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Realvirt, LLC v. Lee

United States District Court, E.D. Virginia, Alexandria Division

October 27, 2016

REALVIRT, LLC, Plaintiff,
v.
MICHELLE K. LEE, Defendant.

          MEMORANDUM OPINION

          T.S. Ellis II United States/District Judge

         Plaintiff Realvirt, LLC filed this 35 U.S.C. § 145 action to challenge a United States Patent and Trademark Office ("PTO") decision rejecting the patentability of the invention claimed in U.S. Patent Application Serial No. 07/773, 161 (the'"161 Application"). By Order and Memorandum Opinion dated July 19, 2016, plaintiffs complaint was dismissed for lack of subject matter jurisdiction on the ground that plaintiff was not the owner or assignee of the ' 161 Application and hence lacked standing to pursue a § 145 action. See Realvirt, LLC v. Lee, __ F.Supp.3d__, No. 1:15-cv-963, 2016 WL 3912855, *13 (E.D. Va. July 19, 2016), appeal docketed, No. 16-2669 (Fed. Cir. Sept. 20, 2016). The PTO then filed a motion for expenses, including attorneys' fees, pursuant to § 145. Shortly thereafter, plaintiff appealed the dismissal of the complaint to the Court of Appeals for the Federal Circuit, and that appeal remains pending. In response to the PTO's motion for expenses, plaintiff filed a motion to stay proceedings in this matter pending the Federal Circuit's resolution of plaintiff s appeal of the standing issue.

         For the reasons that follow, (1) plaintiffs appeal does not remove jurisdiction to consider both the PTO's § 145 motion for expenses and plaintiffs motion to stay proceedings; (2) a stay of proceedings is unwarranted because the PTO's motion for expenses must be resolved regardless of the outcome of plaintiff s appeal, and (3) the PTO is entitled to recover expenses and attorneys' fees incurred in this proceeding because plaintiff is an applicant, albeit one without standing, and is therefore obligated to pay the PTO's expenses and attorneys' fees.

         I.

         The facts pertinent to the motions at bar may be succinctly summarized.[1]

         Plaintiff Realvirt, LLC is a Delaware Corporation with its office in Massachusetts. Defendant Michelle K. Lee is the Under Secretary of Commerce for Intellectual Property and the Director of the PTO. The '161 Application describes a device that connects computers through multiple networks. Two inventors filed the '161 Application with the PTO in 1991, and in 1993 the PTO issued a Non-Final Rejection of the claims in the application. Later that year, the PTO issued a Notice of Abandonment to the inventors for failure to respond to the rejection notice. Approximately 14 years later, the inventors tried to revive the '161 Application, and later sought to transfer their purported ownership interest in the application to plaintiff. The PTO eventually allowed plaintiff, now the purported owner and assignee of the '161 Application, to proceed with its claims.[2] The PTO Examiner rejected the claims in the ' 161 Application in 2013, and the Patent Trial and Appeal Board ("PTAB"). affirmed that decision in 2015. Plaintiff then requested a rehearing, which the PTAB denied.

         At this point, plaintiff had the choice of either (i) appealing the PTAB's decision directly to the Federal Circuit for a review limited to the administrative record or, (ii) initiating a § 145 action in the district court, where plaintiff could introduce new evidence beyond the administrative record to support the application. See 35 U.S.C. §§ 141(a), 145.[3] Plaintiff chose the latter option and filed a § 145 action challenging the PTAB's final decision to reject the claims of the '161 Application. Thereafter, following discovery, plaintiff and the PTO filed cross motions for summary judgment on the merits of plaintiff s challenge to the PTAB's final decision. Additionally, the PTO filed a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), Fed. R. Civ. P., on the ground that plaintiff was not the owner or assignee of the ' 161 Application, and therefore lacked standing to pursue a § 145 action.

         Following full briefing and oral argument, an Order and Memorandum Opinion issued granting the PTO's motion and dismissing the complaint on the ground that plaintiff was not an owner or assignee of the ' 161 Application and thus had no standing to bring the § 145 action. See Realvirt, LLC, 2016 WL 3912855, at *13. Given this result, the merits of plaintiffs claims in the '161 Application were neither reached nor decided. Following the complaint's dismissal, the PTO filed a motion for expenses under § 145. Specifically, the PTO requested $103, 259.52, consisting of (i) $50, 160.00 in expert witness expenses, (ii) $4, 644.90 in deposition expenses, and (iii) $48, 454.62 in attorneys' fees.

         Plaintiff appealed the order dismissing the complaint to the Federal Circuit, and also filed a motion to stay proceedings in the district court concerning the motion for expenses pending the outcome of the appeal. Plaintiff contends that a stay is appropriate because: (i) the Federal Circuit's resolution of the pending appeal regarding the standing issue may render it unnecessary to decide the § 145 expenses motion, (ii) the resolution of another case currently pending before the Federal Circuit, Nantkwest, Inc. v. Lee, [4] will resolve the issue of whether § 145 requires an applicant to pay the PTO's attorneys' fees, as well as other expenses, and (iii) the PTO, in any event, has not adequately documented its request for attorneys' fees.

         II.

         A threshold issue, unaddressed by the parties, is whether jurisdiction exists to decide their motions given the filing of plaintiff s appeal. This question arises because the "filing of a notice of appeal is an event of jurisdictional significance - it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal." Griggs v. Provident Consumer Disc, 459 U.S. 56, 58 (1982). But there are exceptions to this rule, one of which is that a district court may consider a request for fees after the filing of a notice of appeal. See Langham-Hill Petroleum v. S. Fuels Co., 813 F.2d 1327, 1330-31 (4th Cir. 1987) (rejecting the argument that a district court improperly awarded attorneys' fees due to lack of jurisdiction after a notice of appeal had been filed).[5] Thus, there is jurisdiction to decide the parties' motions despite plaintiffs pending appeal.

         III.

         Next, it is appropriate to address whether plaintiffs motion to stay should be granted given the pendency of plaintiff s appeal. Plaintiff argues that a stay is appropriate as the Federal Circuit's decision in the pending appeal may affect or render it unnecessary at this point to determine whether an applicant without standing is obligated to pay expenses under § 145. This argument fails because § 145's expenses provision requires all applicants, with or without standing, to pay the PTO's expenses, regardless of the outcome of the proceedings.

         A patent applicant who is unsuccessful before the PTAB has two avenues of relief: (i) a direct appeal of the PTAB's decision to the Federal Circuit, which reviews the PTAB's decision based solely on the administrative record, or (ii) the filing of a separate § 145 civil action in the district court, which allows the court to determine whether the applicant should receive a patent based on both the administrative record and any new evidence the applicant wishes to introduce. See 35 U.S.C. §§ 141(a), 145; see also Hyatt v. Kappos, 625 F.3d 1320, 1322, 1338 (Fed. Cir. 2010) (en banc), aff'd Kappos v. Hyatt,132 S.Ct. 1690 (2012). Should the applicant choose to proceed via a ยง 145 action, the statute states that "[a]ll the expenses of the proceedings shall be paid by the applicant." Importantly, the ...


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