By Nicholas A. Hurston
BridgeTower Media Newswires
RICHMOND — In a case that “should give pause to those who engage in […] patent prosecution,” the United States Patent and Trademark Office, or USPTO, “acted arbitrarily and capriciously” when it repeatedly refused to reinstate an application initially filed with an incorrect address.
Judge Leonie M. Brinkema of the Eastern District of Virginia saved an international patent application filed by Dr. Elan Pavlov, whose attorney mistyped the correspondence address and did not include filing fees.
Pavlov claimed the USPTO’s denials were contrary to the law, arbitrary and capricious. The parties filed cross-motions for summary judgment, which is the mechanism for deciding whether an agency action is supported by the record and consistent with the law.
Brinkema rejected the USPTO’s new fault-based standard as an “unexplained inconsistency” in his March 23 decision in Hints, Inc., et al. v. Hirshfeld.
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The application
Pavlov and his company, Hints, Inc., invented a process called the “Human Interaction News Trust System,” or HINTS, to detect online misinformation and fake news.
Pavlov’s patent agent employed “experienced patent counsel” to file an application electronically in November 2019 for HINTS. However, because the attorney “was dealing with a number of personal issues,” he listed the patent agent’s address for receiving correspondence about the application. Counsel mistyped the agent’s address in a single portion of the electronic application.
“Just about everything else on the Request was accurate, including the agent’s name, telephone number, fax number and ‘registration number,’ which was indexed to a USPTO file containing the correct […] address,” Brinkema said. Counsel even received an electronic filing receipt which listed the correct address.
Counsel also failed to include filing fees.
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The notices
In late November 2019, the USPTO mailed notice regarding the fees to the incorrect address and the U.S. Postal Service returned it with the indication, “RETURN TO SENDER/NO SUCH NUMBER/UNABLE TO FORWARD.” Pavlov’s agent did not receive the notice.
On Jan. 13, 2020, the USPTO sent a second and final notice to the wrong address, which again was returned.
“Rather than make any effort to determine whether it had a correct address in its records” in February 2020, the USPTO declared the application withdrawn and mailed notice again to the wrong address.
Pavlov’s agent did not discover the withdrawal until late 2020.
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Rejected petitions
Pavlov’s first reinstatement petition was filed in December 2020, along with the unpaid fees. The USPTO attorney-advisor dismissed the petition in January 2021, “finding that ‘there is no mechanism [...] to reinstate an international application that is considered withdrawn for failure to timely pay the required fees, regardless of whether the failure to timely pay the fees was intentional.’”
A second petition filed in late January 2021 was again denied by the same attorney-advisor who recognized their prior decision was “erroneous.” An exception, however, only applied if the USPTO failed to mail notices to correct address.
Pavlov’s third and final petition was filed in March 2021. In May 2021 — before the USPTO could respond — plaintiffs filed the underlying complaint.
In July 2021, the USPTO issued an 11-page decision that relief was not warranted because plaintiffs were at fault for not receiving the notices. They argued that “plaintiffs had ‘not cited any instances where the Office granted relief based on a showing of nonreceipt where the reason for nonreceipt was because applicant provided an invalid address[.]”
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Summary judgment standard
Under the Administrative Procedure Act, or APA, “a court may set aside an agency’s final action that is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” Brinkema explained.
An agency’s explanation must be satisfactory, with a rational connection between the facts and the agency action, and it must provide “enough clarity that its path may reasonably be discerned,” he said.
Although the review standard is “highly deferential,” Brinkema pointed out that “[a]n ‘unexplained inconsistency’ in agency policy indicates that the agency’s action is arbitrary and capricious, and therefore unlawful.”
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Persistently inflexible and unforgiving
The USPTO “was persistently inflexible and unforgiving” when it withdrew Pavlov’s application “despite twice being placed on clear notice by the U.S. Postal Service that ‘NO SUCH NUMBER’ existed [and] that the applicant had not received the past-due notices,” Brinkema found.
He noted the ease with which USPTO agents could have contacted the plaintiff and cited a 2017 USPTO decision in which a notice was returned as undeliverable “due to a miscommunication” and the examiner called that applicant’s phone.
Additionally, “there were multiple means by which the USPTO could have found the correct address” elsewhere in the file, Brinkema said.
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'New ground of applicant error'
Brinkema granted the USPTO summary judgment regarding its initial withdrawal of Pavlov’s application due to untimely payment of fees because the plaintiff failed to identify a law or past practice requiring the USPTO to attempt to find a correct address for remailing notices.
“On the other hand […] defendant’s final agency action dismissing plaintiffs’ Third Petition was arbitrary and capricious because it departed, without adequate notice to the applicants, from a past practice of vacating withdrawals […] when the applicant unintentionally did not receive the past-due notices but later tendered all required late fees and penalties with a request for reinstatement[,]” Brinkema said.
The plaintiffs cited three recent USPTO cases showing that past practice. Brinkema found the plaintiffs’ facts “not just similar” to those cases, but “more compelling” because “proof of nonreceipt [of agency notices] here was indisputable [and] there was no risk of fraud[.]”
“In essence, the USPTO dismissed [the] petitions on the new ground of applicant error,” said the judge, who found nothing in the record where the USPTO cited a case, statute or regulation supporting this.
Brinkema rejected the defendant’s justifications for the fault-based standard as inapplicable where there was clear evidence the applicants did not receive the notices and the USPTO never alleged they engaged in fraudulent tactics.
The defendant “cannot reasonably claim that it was unaware of” a 2017 USPTO decision which “granted relief […] where the reason for nonreceipt was because applicant provided an invalid address,” Brinkema held.
“At a minimum, defendant’s dismissal of plaintiffs’ [petitions] was arbitrary and capricious because defendant cannot explain why plaintiffs’ petitions […] should have been treated any differently than the petition in [the 2017 USPTO decision],” he concluded.
Brinkema ordered the USPTO to render permanent its vacatur of the “considered withdrawn” finding.
Attorneys for the parties did not respond to a request for comment before deadline.
