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Common Sense v. Common Practice in Patent Expiry Dispute

By William Peacock, Esq. on September 27, 2013 | Last updated on March 21, 2019

The Naval Research Laboratory maintains a patent portfolio. If the renewal period is approaching, the man in charge, NRL patent attorney John Karasek, checks to see whether the patent has been worth anything and whether anyone has asked to license it.

If not, he lets it lapse.

One time, however, he let it lapse, and shortly thereafter, he received an inquiry about licensing the patent from someone who had been trying to get a hold of him for some time. Karasek filed a late renewal, checked the "unintentional lapse" box, and paid the fee.

Now, State Farm Insurance is angry, because they are being sued by the patent licensee. They maintain that because the initial lapse was not unintentional, Karasek had engaged in inequitable conduct by "falsely representing" as much to the PTO. The district court agreed, and found the patent unenforceable.

Karasek argued "mistake of fact," as he was mistaken about the demand for the patent due to issues with the phone system and the illness of the head of the Technology Transfer Office. Had it not been for those extenuating circumstances, Karasek would have known about the demand and would not have let the patent lapse.

The district court, citing In re Carlson, held to the common-sense notion that "[t]he discovery of additional information after making a deliberate decision to withhold a timely action is not the 'mistake in fact' that might form the basis for acceptance of a maintenance fee."

Majority: Everyone Does It

A showing of inequitable conduct requires (1) misrepresented or omitted information material to patentability that's (2) done with intent to mislead or deceive the PTO.

The majority's holding, reversing the district court, can be summarized as this: Everyone does it.

The applicable regulations give the PTO director discretion to accept the payment of any maintenance fee after expiration if the missed payment was (a) unavoidable or (b) unintentional.

The PTO has a standardized form that does not require details, and simply states: "The delay in payment of the maintenance fee to this patent was unintentional." Karasek used this standardized form. The court also looked up past post-expiration payments and found that out of the applications accessible by the public, none provided details.

In short: Standard procedure is to use the form and leave off the details, even if that means a conscious decision to not renew a patent is labeled "unintentional."

Dissent: But He Chose to Let It Lapse

They chose to let the patent lapse because of facts not known at the time. Though cases do suggest that mistake of fact may be a tenable theory, no one can find an example of such a theory actually working (and in fact, Carlson went the other way). In another case, In re '974, the PTO stated:

"intentional action or inaction [in paying a maintenance fee] precludes a finding of unintentional delay, even if the agent-representative made his decision not to timely take the necessary action in a good faith error."

The dissent in short: The clear line of cases indicates that the PTO would not have excused the Navy Research Laboratory's neglect of multiple phone calls and email messages as a "mistake of fact."

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