International Business Machines Corporation v Total Peripherals Pty Ltd
[1998] APO 14
•17 March 1998
official notice
decision of a delegate of the commissioner of patents
Patent: No. 579156 in the name of International Business Machines Corporation.
Title: Diskette Drive and Media Type Determination
Action: An application under section 223 for an extension of time to pay a renewal fee and opposition thereto by Total Peripherals Pty. Limited; hearing.
Decision: Issued .
Abstract
The Intellectual Property Department, IBM Japan was charged with monitoring the due date for maintenance fees on IBM patents in Australia and in a number of other countries in the region. They were not responsible for the decision to maintain particular patents but referred lists of “Docket” numbers falling due to patent portfolio managers (PPM’s) within IBM who had that authority. A list including a docket number corresponding to the present Australian patent was sent to a particular PPM with the message that for budgetary reasons the patents would be dropped unless otherwise recommended.
The evidence indicates that the PPM normally made such decisions primarily based on commercial information contained in an IBM database. The docket in the database corresponding to the patent had, at the relevant date, the entry “APPEARS IN US ROYALTY LISTING” and the PPM declares that had he been aware of this he would have sought renewal of the patent. On balance the evidence tends to show that due to a pending relocation the PPM did not consult the database as he was obliged to do but gave a blanket response. This was an “error of judgement” or “faulty reflection” (Kimberly-Clark Ltd v Commissioner of Patents 13 IPR 569) and a “breakdown in procedure” (Weir Pumps Limited v Stork Pompen B.V. (1989) 13 IPR 163).
The public interest or the interests of some other party has not been shown to weigh against the grant of the extension of time. The extension sought is granted.
patents act 1990
decision of a delegate of the commissioner of patents
Re:Patent No. 579156 in the name of International Business Machines Corporation, application under section 223 for an extension of time to pay a renewal fee and opposition thereto by Total Peripherals Pty. Limited.
background
Patent No. 579156 was granted on 26 April 1989 to International Business Machines Corporation (IBM).
The patent ceased following a failure to pay the renewal fee due on 16 May 1996 either by that anniversary date or (upon payment of an additional fee) within the grace period of 6 months after that date. The patent was advertised ceased in the Official Journal on 2 January 1997.
On 17 February 1997 IBM filed an application under section 223(2) to extend the time in which to pay the renewal fee. Evidence in relation to the matter was filed on 17 April 1997 and the application was advertised in the Official Journal on 22 May 1997. Total Peripherals Pty. Limited (Total Peripherals) filed a notice of opposition on 18 June 1997 and served a Statement of Grounds and Particulars on IBM on 18 September 1997.
No evidence was filed by the opponent and a hearing was set down on 18 February 1998 in Canberra. IBM was represented by Mr F P Old, Patent Attorney of Spruson & Ferguson, Sydney assisted by Mr J Villella, Assistant General Counsel, IBM World Trade Asia Inc. Total Peripherals was represented by Mr G Halford, Patent Attorney of Halford & Co. Sydney.
THE LEGISLATION
The provisions of section 223 relevant to the present request are as follows:
"223. (1) ...
(2) Where, because of:
(a)an error or omission by the person concerned or by his or her agent or attorney; or
(b) circumstances beyond the control of the person concerned;
a relevant act that is required to be done within a certain time is not, or cannot be, done within that time, the Commissioner may, on application made by the person concerned in accordance with the regulations, extend the time for doing the act.
(3) The time allowed for doing a relevant act may be extended, whether before or after that time has expired.
(4) Where an application is made for an extension of time for more than 3 months, the Commissioner must advertise the application in the Official Journal.
(5) ...
(6) A person may, as prescribed, oppose the granting of the application.
(7) Where:
(a) a patent application lapses, or a patent ceases, because of a failure to do one or more relevant acts within the time allowed; and
(b) the time for doing that act or those acts is extended;
the application or patent must be treated as having been restored.
.... .”
Mr Old confirmed at the hearing that IBM was relying on section 223(2) (a), that is, “an error or omission by the person concerned or by his or agent or attorney”.
Evidence
The evidence supplied by IBM in support of its application comprises two statutory declarations. The first is made by John Holcombe who states that he was employed by IBM as a Patent Portfolio Manager (PPM) from about 1 July 1989 to his retirement on 30 September 1996. The second is made by Miki Aridome who is a Patent Associate in the IBM Japan Intellectual Property Department.
The facts surrounding IBM’s failure to pay the renewal fee due on 16 May 1996 appear from these declarations to be:
Miki Aridome was responsible for monitoring due dates for patent maintenance fees in a number of countries in the Asia Pacific region including Australia.
On 12 March 1996 Ms Aridome informed John Holcombe by E-mail that a number of listed patent annuities including that for Australian patent 579156 were due in the following 3 months. She also indicated that because of the limited budget for those countries the patents would be allowed to lapse “unless otherwise recommended”.
The IBM docket number for the present patent is BC984012 and is given in the list the PPM code 329. Mr Holcombe clearly was one of a number of PPM’s in IBM responsible for making decisions about maintaining the listed patents and it is evident from the E-mail address details (Exhibit A to the declaration) that Mr Holcombe is identified by the code PPM300.
On 13 March 1996 Mr Holcombe replied “Please drop all PPM 300 listed dockets in Australia”.
Ms Aridome on 23 April 1996 sent a facsimile to IBM’s Australian patent attorney, Davies Collison Cave, indicating that a number of Australian patents including 579156 be abandoned.
In paragraph 6 of his declaration Mr Holcombe indicates that he normally made decisions about IBM patents “based primarily on the information recorded in the IBM DOSSIER data base. My normal practice was to maintain those patents important to licensing negotiations, or likely to be important to licensing negotiations”. An extract from the IBM DOSSIER database for docket No. BC984012 is provided in exhibit C.
Mr Holcombe goes on to state that he did not recall his specific actions in relation to docket No. BC984012 but that had he seen the entry “APPEARS IN US ROYALTY LISTING” he would have maintained the patent in Australia. This entry he says means that royalty payments had been received by IBM for the corresponding family of patents. Mr Holcombe surmises that because of his relocation from Tucon, Arizona to San Jose, California in March 1996 “a time that was particularly hectic for me” he mistakenly departed from his normal practice of reviewing the IBM DOSSIER database for each of the patents within his responsibility on the list provided by Miki Aridome.
decision
Mr Halford referred me to Kimberly-Clark Ltd v Commissioner of Patents 13 IPR 569 as authority for the contention that IBM was required to establish that an error or omission had occurred and that there was a causal connection between the omission and the non-payment of the fee. He also suggested that for me to exercise the Commissioner’s discretion in favour of IBM there must have been a prompt, frank, comprehensive and clear disclosure of all the relevant circumstances.
In addressing these issues Mr Halford made a number of submissions which I summarise as follows:
Mr Holcombe’s attempt to reconstruct his actions is based on a presumption that he made an error or omission.
The evidence is consistent with a decision not to renew in view of the limited budget available.
While Mr Holcombe in his declaration refers to “normal” or “typical” procedures the situation was not a normal one because of the advice that there was a limited budget for Australia and that the patent would be dropped “unless otherwise recommended”.
The fact that the DOSSIER database contained an entry which on the face of it is about US royalties does not demonstrate that the database was not consulted.
An essential question is whether the “mistake” of Mr Holcombe constitutes an error or omission of the kind with which section 223(2) is concerned.
There are two possibilities. The first is that because he was having a hectic time Mr Holcombe decided not to refer to the data base. In this case the decision is seen as a mistake in retrospect because it is now seen as desirable to have the patent in force.
The second possibility is that Mr Holcombe forgot to look at the database. Given that this is his primary source of information and the nature of the request from Ms Aridome suggests that the evidence is not credible.
Jenkins J in Kimberly Clark (supra) suggests that errors of the kind embraced by section 160(1) of the 1952 Act may include “errors resulting from faulty reflection” but “By no means every judgement by ‘the person concerned’ ... which can be shown to have been mistaken will answer the description ‘error of omission’ in the ordinary meaning of the words, which in their context carry, in my opinion, a connotation of obviousness in error”. Taking a calculated risk would be beyond the boundary contemplated by Jenkins J.
There is no evidence of a causal connection between the alleged error and the non-renewal of the patent. It is not believable that Mr Holcombe would instruct the lapsing of all 61 patents without some basis for the decision other than budgetary considerations.
10.If Mr Holcombe’s evidence is accepted as showing the non-renewal was due to the error described the Commissioner’s discretion should not be exercised in favour of IBM because the evidence lacks the necessary degree of frankness and completeness.
Mr Old for his part began by attacking the Statement of Grounds and Particulars as being fatally deficient and defective. While the statement perhaps could be found defective on a highly technical assessment to do so would be to ignore the general principle that a purposive construction should be applied (see Borden Inc v Elkem A/S, ( 1992) AIPC 90-893). In my view the statement is sufficient for its purpose and I do not see the basis for IBM to argue at the hearing that it was not aware of the case to be made against it. Indeed one would have to question why, if this were the case, IBM have not sought to use the provisions available under the Regulations to seek dismissal or directions for further and better particulars.
Otherwise Mr Old submitted that the section 223 application was filed without undue delay, the timing was such not to cause inconvenience to the public and that the circumstances of the error and the causal connection with the failure to the pay the fee was clear from Mr Holcombe’s evidence.
In the present case the sequence of events that may have led to an “error or omission” on behalf of IBM are not entirely clear. Mr Holcombe says simply that he does not recall his actions in relation to the patent. In hindsight he says that he must have made an error because in the usual course of events the information recorded in the DOSSIER database would have led him to renew the patent. I has some sympathy for Mr Halford’s concern about this evidence. While it is understandable that Mr Holcombe would not recall his actions on this matter more than 12 months later his alleged failure to consult the DOSSIER database appears to be a gross departure from established practice. It is also surprising that the key piece of information in the database “APPEARS IN US ROYALTY LISTING” was entered by Mr Holcombe on 4 March 1996 but when asked to make a decision in relation to the docket number only 8 or 9 days later he did not recall its significance.
However, I have no grounds to question the veracity of the declarant and I accept his evidence at paragraph 8 that had he seen the DOSSIER entry he would have maintained the patent. I think what Mr Holcombe is saying in paragraph 9 is that because he was in the process of relocation he made a conscious decision to abandon his usual practice and standards to the point of not even considering the individual docket numbers and “instead provided a blanket response to the entire list on March 13, 1996”. This is a remarkable lapse on his part but I think the evidence tends to support this conclusion more than the alternative suggestion that Mr Holcombe made a decision on the relevant information, decided to let the patent lapse and that IBM has subsequently decided it should be restored. Very possibly the statement in Ms Aridome’s E-mail that:
“In view of the limited budget for these countries, we will let all the dockets expire without paying annuity, unless otherwise recommended”
did influence Mr Holcombe’s actions but if so it was an abrogation of his role in the decision making process. While Ms Aridome suggested the patents be dropped for budgetary reasons she is clear in stating that she had no responsibility for or authority to make the decision.
Mr Halford says Mr Holcombe took a calculated risk which goes beyond the boundary contemplated by Jenkins J in Kimberly Clark. I cannot agree. IBM has a large portfolio of patents and it appears from the evidence that it established a system including a database which was to be the primary source of information on which Mr Holcombe, and I assume all other PPM’s, were to make their decisions concerning the maintenance of IBM’s patents. Mr Holcombe alone was responsible for approximately 9,000 patents or patent applications. If a PPM such as Mr Holcombe has a professional obligation to make decisions based on information in the database but fails to do so for some reason then I think it is fair to say that an error or omission has occurred. It is an error of judgement or “faulty reflection” in terms of Jenkins J in Kimberly Clark. Even were it considered a calculated risk on Mr Holcombe’s part it was nevertheless an error of judgement with the consequence that a potentially valuable patent has been put at risk.
In Weir Pumps Limited v Stork Pompen B.V. (1989) 13 IPR 163 (affirmed in the AAT by Deputy President Bannon QC) “an error or omission” was defined as having occurred where there has been a “breakdown in procedure in effecting a party's intention in respect of an invention or application”. Applying this definition to the present case it appears, not surprisingly, that IBM’s intention was to maintain those patent rights and families of patents that were commercially important, particularly in relation to licensing. The procedure to effect IBM’s intention was to record information about licensing and royalties on a database and for PPM’s to review the database before making decisions in relation to the maintenance of patents. I have accepted that this procedure broke down in the present circumstances because on balance the evidence suggests that Mr Holcombe failed to review each docket on Ms Aridome’s list and did not consult the database. The causal relationship between the failure to consult the database and the failure to pay the fee is clear.
One possible difficulty with the evidence supporting the application is the entry in the database “Abandon in Australia with PPM’s concurrence in 1996 (MT 960610)”. On the face of it this is merely indicating the fact that the patent had been allowed to lapse. However if the person identified by the initials MT was in a position on 10 June 1996 to recognise the error why did they not take action then to rectify the situation? It may show a lack of intent on behalf of IBM. Equally “MT” may not have had the authority to take any action and if that person was an employee of the Intellectual Property Department, IBM Japan, that would be understandable. I note in this regard that “Manager o TAKEMT -- YMTVM1 M. Takeda - IPD” is a “cc:” recipient of the Aridome E-mail message. In the circumstances, and without evidence either way, I do not think this factor should outweigh the force of evidence in favour of IBM.
In coming to the conclusions above I note that IBM has an obligation to put before the Commissioner the circumstances it believes justify the grant of an extension of time but that this is not equivalent to a burden of proof (Sanyo Electric Co Ltd v Commissioner of Patents (1996) AIPC 91-283). I find the evidence is sufficiently complete and frank to support the conclusion that there has been a relevant error or omission.
Among the other considerations relevant to the question of whether the Commissioner’s discretion should be exercised is the public interest. As the patent was advertised ceased in the Official Journal on 2 January 1997 and the application for an extension of time filed on 17 February 1997, I cannot say there has been a significant delay on behalf of IBM in attempting to rectify the standing of the patent. Even if importance is given to the 10 June entry referred to above I do not think the public interest is weighed heavily against the grant of the extension. There is also no evidence that any other person, including Total Peripherals, would be prejudiced by the granting of an extension.
In light of the consideration above I believe my discretion should be exercised in favour of IBM and I hereby grant the extension of time sought.
costs
I believe in the circumstances that costs should follow the event and hence I award costs in favour of IBM.
Philip Spann
Delegate of the Commissioner of Patents
Patent attorneys for the applicant : Spruson & Ferguson, Sydney
Patent attorneys for the opponent : Halford & Co. Sydney
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