Federal Circuit Considers Transferred Patent-Related State Law Malpractice Case, But Questions Balance Between Federal And State Judicial Responsibilities

This article previously appeared in Last Month at the Federal Circuit, May, 2012.

Judges: Prost (concurring), Mayer, O'Malley (concurring) (per curiam)

[Appealed from W.D. Tex., Chief Judge Biery]

In USPPS, Ltd. v. Avery Dennison Corp., No. 11-1525 (Fed. Cir. Apr. 17, 2012), the Federal Circuit affirmed the district court's decision to dismiss a claim for breach of fiduciary duty and fraud, holding that the Court had jurisdiction pursuant to 28 U.S.C. § 1338 and that USPPS, Ltd.'s ("USPPS") complaint was untimely.

In 1999, Joe Pat Beasley filed a patent application for personalized postage stamps. In 2001, the PTO issued a notice of allowance of U.S. Patent Application No. 09/326,712 ("the '712 application"). Beasley then entered into a licensing agreement with Avery Dennison Corporation ("Avery"). The agreement specified that Avery would assume responsibility for prosecution of the '712 application and would pay patent prosecution expenses. Beasley appointed Renner, Otto, Boisselle & Sklar, L.L.P. ("Renner") to prosecute the '712 application. A Renner attorney filed a supplemental IDS disclosing a prior art reference and also filed a continuation application. The PTO issued a second notice of allowance.

Beasley transferred the ownership of the '712 application to USPPS. USPPS and Avery entered into an agreement concerning the personalized postage stamps. Later, as part of its own independent quality review, the PTO vacated its notice of allowance and issued final rejections in the '712 application and the continuation application, based on a newly discovered prior art patent reference.

Beasley and USPPS alleged that Avery mismanaged the applications. In a prior action, Beasley brought suit against Avery and Renner, alleging negligence, among other things, but the district court dismissed Beasley's suit, concluding that Beasley lacked standing because he had transferred title to the '712 application to USPPS. Later, USPPS filed the instant action, alleging breach of fiduciary duty and fraud, based on Avery's alleged representation that Beasley was the client of Renner and failure to inform USPPS that Avery (not Beasley or USPPS) was the client. USPPS contended that Beasley and USPPS had no legal representation in the prosecution of the patent that caused injury and damages. The district court dismissed USPPS's complaint as barred by the statute of limitations, but the Court of Appeals for the Fifth Circuit reversed, determining that it...