The U.S. Court of Appeals for the Federal Circuit recently solidified its 1995 ruling in Ray v. Lehman and rejected the notion that the U.S. Patent and Trademark Office (USPTO) has a duty to question a patent's ownership when it upheld the USPTO Director's denial of the inventor's request to reinstate his patent after failure to pay the maintenance fee. Burandt v. Dudas, Case No. 07-1504 (Fed. Cir., June 10, 2008) (Newman, J.)
Inventor and plaintiff-appellant Corliss Burandt assigned a patent application to his employer Investment Rarities, Inc. (IRI). IRI thereby became the legal title owner of the subsequently issued patent. Soon thereafter, Burandt attempted to regain legal title to the patent from IRI. IRI, however, rebuffed Burandt. Subsequent negotiations proved unsuccessful, and Burandt abandoned his efforts to wrest legal title to the patent from IRI. Some four years passed, and IRI failed to pay the first maintenance fee, resulting in the patent's expiration on October 9, 1994.
Meanwhile, the inventor had fallen on hard times. According to his psychiatrist, Burandt became mentally disabled at some point prior to 1992. In 2001, Burandt learned that the patent had expired. He regained legal title from IRI in 2002 and filed a petition under 37 C.F.R. § 1.378(b) "for acceptance of a delayed fee payment." Under 35 U.S.C. § 41, the USPTO Director "may accept the payment of any maintenance fee... after the six month [grace] period if the delay is shown to the satisfaction of the Director to have been unavoidable." The USPTO denied Burandt's petition. Burandt filed suit against the Director of the USPTO under the Administrative Procedure Act (APA), "alleging that the [USPTO] Director's denial of his request for reinstatement was arbitrary and capricious and an abuse of discretion." The district court granted summary judgment in favor of the Director. Burandt appealed.
The Federal Circuit's decision was heavily based on Ray, wherein it held "that in determining whether a delay in paying a maintenance fee was unavoidable, one looks to whether the party responsible for payment of the maintenance fee exercised the due care of a reasonably prudent person." Here, IRI, as the legal owner of the patent during the relevant time, was "the party responsible for payment of the maintenance fee." Moreover, since the record was clear that IRI's failure to pay the maintenance fee was intentional, the delay in payment was clearly avoidable. The Court also looked to whether Burandt, as the party with only equitable rights in the patent at the relevant time "exercised the due care of a reasonably prudent person" such that they could attain the status of "the party responsible for the payment of the maintenance fee." The Court answered this inquiry in the negative, pointing out that Burandt failed to make "repeated inquiries about the status of his patent" (even though he knew IRI had allowed three of his other patents to expire). Moreover, there was no evidence that IRI made misrepresentations to Burandt about the status of his patent.
The Federal Circuit also rejected the notion that the USPTO has a duty to question ownership, whether legal or equitable: "The Director is entitled to rely on the representations of ownership by the parties and need not engage in a separate analysis to determine title ownership. ... The Director is entitled to rely on the record and does not have to conduct an equitable analysis in order to determine who must pay the maintenance fee."
Practice Note: This case demonstrates the burden placed on parties having any rights—legal or equitable—in patents to not only proactively pursue and protect those rights, but also to ensure that the public record is accurate. Equitable owners should not trust that legal owners will always maintain shared patents. Legal owners should avoid the taint of dishonesty to enter their dealings with equitable owners, lest the equitable owners thereby regain certain legal rights to shared patents.
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