Changes in Patent Office Rules Relating to Inventorship and Continuation Practice

April 28, 1998 Advisory
The following paper was originally presented on April 28th, 1998 at the FOURTEENTH ANNUAL JOINT PATENT SEMINAR hosted by the New Jersey Intellectual Property Association.

"Oh! The old swimmin'-hole! When I
last saw the place
The scene was all changed , like the
change in my face."
James Whitcomb Riley (1849-1916)

I. ABSTRACT

The Patent Office has recently implemented a number of changes governing corrections of inventorship and the filing of continuation applications. The changes regarding correction of inventorship came in response to recent Federal Circuit rulings concerning diligence, deceptive intent, and declaratory judgments to resolve inventorship. In response to these rulings, the Patent Office has revised its regulations governing the correction of inventorship of both issued patents and pending applications. While some of these changes are unambiguous, others raise uncertainties regarding the ability of inventors to properly correct inventorship errors resulting from deceptive intentions, as well as the enforceability of such corrected patents. It is too soon to tell whether these changes, in aggregate, favor plaintiff's or defendants in inventorship contests involving issued patents.

II. INTRODUCTION

Picture this: you are a co-inventor of a valuable new device, but you discover, too late, that your fellow inventors purposely omitted your name from their patent covering your claimed invention. You might bring a tort action alleging fraud and misrepresentation to recover monetary losses, and you might also file a claim under 35 U.S.C. §265 to correct inventorship on the patent. Until recently, some courts considered those two options to be mutually exclusive.2 Under that interpretation of §256, all inventors, both actual and mis-named, had to be free of deceptive intent in order to allow correction of inventorship; and, therefore, concurrent claims of fraud (founded in deceptive intent) against other named inventors barred a §256 action.

The Federal Circuit recently considered this scenario in Stark v. Advanced Magnetics, Inc., 3 however, and ruled that § 256 does not require lack of deceptive intent among all joint inventors, but only among those actual inventors seeking to be added to the patent.

III. BACKGROUND OF THE CASE

Dr. Stark collaborated with Advanced Magnetics, Inc., AMI, in developing magnetic resonance imaging technologies. AMI later obtained six patents on these developments, none of which named Dr. Stark as an inventor, and Dr. Stark sued in federal district court4 to correct inventorship under § 256. Section 256, allows an inventor to bring a suit in federal court to rectify "misjoinder" of a person who is not an inventor or "nonjoinder" of a person who is. Dr. Stark alleged both misjoinder and nonjoinder in his action and also included state law claims relating to misrepresentation and breach of contract.

  1. First District Court Ruling

    The district court granted summary judgment to AMI based on an argument that Dr. Stark's § 256 action was barred because he had not been diligent in seeking correction of inventorship. Evidence showed that Dr. Stark knew or should have known about the inventorship errors at least three years prior to filing suit, 5 and the court interpreted this delay as a lack of diligence.

  2. The Federal Circuit Ruling On Diligence

    On appeal the Federal Circuit vacated the summary judgment and remanded the case, holding that neither 35 U.S.C § 256 nor 37 C.F.R. §1.3246 require diligence on the part of an inventor seeking correction of inventorship of an issued patent. 7 Although acknowledging a general common law requirement of diligence, Judge Newman noted that "Section 1.324, unlike § 1.48, 8 contains no diligence requirement..." and concluded that this conspicuous difference between the requirements for correcting inventorship on an issued patent versus a pending application must be deemed material. Thus, according to the Court's ruling, diligence in correcting inventorship of an issued patent is not required as a matter of law, although it may be examined in context with the facts of each individual case. 9

  3. Second District Court Decision

    On remand, the district court held that, as a precondition for correction of inventorship, § 256 requires that both the actual and named inventors be "without deceptive intent" in procuring the patent. 10 Thus, the court dismissed Dr. Stark's § 256 action in view of the alleged fraud in his state law claim of misrepresentation. This ruling created a "Catch-22" for Dr. Stark, who sought a remedy for the bad acts of other parties to the patent, effectively forcing him to choose between this legitimate state law claim and correcting inventorship of the patent.

  4. The Federal Circuit's Ruling On Deceptive Intent

In an interlocutory appeal to determine to whom the "without deceptive intent" requirement applied, the Federal Circuit reversed the district court. The Federal Circuit held that, in the case of nonjoinder, § 256 requires only that the omitted inventor be free of deceptive intent, and that, in the case of misjoinder, there is no requirement that any of the parties be free of deceptive intent. "In other words, the statute allows correction in all misjoinder cases featuring an error and in those nonjoinder cases where the unnamed inventor is free of deceptive intent." 11

    IV. NEW PATENT OFFICE RULES

    Meanwhile, the Patent Office has issued final rule changes, inter alia, to make the Patent Office regulations for correcting inventorship conform to Stark. 12

    Under the changes relating to 37 C.F.R. § 1.324, statements of good faith in support of a petition to correct inventorship are now required from those inventors being added or deleted from a patent, not from all parties to the patent. It is not entirely clear, though, that this change fully embodies the ruling in Stark, which held that errors of misjoinder can always be corrected, regardless of deceptive intent. Because the new rule still requires statements of good faith from named inventors being deleted from a patent, it appears that the Patent Office, contrary to the Federal Circuit's ruling, is continuing to require lack of deceptive intent in misjoinder cases.

    The Federal Circuit's interpretation of the old § 1.324 rule (requiring good faith statements from all parties involved) was that it was an acceptable combination of the policy goals of 35 U.S.C. § 256 and the inequitable conduct standards of 37 C.F.R. § 1.56. Is that interpretation still valid in light of the new rule? It doesn't seem so, unless the Court is willing to radically change its definition of inequitable conduct.

    With respect to both § 1.48 and § 1.324, the requirement of diligence was eliminated. 13 Of course, it should be noted that the removal of the diligence requirement from 37 C.F.R. § 1.48 was not necessary to comply with the Stark ruling. The PTO simply decided that the requirements of 35 U.S.C. §§ 102(f)&(g) were sufficient to motivate applicants to correct inventorship without the additional requirement of diligence.

    From a wider perspective, the changes made by the PTO were designed to maintain an escalating degree of finality throughout the patent process. From the PTO's perspective, it is undesirable to make the process of correcting inventorship easier after a patent issues than before, since this might create a disincentive for applicants to correct errors.

    Another significant change to the rules was the amendment of § 1.48 to exclude correction of inventorship in reissue applications under that section. Instead, inventorship may be corrected in a reissue under § 1.175 with a new reissue oath or declaration.

    V. A PYRRHIC VICTORY?

    While allowing Dr. Stark to correct inventorship errors, the Federal Circuit noted that if any of the parties to the patent engaged in inequitable conduct before the Patent Office, the patent may be nevertheless unenforceable, even by the innocent inventors, under 37 C.F.R. § 1.56. As Judge Rader stated, "one bad apple spoils the entire barrel." 14

    So is the Stark result merely a check-mate in the form of a Pyrrhic victory for an innocent, omitted inventor? Although successfully added as an inventor through a § 256 action, will a court later find that the corrected patent, though valid, is unenforceable because of inequitable conduct engaged in by other parties to the patent?

    To the extent that 37 C.F.R. § 1.56 imposes a duty of candor on "[e]ach individual associated with the filing and prosecution of a patent application," it does seem that innocent, omitted inventors still face a Catch-22. Although an omitted inventor's state law claims of fraud and inventors still face a Catch-22. Although an omitted inventor's state law claims of fraud and misrepresentation no longer bar him from seeking correction of inventorship under § 256, they still may bar him from successfully interposing a defense of good faith into a suit challenging the enforceability of the patent because of inequitable conduct by other parties to the patent.

    VI. A POSSIBLE LOOPHOLE

    On the other hand, Stark may have created a possible exception to this Catch-22 trap. The Court noted an inconsistency between 37 C.F.R. § 1.324, which (prior to the new changes) required absence of deceptive intent on the part of all actual inventors, and 35 U.S.C. § 256, which (as the Court interpreted it) only requires absence of deceptive intent on the part of the omitted inventor seeking to be added. Judge Rader justified this inconsistency, however, by interpreting the old wording of § 1.324 as encompassing the policy of § 256, combined with the inequitable conduct standards. 15

    But if this reasoning is truly indicative of the Court's interpretation of the inequitable conduct standards, it conceivably could be a loophole for innocent, nonjoined inventors in certain circumstances. Since the old § 1.324 section, only imposed a good faith requirement on actual inventors, the Court's interpretation could conceivably suggest that, as long as the actual inventors acted in good faith, the patent may escape the taint of inequitable conduct. In other words, if an innocent inventor can "toss out the bad apples" through a § 256, misjoinder/nonjoinder proceeding, the barrel may be saved from spoiling. This theory, of course remains to be tested. 16 Further, under the new § 1.324 section , the required statement of lack of deceptive intent by the inventors being deleted from a patent appears to be inconsistent with the Stark requirement that only the actual inventors be required to provide such statements. In any event, the statements from the inventors being deleted from a patent should provide fertile ground exploring an unenforceability defense in a subsequent infringement action regarding the corrected patent.

    VII. ANOTHER RECENT DEVELOPMENT

    Although the result in Stark seems to have tipped the balance of law slightly in favor of plaintiff's seeking correction of inventorship, another recent case, Ewen v. Razavi, 17 seems to have tipped back toward defendants. In Ewen, the Federal Circuit ruled that a patent owner under shadow of threatened litigation to change inventorship of the patent can properly file suit in federal court seeking a declaratory judgment which upholds the named inventors. The Court ruled that a federal district court had a proper jurisdiction over the litigants because, under the well-pleaded complaint rule, the cause of action of a potential plaintiff who claims he was omitted from a patent arises under 35 U.S.C. § 256, and thus creates a federal question. Since the patent owner's property interest could be adversely affected by a § 256 action, sufficient controversy exists to warrant declaratory judgment.

    VII. INVENTORSHIP CHANGES UNDER SIMPLIFIED FILING PROTOCOL

    The Patent Office has simplified its patent application filing procedures by consolidating them into one rule, namely 37 C.F.R. § 1.53. By virtue of this change, continuations, divisionals and CIPs, filed with a new specification and an oath or declaration, are submitted under Rule 53(b), and provisional patent applications are filed under Rule 53(c). Continuation and divisional applications filed without a new specification and an oath or declaration (formerly done under old Rule 62), are now designated "Continued Prosecution Applications" ("CPAs"), and these are submitted under Rule 53(d). Inventorship designation and changes for all filings under Rule 52 are effected in a straightforward manner. Indeed, inventors need not be named when filing an application under the new rule, and the subsequent filing of an oath or declaration designating an inventive entity that is different that the entity named in parent application operates to establish the inventorship automatically. This new flexibility in the timing of designing (or re-designating) the proper inventors will provide a real advantage to the prosecuting attorney by enabling the attorney to be reasonably certain of the proper inventorship before so informing the Patent Office.

    IX. CONCLUSIONS

    The recent actions of the Federal Circuit and the Patent office regarding inventorship errors show this to be a changing area of law, and it is not yet clear whether these changes will make it easier or harder for parties to correct errors in inventorship. Furthermore, it is unclear how these changes will affect the enforceability of patents after they have had inventorship errors corrected under the new rules. Most importantly, how will the Federal Circuit interpret the new changes to § 1.48 and § 1.324 in light of Stark? This important question remains to be answered.

    The flexibility in naming inventors under the new Rule 53 filing protocols will maximize the opportunity for the prosecuting attorney to "get it right the first time", thus hopefully decreasing the likelihood of inventorship errors.

    Endnotes

    1. Dale L. Carlson is a partner and James R. Barney is an intern at Wiggin & Dana.
    2. See, e.g., Stark v. Advanced Magnetics, Inc., 894 F. Supp. 555, (D.Mass 1995); University of Colorado Foundation, Inc. v. American Cyanamid, 880 F.Supp. 1387, 1399 (D.Colo. 1995); McMurray v. Harwood, 870 F.Supp. 917, 919-920 (E.D.Wis. 1994); Dee v. Aukerman, 625 F.Supp. 1427, 1430 (S.D. Ohio 1986).
    3. Stark v. Advanced Magnetics, Inc., No. 95-1233, (Fed. Cir. Jul. 11, 1997).
    4. Stark v. Advanced Magnetics, Inc., No. 92-12157-Y (D.Mass Apr. 19, 1993).
    5. This was based on testimony that Dr. Stark had received the 1989 AMI Annual Report, which described the patents in question, three years prior to filing suit.
    6. 37 C.F.R. §1.324 is the regulatory implementation of 35 U.S.C. §256, pertaining to correction of inventorship in issued patents.
    7. Stark v. Advanced Magnetics, Inc., 29 F.3d 1570 (Fed. Cir. 1994).
    8. 37 C.F.R. §1.48 is the regulatory implementation of 35 U.S.C. §116, pertaining to correction of inventorship in patent applications.
    9. Stark, 29 F.3d at 1574.
    10. Stark, 894 F.Supp. at 560.
    11. Stark, No. 95-1233, slip op. at 9.
    12. Changes to Patent Practice and Procedure; Final Rules Effective December 1, 1997, 62 Fed. Reg. 53, 131 (Oct. 10, 1997) (codified at 37 C.F.R. Parts 1,3,5,7 & 10).
    13. Although §1.324 never actually contained a diligence requirement, it might have been possible to infer one from a statement in M.P.E.P. §1481 that the factual showing required by §1.324 must be of the same type and character as the proof require under §1.48.
    14. Stark, No. 95-1233, slip op. at 11.
    15. Id.
    16. U.S. Patent No. 4,770,183 was one of the patents involved in this case in which Dr. Stark did, in fact, substitute himself as the sole inventor. Thus, a challenge to that patent could precipitate a test to this theory.
    17. Ewen v. Razavi, No. 96-1179, 1997 WL 536006, (Fed. Cir. Sep 2, 1997).