Federal Circuit: Failure to File Divisional Patents Not Cured by Reissue | Practical Law

Federal Circuit: Failure to File Divisional Patents Not Cured by Reissue | Practical Law

In Landmark Screens LLC, v. Morgan, Lewis, & Bockius, LLP, the US Court of Appeals for the Federal Circuit, asserting subject matter jurisdiction over California state law claims against a patent attorney for legal malpractice, reversed the summary judgment orders of the US District Court for the Northern District of California limiting the plaintiff's claims for damages and dismissing its state law claims.

Federal Circuit: Failure to File Divisional Patents Not Cured by Reissue

Practical Law Legal Update 9-519-1170 (Approx. 4 pages)

Federal Circuit: Failure to File Divisional Patents Not Cured by Reissue

by PLC Intellectual Property & Technology
Published on 24 Apr 2012 • USA (National/Federal)
In Landmark Screens LLC, v. Morgan, Lewis, & Bockius, LLP, the US Court of Appeals for the Federal Circuit, asserting subject matter jurisdiction over California state law claims against a patent attorney for legal malpractice, reversed the summary judgment orders of the US District Court for the Northern District of California limiting the plaintiff's claims for damages and dismissing its state law claims.

Key Litigated Issues

The key issues before the US Court of Appeals for the Federal Circuit in Landmark Screens, LLC, v. Morgan, Lewis, & Bockius, LLP, were whether:
  • The court had subject matter jurisdiction over the plaintiff's state law claims.
  • The plaintiff's claims were barred by the applicable California statute of limitation.
  • The district court appropriately limited the plaintiff's damages claims based on its finding that certain of the patent claims initially lost due to the defendant's alleged malpractice were restored in a broad reissue patent.

Background

In January 2002, the individual defendant, attorney Thomas Kohler, filed a US Patent Application on behalf of Landmark Screens, LLC's for an LED electronic billboard. The USPTO informed Kohler that Landmark's application contained multiple inventions and asked Landmark to restrict the application to one of four claimed inventions. Landmark and Kohler filed an application for one of the four inventions in May 2003 (096 Application) and withdrew the remaining claims. Landmark intended to file divisional applications for the remaining three inventions. Landmark was award a patent (574 Patent) on the elected claims in October 2003.
In August 2003, Kohler filed a divisional application for the remaining inventions. However, the examiner found two mistakes in the application that left it incomplete. Kohler and his firm, Morgan Lewis, did not become aware of this deficiency until June 2004 and did not take action with the USPTO to correct the problem until August 2004.
Kohler filed a corrected divisional application in August 2004 and a petition to grant an original filing date of August 2003. The USPTO dismissed the petition and granted the divisional application an August 23, 2004 filing date. Because the 096 Application was published more than one year before the divisional application was published, the 096 Application became prior art against the divisional application.
Landmark sued Kohler and Morgan Lewis in 2005 in state court under California state law claims for legal malpractice, negligence and breach of fiduciary duty. Landmark also reissued the 574 Patent to broaden the issued claims to correct Kohler's alleged malpractice. In May 2008, the state court dismissed Landmark's action against the defendants for lack of subject matter jurisdiction because the case depended on a substantial question of patent law. Landmark then filed a new complaint, with the same claims, in the US District Court of the Northern District of California. Landmark also asserted an additional claim of fraud.
In September 2010, the federal district court entered partial summary judgment for damages on Landmark's fraud claim, which limited the recovery it could receive at trial. In February 2011, the court granted the defendant's motion for summary judgment and ruled that Landmark's case was barred by the statute of limitations applicable under California law.

Outcome

In its decision on April 23, 2012, the Federal Circuit found that it had jurisdiction over this appeal and vacated both of the district court's summary judgment decisions.

Subject Matter Jurisdiction

The Federal Circuit ruled it had jurisdiction over this appeal under Title 28 Section 1338(a) of the US Code because Landmark's malpractice and fraud claims both involve a substantial question of patent law. Interpreting California law, the Federal Circuit found that both the malpractice and fraud claims require a plaintiff to prove that the defendant's conduct was the proximate cause of harm to the plaintiff. To succeed on these claims, therefore, Landmark had to show, among other things, that it would have:
  • Been able to obtain patent protection for its invention absent the defendant's alleged malpractice.
  • Similarly obtained patent rights but for the defendant's alleged fraud.
The Federal Circuit held that determining if Landmark would have been granted patent rights absent the defendant's conduct would require a patent case within a larger case, which is sufficient to grant federal patent jurisdiction under Title 28 Section 1338(a) of the US Code.

Statute of Limitations

The Federal Circuit, deferring to established US Court of Appeals for the Ninth Circuit procedural law and California substantive law, held that Landmark's claims were not barred by California's statute of limitations because of equitable tolling. Relying on Daviton v. Columbia/HCA Healthcare Corp. (241 F.3d 1131 (9th Cir. 2001) (en banc)), a Ninth Circuit decision interpreting California's law on equitable tolling, the Federal Circuit held that Landmark's claims against the defendant's were tolled because:
  • Landmark gave timely notice to the defendants by filing the state court action in 2005, less than a year after Kohler first mentioned any problem with the divisional application.
  • The defendants did not suffer prejudice in their ability to gather evidence and prepare a defense since they were on notice of all key facts underlying Landmark's claims from the beginning of the state court action.
  • Landmark acted reasonably and in good faith in filing the federal lawsuit after the state court dismissed its claims for lack of subject matter jurisdiction.

Damages

The Federal Circuit vacated the district court's decision limiting Landmark's potential recovery for damages. The Federal Circuit rejected the district court's reasoning that, because the claims lost in the rejected divisional application were captured by the broader reissue claims, Landmark's right to any damages related to the divisional claims must be cut off at the date of the reissue patent.
The Federal Circuit ruled that the district court erred in failing to appreciate that, while the pertinent reissue claims might in some respects be broader than their corresponding divisional claims, they were narrower in other respects. Therefore, the Federal Circuit vacated the district court's damages order, holding that the district court erred in ruling that Landmark could suffer no harm after the grant of the reissue patent because the court failed to fully compare the relative scopes of the reissue and divisional application claims.

Practical Implications

Lawyers and agents filing for divisional patents on behalf of their clients must take care to file these claims as soon as practicable after electing the claims of the parent application. Failure to do so could invite malpractice in rushing to file last minute applications to avoid a Section 102(b) statutory bar.

Court Documents