Form Over Substance: CAFC Kills Patent Due to Paralegal Mistake

By Gene Quinn
December 16, 2014

Every once in a while  you stumble across a situation where what is fair seems obvious. At those moments we are all too frequently reminded that we do not have a fairness system, but rather we have a justice system. Which is one way to say that I think the Federal Circuit made a terribly poor decision; one that flies in the face of common sense, and frankly common decency. If the legal system cannot fix a mistake like this before the mistake has even been made public then the system is broken.

The case I am referring to is the recent decision from the United States Court of Appeals for the Federal Circuit in Japanese Foundation for Cancer Research v. Lee, which is the epitome of reaching the right legal decision instead of doing what is fair and just. A paralegal made a mistake, instructed the U.S. representatives to file a terminal disclaimer abandoning a patent, the paperwork was signed and filed by the attorney of record, and then immediately the error was identified. In fact, the mistake was identified and attempts made to mitigate the mistake even prior to the filing ever appearing in the PAIR system operated by the United States Patent and Trademark Office. Yet, at the end of the day, even though there was no question that the chain of events was caused by a paralegal misunderstanding what she was asked to do, the patent still winds up effectively nullified.

This case came to the Federal Circuit on an appeal from the USPTO, which appealed from the decision of the United States District Court for the Eastern District of Virginia granting the Japanese Foundation for Cancer Research’s summary judgment and ordering the USPTO to delete the disclaimer.  The Eastern District of Virginia ruled hat the USPTO acted arbitrarily and capriciously, and abused its discretion, when it refused to withdraw the terminal disclaimer on U.S. Patent No. 6,194,187 (“’187 patent”).

Did the District Court reach the correct legal ruling? In what can only be described as an academic treatment of the rules governing terminal disclaimers, correcting mistakes and whether this was a final agency determination by the USPTO, the Federal Circuit per Chief Judge Prost determined that the Eastern District of Virginia reached the wrong legal conclusion. In my opinion you could only come to the determination reached by the Federal Circuit if you were completely and thoroughly focused on the tree rather than the forest surrounding the tree.

Do I blame the USPTO for denying the request to remove the terminal disclaimer? No, not at least in the first instance. Whether the Supreme Court likes it or not, government bureaucracies work because they apply bright-line rules. The terminal disclaimer was properly signed and filed by the attorney of record. I can understand the USPTO not wanting to set the precedent of getting involved with making decisions about whether on a case-by-case basis such a proper filing should be removed, although I will point out that the Office does have procedures to expunge (see Rule 59), which has to necessarily mean that the Office is at times willing to provide recourse for mistaken filings. Had I been the decision maker at the Office I would have reached a different decision, but I’m not going to throw stones at the USPTO for saying no and forcing the applicant to exercise their rights to challenge the bright-line implementation in Federal District Court.

I do have a problem with the USPTO appealing the decision of the Eastern District of Virginia for the Federal Circuit. The USPTO was ordered to delete the terminal disclaimer because the action was ruled to be arbitrary and capricious. The USPTO could have easily taken the position that this only meant that it was arbitrary and capricious to refuse to delete something mistakenly filed that had yet to become a public record, hardly an unreasonable position. But the USPTO pushed the issue to the Federal Circuit in pursuit of what in my opinion is an objectively unfair outcome.

It also seems to me that the Federal Circuit went out of their way to reach a decision that is fundamentally unfair.  I understand that life is not fair, and I understand that we do not have a fairness system. In this case there was clearly a mistake made. It is as if Chief Judge Prost, Judge Dyk and Judge Taranto have never made a mistake themselves. This mistake was uncovered nearly instantaneously, the public had not even been informed so there is no way that there could have been any detrimental reliance by anyone, and yet there was nothing that could be done? The Eastern District of Virginia did what Judges have done in similar situations for ever — they exercised the enormous powers they possess to do what is fair and equitable. Fixing the mistake would have caused no harm to anyone. The fact that there may or may not have been the authority to do this is purely an academic concern when you are talking about equity. Doing what is fair and equitable is always within the power of a Federal District Court Judge.

Here there was something that could have been done, the District Court was exactly right. The USPTO was wrong to appeal the decision rather than forgiving the mistake and the Federal Circuit went out of their way to explain why a clearly unfair outcome was what the law demanded. Institutionalizing an unfair outcome is hardly what our justice system is all about, although unfair outcomes are sometimes a byproduct of speed based on the philosophy that justice delayed is justice denied. Still, this decision really bothers me on a human level.

Chief Judge Prost wrote:

Even if we disagreed with the PTO’s position as a matter of policy, we must not substitute our own judgment for that of the agency… Here, the PTO determined that miscommunications between the Foundation and its attorney of record did not excuse the actions of the attorney, and we will not substitute our judgment for that of the agency.

Reading this passage made me chuckle. The Federal Circuit lecturing on not substituting their own judgment for that of the agency? The Federal Circuit substitutes their own judgment for the judgment of decision makers on every level every month. I understand administrative procedures laws are supposed to prevent such substitution of judgment, as Judge Prost writes, but the Federal Circuit time after time simply wipes away years of the litigation process without any deference to another Article III confirmed Judge, and without any deference to juries. They have similarly ignored the PTAB, never showing any problem with reversing what they disagree with.

I do understand the peculiarities of administrative law that raise certain agency decisions and policies to an elevated position under our system. Oddly, it seems that the agency decisions that make the least sense are the ones that are the most insulated, which is an enormous problem. Still, even under this preferential treatment an arbitrary and capricious decision is never legal or within the agency’s purview. I agree with the Eastern District of Virginia — this was an arbitrary and capricious decision that mandated the courts to step in and do the right thing. The Eastern District of Virginia did that, the Federal Circuit erred.

Speaking as a member of the public, I don’t know what better definition there can be of arbitrary and capricious action when for no reason someone in power refuses to fix what everyone agrees is an unfortunate mistake. If the law cannot allow a mistake like this to be fixed before the public even knows then the law is broken and is itself unjust.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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Discuss this

There are currently 6 Comments comments.

  1. patent leather December 16, 2014 5:06 pm

    I wouldn’t expect this particular panel to come out any differently. If the panel was Linn, O’Malley and Newman, I have no doubt the outcome would have been different.

    I wonder if there is any solution to the panel dependency problem at the CAFC? The outcomes at the CAFC are (on a high level) a random system and it is making a mockery out of our esteemed federal court system. But I can’t think of a solution.

  2. Nancy Tedeschi December 17, 2014 7:39 am

    Can you say US Supreme Court. What BS!!!!!!

  3. Thomas Hassing December 17, 2014 11:57 am

    Applicants also have the ability to petition the USPTO Director for suspension of the rules under 37 CFR 1.183: “In an extraordinary situation, when justice requires, any requirement of the regulations in this part which is not a requirement of the statutes may be suspended or waived by the Director or the Director’s designee, sua sponte, or on petition of the interested party, subject to such other requirements as may be imposed.”

  4. RH December 17, 2014 12:38 pm

    How can the alleged “misunderstanding” be credible when the attorney signed the TD? What else but the filing of a TD did the attorney intend when signing the TD?

  5. Ralph December 17, 2014 3:13 pm

    I see they did the noble thing, blame the paralegal for misunderstanding. Its never the attorney giving unclear instructions, is it?

  6. wea December 17, 2014 5:49 pm

    The problem I see here is that it was an issued patent whose term was disclaimed. It is not a pending application for which a terminal disclaimer is filed to overcome a double patenting rejection. It was a statutory disclaimer disclaimer disclaiming the remaining years of term.

    Why one would file one of these statutory disclaimers is very suspicious. The US attorneys should have been more careful here and asked if this is what really was desired from the foreign associates because it is so out of the ordinary course. Why not just let the patent lapse for failing to pay maintenance fees.

    Given that it is an issued patent, a competitor may see the statutory disclaimer in the file and rely on that to develop a product.

    On the other hand, to the US attorney’s credit, they did try and file a number of petitions that were denied, including the one regarding waiver of the rules. They also held an interview at the petitions branch to try and resolve issues that might have remained. The only petition I missed seeing is the petition to expunge, but it may not have been granted anyway. Administrative remedies exhausted, go to court.

    Foreign language and the foreign associates complicates this fact pattern.
    Of course if this was one of us making this mistake, we would probably like to be able to take it back.