Landmark Screens, LLC v. Morgan, Lewis, & Bockius, LLP, No. 2011–1297 (Fed. Cir. Apr. 23, 2012) (Judges Bryson, Clevenger, and O’Malley)
This is a malpractice case, and the conduct by Landmark’s former patent lawyer is pretty bad. The main issue before the court was whether Landmark’s fraud claim was barred by the statute of limitations, but it’s worth looking at the facts.
A Patent Filing Gone Wrong
Patent attorney Thomas Kohler filed a patent application for Landmark for an LED electronic billboard in early 2002. The USPTO issued a restriction, which means that the claims covered more than one distinct invention. What you normally do is elect to prosecute one of the inventions and then file one or more divisional patent applications for the other inventions. Done properly, the divisional gets the same filing date as the original application. But that’s not how it worked in this case.
The PTO issued the restriction in May 2003, and the original application published a couple of months later, in July 2003. So long as the original application was still pending (that is, it hadn’t issued as a patent or been abandoned), Kohler could file the divisional application. A patent issued from the original application on October 28, 2003.
Kohler filed a divisional in August 2003, while the original application was pending, but it had some major problems. He didn’t include drawings, which are required, and he didn’t incorporate the original application by reference. These omissions meant that the divisional application didn’t count as being filed on the date Kohler submitted it; it couldn’t get a filing date until all the requirements were met. He had until October 28, 2003 to fix it.
Normally, when you file an application by mail or by hand, you include a return receipt postcard. The return receipt postcard lists everything being submitted — the PTO will verify that everything on the list is included. If Kohler had included a postcard that listed the drawings, for example, the PTO would have notified him quickly that the drawings were missing.
But Kohler didn’t include a return receipt postcard in his submission. He would have to wait for the PTO to process the application to learn that it was incomplete.
Bad News Arrives from the Patent Office
By the time the PTO issued a Notice of Incomplete Nonprovisional Application, it was June 2004. The divisional still didn’t have a filing date because it wasn’t complete, and the original application was no longer pending. In the meantime, Kohler had left his old firm and moved over to Morgan, Lewis, although Landmark was still his client.
At this point, there was still time to salvage the divisional. Kohler could have filed the drawings and amended the specification, if he did it quickly. There was no way to get the original 2002 priority date back. But the hard deadline he was up against was the July publication anniversary of the original application. Once that date passed, the July 2003 publication would become a statutory bar! (Under 35 U.S.C. § 102(b), that published application would be a printed publication published more than 1 year before the divisional application was filed. That’s a total bar to patentability.)
Timeline of events
For some reason, Kohler did nothing for weeks, and the July deadline passed. The published application for Landmark’s own patent was now a statutory bar against its divisional application.
Without telling Landmark about the problem, Kohler filed the rest of the divisional application and petitioned the PTO to try to get the filing date of August 13, 2003. The PTO dismissed the petition, because there was no good cause for the errors. The divisional was considered filed on August 23, 2004, over a month too late.
What all this means is that Landmark lost these claims for good.
It gets worse.
Worse Than the Crime?
Kohler didn’t tell Landmark about the problem until December 2004, nearly six months later, when Landmark telephoned him to get a status report. Kohler apparently told Landmark that they were still working to salvage the claims, even though that wasn’t true. Landmark finally fired Kohler and Morgan, Lewis the next year.
(The defendants didn’t dispute any of these facts.)
Heading to Court, and Then to Another Court
Landmark filed a malpractice suit in California state court in 2005. Kohler’s original firm settled, but the case went on for Kohler and Morgan, Lewis. In 2008, the state court dismissed the case for lack of jurisdiction, finding that it should have been filed in federal court. Landmark filed a complaint in federal court the same day.
None of this was Landmark’s fault, as Judge O’Malley pointed out in her concurrence. In 2005, when Landmark filed the suit, precedent said that it should be filed in state court. But in 2007, the Federal Circuit issued a couple of opinions that expanded its jurisdiction over malpractice cases. Under the new opinions, the state court had no jurisdiction.
Why does this matter? Because it means that the federal suit wasn’t filed until almost 3 years after Landmark learned of the malpractice. California has a 1-year statute of limitations for malpractice claims, and it can’t be tolled because a suit was filed in the wrong court. So Landmark’s malpractice claims were barred by the statute of limitations.
This is exactly the kind of problem that Judge O’Malley had predicted in her opinions in USPPS, Ltd. v. Avery Dennison Corp. and Byrne v. Wood, Herron, and Evans, LLP, which Marynelle wrote about recently.
You Can’t Always Get What You Want, But…
Landmark wasn’t totally out of luck. It had added a claim for fraud, which has a 3-year statute of limitations. The district court dismissed that, too, as being barred, but Landmark appealed the dismissal.
While there was nothing to do about the malpractice claim, the Federal Circuit reversed the dismissal of the fraud claim. The facts were the same for the fraud claim as the malpractice claim, so the defendants had notice of the fraud claim when the state suit was filed. The court held that the statute of limitations was tolled (that is, it stopped running) while the state suit went forward.
This isn’t a pretty case. The filing mistakes were bad enough, and they were compounded by failing to include a return postcard and failing to promptly respond to incoming mail from the PTO. But not telling the client what’s going on? That’s totally inexcusable. The ethical rules require disclosure, and owning up to mistakes is just the right thing to do.
This ends today’s cautionary tale…
Photo credit: Sarah DuMay