patent prosecution firms is so high.

    Hi/fn, Inc. v. Dudas, No. C-07-6430 MMC, 2009 WL 186180 (E.D. Tex. Jan. 26, 2009).
    © 2009 Pamela Chestek