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Recent U.S. Decisions Affecting Licensing

Tuesday, February 14, 2017   (0 Comments)
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Inequitable Conduct Results from Trying to Revive a Lapsed Patent without Investigating if it was Intentionally Abandoned

By John Paul, Brian Kacedon, and Ben Cassady

Patents expire unless the owner pays periodic maintenance fees to the Patent and Trademark Office.   The patent may be revived if the owner establishes that the delayed payment was “unintentional.”  In 3D Medical Imaging Systems, LLC v. Visage Imaging, Inc. et al, a Georgia court considered whether a patent owner committed inequitable conduct by certifying, without knowledge of the circumstances leading to the lapsed payment, that the lapse was unintentional.

Background

Faced with financial pressures, IMS decided to forego payment of a maintenance fee and let their patent expire.  After IMS later declared bankruptcy, MedFlex and its owner, Maurice Bailey, acquired the rights to IMS’s patent. Mr. Bailey petitioned the PTO to revive the patent, representing that the failure to pay the maintenance fee was “unintentional,” and based on his representation, the PTO reinstated the patent.

Meanwhile, Mr. Bailey and MedFlex assigned the patent rights to 3D Medical Imaging Systems, who then sued Visage for infringement.  Visage moved the court for summary judgment in its favor on the basis that Mr. Bailey’s representation to the PTO that the delay in the failure to pay the maintenance fee for the ’655 was “unintentional” constituted inequitable conduct rendering the patent unenforceable. 

The 3D Medical Decision

Inequitable conduct exists when a patent owner (1) misrepresents or omits information material to patentability, and (2) did so with specific intent to mislead or deceive the PTO.  Through that lens, the Court analyzed Mr. Bailey’s representation regarding the “unintentionally” delayed maintenance fee paid for the ’655 patent. 

First, the Court found that Mr. Bailey did mispresent information to the PTO, and that the information was material to patentability.  Mr. Bailey’s testified that he did not investigate why IMS let the ’655 patent expire, yet certified to the PTO that IMS did not intend to let the patent expire.  The court found this statement material to patentability because the patent would have expired for failing to pay the maintenance fees.

Second, the Court found that Mr. Bailey intended to deceive the PTO, even though the Court had no direct evidence to that effect.  Absent direct evidence, courts can infer an intent to deceive the PTO when it is the single most reasonable inference that can be drawn from the available evidence.  Here, the court found that the only reason for Mr. Bailey to have misrepresented that IMS’s failure to pay the maintenance fee was unintentional was to cause the PTO to reinstate his newly acquired patent.

Strategy and Conclusion

This case shows the value of investigating the status and related issues for patents to be acquired, especially when they are being acquired in bankruptcy or other distressed sale conditions.  In particular, it is helpful to investigate whether any of the patents have expired, and if so, whether the patents can be reinstated without any showing about why they were abandoned.  If it is necessary to show the patents were unintentionally abandoned, then further investigation is required to determine the reasons for abandonment and related facts and whether the patent is likely to be reinstated for those reasons.  

Further information

The 3D Medical decision is available here.

 

Editors and authors

The editors and authors are attorneys at Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P.

                                    John Paul john.paul@finnegan.com

                                    Brian Kacedon brian.kacedon@finnegan.com

                                    Robert C. MacKichan robert.mackichan@finnegan.com

R. Benjamin Cassady r.benjamin.cassady@finnegan.com

 

This article is for informational purposes and does not constitute legal advice.

The views expressed do not necessarily reflect the views of LES or Finnegan.