Seed Co. v. Westerman Ex Rel. Estate of Westerman

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 11, 2016 Decided August 12, 2016
No. 14-7126
SEED COMPANY LIMITED AND SHIGERU TAMAI,
APPELLANTS
v.
ANN G. WESTERMAN, AS THE PERSONAL REPRESENTATIVE OF
THE ESTATE OF WILLIAM F. WESTERMAN, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:08-cv-00355)
Paul T. Meiklejohn argued the cause for appellants. With
him on the briefs was Creighton R. Magid.
Lance A. Robinson argued the cause for Westerman
appellees. With him on the briefs were Mark London and
Christopher Mead.
John P. Glaws IV argued the cause for Kratz appellees.
With him on the brief was Paul J. Maloney.
Before: HENDERSON, KAVANAUGH and SRINIVASAN,
Circuit Judges.
2
Opinion for the Court filed by Circuit Judge SRINIVASAN.
SRINIVASAN, Circuit Judge: This case involves a legal
malpractice action arising out of an unsuccessful application
for a patent. Seed Company Limited, a Japanese company, is
led by Shigeru Tamai. Tamai invented a dispenser of
correctional tape enabling users to correct printed documents
by rolling white tape over errors. Seed and Tamai hired legal
counsel in connection with their patent applications. The
effort to obtain a U.S. patent ultimately failed because of
counsel’s noncompliance with Patent Office regulations when
filing a motion related to the application. As a result of the
error, another inventor obtained the patent for the same
invention.
Seed and Tamai sued their attorneys, alleging that they
had committed malpractice when they submitted filings for
the patent application without complying with the Patent
Office regulations. The district court first rejected the
defendants’ argument that the suit was barred by the statute of
limitations. But the court then granted summary judgment in
their favor, ruling that they had exercised reasonable
professional judgment in concluding (erroneously) that their
filings complied with the Patent Office’s rules.
We reverse and remand. We conclude that the statute of
limitations had elapsed with respect to the malpractice claims
against one group of defendants—those who ceased working
on behalf of Seed and Tamai when the law firm engaged in
the representation split into two firms. With regard to the
remaining defendants—those who continued to represent
Seed and Tamai after the breakup of the firm—we find that
the statute of limitations poses no bar to the malpractice
action. On the merits of the claims against those defendants,
3
we reverse the grant of summary judgment in their favor and
remand the case for trial.
I.
Seed filed three relevant patent applications listing Tamai
as the inventor: one in Japan, one through the international
Patent Cooperation Treaty (PCT), and one in the United
States. The PCT creates an international system for filing
patents. After filing through the PCT, an inventor can submit
related national applications in various member countries.
The dates of the applications were as follows. On July
31, 1991, Seed filed its Japanese application. The PCT
application followed, on July 24, 1992. In March 1993, Seed
and Tamai retained legal counsel to pursue a U.S. patent. On
March 29, 1993, counsel filed a translation of the PCT
application as Seed’s first U.S. application. On February 15,
1994, they filed another U.S. application as a continuation-in-
part of the first.
On May 9, 1997, the U.S. Patent Office determined that
another inventor, Christopher J. Stevens, had already patented
the same invention. The Board of Patent Appeals and
Interferences thus began interference proceedings to
determine whether Stevens or Tamai had first invented the
device. Whoever could show an earlier patent application
filing date for the same invention (known as a “constructive
reduction to practice,” 37 C.F.R. § 1.637(f)(3) (1997)) would
have priority and receive the sole patent on the invention.
Stevens and Tamai each filed a “motion for benefit,” a
request to credit a U.S. application with the benefit of an
earlier filing date based on a prior patent application for the
same invention in a different jurisdiction. Stevens relied on
4
the filing date of his prior United Kingdom patent application.
Tamai did not oppose Stevens’s motion, and the Board
granted him an effective filing date of February 10, 1993.
Tamai relied on the earlier filing dates of Seed’s Japanese and
PCT patent applications.
The Patent Office had promulgated regulations governing
motions for benefit. When a motion for benefit relied on a
foreign patent application filed in a language other than
English, the moving party was required to follow additional
regulations requiring submission of a translation of the
foreign application and an affidavit certifying the accuracy of
the translation. 37 C.F.R. § 1.647 (1997). Both of Seed’s
earlier patent applications (in Japan and through the PCT) had
been written in Japanese. Seed’s counsel filed a translation of
the Japanese application, but they failed to file a translation of
the PCT application.
Because of the failure to include a translation of the PCT
application, the Board denied Tamai’s motion for benefit with
respect to that application. The Board also denied Tamai’s
motion for reconsideration. Although the Patent Board
denied the motion for benefit regarding the PCT application,
it granted the motion with regard to the earlier Japanese
application. Because the Japanese application (filed on July
31, 1991) predated Stevens’s United Kingdom application
(filed on February 10, 1993), the Board granted Tamai
priority.
Stevens appealed to the Federal Circuit, arguing that the
Board could not give Tamai the benefit of the Japanese
application without also crediting the PCT application.
Stevens relied on a statute specifying that the Board can give
a patent application the benefit of an earlier application only if
filed within one year of the prior one. See 35 U.S.C. § 119(a).
5
Tamai’s Japanese application fell outside that window
because it predated his U.S. application by more than one
year. The PCT application in theory could create a chain
linking the Japanese application to the U.S. application
without violating the one-year rule because the PCT
application was filed less than one year before the U.S.
application and less than one year after the Japanese
application. But the PCT application had been filed without
the required translation. Without the PCT application,
Stevens argued, the Japanese application alone was too old.
The Federal Circuit agreed with Stevens and held that the
Japanese application could not establish an earlier filing date
without the benefit of the PCT application. Stevens v. Tamai,
366 F.3d 1325, 1331 (Fed. Cir. 2004). And the court, like the
Board, held that Tamai could not benefit from the PCT
application’s filing date because he had failed to file a
translation of the PCT application. Id. at 1332. The court
therefore remanded to the Board to enter judgment in favor of
Stevens, id. at 1335, which the Board did.
Meanwhile, between the time of the initial Board
decision in 2002 and the Federal Circuit appeal in 2004, the
law firm with which Seed and Tamai’s U.S. counsel had been
associated had split into two separate firms. Until October 1,
2003, the attorneys representing Seed and Tamai had been
doing business as part of one firm. On that date, some of
those lawyers left the firm to form Westerman, Hattori,
Daniels, and Adrian LLP. We will refer to them as the
Westerman defendants. The remaining lawyers founded
Kratz, Quintos & Hanson LLP. We will call them the Kratz
defendants. Seed and Tamai (whom we will refer to
collectively as “Seed” from this point forward) took their
business to the new Westerman firm, which continued to
represent them during the Federal Circuit appeal.
6
In December 2006, Seed obtained counsel to pursue a
malpractice suit against the Westerman and Kratz defendants.
The defendants and Seed entered into tolling agreements
effective May 3, 2007 (for the Westerman defendants), and
May 10, 2007 (for the Kratz defendants). On February 28,
2008, Seed brought this malpractice action against the
Westerman and Kratz defendants.
The complaint, as amended, contains four counts. The
first two counts, which apply to all defendants, allege that
they committed malpractice by failing to file the translation of
the PCT application (and also by giving erroneous advice
about the implications of Stevens’s appeal to the Federal
Circuit). The third and fourth counts apply only to the Kratz
defendants and are contingent on the dismissal of Seed’s
primary claims under the statute of limitations. The third and
fourth counts allege that, if the statute of limitations bars the
primary claims, the Kratz defendants committed malpractice
by giving Seed erroneous advice about the statute of
limitations.
Following discovery, the defendants moved for summary
judgment and Seed moved for partial summary judgment on
the question of liability. The district court found that the
statute of limitations did not bar any of the claims. But the
court granted the defendants’ motion for summary judgment
on the merits and thus denied Seed’s motion. Because the
court found no violation of the statute of limitations, it
dismissed the third and fourth counts as moot. Seed now
appeals.
II.
We first consider whether Seed’s claims were brought
within the statute of limitations, and we then review the grant
of summary judgment in the defendants’ favor. Before
7
turning to these matters, however, we briefly address our
jurisdiction over this appeal. Although no party contests our
jurisdiction, we have an independent obligation to assure that
we have it.
The district court had jurisdiction over this case because
it meets the requirements for diversity jurisdiction. See 28
U.S.C. § 1332(a). While the Federal Circuit has exclusive
jurisdiction over appeals in cases “arising under” federal
patent law, 28 U.S.C. § 1295(a)(1), “state legal malpractice
claims based on underlying patent matters will rarely, if ever,
arise under federal patent law” for purposes of jurisdiction,
Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013). Gunn
involved a different federal jurisdictional statute (28 U.S.C.
§ 1338(a)), but the Court’s guidance about when a case
“arises under” federal patent law also informs the proper
interpretation of the statute at issue in this case (28 U.S.C.
§ 1295(a)(1)), which contains identical operative language.
See Vermont v. MPHJ Tech. Invs., LLC, 803 F.3d 635, 645-46
(Fed. Cir. 2015). This case, like Gunn, involves no forward-
looking questions about any patent’s validity, but instead
solely concerns whether unsuccessful patent applicants can
recover against their attorneys. We therefore have appellate
jurisdiction to review the district court’s decision. 28 U.S.C.
§ 1291.
A.
The threshold question before us is whether the statute of
limitations bars the malpractice claims against either the
Westerman defendants or the Kratz defendants. We review
the application of the statute of limitations de novo. Jung v.
Mundy, Holt & Mance, P.C., 372 F.3d 429, 432 (D.C. Cir.
2004). Because we hear this case under diversity jurisdiction,
we apply the choice-of-law rules of the forum state, here, the
8
District of Columbia. The District of Columbia in turn
requires us to apply its rules concerning the statute of
limitations. A.I. Trade Fin., Inc. v. Petra Int’l Banking Corp.,
62 F.3d 1454, 1458 (D.C. Cir. 1995). The burden of proof
rests with the defendants because the statute of limitations is
an affirmative defense. Brin v. S.E.W. Inv’rs, 902 A.2d 784,
800-01 (D.C. 2006).
The statute of limitations for legal malpractice claims in
the District of Columbia is three years. D.C. Code § 12-
301(8) (2001). The limitations period starts to run when “the
right to maintain the action accrues.” Knight v. Furlow, 553
A.2d 1232, 1233-34 (D.C. 1989). The cause of action accrues
when the would-be plaintiff has knowledge of, or by the
exercise of reasonable diligence should have knowledge of,
three items: the injury, its cause in fact, and some evidence of
wrongdoing. Id. at 1234. At that point, the plaintiff is on
inquiry notice of the cause of action, and the statute of
limitations begins to run. Wagner v. Sellinger, 847 A.2d
1151, 1154 (D.C. 2004).
Each group of defendants argues that Seed’s claims
against it are barred by the statute of limitations. The
Westerman defendants’ tolling agreement with Seed took
effect on May 3, 2007, and the Kratz defendants’ tolling
agreement took effect one week later, on May 10, 2007. It is
undisputed that the agreements tolled the statute of limitations
from those effective dates until the date of the complaint. The
question thus is whether the statute of limitations had already
run by the date the tolling agreements took effect. To show
that the claims are barred by the statute of limitations, the
defendants need to demonstrate both that the claims accrued
more than three years before the tolling agreements and that
there was no reason to toll the limitations period during those
three years.
9
Seed contests the defendants’ position on both scores: it
contends that its cause of action accrued within three years of
the tolling agreements, and it further argues the statute of
limitations was tolled during the Federal Circuit appeal. With
regard to the latter argument, Seed relies on the “continuous-
representation rule.” That rule tolls the statute of limitations
for a legal malpractice claim during the time the attorney
continues to represent the client in the relevant matter. The
rule aims to avoid putting a client in the position of having to
choose between (i) disrupting an ongoing lawyer-client
relationship to enable bringing a malpractice claim and (ii)
continuing the relationship but relinquishing the claim. See
Bradley v. Nat’l Ass’n of Sec. Dealers Dispute Resolution,
433 F.3d 846, 850 (D.C. Cir. 2005). Under the rule, “when
the injury to the client may have occurred during the period
the attorney was retained, the malpractice cause of action does
not accrue until the attorney’s representation concerning the
particular matter in issue is terminated.” Id. (quoting R.D.H.
Commc’ns, Ltd. v. Winston, 700 A.2d 766, 768 (D.C. 1997)).
The district court addressed the application of the statute
of limitations to the Westerman and Kratz defendants
together, finding that the claims were not time-barred. See
Seed Co. v. Westerman, 62 F. Supp. 3d 56, 62-65 (D.D.C.
2014). The court concluded that the claims had accrued by
March 13, 2003, more than three years before the effective
date of the tolling agreements. Id. at 63. But the court held
that the continuous-representation rule tolled the statute of
limitations. Id. at 63-65. We disagree in part: we conclude
that the continuous-representation rule applies only to the
Westerman defendants, not the Kratz defendants, and that the
first and second counts must therefore be dismissed as they
apply to the Kratz defendants.
10
1.
Like the district court, we conclude that the statute of
limitations on the claims against the Westerman defendants
was tolled while the Westerman firm represented Seed during
and after the Federal Circuit appeal. The departure of the
Westerman lawyers to form their own law firm (on October 1,
2003) did not affect the operation of the continuous-
representation rule with respect to the Westerman defendants.
Seed had been notified of the impending split, and, on
September 9, 2003, its agent sent a letter to the existing firm
directing that the new Westerman firm would represent it with
regard to its patent application. After the split, the Westerman
firm continued to represent Seed in pursuing the patent
(although the Kratz firm did not).
The Westerman defendants argue that the continuous-
representation rule did not apply during the Federal Circuit
appeal. We disagree. Although the rule will not always toll
the statute of limitations during an appeal, it is not
categorically inapplicable either. At the least, the rule applies
when the same attorneys continue to represent a client in
connection with the same matter. See De May v. Moore &
Bruce, LLP, 584 F. Supp. 2d 170, 183 (D.D.C. 2008). Here,
the Federal Circuit appeal concerned the same matter for
which the Westerman defendants had been originally hired:
procuring Seed’s patent. The same lawyers at the Westerman
firm continued to represent Seed through the appeal.
Contrary to the Westerman defendants’ argument, this
court’s decision in Bradley, 433 F.3d 846, did not establish
that the continuous-representation rule never applies during
an appeal. Although Bradley observed that the “specific
dispute” for purposes of the continuous-representation rule
“does not include appeals,” id. at 851, the case did not involve
11
a situation in which the same lawyer continued to represent
the client on appeal. In fact, Bradley did not involve a
lawyer-client relationship at all. Instead, we assumed that an
analogous continuous-representation rule would apply to a
claim alleging malpractice by an arbitration panel assigned to
resolve the plaintiff’s underlying action; but we held that the
rule would toll the statute of limitations only until the
arbitration panel made its decision, not through the appeal of
that decision in court (at which point the plaintiff of course
had no ongoing relationship with the arbitral panel). See id. at
850-51. To the extent Bradley has implications for the
operation of the continuous-representation rule in the context
of lawyer-client relationships, it did not hold that the rule
never applies during an appeal, even one handled by the same
lawyer who represented the plaintiff at trial. See De May, 584
F. Supp. 2d at 183. Because the relevant appeal here involved
a continued representation by the same lawyers in the same
matter, we hold that the continuous-representation rule tolled
the statute of limitations during the appeal.
Seed and the Westerman defendants also disagree about
when the claims against the Westerman defendants accrued.
We need not resolve the dispute, because, even under the
Westerman defendants’ view, the claims against them were
timely filed. They argue that the claims accrued on March 13,
2003, when the Patent Board denied Tamai’s request for
reconsideration. The Westerman tolling agreement took
effect on May 3, 2007. Seed’s complaint therefore was timely
as long the statute of limitations was tolled until at least May
3, 2004 (three years before the tolling agreement took effect).
The Westerman defendants continued to represent Seed well
past May 3, 2004: at that point, the Federal Circuit had yet to
issue its decision. As a result, the claims against the
Westerman defendants were brought within the statute of
limitations.
12
2.
We reach a different conclusion with regard to the claims
against the Kratz defendants. The Kratz defendants’ tolling
agreement took effect on May 10, 2007. We find that the
continuous-representation rule did not toll the statute of
limitations for the claims against them at any point in the
three-year period from May 2004 to May 2007. We further
hold that the claims accrued before May 10, 2004. The
claims against the Kratz defendants are therefore barred by
the statute of limitations.
We join other courts in holding that the continuous-
representation rule does not toll the statute of limitations on a
claim against a firm after the attorney providing the
representation leaves the firm and takes the client’s business
with her. See Dunn v. Rockwell, 689 S.E.2d 255, 275 (W. Va.
2009); Beal Bank, SSB v. Arter & Hadden, LLP, 167 P.3d 666
(Cal. 2007). In that situation, the client is no longer
represented by the original firm. The continuous-
representation rule thus no longer tolls the statute of
limitations for malpractice claims against that firm. That
conclusion accords with the underlying objectives of the rule:
“avoid[ing] unnecessarily disrupting the representation in
which the error occurred” and giving the firm “the
opportunity to remedy, avoid or establish that there was no
error or attempt to mitigate the damages.” R.D.H. Commc’ns,
700 A.2d at 769 (quotation omitted). The rule cannot guard
against unnecessary disruption of ongoing representations or
encourage lawyers to correct their mistakes after the client has
already taken its business to a new firm. See Beal Bank, 167
P.3d at 671.
Consequently, the continuous-representation rule cannot
save Seed’s claims against the Kratz defendants. By the fall
13
of 2003, the Kratz defendants had formed their own firm and
no longer represented Seed in pursuing the patent application
at issue in this case: Seed’s agent confirmed in writing on
September 9, 2003, that the patent case was “entrusted to” the
Westerman firm. J.A. 576. As a result, if the claims accrued
sometime before May 10, 2004, then more than three years
would have elapsed before the May 10, 2007, effective date of
the tolling agreement, and the claims would be time-barred.
The Kratz defendants argue that the claim accrued at the
latest on May 4, 2004, the date of the Federal Circuit’s
decision against Seed. We agree. After the Federal Circuit
issued its decision directing the Patent Board to enter
judgment against Seed, Seed should have known that it would
be denied its patent (an injury) because of the failure to
include a translation of the PCT application (a cause in fact
attributable to the defendants). Seed presses two responses,
neither of which persuades us.
Seed’s first argument is that its claim did not accrue until
September 14, 2004, when the Board entered its post-appeal
judgment on remand from the Federal Circuit. The Federal
Circuit, however, directed the Patent Board to enter judgment
against Seed, see 366 F.3d at 1335, so there was no ambiguity
about what would happen on remand. Seed relies on Wagner,
in which the District of Columbia Court of Appeals held that
a client does not suffer an injury triggering the statute of
limitations at the moment her attorney errs during discovery
or trial. Wagner, 847 A.2d at 1156. But Wagner held only
that the injury arises when the trial court resolves the case, not
that any injury awaits final resolution of an appeal. See id. at
1156-57. This court has already rejected a reading of Wagner
that would require “exhaustion of appeals” before the statute
of limitations begins to run. Bradley, 433 F.3d at 852. And
the District of Columbia Court of Appeals similarly rejected
14
an exhaustion-of-appeals rule in its pre-Wagner cases. R.D.H.
Commc’ns, 700 A.2d at 771. The “lingering hope” that an
appellate ruling might lead to a different outcome on remand
is “irrelevant for purposes of determining” the date the statute
of limitations begins to run based on inquiry notice. Bradley,
433 F.3d at 852.
Seed next claims it did not realize that the Federal Circuit
decision meant it had lost its patent claim. It contends that,
even after the Federal Circuit issued its decisions, the
Westerman defendants continued to represent that Seed could
receive a patent by contesting the Federal Circuit decision.
Seed relies on a letter dated May 5, 2004, in which the
Westerman defendants presented a number of possible ways
to deal with the adverse decision, including by petitioning for
rehearing or for review in the Supreme Court. The letter
acknowledged that those options were unlikely to succeed,
but it held open the possibility.
We conclude that Seed had inquiry notice of an injury
upon receiving the Federal Circuit decision. The Federal
Circuit instructed the Patent Board “to enter judgment for
Stevens” (and thus against Tamai) on remand. Stevens, 366
F.3d at 1335. At most, the Westerman defendants’ advice
could have convinced a reasonable party in Seed’s position
that there existed some chance the injury could be resolved in
further appeals. But no reasonable client could conclude that
the possibility of redressing an injury in further proceedings
means that no injury exists in the first place.
Seed thus had inquiry notice of its claim against the Kratz
defendants by May 4, 2004, more than three years before the
effective date of their tolling agreement. Consequently, the
first and second counts against the Kratz defendants were
barred by the statute of limitations.
15
3.
We finally consider the application of the statute of
limitations to the third and fourth counts in the complaint, i.e.,
the contingent claims concerning the Kratz defendants’ advice
about the statute of limitations for the claims alleged in the
first and second counts. Seed contends that it sought advice
in 2005 from James Armstrong, a member of the Kratz firm,
about the accrual date for its first two malpractice claims.
Armstrong suggested that those claims had ripened on either
June 10, 2004 or October 18, 2004, such that they would have
been timely when filed. Seed’s claims of malpractice based
on that advice about the statute of limitations is contingent on
its loss of the first two counts on statute of limitations
grounds.
The district court did not dismiss the first two counts on
statute-of-limitations grounds; it dismissed them on the
merits. Because the third and fourth counts were contingent
on the dismissal of at least one of the first two counts on
statute-of-limitations grounds, the court found that the third
and fourth counts were moot. But because we have now
concluded that the claims against the Kratz defendants are
barred by the statute of limitations, the contingent counts must
be adjudicated. We remand for the district court to adjudicate
them in the first instance.
B.
Having concluded that the statute of limitations poses no
bar to the claims against the Westerman defendants, we turn
to considering whether those claims survive summary
judgment. We review grants and denials of summary
judgment de novo. Fenwick v. Pudimott, 778 F.3d 133, 136
16
(D.C. Cir. 2015); George v. Leavitt, 407 F.3d 405, 410 (D.C.
Cir. 2005).
Seed’s claims in this case arise under District of
Columbia law. That law requires a plaintiff to establish three
elements to state a claim of malpractice: “the applicable
standard of care, a breach of that standard, and a causal
relationship between the violation and the harm complained
of.” Biomet Inc. v. Finnegan Henderson LLP, 967 A.2d 662,
664 (D.C. 2009). The standard of care in a legal malpractice
case is the “degree of reasonable care and skill expected of
lawyers acting under similar circumstances.” Morrison v.
MacNamara, 407 A.2d 555, 561 (D.C. 1979). Specialists
must “adhere to a standard of conduct commensurate with”
their “special training and experience.” O’Neil v. Bergan, 452
A.2d 337, 341 (D.C. 1982) (quoting Morrison, 407 A.2d at
560).
The District of Columbia applies the judgmental-
immunity doctrine, under which “an informed professional
judgment made with reasonable care and skill cannot be the
basis of a legal malpractice claim.” Biomet, 967 A.2d at 666.
The Westerman defendants argue that their decision fell
within the protections of the judgmental-immunity doctrine.
The district court agreed and granted them summary
judgment. To affirm, we would need to find no genuine
dispute of material fact about either of the elements of the
doctrine: “that (1) the alleged error is one of professional
judgment, and (2) the attorney exercised reasonable care in
making his or her judgment.” Id.; see Fed. R. Civ. P. 56(a).
Because we find a genuine issue as to both, we reverse the
grant of summary judgment.
17
1.
We first examine if there is any genuine issue about
whether the Westerman defendants’ error in failing to file a
translation with the PCT application was one of professional
judgment. All parties agree that Tamai needed the benefit of
the PCT application’s filing date to establish priority over
Stevens in the patent interference proceeding. See p. 5, supra.
The question thus becomes what the Westerman defendants
needed to do to get Tamai the benefit of the PCT application’s
filing date.
The Patent Office had promulgated two pertinent rules.
First, Rule 637 stated that a motion for benefit must serve all
opponents with copies of the relevant earlier application, and
must, “[i]f the earlier filed application is not in English,”
comply with Rule 647. 37 C.F.R. § 1.637(f)(2). Rule 647, in
turn, provides that “[w]hen a party relies on a document or is
required to produce a document in a language other than
English, a translation of the document into English and an
affidavit attesting to the accuracy of the translation shall be
filed with the document.” Id. § 1.647. When the Westerman
defendants filed Tamai’s motion for benefit, however, they
included neither a translation of the PCT application nor an
affidavit attesting to its accuracy. Stevens, 366 F.3d at 1328.
As a result, if a reasonable lawyer would have known that
getting the benefit of the PCT filing date would require
complying with Rules 637 and 647, the Westerman
defendants’ failure to abide by those rules could not have
been an exercise of professional judgment.
The Westerman defendants respond that they reasonably
believed Rules 637 and 647 did not pertain to PCT
applications. Rule 637 applies only to “earlier filed
application[s].” 37 C.F.R. § 1.637(f)(2). The Westerman
18
defendants argue that, when they filed the motion for benefit
in 1997, a reasonable lawyer could have thought that PCT
applications designating the United States did not count as
“earlier filed application[s]” in subsequent national
applications. They rely on the Manual of Patent Examining
Procedure, which as of 1997 stated that a PCT application
was not a separate application but rather an earlier “stage” of
the American application which automatically shared the
same filing date. Manual of Patent Examining Procedure
§ 1893.03(b) (6th ed., Rev. 2, July 1996); see 35 U.S.C. § 363
(1997) (amended 2011). The manual thus directed applicants
“not [to] claim benefit of the filing date of the international
application” in a national application. Manual of Patent
Examining Procedure § 1893.03(c). The Westerman
defendants argue that the manual reflected a reasonable belief
among patent lawyers in 1997: because Rule 637 applied to
motions for benefit and the Westerman defendants did not
believe they needed to file a motion for benefit for the PCT
application, they concluded that the translation requirements
in Rules 637 and 647 did not apply to the PCT application.
We conclude that Seed raises a genuine dispute of
material fact about whether the defendants’ decision could
have been characterized as an exercise of professional
judgment in 1997. Although the manual provides some
evidence in support of the defendants’ claim, Seed also cites
evidence supporting its position. Drawing all inferences in
favor of Seed, we conclude that a factfinder could find the
Westerman defendants’ choice unreasonable.
First, ambiguity about the applicability of the rules’
translation requirement to PCT applications does not
necessarily support the defendants’ claim that they exercised
judgment in failing to file a translation. Typically, the
judgmental-immunity doctrine applies when a lawyer makes a
19
strategic choice between two options, each of which has costs
and benefits. For example, in Biomet, the defendant lawyer
had to decide which arguments to include in the limited space
in his appellate brief. 967 A.2d at 666. But an attorney does
not exercise professional judgment when she interprets
unsettled law in a way that “manifestly risk[s] the loss of [a]
client’s claims” for no plausible advantage. Skywark v.
Isaacson, 202 B.R. 557, 564 (S.D.N.Y. 1996). A factfinder
could infer that a reasonable lawyer would err on the side of
caution by filing the translation if the requirements were
ambiguous and there were no reason not to do so.
Second, the Westerman defendants’ actions did not align
with their purported understanding of the requirements. The
defendants’ claimed interpretation—in which an American
application based on a PCT application was not a separate
application at all—is belied by the fact that they filed a
motion for benefit regarding the PCT application. The
regulation authorizing motions for benefit referenced “an
earlier filed application” just like Rule 637, and it directly
referred readers to Rule 637. 37 C.F.R. § 1.633(f) (1997). If
the Westerman defendants in fact had thought that the PCT
application was not an “earlier filed application”—but rather
an automatically credited earlier stage of the same
application—there would have been no need to file a motion
for benefit at all. But they did file a motion for benefit, and in
the title of that document, they called the PCT application an
“earlier filed application” and referenced Rule 637. J.A. 947.
A reasonable factfinder could infer that the exercise of
professional judgment could not lead to the Westerman
defendants’ seemingly odd hybrid strategy: electing to file a
motion for benefit but without following the proper
procedures for such a motion.
20
Moreover, Seed introduced an affidavit from an expert
attesting that a reasonable patent lawyer in 1997 would have
understood the regulations to require the filing of a translation
in connection with a motion for benefit related to a PCT
application. Any other understanding of the regulations
would make little sense, Seed contends: it would call for the
Board to decide in an interference proceeding whether a PCT
application written in a foreign language patented the same
invention as the one claimed by the other party, but to do so
without a translation of the relevant application. And
although the Federal Circuit’s 2004 decision in Stevens would
not necessarily speak to the state of the law in 1997, Stevens
characterized the application of Rules 637 and 647 to PCT
applications as “very clear.” 366 F.3d at 1335.
For those reasons, we conclude Seed has raised a genuine
dispute of material fact about the requirements a reasonable
patent lawyer would have thought relevant to claiming the
benefit of a prior PCT application in 1997. Whether the
Westerman defendants exercised professional judgment in
choosing not to file a translation is a question for the finder of
fact.
Finally, we briefly address the Westerman defendants’
claim that they thought they did file a translation. In their
view, they exercised their professional judgment in
concluding that the American application itself would qualify
as a translation of the PCT application. But even if the
American application in fact was a translation of the PCT
application, the opposing party and the Patent Office would
not have known it because the American application was not
filed as a translation and included no affidavit attesting to its
accuracy. At the very least, a factfinder could conclude that
no lawyer exercising professional judgment would have
21
considered a document entirely unidentified as a translation to
somehow satisfy a translation requirement.
2.
Seed next argues that the defendants failed to exercise
reasonable care in making the decision not to file the
translation. To fall under the judgmental-immunity doctrine,
the lawyer must “undertak[e] reasonable research of the
relevant legal princip[les] and facts of the given case.”
Biomet, 967 A.2d at 666 (quotation omitted). It is not enough
to “characteriz[e] an act or omission as a matter of judgment.”
Id. (quotation omitted).
The Westerman defendants have introduced no evidence
of their deliberative process in reaching the decision not to
file the translation. They have produced no research,
memoranda, or other internal correspondence about the
applicability of Rules 637 and 647 to PCT applications. Nor
have they submitted any affidavits about their consideration
of such questions. Although the absence of evidence is not
necessarily dispositive, it at least permits a factfinder to draw
an inference that the Westerman defendants did not exercise
reasonable care. That sort of reasonable inference makes
summary judgment for the defendants inappropriate in this
case.
3.
Seed argues that, not only was it wrong to grant summary
judgment in favor of the defendants, but summary judgment
should have been granted in favor of Seed. Although we do
not think the Westerman defendants are entitled to summary
judgment when we weigh the evidence in Seed’s favor, we
similarly do not think Seed is entitled to summary judgment
22
when we make the opposite inferences. The Westerman
defendants raise a genuine dispute of material fact about
whether they could have reasonably thought that Rules 637
and 647 did not apply to PCT applications. The resolution of
that dispute is for the factfinder at trial.
III.
Finally, two of the Westerman defendants argue that they
should be dismissed from the case. Edward Kenehan and the
Westerman firm are listed as defendants only for the second
count of the complaint, which alleges that they gave Seed
erroneous advice about the strength of its arguments in the
Federal Circuit appeal. The district court found that Seed had
withdrawn its second count because it had conceded that there
were no damages stemming from the second count in
particular. Kenehan and the Westerman firm moved to be
dismissed from this appeal because the district court had
found, based on Seed’s concession, that any claims against
them were moot. Seed responds that the defendants’
understanding of its concession is too broad. In Seed’s view,
the second count contained two types of damages: damages
from not accepting a settlement, and damages from
underestimating the importance and finality of the Federal
Circuit appeal, delaying their discovery of their malpractice
claims. Seed admits that it conceded the first type of
damages, but not the second.
We decline to resolve those issues at this stage. Because
the district court found that the claims were brought within
the statute of limitations, it had no occasion to consider
whether the second count alleges damages stemming from
appellants’ failure to pursue their malpractice claims sooner
due to the defendants’ erroneous advice about the significance
of the Federal Circuit appeal (and, if it does, whether Seed
23
waived those damages as well). Our decision requires
answers to those questions: if the allegations in the complaint
cover such a claim and Seed did not concede it, Seed could
seek damages based on the Westerman defendants’ faulty
advice about the timing of its (now dismissed) claims against
the Kratz defendants. We remand to the district court to
interpret the complaint in the first instance and decide
whether Seed waived any remaining claims against Kenehan
and the Westerman firm.
* * * * *
We hold that the first and second counts of the complaint
should be dismissed against the Kratz defendants as barred by
the statute of limitations, and we remand for further
proceedings on the contingent third and fourth counts. With
regard to the Westerman defendants, we reverse the district
court’s grant of summary judgment on the first and second
counts and remand for further proceedings. We also remand
for the district court to decide whether Edward Kenehan and
the Westerman firm should be dismissed from the suit.
So ordered.