Burandt v. Dudas

• Decision Date: 10 June 2008
• Docket Number: No. 2007-1504.,2007-1504.
• Citation: 528 F.3d 1329
• Parties: Corliss O. BURANDT, Plaintiff-Appellant, v. Jon W. DUDAS, Director, United States Patent and Trademark Office, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

528 F.3d 1329

Corliss O. BURANDT, Plaintiff-Appellant, v. Jon W. DUDAS, Director, United States Patent and Trademark Office, Defendant-Appellee.

No. 2007-1504.

United States Court of Appeals, Federal Circuit.

June 10, 2008.

Scott F. Yarnell, Hunton & Williams LLP, of McLean, VA, argued for plaintiff-appellant. Of counsel on the brief were Donna M. Praiss, Elizabeth M. Wieckowski, and Eugene C. Rzucidlo, of New York, NY; and George M. Macdonald, Law Office of George M. Macdonald, of New Canaan, CT.

Mary L. Kelly, Associate Solicitor, Office of the Solicitor, United States Patent and Trademark Office, of Arlington, VA, argued for defendant-appellee. With her on the brief were Stephen Walsh, Acting Solicitor, and Thomas L. Stoll, Associate Solicitor.

Before NEWMAN, LOURIE, and BRYSON, Circuit Judges.

LOURIE, Circuit Judge.

Corliss O. Burandt ("Burandt") appeals from the decision of the United States District Court for the Eastern District of Virginia granting summary judgment in favor of the Director ("Director") of the U.S. Patent and Trademark Office ("PTO") and affirming the Director's denial of Burandt's request to reinstate his patent for failure to pay the maintenance fee. Because the district court did not err in upholding the Director's denial of Burandt's request for reinstatement, we affirm.

BACKGROUND

In 1980, Burandt designed internal combustion engines for Investment Rarities, Inc. ("IRI"). The following year, Burandt entered into an assignment agreement with IRI ("the 1981 Agreement"). The agreement provided that IRI would fund Burandt's research efforts and, in return, any patent application or patent resulting from that research would become the property of IRI. As compensation, Burandt was entitled to receive a percentage of the profits derived from the patents. Burandt was also entitled to repurchase the patents from IRI in the event IRI ceased funding Burandt's research. To exercise that option, Burandt was required to provide written notice and payment, or alternatively, a lien against future revenues to IRI.

On April 7, 1988, Burandt filed a patent application that issued as U.S. Patent 4,961,406 ("the '406 patent") on October 9, 1990. Burandt is the named inventor on the '406 patent and IRI is the assignee. The '406 patent is directed to "methods and devices for affecting the size and timing of valve events as related to air-fuel mixture burn rates for the optimizing of engine performance at various engine speeds." '406 patent col.1 ll.10-15. Pursuant to the agreement, IRI was the legal title holder of the '406 patent at the time of issuance. However, Burandt tried to exercise his repurchase rights even before the patent issued on March 30, 1989, and Burandt claims that he thus gained equitable title to the patent.

IRI, as the legal title holder, was required to pay maintenance fees at three points during the life of the patent, viz., three and a half, seven and a half, and eleven and a half years from the date of issuance. 35 U.S.C. § 41(b). The first maintenance fee was due on April 9, 1994, but under the statutory provision governing maintenance fees, the fee could be paid up to six months from that date without a surcharge. Id. IRI failed to pay the first maintenance fee by the end of the six-month grace period, and the patent accordingly expired on October 9, 1994.

According to Burandt, he became mentally disabled at some point before 1992. Burandt submitted a declaration from his psychiatrist, Dr. Warner, who has continuously treated Burandt since 1992. Dr. Warner opined that Burandt had been suffering from an anxiety disorder that precluded him from holding a job since before Dr. Warner started treating him. Because Burandt was without a job, he began relying on government assistance in 1991.

Burandt learned of the expiration of the '406 patent in December 2001, seven years after the patent had expired, when he contacted the PTO about his patent after reading an article about Honda's introduction of a variable valve engine. Burandt admits that he did not inquire about the '406 patent at any point before then. After learning of the expiration, Burandt sought financial and legal assistance in an effort to reinstate his patent by reaching out to attorneys, the press, congressional leaders, and automobile manufacturers. He sought and actually regained legal title from IRI on May 21, 2002, long after the patent had lapsed.

On October 13, 2005, Burandt, through his attorney George Macdonald, filed a petition in the PTO under 37 C.F.R. § 1.378(b) for acceptance of a delayed maintenance fee payment, asserting that the failure to pay the maintenance fee was unavoidable. Burandt argued that he should not be bound by IRI's actions, viz., its failure to pay the maintenance fee, because he held equitable title in the patent and he was excusably unable to pay the fee. Burandt urged the PTO to consider the reasons for his inaction in deciding whether the delay in the payment of the maintenance fee was unavoidable. The PTO denied the petition on October 31, 2005. Burandt filed a petition for reconsideration of the decision, which was denied on February 1, 2006. Burandt then filed another petition for reconsideration, which was denied in the Final Agency Action dated May 26, 2006.¹

Burandt brought an action against the Director under the Administrative Procedure Act ("APA") in the Eastern District of Virginia, alleging that the Director's denial of his request for reinstatement was arbitrary and capricious and an abuse of discretion. Both parties moved for summary judgment. On July 12, 2007, the district court granted summary judgment in favor of the Director. Burandt v. Dudas, 496 F.Supp.2d 643 (E.D.Va.2007). In reaching its decision, the court noted that under our decision in Ray v. Lehman, 55 F.3d 606 (Fed.Cir.1995), one must look to the actions of the party responsible for payment of the maintenance fees to determine whether a delay in payment was unavoidable. The court determined that IRI was the party responsible for making payment here and that Burandt failed to proffer any evidence showing that IRI exercised due care in paying the maintenance fee. In contrast, the record showed that IRI deliberately allowed the '406 patent to expire, as it had allowed three others of Burandt's patents to expire prematurely. The court also rejected Burandt's assertion that his actions, as the putative equitable owner of the patent, should have been considered in the unavoidable delay analysis. The court found, however, that even if Burandt's actions had been considered, Burandt failed to show reasonable care in paying the maintenance fee and thus the same result would have been reached. The court entered final judgment in favor of the Director.

Burandt timely appealed the court's decision. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

We review a district court's grant of summary judgment de novo, reapplying the standard applicable at the district court. See Rodime PLC v. Seagate Tech., Inc., 174 F.3d 1294, 1301 (Fed.Cir. 1999). Because this case was brought under the APA, we apply the standard of review set forth in that statute. The APA provides that "[t]he reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Under an arbitrary and capricious standard, the scope of review is narrow and a court may not "substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). A court reviewing the agency decision "must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S. 281, 285, 95 S.Ct. 438, 42 L.Ed.2d 447 (1974) (quotations omitted). "An abuse of discretion occurs where the decision is based on an erroneous interpretation of the law, on factual findings that are not supported by substantial evidence, or represents an unreasonable judgment in weighing relevant factors." Star Fruits v. United States, 393 F.3d 1277, 1281 (Fed.Cir.2005).

On appeal, Burandt raises four primary arguments. First, Burandt argues that the district court erred by giving deferential review to the PTO's determination regarding unavoidable delay. Second, Burandt asserts that the court erred by focusing on the actions of IRI as the legal title holder in determining whether there was unavoidable delay rather than focusing on the actions of Burandt as the equitable owner. Third, Burandt contends that the court erred by failing to find that Burandt's delay in paying the maintenance fee was literally unavoidable. Lastly, Burandt argues that the court erred in sustaining the denial of the Rule 183 Petition.

In response, the Director argues that the district court correctly concluded that the PTO's denial of Burandt's request for reinstatement was neither arbitrary nor capricious. The Director asserts that, under Ray v. Lehman, 55 F.3d 606 (Fed.Cir. 1995), the court properly considered the actions of IRI as the legal title owner. According to the Director, the record demonstrated that IRI failed to pay the required maintenance fee and thus that Burandt failed to make a showing of unavoidable delay. Lastly, the Director argues that the court correctly determined that even if the actions of Burandt had been considered, Burandt's claim would still have failed because he did not exercise sufficient diligence to satisfy the unavoidable delay standard.

We agree with the Director. The Patent Act governs whether a patent that has expired due to nonpayment of maintenance fees can be reinstated. Pursuant to 35 U.S.C. § 41(b), maintenance fees are to be paid at three different intervals during...