Lead Article: Snooze? Think Again—Prosecution Laches and Why Applicants and Litigants Should Beware

Twenty-six years ago, the term of a patent was changed from 17 years from issuance to 20 years from filing.  Before this change, it had been a common practice for applicants to file continuations of patents to delay their issuance to keep the patents alive for as long as possible. These patents are sometimes referred to as “submarine patents”—an name apt for their presumed purpose, which is to hide below the surface and emerge when needed.  However, two recent rulings on a rarely-invoked defense—prosecution laches—may serve to force patentees to think twice about employing this strategy and give accused infringers an additional sword in their arsenal of defense.

            Prosecution laches is an equitable defense that dates back to the early 1900s.  An alleged infringer may invoke this defense to render a patent unenforceable if the patentee is found to have caused an unreasonable and unexplained lengthy delay in its prosecution.  Unlike traditional laches that is aimed to protect a particular competitor, the purpose of prosecution laches is to serve the public interest.  As the Supreme Court has said, “[a]ny practice by the inventor and applicant for a patent through which he deliberately and without excuse postpones beyond the date of the actual invention, the beginning of the term of his monopoly, and thus puts off the free public enjoyment of the useful invention, is an evasion of the statute and defeats its benevolent aim.”  Woodbridge v. United States, 263 U.S. 50 (1923).

            An ancient but rarely used defense, prosecution laches made headlines this year after the Federal Circuit sank four submarine patents in Hyatt v. Hirshfield and Judge Gilstrap overturned a $308 million verdict in Personalized Media Communications v. Apple on the ground of prosecution laches.  This article examines these two cases and explores some of the implications for patent litigants.

 

Hyatt v. Hirshfield—Revival of Prosecution Laches

 

Earlier this year, the Federal Circuit vacated a district court order to the PTO to issue four patents to Gilbert Hyatt, owner of a number of core patents related to microchip and integrated circuit technology.  Hyatt v. Hirshfeld, 998 F.3d 1347 (Fed. Cir. June 1, 2021).  These four patents, if issued, could be extremely valuable.  The PTO raised prosecution laches as a defense but the district court decided that the PTO failed to carry its burden of proof. 

            The patent applications at issue date back to 1995.  The year 1995 is significant in understanding the background of the Hyatt case: in that year, because of its adoption of the Uruguay Round of the General Agreement on Tariff and Trade (“GATT”), the U.S. agreed to change the patent term from 17 years from date of issuance to 20 years from the date of filing the application or an earlier non-provisional application to which the subject application claims priority.  The new law, which would become effective on June 8, 1995, triggered a flood of patent applications rushed to the PTO in the spring of 1995—a period that was later named the “GATT Bubble,” a name which figure prominently in the recent prosecution laches cases.   Hyatt bulk-filed 381 patent applications during the GATT Bubble, each one a photocopy of one his eleven earlier parent applications.  The four patent applications considered in the Hyatt decision come from Hyatt’s GATT Bubble applications.

            Following the initial GATT Bubble application, Hyatt filed a series of amendments that were not only excessive in length but also featured an enormous number of claims—averaging hundreds of claims per application.  Overwhelmed, the PTO gave Hyatt a series of notices and requirements to streamline the number of redundant claims, but Hyatt did not fully comply.  The PTO eventually rejected these four applications.

            In November 2005 and September 2009, Hyatt filed four § 145 actions seeking issuance of patents from these four patent applications.  In each complaint, Hyatt alleged that the PTO had made factual errors and failed to comply with the law.  The PTO countered that prosecution laches applied; Hyatt, the PTO argued,  had engaged in a “pattern of delay in prosecuting his nearly 400 patent applications from 1969 through the present day” resulting in the forfeiture of his patent rights. His  delaying tactics included claiming priority to applications more than 45 years old, bulk-filing over three hundred applications that were photocopies of his 11 prior applications on the eve of June 8, 1995, and agreeing with the PTO to focus each application on a different invention but then not doing so (and it was later revealed that he never planned to do so).  After a five-day bench trial,  the District Court found the PTO could have put in more effort and resources to accommodate Hyatt’s pending applications, and that the PTO’s meetings with Hyatt were too informal and otherwise inadequate.  Furthermore, because the PTO stayed prosecution of Hyatt’s patents from 2003 to 2012 pending the outcome of several litigations, the suspension of prosecution was not entirely caused by Hyatt.  Ultimately, the district court found the PTO—not Hyatt—had failed to “take the actions necessary to advance the prosecution of Hyatt’s applications,” rendering  prosecution laches inapplicable.  

            On appeal, the Federal Circuit reversed.  First, the Federal Circuit  examined the origin and history of prosecution laches and determined that it is still alive and available to both patent litigants and the PTO.  In particular, the Federal Circuit analyzed three prior cases that regarding prosecution laches: In re Bogese, 303 F.3d 1362 (Fed. Cir. 2002), Symbol Techs., Inc. v. Lemelson Med., Educ. & Research Found., LP, 422 F.3d 1378, 1385 (Fed. Cir. 2005), and Cancer Research Tech. Ltd. v. Barr Labs., Inc., 625 F.3d 724 (Fed. Cir. 2010).

            In Bogese, the Court found filing 12 continuations in an 8 year period—none of which addressed the reasons for previous rejections—triggered prosecution laches.  Similarly, in Symbol Technologies, the Federal Circuit found the applicant’s repetitive filing, which caused a 18- to 39-year delay between the filing and the issuance of the patents, to be unjustifiable.  More recently, in  Cancer Research, the Federal Circuit added another element to proving prosecution laches, requiring the proponent to demonstrate (a) that the patentee’s delay in prosecution was unreasonable and inexcusable under the totality of circumstances, and (b) that the accused infringer suffered prejudice attributable to the delay.  The Federal Circuit then denied the accused infringer’s prosecution laches defense because it has not proven prejudice.

            Applying these precedents to the facts in Hyatt, the Federal Circuit held that the district court misapplied the legal standard for prosecution laches, did not properly evaluate the PTO’s conduct, and failed to consider the totality of the circumstances.  The Federal Circuit applied  the two prongs of prosecution laches established in Cancer Research:

 

Totality of the Circumstances

The Federal Circuit first found that Hyatt’s four applications at issue all claim priority to applications filed in the early 1970s and 1980s, meaning that Hyatt had waited between 12 and 28 years to present his claims for prosecution.  Similar delay was found to have occurred across all of his GATT Bubble patents.  Hyatt presented arguments that suggested his delay was only between 10 and 19 years, but even accepting that as true, the Federal Circuit found that these  delays were sufficient to trigger prosecution laches.

            The court also criticized Hyatt’s prosecution approach which “all but guaranteed indefinite prosecution delay.”  Characterizing it as “the perfect storm that overwhelmed the PTO,” the court found several of Hyatt’s actions had caused the prolonged delay of the prosecution, including that:

• Hyatt claimed priority to a large number of early patent applications with different priority dates, causing great frustration to the examiners;
• Hyatt filed lengthy and complicated specifications, making it extraordinarily difficult and time consuming for the examiners to identify the elements; and
• Hyatt engaged in a pattern of filing amendments adding hundreds of claims to each application, some of them redundant and identical to the claims in prior filings, which further frustrated the review.

When considered in their totality, there was “no reasonable explanation . . . to justify Hyatt’s prosecution approach.” The Federal Circuit therefore concluded that Hyatt had engaged in unexplained and unreasonable delay and obstructed the PTO from examining his applications. 

 

Prejudice

In Hyatt, the court applied its precedent regarding prejudice in patent infringement cases to the § 145 action brought by Hyatt. This precedent generally required the accused infringer to establish  prejudice  attributable to the patentee’s delay, typically by proving the infringer had invested in, worked on, or used the claimed technology in the period of delay—in other words, the accused infringer needs to show intervening rights.  The Federal Circuit also borrowed from its precedents regarding the prejudice element in traditional laches defenses, which generally hold  that a six-year delay is presumptively “unreasonable, inexcusable, and prejudicial.”  Combining these two lines of cases, the Federal Circuit held that, in the context of a § 145 action, the PTO must generally prove intervening rights to establish prejudice, but an unreasonable and unexplained prosecution delay of six years or more raises a presumption of prejudice, and the burden shifts to the applicant to prove lack of prejudice.

 

The court went on to hold that:

Where a patent applicant has committed a clear abuse of the PTO’s patent examination system, the applicant’s abuse and its effects meet the prejudice requirement of prosecution laches.  A clear abuse of the patent system occurs when, for example, the applicant’s conduct unduly increases the administrative burden on the PTO and thereby effectively taxes everyone using the system.  Such abuse also demonstrates a dangerous likelihood that the applicant is harming the public’s interests more broadly, diminishing the patent system’s benevolent nature, and stifling innovation and creativity in the useful arts.  In rare circumstances like these, an applicant’s conduct and its effects on the PTO can alone suffice to prove prejudice for purposes of the prosecution laches defense in a § 145 action.

 

The Federal Circuit suggested that Hyatt’s conduct during the prosecution, which caused unreasonable and unjustifiable delay, may alone suffice to satisfy the prejudice requirement.  The court noted that, however, on remand, Hyatt would be entitled to present evidence to negate the presumption of  prejudice.  Thus, Hyatt ended with the PTO prevailing on its prosecution laches defense, leaving Hyatt with the task of rebutting prejudice on remand.

 

Application of Hyatt v. Hirshfield: Personalized Media Communications v. Apple

Shortly after prosecution laches was given new life in Hyatt, it stormed the Eastern District of Texas to blow away a $308 million jury verdict.

            In a patent infringement case between Personalized Media Communications (“PMC”) and Apple, the jury returned a verdict finding that Apple infringed PMC’s patent and awarded PMC over $308 million in damages.  Personalized Medica Commc’ns, LLC, v. Apple, Inc., No. 2:15-CV-01366-JRG (E.D. Tex. Aug. 5, 2021).  Three months later, Judge Gilstrap held a bench trial to determine Apple’s equitable affirmative counterclaims, one of them being prosecution laches.

            The evidence at the bench trial established that PMC’s infringed patent originated from two patent applications it filed in 1981 and 1987.  Between 1981 and 1995, PMC’s prosecution strategy was to delay filing continuations “as late as the law allowed” with the goal of enabling it “to exercise far-reaching market control for as long as 30 to 50 years.”  Additionally, PMC kept its patent portfolio hidden until after the claimed subject matter became widely adopted in the industry and only then —after infringement was engrained and widespread—engage in licensing or enforcement efforts.

            Just as Hyatt had, PMC filed a huge number (328) continuation applications during the GATT Bubble shortly before June 8, 1995. These applications claimed priority back to 1981 and 1987 applications, each one containing only placeholder claims to allow PMC to amend later while enjoying the benefit of pre-GATT law.  From these beginnings, the infringed PMC patent was not issued until 2012 and contained newly amended claims that were  added shortly before issuance.

            Judge Gilstrap found this case to be remarkably similar to the fact pattern in Hyatt and that, like Hyatt, the totality of the circumstances suggested that PMC had engaged in an unreasonable and unexplained delay in prosecuting its patents.  In particular with respect to proof of prejudice, Judge Gilstap noted that while PMC was prosecuting the patent that it would later assert, Apple had been developed its products over the intervening years without any awareness of PMC’s potential patent rights.  Apple’s intervening rights thus satisfied the prejudice prong.

            In his final disposition, Judge Gilstrap wrote, “[t]his Court takes very seriously the prospect of disturbing the unanimous verdict of a duly empaneled jury,” but “[a]t the same time, the Court cannot disregard the clear, timely, highly relevant, and—above all—binding authority from the Federal Circuit.”  Facing the striking similarity between this case and Hyatt, the Court sided with Apple and found PMC’s patent to be unenforceable, a decision that overturned the $308 million unanimous jury verdict. 

 

Takeaways

 

So what are the implications of these two cases to patent litigants and applicants?  First of all, Hyatt and PMC represent egregious prosecution tactics; as the Federal Circuit made clear, patentees can certainly file continuations without triggering prosecution laches.  The Federal Circuit provided three examples of permissible prosecution actions in Symbolic Techs.:

 

1. Filing a divisional application in response to a restriction requirement, even if the filing occurs immediately before issuance of the patent application;
2. Refiling an application to present new evidence of an invention’s unexpected advantages; and
3. Refiling an application to add subject matter in order to attempt to support broader claims as the development of an invention progresses.

 

            This list is not exhaustive and there are many ways in which an applicant can file applications and rightfully pursue patentability without rising to the level of Hyatt and PMC.  Further, even if a prosecution were delayed  beyond six years (after which prejudice is presumed), the applicant still has an opportunity to present evidence to negate prejudice.

            Second, applicants should keep in mind that it is the totality of the circumstances that matters.  As Hyatt and PMC had demonstrated, the courts will look beyond the patents at issue and examine the applicants’ conduct before the PTO as a whole.  Needless to say, seasoned litigants will (and should) diligently sift through  prosecution histories—particularly voluminous histories—to uncover any unreasonable conduct to support claims of prosecution laches.  The decisions in Hyatt and PMC  stand as a warning to patent applicants to think twice before engaging in a pattern of continuations and other delays during prosecution to avoid jeopardizing their right to patent protections.