Carnegie Mellon Univ v. Schwartz

Opinions of the United
1997 Decisions States Court of Appeals
for the Third Circuit
1-28-1997
Carnegie Mellon Univ v. Schwartz
Precedential or Non-Precedential:
Docket 95-3440
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 95-3440
CARNEGIE MELLON UNIVERSITY,
Appellant.
v.
ANSEL M. SCHWARTZ, ESQUIRE;
COHEN & GRIGSBY, P.C.
UNITED STATES OF AMERICA,
Third-party Defendant
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 92-cv-01554)
Argued on March 26, 1996
Before: SLOVITER, Chief Judge, GREENBERG and ROTH,
Circuit Judges
(Opinion Filed January 28, 1997)
Walter P. DeForest, Esq. (Argued)
Jacqueline A. Koscelnik, Esq.
DeForest & Koscelnik
3000 Koppers Building
436 Seventh Avenue
Pittsburgh, PA 15219
1
William S. Schweers, Jr., Esq.
Harrington, Schweers, Dattilo & McClelland, P. C.
100 Ross Street
Pittsburgh, PA 15219
Attorneys for Appellant
Vincent J. Grogan, Esq. (Argued)
Richard D. Kalson, Esq.
Grogan, Graffam, McGinley & Lucchino, P.C.
Three Gateway Center, 22nd Floor
Pittsburgh, PA 15222
Attorneys for Appellee Ansel M. Schwartz
Frank W. Hunger, Esq.
Assistant Attorney General
Frederick W. Thieman, Esq.
United States Attorney
Frank A. Rosenfeld, Esq. (Argued)
William Kanter, Esq.
United States Attorneys Office
Appellate Staff, Civil Division
Room 7124
Department of Justice
Washington, D.C. 20530-0001
Amy R. Hay, Esq.
Office of United States Attorney
633 United States Post Office & Courthouse
Pittsburgh, PA 15219
Attorneys for Appellee United States of America
Patrick G. Barry, Esq.
Manion, McDonough & Lucas
600 Grant Street
Suite 882
Pittsburgh, PA 15219
Attorney for Appellee Cohen & Grigsby
OPINION OF THE COURT
2
ROTH, Circuit Judge:
Carnegie Mellon University (CMU) brings this action for
professional negligence against Cohen & Grigsby, P.C. (C&G) and a
former C&G associate, Ansel M. Schwartz, alleging that they were
negligent in their handling of two CMU patents. Schwartz joined
the United States as a third-party defendant, alleging that the
United States Patent and Trademark Office (PTO) is responsible
for any damages suffered by CMU. The district court granted
summary judgment against CMU on the ground that CMU could not
have suffered any actual loss as a result of Schwartz's alleged
professional negligence. Because we believe that the district
court's conclusion that CMU suffered no actual loss is premature,
we will vacate the district court's order and remand the case for
further proceedings consistent with this opinion.
The district court had jurisdiction pursuant to 28
U.S.C. § 1346(b) because this is a civil action sounding in tort
in which the United States is a defendant. We have jurisdiction
of the district court's summary judgment order. 28 U.S.C. §§
1291, 1295(a)(2).
I
CMU commenced this action against C&G, a professional
corporation rendering legal services, and Ansel M. Schwartz, a
former C&G associate, for alleged professional negligence in
connection with their handling of two patents owned by CMU. The
3
crux of CMU's complaint is that Schwartz erroneously and
negligently disclaimed a CMU patent and that the error was not
corrected for fifteen months after the PTO published notice of
the disclaimer in its Official Gazette. CMU argues that during
these fifteen months, third parties who relied on the published
disclaimer might have acquired intervening rights to the patent
and that the disclaimer diminished the value of CMU's patent.
CMU argues that Schwartz and C&G are liable to it for any damages
that CMU suffers as a result of their alleged professional
negligence. Schwartz argues that the PTO negligently published
notice of a statutory disclaimer when he had filed only a
terminal disclaimer to obviate a double patenting rejection.
The district court adopted the Supplemental Report and
Recommendation of the magistrate judge, which granted Schwartz's
and C&G's motions for summary judgment and also granted the
United States's motion to dismiss or, in the alternative, for
summary judgment. Order, No. 92-1554 (July 7, 1995) (citing
Supplemental Report and Recommendation, No. 92-1554 (May 4, 1995)
(hereinafter Supplemental Report)). On appeal, we view all facts
in the light most favorable to CMU, the non-moving party, and
give CMU the benefit of all reasonable inferences from those
facts. Travitz v. Northeast Dept. ILGWU Health and Welfare Fund,
13 F.3d 704, 708 (3d Cir. 1994), cert. denied, 114 S. Ct. 2165
(1994). We apply the same legal test that the district court
should have applied initially, and we have plenary review of the
4
legal issues underlying the district court's order granting
summary judgment. Id.
CMU avers that it retained C&G and Schwartz to
prosecute and transact all business related to United States
Patent No. 4,767,708, issued August 30, 1988 (708 Patent), and
related United States Continuation Patent Application Serial
Number 07/117,279, filed November 5, 1987 (279 Application).
After the PTO entered an obviousness-type double patenting
rejection in connection with the 279 Application, Schwartz
prepared a terminal disclaimer to obviate the double patenting
rejection. See 37 C.F.R. 1.78(d).
According to CMU, Schwartz inadvertently placed the
serial number and filing date of the 708 Patent (rather than the
279 Application) on the disclaimer and mailed it to the PTO on
March 15, 1990. In May 1990 the PTO advised Schwartz that no
terminal disclaimer had been filed for the 279 Application,
whereupon Schwartz refiled the incorrect disclaimer.1 Although
the PTO published a notice of disclaimer pertaining to the 708
Patent on May 29, 1990, Schwartz did not note that the patent had
been disclaimed. After Schwartz was notified again on July 23,
1990, that a terminal disclaimer was needed for the 279
Application and that the previously filed disclaimer had gone to
another case,2 Schwartz made no effort to determine the status of
1
Schwartz denies that he resubmitted an incorrect
disclaimer.
2
Schwartz denies receiving such notification.
5
the 708 Patent or to correct the disclaimer. Finally, on
November 23, 1990, Schwartz filed a correct terminal disclaimer
form for the 279 Application, and the PTO granted the disclaimer.
On July 25, 1991, Schwartz learned for the first time
that more than a year earlier, the PTO had published a statutory
disclaimer for the remaining term of the 708 Patent. Upon
learning of the statutory disclaimer, Schwartz immediately filed
a Petition to Expunge with the Commissioner of Patents and
Trademarks. On September 10, 1991 (more than fifteen months
after the disclaimer of the 708 Patent was originally published
on May 29, 1990), the PTO published an Erratum in the Official
Gazette, which stated that "all references to [the 708 Patent]
should be deleted as the patent should not have been disclaimed."
Supplemental Report at 4 n.2. On December 5, 1991, the PTO
directed that the erratum be attached to all soft copies of the
708 Patent furnished by the PTO.
As a result of the mistaken disclaimer, CMU filed this
action for professional negligence against Schwartz and C&G. In
his third party complaint against the United States, Schwartz
contends that the PTO negligently processed a statutory
disclaimer, see 35 U.S.C. § 253; 37 C.F.R. § 1.321(a), in
response to his request for a terminal disclaimer. He asserts
that the PTO is jointly liable to the CMU or liable directly to
him for all of CMU's alleged damages.
In their first motion for summary judgment, appellees,
6
Schwartz, C&G, and the United States argued that publication of
the erratum operated retroactively to cure the mistaken
disclaimer. They argued, therefore, that even if there were
potential infringers of the 708 Patent or the 270 Patent,3 CMU
could have suffered no damages as a result of the disclaimer
because no legitimate intervening rights (rights arising between
publication of the disclaimer and publication of the erratum)
could be asserted by individuals infringing the patent. On
February 7, 1994, the district court denied this first motion for
summary judgment based upon the magistrate judge's conclusion
that it was unclear whether the erratum would operate
retroactively so as to eliminate intervening rights.
Supplemental Report at 5 (citing 1993 Report). The court
reasoned that to the extent that third parties might have derived
intervening rights from reasonable reliance on the disclaimer,
CMU might have a viable claim for damages against appellees.4
After a settlement conference, the magistrate judge
ordered CMU to file infringement lawsuits against any alleged
infringers of its patents. CMU thereafter filed a claim for
infringement of the 708 Patent and the 270 Patent. That
infringement action is currently pending in the United States
3
The 270 Patent was the result of the 279 Application.
4
Prior to publication of the erratum, Schwartz had written
an opinion letter to CMU identifying several infringers of the
279 Application and several potential infringers of the 708
Patent. Supplemental Report at 5.
7
District Court for the Northern District of California. CMU
notes that the defendants' answers in that action preserve their
right to raise as an affirmative defense intervening rights
allegedly acquired during the apparent lapse in the 708 and 270
Patents. Thus, CMU argues that summary judgment is inappropriate
in this case. CMU contends that it might still suffer damages as
a result of Schwartz's alleged negligence if defendants in CMU's
infringement action successfully assert their reliance on the
published disclaimer as a defense to liability for infringement.
In renewing their motions for summary judgment in 1995,
appellees again argued that the erratum had retroactive effect
and that it therefore eliminated any intervening rights that
might have been acquired by infringers. Appellees maintained
that the erratum was published in lieu of a certificate of
correction and that it was equivalent thereto. Supplemental
Report at 6. In support of these contentions, appellees
submitted an affidavit from Jeffrey V. Nase, Director of the
PTO's Office of Petitions. Id. CMU countered the Nase affidavit
with an affidavit from Donald W. Banner, former United States
Commissioner of Patents and Trademarks, which stated that the
sale value of the 708 Patent had been diminished by the
disclaimer, issuance of the erratum notwithstanding. The
magistrate judge found that the retroactive legal effect of the
erratum was unclear and recommended again in his 1995 Report and
Recommendation that appellees' motions for summary judgment be
8
denied. App. at 71, 75-79.
Subsequent to the magistrate judge's 1995 Report, the
PTO issued a certificate of correction to the 708 Patent, which
it published in the Official Gazette on April 18, 1995. Nase
represented by letter that "[t]he Certificate corrects any
residual error in [the 708 Patent] . . . that may not have been
corrected by the Erratum . . .." Supplemental Report at 7. In
light of the issuance of the certificate of correction, the
district court remanded the case to the magistrate judge for
further consideration. The magistrate judge ruled that
when a Certificate of Correction is issued to correct a patent
without changing the scope of its claim, as here, "the
correction is given retroactive application in order
that intervening rights may not be alleged." Eagle
Iron Works v. McLanahan Corporation, 429 F.2d 1375,
1383 (3d Cir. 1970). Since issuance of the Certificate
has corrected the improper disclaimer of the 708
Patent, and such correction applies retroactively, no
intervening rights, nor damages, may be asserted by
CMU.
Id.
Thus the magistrate judge concluded that the
certificate of correction foreclosed any possibility that an
alleged infringer of the patents could assert intervening rights
based on the disclaimer. He therefore recommended in his
Supplemental Report that the district court grant summary
judgment to appellees. Id. at 7-8. The district court granted
the motions for summary judgment and adopted the magistrate
judge's Supplemental Report as the court's opinion. Order, Civil
Action No. 92-1554 (July 7, 1995).
9
II
CMU brought this action for professional negligence,
claiming that Schwartz and/or C&G is liable to CMU for any
damages that CMU sustains as a result of the errant disclaimer
filed by Schwartz. Under Pennsylvania law, an action for
professional negligence requires proof of actual loss. Rizzo v.
Haines, 520 Pa. 484, 555 A.2d 58, 68 (1989). "The mere breach of
a professional duty, causing only nominal damages, speculative
harm, or the threat of future harm--not yet realized--does not
suffice to create a cause of action for negligence." Id. (citing
Duke & Co. v. Anderson, 275 Pa. Super. 65, 73-74, 418 A.2d 613,
617 (1980)). Because it concluded that Schwartz's alleged
negligence could not cause CMU actual damages, the district court
granted summary judgment to appellees.
According to the district court, the certificate of
correction precludes any possibility that alleged infringers of
the 708 and 270 Patents acquired valid intervening rights in the
fifteen months between the publication of the disclaimer and the
publication of the erratum. If the certificate of correction
precludes any third-party intervening rights in the patents, the
court reasoned, CMU cannot prevail on its negligence claim
because the allegedly negligent disclaimer could cause CMU no
damages. Thus, the district court's holding is premised on the
conclusion that under any factual scenario, alleged patent
infringers will not have valid defenses to CMU's claims for
10
infringement based upon Schwartz's allegedly negligent
disclaimer.
We are not so confident in the broad ameliorative
powers of the certificate of correction. The legal effect of the
PTO's certificate of correction on third-party intervening rights
turns on a number of difficult issues, many of which were not
raised in the district court. These include the question of
whether the certificate of correction changed the scope of the
708 Patent from what it was immediately prior to the issuance of
the certification of correction. In order to render a definitive
ruling that would bar intervening rights for all potential third
parties, we would have to resolve difficult questions of first
impression involving the proper construction of 35 U.S.C. §§ 254
and 255--the statutes that authorize and define certificates of
correction. Furthermore, we would have to consider the
implications of Eagle Iron Works v. McLanahan Corp., 429 F.2d
1375 (3d Cir. 1970), concerning the retroactive effect of
certificates of correction, as well as fundamental principles of
patent law. Thus, although we have no concrete infringement
action before us, we would need to fashion a broad rule that
addresses important issues of first impression regarding
certificates of correction. We would then have to determine how
the rule would apply to a large, hypothetical class of alleged
patent infringers, who are not currently before this court.
We decline to decide these difficult questions in a
11
factual vacuum. CMU's patent infringement case is currently
proceeding in the Northern District of California, and that court
will likely decide the legal effect of the certificate of
correction in the context of an actual patent infringement
action. We cannot confidently predict that the certificate of
correction will shield CMU from an "actual loss" in that case.
Moreover, even if we were to render a definitive holding
regarding the effect of the certificate of correction on all
intervening rights, we could not ensure that a district court
sitting in the Ninth Circuit would find our reasoning persuasive.
Under these circumstances, we believe it best to hold
this negligence action in abeyance until we can determine whether
CMU suffered an "actual loss" as a result of intervening rights
arising from the disclaimer. We will, therefore, vacate the
district court's order granting summary judgment to the
defendants and dismissing the complaint against the third party
defendant, and we will remand the case to the district court with
instructions to proceed in a manner not inconsistent with this
opinion. We recommend that the court wait for an outcome in the
California infringement action and in any other relevant
infringement actions currently pending before it rules on the
professional negligence claim against Schwartz and C&G and the
crossclaim against the United States. In coming to the above
conclusion, we are certainly cognizant of the fact that appellees
are entitled to a final disposition of the charges against them.
12
This ruling should not be used to forestall prompt resolution of
the negligence claim once the issue of actual loss is clarified.5
5
In this regard, we consider it to be CMU’s obligation to identify any other potential
infringers and to take appropriate action against them in order to preclude further prolongation of
the present litigation.
13