Burandt v. Dudas

United States Court of Appeals for the Federal Circuit

2007-1504

CORLISS O. BURANDT,

Plaintiff-Appellant,

v.

Jon W. Dudas, DIRECTOR, UNITED STATES PATENT AND TRADEMARK OFFICE,

Defendant-Appellee.

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

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

Appealed from: United States District Court for the Eastern District of Virginia

Senior Judge Claude M. Hilton
United States Court of Appeals for the Federal Circuit

2007-1504

CORLISS O. BURANDT,

Plaintiff-Appellant,

v.

Jon W. Dudas, DIRECTOR, UNITED STATES PATENT AND TRADEMARK OFFICE,

Defendant-Appellee.

Appeal from the United States District Court for the Eastern District of
Virginia in Case No. 1:06-CV-1141, Senior Judge Claude M. Hilton.

_____________________

DECIDED: June 10, 2008
_____________________

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

2007-1504 2
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

2007-1504 3
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

1
Burandt also filed a fourth petition, a Petition Under 37 C.F.R. § 1.183 for
Suspension of Rule 37 C.F.R. § 1.378(b) (“Rule 183 petition”), which the PTO denied in
its May 26, 2006 decision.

2007-1504 4
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 (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 (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).

2007-1504 5
 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 the

life of a patent. 35 U.S.C. § 41(b). In the event payment of a maintenance fee is not

received in the PTO by the due date or within a six-month grace period, “the patent will

expire as of the end of such grace period.” Id. The statute further provides that:

2007-1504 6
 (c)(1) The Director may accept the payment of any maintenance fee
required by subsection (b) of this section which is made within twenty-four
months after the six-month grace period if the delay is shown to the
satisfaction of the Director to have been unintentional, or at any time after
the six-month grace period if the delay is shown to the satisfaction of the
Director to have been unavoidable.

35 U.S.C. § 41(c)(1) (emphases added). Thus, the statute provides the Director with

the discretion to accept a late maintenance fee any time after the close of the grace

period if the delay is shown to the satisfaction of the Director to have been unavoidable.

In Ray, we held that “in determining whether a delay in paying a maintenance fee

was unavoidable, one looks to whether the party responsible for payment of the

maintenance fee exercised the due care of a reasonably prudent person.” Ray, 55 F.3d

at 609. Under the PTO regulations, a patentee can show unavoidable delay by

demonstrating that “reasonable care was taken to ensure that the maintenance fee

would be paid timely and that the petition [to accept an unavoidably delayed payment]

was filed promptly after the patentee was notified of, or otherwise became aware of, the

expiration of the patent.” 37 C.F.R. § 1.378(b)(3). In addition, “[t]he showing must

enumerate the steps taken to ensure timely payment of the maintenance fee, the date

and the manner in which patentee became aware of the expiration of the patent, and

the steps taken to file the petition promptly.” Id.; see also Ray, 55 F.3d at 609.

Here, IRI, as the legal title holder of the patent, was the party responsible for

paying the maintenance fee. The record demonstrated that IRI failed to exercise

reasonable care in ensuring that the maintenance fee would be paid in a timely manner.

Indeed, the record was devoid of any evidence suggesting that IRI took any steps to

make timely payment of the maintenance fee. Rather, the record indicated that IRI

allowed the ’406 patent to expire, as it had deliberately allowed three others of

2007-1504 7
Burandt’s patents to expire. As such, under the guidance set forth in Ray, we find no

clear error of judgment or any abuse of discretion with regard to the Director’s

conclusion that unavoidable delay was not shown.

We disagree with Burandt’s argument that the district court erred by focusing on

the actions of IRI. According to Burandt, he attempted to gain legal title to the ’406

patent in March 1989 by exercising his repurchase rights under the 1981 Agreement,

but IRI “obstinately” refused to reassign the patent, and the relationship between the

two parties deteriorated. Notwithstanding IRI’s refusal to reassign, Burandt contends

that he gained equitable title to the patent when he exercised his repurchase rights in

1989. Therefore, Burandt asserts that the ownership of the ’406 patent was “divergent”

at the time the first maintenance fee was due, and thus that he should not be bound by

IRI’s actions.

Burandt’s argument directly flies in the face of our holding in Ray, where we

expressly held that it is the actions of the party responsible for making payments of the

maintenance fees, the legal title owner, that must be considered when evaluating

unavoidable delay under 35 U.S.C. § 41(c). To the extent that Burandt suggests that

the Director cannot rely only on a party’s representation of ownership when presented

with a petition for reinstatement under 37 C.F.R. § 1.378, we find no basis to adopt such

a rule. The Director is entitled to rely on the representations of ownership by the parties

and need not engage in a separate analysis to determine title ownership. Moreover,

even if Burandt could have been considered the equitable owner of the patent, that

status would not override the fact that IRI was the owner of record with the legal

responsibility of paying the maintenance fees. The Director is entitled to rely on the

2007-1504 8
record and does not have to conduct an equitable analysis in order to determine who

must pay the maintenance fee.

Burandt further cites Futures Technology, Ltd. v. Quigg, 684 F. Supp. 430, 431

(E.D. Va. 1988), and Total Containment Inc. v. Buffalo Environmental Products, 35

U.S.P.Q. 2d 1385 (E.D. Va. 1995), in support of his assertion that the relevant inquiry

should have been whether Burandt, as the equitable owner, intentionally abandoned the

patent. As a preliminary matter, both Futures and Total Containment were decided by

the District Court for the Eastern District of Virginia and thus, in contrast to our decision

in Ray, are not binding precedent. Moreover, both cases concerned abandoned patent

applications pursuant to 37 C.F.R. § 1.137, rather than reinstatement of expired patents

due to nonpayment of maintenance fees pursuant to 37 C.F.R. § 1.378.

Additionally, those cases are factually distinguishable. In Futures, a case

decided before Ray, the plaintiff entered into an agreement with a company that was

made responsible for filing patent applications on the plaintiff’s inventions. The contract

expressly provided that the plaintiff was the equitable owner of any patent applications

or patents relating to its inventions. Although the prosecuting company received notice

of the rejection of the patent application and ultimately abandoned the application, the

company withheld such information from the plaintiff. Notably, when the plaintiff asked

the company about the status of the application, the company misled the plaintiff into

believing that work was being done on the application, when in fact the application was

abandoned. The district court held that the plaintiff’s delay in prosecuting the

application was unavoidable given the deception and hence the equities in that case.

Futures, 684 F. Supp. at 431.

2007-1504 9
 Here, unlike the plaintiff in Futures, the record shows that Burandt did not make

repeated inquiries about the status of his patent. Burandt conceded that he did not

inquire about the ’406 patent at any point during the time period between when the

patent issued in 1990 and when he read the Honda article in 2001—over a decade

later. Moreover, there is no evidence in the record that IRI made misrepresentations to

Burandt about the status of the ’406 patent as the company had done in Futures.

Significantly, Burandt conceded that he was aware that IRI had previously allowed three

of his other patents to expire; yet he continued to rely on IRI to make the maintenance

fee payments. Burandt’s reliance on Futures is therefore misplaced.

We likewise find Total Containment distinguishable from the present case. While

that case also involved the purported abandonment of patent applications, the court

considered a different standard—the “unintentional delay” standard of 37 C.F.R § 1.137.

As such, we are not persuaded by Burandt’s assertion that reversal is warranted in light

of Futures and Total Containment.

We further disagree with Burandt’s assertion that the district court erred by giving

deferential review to the PTO’s determination of unavoidable delay. Burandt’s

argument appears to be premised on his assertion that the court’s conclusion that delay

was not unavoidable conflicts with the Congressional intent of 35 U.S.C. § 41, viz., “to

avoid the inequitable loss of patent rights,” which Burandt states appears in the

legislative history. While it may well have been the intent of Congress to permit

patentees to avoid the inequitable loss of patent rights, Congress gave the Director the

responsibility of determining the circumstances under which a late payment may be

waived. We agree with the Director that unavoidable delay was simply not shown in this

2007-1504 10
case, particularly in light of IRI’s failure to pay the maintenance fee combined with

Burandt’s failure to inquire about the status of his patent until over a decade after his

patent issued. We thus find no conflict with the intent of the statute.

We are likewise unpersuaded by Burandt’s argument that the district court erred

in failing to find that the delay in paying the maintenance fee was literally unavoidable.

Burandt essentially argues that the court wholly ignored Burandt’s destitute financial

condition during the relevant time period and failed to give due weight to Burandt’s

mental disability in concluding that Burandt’s actions failed to meet the unavoidable

standard. We conclude that the district court did not err when it considered and rejected

the evidence relating to Burandt’s purported mental disability and destitution. Although

the facts surrounding Burandt’s situation are no doubt unfortunate, they are irrelevant

given IRI’s status as the legal owner of the patent at the time the first maintenance fee

was due. In any event, the Board and the district court considered Burandt’s financial

status and mental condition, but found no evidence in the record to show that, despite

his condition, he could not have inquired into the status of his patent during the eleven

years between the patent’s issuance and his discovery of its expiration in 2001.

Lastly, we disagree with Burandt that reversal is warranted because the district

court erred in sustaining the denial of his Rule 183 petition. Burandt filed a petition

under 37 C.F.R. § 1.183, which provides that:

In an extraordinary situation, when justice requires, any requirement of the
regulations in this part which is not a requirement of the statutes may be
suspended or waived by the Director or the Director’s designee, sua
sponte, or on petition of the interested party, subject to such other
requirements as may be imposed.

2007-1504 11
37 C.F.R. § 1.183. The PTO denied Burandt’s request for waiver upon concluding that

a showing of unavoidable delay is required under § 1.378 and thus that the fee cannot

be waived. There is no error in the PTO’s denial or in the district court’s upholding of

that denial. Section 183 is cast in discretionary terms, providing that the Director may

waive a requirement. He did not waive the fee requirement here, and, for the reasons

stated above, we find no error with respect to that decision.

We have considered Burandt’s remaining arguments and found none that justify

reversal. Accordingly, we conclude that the Director’s decision to deny Burandt’s

request for reinstatement of the ’406 patent was neither arbitrary or capricious, nor an

abuse of discretion.

CONCLUSION

For the foregoing reasons, we affirm the decision of the district court.

AFFIRMED

2007-1504 12