Federal Circuit Vacates And Remands District Court’s Finding Of No Prosecution Laches Related To “GATT Bubble” Patent Applications
On June 1, 2021, the United States Court of Appeals for the Federal Circuit (“CAFC”) vacated-in-part and remanded a ruling from the U.S. District Court for the District of Columbia related to prosecution laches. Hyatt v. Hirshfeld, --- F.3d --- (Fed. Cir. June 1, 2021). The CAFC determined that the appellant, U.S. Patent and Trademark Office (“PTO”), met its burden to prove prosecution laches, and remanded to the district court to determine whether appellee Gilbert Hyatt had a legitimate reason to excuse his prosecution delay.
The four patents at issue in the appeal (the four Hyatt patents) resulted from applications filed during the “GATT Bubble”—the period leading up to the amendment of the patent statute in which the measure of patent term in the U.S. changed from 17 years following the date of issuance to 20 years following the filing date of the patent application. Hyatt filed a total of 381 GATT Bubble applications, which ultimately included approximately 115,000 claims. Examination of these applications was laborious—the PTO created an art unit of 12 examiners dedicated solely to the applications and estimated that it would take 532 years of examiner time to get through all of Hyatt’s GATT Bubble applications. The PTO spent more than $10 million in five years alone examining the claims (Hyatt, meanwhile, spent around $7 million in fees). Shortly after Hyatt filed all of the GATT Bubble applications, the Director of the PTO asked Hyatt to demarcate the applications, and Hyatt agreed, but later admitted that he never planned to do so. According to the PTO, the number, size, and overlap of the applications and claims, as well as Hyatt’s lack of cooperation, made it difficult for the examiners to determine priority dates or to determine whether the claims satisfied the written description requirement. For example, the four Hyatt patents at issue claimed priority to several applications filed in the 1970s and 1980s.
The PTO eventually rejected the four Hyatt patents, and on review the Board of Patent Appeals and Interference affirmed the majority of the rejections. Hyatt filed lawsuits against the PTO under 35 U.S.C. § 145 in the U.S. District Court for the District of Columbia seeking issuance of patents from the four Hyatt applications in 2005 and 2009. The court held a five-day bench trial on prosecution laches in 2017.
To prove prosecution laches, a party must show that the patentee’s conduct caused: (1) an unreasonable and inexcusable delay under the totality of the circumstances, and (2) prejudice attributable to the delay. The burden then shifts to the patentee to prove a legitimate excuse for the delay.
During the trial, the PTO attempted to prove prosecution laches by pointing to Hyatt’s conduct in front of the PTO. The PTO focused on Hyatt’s prosecution strategy with regard to all GATT Bubble applications—waiting years (even decades) after the alleged priority dates to submit claims, misleading the Director of the PTO about demarcating his applications, and jamming the examiners with hundreds of applications and hundreds of thousands of claims.
On the other hand, Hyatt argued that the PTO failed to show laches because: (1) it did not show that it provided Hyatt with adequate notice of the laches issue during examination, (2) it never issued laches rejections for the four Hyatt applications, and (3) it did not prove intervening rights. Accordingly, Hyatt argued, the PTO failed to meet its burden of proving unreasonable and unexplained delay by a preponderance of the evidence. The district court agreed with Hyatt, and eventually concluded that certain claims of three of the Hyatt patents were patentable and issued patents for those claims.
On appeal, the PTO challenged the district court’s findings with regard to prosecution laches and patentability. The CAFC first ruled that the PTO can assert the defense of prosecution laches in a § 145 action. The CAFC concluded that because the PTO has the authority to deny a patent issuance on prosecution laches grounds and to defend rejections on appeal based on prosecution laches, it follows that the PTO should be able to assert prosecution laches in a § 145 action. Further, citing Supreme Court precedent, the CAFC ruled that the PTO could assert prosecution laches even where it did not do so during the examination or prosecution of the patent applications.
Turning to the merits of the prosecution laches argument, the PTO concluded that the district court failed to consider the totality of the circumstances, and instead focused predominantly on the PTO’s role in the prosecution of the GATT Bubble applications rather than Hyatt’s conduct which caused an unreasonable and unexplained delay. The CAFC ruled that the PTO carried its burden of showing that Hyatt caused an unreasonable and inexcusable delay based on the facts discussed above. The CAFC found particularly persuasive the amount of time between the Hyatt patents’ filings and the applications to which they claimed priority, which the PTO argued was between 12 and 28 years. The CAFC ruled that an applicant must not only comply with the statutory requirements of the PTO regulations, but also must prosecute its applications in an equitable way that avoids unreasonable, unexplained delay, which Hyatt did not do.
Next, the CAFC considered the prejudice prong of the prosecution laches analysis. First, the CAFC concluded that the PTO must generally prove intervening rights in a § 145 action to establish prejudice. The CAFC ruled that an unreasonable and unexplained prosecution delay of six years or more raises a presumption of prejudice, including intervening rights. Given that Hyatt admitted to a delay of between 7 and 11 years, this presumption was met.
Given that the PTO had met its burden of showing prosecution laches, the CAFC vacated and remanded to the district court to determine whether Hyatt could prove that he had a legitimate, affirmative reason for delay which now excuses him from responsibility for the undue administrative burden that his applications placed on the PTO.