Is It Safe Not
to File a Copy of a Settlement Agreement Entered Into
After Court
Review of a Board Decision in an Interference Has Begun?
I. The Law Before Johnston
v. Beachy
In 1998 I published a two-part
article entitled The Law and Practice Under 35 USC 135(c), 80 JPTOS 561,
675 (1998). In the section of that
article entitled “What is 'the termination of...[an] interference as between
the said parties to an agreement or understanding’ Within the Meaning of 35 USC
135 (c)?,” 80 JPTOS at 585-89, I reviewed the very confusing case law on that subject.[1] The clear moral of that review was to file
copies of settlement agreements entered into after court review of a board
decision in an interference had begun.
If the Federal Circuit ultimately held that it is unnecessary to file
copies of such agreements, presumably no harm would be done by filing an
unnecessary copy.[2] However, if the Federal Circuit ultimately
held that it is necessary to file copies of such agreements, and if one
failed to do so, the consequences would be catastrophic.[3]
II. Johnston
v. Beachy
In Johnston v. Beachy,
60 USPQ2d 1584 (PTOBPAI 2001) (opinion for an expanded panel by APJ Torczon,
joined by SAPJ McKelvey and APJs Schafer, Lee, Spiegel, Gardner-Lane, Medley,
and Tierney), the Trial Section attempted to settle the issue by holding that
“an interference is terminated when the time for seeking review is past
regardless of whether such review is sought....”[4] It offered four rationales for this holding,
and I will discuss each of those four rationales in the order set forth in the
opinion.
First, the opinion states that the
Trial Section is “bound by § 1.661 and the construction of that the Director
has given to the rule...”[5]
in its “regulatory history.”
37 CFR 1.661 says that:
After a final decision is entered by the Board, an
interference is considered terminated when no appeal (35 U.S.C. 141) or other review (35
U.S.C. 146) has been or can be taken or had.
However,
37 CFR 1.661 does not say when an interference is considered terminated
when an appeal or other review has been or can be taken or had. Accordingly, 37 CFR 1.661 certainly does not
settle the issue.
As for the regulatory history[6]
cited by the Trial Section, it says only that:
Section 1.661 sets forth when an interference is
considered terminated after a judgment is entered in the interference. For the purpose of filing copies of
settlement agreements, an interference is considered terminated when the time
for all appeals has expired. Tallent
v. Lemoine, 204 USPQ 1058 (Comm’r. Pat. 1979). See also Nelson v. Bowler, 212 USPQ 760 (Comm’r Pat.
1981).
However,
the Trial Section’s opinion points out (correctly) that:
The Tallent decision held a filed settlement
agreement timely because it was filed within the time permitted for filing an
appeal. As Gholz observes (at 587 n.
70), the Nelson case avoids the issue as moot since Bowler would have
lost even under the construction that the interference continues during
judicial review.[7]
Hence,
while it is true that the regulatory history asserts that, “For the
purpose of filing copies of settlement agreements, an interference is
considered terminated when the time for all appeals has expired,” neither
opinion cited in the regulatory history supports that assertion. Moreover, if the Commissioner really meant what
he said in the regulatory history, he (and his successors) have had almost
twenty years to amend 37 CFR 1.661 to clearly so state. The fact that the Commissioner/Director has
not done so suggests (to me) that the assertion is the regulatory history should
not be taken seriously. Accordingly, I
believe that there really is no regulatory history compelling the result
reached by the Trial Section.
Next, the Trial Section asserts that
“there are many reasons to believe that Congress did not intend for § 135(c) to
apply to other proceedings [i.e., to proceedings other than interferences
pending before the board],”[8]
and it gives three of those “many reasons”.
According to the Trial Section:
First is placement: the requirement is placed in the
same section as the authority for interferences in the Office (§ 135(a)) and
the statute of repose from such interferences (§ 135(b)). It was not placed on its own as a general
provision and, indeed, is located in chapter 12 of title 35, which is a
different chapter than the locations for § 146 (chapter 13) or § 291 (chapter
29).[9]
However,
35 USC 256 (which states a ground for invalidating a claim--namely, incorrect
inventorship that cannot be corrected) is in chapter 25, not chapter 29 (where
the other grounds for invalidating claims are collected). The truth of the matter is that 35 USC grew
over time, and not always logically.
Thus, the fact that 35 USC 135 (c) is in chapter 12 rather than chapter
18 or chapter 29 is an extremely weak reed on which to rely.
Next, the Trial Section said that:
Second, is purpose: Congress and the Executive
branch feared conspiracy under the cover of confidentiality afforded in
interferences. Acting Secretary of
Commerce, correspondence to House, published in S. Rep. 87-2169, reprinted
at 1962 U.S.C.C.A.N. at 3287, 3288.
When § 135(c) was enacted interferences were, and currently are, largely
shielded from sight automatically by the confidentiality provisions of 35
U.S.C. 122(a), while judicial proceedings are public except to the extent that
a district court judge deliberately enters a confidentiality order on the
public record. Even in the unlikely
event that a district court fails to act in the public interest when entering
such an order, the public nature of the order and the overall proceeding will
still offer ample opportunity for enforcement agencies to become involved. Hence, the
need addressed in § 135(c) does not extend to judicial proceedings.[10]
I think that this is the least
persuasive of the Trial Section’s four rationales.
In the first place, most court
review of board decisions is sought by way of direct appeals to the Federal
Circuit under 35 USC 141 rather than by way of civil actions in district courts
under 35 USC 146.[11] While the Solicitor does occasionally
intervene in (or file amicus briefs in) 35 USC 141 appeals,[12] there is
essentially zero probability that any “enforcement agenc[y]” (sic; the
Antitrust Division) will become involved in such an appeal.
In the second place, the Trial
Section’s rationale doesn’t make any sense even as to 35 USC 146 district court
review of board decisions. The Trial
Section is clearly right that the background of the promulgation of 35 USC
135(c) is that “Congress and the Executive branch feared conspiracy [by the parties]
under the cover of confidentiality afforded in interferences.” However, if the parties to a 35 USC 146
action are conspiring, they are not going to put anything in the public record
of the 35 USC 146 action that would attract the attention of the Antitrust
Division! In my article I concluded
that “what became 35 USC 135(c) was apparently expected to assist the Antitrust
Division of the Justice Department in ferreting out anti-social activity by the
patent interference bar.”[13] However, the only way that 35 USC 135(c) can
accomplish that result is to allow the representatives of the Antitrust
Division to review the settlement agreements, and the only way that the
representatives of the Antitrust Division will have the opportunity to do that
is if copies of the settlement agreement are filed.
Next, the Trial Section asserted
that:
Finally, jurisdiction and constitutional factors
bear on whether the Board should act on settlement matters arising during
judicial review. Congress expressly
gave both the Federal Circuit and district courts authority (§§ 141 and 146) to
review an “interference”, while the Board has no comparably explicit authority
to adjudicate any aspect of a judicial proceeding. Moreover, the Board is situated in the Executive branch of
government; the courts, in the Judicial branch. It would be odd to construe a single proceeding as continuing
across constitutionally separate, collateral branches of government. Principles of separation of powers and
comity would prevent us from entangling the Board in judicial proceedings
unless absolutely necessary.[14]
However, construing 35 USC 135(c) to
require the filing of copies of settlement agreements entered into after
judicial review of a decision by the board has begun would not require the
board to “act on settlement matters arising during judicial review.” All that the board does with the copies of
35 USC 135(c) agreements it receives is to put them in a locked filing cabinet![15] What the consequences of those agreements
are is normally up to the Antitrust Division, not to the board.[16]
III. So, Is It Safe?
In my opinion, no. While the Trial Section reached a desirable
result, it is only a trial entity, and the rationales given in its opinion in Johnston
v. Beachy are remarkably unpersuasive.
Under the circumstances, I don’t think that it would be safe to rely on
the Trial Section’s holding in Johnston unless and until the Federal
Circuit endorses it. Accordingly, I
strongly recommend that interferents continue to file copies of settlement
agreements entered into after court review of board decisions has begun.
* Mr. Gholz is a senior partner in and head of the
Interference Section of Oblon, Spivak, McClelland, Maier and Neustadt, PC in
Arlington, Virginia. His email address
is cgholz@oblon.com.
Published in Intellectual Property Today, Vol. 9, No. 2, February 2002, page
28.
[1] Some district courts had
stated that an interference “terminates” for purposes of 35 USC 135(c) when the
participants enter into an agreement that reduces their incentive to litigate
with maximum vigor even though the interference is going forward before the
board, and the CCPA specifically ducked the opportunity to say that
interferences terminate for purposes of 35 USC 135(c) at the conclusion of the
administrative phase of the proceedings.
[2] At worst, the board might
refuse to accept the copy and send it back to the attorney who submitted
it. Cf. LaCroix v. Bellini,
58 USPQ2d 1528 (CAPJ 2001) (non-precedential), and Nelson v. Bowler,
212 USPQ 760, 762 (Comm’r 1981) (“Since the agreement copy was filed beyond the
six-month period, under the provisions of 35 USC 135(c) the Commissioner has no
authority to accept it, regardless of whether or not 'good cause’ is shown.”)
[3] If the interferents violate
35 USC 135(c), not only is any patent involved in or that matures from an
application involved in the interference permanently unenforceable, but so is
the agreement. The latter consequences
can be far more significant than the former.
See Gholz, op. cit. supra at 581 n. 54 and 593 n. 87.
[4] 60 USPQ2d at 1589.
[5] 60 USPQ2d at 1589; footnote
omitted.
[6] The regulatory history
cited by the Trial Section may be found at 49 Fed. Reg. 48,416, 48,427 (12 Dec
1984).
[7] 60 USPQ2d at 1589; footnote
omitted.
[8] 60 USPQ2d at 1589.
[9] 60 USPQ2d at 1589; footnote
omitted.
[10] 60 USPQ2d at 1589-90.
[11] Regrettably the board has
stopped publishing such statistics.
However, Calvert et al., Interference Statistics for Fiscal Years
1992 to 1994, 77 JPTOS 417, 426 (1995), indicates that, for that period:
Court review was sought in
41 (28.1%) of the 146 interferences (139 two-party, seven multi-party) in which
the Board rendered a decision after final hearing. 26 appeals were filed in the Court of Appeals for the Federal
Circuit[,] and 15 civil actions under 35 USC 146 were filed in the U.S.
district courts....
[12] See, e.g., Parks v. Fine,
783 F.2d 1036, 228 USPQ 677 (Fed. Cir. 1986), discussed in Gholz, A Critique
of Recent Opinions of the Federal Circuit in Patent Interferences, 69 JPTOS
657 (1987), at pages 667-68.
[13] 80 JPTOS at 563.
[14] 60 USPQ2d at 1591;
footnotes omitted.
[15] Nelson v. Bowler, 212 USPQ
760, 762 (Comm’r 1981) (“the PTO is merely the repository for copies of
agreements filed under 35 USC 135(c), and does not undertake to rule on whether
the statute requires that a copy of a particular agreement be filed.”)
[16] Of course, in Johnston
the board was called upon to decide what the consequences of Beachy’s alleged
failure to comply with 35 USC 135(c) in a previous interference. However, even here the legality of the agreement
that Beachy had allegedly not filed in timely fashion was not at issue before
the board.