Patlex Corp., Inc. v. Mossinghoff

• Decision Date: 17 November 1983
• Docket Number: Civ. A. No. 82-5472.
• Citation: 585 F. Supp. 713
• Parties: PATLEX CORPORATION, INC., Refac International, Ltd., and Gordon Gould, Plaintiffs, v. Gerald J. MOSSINGHOFF, Commissioner of Patents and Trademarks, and The United States Patent and Trademark Office, Defendants, and Control Laser Corporation, Inc., Third Party Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

585 F. Supp. 713

PATLEX CORPORATION, INC., Refac International, Ltd., and Gordon Gould, Plaintiffs, v. Gerald J. MOSSINGHOFF, Commissioner of Patents and Trademarks, and The United States Patent and Trademark Office, Defendants, and Control Laser Corporation, Inc., Third Party Defendant.

Civ. A. No. 82-5472.

United States District Court, E.D. Pennsylvania.

November 17, 1983.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jeffrey S. Saltz, Philadelphia, Pa., for plaintiffs.

Stanley M. Weinberg, Asst. U.S. Atty., Philadelphia, Pa., for defendants, Gerald J. Mossinghoff, et al.

T. Andrew Culbert, Edward M. Posner, Stewart Dalzell, Philadelphia, Pa., for third party defendant, Control Laser Corporation.

MEMORANDUM OPINION

CAHN, District Judge.

I. PRELIMINARY STATEMENT

This is an action for declaratory and injunctive relief. Plaintiffs, Patlex Corporation, Inc. ("Patlex") and Gordon Gould ("Gould" or "plaintiffs") seek an order declaring unconstitutional certain procedures used by defendant, United States Patent and Trademark Office ("PTO") in reexamining plaintiffs' patent. Plaintiffs originally filed this action against PTO Commissioner Gerald Mossinghoff and the PTO. On January 31, 1983, this court granted Control Laser Corporation, Inc., ("Control Laser") leave to intervene as a third party defendant. Refac International, Ltd., ("Refac"), was joined as a necessary party plaintiff on February 23, 1983.

Plaintiffs attack the constitutionality of 35 U.S.C. §§ 301-307, the statutory provisions which provide the framework for the PTO reexamination procedures. Patlex and Gould also challenge internal PTO regulations and operating procedures on constitutional grounds. Finally, plaintiffs ask this court to vacate the PTO's order which permitted the reexamination of plaintiffs' patents and to enjoin the PTO permanently from proceeding with the reexamination of those patents.

There are currently two motions before the court. One is plaintiffs' motion for preliminary injunction. The second motion is the defendants' motion to dismiss or in the alternative for summary judgment.¹ Defendants argue that plaintiffs have failed to exhaust administrative remedies and that plaintiffs' complaint fails to state a claim upon which relief can be granted. The issues presented by both motions are virtually identical. Accordingly, the court has consolidated the motions and will dispose of the arguments presented by the parties in a single opinion.

II. FACTUAL AND PROCEDURAL BACKGROUND²

As the parties have submitted affidavits and presented witness testimony, defendant's motion will be treated as a Fed.R. Civ.P. 56 motion for summary judgment. Fed.R.Civ.P. 12(b)(6). Consequently, the pleadings must be construed liberally in a light most favorable to the plaintiff, and all doubt as to the existence of material facts must be resolved against the moving party. Lynn v. Heyl and Patterson, Inc., 483 F.Supp. 1247, 1250 (W.D.Pa.1980), aff'd, 636 F.2d 1209 (3d Cir.1980); Smith v. Webb, 420 F.Supp. 600, 601 (E.D.Pa.1976). With these standards in mind, the factual and procedural background of this action is described below.

On April 6, 1959, Gordon Gould filed an application with the PTO, Serial No. 804,540, which included claims to various inventions in the field of laser technology. On October 11, 1977, Gould was issued United States Patent No. 4,053,845 (the "'845 patent"). This patent pertains to Gould's alleged invention of an optically pumped light amplifier. Gould was granted a second patent, No. 4,161,436 (the "'436 patent") on July 17, 1979. The '436 patent was issued for a method of energizing a material through the use of light amplifier aparatus. After obtaining the '845 and '436 patents, Gould entered into agreements with Patlex and Refac, whereby Patlex and Refac obtained a percentage interest in the gross revenues generated by licensing the '845 and '436 patents. In return, Refac and Patlex assumed responsibility for enforcement of the patents and for the prosecution of the patent applications.

Gould, Patlex and Refac commenced civil actions to restrain the infringement of the '845 and '436 patents soon after obtaining the patent rights. At the time, there was widespread use in the laser industry of devices arguably covered by the patents. This fact, coupled with the financial restraints of widespread litigation, convinced plaintiffs to adopt a strategy of selectively enforcing the Gould patent rights. Plaintiffs identified and sued "representative" infringers with the intent to use favorable judgments to convince prospective infringers to execute licensing agreements.

On October 19, 1977, Gould filed suit in the United States District Court for the Middle District of Florida against Control Laser for infringement of the '845 patent.³ Less than one year later, on July 26, 1978, Gould filed suit in the United States District Court for the Northern District of California against General Photonics Corporation, also for infringement of the '845 patent.⁴ On March 1, 1982, that court held the '845 patent valid, and determined that the '845 patent had been infringed by General Photonics. Gould v. General Photonics Corporation, 534 F.Supp. 399 (N.D.Cal. 1982). This result was obtained, however, over General Photonics' protestations that it lacked the resources to mount an adequate defense to the lawsuit.

More extensive litigation surrounding the Gould patents followed. On November 1, 1979, Gould filed suit against Lumonics Research, Ltd., ("Lumonics") in the United States District Court for the Northern District of Illinois, for infringement of the '436 patent.⁵ In January of 1980, General Motors Corporation ("General Motors") intervened in the action as a defendant, and eventually settled with Gould by signing a license agreement. That case proceeds against Lumonics, and a trial date is expected to be assigned in the near future. On July 9, 1982, Bell Telephone Laboratories, Inc., ("Bell Labs"), Western Electric Company, Inc., and American Telephone & Telegraph Company, Inc., brought suit in the United States District Court for the Southern District of New York against Gould, Patlex and Refac.⁶ Those plaintiffs seek a declaratory judgment that the '845 and '436 patents are invalid and have not been infringed by plaintiffs in that action. Gould, Patlex and Refac have filed counterclaims for infringement of the two Gould patents. That case is not now being actively litigated by the parties.

On December 12, 1980, Congress amended Title 35 of the United States Code, and added Chapter 30, 35 U.S.C. §§ 301-307.⁷ These provisions outline a procedure for the reexamination of patents by the PTO. Previously, patent reexamination and validation was committed to the United States District Courts and, in some limited situations, to the PTO.⁸ Under 35 U.S.C. §§ 301-307, the Patent and Trademark Office Commission is authorized to reexamine patents sua sponte, 35 U.S.C. § 303, or upon request, 35 U.S.C. § 302.

The PTO promulgated rules governing the administration of the new patent reexamination procedure, 37 C.F.R. § 1.510-1.570, and added new provisions to its Manual of Patent Examining Procedures ("M.P. E.P."). These regulations mandate that all reexamination requests be accompanied by a $1,500 filing fee. 37 C.F.R. § 1.510(a). If reexamination is not instituted, $1,200 is refunded to the requester of the reexamination proceeding. 37 C.F.R. § 1.515(b). A reexamination request is considered filed when the fee is paid. The request is considered ex parte by the PTO, and the PTO does not permit the patent owner to challenge the request for reexamination. 37 C.F.R. § 1.530(a). The regulations state that "no statement ... by the patent owner ... will ... be acknowledged or considered in making the determination" of whether to reexamine. Id. Within three months of the filing of the reexamination request, a PTO examiner determines whether "a substantial new question of patentability ... is raised by the request". 35 U.S.C. § 303. Where any doubts exist, the PTO examiner should resolve all questions in favor of granting the reexamination request. M.P. E.P. § 2286. If it is determined that a substantial new question of patentability is raised, the examiner will enter an order for reexamination. 35 U.S.C. § 304; 37 C.F.R. § 1.525. Within a period of not less than two months after the reexamination order, the patent owner may file a statement discussing new questions of patentability and other issues he deems appropriate. 35 U.S.C. § 304; 37 C.F.R. § 1.530(b). If such a statement is filed, the original requester may, within two months, file a reply. 37 C.F.R. § 1.535. Upon completing reexamination, the examiner may find all patent claims patentable over prior art. If so, a certificate confirming the patentability of the claims is issued. 35 U.S.C. § 307. If the PTO determines that a claim is unpatentable, an "action" is entered explaining this finding. At that time, the patent owner may seek review of the examiner "action" by filing a timely written response with the PTO, and by serving that response on the party who requested reexamination. 37 C.F.R. § 1.550. If the examiner continues to hold claims unpatentable after considering the patent owner's response, a final "action" is issued. 37 C.F.R. § 1.570. Adverse final actions can be appealed by patent owners to the PTO Board of Appeals. 35 U.S.C. § 306. After exhausting these administrative procedures, judicial review of adverse decisions by the PTO Board of Appeals is available (1) on the administrative record in the United States Court of Appeals for the Federal Circuit, or (2) by trial de novo in the United States District Court for the District of Columbia. Id.

Apparently, circumstances in another patent controversy resulted in the reexamination request which is the subject of this action. On December 24, 1980, Gould filed suit against the Commissioner of the PTO, Gerald J....