10-Cv-144 17_Schmirler MSJ Memo

IN THE UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

Dennis L. Schmirler Plaintiff, v. Hon. David J. Kappos, In his official capacity as Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office Defendant.

Case No. 10-cv-00144-LA

MEMORANDUM IN SUPPORT OF

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Case 2:10-cv-00144-LA Filed 03/31/11 Page 1 of 28 Document 17

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TABLE OF CONTENTS

Table of Authorities iii

Statement of Facts 1

Legal Standards 10

Argument 11

I. Mr. Schmirler has the right to protect his personal property interest. 11

A. Mr. Schmirler is a tenant in common with the right to protect. 12

B. Mr. Schmirler is the only known person that has legal rights to act in connection with the ‘374 Patent. 14

C. Public policy favors protection and use of patent rights. 15

D. Defendant’s logic is flawed. 16

II. The ‘374 Patent properly issued but the Office later erroneously withdrew it. 19

III. The Office did not have authority to refund the issue fee. 21

Conclusion 23


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TABLE OF AUTHORITIES

CASES

Acs Consultant Co. v. Care No. 08C0803 (E.D. Wis. 2011) 10 Blackledge v. Weir & Craig Mfg. 108 F. 71 (7th Cir. 1901) 13 Blacklight Power, Inc., v. Dickinson 109 F. Supp. 2d 44 (D.D.C. 2000) 20 Camp v. Pitts 411 U.S. 138 (1973) 10 Citizens to Preserve Overton Park, Inc. v. Volpe 401 U.S. 402 (1971) 10 Ethicon Inc. v. U.S. Surgical Corp. 135 F.3d 1456 (Fed. Cir. 1998) 12, 13, 16 In re Patent No. 4,793,265 1999 WL 34807445 (Comm’r Pat. 1999) 16 Kuenzi v. Leisten 271 N.W. 18 (Wis. 1937) 13 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co. 463 U.S. 29 (1983) 11 Sampson v. Dann 466 F. Supp. 965 (D.D.C. 1978) 19 Vose v. Singer 4 Allen 226 (Mass. 1862) 13

STATUTES 35 U.S.C. § 42(d) 21, 22 35 U.S.C. § 100 5, 11 35 U.S.C. §§ 116-118 15 35 U.S.C. § 151 7, 11, 19, 20, 21, 23 35 U.S.C. § 253 16 35 U.S.C. § 261 12 35 U.S.C. § 262 13 8 Del. C. § 278 14

ADMINISTRATIVE RULES 37 C.F.R. § 1.26(a) 21 37 C.F.R. § 1.26(b) 21


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ADMINISTRATIVE RULES (continued) 37 C.F.R. § 1.41(b) 11 37 C.F.R. § 1.42 18 37 C.F.R. § 1.110 12 37 C.F.R. § 1.175 12 37 C.F.R. § 1.251 12 37 C.F.R. § 1.313(b) 10, 19, 20, 21 37 C.F.R. § 1.366(a) 16

OTHER REFERENCES Oxford Dictionary of Phrase and Fable (2d ed. 2005) 18 Manual of Patent Examining Procedure (MPEP) § 509 19


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Now comes Plaintiff Dennis L. Schmirler, through his attorneys, Garet K.

Galster and Ryan Kromholz and Manion, S.C., and moves this Honorable Court,

pursuant to Fed. R. Civ. P. 56(a) and Civil L.R. 56 and Civil L.R. 7, to grant

summary judgment reinstating his patent, which was withdrawn from issuance by

the Defendant arbitrarily, capriciously, without discretion or otherwise not in

accordance with the law and the rules promulgated by Defendant.

Statement of Facts

This case involves a loss of patent rights caused by action of the United

States Patent and Trademark Office (“the Office”), which occurred after the

issuance of a United States patent, U.S. patent number 6,214,374 (the ‘374 Patent).

While the complained-of action occurred after the issuance of the ‘374 Patent, a

short explanation of its history may provide a helpful backdrop. In the discussion

that follows, this timeline of key patent prosecution dates will be constructed, with

specific attention focused on events D-G:

The ‘374 Patent issued from a nonprovisional U.S. patent application. The

nonprovisional U.S. patent application, serial number 08/652,280, listing Mr.


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Schmirler as inventor, was filed on 22 May 1996, by a first law firm—Pennie and

Edmonds. (See Administrative Record (the “Record”) (Dkt. 10) at A1-A88)

The prosecution of the application progressed generally normally at the

outset, including a preliminary amendment (id. at A89-A92), an information

disclosure statement (IDS) (id. at A93-A95), a restriction requirement (id., A96-

A104) and response thereto (id. at A105-A110), a supplemental IDS (id. at A111-

A112), a reformulated restriction requirement (id., A113-A125) and response

thereto (id. at A126-A131), and a first action on the merits (id. at A132-A138).

A change of attorney then occurred and the patent application was allowed.

As permissible under the rules governing representation of others before the Office

(37 C.F.R. §§ 10.1 et seq.), the firm of Pennie and Edmonds requested withdrawal

from representation before the office. (Record, A139-A148.) After Pennie and

Edmonds withdrew, a second prosecuting attorney, Mr. Arthur Gardner, timely

filed an extension of time (id. at A160), a CPA request (id. at A156-A157), and a

preliminary amendment (id. at A158-A160). On 12 July 1999, the Office issued a

Notice of Allowance and Issue Fee Due, setting a due date for 12 October 1999 for

the payment of the issue fee. (Id. at A161-A163.) This deadline was not extendable.

37 C.F.R. § 1.311(a).


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The issue fee, evidently, was not paid by the October 1999 deadline. On 30

December 1999, the Office issued a Notice of Abandonment for failure to pay the

issue fee. (Id. at A164.)

On 11 October 2000, the second named inventor, Mr. Edward M. Portman,

attempted to revive the application by filing a first Petition for Revival of an

Application for Patent Abandoned Unintentionally under 37 C.F.R. § 1.137(b). (Id.,

at A165-A180.) This petition authorized payment of the outstanding issue fee and

petition fee to Mr. Portman’s American Express credit card. (Record (as

supplemented by Dkt. 12) at Dkt. 12-1, 2.)


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The Office dismissed the first petition for failure to include signatures from all

inventors. (Record at A181-A184.) A second attempt was made by Mr. Portman, on

23 October 2000, to revive the application. (Id. at A185-A193.) This second attempt

again authorized payment of the outstanding issue fee and petition fee to Mr.

Portman’s American Express credit card. (Record (as supplemented by Dkt. 12) at

Dkt. 12-1, 3.)

Presumably due to the inventors’ difficulty in getting the application revived,

a third prosecution firm—Andrus, Sceales, Starke & Sawall, LLP (“Andrus”)—took

over the prosecution of the patent application. (Record at A208-A211.) On 17

November 2000, Andrus filed a Substitute Petition to Revive Pursuant to 37 CFR

1.137(b) (id. at A194-A203), and a request for reconsideration of the first petition

filed by Mr. Portman (id. at A204-A207). In the Substitute Petition, Andrus

explicitly indicated that the petition and issue fees were accepted by the U.S. Patent

Office. (Id. at A195.) Furthermore, Andrus asked that the Office “kindly charge any

additional fees under 37 CFR §§ 1.16, 1.17 and 1.18 incurred in connection with this

Petition and response” to a Deposit account. (Id.) In the request for reconsideration,


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Andrus again asserted that Petitions Examiner “indicated that the issue fee and the

petition fee to revive the application were received from the applicant by credit

card. Therefore, the applicant is now believed to have addressed all of the issues

identified by the Examiner such that the applicant’s Petition should be granted.”

(Id.)

After receiving the submissions from Andrus, the Office notified Applicants

that the recently submitted power of attorney had been accepted. (Id. at A212.)

Andrus then transmitted formal drawings in compliance with the requirement of

the 12 July 1999 Notice of Allowability. (Id. at A213-A224.) On 21 December 2000,

the Office granted the petition to revive the abandoned application. (Id. at A225-

A226.)

On 10 April 2001, pursuant to 35 U.S.C. § 100(d), since all fees had been paid

appropriately, all procedures had been followed and petition granted, the Office

correctly issued U.S. Pat. No. 6,214,374, thereby rendering Mr. Schmirler no longer

a patent applicant, but a patentee. (See Exhibit B to Complaint, Dkt. 1-5.)


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More than three weeks after the ‘374 Patent issued, American Express,

through the Card Support Services at the Mellon Client Service Center, informed

the Office that, on 27 April 2001, seventeen days after the ‘374 Patent properly

issued, a chargeback in the amount of $1,370.00 was debited from the Office in

connection with the subject file. (Record at A227.) Despite no refund request having

been filed with the Office, the Office did not dispute this chargeback, and the Office

failed to notify Mr. Schmirler or his attorney of record of same.

On 7 June 2004, more than three years after the grant of the patent, the

Office sent to the attorney of record a Notice of Unsettled Issue Fee Payment and of


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Withdrawal of Petition Decision – Patent may be Vacated. (Id. at A228-A233.)

While setting out the approximate timeline above, the Office indicated that

[o]n May 4, 2001, the Office received a communication from Card Support Services, Mellon Client Service Center, Room 154-0910, Pittsburgh, PA 15262, that a chargeback in the amount of $1370 was processed on April 27, 2001, for the credit card charge, including the issue fee payment received on October 12, 2000. Accompanying the communication of May 4, 2001, was an American Express ‘Service Establishment Claim Form,’ dated December 17, 2000, stating that the cardholder, Dr. Edward M. Portman, claimed that ‘this service was never rendered.’

(Id. at A229.) The Office continued on to admit that the disputed “services were

clearly rendered.” (Id.) Citing to 35 U.S.C. §151, the Office pointed out that the

grant of a patent is dependent upon the payment of the requested issue fee. (Id.)

According to the Office, however, “[s]ince the credit card charge for the issue fee was

disputed by applicant [sic, only one of three inventors], the issue fee was never paid,

and the Office’s publication on April 10, 2001, of a patent document purporting to be

a patent was in error.” (Id.) Thus, according to the Office, the grant of the petition

under 37 C.F.R. 1.137(b) to accept late payment of an unintentionally delayed issue

fee, which occurred more than four months prior to the erroneous refund, needed to

be withdrawn. (Id. at A230.) Unbeknownst to Mr. Schmirler, on 13 January 2005,

the Office vacated U.S. Patent 6,214,374, which issued on 10 April 2001. (Id. at

A234-A236.)


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In an attempt to protect his patent rights, Mr. Schmirler filed a petition on

16 October 2007, under 37 C.F.R. § 1.182, in the PTO requesting reinstatement of

the Patent. (See Exhibit C to Complaint, Dkt. 1-6) (the “Petition”). All required fees,

including issue fees and maintenance fees, were included with the Petition. (Id.)

After nearly six months, having received no response from the PTO and being

unable to verify whether the Petition was ever received by the Office of Petitions, a

copy of the Petition was hand delivered to the PTO on 11 April 2008. (See Exhibit D

to Complaint, Dkt. 1-7.) After another few weeks, having received no response from

the PTO and being unable to verify whether the Petition was ever received by the

Office of Petitions, a copy of the Petition was hand delivered directly to an Office of

Petitions attorney at the PTO on 28 April 2008. (See Exhibit E to Complaint, Dkt. 1-

8.) Additionally, on 5 September 2008, an executed power of attorney was sent to

the PTO. (See Exhibit F to Complaint, Dkt. 1-9.)

Nearly eleven months after the Petition was filed, on 11 September 2008, the

PTO sent a “Decision Returning Improper Papers” to the attorney of record, and to

the attorney that submitted the Rule 182 petition. (Record at A238-A245 (the


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“Decision”).) In the Decision, the PTO recognizes that the patent “applicant”

consisted of more than one person. (Id. at A240.) The PTO rejected the submitted

power of attorney as improper because it was not signed by all persons that formed

the applicant. (Id. at A240-A241.) The Decision invited a reply within a two-month

time period. (Id. at A244.)

On 4 November 2008, Mr. Schmirler replied to the PTO. (Id. at A246-A261

(the “Reply”).) In the Reply, Mr. Schmirler argued that he was not an “applicant”

but was rather a “patentee,” that the Rules (37 C.F.R. § 1 et seq.) do not provide

instructions on how to change power of attorney after issuance, and that Mr.

Schmirler, as patentee, had the right to unilaterally protect his patent rights. (Id. at

A247-A248.)

Nine months later, on 5 August 2009, the PTO issued its final agency action

related to the Petition. (Id. at A262-A282 (the “Final Action”).) In the Final Action,

the PTO “interpreted” the 4 November 2008 response as three separate petitions,

alleging that fees for such petitions (totaling $1,200.00) were authorized by Mr.

Schmirler’s statement in the Reply that “If any fees in addition to those already

provided, are required to reinstate the erroneously withdrawn patent, the Office is

hereby authorized to satisfy such requirement with funds from Deposit Account

Number 06-2360.” (Id. at A263 (emphasis added).) Such withdrawals were not used

“to reinstate” the Patent. (See id.) Also in the Final Action, the PTO denied all relief

sought by Mr. Schmirler in his Petition, (see id. at A271-A280), indicating that the


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Final Action was designated as final agency action under 5 U.S.C. § 704 (id. at

A281).

Mr. Schmirler then filed this action claiming that the withdrawal of the ‘374

Patent was contrary to 37 C.F.R. § 1.313(b), and subsequent denial of reinstatement

of the Patent constituted agency action that was arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law. Mr. Schmirler also claims that

any refund in this matter was made contrary to the Office rules governing refunds;

therefore, such refund constituted agency action that was arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law.

Legal Standards

“Summary judgment is required ‘if the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a

matter of law.’” Acs Consultant Co. v. Care, No. 08C0803, slip op. at 3 (E.D. Wis.

2011). Generally, in actions under the Administrative Procedure Act, there is no

genuine dispute as to any material fact because “the focal point for judicial review

should be the administrative record already in existence[.]” Camp v. Pitts, 411 U.S.

138, 142 (1973). In all cases brought under the Administrative Procedure Act,

“agency action must be set aside if the action was arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law[.]” Citizens to Preserve Overton

Park, Inc. v. Volpe, 401 U.S. 402, 414 (1971). Agency action is

arbitrary and capricious if the agency has relied on [unintended considerations], entirely failed to consider an important aspect of


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the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

See Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983).

For the following reasons, the Office’s action in this case was arbitrary and

capricious, at least because the Office offered an explanation for its decision that

runs counter to the evidence before the agency, or is so implausible that it could not

be ascribed to a difference in view or the product of agency expertise. Furthermore,

the Office’s action was not in accord with the law, namely 35 U.S.C. § 151.

Argument

I. Mr. Schmirler has the right to protect his personal property interest.

As an initial note, the rules promulgated by Defendant (at least 37 C.F.R.

Part 1) do not provide guidance for changes to powers of attorney after issuance of a

patent, and Mr. Schmirler, as patentee and owner of an undivided interest in an

issued patent, has the unilateral right to protect such interest. There is a

distinction between a patent applicant and a patentee. “Unless the contrary is

indicated the word ‘applicant’ when used in [the Rules] refers to the inventor or

joint inventors who are applying for a patent[.]” 37 C.F.R. § 1.41(b) (July 1, 2009)

(emphasis added). On the other hand, the term “patentee” refers to the person to

whom the patent was issued and his or her successors in interest. 35 U.S.C. § 100

(2010). Even the Office, in its own Rules, makes a clear distinction between an


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“applicant” and a “patentee.” See 37 C.F.R. § 1.110 (stating “the Patent and

Trademark Office . . . may require an applicant, patentee, or owner to identify the

inventive entity of the subject matter of each claim in the application or patent.”)

(emphasis added); see also id. at §§ 1.175 & 1.251 (both sections using the terms

“applicant” and “patentee” to deliberately distinguish status). Accordingly, the

Rules do not provide procedures to change powers of attorney after patent issuance,

which event creates a property interest in each patentee. The Office’s refusal to

consider Mr. Schmirler’s petition filed under 37 C.F.R. § 1.182 constituted agency

action that was arbitrary, capricious, an abuse of discretion, or otherwise not in

accordance with law.

A. Mr. Schmirler is a tenant in common with the right to protect.

“Subject to the provisions of [U.S.C. Title 35], patents shall have the

attributes of personal property.” 35 U.S.C. § 261, 1st Paragraph. “Questions of

patent ownership are distinct from questions of inventorship.” Ethicon Inc. v. U.S.

Surgical Corp., 135 F.3d 1456, 1465 (Fed. Cir. 1998). Indeed, “each co-inventor

presumptively owns a pro rata undivided interest in the entire patent, no matter

what [his or her] respective contribution[.]” Id. “[A] co-inventor as to even one

claim enjoys a presumption of ownership in the entire patent . . . [; t]hus, where

inventors choose to cooperate in the inventive process, their joint inventions may

become joint property without some express agreement to the contrary.” Id. at

1466. Therefore, at the moment a patent issues, “applicants,” “inventors,” or their


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respective assigns become joint owners of personal property—patentees—each

having an undivided interest in and to that property.

The most analogous relationship to patentee co-ownership is a tenancy in

common. See Blackledge v. Weir & Craig Mfg., 108 F. 71 (7th Cir. 1901) (citing

Vose v. Singer, 4 Allen 226 (Mass. 1862)). It has long been held that the co-owners

of a patent do not have “any right to control the action of the other [co-owners, nor]

to exercise any supervision over them.” Vose at 232. Unlike a conventional tenancy

in common, however, the default rule is that joint patentees do not have a duty of

accounting to each other. 35 U.S.C. § 262. Just like co-owners have a “freedom to

exploit the patent without a duty to account to other co-owners,” Ethicon Inc. at

1468, it is a fundamental principle of property law that tenants in common have the

right to take unilateral action, without requiring permission of any other tenant, to

protect the common property, see Kuenzi v. Leisten, 271 N.W. 18 (Wis. 1937).

In this case, the ‘374 Patent correctly issued on 10 April 2001. (See Exhibit B

to Complaint, Dkt. 1-5.) Therefore, as of that date, Mr. Schmirler became a

patentee, a joint owner of that patent, in addition to being one of its inventors. As a

joint owner, Mr. Schmirler is not required to seek permission from any other owner

of the patent to exploit his patent rights. See 35 U.S.C. § 262. Likewise, Mr.

Schmirler is not required, by well accepted property law, to obtain permission from

any other owner of the patent to protect his personal property interest therein. As

such, the petition as submitted to the Office in October 2007, was proper. The

petition should have been considered on its merits and granted.


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B. Mr. Schmirler is the only known person that has legal rights to act in connection with the ‘374 Patent.

Under Delaware law, a corporation may exist for three years after dissolution

to “enabl[e it] gradually to settle and close [its] business, to dispose of and convey

[its] property, to discharge [its] liabilities and to distribute to [its] stockholders any

remaining assets, but not for the purpose of continuing the business for which [it]

was organized.” 8 Del. C. § 278.

In this case, the Office asserts that “the ‘applicant’ is comprised of three joint

inventors.” (Record at A240.) Assuming, arguendo, that a power of attorney after

issuance is required to be signed by the “applicant,” the Office is incorrect. The

erroneously withdrawn patent, U.S. Patent 6,214,374, included three inventors:

Dennis L. Schmirler, who is the present petitioner, Edward M. Portman, and

Michael S. Christenson. All interests of inventors Edward M. Portman and Michael

S. Christenson were assigned to a company called Diversified Pharmaceuticals, Inc.

(DPI), a Delaware corporation purportedly having an office in Atlanta, Georgia.

(See Record at A253-A255.) Mr. Schmirler never assigned his rights and retains an

undivided interest in the patent. However, DPI ceased to exist, at the latest, in

2003. (Id. at A252) (indicating corporate status of DPI as “Void” and status date of

03/01/2000). Therefore, it was impossible to obtain a signature on behalf of the only

other real party in interest, the only other patentee, the sole assignee of the entire

interests of the other two inventors, DPI. Indeed, even if it were possible to track

down persons who once served as representatives of DPI, DPI does not exist as a

legal person, and has not so existed for more than eight years (and has been void for


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more than eleven years); therefore, a signature on its behalf could have no legal

effect. As a result, Mr. Schmirler is the only person that is capable of acting in this

matter to revive the correctly issued and erroneously withdrawn ‘374 Patent. Mr.

Schmirler executed a power of attorney authorizing the undersigned to act on his

behalf. (Exhibit H to Complaint, Dkt. 1-11 at 19.) Even though it was a long shot,

Mr. Schmirler even attempted contact with DPI, the nonexistent corporation, and

the attempted communication was predictably returned as undeliverable. (Record

at A256-A261.) For these reasons, the petition submitted to the Office, on behalf of

the only known person that can submit such documentation, should have been

considered on its merits and granted.

C. Public policy favors protection and use of patent rights.

Where a patent is owned by more than one person, unilateral action by any

one such patentee to preserve patent rights should trump any undocumented

unilateral action by any other joint inventor prior to patent issuance, where such

purported inventor action results in the destruction of patent rights.

The laws and rules surrounding U.S. patents are rife with examples

defaulting to, or at least favoring, the protection and use, as opposed to the

destruction, of patent rights. As an example of the protection of patent rights, a

joint inventor may file a patent application, thus protecting his or her rights, even if

the other joint inventor(s) refuse to join in the filing of the application or cannot be

found. 35 U.S.C. §§ 116-118. In addition to filing, another example of the


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protection of patent rights as between joint inventors after a patent is issued is the

limitation of statutory disclaimers in patent rights to only the extent of a joint

inventor’s interest. 35 U.S.C. § 253, 1st paragraph. Yet another example of

demonstrated policy to protect patent rights after issuance is that anyone, even

without authorization of a patentee, may pay maintenance fees. 37 C.F.R. §

1.366(a); In re Patent No. 4,793,265, 1999 WL 34807445, *5 (Comm’r Pat. 1999)

(stating “while a patent remains in force, any person may pay a maintenance fee

without the approval of the patent holder”). Additionally, as already discussed

above, the use of patent rights is encouraged by allowing a joint patent owner to,

unilaterally and without accounting to any other owner, exploit the patent rights.

Ethicon Inc., 135 F.3d at 1468. Accordingly, this Court should reflect the

penumbras and emanations of the protection of patent rights found throughout U.S.

patent laws and related regulations and hold that Mr. Schmirler has the right to

protect his property interest in the ‘374 Patent.

D. Defendant’s logic is flawed.

Defendant mechanistically attempts to apply rules not drafted with the

present situation in mind. Generally, Defendant asserts that Mr. Schmirler is not

an “applicant” because he is only one of three inventors. If Mr. Schmirler is not a

“patentee,” thus conveying the right to protect his property as discussed above, the

complained-of agency action in this case caused such change in status. It is

implausible that wrongful agency action could change a person’s status from Status


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A (Mr. Schmirler as “patentee”) to Status B (Mr. Schmirler as “inventor”) and then

the agency could rely on such post-action status, Status B, to deny review of such

wrongful agency action. The logic of this reasoning is flawed. In effect, the Office is

indicating that Mr. Schmirler cannot request a review of agency action because of

his post-action status, which was caused by the very agency action to be reviewed.

Even if Defendant can refuse, on the basis of a person’s post-action status,

caused by the very complained-of agency action, Defendant’s reasoning is flawed

because it is based on nonexistent evidence and competing definitions of the term

“applicant.” Defendant asserts that “the credit card charge for the issue fee was

disputed by applicant[.]” (Record at A236.) Such assertion plays fast and loose with

the administrative record for two reasons: first, the characterization of the fee as

“disputed” has no evidentiary basis; second, the Office appears to rely on two

different definitions of the word “applicant.” First, with regards to the

characterization of the issue fee as “disputed,” there is zero evidence on the

administrative record that Mr. Portman ever disputed fees or requested a refund of

fees paid. (See Record.) Mr. Portman never requested a refund from the Office.

(Id.) Indeed, the only evidence in the record related to fees and tied directly to Mr.

Portman is the payment authorization form, (Record (as supplemented by Dkt. 12)

at Dkt. 12-1, 2), and an unequivocal determination to bring the patent to issuance

(Record at A166 (Mr. Portman stating “Clearly, I am prepared to pay any additional

fees that would be required for the continued prosecution and issuance of this

patent”).) The only documentation regarding the chargeback of the issue fee in


18

question is documentation from a third party payment intermediary. (Id. at A227.)

However, there is no evidence that Mr. Portman even initiated such process. (See

Record.)

Second, even to the extent that a fee was disputed, it certainly was not

disputed by the “applicant,” as that term was used by Defendant in the Final

Action. In fact, Defendant’s definition of a patent “applicant” is duplicitous. That

is, for its purpose in the Final Action of refusing to consider Mr. Schmirler’s

petition, the Office relies on the assertion that, even after patent issuance and

subsequent withdrawal, the “applicant” must consist of more than a single inventor.

(Record at A271-A281.) Conversely, however, to justify its prior action withdrawing

the patent from issue, the Office apparently viewed action by a single inventor to be

action by the “applicant.” (Record at A236.) Adapted from the well-known 16th

century phrase, Defendant cannot have his cake and eat it too. See Oxford

Dictionary of Phrase and Fable, 321-22 (2d ed. 2005). Defendant should not be

allowed to manipulate the definition of “applicant” in a manner that self-

preferentially suits a given situation. Based on Defendant’s statements, the

definition of “applicant” consists of either (1) all three inventors/assigns, in accord

with 37 C.F.R. § 1.42, and as asserted by the Office in its Final Action (Record at

A271-A281); or (2) any one of the inventors/assigns, as also asserted by the Office

(Record at A236). If the former definition applies, the Office’s action with respect to

the refund and subsequent withdrawal was arbitrary, capricious, without discretion

or otherwise not in accordance with the law. If the latter definition applies, though


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not necessarily rendering proper the refund and subsequent withdrawal, the

Office’s refusal to address Mr. Schmirler’s petition on the merits was arbitrary,

capricious, without discretion or otherwise not in accordance with the law.

II. The ‘374 Patent properly issued but the Office later erroneously withdrew it. Upon payment of the sum specified in a written notice of allowance, a patent

“shall” issue. 35 U.S.C. § 151. Indeed, the Office recognizes, in its own rules, that

only exceptional circumstances will prevent the grant of a patent once an issue fee

has been paid:

[o]nce the issue fee has been paid, the Office will not withdraw the application from issue at its own initiative for any reason except: (1) A mistake on the part of the Office; (2) A violation of [37 C.F.R.] § 1.56 or illegality in the application; (3) Unpatentability of one or more claims; or (4) For interference.

37 C.F.R. § 1.313(b). To fall under the first exception, which is the only arguably

applicable exception in this case, a mistake on the part of the Office must be a

mistake made in the issuance of the patent, such as a failure on the part of the

Office to comply with a Supreme Court decision. See Sampson v. Dann, 466 F.

Supp. 965, 975 (D.D.C. 1978). Effective 5 June 2000, payment of an issue fee could

be made by credit card. 37 C.F.R. § 1.23; see also Manual of Patent Examining

Procedure (MPEP) § 509 (8th ed.) located at

http://www.uspto.gov/web/offices/pac/mpep/documents/0500_509.htm#sect509. A

payment to the Office made by credit card is deemed paid when the fee is actually

collected. MPEP § 509. While the Office’s interpretation of § 151 and the rules, 37


20

CFR part 1, is entitled to Chevron deference, see Blacklight Power, Inc., v.

Dickinson, 109 F. Supp. 2d 44, 47-50 (D.D.C. 2000), Applicants have not found any

authority which would extend the Office’s power to enable the withdrawal of a

validly granted patent, much less where withdrawal occurred more than three years

after issuance, effected by the purported dismissal of a previously granted petition

after an unrequested, unauthorized refund.

In this case, the issue fee was paid on 13 October 2000, (Record at A229, n.1);

therefore, a patent was to issue, 35 U.S.C. § 151, absent an exceptional

circumstance, 37 C.F.R. § 1.313(b). Of the four exceptions listed in 37 C.F.R. §

1.313(b), the only exception remotely related to the present situation, if any, is the

first exception; a mistake on the part of the Office. However, the Office did not

make a mistake in this case. The ‘374 Patent was properly granted (see Exhibit B

to Complaint, Dkt. 1-5) by the Office in accord with statutory and regulatory

prescriptions because, as of the petition grant date, 21 December 2000, and the

issue date, 10 April 2001, the issue fee requested by the Notice of Allowance was

paid and in possession of the Office. (Record at A229, n.1) Unlike the withdrawals

in Sampson and Blacklight, which occurred prior to the grant of the respective

patents, the withdrawal here occurred after the grant of the patent. The

withdrawal in this case had no statutory or regulatory basis, and is contrary to 35

U.S.C. § 151 and 37 C.F.R. § 313(b).

Therefore, the Office’s dismissal of a previously properly granted petition

which effected an erroneous withdrawal from issue constitutes agency action that


21

was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance

with law.

III. The Office did not have authority to refund the issue fee.

“The Director may refund any fee paid by mistake or in excess of that

required.” 35 U.S.C. § 42(d). Even a change of purpose on the part of the payer

does not entitle a party to a refund for such fee. 37 C.F.R. § 1.26(a). A party must

request a refund from the Office. See 37 C.F.R. § 1.26(b). A request for refund may

be denied by the Office, see 37 C.F.R. § 1.26(a); therefore, a request for refund made

to the Office does not and cannot automatically effect a withdrawal of the payment

of the requested fee.

In this case, a refund was never requested from the Office, and American

Express—a third party payment intermediary—apparently unilaterally withdrew

payment, contrary to the Rules. The Office appears to be of the opinion that the fee

was not properly paid at the time the Rule 137 petition was granted. (Record at

A229.) It is the Office’s contention that a request from a patent Applicant to a

payment intermediary for a return of fees already paid to the Office is tantamount

to a nonpayment of fees to the Office. (Id. at A236) First, there is no evidence that

any such request was made by Mr. Portman; second, such opinion is unsupportable.

American Express, as a credit account holder to Mr. Portman, was in the position of

a payment intermediary to the Office. Payment was received by the Office on 13

October 2000. (Id. at A229, n.1.) Therefore, the issue fee was properly paid.


22

Furthermore, there was no request for a refund of that fee, from either Mr. Portman

or American Express. (See Record.) Even if the Office considers that a request on

the part of Mr. Portman to American Express, if there was one, equated to a request

for refund from the Office, there is no basis for granting the request, since the fee

was not one paid by mistake or in excess of that required, which are the only

situations in which the Director is statutorily authorized to provide a refund. 35

U.S.C. § 42(d). Indeed, upon receiving the purported chargeback notification from

American Express, (Record at A227), the Office should have disputed the

withdrawal of payment by American Express because the Office admits to having

rendered the services (Record at A229 stating “Given the above record, services

were clearly rendered.”). If the unilateral chargeback by American Express was

allowed under any extant contract between the Office and American Express, such

contract should be deemed contrary to the Office’s rules.

Therefore, since a request by an applicant to a payment intermediary to

refund fees is not a proper request for refund under the Rules, it is not tantamount

to a nonpayment of fees to the Office, and a refund of such fees is not authorized,

the dismissal of a petition previously granted for such nonpayment of fees

constitutes agency action that was arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.


23

Conclusion

For the foregoing reasons, Mr. Schmirler respectfully requests that this Court

hold that the Office’s action in connection with the refund of the paid issue fee, the

withdrawal of the ‘374 Patent from issue, and/or the Office’s failure to consider Mr.

Schmirler’s petition filed with the Office, individually or collectively, constituted

agency action that was arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law. As a result, Mr. Schmirler requests the Court to issue

an order compelling the Office to accept late payment of the issue fee, which

acceptance is authorized under 35 U.S.C. § 151, which would reinstate U.S. Patent

6,214,374 on U.S. Patent Application Serial Number 08/652,280, having a filing

date of 22 May 1996 and an issue date of 10 April 2001, subject to the payment of

all fees, if any, due to the PTO. Additionally, Mr. Schmirler requests that the Court

grant any such other and further relief as may be just and equitable.

Respectfully submitted,

Date: 31 March 2011 Ryan Kromholz & Manion, S.C. By: s/Garet K. Galster Joseph A. Kromholz (State Bar No. 1002464) [email protected] Garet K. Galster (State Bar No. 1056772) [email protected] RYAN KROMHOLZ & MANION, S.C. P. O. Box 26618 Milwaukee, Wisconsin 53226-0618 Attorneys for Plaintiff


24

CERTIFICATE OF SERVICE

I hereby certify that I have this day caused copies of the forgoing document to be

served on the parties and counsel of record noted below by Court email and First

Class Mail:

By First Class Mail:

Frances M Lynch United States Patent & Trademark Office

PO Box 15667 Arlington, VA 22215

Thomas W Krause

United States Patent & Trademark Office PO Box 15667

Arlington, VA 22215

By Court Email:

Matthew V Richmond United States Department of Justice (ED-WI)

Office of the US Attorney 517 E Wisconsin Ave - Room 530

Milwaukee, WI 53202

Christian R Larsen United States Department of Justice (ED-WI)

Office of the US Attorney 517 E Wisconsin Ave - Rm 530

Milwaukee, WI 53202

Date: 31 March 2011 s/Peggy Pechulis Peggy Pechulis


Documents

10-Cv-144 17_Schmirler MSJ Memo