The Law and Practice Under 35 USC 135(c)

THE LAW AND PRACTICE UNDER 35 USC 135(c)^[1]

By Charles L. Gholz ^[2]

Table of Contents I.           Introduction II.           The Statutory and Regulatory Scheme -- and a Few Questions III.            A Few Answers -- and a Few Guesses

A. What is "an interference" Within the Meaning of 35 USC 135(c)?

B. Who are the "parties to an interference" Within the Meaning of 35 USC 135(c)?

C. What is an "agreement... made in connection with or in contemplation of the termination of the interference" Within the Meaning of 35 USC 135(c)?

D. What is an "understanding... made in connection with or in contemplation of the termination of the interference" Within the Meaning of 35 USC 135(c)?

E. What is a "collateral agreement[ ]" Between the Parties to an Interference Within the Meaning of 35 USC 135(c)?

F. What Kind of a Reference to a "collateral agreement [ ]" Between the Parties to an Interference is Required to Trigger 35 USC 135(c)?

G. 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)?

H. What (If Anything) Must One Do If an Agreement or Understanding a Copy of Which Has Been Filed in the PTO Pursuant to 35 USC 135(c) is Later Modified?

I. Does 35 USC 135(c) Apply to Agreements or Understandings Made Prior to the Declaration of an Interference?

J. What Does It Mean for an Agreement or Understanding

to "be in writing" Within the Meaning of 35 USC 135(c)?

K. What is a "true copy" of an Agreement or Understanding Within the Meaning of 35 USC 135(c)?

L. Who Has Standing to Assert a Violation of 35 USC 135(c)?

M. By What Standard of Proof Must a Party Asserting a Violation of 35 USC 135(c) Prove Its Case?

N. How Does the PTO Implement the Mandate in 35 USC 135(c) that, "If any party filing... [a true copy of an agreement or understanding between the parties to an interference] so requests, the copy shall be kept separate from the file of the interference..."?

O. What "Government agencies" are Entitled to Obtain Access to the Copies of 35 USC 135(c) Agreements "kept separate from the file[s] of the interference[s]" Pursuant to the Written Requests of the Parties That Filed the Copies, and What Government Agencies Do Obtain Access to the Copies of 35 USC 135(c) Agreements "kept separate from the file[s] of the interference[s]" Pursuant to the Written Requests of the Parties That Filed the Copies?

P. How Do the Government Agencies Go About Obtaining Access to the Copies of 35 USC 135(b) Agreements "kept separate from the file[s] of the interference[s]" Pursuant to the Written Requests of the Parties That Filed the Copies?

Q. What Do the Government Agencies Do After Having Obtained Access to the Copies of 35 USC 135(c) Agreements "kept separate from the file[s] of the interference[s]" Pursuant to the Written Requests of the Parties that Filed the Copies?

R. What Reasons Have Been Accepted or Not Accepted as Constituting "good cause" Within the Meaning of 35 USC 135(c) for Someone Other Than a "Government agenc[y]" to Obtain Access to a 35 USC 135(c) Agreement "kept separate from the file of the interference" Pursuant to the Written Request of the Party That Filed the Copy?

S. If a Party to an Interference Failed to Comply with 35 USC 135(c), Does the Entire Patent Become Permanently Unenforceable or Only the Claims That Were Designated as Corresponding to the Count or Counts in the Interference?

T. If a Party to an Interference Failed to Comply with 35 USC 135(c), is a Patent That Matured from a Downstream Application Permanently Unenforceable?

U. If a Party to an Interference Failed to Comply with 35 USC 135(c), Can That Failure be Remedied in Any Way?

V. What Reasons Have Been Accepted or Not Accepted as Constituting "good cause" Within the Meaning of 35 USC 135(c) Justifying the Filing of a Copy of a 35 USC 135(c) Agreement or Understanding "during the six-month period subsequent to the termination of the interference as between the parties to the agreement or understanding"?

W. Is a Notice Concerning 35 USC 135(c) Given in the Declaration of the Interference a "notice... [given] a reasonable time prior to... [the] termination [of the interference]..." Within the Meaning of 35 USC 135(c)?

X. Does a Notice Given to a Patent Agent or Agents of Record Rather Than to an Attorney or Attorneys of Record Comply with the Second Paragraph of 35 USC 135(c)?

Y. Is a Patent Permanently Unenforceable If the Commissioner Fails to Give the Required Notice, But the Patentee and/or the Patentee's Attorney or Agent Knew About 35 USC 135(c) and Nevertheless Failed to Comply with It?

Z. What are the "discretionary action[s] of the Commissioner" Referred to in the Third Paragraph of 35 USC 135(c), and What Standard of Review Will the Court Apply if you Do Seek Review Under Section 10 of the Administrative Procedure Act of a Discretionary Action of the Commissioner Under 35 USC 135(c)?

IV. Conclusion

I. Introduction

35 USC 135(c) was added to 35 USC 135 in 1962 by Public Law 87-831. According to the House Committee Report relating to the enactment of the bill that became 35 USC 135(c):

Interference proceedings may be terminated in a manner hostile to the public interest by using patent interference settlement agreements as a means of restricting competition. To make such a practice more difficult[,] the bill requires the filing of such agreements in the Patent Office.^[3]

The legislative history indicates that its sponsors expected what became 35 USC 135(c) to have a major, salutary impact on patent law.^[4] Specifically, what became 35 USC 135(c) was apparently expected to aid the Antitrust Division of the Justice Department in ferreting out antisocial activity by the patent interference bar.

In practice, 35 USC 135(c) has had little impact. However, the "harsh"^[5] and "penal"^[6] results of non-compliance with 35 USC 135(c) require that careful attention be paid to it. Compliance may be pointless, but it can't be overlooked.

II. The Statutory and Regulatory Scheme -- and a Few Questions

In its current incarnation, 35 USC 135(c) reads as follows^[7]:

Any agreement or understanding between parties to an interference, including any collateral agreements referred to therein, made in connection with or in contemplation of the termination of the interference, shall be in writing and a true copy thereof filed in the Patent and Trademark Office before the termination of the interference as between the said parties to the agreement or understanding. If any party filing the same so requests, the copy shall be kept separate from the file of the interference, and made available only to Government agencies on written request, or to any person on a showing of good cause. Failure to file the copy of such agreement or understanding shall render permanently unenforceable such agreement or understanding and any patent of such parties involved in the interference or any patent subsequently issued on any application of such parties so involved. The Commissioner may, however, on a showing of good cause for failure to file within the time prescribed, permit the filing of the agreement or understanding during the six-month period subsequent to the termination of the interference as between the parties to the agreement or understanding.

The Commissioner shall give notice to the parties or their attorneys of record, a reasonable time prior to said termination, of the filing requirement of this section. If the Commissioner gives such notice at a later time, irrespective of the right to file such agreement or understanding within the six-month period on a showing of good cause, the parties may file such agreement or understanding within sixty days of the receipt of such notice.

Any discretionary action of the Commissioner under this subsection shall be reviewable under section 10 of the Administrative Procedure Act.

The statutory mandate that, "If any party filing... [a true copy of an agreement or understanding between the parties to an interference] so requests, the copy shall be kept separate from the file of the interference..." is reflected in 37 CFR 1.666, which currently reads as follows:

§ 1.666 Filing of interference settlement agreements.

(a) Any agreement or understanding between [the] parties to an interference, including any collateral agreements referred to therein, made in connection with or in contemplation of the termination of the interference, must be in writing and a true copy thereof must be filed before the termination of the interference (§ 1.661) as between the parties to the agreement or understanding.

(b) If any party filing the agreement or understanding under paragraph (a) of this section so requests, the copy will be kept separate from the file of the interference, and made available only to Government agencies on written request, or to any person upon petition accompanied by the fee set forth in § 1.17(i) and on a showing of good cause.

(c) Failure to file the copy of the agreement or understanding under paragraph (a) of this section will render permanently unenforceable such agreement or understanding and any patent of the parties involved in the interference or any patent subsequently issued on any application of the parties so involved. The Commissioner may, however, upon petition accompanied by the fee set forth in § 1.17(h) and on a showing of good cause for failure to file within the time prescribed, permit the filing of the agreement or understanding during the six month period subsequent to the termination of the interference as between the parties to the agreement or understanding.

Finally, the statute and the rule are further explained in MPEP § 2366, which currently reads as follows:

2366 Interference Settlement Agreement

***

37 CFR 1.666 sets out the procedure for filing settlement agreements in interference cases. The PTO is merely a repository for copies of agreements filed under 35 U.S.C. 135(c) and does not undertake to rule on whether the statute requires that a copy of any particular agreement be filed. Nelson v. Bowler, 212 USPQ 760 (Comm'r Pat. 1981).

A Certificate of Mailing under 37 CFR 1.8 cannot be used for the purpose of filing a settlement agreement, nor can the settlement agreement be transmitted by facsimile, (37 CFR 1.6(d)(3) and 1.8(a)(2)(i)(C)).

The language of 35 USC 135(c) suggests at least the following questions, some of which have been answered by the case law or PTO practice and some of which have not yet been answered by the case law or PTO practice:

What is "an interference" within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

Who are the "parties to an interference" within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

What is an "agreement...made in connection with or in contemplation of the termination of the interference" within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

What is an "understanding...made in connection with or in contemplation of the termination of the interference" within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

What is a "collateral agreement[ ]" between the parties to an interference within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

What kind of a reference to a "collateral agreement[ ]" between the parties to an interference is required to trigger 35 USC 135(c)?

What is "the termination of... [an] interference as between the said parties to an agreement or understanding" within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

What (if anything) must one do if an agreement or understanding a copy of which has been filed in the Patent and Trademark Office pursuant to the first paragraph of 35 USC 135(c) is later modified (a) prior to termination of the interference, (b) within the six-month period subsequent to the termination of the interference as between the parties to the agreement or understanding, or (c) after the six-month period subsequent to the termination of the interference as between the parties to the agreement or understanding?

Does the first paragraph of 35 USC 135(c) apply to an agreement or understanding made prior to the declaration of an interference?

What does it mean for an "agreement or understanding" to "be in writing" within the meaning of first sentence of the first paragraph of 35 USC 135(c)?

What is a "true copy" of an agreement or understanding within the meaning of the first sentence of the first paragraph of 35 USC 135(c)?

Who has standing to assert a violation of 35 USC 135(c)?

By what standard of proof must a party asserting a violation of 35 USC 135(c) prove its case?

How does the PTO implement the statutory mandate in the second sentence of the first paragraph of 35 USC 135(c) that, "If any party filing... [a true copy of an agreement or understanding between the parties to an interference] so requests, the copy shall be kept separate from the file of the interference..."?

What Government agencies are entitled to obtain access to the copies of 35 USC 135(c) agreements "kept separate from the file[s] of the interference[s]" pursuant to the written requests of the parties that filed the copies, and what Government agencies do obtain access to the copies of 35 USC 135(c) agreements "kept separate from the file[s] of the interference[s]" pursuant to the written requests of the parties that filed the copies?

How do the Government agencies go about obtaining access to the copies of 35 USC 135(c) agreements "kept separate from the file[s] of the interference[s]" pursuant to the written requests of the parties that filed the copies?

What do the Government agencies do after having obtained access to the copies of 35 USC 135(c) agreements "kept separate from the file[s] of the interference[s]" pursuant to the written requests of the parties that filed the copies?

What reasons have been accepted or not accepted as constituting "good cause" within the meaning of the second sentence of the first paragraph of 35 USC 135(c) for someone other than a "Government agenc[y]" to obtain access to a copy of a 35 USC 135(c) agreement "kept separate from the file of the interference" pursuant to the written request of the party that filed the copy?

If a party to an interference failed to comply with 35 USC 135(c), does the entire patent become permanently unenforceable or only the claims that were designated as corresponding to the count or counts in the interference?

If a party to an interference failed to comply with 35 USC 135(c), is a patent that matured from a downstream application permanently unenforceable?

If a party to an interference failed to comply with 35 USC 135(c), can that failure be remedied in any way?

What reasons have been accepted or not accepted as constituting "good cause" within the meaning of the fourth sentence of the first paragraph of 35 USC 135(c) justifying the filing of a copy of a 35 USC 135(c) agreement "during the six-month period subsequent to the termination of the interference as between the parties to the agreement or understanding"?

Is a notice of 35 USC 135(c) given in the declaration of the interference a "notice... [given] a reasonable time prior to... [the] termination [of the interference]..." within the meaning of the first sentence of the second paragraph of 35 USC 135(c)?

Does a notice given to a patent agent or agents of record rather than to an attorney or attorneys of record comply with the second paragraph of 35 USC 135(c)?

Is a patent permanently unenforceable if the Commissioner fails to give the required notice, but the patentee and/or the patentee's attorney or agent knew about 35 USC 135(c) and nevertheless failed to comply with it?

What are the "discretionary action[s] of the Commissioner" referred to in the third paragraph of 35 USC 135(c), and what standard of review will the court apply if you do seek review under section 10 of the Administrative Procedure Act of a discretionary action of the Commissioner under 35 USC 135(c)?

III. A Few Answers -- and a Few Guesses

A. What is "an interference" Within the Meaning of 35 USC 135(c)?

The only guidance we have on this question comes from Carella v. Starlight Archery 804 F.2d 135, 231 USPQ 644 (Fed. Cir. 1986)Carella v. Starlight Archery, 804 F.2d 135, 231 USPQ 644 (Fed. Cir. 1986). There a third party had previously sued the patentee (Carella) for a declaratory judgment, apparently that one or more claims in Carella's patent were invalid. The previous action had been settled, and the patentee had "fail[ed] to disclose [that settlement] to the PTO...."^[8] The defendant in the action for patent infringement on appeal argued that the patentee's failure to disclose the settlement of the previous litigation to the PTO "should have rendered Carella's patent void ab initio."^[9] The court rejected that argument, saying that:

We have considered this argument, but are unpersuaded. The cited cases [i.e., Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co. 324 U.S. 806, 65 USPQ 133 (1945)Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806, 818-20, 65 USPQ 133, 138-40 (1945), and Moog, Inc. v. Pegasus Laboratories, Inc. 521 F.2d 501, 187 USPQ 279 (6th Cir. 1975)Moog Inc. v. Pegasus Lab., Inc., 521 F.2d 501, 504, 187 USPQ 279, 281-82 (6th Cir. 1975)] are inapposite because they deal specifically with failure to disclose in the context of an interference proceeding before the PTO, which is not present in this case.^[10]

Thus, I think it safe to say that both patent infringement actions and actions for declaratory judgments of non-infringement and/or invalidity are not interferences within the meaning of 35 USC 135(c). However, how about (a) a patent-patent interference under 35 USC 291 and (b) a civil action under 35 USC 146 to review a decision by the board in a proceeding under 35 USC 135(a)? Even more importantly, how about an agreement or understanding between the parties to an incipient interference -- i.e., an interference that has not yet been declared?

As to patent-patent interferences under 35 USC 291, I know of no authority requiring that an agreement or understanding between the parties to a 35 USC 291 action must be filed with the Patent and Trademark Office,^[11] and it could be argued that, since, by definition, a United States district court has jurisdiction over any such proceeding, there would be no reason to file a true copy of an agreement or understanding between the parties to such a proceeding with the Patent and Trademark Office. On the other hand, a 35 USC 291 action is clearly "an interference" in a general sense, and it could be argued that the plain language of the statute requires that result whether or not it makes any sense. Moreover, if the point of 35 USC 135(c) is to aid the Antitrust Division of the Justice Department in ferreting out antisocial activity by the patent interference bar, there is no reason to think that we engage in any less such activity in patent-patent interferences under 35 USC 291 than we do in application-application and application-patent interferences under 35 USC 135. On balance, I recommend the filing of a true copy of any such agreement or understanding with the PTO.

As to civil actions under 35 USC 146 to review decisions of the board in proceedings under 35 USC 135(a), again assuming that the point of 35 USC 135(c) is to aid the Antitrust Division of the Justice Department in ferreting out antisocial activity by the patent interference bar, there is obviously no reason to draw a distinction between a 35 USC 135(a) proceeding before the board and a 35 USC 146 proceeding before a district court -- or, for that matter, between a proceeding before the board and an appeal to the Federal Circuit from a decision by either the board in a 35 USC 135(a) proceeding or a district court in a 35 USC 146 proceeding. However, in CTS Corp. v. Piher International Corp. 727 F.2d 1550, 221 USPQ 11 (Fed. Cir. 1984)CTS Corp. v. Piher International Corp., 727 F.2d 1550, 221 USPQ 11 (Fed. Cir. 1984), the court specifically left open the possibility that a 35 USC 146 proceeding is not "an interference" within the meaning of 35 USC 135(c):

We note with interest that appellee contends that an "interference," as stated in section 135, refers only to the proceedings in the PTO and not to the proceedings in the district courts under section 146. Thus, the "interference" in the instant case terminated in 1980 when the PTO granted priority to CTS. We, however, do not and need not reach this issue. Moreover, the record for this issue was not fully developed below.^[12]

As to an agreement or understanding settling an incipient interference, see section III.I, infra.

B. Who are the "parties to an interference" Within the Meaning of 35 USC 135(c)?

As stated in section I.C., "The Parties to an Interference" of Gholz, "Interference Practice," Chapter 24 in Patent Practice (6th Ed. Release No. 1):

The nominal parties to interferences in the Patent and Trademark Office are the named inventors, regardless of whether the applications or patents involved have been assigned. That is, the interference will be termed "Jones v. Smith," not "ABC Corp. v. XYZ Inc.," even if Jones and Smith have each left their former employers and have no further interest in the subject matter of the interference.

However, as that treatise notes in the next paragraph:

The polite fiction that the litigation is between the inventors rather than the owners of the applications or patents involved is, however, abandoned when it comes to discovery (e.g., when the question is whether a given document is in the possession, custody, or control of one of the "parties"), when it comes to determining personal jurisdiction or venue for a civil action brought to review the decision of the board under 35 USC § 146, and when two or more cases are owned by the same real party in interest.^[13]

While I have found no opinion that expressly deals with the issue, it is my opinion that, if the issue were ever litigated, the court would hold that the "parties to an interference" within the meaning of 35 USC 135(c) are the real parties in interest, not the nominal "parties" as that term is used in the Patent and Trademark Office.

The opinion that comes closest to answering this question is PPG Industries, Inc. v. Bausch & Lomb, Inc.___ F.Supp. ___, 205 USPQ 914 (W.D.N.Y. 1979)PPG Industries, Inc. v. Bausch & Lomb, Inc., ___ F.Supp. ___, 205 USPQ 914 (W.D.N.Y. 1979). There the defendant, Bausch & Lomb, argued that Brockaway's Weber patent^[14] was "unenforceable because a license agreement between PPG, Research Corporation[,] and Corning, excuted [sic; executed] September 16, 1969 was not filed with the Patent Office."^[15] The opinion says that Bausch & Lomb "contend[ed] that this agreement should have been filed because of the provisions of 35 U.S.C. Section 135(c), which requires parties to an interference to file agreements they make in contemplation of termination of the interference."^[16] That sentence implies that the September 16, 1969, license agreement was entered into prior to termination of the interference. However, elsewhere in the opinion the court indicated that the interference was Kistler v. Webber412 F.2d 280, 162 USPQ 214 (CCPA 1969)Kistler v. Weber, 412 F.2d 280, 162 USPQ 214 (CCPA 1969) (Rich, J.). That case was decided by the CCPA on June 26, 1969, which was before the license agreement was executed on September 16, 1969, and certiorari was not sought. Accordingly, the interference had apparently terminated before the license agreement was executed,^[17] which makes the court's analysis doubly suspect -- i.e., suspect for a reason other than the goofiness of the court's reasoning, discussed below.

Now, recall that the patentee was Brockaway and that the court said that the license agreement was "between PPG, Research Corporation[,] and Corning...."^[18] Elsewhere in the opinion the court said that "Research Corporation, acting as... [Brockaway's] licensing agent in the ophthalmic field, has [apparently as of the 1979 date of the court's opinion] licensed nearly fifty companies to use the Weber invention in strengthening lenses."^[19] Thus, Research Corporation's position in the license agreement with PPG and Corning was apparently that of Brockaway's agent, not that of a principal. Nevertheless, the court said that 35 USC 135(c) didn't apply because:

45. Brockaway was, at all relevant times, the owner of the Weber patent and was the controlling party to the interference between the Weber patent and Kistler's application. Brockaway was not a party to the agreement in question. Since the only agreements required to be filed under the penal provisions of the statute are those between parties to an interference, the statute is not applicable. PPG, which was a party to the agreement, was not a party to the interference. The fact that a PPG house counsel, Oscar Spencer, was representing Brockaway in the interference does not make PPG a party. It is clear that Spencer was acting under the direct control of Brockaway, its general counsel, Saperston, and its outside patent counsel, Christel.

46. The statute requires only the filing of agreements made in settlement of interferences or those which totally destroy the incentives of the parties to the interference to litigate in an adverse manner. The license agreement in question here did not terminate or otherwise decide the interference, and Research Corporation, the only party to the license agreement who was also a party to the interference,^[[20]] retained the same strong incentives to litigate after the license agreement that it had before that agreement. Research Corporation's financial incentives to win the interference were greater after the license agreement than they had been before it.^[21]

Comment: In my opinion, if Research Corporation was acting as Brockaway's "licensing agent" when it entered into the license agreement with PPG and Corning, Brockaway should have been deemed a party to the license agreement for purposes of 35 USC 135(c). However, 35 USC 135(c) apparently still did not apply (a) because the license agreement was entered into after the interference had been terminated^[22] and (b) because the party Kistler's assignee (which was apparently the University of Utah, although Judge Rich's opinion does not say so expressly) was not a party to the license agreement. That is, the license agreement was not between the real parties in interest to the interference.

Despite the general goofiness of the opinion, PPG can be cited (gingerly) for the proposition that 35 USC 135(c) does not require the filing of a license agreement entered into during the course of an interference between one real party in interest to the interference and another party that is not involved in the interference.^[23]

C. What is an "agreement... made in connection with or in contemplation of the termination of the interference" Within the Meaning of 35 USC 135(c)?

According to CTS Corp. v. Piher International Corp., 727 F.2d 1550, 221 USPQ 11 (Fed. Cir. 1984):

As a means to prevent anti-competitive settlements between parties involved in patent interferences, any settlement agreements between parties must be filed with the PTO.^[24]

***

We agree with the district court that, pursuant to section 135(c), there must be a causal relationship between the agreements and the termination of the interference. See United States v. FMC Corp. 514 F.Supp. 1166, 210 USPQ 486 (E.D. Pa. 1981), ___ F.Supp. ___, 215 USPQ 43 (E.D. Pa. 1982), rev'd, 717 F.2d 775, 219 USPQ 761 (3rd Cir. 1983)United States v. FMC Corp., 215 USPQ 43, 51-53 (E.D.Pa. 1982), rev'd on other grounds, 717 F.2d 775, 219 USPQ 761 (3rd Cir. 1983); cf. Moog [, Inc. v. Pegasus Laboratories, Inc., 521 F.2d 501, 187 USPQ 279 (6th Cir. 1975)], 521 F.2d at 506 ("The District Court was right in finding a causal relationship between the withholding [of an agreement] and the termination of the interference.").^[25]

That language certainly suggests that 35 USC 135(c) requires the filing only of copies of settlement agreements (i.e., of agreements that are part of the termination of an interference),^[26] and indeed CTS was found not to have violated 35 USC 135(c) in this case because the agreement a copy of which it did not file had nothing to do with the termination of the interference.^[27] However, there is other precedent that indicates that the obligation is actually much broader.

In Old Dominion Box Co. v. Continental Can Co. 273 F.Supp. 550, 155 USPQ 70 (S.D.N.Y. 1967), aff'd on other