Digital Equip. Corp. v. Parker
| Decision Date | 02 April 1980 |
| Docket Number | Civ. A. No. 78-1842-Z. |
| Citation | 487 F. Supp. 1104 |
| Parties | DIGITAL EQUIPMENT CORPORATION, Plaintiff, v. Lutrelle F. PARKER, Commissioner of Patents and Trademarks, and Rene D. Tegtmeyer, Assistant Commissioner for Patents, Defendants, and Computer Operations, Inc., Defendant-Intervenor. |
| Court | U.S. District Court — District of Massachusetts |
Martin J. O'Donnell, Cesari & McKenna, Boston, Mass., for plaintiff; Donald R. Dunner, Finnegan, Henderson, Farabow & Garrett, Washington, D. C., of counsel.
Charles K. Mone, Asst. U. S. Atty., Boston, Mass., for defendants.
Stephen B. Deutsch, Boston, Mass., William L. Mentlik, Westfield, N. J., Foley, Hoag & Eliot, Boston, Mass., for defendant-intervenor; Richard I. Samuel, Lerner, David, Littenberg & Samuel, Westfield, N. J., of counsel.
This is an action to set aside a 1978 decision by the U. S. Patent and Trademark Office (USPTO) which arises in the course of continuing patent infringement proceedings involving plaintiff Digital Equipment Corporation ("Digital," "DEC"), defendant-intervenor Computer Operations, Inc. ("COI"), a competitor, and United States Patent No. 3,387,293, obtained by Digital in 1968 for a computer data storage and retrieval system. In the course of a 1974 antitrust action by COI1, Digital sought to bolster its claim to the patented system by applying to the USPTO for the correction of asserted technical defects in its patent and for reissue of the patent as corrected. Finding deceptive intention in Digital's failure to include required information in both the applications for issue and reissue, the USPTO "struck" the reissue application from the file pursuant to a USPTO regulation ("USPTO Rule 56") which permits summary dismissal of an application upon clear and convincing evidence of fraud. Digital now seeks to set aside the use of that summary procedure in this case. This claim is grounded on 5 U.S.C. § 706(2), a provision of the Administrative Procedure Act, and is before the Court on cross motions for summary judgment.
The facts of the case are set forth in affidavits, pleadings, memoranda and USPTO documents, and are essentially undisputed. The subject of the action is Digital's Patent No. 3,387,293 ("the '293 patent") for "Bidirectional Retrieval of Magnetically Recorded Data", the basis for a data retrieval system which Digital came to market under the names "DEC tape" and "Microtape" (the "system"). Development of the Microtape system was largely the work of employee Thomas C. Stockebrand ("Stockebrand") who joined Digital in 1962. Stockebrand had previously worked at MIT Lincoln Laboratories in Bedford, Massachusetts, where he participated in the development of a forerunner of DEC tape called "LINC tape", a system technologically similar to DEC tape. At Digital, Stockebrand worked in 1963 and 1964 to perfect the DEC tape system and to service a lease and purchase agreement which Digital entered into with KIE Data, Incorporated in May 1963. Although initial contracts to market the system in 1963 suffered disappointments in the system's performance and lapsed deadlines in the delivery of services, during that period Digital stepped up its efforts to market the system with additional publicity and personnel. Simultaneously, Stockebrand and other Digital employees were in the process of preparing an application for the patent, and in 1964 Stockebrand executed the oaths required for submission of the patent application.
On November 6, 1964, Stockebrand assigned the rights to what would become the '293 patent to Digital. Three days later Stockebrand filed the application with the USPTO. On June 4, 1968 the USPTO issued the patent to Stockebrand, and the patent became the property of the assignee, Digital.
Some five years after the '293 patent issued, defendant-intervenor COI began marketing a data retrieval system which had the option of reading and writing on DEC tape. Following an exchange of correspondence between Digital and COI on the subject of possible infringement, COI initiated Civil Action No. 74 CIV 980, (E.D. N.Y.) on July 2, 1974 asserting antitrust claims, and seeking a declaratory judgment to establish the invalidity and non-infringement of the '293 patent.
In the course of the District Court proceeding, and over COI's objection, Digital applied to the USPTO for correction and reissue of the '293 patent pursuant to 35 U.S.C. § 251, a provision which enables the Commissioner of Patents and Trademarks ("Commissioner") to correct and reissue outstanding patents when erroneous specifications, drawings or claims in the original application through no deceptive intention of the holder, render the patent inoperative or invalid.2 Digital's reissue application contained the requisite assertion of good faith and was submitted on the grounds that "certain of the original claims may be subject to a construction which covers more than the applicant is claiming as his invention". The reissue application not only listed the clerical errors in the text of the original application, but, additionally identified and distinguished Lincoln Laboratory's "LINC tape" and another Lincoln Laboratory system, "TX-2", which had not been identified by names in the original application, and acknowledged the 1963 sales and lease contracts, information arguably required, but absent from the original application.
In response to the reissue application, COI petitioned the USPTO to "strike" the application pursuant to 37 CFR § 1.56(d) (1979) (USPTO Rule 56), and on November 3, 1976 the USPTO issued to Digital an "Order to Show Cause" why COI's petition should not be granted. On November 22, 1976, COI submitted comments on the order. On March 2, 1977 Digital submitted comments and affidavits by counsel and Digital personnel.
On April 4, 1978, the USPTO issued its "Decision Striking Application Under 37 CFR § 1.56", which contained a lengthy discussion of the reissue application and the submissions by Digital and COI. The USPTO determined that with Digital's knowledge, Stockebrand's initial application withheld certain facts, and swore to the lack of knowledge of facts about the invention, the disclosure of which were required by law for the issuance of a patent: specifically, facts concerning sales of the system more than one year prior to the filing of the application, and the "prior art" most relevant to the invention. Considering his failure to disclose material misrepresentations and attributing them to both Stockebrand and Digital, the assignee, the USPTO set forth ten independent grounds to strike the application for reissue; nine grounds for fraud in the procurement of the original patent and one ground for fraud in the application for reissue.3 It is that decision of the USPTO which Digital seeks to set aside.
Digital attacks the April 4, 1978 decision on both procedural and substantive grounds. It argues that the decision to "strike the application from the file" pursuant to USPTO Rule 56, 37 CFR § 1.56(d) (1979), enlisted a summary procedural device which USPTO regulations make available solely for the processing of initial applications for patents. USPTO Rule 56 effectively permits the Commissioner to "dismiss" an application without a hearing upon a finding of fraud in the application. The consequence of using the summary procedure in reissue procedure, Digital contends, is to foreclose a statutory procedure which includes de novo review, and which Digital argues The Patent Act, 35 U.S.C. §§ 1, et seq. affords to every applicant for reissue.
Digital contends that this statutory violation has Constitutional dimension because the decision, based exclusively on petitions, comments and affidavits, amounted to a finding of fraud without benefit of live testimony and cross-examination of witnesses, and thus deprived the holder of the patent of liberty without due process of law. Finally, Digital argues that even if the invocation of summary procedures was not illegal, and a hearing de novo is, accordingly, not required, the USPTO decision was arbitrary and capricious and an abuse of discretion such that this Court, pursuant to 5 U.S.C. § 706(2), should set the decision aside and order a fresh hearing, including the taking of oral testimony.
Defendants contend that the April 4, 1978 decision by the Commissioner fully comports with statutory requirements and valid regulations. The Commissioner argues that because 35 U.S.C. § 251 is limited by its terms to the consideration of applications made without deceptive intention, the finding of fraud in any event pre-empts the USPTO's authority to reject or even to consider the application, and leaves no choice but to strike the application. Finally defendants assert that the decision is supported by sufficient evidence on ten independent grounds, any one of which would preclude a finding that the decision represented an abuse of discretion.
"Rule 56" Claim
The Commissioner of Patents and Trademarks is empowered by 35 U.S.C. § 131 to issue, and by 35 U.S.C. § 251 to "reissue", patents upon proper application of an inventor or other qualified party. See 35 U.S.C. §§ 111, et seq., particularly 35 U.S.C. § 251. The Patent Act, 35 U.S.C. §§ 1, et seq., sets forth procedures for the consideration of applications for the issue and reissue of patents, and empowers the Commissioner, "subject to the approval of the Secretary of Commerce, to establish regulations, not inconsistent with law, for the conduct of proceedings in the Patent Office." 35 U.S.C. § 6. Those regulations are found at 37 CFR §§ 1.1 et seq. (1979).
The subject of plaintiff's attack is the Commissioner's decision to "strike" a reissue application pursuant to a USPTO regulation, USPTO Rule 56,37 CFR § 1.56(d), 42 F.R. 5593 (Jan. 28, 1977), a summary procedure most commonly used in dismissing initial patent applications for fraud in the application. Plaintiff argues that the use...
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