The Federal Circuit’s Take on Prosecution Laches Swallows Whole the Presumption of Validity

It is an understatement to say that the patent system in the United States has seen better times. The belief that U.S. patent quality is low is unfounded, but like so many other myths it endures despite its falsity. The persistent myth about low patent quality continues to mislead patent policy even though annual “correctness” reviews by the Patent Office show remarkably high levels of accuracy for patent examiners. The myth continues despite independent research showing that when mistakes are made it is far more common for examiners to reject patent claims than it is for them to issue patents with invalid claims.

Governance through anecdote does not make for ideal policy, particularly when mythological boogeymen meet opportunistic narratives that are specifically intended to tilt reality toward a predetermined endpoint. Ends are not supposed to justify the means, but the low patent quality narrative has been the means—no matter how wrong it is—to guide legal and policy decisions that favor big tech companies that infringe and then fight a war of attrition against innovators rather than pay their fair share for what they have taken.

The low patent quality narrative has been so successful that it has led to numerous policies and decisions over the last generation that have made it easier to challenge patents, easier to infringe patents, and increasingly more difficult to obtain patent protection in the first place as the result of ill-advised changes to the law of patent eligibility and obviousness. But over the last several years, we have seen this fight taken one step further. If innovations are too good, if patent applications are too strong, if no prior art can be found and implementers must suffer the indignity of paying for what they have taken, well then we have to stop innovators from acquiring so many patents and cut off their ability to receive patent protection if it takes longer than six years to obtain a patent. The U.S. Court of Appeals for the Federal Circuit is behind the creation of this idea—known as prosecution laches—which says that after six years no further patents should be allowed.

The problem is that both the Supreme Court and Congress have stated that prosecution laches cannot be used to attack patent applicants.

Supreme Court on Appropriateness of Laches

The Supreme Court found laches to be inappropriate more than 100 years ago in United States v. American Bell Tel. Co. In that case, the Court explained that “[w]hen [an applicant] has once filed his applications, complying with statutory requirements, then the Patent Office takes possession of the matter. It determines when and how it will act, and the applicant can only ask and wait.” This correctly means that once the applicant has filed, whether it is an application or a response to an examiner, the applicant has no opportunity to influence the speed with which the USPTO operates, and wisely recognizes that an applicant can’t possibly delay prosecution once the application or response is in the hands of the USPTO for action by the agency.

And while some many wonder about the relevance of a 100+ year old Supreme Court decision, it is still valid law, and it has been cited numerous times in other decisions up to the present. And we also have a far more recent Supreme Court decision that even goes farther and is more specifically on point. In 2017, the Supreme Court in SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC, possibly based in part on Judge Hughes’ convincing dissent in SCA Hygiene, reversed the Federal Circuit regarding the applicability of laches in patent cases, saying that for laches to have any relevance it must fill a “gap” in the legislation. Simply stated, where there is a statute of limitations it is simply inappropriate for laches to be used to support equitable unenforceability. Said another way, if there is a statute that gives an actor a certain time within which to act it cannot possibly be inequitable for the actor to have taken the length of time the statute gives. What a reasonable rule. Acting within given time periods allotted by the law is not wrong—it is specifically allowed.

Undeterred, the Federal Circuit knows better than the Supreme Court, and they were not about to abandon the idea of laches. Disregarding the “gap” required for laches to be appropriate in Hyatt v. Hirshfeld, the Federal Circuit purported to base the applicability of laches on a “totality of circumstances” that ultimately leads to a presumption of unenforceability regardless of the fact that there are bright line time-limits in both the statute and enabling regulations promulgated by the U.S. Patent and Trademark Office (USPTO). But fortunately, Judge Hughes appears to have seen through this subterfuge. During oral arguments in Hyatt v. Stewart, he recognized that prior Federal Circuit rulings over the last several years on the issue of prosecution laches are in direct opposition to the Supreme Court’s ruling in SCA Hygiene Prods.

Congress on Timeliness of Applicant Action

But not only does the Federal Circuit know better than the Supreme Court, they also know better than Congress, which, when it codified patent laws with the 1952 Patent Act, gave patent applicants a statutory deadline within which to act or suffer abandonment. Specifically, in the 1952 Patent Act, Congress codified the obligation of an applicant to respond to a USPTO action within six months to save the application from abandonment.

First, the 1952 Patent Act codified the responsibility of the USPTO to examine an application and notify the applicant of any decision. The text of 35 U.S.C. 132 as codified in 1952 read:

Whenever, on examination, any claim for a patent is rejected, or any objection of requirement made, the Commissioner shall notify the applicant thereof, stating the reasons for such rejection, or objection or requirement, together with such information and references as may be useful in judging of the propriety of continuing the prosecution of his application; and if after receiving such notice, the applicant persists in his claim for a patent, with or without amendment, the application shall be reexamined. No amendment shall introduce new matter into the disclosure of the invention.

Section 132 remains a part of the Patent Act today, with only the slightest of changes (i.e., changing “Commissioner” to “Director”).

Then, the text of 35 U.S.C. 133 as codified in 1052 read:

Upon the failure of the applicant to prosecute the application within six months after any action therein, of which notice has been give or mailed to the applicant, or within such shorter time, not less than thirty days, as fixed by the Commissioner in such action, the application shall be regarded as abandoned by the parties thereto, unless it be shown to the satisfaction of the Commissioner that such delay was unavoidable.

Today, 35 U.S.C. 133 reads:

Upon failure of the applicant to prosecute the application within six months after any action therein, of which notice has been given or mailed to the applicant, or within such shorter time, not less than thirty days, as fixed by the Director in such action, the application shall be regarded as abandoned by the parties thereto.

Simply stated, Section 133 defines the maximum time an applicant can wait to take action without the time being considered too long. The Code of Federal Regulations promulgated by the USPTO reinforces this clear statutory text, by not only explicitly saying that an application will go abandoned when there is no response filed within six months, but also further requires a complete and proper reply. See 37 CFR 1.135(b). Furthermore, Rule 1.135 prohibits gamesmanship by the filing of an incomplete or improper response, it requires a bona fide attempt to further prosecution and prevents attempts to file substantive papers after final rejection from resetting the six-month statutory time limit.

It is easy to see that this text—both statutory text and regulatory text—is a codification of the decision in American Bell. Once an applicant has filed an application, the USPTO takes possession of the matter and proceeds on its own timetable to make decisions ranging from whether the application is fully compliant with statutory and regulatory requirements, to whether on the substance the described invention is allowable. In all scenarios the applicant simply waits for some response from the USPTO and once a response is received action must be taken within six months or the application goes abandoned. There is no way for an applicant to “delay”.

Furthermore, the 1952 Patent Act also detailed the requirements for continuing applications in 35 U.S.C. 120, which in 1952 read:

An application for patent for an invention disclosed in the manner provided by the first paragraph of section 112 of this title in an application previously filed in the United States by the same inventor shall have the same effect, as to such invention, as though filed on the date of the prior application, if filed before the patenting or abandonment of or termination of proceedings on the first application or on an application similarly entitled to the benefit of the filing date of the first application and if it contains or is amended to contain a specific reference to the earlier filed application.

Today, although a bit longer, 35 U.S.C. 120 continues with the same allowances for patent applicants—there is a right to file a continuation provided the parent is co-pending.

It is critical to notice that in its wisdom Congress intentionally did not put a time limit on the continuing applications although it certainly knew how to put time limits in other provisions (e.g., 35 USC 133). And 35 U.S.C. 120 continues to have no time limit on the filing of a continuation. It is entirely unreasonable to believe that an uncodified provision finding an entire class of patent is presumptively unenforceable was intended by Congress when it is in blatant conflict with an expressly codified language of the 1952 Patent Act, which continues to be the law through today.

What’s Next?

In the coming months, the Federal Circuit is poised to decide several cases where prosecution laches will be front and center, including in the much-anticipated patent fight between Sonos and Google, argued where Sonos’ patent was lost because the district court presumed it to be unenforceable.

Simply stated, the Federal Circuit presumption that issued patents are unenforceable because it took too long to get the patent violates decades of common law, it ignores the explicit will of Congress as evidenced by the literal meaning of the Patent Act,  ignores the reality that applicants are required to operate within strict statutory time limits, and overlooks—or perhaps excuses—the singular role of the USPTO for causing prosecution delays.

If the Federal ’Circuit’s theory of prosecution laches is allowed to stand, the presumption of validity found in 35 U.S.C. 282 would be swallowed whole by the presumption of unenforceability, which would be a truly absurd result.

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Author: mborgali
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