DH Technology, Inc. v. Synergystex International, Inc., 47 U.S.P.Q.2d 1865, 1998 WL 554195 (Fed. Cir. Sept. 1, 1998).



Whether the lower court erred by holding that DH Technologies' patent was unenforcable because it had lapsed pursuant to 35 U.S.C. § 151 for erroneously payment of the small entity status issue fee and could not be revived because 37 C.F.R. § 1.317(c) limited the time during which the error could be corrected.


Yes.  While 35 U.S.C. § 151and 37 C.F.R. § 1.317(c) apply in a case where a fee increase occurs after the mailing of the notice of allowance but prior to payment of the issue fee, there is no support for applying these provisions to the erroneous payment of the small entity issue fee by a large entity.  When small entity status has been established in error and small entity fees have been paid in error, the matter is to be addressed under 37 C.F.R. § 1.28(c).


The patent in question evolved from an application originally assigned to Identification Business, Inc. (IBI).  At the time, IBI had fewer than 500 employees and consequently executed a Verified Statement (Declaration) Claiming Small Entity Status under 37 C.F.R. § 1.9(f).  This classification is available to business entities with fewer than 500 employees and allows for a filing fee discount of 50%.  DH Technologies (DHT) acquired IBI and the pending patent application.  DHT had more than 500 employees at the time.  However, it paid the small entity issue fee when the patent in question issued.  DHT later sued Synergystex for infringement of the patent.  Synergystex defended on the ground that the patent was unenforceable due to DHT's erroneous small entity classification.  The district court held that the patent application was abandoned under 35 U.S.C. § 151 and could not be corrected under 37 C.F.R. § 1.317(c).  It thus held the patent unenforceable.  DHT appealed, and the Federal Circuit held that 37 C.F.R. § 1.28(c) should govern.  This provision has a correction mechanism for good faith mistakes, but forbids correction if small entity status was designated in bad faith.  Thus, the case is remanded to the lower court to determine if DHT committed good faith error when it claimed small entity status.

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