Legal owner responsible for timely payment of maintenance fees, equitable owner out of luckJune 11, 2008

In a decision yesterday, the Federal Circuit affirmed a district court's grant of summary judgment upholding the USPTO's denial of a request to reinstate a patent for failure to pay maintenance fees. The patentee had assigned his invention to his employer, who had subsequently allowed the patent to expire due to non-payment of the maintenance fee. The patentee argued that he had equitable title to the patent during the relevant timeframe and that his delay in payment was unavoidable.

The Federal Circuit held that notwithstanding the equitable title claim, for purposes of maintenance fee payment the relevant party was the party with legal title, in this case the employer. Because the employer deliberately allowed the patent to expire, it was not outside the discretion of the USPTO to deny the request to reinstate the patent.

More detail on Burandt v. Dudas after the jump.

The inventor did development work for a company and, pursuant to an agreement, assigned title of any patents developed as a result of the development to the company in exchange for the company paying for the inventor's research. The inventor was allowed to repurchase rights to any patents issued as a result of the research.

The relevant patent issued in 1990. In 1989, the inventor allegedly attempted to exercise his option to repurchase, but no change in title was ever recorded. The inventor claimed that this attempt to exercise these rights gave him equitable title to the patent.

The company failed to pay the first maintenance fee for the patent, due in 1994, and as a result the patent expired. The inventor learned that the patent had expired in 2001, began legal proceedings with the employer, and gained legal title in 2002. In 2005, the inventor filed a request for acceptance of a delayed payment and claimed that the delay had been unavoidable. The petition was rejected and, eventually, this appeal ensued under the Administrative Procedure Act. The district court affirmed the denial of the petition on summary judgment.

On appeal to the Federal Circuit, the inventor raised four arguments: 1) the deferential review of the USPTO's determination of unavoidable delay by the district court was error, 2) the district court should have focused on the inventor's, instead of the employer's, actions in determining unavoidable delay, 3) the district court should have found delay in payment of the maintenance fee unavoidable, and 4) the court erred in sustaining the denial of a petition to suspend the rules and accept the late payment under Rule 183.

Regarding the deference given to the USPTO, the court reviewed 35 U.S.C. § 41(c)(1) and found that "the statute provides the Director with the discretion to accept a late maintenance fee any time after the close of the grace period if the delay is shown to the satisfaction of the Director to have been unavoidable." Given this interpretation of the statute, the deference given the Director was found to be proper.

Turning to the party whose action (or inaction) was relevant for purposes of determining unavoidable delay, the court referred to Ray v. Lehman, where the court "expressly held that it is the actions of the party responsible for making payments of the maintenance fees, the legal title owner, that mush be considered when evaluation unavoidable delay under 35 U.S.C. § 41(c)." Given this interpretation, it was clearly the actions of the employer which were relevant in determining unavoidable delay.

This conclusion doomed the inventor's next argument, that the delay was literally unavoidable. The inventor had raised a history of mental illness during the appropriate time coupled with dire financial circumstances as the basis for his unavoidable delay. The court noted that these conditions were "unfortunate," however the court concluded that "they are irrelevant given [the employer's] status as the legal owner of the patent. Turning to the actions of the employer, the court found that the employer had intentionally allowed the patent to expire. Finally, the court held it was within the USPTO's discretion to deny the Rule 183 petition.

This case illustrates the importance of ensuring clear title to patents, and getting transfers of title recorded with the USPTO to ensure the proper party is deemed responsible for maintenance fee payment.

To read the full decision in Burandt v. Dudas, click here.

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