Aristocrat v. IGT: Attorney Negligence, Revival, and Inequitable Conduct

Aristocrat Techs. v. Int’l. Game Tech. & IGT (N.D. Cal. 2011) (File Attachment: AristocratIneqCond.pdf (125 KB))

Patent attorneys regularly have hundreds of patent applications pending, each with their own due dates – far too many for anyone remember on their own. We keep track through docketing systems, paralegals, and attorney cross-checks. We are often overwhelmed – especially when firms change and staff leaves (as happened in this case). One of the comments to this post astutely introduced the old adage: “there but for the grace of God go I.”

The Aussie slot-machine manufacturer Aristocrat missed its US national stage patent filing deadline by one day. The patent was saved when the USPTO granted Aristocrat’s US attorney’s petition to revive the abandoned application based on the claim that the “entire delay” in filing the appropriate papers was “unintentional.”  During infringement litigation against market leader IGT, the district court first held the patent invalid based on a defense of improper revival. In particular, the district court held that the USPTO lacked authority to revive national stage applications unless the abandonment met the much higher standard of being unavoidable.  On appeal, the Federal Circuit reversed — holding that improper revival did not constitute a cognizable defense to allegations of infringement under 35 U.S.C. 282.

On remand, IGT shifted its focus to unenforceability — alleging that Aristocrat committed inequitable conduct in the revival of its abandoned application.

Late Filing and Hiding Abandonment from Client: The district court used one-hundred-twelve paragraphs to described the facts relating to the abandonment and revival.  Here are a few key facts:

  • January 10, 2000: On the day of the 30–month deadline, Aristocrat’s US patent counsel (Shahan Islam) used US Express mail to file the necessary documents to enter US national stage examination.  The USPTO received the documents the next day (January 11, 2000). However, according to the USPTO, Islam did not include sufficient evidence to prove the January 10, 2000 mailing date. And, Mr. Islam’s firm did not retain the filing evidence in a locally held file.
  • June 2001: The USPTO dismissed Islam’s petition to correct the filing date and indicated that the application remained abandoned.  Mr. Islam later testified that he did not remember receiving the June 2001 decision.  The court found that Mr. Islam likely saw the decision shortly after it was mailed.
  • November 2001: Aristocrat requested a status update on the application from Mr. Islam. (Up to that time, Aristocrat had been told nothing of the abandonment issues).  In December 2001, Mr. Islam responded in an e-mail that “we have learned that the application won’t be examined for at least another nine months(!) [or] so in view of the backlog.”  The e-mail did not indicate anything about the abandonment.  Mr. Islam also forwarded his response to another attorney at his law firm saying “lets discuss.”
  • During this same time period, eight other Aristocrat applications being prosecuted by Mr. Islam also went abandoned based on failure to respond to PTO notices mailed in 2001.
  • July 18, 2002: Mr. Islam (at this point with the KMZ firm) filed a petition for revival for unintentional abandonment — included a statement that “the entire delay in filing the required reply from the due date for the reply until the filing of a grantable petition under 37 CFR 1.137(b) was unintentional.”  In addition, Mr. Islam filed a preliminary amendment and petition for accelerated examination.  In a letter to Aristocrat, Mr. Islam incorrectly (and apparently intentionally) stated that the amendment & petition to accelerate had been filed in January 2002.  The letter did not mention the petition for revival.
  • September 3, 2002: USPTO granted the petition to revive. 
  • 2003: KMZ attorneys informed Aristocrat of the abandonments & revivals.

Revival: The USPTO typically does not require documentation to revive under the unintentional delay standard. Rather, the office relies on the applicant’s statements that the entire delay in filing a response was unintentional.  Here, the USPTO did not require specific documentation.

Unintentional versus Not Intentional: In its analysis, the district court held that the facts did not provide clear and convincing evidence that Mr. Islam had intentionally delayed the petition filing. In particular, the court could find no motive for the delay.  Instead, the delay appeared to be the result of Mr. Islam’s ongoing negligence rather than intentional misbehavior.  Negligence is the foundational non-intentional tort and therefore a finding of negligence does not suggest that the delay was intentional. In an odd logical analysis, Judge Whyte concluded that Islam’s failure to notify Aristocrat of the abandonment “actually suggests that the delay was unintentional.”

Mr. Islam did not want to disclose his errors [to Aristocrat] because he was likely embarrassed by his failure to act in accordance with his client’s instruction. Had it been granted, Mr. Islam’s Petition to Correct would have avoided abandonment altogether. Mr. Islam’s deflections in December 2001 show that he was fully aware that Aristocrat wished to proceed with the ‘717 application. Mr. Islam’s comments to Mr. Owen’s regarding the PTO backlog at the time further avoided acknowledging any personal responsibility for delay but it may have been correct, especially considering that the ‘717 application remained in an abandoned state even after the PTO had officially revived it. Still further, Mr. Islam’s incorrectly dated Second Preliminary Amendment is further evidence that Mr. Islam’s chief motive was to hide his failures from Aristocrat. Once the June 2001 Decision was sent, a decision to deliberately delay reviving the ‘717 application would not have helped to hide his errors from Aristocrat.

Although Judge Whyte found “Mr. Islam’s testimony was disturbingly vague and his lack of memory difficult to believe,” the Judge agreed with the notion the delay was entirely explained by Mr. Islam’s disorganization and the “out of control” state of his practice at the time. “Even if Mr. Islam failed to properly prosecute the ‘717 application, ‘unintentional’ delay does not require that the delay have occurred despite the exercise of due care and diligence (as does ‘unavoidable’ delay).”

After holding that the delay was not intentional, the court concluded that the statement regarding unintentional delay could not be a material misrepresentation and therefore that the defense of inequitable conduct could not stand.

Expert Opinion: Two leading patent law experts testified at the inequitable conduct hearing: Charles Van Horn for Aristocrat and Paul Gardner for IGT. While the court found the testimony helpful for explaining the prosecution of PCT applications, it found the experts’ extensive legal conclusions filled with “blatant advocacy” to be “not helpful.” Judge Whyte has been known to speak critically against expert testimony in patent cases.

44 thoughts on “Aristocrat v. IGT: Attorney Negligence, Revival, and Inequitable Conduct

  1. 44

    In-house, thanks for the reply.

     

    Actually,  if you check these threads recently, the whole subject of just what our duty of disclosure requires has been hotly debated.

     

    In a recent thread, for example, many here wanted to disbar an attorney who violated the rules against contacting the PTO to apparently report what could be willful fraud on the PTO. 

     

    We discussed the Precision Instruments case where the Supreme Court went out of its way to say that one who knew of fraud or perjury in a PTO proceeding had a duty to report it.  Most here still believe they have no duty to report known fraud by a third party regardless of the facts of Precision Instruments.

     

    In the case of fraud by one's own client, the practition has two conflicting duties.  The Supremes in Precision seemed to endorse simply withdrawing from further representation.

     

    The topic is worth a full discussion, because what our duties are, to say the least, are not well understood.

     

     

  2. 42

    Do I have a duty to report an ethical violation of another attorney? Well, if my state bar has incorporated DR 1-103 into their ethical rules then yes. Additionally some states have a fairly far reaching provision in their ethical rules that arguably reach out to attorneys of other states when it relates to violations in their state.

    Ned, are you not familiar with these ethical rules or are you just testing me and the rest of the commentors on our collective knowledge of the ethical rules?

    DR 1-102 Misconduct.
    (A) A lawyer shall not:
    (1) Violate a Disciplinary Rule.
    (2) Circumvent a Disciplinary Rule through actions of another.
    (3) Engage in illegal conduct involving moral turpitude.
    (4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.
    (5) Engage in conduct that is prejudicial to the administration of justice.
    (6) Engage in any other conduct that adversely reflects on his fitness to practice law.

    DR 1-103 Disclosure of information to Authorities.
    (A) A lawyer possessing unprivileged knowledge of a violation of DR 1-102 shall report such knowledge to a tribunal or other authority empowered to investigate or act upon such violation.
    (B) A lawyer possessing unprivileged knowledge or evidence concerning another lawyer or a judge shall reveal fully such knowledge or evidence upon proper request of a tribunal or other authority empowered to investigate or act upon the conduct of lawyers or judges.

  3. 41

    “Part of the reason it’d be interesting to hear Mr. Islam’s side of it.”

    I think a lot of us could benefit from hearing from Mr. Islam about his experience in this matter. But he’s not presenting at the AIPLA meeting on his role in this matter. Should the guy have to answer every question of every practitioner any time he makes a presentation, regardless of the topic?

  4. 40

    I don’t lie to my clients. There’s no point. They are all quite capable of looking the case up in PAIR and finding out for themselves what is going on, so there’s no point in telling them that everything is okey dokey and not to worry.

    I’m sure whatever issues Mr. Islam’s client(s) had with him were handled in the manner chosen by the client(s) (e.g. they fired him, they did/did not report him to the state bar/PTO, whatever). I don’t think asking him in a room full of his peers to relay details of his actions and the consequences thereof would make somebody gutsy. To me it would make somebody a jerk.

  5. 39

    Malcolm, don’t get too far ahead off my “Socratic method.” Look, for example to the subsequent posts to see where I’m going.

  6. 38

    IP, if you were in-house counsel that was lied to such as here, would you file a complaint with the PTO, quietly fire the firm and move on, discuss the matter with the firm’s management, something else? Do you believe you have a duty as in-house counsel to report violations of ethical rules to the authorities?

  7. 37

    Ned what ethical rules are broken if the counsel misinforms the client about the case to cover up minor malpractice that are correctable?

    R U Fking kidding me?

  8. 36

    “All, what ethical rules are broken if the counsel misinforms the client about the case to cover up minor malpractice that are correctable”

    Don’t tell me we’re not allowed to lie to our clients?!?!?!? Makes it really hard to date them if that’s the case!!!!!

    Rule 1.4 Communication
    (a) A lawyer shall:

    (1) promptly inform the client of any decision or circumstance with respect to which the client’s informed consent, as defined in Rule 1.0(e), is required by these Rules;

    (2) reasonably consult with the client about the means by which the client’s objectives are to be accomplished;

    (3) keep the client reasonably informed about the status of the matter;

    (4) promptly comply with reasonable requests for information; and

    (5) consult with the client about any relevant limitation on the lawyer’s conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.

    (b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

  9. 35

    I agree. Yet, from my own experience, I have found the practice to be not that uncommon. If a firm makes a small but correctable mistake, they fix it on their own dime and do not inform the client. The present case went a little beyond the norm in that it did appear that the counsel did more than just not inform the client.

    All, what ethical rules are broken if the counsel misinforms the client about the case to cover up minor malpractice that are correctable?

  10. 34

    Of course, to avoid the whole _Rakofsky vs. Internet_ issue See: link to scribd.com I want to make it clear to Mr. Islam that I am only alleging he lied because the court said he did in my opinion. Part of the reason it’d be interesting to hear Mr. Islam’s side of it.

  11. 33

    You may want to check out on-line web-hosted services if you’re a small shop. Frontier IP is one example. If you don’t have an IT group, it may be more to bite off than you want to run your own docketing system.

  12. 32

    What’s the view link from down there wrote:”Not excusing his behavior, but don’t really see the point in publicly humiliating him for it.’

    I hope you don’t lie to your client like he did. As in-house counsel, I would be furious if I was ever lied to like Mr. Islam’s clients were lied to.

  13. 31

    While we are on the subject, are there good automated systems available for docketing for PC and Mac based systems? Even in calendaring systems, someone has to type in deadlines, generate ticklers, etc. There are some online apps, but they cost too much, and who knows what happens when the company that runs them shuts down, or you decide you don’t want their services anymore.
    How would a good calendar app have helped the attorney in this case? He could have filed a petition to revive along with the petition to correct the filing date. He used no return receipt post card? No mail log? No Express mail statement? No express mail receipt? Waited till the last day to file so he left himself no chance to recover from an error? Even back then, the Post Office would provide records of deposit and delivery over the internet. So many other things went wrong here that a better calendar system probably would not have helped.

  14. 30

    Probably not, although it’s a valid point. The PTO requires a showing after two years delay, so one assumes that the delay must go well beyond that before laches becomes a viable argument, IMHO, anyway.

  15. 29

    anon,

    It almost goes without saying that you should refer back to my reply to It almost goes without saying.

  16. 28

    suggests to me that you’re a fxcking t00l

    Yet another vacuous use of a slang term that has no real meaning. Here, “associate” seems a perfectly legitimate concept. You may not like it, but the term fits. I am convinced that the use of the word t00l only indicates that the user of that term lacks intellect to say something meaningful.

    Why bother posting when the post shows the poster to be a thoughtless third grader?

  17. 25

    Children often use the whiney excuse “I didn’t mean to”.

    For children, it does not always succeed. Indeed, that particular excuse often tends to annoy those to whom it is directed, who piously reply with the need to learn lessons about taking consequences for careless actions.

    What provisions of US law protect the public, when the owner of a published but long-abandoned US patent application pops up with a petition for restoration with the excuse “I didn’t mean to let it go abandoned”?

  18. 24

    What do you think would happen at the PTO if they shut down their docketing database and had all the examiners and LIE’s handwriting all of the due dates down on calendars? According to Mooney, it wouldn’t make a difference.

    Right. And I also said that even if your entire docketing staff was stripped naked and bound up with ropes so their hands were useless, they should be able to keep track of deadlines for 10 trillion different cases in their heads for ten years, and if a single deadline is missed under those circumstances, that is a sure sign of utter and total incompetence on the part of those naked, bound up people.

    And some people dare to disagree!

  19. 23

    When did I say it was not the responsibility of the attorney and could be delegated?

    I am aware that law firms operated prior to electronic docketing databases, Ned. Thanks for the insight though. /sarcasm

    At a previous firm I once checked our docketing database and my name was associated with over 850 matters. But according to Mooney, it wouldn’t make a difference to my practice if all of that information was stored and managed in the electronic database or if I was writing them all down in my little red book. Need any more evidence that Mooney is an examiner.

    What do you think would happen at the PTO if they shut down their docketing database and had all the examiners and LIE’s handwriting all of the due dates down on calendars? According to Mooney, it wouldn’t make a difference.

    Get a fxcking clue.

  20. 22

    what, I am sure we had law firms, even patent law firms, prior to the invention of computers and computer databases.

    Just how in the world could they have handled their dockets?

    Docketing remains the responsibility of the attorney and cannot be delegated.

  21. 21

    Well Malcolm, why don’t you shut down your docketing database for 6 months and run your practice on nothing more than handwritten entries in a Standard Diary (that little red book that I’m sure you’re familiar with) and/or on a calendar. Then tell us whether it makes a difference or not.

    My classmate experienced both systems, hand kept docketing entries and a docketing database configured to generate docket reports every day. His experience was that the latter system made things much easier. I suspect most of us would arrive at the same conclusion.

  22. 20

    If you read the decision, it states that he was working at a firm that had no IP department when he got there, and was working off basically a manual docketing system (i.e. handwritten calendar entries).

    A classmate of mine worked at a firm that was forced to use such a manual docketing system for several months due to some system malfunction/breakdown.

    Why was it “nerve wracking”? I’m not aware of any reliable patent docketing system that doesn’t rely on manual entry of docket dates. As long as you can read the handwriting, what difference does it makes?

    Either the docketing department (which may consist of just one person, including the prosecuting agent/atty) is capable of doing the job or it isn’t. That’s not to say that mistakes won’t happen. They do. That’s what insurance is for. But if prosecutors in an office are walking around with ulcers because the docketing system isn’t up to the task, that’s a lawsuit waiting to happen.

    Fundamentals, people.

  23. 19

    “Dear [insert client name],

    As you are aware, our small boutique merged with a larger law firm last year. As often happens during such transitions, our staff who previously handled much of the docketing for your applications was ‘let go’ by the new management. As a result and, perhaps unsurprisingly, roughly a dozen of your patent applications went abandoned. Thankfully, it appears that only a minority of these would qualify as applications of critical importance to your business.

    We will keep you up to date as we revive the applications. We expect this process to proceed smoothly and, except for one or two cases, we do not believe that an appeal to the Federal Circuit will be necessary.

    Thank you for your understanding. If you have any questions, please let us know and we will respond as instructed by our outside counsel.

    Sincerely,

    [insert firm name here]”

  24. 18

    BTW, the fact that you would “associate” somebody with Mr. Islam for simply suggesting that there’s no point in further humiliating him suggests to me that you’re a fxcking t00l.

  25. 17

    If you read the decision, it states that he was working at a firm that had no IP department when he got there, and was working off basically a manual docketing system (i.e. handwritten calendar entries).

    A classmate of mine worked at a firm that was forced to use such a manual docketing system for several months due to some system malfunction/breakdown. He told me it was beyond nerve wracking.

    I’m not excusing his actions, I’m merely suggesting that as fellow members of the same profession we shouldn’t think it “gutsy” to humiliate the guy at a professional gathering. It serves no purpose whatsoever.

  26. 16

    I would not like to have to explain to any client (either Mr. Islam’s, or by association Mr. What’s the view like from down there, how anybody finds any case load too difficult to manage.

    Here is a hint: Do not bite off more than you can chew. Lawyers have an ethical responsibility to be able to serve their clients – this includes not only “capability” but “capacity.”

  27. 15

    Says the man who will examine the f out of some toiletpaper holders but who pulls no punches regarding the search habits of AUs doing things infinitely more complicated probably with less time.

    I lulzed.

  28. 14

    Well, should anyone have the guts, I would hope that prior to asking him they would reflect on the age old warning that “There but for the grace of God go I.”

    Not excusing his behavior, but don’t really see the point in publicly humiliating him for it.

  29. 12

    I wonder if anyone will have the guts to ask Mr. Islam about this case tomorrow when he speaks about protecting IP in Asia at the AIPLA?

    For reference:
    link to aipla.org

  30. 11

    I agree with the court’s conclusion that there was no inequitable conduct because clearly the patent attorney was trying to fix the problem of abandonment while not informing his client of the problem.

    Obviously the District Court named the patent attorney for a reason. I think Mr. Islam might be in trouble with the PTO, but not for inequitable conduct.

  31. 10

    “unable to come to terms with the extent of his incompetence and the potential repercussions?”

    lulz yep

  32. 9

    I wonder if some sort of laches argument would have worked here to render the patent unenforceable?

  33. 8

    The “odd” part is that attorney’s lies to Aristocrat suggest that he was thinking about the abandonment and yet did nothing for another six months.

    Woe be unto anyone who tries to get into this guy’s head. Maybe he was just in a state of panic half the time and denial the other half, unable to come to terms with the extent of his incompetence and the potential repercussions?

    Weirdly enough, anyone who practices in the US should probably be thanking Islam for the bungle because there is little doubt now that the law is generous when it comes to missing these “absolute” deadlines.

  34. 7

    I agree – the facts of this case are odd.

    But the logical analysis is not odd. It would be odd if Judge Whyte’s opinion was based on an odd logical analysis.

  35. 6

    Nothing wrong per se. Expert testimony is pretty much ueseless in all areas of litigation. Is anybody surprised that both plaintiffs and defendants can find “experts” who will, for $750/hour, testify to exactly opposite conclusions based on the same set of facts? So there’s a whole industry built up around this “expert testimony.” Doesn’t mean J. Whyte, or anybody else for that matter, has to be impressed by it. He’s simply saying what everybody else is thinking, but is too afraid to say out loud.

  36. 4

    The “odd” part is that attorney’s lies to Aristocrat suggest that he was thinking about the abandonment and yet did nothing for another six months.

  37. 2

    In an odd logical analysis, Judge Whyte concluded that Islam’s failure to notify Aristocrat of the abandonment “actually suggests that the delay was unintentional.”

    I’m not sure what is odd about this logical analysis. Makes perfect sense to me. If anything, the prosecution agent/attorney had a motive to cause no further delays. It would have been odd if the court had concluded that the delay was intentional.

  38. 1

    Judge Whyte “Even if Mr. Islam failed to properly prosecute the ‘717 application, ‘unintentional’ delay does not require that the delay have occurred despite the exercise of due care and diligence (as does ‘unavoidable’ delay).”

    I might have argued that if eight applications go abandoned in one year under your supervision, without instructions from the client to let them go abandoned, you are almost surely trying to fxxx up and crying for help.

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