Ulead Systems, Inc. v. Lex Computer & Management Corp.Ulead Systems, Inc. v. Lex Computer & Management Corp.
William J. Brutocao, Sheldon & Mak, of Pasadena, California, argued for defendant/cross claimant-appellant. With him on the brief was Jeffrey G. Sheldon.
Before NEWMAN, DYK and PROST, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK. Concurring in part and dissenting in part opinion filed by Judge NEWMAN.
DYK, Circuit Judge.
Lex Computer & Management Corp. (“Lex“) appeals the decision of the United States District Court for the Central District of California, granting summary judgment that United States Patent No. 4,538,188 (“the ‘188 patent“) is unenforceable and expired because Lex falsely claimed status (and paid maintenance fees) as a small entity. Lex also appeals the district court‘s award of attorneys’ fees under
We conclude that summary judgment of inequitable conduct was improper because a genuine dispute of material fact remains as to Lex‘s intent to deceive. We also hold that the erroneous payment of small entity fees may be excused under
In 1980, Congress amended the patent laws to require for the first time the payment of periodic maintenance fees to maintain the life of a patent.
The PTO rules define a “small entity” as a small business concern, independent inventor, or non-profit organization.
a small business concern for purposes of paying reduced fees ... to the Patent and Trademark Office means any business concern (1) whose number of employees, including those of its affiliates, does not exceed 500 persons and (2) which has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey or license, any rights in the invention to any person who could not be classified as an independent inventor if that person had made the invention, or to any concern which would not qualify as a small business concern or a nonprofit organization under this section.
In the present case, it is undisputed that Lex has never had more than twenty employees and qualified as a small entity when it acquired the ‘188 patent by assignment on May 21, 1986. Lex properly paid the first maintenance fee on the ‘188 patent at the reduced rate in 1988. However, on February 15, 1993, Lex granted a nonexclusive license to Adobe Systems Incorporated (“Adobe“), a company with more than 500 employees, and later granted non-exclusive licenses to at least two more large entities.
It is undisputed that the grant of the Adobe license and the other licenses to large entities disqualified Lex from claiming small entity status and paying reduced fees. It is also undisputed that on November 1, 1993, Lex submitted the second maintenance fee for the ‘188 patent to the PTO along with a petition to accept delayed payment and a verified statement claiming small entity status. The verified statement stated: “no rights to the invention are held by any person ... who could not qualify as a small business concern under
Lex opposed summary judgment on the ground that it did not intend to mislead the PTO to believe it was entitled to small entity status. Lex also argued that the ‘188 patent was not expired because the PTO had properly excused its erroneous claim to small entity status (and underpayment of fees) under
Based upon its conclusion that Ulead had proven, by clear and convincing evidence, that Lex was guilty of inequitable conduct and bad faith, the district court held this to be exceptional case under
Lex timely appealed. Ulead timely cross-appealed. We have jurisdiction under
“Summary judgment is proper in a case where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” DH Tech., Inc. v. Synergystex Int‘l, Inc., 154 F.3d 1333, 1339 (Fed.Cir.1998). We review a district court‘s grant of summary judgment without deference. Dayco Prods., Inc. v. Total Containment, Inc., 329 F.3d 1358, 1362 (Fed.Cir.2003).
I
This case presents significant questions concerning the standards for rendering patents unenforceable for misconduct before the PTO in connection with claims of small entity status.
Under our precedent, inequitable conduct rendering a patent unenforceable arises when there is “evidence of affirmative misrepresentation of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive.” Dayco, 329 F.3d at 1362 (quoting Purdue Pharma L.P. v. Boehringer Ingelheim GMBH, 237 F.3d 1359, 1366 (Fed.Cir.2001)); see also Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 872 (Fed.Cir.1988). After threshold findings of materiality and intent have been established by clear and convincing evidence, the court must weigh them to determine if equity warrants a finding of inequitable conduct. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1178 (Fed.Cir.1995). Thus, “inequitable conduct is a broader, more inclusive concept than ... common law fraud.” Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1069 (Fed.Cir.1998).
A finding of ... fraud requires higher threshold showings of both intent and materiality than does a finding of inequitable conduct. Moreover, unlike a finding of inequitable conduct, a finding of ... fraud may not be based upon an equitable balancing of lesser degrees of materiality and intent. Rather, it must be based on independent and clear evidence of deceptive intent together with a clear showing of reliance.
Id. at 1070-71 (citation omitted). Historically issues of unenforceability have arisen in cases involving inequitable conduct occurring in the prosecution of patents. See, e.g., Purdue, 237 F.3d 1359; Kingsdown, 863 F.2d 867. But, we see no reason why the doctrine should not extend into other contexts, like the present one, where the allegation is that inequitable conduct has occurred after the patent has issued and during the course of establishing and paying the appropriate maintenance fee. In this context, it is equally important that the PTO receive accurate information from those who practice before it.
II
However, at the outset, we must determine whether the applicable PTO rule was designed to establish a different standard than our traditional standard for inequitable conduct. We conclude that it was not, and thus, do not need to decide whether our standard or the standard in the PTO rule should prevail in the event of a conflict. See Dayco, 329 F.3d at 1364.
From the origin of the small entity system, the PTO has been concerned that small entity status might be abused by unqualified entities. Its initial regulations addressed this problem, warning that:
(d)(1) Any attempt to fraudulently (i) establish status as a small entity or (ii) pay fees as a small entity shall be considered as a fraud practiced or attempted on the Office.
(2) Improperly and through gross negligence (i) establishing status as a small entity or (ii) paying fees as a small entity shall be considered as a fraud practiced or attempted on the Office. See §§ 1.56(d) and 1.555 of this part.
As originally drafted, the PTO standard was plainly not the same as the standard we have adopted for inequitable conduct. In particular, the rule stated that “gross negligence” would amount to “a fraud practiced ... on the Office.”
However, the PTO amended its rule in 1992, and the conduct at issue in this case occurred after the amendment. The rule was amended to delete the references to gross negligence and read as follows:
(d)(1) Any attempt to fraudulently (i) establish status as a small entity or (ii) pay fees as a small entity shall be considered as a fraud practiced or attempted on the Office.
(2) Improperly and with intent to deceive
(i) establishing status as a small entity, or
(ii) paying fees as a small entity shall be considered as a fraud practiced or attempted on the Office.
Proposed § 1.28(d)(2) retains the reference to fraud practiced or attempted on the Office, but removes any reference to sections which currently provide for rejections based on fraud. Further, the reference to “gross negligence” is proposed to be replaced by references to “intent to deceive” to reflect binding precedent of the U.S. Court of Appeals for the Federal Circuit. See, e.g., Kingsdown Medical Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 9 USPQ 2d 1384 (Fed.Cir.1988) (en banc). 56 Fed. Reg. 37,321, 37,323 (Aug. 6, 1991).
As noted above, Kingsdown discarded the notion that gross negligence alone satisfies the intent to deceive threshold for inequitable conduct. 863 F.2d at 876 (en banc in relevant part); see also Baxter Int‘l, Inc. v. McGaw, Inc., 149 F.3d 1321, 1329 (Fed. Cir.1998); Halliburton Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1439 n. 3 (Fed.Cir.1991). Thus, the PTO‘s amendment removed any inconsistencies with our inequitable conduct precedent. We hold that our traditional standard for inequitable conduct is applicable to PTO proceedings involving the payment of maintenance fees as a small entity-and that a threshold determination of both materiality and intent and a balancing of the two are required. The burden is on the party asserting inequitable conduct to establish it by “clear and convincing evidence.” Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., 326 F.3d 1226, 1233 (Fed.Cir. 2003).
III
There is no serious question here as to materiality, as the district court found. In its reply brief, Lex challenges Ulead‘s argument that the false declaration of small entity status was material, arguing that Lex‘s misrepresentation had “no bearing on patentability.” (Def.-Appellant Reply Br. at 11.) While Lex is correct that the affidavit did not induce issuance of the patent, the misrepresentation that Lex qualified as a small entity was material to the PTO‘s acceptance of reduced maintenance fees, and thus, survival of the patent. As such, at least a threshold level of materiality has been established as a matter of law. See Gen. Electro Music Corp. v. Samick Music Corp., 19 F.3d 1405, 1411 (Fed.Cir.1994) (“[T]here is no room to argue that submission of false affidavits is not material.“) (quoting Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1561 (Fed.Cir. 1983));
There are, however, genuine issues of material fact as to intent. “To satisfy the intent to deceive element of inequitable conduct, ‘the involved conduct, viewed in light of all the evidence, including evidence of good faith, must indicate sufficient culpability to require a finding of intent to deceive.‘” Paragon, 984 F.2d at 1189 (quoting Kingsdown, 863 F.2d at 876 (en banc in relevant part)). Direct evidence of deceptive intent is not required; rather it is usually inferred from the patentee‘s overall conduct. Id. at 1189-90. Although inequitable conduct is a matter for the court, rather than the jury to resolve, summary judgment is inappropriate if there are genuine issues of material fact. Id. at 1190.
Lex admits that it was not entitled to small entity status when it filed its affidavit of small entity status and paid reduced fees in 1993 and 1997. But, it claims that these were innocent errors and that it was grossly negligent at worst, and that it did not have an intent to deceive. To support this argument, Lex cites the deposition of its president, Mr. Haberman, who testified that he was unaware that Lex was not a small entity when he signed the 1993 verified statement claiming small entity status (the “1993 declaration“). Lex also refers to the declaration of its patent counsel, Mr. Weiner, who stated that although he was aware of the PTO rule in question, he was unaware of the existence of the licenses that caused the loss of small entity status. Ulead I, 130 F.Supp.2d at 1145-46. Ulead argues that Lex remained intentionally ignorant of the law and that Lex‘s false statements to the PTO support an inference of intent to deceive. The district court agreed with Ulead; it rejected the testimony offered by Lex as “self-serving and inconsistent with the documentary evidence,” and it found that the circumstantial evidence was sufficient to establish intent on summary judgment. Id. at 1146. We conclude that the evidence before the district court raises genuine issues on the question of intent.
A. Haberman‘s Testimony
Mr. Haberman testified that, while he was aware of the language of the declaration, he was not aware that a non-exclusive license to a large entity would result in a loss of the licensor‘s small entity status. Mr. Haberman is a lawyer. The district court relied on the fact that Haberman, while primarily a real estate lawyer, had taken patent law review courses and twice sat unsuccessfully for the patent bar examination, and on the language of the 1993 declaration, along with Haberman‘s admission that Lex‘s licensees had “rights” in the ‘188 patent, to discredit this testimony. Id. at 1145. However, there was no evidence that Haberman had studied the law concerning small entity status or the language of the regulation itself prior to signing the 1993 declaration.
Moreover, the language of the form declaration itself does not unambiguously notify the reader that granting a non-exclusive license to a large entity will result in forfeiture of small entity status. The 1993 declaration stated:
If the rights held by the above identified small business concern are not exclusive, each individual, concern or organization having rights to the invention is listed below and no rights to the invention are held by any person ... who could not qualify as a small business concern under
37 CFR 1.9(d) .4
(App. at 523 (footnote omitted).) The 1993 declaration refers to “rights to the invention,” but unlike the regulations does not refer to licensing. See
Mr. Haberman‘s testimony is consistent with this interpretation of the 1993 declaration. Haberman testified that the language of the affidavit required disclosure of any other entities with ownership rights in the ‘188 patent, but not non-exclusive licensees who only had rights to use the invention. Haberman‘s testimony that he was unaware that a non-exclusive license could result in forfeiture of small entity status, in light of the ambiguous language of the form declaration, is sufficient to create a genuine issue as to Lex‘s intent.
B. Weiner‘s Declaration
Lex‘s patent counsel, Mr. Weiner, also testified that he did not intend to deceive the PTO. (App. at 1646.) Lex admits that Weiner understood the law. However, it argues that Weiner was unaware, until after Ulead raised the issue in this case, that Lex had entered into any licenses with companies having more than 500 employees. Id. In his declaration, Mr. Weiner explained that he did not directly represent Lex in acquiring any of its licenses and, as a result, was unaware that Lex had finalized license agreements with any companies having more than 500 employees. (App. at 1644.) The district court discounted this declaration because of Weiner‘s statement that he had “checked” the small entity status and it was still in effect. Ulead I, 130 F.Supp.2d at 1146. The court found that “either Mr. Weiner did not ask the right questions or he was not provided the right answers.” Id. But this assessment is more telling of negligence then any actual intent to deceive. If Mr. Weiner was truly ignorant of the facts, as his declaration states, then his testimony raises a genuine issue for trial.
On summary judgment “[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); see also Stark v. Advanced Magnetics, Inc., 29 F.3d 1570, 1575-76 (Fed.Cir.1994). The district court did not do that here. Mr. Haberman and Mr. Weiner‘s testimony that they were unaware of Lex‘s loss of small entity status creates an issue of fact. Their testimony is not merely conclusory. Moreover, it is supported by the fact that the amount of money Lex saved by paying maintenance fees as a small entity was relatively miniscule in comparison to the value of the ‘188 patent.5 The mere fact that no action to correct the mistake was taken prior to the commencement of this litigation is simply beside the point if Lex was previously unaware of the mistake. The existence of gross negligence might be inferred from the undisputed facts, but as the district court recognized, gross negligence is not, in and of itself, sufficient to satisfy the intent element of inequitable conduct.6 E.g. Ulead I, 130 F.Supp.2d at 1144; Baxter, 149 F.3d at 1329; Kingsdown, 863 F.2d at 876 (en banc in relevant part). In a particular case, the question of whether an inference of actual intent can be supported by evidence of gross negligence and other evidence can only be determined after a hearing at which the credibility of the witnesses is assessed. A trial on the issue of intent is required, and if a threshold level is found, the district court must balance materiality and intent to determine if Lex has committed inequitable conduct.
IV
The district court in this case granted summary judgment on the alternate ground that the ‘188 patent expired for failure to pay maintenance fees. It reasoned that
In DH Technology, we held that the statute and regulations barring reinstatement of a patent for failure to timely pay issuance fees within the allowed grace period do not apply to underpayments resulting from erroneous claims of small entity status. 154 F.3d at 1342. Rather, we held that when a party inaccurately claims small entity status, the question of whether a patent has expired for failure to pay the full issuance fee is exclusively governed by
However, we conclude that
If status as a small entity is established in good faith, and fees as a small entity are paid in good faith, in any application or patent, and it is later discovered that such status as a small entity was established in error, or that through error the Office was not notified of a loss of entitlement to small entity status as required by 1.27(g)(2), the error will be excused upon: compliance with the separate submission and itemization requirements of paragraphs (c)(1) and (c)(2) of this section, and the deficiency payment requirement of paragraph (c)(2) of this section.
To be sure, if the patentee makes a request to correct incorrect payment of fees as a small entity knowing that it does not satisfy the good faith error standard of
CONCLUSION
For the foregoing reasons, we vacate the district court‘s grant of summary judgment of unenforceability, invalidity and/or expiration of the ‘188 patent because there are genuine issues of material fact remaining as to intent.8 We remand for further consideration of the issue of inequitable conduct and the remaining issues of invalidty and infringement. Having vacated on the merits, we also vacate the district court‘s finding of exceptional case and award of attorneys’ fees. On the cross-appeal, we affirm the district court‘s denial of sanctions for failure to conduct a pre-filing investigation. Ulead agrees that, in this case, sanctions cannot be imposed under
VACATED AND REMANDED.
COSTS
No costs.
Notes
PAULINE NEWMAN, Circuit Judge, concurring in part, dissenting in part.
I write to state my concerned objection to the court‘s conversion of the regulatory criterion of “fraud” into the rejected substitute “inequitable conduct.” The underpayment of a fee is not a matter of “inequitable conduct” in obtaining a patent to which one is not entitled, with the penalty of permanent loss of the wrongfully obtained patent. The regulation herein is explicit in requiring the more rigorous proof of “fraud” in establishing a false claim of entitlement to reduced fees. My colleagues on this panel now change this criterion to the more readily met “inequitable conduct,” negating the regulations and ignoring the deference appropriate to the PTO Director‘s administration. As the panel majority recognizes, “inequitable conduct is a broader, more inclusive concept than ... common law fraud.” Maj. op. at 1144. The difference between these causes was explained in Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059 (Fed.Cir.1998):
A finding of Walker Process fraud requires higher threshold showings of both intent and materiality than does a finding of inequitable conduct. Moreover, unlike a finding of inequitable conduct, a finding of Walker Process fraud may not be based upon an equitable balancing of lesser degrees of materiality and intent. Rather, it must be based on independent and clear evidence of deceptive intent together with a clear showing of reliance.
Id. at 1070-71. The panel majority‘s holding that inequitable conduct is simply fraud in other words, is contrary to law and precedent. As discussed in Consolidated Aluminum Corp. v. Foseco International Ltd., 910 F.2d 804, 812 (Fed.Cir. 1990), “what we have termed ‘inequitable conduct’ is no more than the unclean hands doctrine applied to particular conduct before the PTO.” It is hornbook law that unclean hands and fraud are different wrongs, subject to different criteria.
The court now negates the Regulation,
DISCUSSION
A reduction in patent fees is available to an entity that qualifies as a “small business concern” in accordance with the Small Business Administration definition of such concern as an entity having less than 500 employees.
37 C.F.R. § 1.28(c) How errors in small entity status are excused.If status as a small entity is established in good faith, and fees as a small entity are paid in good faith, in any application or patent, and it is later discovered that such status as a small entity was established in error, or that through error the Office was not notified of a loss of entitlement to small entity status as required by
§ 1.27(g)(2) , the error will be excused upon: compliance with the separate submission and itemization requirements of paragraphs (c)(1) and (c)(2) of this section, and the deficiency payment requirement of paragraph (c)(2) of this section.
The panel majority acknowledges that the submission of the deficiency in the fee is a representation of good faith, as the regulations provide, and is not subject to judicial review. Despite this concession that the patentee‘s good faith in making the reduced payment cannot be challenged, the majority then circumvents its own holding and rules that the question of bad faith may indeed be raised, by changing the question: “The question here is whether Lex committed inequitable conduct by knowingly misrepresenting that it was entitled to have the error excused.” Maj. op at 1147. I marvel at the ingenuity whereby the majority accepts that the error is correctable without further inquiry when the requirements of
The term “inequitable conduct” is absent from the regulations. An amendment to
Lex was entitled to small entity status when it paid the first (fourth year) maintenance fee. The second (eighth year) maintenance fee was due February 27, 1993. Lex paid the fee late, in November 1993, paying the $935 fee for a small entity (half the regular rate) and the $1,500 surcharge for late payment. With its payment Lex submitted PTO form PTO/SB/10, entitled “Verified Statement Claiming Small Entity Status (
I hereby declare that the above identified small business concern qualifies as a small business concern as defined in
13 CFR 121.3-18 , and reproduced in37 CFR 1.9(d) , for purposes of paying reduced fees under section 41(a) and (b) of Title 35, United States Code, in that the number of employees of the concern, including those of its affiliates, does not exceed 500 persons.... If the rights held by the above identified small business concern are not exclusive, each individual, concern or organization having rights to the invention is listed below and no rights to the invention are held by ... any concern which would not qualify as a small business concern under37 CFR 1.9(d) .
No other entity was listed as having “rights to the invention,” although Lex had several non-exclusive licensees. The form was prepared by patent attorney Irving Weiner, and was signed by Simon Haberman as president. Lex was again late in paying the third (twelfth-year) maintenance fee, again accompanied by a small entity claim, signed by Mr. Weiner:
A verified statement establishing small entity status for this patent was filed November 2, 1993. It is confirmed that the small entity status for this patent has been checked and is still in effect.
The statement was accompanied by the small entity fee of $1,580 (half the regular rate) and the $1,640 surcharge for late payment.
When the issue arose in this litigation, Lex paid the deficiency in the maintenance fees, complying with the conditions set in
The PTO form, the relevant portion of which is shown ante, did not contain the text of the SBA regulation
But analogous to say, for example, real estate. If I license you to use this room for your deposition, I do not give you part of the building. I don‘t give you an interest in the building. And if you asked my opinion, that‘s the way I understand it. A license is something temporary that you‘re given to use. It‘s not part of the — you‘re not becoming my partner, you do not own part of the patent, you simply have a right, as explained in the patent, to use the art that is taught by the patent.
He testified that Lex was the only entity with “the right to prevent others from making a product that contained or was covered by the claims of the ‘188 patent.”
Mr. Haberman‘s statement of the law of non-exclusive licenses cannot be faulted. A non-exclusive licensee does not have a property interest in the patent. See Spindelfabrik Suessen-Schurr v. Schubert & Salzer, 829 F.2d 1075, 1081 (Fed.Cir.1987) (“a patent license agreement is in essence nothing more than a promise by the licensor not to sue the licensee“); Gilson v. Republic of Ireland, 787 F.2d 655, 658 (D.C.Cir.1986) (“It is well settled that a non-exclusive licensee of a patent has only a personal and not a property interest in the patent and that this personal right cannot be assigned unless the patent owner authorizes the assignment or the license itself permits assignment.“)
Lex points out that it underpaid the eighth year fee by $935, and the twelfth year fee by $1,580, and that it would not have jeopardized ten million dollars in royalty income for this saving in maintenance fees. Although Ulead argues that the mere fact that Lex saved money establishes both materiality and intent, and that the amount saved is irrelevant, a court need not reject common sense. See The Eliza Lines, 199 U.S. 119, 139 (1905) (Holmes, J.) (rejecting a position as “utterly opposed to common sense“); Stromberger v. 3M Co., 990 F.2d 974, 979 (7th Cir.1993) (“the scheme that Stromberger imputes without evidence to the company would have been Machiavellian, all right, but it would also have been stupid“). Common sense cannot reconcile Ulead‘s charge that Haberman deliberately misstated the status of Lex with deceptive intent, jeopardizing millions of dollars in royalties then being paid, for a saving of $935 in the second maintenance fee (exceeded by the late-payment penalty). And if attorney Weiner filed a deliberately false (as contrasted with negligent) statement in order to save his client $1,540 of the third maintenance fee (also exceeded by the late-payment penalty), such behavior is neither rational nor comprehensible.
When the issue is fraud, scienter is essential. See Lord v. Goddard, 54 U.S. 198, 202 (1851) (“[T]he action [of fraud] cannot be maintained without showing affirmatively knowledge of its falsity.“) A knowing and intentional misrepresentation must always be present. See, e.g., Knauer v. United States, 328 U.S. 654, 657 (1942) (“Fraud connotes perjury, falsification, concealment, misrepresentation.“) Contrary to the position of the panel majority, the history as well as the letter of the small entity fee regulations show that the regulatory intent was to apply the more rigorous law of fraud, not the more readily satisfied standards of inequitable conduct.
In further departure from precedent, the panel majority holds, for the first time, that inequitable conduct and ensuing unenforceability can be based on actions after the patent has issued and unrelated to patentability. This too is contrary to established law, and raises an important principle, for it achieves forfeiture of vested property rights. In Aptix Corp. v. Quickturn Design Systems Inc., 269 F.3d 1369, 1376 (Fed.Cir.2001) the court observed that when the patent had not been procured by inequitable conduct in the PTO, “[n]o case law from the Supreme Court or this court provides a basis for nullifying property rights granted by the United States when such property rights did not themselves accrue through inequitable conduct.” The panel majority now violates this precedent.
The record in promulgating
It is a denial of not only precedent and regulation but also of the requisite administrative deference, in now requiring Lex to litigate in the district court the question of whether the Director can accept the deficiency payment. Principles of judicial deference require the presumption that the Director correctly interpreted the governing regulations and acted within his authority. See, e.g., Auer v. Robbins, 519 U.S. 452, 462 (1997); Kubota v. Shibuya, 999 F.2d 517, 520-21 (Fed.Cir.1993). The statute, regulations, and requisite agency deference do not accommodate de novo judicial determination of this administrative aspect. As discussed in Hyatt v. Boone, 146 F.3d 1348, 1355 (Fed.Cir.1998) “[a]ny technical deficiency in meeting the formal requirements of [a PTO rule concerning streamlined continuations] must be viewed in light of the agency‘s acceptance of the applications as in compliance with the Rule. Regularity of routine administrative procedures is presumed, and departure therefrom, should such have occurred, is not grounds of collateral attack.”
Conclusion
The regulations implement the recognized concern lest the small entity fee status spawn new grounds of dispute. Thus the regulations provide a simple administrative method of correcting errors in such status. The record reflects various purposes, such as easing the entry of small entities into the patent system without undue risk of technical violation, and the recognition of possible human error. At the time this fee concession was adopted the courts were experiencing the “absolute plague” of charges of inequitable conduct in “almost every major patent case,” perhaps cautioning the regulators about additional fodder for that plague.
The regulations governing correction of a small entity fee underpayment are explicit, and were explicitly met by Lex. From my colleagues departure from regulation, law, and administrative practice, I respectfully dissent.
IV CROSS APPEAL
I concur in the judgment on the cross appeal.