Gilbert P. Hyatt v. Andrew Hirshfeld, Appeal Nos. 2018-2390, -2391, -2392, 2019-1038, -1039, -1049, -1070 (Fed. Cir. June 1, 2021)
This week’s Case of the Week explores a long-running dispute between controversial inventor Gilbert Hyatt and the Patent Office concerning patent applications filed in 1995 that claim priority to applications filed in the 1970s and 1980s. They can be fairly described as submarine patents. After his applications were rejected, Hyatt sued the Patent Office to have the patents issued. At trial, the Patent Office asserted the doctrine of prosecution laches. The district court rejected the Patent Office’s position and ordered the patents to issue. The Patent Office appealed. In a 42-page opinion issued this week, the Federal Circuit explored the history of submarine patents related to the 1995 “GATT Bubble” and provided a lengthy discussion on the doctrine of prosecution laches.
The case makes a great read for students of patent law. It explains an important historical chapter in the law that led to substantial changes in 1995 that continue to this day—an era that struggled with the proliferation of submarine patents and led to the practice of patent trolling. Our summary and analysis are provided below.
An inventor who files a patent application can file new “continuation” or “continuation-in-part” applications based on the prior application at any time prior to the issuance of the application. In prior decades, the new application, upon issuance, would have a term of 17 years from the date of issuance. This led to what some would call “creative lawyering” and others would call “abuse” of the patent system. Patent applicants would keep a patent family open and seek new claims based on prior disclosures that could be read onto newer technologies. In other cases, patentees would abandon their patent applications and file continuation applications instead. Either approach would extend the life of the original application. In some cases, inventors successfully did this for decades. In the meantime, an industry could grow up, adopting technology that could be read onto the pending patent applications. When a patent suddenly issued into a developed field, claiming priority back decades, it was like a submarine surfacing from underwater, and the inventor could make a fortune extracting license fees from the industry.
In 1995, the United States sought to address the problem of submarine patents by agreeing to change the term of U.S. patents from 17 years following the date of issuance to 20 years from the date of application from which the patent claims priority. This was effectuated through a treaty: the Uruguay Round of the General Agreement on Tariff and Trade (“GATT”), and then enacted into law as the Uruguay Round Agreements Act. Applications filed prior to June 8, 1995, would be given a 17-year term from the date of issuance; applications filed thereafter would be given a 20-year term from the date of the application. As the change came into effect, there was “a patent application gold rush in the spring of 1995, often referred to as the ‘GATT Bubble.’” For example, in the nine days before the change, over 50,000 applications (one quarter of the entire year’s projected filings) were filed.
Gilbert Hyatt is one of the inventors whose name surfaces throughout that history. He is the named inventor on 399 patent applications, 381 of which he filed during the GATT Bubble.
The appeal concerned four of those applications, all of which claimed priority to applications originally filed in the 1970s and 1980s. “Hyatt’s GATT Bubble applications … are atypically long and complex.” Two of them had 576 pages of text and 65 pages of figures. Over the next eight years, “Hyatt filed a series of amendments in his applications that grew the number of claims to a total of approximately 115,000, including approximately 45,000 independent claims.” The four patents at issue contained an average of 398 claims per application. Thus, many of the claims were added “between 12 and 28 years after their alleged priority dates.”
After the examiners rejected Hyatt’s claims, Hyatt sued the Patent Office in the U.S. District Court for the District of Columbia seeking issuance of the patents pursuant to 35 U.S.C. § 145, which allows an aggrieved applicant to sue in district court to obtain a patent. The four Section 145 actions corresponding with the four patents at issue were filed in 2005 and 2009. The litigation continued for several years. In 2016, the district court rendered summary judgment opinions, denying Hyatt’s, and granting some of the Patent Office’s.
The next month, the Patent Office filed a motion to dismiss each case on the grounds of prosecution laches. “The PTO argued that Hyatt had engaged in a ‘pattern of delay in prosecuting his nearly 400 patent applications from 1969 through the present day.’” The Patent Office cited: “claiming priority to applications more than 45 years old; bulk-filing about 400 photocopies of 11 applications [in the GATT Bubble]; and agreeing to focus each application on a different invention but not doing so.”
The PTO treated the motions to dismiss as motions for summary judgment and denied them because issues of material fact existed. The Court then held a give-day trial on prosecution laches. In the ensuing months, the court also conducted additional bench trials on the patentability of the four applications’ claims.
On August 1, 2018, the district court issued a series of orders resolving the four cases. The Court held that prosecution laches did not bar issuance of the applications, holding in relevant part that the PTO had failed to take the actions necessary to advance the prosecution of Hyatt’s applications. It subsequently ruled on the substantive issues of patentability and ordered the PTO to issue patents for many of Hyatt’s claims.
The PTO appealed. Hyatt cross-appealed on issues not addressed here.
Prosecution laches is an equitable affirmative defense rooted in two Supreme Court cases from the early 20th century. In general, it “may render a patent unenforceable when it has issued only after an unreasonable and unexplained delay in prosecution that constitutes an egregious misuse of the statutory patent system under a totality of the circumstances.” The doctrine has been rarely invoked over the years. The Federal Circuit first addressed it in 2002, affirming a Patent Office rejection of a patent based on prosecution laches. It has only affirmed a prosecution laches determination one other time, in 2005. In that case, the patentee’s delays led to an 18- to 39-year time between the filing of the applications and the issuance of the lawsuits. The defense was raised by accused infringers as an affirmative defense to infringement.
This was the first case where the Federal Circuit addressed whether prosecution laches could be a defense in a Section 145 action. The Court held that it could. The court also held that the Patent Office may assert prosecution laches in a Section 145 action even if it was not previously the basis of a rejection during examination. The Court reasoned that, since a patent applicant may introduce new evidence during a Section 145 action, “[f]airness dictates that the door must also remain open for the PTO to assert its meritorious defenses under the circumstances, including prosecution laches.”
The court then concluded that the district court misapplied the prosecution laches defense in “several respects.” For example, the court held that the district court failed to properly apply the “totality of the circumstances” test, and identified several facts that the district court found had little relevance to its analysis. “These examples of discounting or ignoring evidence—indeed swaths of evidence in certain situations—regarding Hyatt’s prosecution conduct as a cause for delay illustrate that the district court failed to follow this court’s guidance on considering the totality of the circumstances.” The court held that the district court should have considered Hyatt’s conduct in relation to all of his GATT Bubble applications, because the totality of the circumstances includes “the prosecution history of all of a series of related patents and overall delay in issuing claims.” All of Hyatt’s GATT Bubble applications “overlapped, for example, in subject matter, claim scope, and priority disclosures, and were filed together as photocopies of a small group of applications.” Thus, Hyatt’s conduct across his GATT Bubble applications was relevant.
The Federal Circuit also found that the district court focused too much on the Patent Office’s conduct and not Hyatt’s. The Court held that “an applicant may [not] prosecute his patents however he or she wishes within the statute and PTO regulation, because the doctrine of prosecution laches places an additional, equitable restriction on patent prosecution conduct beyond those imposed by statute of PTO regulation … [the applicant] must also prosecute its applications in an equitable way that avoids unreasonable, unexplained delay that prejudices others.” Thus, “the PTO’s conduct may be considered in the totality of circumstances, but its delay ‘cannot excuse the applicant’s own delay’ in prosecution.” “The PTO’s delay” is “a weak reason to negate prosecution laches.” The actual question is about “the applicant’s prosecution conduct.”
The Federal Circuit ultimately found that the facts presented were sufficient to meet a prima facie case of prosecution laches, shifting the burden to Hyatt. The Federal Circuit summarized Hyatt’s GATT Bubble applications succinctly and pointedly: “Simply put, Hyatt’s applications were placeholders.”
The Federal Circuit also considered the standard for prosecution laches, and whether the Patent Office must show prejudice, or intervening rights. Where the Patent Office raises prosecution laches during prosecution, that element is not required. Where the defense is raised in an infringement action, it is required. The Federal Circuit held that a Section 145 action is more like an infringement action in that regard, but “an unreasonable and unexplained prosecution delay of six years or more raises a presumption of prejudice, including intervening rights.” The Federal Circuit held that this was satisfied, and that the burden shifts back to Hyatt to prove lack of prejudice. The Court also held that “clear abuse of the PTO’s patent examination system” constitutes prejudice, and that “clear abuse” occurs when the applicant “unduly increases the administrative burden on the PTO and thereby effectively taxes everyone using the system.”
The court remanded for Hyatt to disprove that the Patent Office experienced prejudice.
Finally, the court considered whether it should proceed to the appeal on the merits of patentability and noted that “[i]n certain circumstances this court and our sister circuits have retained jurisdiction over appeals and held them in abeyance pending resolution of a limited issue.” Applying that practice, the court remanded for the limited purpose of affording Hyatt the opportunity to respond to the prosecution laches defense. The Federal Circuit also provided substantial guidance to the district court in how to weigh the evidence and factors going forward. Following that guidance, the court was clear: “We can divine no reason in the record currently before the court that would suffice” to explain Hyatt’s delays in prosecuting his patents, “but Hyatt is entitled as a matter of fairness to present evidence and be heard on this issue.” Likewise, as to prejudice, the court held: “We again cannot guess what might negate” the voluminous evidence of prejudice to the Patent Office. “But be that as it may, we recognize that Hyatt is entitled to present evidence that his delay did not cause prejudice.”
A copy of the opinion can be found here.
By Nika F. Aldrich
ALSO THIS WEEK
SpeedTrack, Inc. v. Amazon.com, Inc., Appeal Nos. 2020-1573, -1660 (Fed. Cir. June 3, 2021)
In this appeal from a final judgment of noninfringement, the Federal Circuit affirmed, finding the district court’s claim construction was correct based on the doctrine of prosecution disclaimer. The patent at issue discloses a “computer filing system for accessing files and data according to user-designated criteria.” The district court adopted SpeedTrack’s proposed claim construction and included reference to “disclaimers made during prosecution.” Subsequently, the parties presented a further dispute regarding the scope of the claim term. The district court entered a second claim construction order clarifying that “[c]ategory descriptions based on predefined hierarchical field-and-value relationships are disclaimed.” The district court explained that SpeedTrack’s prosecution statements demonstrated a “clear and unambiguous disavowal” of the same. Because of the second construction order, SpeedTrack stipulated to noninfringement and the district court entered final judgment of noninfringement. On appeal, the Federal Circuit held that the district court’s claim construction was correct, explaining that “the doctrine of prosecution disclaimer ensures that claims are not construed one way in order to obtain their allowance and in a different way against accused infringers.” Thus, the Court affirmed the district court’s final judgment of noninfringement.
By Annie White