IP Law Daily, PATENT—E.D. Va.: PTO’s ‘standing’ defense could proceed in lawsuit challenging ownership rejection of patent application, (Apr 15, 2016)

By Mark Engstrom, J.D.

In an action challenging the PTO’s ownership rejection of a patent application involving computer networking technology, the doctrine of collateral estoppel did not bar the PTO from arguing that the plaintiff, Realvirt LLC, lacked an ownership interest in the application and thus lacked standing to sue, the federal district court in Alexandria, Virginia, has ruled (Realvirt, LLC v. Lee, April 14, 2016, Ellis III, T.). The court denied Realvirt’s motion for partial summary judgment on the issue of standing.

Procedural posture. In 2013, the Office of Patent Legal Administration (OPLA) found that two inventors retained an ownership interest in a patent application that had been transferred to Realvirt. Thereafter, all of the patent claims in Realvirt’s patent application were rejected, and the rejection was affirmed by the Patent Trial and Appeal Board.

Realvirt filed a civil action against PTO Director Michelle K. Lee to challenge Office’s final decision in Realvirt’s appeal of the OPLA ruling. In its answer, the PTO asserted an ownership defense. According to the PTO, Realvirt did not own all right, title, and interest in the patent application, and thus lacked standing to sue.

Realvirt sought summary judgment on the standing issue. In Realvirt’s view, the PTO’s standing defense was barred by the doctrine of collateral estoppel because administrative proceedings had already established that Realvirt possessed an ownership interest in the rejected patent application.

Analysis. The court noted that the U.S. Supreme Court had found in University of Tennessee v. Elliott, 478 U.S. 788 (1986), that the factual findings of an administrative body should be given preclusive effect in subsequent litigation, but only if the administrative body had acted in a judicial capacity and had resolved disputed issues of fact that the parties had an opportunity to litigate.

In this case, collateral estoppel was inapplicable because the prosecution proceedings that established Realvirt’s ownership interest in the asserted patent application were not adversarial, litigation-type proceedings; they were ex parte proceedings in a quasi-adjudicatory forum. Significantly, prosecution proceedings lacked cross-examination, discovery, and other opportunities that were available to adversarial litigants.

Furthermore, the use of collateral estoppel in the Fourth Circuit had four requirements: (1) the disputed issue or fact had to be “identical” to the issue or fact that was previously litigated; (2) the disputed issue or fact had to be “actually resolved” in the prior proceeding; (3) the disputed issue or fact had to be “critical and necessary” to the judgment in the prior proceeding; (4) the judgment in the prior proceeding had to be “final” and “valid”; and (5) the party that would be foreclosed by the prior resolution of the issue or fact had to have received a “full and fair opportunity to litigate” the issue or fact in the prior proceeding.

In this case, the court concluded that the ownership issue in the PTO’s standing defense was not an “issue or fact” that was “identical” to the issue that was decided by the OPLA; nor was it “actually resolved” by the OPLA. Further, the proceedings did not provide the PTO a “full and fair opportunity” to litigate the ownership issue because the relevant finding—that the inventors had sufficiently demonstrated an ownership interest in the asserted patent application—was based solely on the documents that the inventors themselves had submitted. Finally, the court concluded that the PTO’s determination of ownership was not a “final” decision; it was a “threshold” finding that the PTO could proceed with the prosecution of the patent application. In fact, the PTO did not determine—and could not determine—the ownership of a patent application because title issues were grounded in state law, the court explained.

Contrary to Realvirt’s contention, collateral estoppel did bar the PTO from arguing that Realvirt lacked an ownership interest in the rejected patent application, and thus lacked standing to sue. Summary judgment was therefore unwarranted on the issue of standing.

Fees and costs. Realvirt argued that summary judgment was warranted regarding the PTO’s §145 defense, which stated that the PTO was entitled to “reasonable expenses, including those related to compensation paid for attorneys’ and paralegals’ time, incurred in defending this action, regardless of whether the final decision is in plaintiff’s favor.”

According to the court, the PTO had not—at the time of the court’s decision—affirmatively requested the recovery of its expenses under 35 U.S.C. §145. For that reason, the court decided that a determination regarding expenses (i.e., whether they exceeded what was authorized by statute) was, at that time, neither necessary nor appropriate. Realvirt’s motion for partial summary judgment was therefore denied, with respect to the PTO’s §145 defense.

The case is No. 1:15-cv-963.

Attorneys: Joseph Scafetta, Jr. (Ditthavong & Steiner PC) for Realvirt, LLC. Ayana Niambi Free, U.S. Attorney's Office, for PTO Director Michelle K. Lee.

Companies: Realvirt, LLC

Cases: Patent VirginiaNews