Petition for Writ of Certiorari — Invention Submission Corp. v. Dudas
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4
On October 30, 2002, without affording ISC any
opportunity to develop the agency record relating to the
PTO’s implementation of its scheme to misuse agency
resources and influence, the district court dismissed ISC’s
Complaint. Rather than addressing the issue of sovereign
immunity under Rule Ib I), the district court evaluated
ISC’s allegations under Fed. R. Civ. F 12(bX6). ISC ap-
pealed the district court's order because it dismissed ISC’s
complaint under Rule 12(b\6) and also because he court
failed to apply the standard set forth in Industrial Safety.
On appeal, ISC focused in greater detail on the un-
derpinnings for the Industrial Safety standard of review
by tracing the “presumption” in favor of judicial review to
its origin in the McAnnulty Doctrine. The “McAnnulty
Doctrine” refers to this Court’s decision in American
School of Magnetic Healing u. McAnnulty, 187 U.S. 94, 23
S. Ct. 33, 47 L. Ed. 90 (1902). See Chamber of Commerce of
the United States v. Reich, 74 F.3d 1322, 1327 (D.C. Cir.
1996). The McAnnulty Doctrine broadly protects against
arbitrary action by agency officials by affording judicial
review whenever an agency official's conduct is unauthor-
ized by law or violates the rights of the aggrieved plaintiff.
ISC argued that as part of the restructuring of federal
question jurisdiction in 1976, Congress provided for
McAnnulty-type review in the context of federal question
jurisdiction and the APA. ISC asserted that post 1976,
federal question jurisdiction and the APA's waiver of
sovereign immunity provide jurisdiction for the court to
review agency action in the nature of a sanction, such as
the PTO’s misuse of agency resources to cause ISC irrepa-
rable harm.
The Fourth Circuit held that the PTO’s conduct was
not final agency action reviewable under the APA and
5
therefore the district court lacked s bject matter jurisdic-
tion. The Court held as follows:
Because the conduct of the [Patent and Trade-
mark Office] ... did not constitute “final agency
action” as used under the [Administrative Proce-
dure Act}, the district court did not have subject
matter jurisdiction to evaluate the complaint un-
der Rule 12(b)\(6) and s' ould have dismissed this
case under Rule Ib I). We therefore vacate its
order of October 30, 2002, as well as the support-
ing opinion, and remand with instructions to
dismiss this case under Federal Rule of Civil
Procedure 12(b\1).
Invention Submission Corp. v. Dudas, 413 F.3d 411, 412
(2005); App. p. 2. In reaching this decision, the Fourth
Circuit interpreted the scope of review of agency action
under the APA to apply only to the text of statements
having “regulatory effect.” Invention Submission Corp. v.
Rogan, 357 F.3d. 452, 460; App. p. 35. Under this stan-
dard, the PTO’s media campaign, which involved the use
of false or unauthorized adverse publicity intended to put
ISC out of business, was not subject to judicial review
because the “text” itself did not have a regulatory effect.
Id. at 459-60; App. pp. 32-34. The Court observed that the
Pro's advertising did not create legal consequences’
for Invention Submission or any other member of the
public cognizable as final agency action” and that under
the regulatory effects standard the harm to ISC’s lawful
business activities is “ ... attributable to ir ſependent
responses and choices of third parties and cannot be
imputed to the PTO for purposes of determining whether
its conduct was a final agency action.” Jd. at 460; App. pp.
34-35.
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The Fourth Circuit also concluded that subject matter
jurisdiction under McAnnulty has not been incorporated
into federal question jurisdiction and the APA as argued by
ISC. Id. at 457; App. p. 29. In its decision, the Fourth
Circuit stated that general equity jurisdiction under the
McAnnulty Doctrine is separate and apart from the APA,
rather than incorporated into the APA. Jd. The Fourth
Circuit indicated that although subject matter jurisdiction
may rest outside the APA under the McAnnulty Doctrine,
it did not need to address this issue because ISC had
relied on Industrial Safety “which was construing the APA
itself,” and ISC had not raised the issue of subject matter
jurisdiction under McAnnulty in the district court. Id. The
Fourth Circuit stated in its opinion that “[flor these
reasons, we do not address whether the ‘McAnnulty
Doctrine’ which Invention Submission raises for the first
time on appeal, provides a basis for judicial review of
unlawful agency action.” Id.
On April 22, 2004, after the Fourth Circuit’s mandate
was returned, the district court ordered the parties to
advise the court within ten days of any reason why the
court should not dismiss this civil action under Fed. R. Civ.
P. 12(b)(1). Order dated April 22, 2004; App. pp. 18-19. On
May 5, 2004, prior to the expiration of the response period,
the district court entered an order vacating its October 30,
2002 Order and Memorandum Opinion and dismissing the
civil action under Rule 12(b)(1). Order dated May 5, 2004;
App. pp. 16-17. On the same day, May 5, 2004, ISC moved
under Fed. R. Civ. P. 60 to vacate the entry of the district
court’s order of May 5, 2004, and moved under Fed. R.
Civ. P. 15 and 28 U.S.C. § 1653 for leave to amend its
complaint to plead subject matter jurisdiction under
the court’s general equity jurisdiction known as the
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McAnnulty Doctrine. Plaintiff’s Response To Court’s Order
Dated April 22, 2004, Motion To Vacate Order Of May 5,
2004, and Motion For Leave To File Amended Complaint;
App. pp. 51-84.
Except for the jurisdictional basis for its claim, ISC’s
Amended Complaint did not raise new or additional
matters. Based on the same underlying facts, paragraph 1
of ISC’s Complaint was revised to plead subject matter
jurisdiction as follows:
This court has federal question jurisdiction over
the instant case under 28 U.S.C. 61331 as
ISC seeks judicial review under the. APA and
nonstatutory judicial review under the court's
general equity jurisdiction and the McAnnulty
Doctrine of the. PTOJ’s] conduct in acting
and/or failing to act in an official capacity or un-
der color of legal authority... .
Motion Exhibit A, Amended Complaint 7 1; App. pp. 59-60.
By order dated August 13, 2004, the district court denied
ISC leave to amend and reaffirmed its prior order of May
5, 2004 dismissing plaintiff's complaint pursuant to Rule
12(b\(1). Order dated August 13, 2004; App. pp. 11-15.
Thereafter, ISC appealed the district court's order denying
It is undisputed that the district court's order of May 5, 2004 was
entered prior to the expiration of the response period. Under Rule 6(a)
of the Federal Rules of Civil Procedure, the computation of any period
of time prescribed or allowed by any order of court which is less than 11
days does not include intermediate Saturdays and Sundays. Thus the
district court's Order of April 22, 2004, required response on or before
May 6, 2004. The PTO did not object to ISC’s Motion to Vacate and filed
Defendant's response to the Court's April 22, 2004 Order on May 5,
2004. See Motion To Vacate J 10; App. p. 54. In its Order dated August
13, 2004 the district court stated that “May 5, 2004 was the deadline for
filing any objection to dismissal.” See App. p. 12.
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ISC’s request for leave to amend its complaint in accor-
dance with Fed. R. Civ. P. 15 and 28 U.S.C. § 1653.
The issue before the Fourth Circuit Court of Appeals
in this appeal was the “scope of ... [its] mandate and a
determination of whether the district court faithfully
executed ... [its mandate) in dismissing this case without
permitting Invention Submission leave to file an amended
complaint.” ISC v. Dudas, at 415; App. pp. 8-9. The Fourth
Circuit concluded that ISC had waived subject matter
jurisdiction under McAnnulty by not raising it in the
district court prior to the first appeal. The Court explained
“that Invention Submission had not properly raised the
McAnnulty doctrine as a jurisdictional basis before the
district court and therefore had not preserved that issue
for consideration on appeal.” Id.; App. p. 9. The Fourth
Circuit held that its mandate directing the district court to
dismiss this case for lack of subject matter jurisdiction
precluded the district court from taking any further action
other than dismissing the case, and therefore there was no
basis to reverse the district court’s order of dismissal
denying ISC leave to amend its complaint to remedy
inadequate jurisdictional allegations. Id.
V.
REASONS FOR GRANTING THE WRIT
The Writ Should Be Granted to Resolve the Conflict
Between the Fourth Circuit’s Prohibition Against
Pleading an Alternate Ground for Subject Matter
Jurisdiction on Remand and Decisions of this Court
and Other Circuits Which Permit Such Amendment
The mandate in the instant case consisted of the
Fourth Circuit's instruction to dismiss under Rule 12(b)(1),
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and the Court’s statement of the reasons on which the
decision or judgment rested, that is:
Because the conduct of the [Patent and Trade-
mark Office] that is the subject of this action did
not constitute “final agency action” as used under
the [Administrative Procedure Act], the district
court did not have subject matter jurisdiction to
evaluate the complaint under Rule 12(b)(6) and
should have dismissed this case under Rule
12(b\(1).
ISC v. Dudas, at 412; App. p. 2. The Fourth Circuit inter-
preted its mandate as foreclosing consideration of subject
matter jurisdiction under the McAnnulty Doctrine because
it had not “properly” been raised in the district court and
therefore had not been “preserved” for consideration on
appeal. Id. at 415; App. p. 9. The Fourth Circuit denied
ISC the right to remedy inadequate jurisdictional allega-
tions under 28 U.S.C. § 1653 by adopting a rigid applica-
tion of Stamper v. Baskerville, 724 F.2d 1106 (4th Cir.
1984). Id. The Fourth Circuit held, in effect, that in all
cases where the Court orders dismissal under Fed. R. Civ.
P 12(b)(1), the lower court is precluded from taking any
further action even though an alternative basis for juris-
diction may exist on the facts plead. Id. (See Section 2
below for discussion of McAnnulty as a basis for jurisdic-
tion). The application of Stamper to the instant case is not
warranted and serves only to improperly foreclose ISC’s
rights under § 1653.
The mandate rule is a specific application of the law of
the case doctrine which provides that when a court decides
a rule of law, the mandate of the higher court is controlling
as to matters within its compass. Sprague u. Ticonic Nat'l
Bank, 307 U.S. 161, 59 S. Ct. 777, 83 L. Ed. 1184 (1939),
10
Gertz v. Robert Welch, Inc., 680 F.2d 527 (7th Cir. 1982); S.
Atl. Ltd. Pship of Tenn, L.P. v. Riese, 356 F.3d 576 (4th Cir.
2004); See also Quern v. Jordan, 440 U.S. 332, 347 n.18, 99
S. Ct. 1139, 1148 n.18, 59 L. Ed. 2d 358 (1979). The doc-
trine of law of the case is implicated only with respect to
issues previously determined. Quern v. Jordan, supra.
(citing In re Sanford Fork & Tool Co., 160 U.S. 247, 16
S. Ct. 291, 40 L. Ed. 414 (1895)). A lower court has author-
ity to address any issue which was not expressly or impli-
edly disposed of on appeal. Id.; Sprague v. Ticonic Natl
Bank, supra; Wells Fargo and Company v. Taylor, 254 U.S.
175, 41 S. Ct. 93, 65 L. Ed. 205 (1920).
In the instant case, there is no law of the case ad-
dressing subject matter jurisdiction under the McAnnulty
Doctrine. ISC pled subject matter jurisdiction under
federal question jurisdiction and the APA based on the
Industrial Safety standard, that the malicious targeting of
ISC by PTO officials constituted final agency action in the
nature of a sanction. The Fourth Circuit expressly stated,
both in the prior appeal and in this appeal, that the Court
was not addressing the issue of subject matter jurisdiction
under the McAnnulty Doctrine, which it characterized as
“a doctrine of equity jurisdiction apart from the APA....”
ISC v. Dudas, at 415; App. p. 9; JSC v. Rogan, at 457; App.
p. 29. The Fourth Circuit’s reliance on Stamper to limit the
court’s authority to remedy inadequate jurisdictional allega-
tions represents a direct conflict with: 1) section 1653 of the
Judicial Code and the decisions of this Court and other
Circuit Courts establishing the appellate court’s responsibil-
ity under § 1653 to broadly consider alternative grounds for
subject matter jurisdiction at any stage of the proceeding;
and, 2) the decisions of this Court limiting the scope
of appellate mandates to issues actually addressed on
11
appeal. Consistent with the mandate rule set forth in the
Quern-Sprague-Wells Fargo line of cases (see above), the
Fourth Circuit’s statement that it was not addressing the
court’s equity jurisdiction under McAnnulty conclusively
establishes that the law of the case does not discharge the
district court from its duties and responsibilities under
§ 1653 of the Judicial Code to allow amendments to plead
alternative grounds for jurisdiction.
1. The Fourth Circuit’s Failure to Permit
Amendment Is in Direct Conflict with Section
1653 of the Judicial Code Requiring Both Ap-
pellate Courts and the District Courts to Con-
sider Alternative Grounds for Jurisdiction at
Any Stage of the Proceeding
The Fourth Circuit concluded in the instant case that
the effect of ISC’s failure to raise McAnnulty prior to the
first appeal resulted in waiver of McAnnulty as a grounds
for the court to exercise subject matter jurisdiction. Thus,
had the district court considered the McAnnulty Doctrine
as an alternative ground for jurisdiction, which it did not
do, the Fourth Circuit stated that the district court “would
have had to violate what we did instruct: to dismiss the
case for lack of subject matter jurisdiction.” JSC v. Dudas,
at 415; App. pp. 9-10. The Fourth Circuit's use of waiver as
a vehicle to foreclose ISC’s rights under 28 U.S.C. § 1653 is
clearly in conflict with the decisions of this Court and
other Circuit Courts and should not serve as legal basis for
affirming the district court’s abuse of discretion in denying
ISC leave to amend.
Under Federal Rule of Civil Procedure 8(aX1) an
affirmative pleading of the precise statutory basis for
federal subject matter jurisdiction is not required as long
12
as a complaint alleges sufficient facts to establish jurisdic-
tion. LeBlanc v. Salem (In re Mailman Steam Carpet
Cleaning Corp.), 196 F.3d 1, 5 (Ist Cir. 1999); Rohler v.
TRW Inc., 576 F.2d 1260, 1264 (7th Cir. 1978). If the stated
grounds do not provide jurisdiction, the district court has
the “duty” under Rule 8(a) to read a complaint liberally
and to determine whether the facts set forth justify the
court exercising jurisdiction on grounds other than those
pleaded. Rohler v. TRW Inc., supra. Consistent with this
liberal pleading standard, § 1653 authorizes federal
district and appellate courts to remedy inadequate juris-
dictional allegations at any stage of the proceeding.
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 109
S. Ct. 2218, 104 L. Ed. 2d 893 (1989).
Apart from the instant case, all courts which have
addressed this issue have held that a plaintiff may rely on
§ 1653 at any stage of the proceeding, including on appeal,
to assert a new theory of subject matter jurisdiction that is
apparent from the face of the complaint. Advani Enter-
prises, Inc. v. Underwriters at Lloyds, 140 F.3d 157, 161
(2d Cir. 1998) (pursuant to § 1653 an appellate court can
allow amendment to assert a new theory f subject-matter
jurisdiction after finding that the original theory was
insufficient); Kiser v. General Electric Corp., 831 F.2d 423
(3rd Cir. 1987) (pursuant to § 1653 a federal court not only
has the power but also the duty to consider on the merits a
proposed amendment remedying defective allegation of
subject matter jurisdiction); Whitmire v. Victus Limited t/a
Master Design Furniture, supra (§ 1653 allows amendment
to state an alternative jurisdictional basis for recovery
upon the facts previously alleged either in the district
court or the appellate court); Seagraves v. Harris, 629 F.2d
385 (5th Cir. 1980) (§ 1653 in conjunction with Fed. R. Civ.
13
P. 15 allow plaintiff to amend after appellate argument to
plead a new theory of subject matter jurisdiction); Miller v.
Davis, 507 F.2d. 308 (6th Cir. 1974) (§ 1653 allows the
appellate court to direct plaintiff to assert a new basis for
subject matter jurisdiction); See also LeBlanc v. Salem (In
re Mailman Steam Carpet Cleaning Corp.), 196 F.3d 1, 5
(1st Cir. 1999) (plaintiff’s misplaced reliance on statute as
basis for subject matter jurisdiction does not foreclose the
appellate court from considering any other jurisdictional
source because “federal subject matt jurisdiction may be
established by reading a complaint holistically, ‘even
though the jurisdiction expressly asserted was im-
proper). In Vukonick v. Civil Service Comm’n, 589 F.2d
494 (10th Cir. 1978), for example, plaintiff pled subject
matter jurisdiction under the APA in an attempt to obtain
judicial review of the civil service commission’s refusal to
proceed with an appointment due to a dispute with the
EPA. While the case was pending, the United States
Supreme Court held that the APA did not afford independ-
ent subject matter jurisdiction for judicial review and that
subject matter jurisdiction rests solely on federal question
jurisdiction, 28 U.S.C. § 1331. The Tenth Circuit concluded
that the failure to allege this alternate basis for jurisdic-
tion was not fatal because “the complaint revealed a basis
for § 1331 jurisdiction.” Jd. at 496.
The Fourth Circuit’s failure to consider alternative
jurisdictional grounds and its use of waiver to deny ISC’s
rights to amend in conformity with § 1653 of the Judicial
Code presents an irreconcilable conflict in the law which is
likely to have significant impact beyond this case. By
enacting § 1653, it was the intention of Congress to permit
amendment broadly to avoid the dismissal of suits on
technical grounds. Moore v. Coats Co., 270 F.2d 410 (3rd
14
Cir. 1959); Whitmire v. Victus Limited T/A Master Design
Furniture, 212 F.3d 885 (5th Cir. 2000), Miller v. Davis,
507 F.2d 308 (6th Cir. 1974); Commercial Union Insurance
Co. v. U.S., 999 F.2d 581 (D.C. Cir. 1993). Accordingly,
federal practice dictates that “Section 1653 should be
construed ‘liberally to permit the action to be maintained
if it is at all possible to determine from the record that
jurisdiction does in fact exist Advani Enterprises, Inc.,
supra. The Fourth Circuit’s decision in the instant case
stands in stark contrast to these legal precepts. Here the
Fourth Circuit adopted a pleading standard which ele-
vates form over substance: all jurisdictional grounds not
precisely pled by plaintiff are waived. Under this standard
Fourth Circuit practice permits the court to arbitrarily
deny plaintiff rights protected in the Judicial Code and by
the decisions of this Court and all other Circuit Courts.
2. The Fourth Circuit’s Reliance on the Mandate
Rule to Deny ISC Leave to Amend under Sec-
tion 1653 Is in Direct Conflict with this Court’s
Decisions Limiting the Scope of an Appellate
Mandate to Issues Actually Addressed on Ap-
peal
Nothing contained in the Fourth Circuit’s mandate
should have precluded the district court from discharging
its responsibilities under § 1653 to broadly consider
alternative grounds for subject matter jurisdiction which
were apparent on the face of the complaint. The district
court in the instant case had authority under the mandate
rule to address any issue which was not expressly or
impliedly disposed of on appeal. The Fourth Circuit
expressly stated that it did not address the issue of subject
matter jurisdiction under the McAnnulty Doctrine, nor did
15
it address the merits of jurisdiction under McAnnulty by
implication.
The jurisdictional issue decided by the Fourth Circuit
was whether the PTO’s advertising campaign, directed at
ISC for the purpose of causing ISC irreparable harm,
constituted final agency action under the APA so as to be
reviewable in court. [SC v. Rogan, 357 F.3d at 458; App. p.
31. The Fourth Circuit stated that in order to constitute
final agency action the agency’s conduct must have regula-
tory impact, that is, it must be both the “‘consummation of
the agency's decision making process land] must be [an
action] by which rights or obligations have been deter-
mined, or from which legal consequences will flow.” Id. at
559; App. p. 32. The Fourth Circuit concluded that this
inquiry into regulatory impact is limited to the “text” of
the publication and whether the text constitutes the
“consummation” of a decision making process which
results in a formal determination of rights or obligations
or legal consequences. The Fourth Circuit explained that
the PTO advertisements did not have the requisite regula-
tory impact to be reviewable as “final agency action” under
the APA because the PTO advertisements did not ex-
pressly name ISC. The court further stated that unless the
“intent to penalize” is “referenced” in the text, any scheme
to penalize ISC, including the PTO’s attempts to link ISC
to the advertisements, was incapable of “taint{ing]” the
text. In other words, jurisdiction under the APA is to be
determined from the text of the agency publication with-
out consideration of the intent to penalize, the libel actu-
ally committed, or the federal rights violated.
This is quite different from the court’s jurisdiction
under the McAnnulty Doctrine, which broadly protects
against arbitrary and unlawful action by agency officials.
16
Nothing addressed by the court in the context of final
agency action forecloses jurisdiction under the McAnnulty
Doctrine. Under the McAnnulty Doctrine, judicial review
is afforded whenever an agency official’s conduct is unau-
thorized by law or violates the rights of the aggrieved
plaintiff. See Chamber of Commerce of the U.S. v. Reich, 74
F.2d 1322 (D.C. Cir. 1996); See also RI. Dep't of Enutl.
Mgmt. v. U.S., 304 F.3d 31 (ist Cir. 2002); Aid Assen for
Lutherans v. U.S. Postal Serv., 321 F.3d 1166 (D.C. Cir.
2003).
Under the McAnnulty Doctrine, regulatory impact is
not a pre-condition for the district court’s subject matter
jurisdiction. See Joint Anti-Fascist Refugee Comm. v.
McGrath, 341 U.S. 123, 71 S. Ct. 624, 95 L. Ed. 817 (1951)
(plurality opinion); B.C. Morton Int'l Corp. u. FDIC, 305
F.2d 692 (Ist Cir. 1962). Therefore, the Fourth Circuit's
statement that the non-regulatory harm to ISC’s reputa-
tion “cannot be imputed to the PTO for purposes of deter-
mining whether its conduct was a final agency action” does
not preclude review jurisdiction under the McAnnulty
Doctrine. See ISC v. Rogan, 357 F.3d at 460; App. pp. 34-
35. In fact, there are many circumstance, such as the
instant case, where the risk of harm to reputation caused
by the conduct of agency officials does not have direct
regulatory effect yet nonetheless constitutes a sufficiently
“cognizable injury” to support equity jurisdiction in federal
court. Meese v. Keene, 481 U.S. 465, 107 S. Ct. 1862, 95
L. Ed. 2d 415 (1987); Joint Anti-Fascist, supra; B.C.
Morton, supra. See also Foretich v. U.S., 351 F.3d 1198
(D.C. Cir. 2003); S. Mut. Help Ass’n, Inc. v. Califano, 574
F.2d 518 (D.C. Cir. 1977).
Furthermore, while the fact that the text of the media
campaign did not name ISC may defeat jurisdiction based
17
on final agency action under the APA, this does not fore-
close judicial review under the McAnnulty Doctrine when
the underlying intent of the PTO officials was to target
ISC through the improper use of agency resources and
agency influence. In the context of the court’s equity
jurisdiction, allegations of the underlying intent of agency
officials to specially target an individual or company are
not limited to the four corners of the text of the agency
publication as they are under the regulatory effects
standard applied by the Fourth Circuit. See B.C. Morton,
supra.” Similarly, the Fourth Circuit’s statement that the
text of the advertisements was not a regulatory effect but
a “warning [to] the public about invention promotion
scams [that is] consistent with the PTO’s commission
granted by the Inventors’ Rights Act of 1999” does not
foreclose judicial review under McAnnulty. Sve ISC v.
Rogan, 357 F.3d at 460; App. p. 35."
In B.C. Morton, the First Circuit was presented with virtually the
same type of agency abuse, resulting harm to reputation and lawful
business activities as presented in the instant case. Plaintiff alleged
that the FDIC has issued a lawful press release that contained deliber-
ate misrepresentations regarding the sale of certain types of certifi-
cates. Plaintiff alleged that, although not specifically identified in the
press release, its business was the target of agency officials who
intended to use the press release to destroy lawful business activities.
The First Circuit found that it had McAnnulty-type subject matter
jurisdiction where agency officials target a specific company with the
intent to interfere with lawful business activities. The Court held that
the district court may grant relief based on the threatened injury to
reputation resulting from arbitrary action of agency officials regardless
of whether the use of adverse publicity has regulatory impact.
In B.C. Morton, as in the instant case, it was the improper use of
agency resources and agency influence to interfere with lawful business
activities that supported the district court exercising equity jurisdiction
under McAnnulty. Subject matter jurisdiction is not defeated, as it is
under the regulatory impact standard, where the agency uses “artful
(Continued on following page)
18
In summary, the Fourth Circuit's prohibition of
amendment under § 1653 is in direct conflict with long
standing law. The Quern-Sprague-Wells Fargo line of cases
(discussed above) limit the doctrine of law of the case to
issues actually decided by the appellate court. The district
court on remand has the authority to address any issue
which was not expressly or impliedly decided. As discussed
in Section 1 above, where the issue left open concerns an
alternative ground for the court to exercise jurisdiction,
§ 1653 permits amendment in conformity with the liberal
policy of amendment contained in the Federal Rules. In
the instant case, the Fourth Circuit did not decide, directly
or indirectly on the merits, whether equity jurisdiction
exists in the district court under the McAnnulty Doctrine.
Thus, Stamper, on which the Fourth Circuit relies, does
not apply because the district court has jurisdiction on
grounds other than those addressed by the appellate court.
generality” in its written communication, whether in a press release, as
was used in B.C. Morton, or in advertisements, as were used in this
case. In this regard the First Circuit stated as follows:
The Joint Anti- Fuscist Committee case shows that in determining
the right of a plaintiff to relief against arbitrary governmental ac-
tion, “the true test is the substantiality of the present or immi-
nent harm which the administrative action inflicts on the
plaintiff.” ... There is no merit in the contention that a private
business has no protection against attack by a government agency
as long as the agency uses artful generality ... we are unable to
see any sound reason why, upon the facts alleged in the amended
complaint, a federal court should refuse to exercise jurisdiction.
B.C. Morton, 305 F.2d at 698-99 (citations omitted).
19
3. The Fourth Circuit’s Affirmance of the District
Court’s Order Denying ISC Leave to Amend Is
in Conflict with this Court’s Decisions and the
Decisions of the Other Circuit Courts Address-
ing the Right to Amend
Federal Rules of Civil Procedure 15(a) provides that
a] party may amend the partys pleading .. . by leave of
court ... and leave shall be freely given when justice so
requires.” Fed. R. Civ. P. 15(a). The liberal approach to
amendment embodied in Rule 15 allows a district court, in
conjunction with §1653, to grant leave to amend after
dismissal in order to assert a new basis for subject matter
jurisdiction, provided that the amendment is not unduly
delayed, advanced in bad faith, or prejudicial to the
opposing party. Berkshire Fashions, Inc. u. The M.V.
Hakusan II, supra; United Steelworkers of America, AFL-
CIO v. Mesker Bros. Industries, Inc., 457 F.2d 91 (8th Cir.
1972); Whitmire u. Victus Limited t/a Master Design
Furniture, supra; Miller v. Davis, supra.
Inherent in the authority to address issues not dis-
posed of on appeal is the district court’s authority, on
remand, to allow amendments of the pleadings. Jn re
Sanford Fork & Tool Co., supra; Wells Fargo and Company
v. Taylor, supra. It is well settled that unless an appellate
mandate constitutes a final decision on the merits, a
district court is to exercise its sound discretion on remand
to allow the plaintiff to amend pleadings in order to cure
defects in the sufficiency of a complaint. Rogers v. Hill, 289
U.S. 582, 53 S. Ct. 731, 77 L. Ed. 1385 (1933). This author-
ity includes jurisdictional amendments as there is no
general prohibition against asserting another basis for
jurisdiction in an amendment to a pleading, provided that
such jurisdiction would have existed at the time the
20
complaint was originally filed (Berkshire Fashions, Inc. v.
The M.V. Hakusan II, 954 F.2d 874 (3rd Cir. 1992)) and
dismissal for lack of subject matter jurisdiction does not
constitute a final decision on the merits (Fed. R. Civ. P.
41(b); See also Costello v. U.S., 365 U.S. 265, 81 S.Ct. 534,
5 L. Ed. 2d 551 (1961)).
ISC’s original complaint set forth all of the requisite
facts for the court to exercise subject matter jurisdiction
under the McAnnulty Doctrine even though this theory
was not specifically pled, including:
¢ The overarching goal of the PTO officials
was to use false and unauthorized adverse
publicity to put ISC out of business and oth-
erwise prevent ISC from engaging in its law-
ful business activities although Congress
placed specific restrictions on the PTO by
denying it authority, directly or indirectly, to
interfere with the lawful business activities
of invention promoters and by placing spe-
cific restrictions on the PTO with respect to
the manner and context in which the PTO
was authorized to make customer com-
plaints publicly available in a neutral public
forum. Amended Complaint JA 4-7, 11-14,
16, 28-39; App. pp. 60-62, 64-65, 69-75.
* Petitioner refers to Paragraphs 4 through 45 of the Amended
Complaint reprinted in the Appendix hereto at pp. 59 through 84. These
paragraphs are identical to Paragraphs 4 through 45 of the original
Complaint. The facts supporting the court’s general equity jurisdiction
under the McAnnulty Doctrine are set forth in Paragraphs 46 through
54, which incorporate and summarize the facts pled in Paragraphs 4
through 45. In its Amended Complaint ISC pled the same facts in
support of both general equity jurisdiction under the McAnnulty
Doctrine and federal question jurisdiction under the APA to preserve
(Continued on following page)
21
¢ The PTO officials implemented their scheme
to target ISC through the improper use of
agency resources and agency influence, in-
cluding featuring an ISC customer in its
media campaign because PTO officials har-
bor a specific animus toward ISC. Amended
Complaint 1 15-16, 18-19, 22, 32-38; App.
pp. 65-67, 71-74.
„ As part of its improper efforts to publicly
identify ISC as running a scam and to cause
harm to ISC: i) the PTO publicized the alle-
gation contained in the Lewis complaint
outside the neutral public forum provided
for in the IRA and linked ISC through the
PTO’s contacts with the media; ii) the PTO
officially embraced the false allegations
made by Lewis and falsely represented to
the public that Lewis was the victim of a
patent scam; and, iii) the PTO disparaged
ISC’s services to various individuals and
groups, expressly or impliedly, including
that it was featuring an ISC customer in its
media campaign to counter patent scams
like ISC. Amended Complaint 11 20-21, 23-
27; App. pp. 66-69.
¢ The PTO officials’ conduct is ultra vires be-
cause it is arbitrary and capricious, is in ex-
cess of the PTO jurisdiction, is contrary to
ISC’s federal and constitutional rights and
has proximately caused and continues to
cause harm to ISC. Amended Complaint
14 40-45; App. pp. 75-79.
both jurisdictional bases while ISC petitioned this Court for a writ of
+ — Fourth Circuit in connection with its decision in JSC u
upra.
Rogan, supra.)
22
The Fourth Circuit’s affirmance of the district court’s order
denying ISC leave to amend to plead an alternative basis
for jurisdiction disregards completely § 1653 of the Federal
Judicial Code and Rule 15(a) of the Federal Rules of Civil
Procedure.
The exercise of the lower court’s discretion in granting
leave to amend after remand must be in accordance with
the liberal policy of amendment as set forth in Fed. R. Civ.
P. 15(a). Nguyen v. U.S., 792 F.2d 1500 (9th Cir. 1986); See
also Harkless v. Sweeny Indep. Sch. Dist., 554 F.2d 1353
(5th Cir. 1977). The seminal case addressing the liberal
amendment standard is Foman v. Davis, 371 U.S. 178, 83
S. Ct. 227, 9 L. Ed. 2d 222 (1962). In Foman, this Court
described the liberal amendment standard under Rule 15
as follows:
Rule 15(a) declares that leave to amend “shall be
freely given when justice so requires”; this man-
date is to be heeded. . . If the underlying facts or
circumstances relied upon by a plaintiff may be a
proper subject of relief, he ought to be afforded
an opportunity to test his claim on the merits. In
the absence of any apparent or declared reason
such as undue delay, bad faith or dilatory motive
on the part of the movant, repeated failure to
cure deficiencies by amendments previously al-
lowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of
amendment, etc. — the leave sought should, as
the rules require, be “freely given.” Of course, the
grant or denial of an opportunity to amend is
within the discretion of the District Court, but
outright refusal to grant the leave without any
justifying reason appearing for the denial is not
an exercise of discretion; it is merely abuse of
23
that discretion and inconsistent with the spirit of
the Federal Rules.
371 U.S. at 182 (citations omitted).
As discussed in Section 1 above, the district court is
duty bound to broadly consider alternative grounds for
subject matter jurisdiction supported by the factual
allegations of the complaint at any stage of the proceeding.
Accordingly, in considering ISC’s request for leave to
amend its complaint to plead equity jurisdiction under
McAnnulty, the Fourth Circuit should have focused solely
on whether the district court had abused its discretion in
concluding that dismissal under 12(b)(1) constitutes a final
decision on the merits and in failing to apply the Foman
standard. The record in the instant case establishes that
ISC’s right to amend under Foman is clear.
The district court abused its discretion by disregarding the
liberal amendment policies embodied in Rule 15 and § 1653 and,
contrary to established law, concluding that the Fourth Circuit's
dismissal under 12(b)(1) constituted a decision on the merits. In this
regard, the district court stated as follows:
[Tlo allow the plaintiff to amend its Complaint by adding a com-
pletely new legal theory at this stage would defeat notions of judi-
cial economy and finality. “Although amendment of pleadings
following remand may be permitted.... The genera! rule that
leave to amend under rule 15 should be freely granted will not be
extended without limit when a rule 15 motion is brought after a
claim has been fully litigated on the merits through appeal. At
some point, there must be finality. Permitting amendment in this
case would not enhance finality, but instead would encourage se-
riatim judgments in the same basic dispute, as a plaintiff contin-
ues to put forth new theories of recovery. For these reasons,
plaintiff's Motion to Vacate Order of May 5, 2004 and Motion for
Leave to File an Amended Complaint are DENIED.
Order dated August 13, 2004; App. pp. 11-15. Of course, the instant case
was never “fully litigated on the merits through appeal.”
24
ISC did not act in bad faith in moving for leave to
amend to assert subject matter jurisdiction under the
McAnnulty Doctrine. The forty day period between the
filing of the PTO’s 12(b)\(1) motion and the time the district
court entered its dismissal order under 12(b)(6) does not
provide a basis under Foman to deny leave to amend.
This is not a case where plaintiff has attempted
piecemeal litigation, one theory at a time, and any impli-
cation to the contrary is incorrect and not based on the
record. At the time ISC filed its complaint there was a
bona fide conflict in the law regarding the source of the
Court’s authority to review ultra vires agency conduct.
This Court has repeatedly instructed courts, both prior to
and after the enactment of the APA, to apply a presump-
tion in favor of judicial review where plaintiff seeks
injunctive or declaratory relief from ultra vires adminis-
trative agency action. Bowen v. Mich. Academy of Family
Physicians, 476 U.S. 667, 106 S. Ct. 2133, 90 L. Ed. 2d 623
(1986); Barlow v. Collins, 397 U.S. 159, 90 S. Ct. 832, 25
L. Ed. 2d 192 (1970); Abbott Labs v. Gardner, 387 U.S.
136, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967); Joint Anti-
Fascist, supra; Leedom v. Kyne, 358 U.S. 184, 79 S. Ct.
180, 3 L. Ed. 2d 210 (1958); Stark v. Wickard, 321 US.
288, 64 S. Ct. 559, 88 L. Ed. 773 (1944). These decisions,
however, leave unclear the specific basis for the Court’s
subject matter jurisdiction as certain cases arise under the
APA and others do not specify whether or not relief is
sought under the ApA. At the time ISC filed its complaint
The law in this area showed that in 1976, in order to provide “a
safety-valve to ensure greater fairness and accountability in the
administrative machinery of the Government” (H. Rep. No. 1656, 94th
Cong., 2d Sess. 9 (1976), reprinted in 1976 U.S.C.C.A.N. at 6129-30),
Congress decided to combine equity with federal question jurisdiction,
(Continued on following page)
25
there were no Fourth Circuit opinions reconciling the
relationship between the court’s equity jurisdiction under
McAnnulty and the APA. In fact, it was not until the
Fourth Circuit’s decision in this case that any Circuit
Court had held that equity jurisdiction to review agency
action remains separate from federal question jurisdiction
and the APA, a decision that necessitated the need for ISC
to seek leave to amend to plead subject matter jurisdiction
under the McAnnulty Doctrine. As discussed above, the
limitations which the Fourth Circuit placed on final
agency action do not defeat jurisdiction under the McAn-
nulty Doctrine and therefore amendment of the complaint
would not be futile.
The PTO is not prejudiced by the Court allowing ISC
leave to amend the allegations of subject matter jurisdic-
tion contained in its Complaint. This case is in the initial
pleading stage and no discovery has been taken. The
stating: ‘the time ſhas] now come to eliminate the sovereign immunity
defense in all equitable actions for specific relief against a Federal
agency or officer acting in an official capacity.” Presbyterian Church
(U.S.A, v. U.S., 870 F.2d 518, 525 (9th Cir. 1989) (emphasis in opinion)
(citing H. Rep. No. 1656, 94th Cong., 2d Sess. 9 (1976), reprinted in
1976 U.S.C.C.A.N. at 6129). Specifically, Congress amended 28 U.S.C
§ 1331 to eliminate the monetary requirement in order to provide
federal question jurisdiction in all cases challenging an agency action,
including equity cases. See Califano v. Sanders, 430 U.S. 99, 106, 97
S. Ct. 980, 51 L. Ed. 2d 192 (1977) (in “restructur[ing] afresh the scope
of federal-question jurisdiction,” the “obvious effect” was to confer broad
jurisdiction on federal courts to review agency action). At the same
time, additional language was added to § 702 of the APA in order to
provide broad waiver of sovereign immunity. It was entirely consistent
with the case law to argue that the combination of the amendment to
§ 1331, which removed the monetary requirement, together with the
addition to § 702 of the APA, in effect codified the right to judicial
review exsting in equity as the McAnnulty Doctrine. See Chamber of
Commerce, supra; R.] Dep't, supra; Presbyterian Church, supra.
26
requested amendment does not cause any unfair surprise
to the PTO as the underlying facts and circumstances
have been known to the PTO since ISC filed its complaint.
In contrast, ISC is greatly prejudiced by the failure of
the Fourth Circuit to allow ISC to amend its complaint.
The prohibition against amendment adopted by the
Fourth Circuit has unfairly left ISC without a judicial
remedy against conduct that offends every notion and
sense of fairness and justice. Here PTO officials have
publicly stated their intention to wield agency resources
and influence to stigmatize ISC and prevent ISC from
engaging in lawful business activities because of the
animus PTO officials personally harbor against ISC. In
response to the PTO’s attempt to shield its agency abuse
from judicial review, the Fourth Circuit was called upon,
as a case of first impression in the Fourth Circuit, to
resolve the relationship between federal question jurisdic-
tion under the APA and equity jurisdiction under the
McAnnulty Doctrine. Contrary to the decisions in other
Circuits, the Fourth Circuit concluded that equity jurisdic-
tion under the McAnnulty Doctrine is separate and apart
from federal question jurisdiction. The Fourth Circuit then
further shielded the PTO’s agency abuses from judicial
review by adopting a prohibition against amendment in
direct conflict with § 1653 of the Judicial Code which is the
subject of this petition for writ of certiorari.
*
27
CONCLUSION
For the foregoing reasons Petitioner respectfully
requests that this Court grant its petition for writ of
certiorari to review the decision of the United States Court
of Appeals for the Fourth Circuit.
Respectfully submitted,
EDWARD B. FRIEDMAN RICHARD C. SULLIVAN, JR.
Counsel of Record REEDSMITH, LLP
J. STEPHEN PURCUPILE Suite 1400
FRIEDMAN AND 3110 Fairview Park Drive
FRIEDMAN Falls Church, VA 22042-3844
900 Fifth Avenue Tel. (703) 641-4200
Pittsburgh, PA 15219 Fax (703) 641-4340
Tel. (412) 261-5834
Fax (412) 261-0350
Attorneys for Petitioner
Invention Submission Corporation
App. 1
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
INVENTION SUBMISSION CORPORATION,
a Pennsylvania corporation,
Plaintiff-Appellant,
V.
JONATHAN W. DuDAS, Under
Secretary of Commerce for
Intellectual Property and
Director, United States Patent
and Trademark Office,
U.S. Department of Commerce,
in his official capacity,
Defendant-Appellee.
No. 04-2295
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Leonie M. Brinkema, District Judge.
(CA-02-1038-1)
Argued: May 24, 2005
Decided: June 24, 2005
Before WILKINS, Chief Judge, and NIEMEYER
and SHEDD, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the
opinion, in which Chief Judge Wilkins and Judge Shedd
joined.
App. 2
COUNSEL
ARGUED: Edward B. Friedman, Pittsburgh, Pennsyl-
vania, for Appellant. Rachel Celia Ballow, Assistant
United States Attorney, Office of the United States
Attorney, Alexandria, Virginia, for Appellee. ON BRIEF:
J. Stephen Purcupile, Friedman & Friedman, Pittsburgh,
Pennsylvania; Richard C. Sullivan, Reed Smith, L.L.P.,
Falls Church, Virginia, for Appellant. Paul J. McNulty,
United States Attorney, Alexandria, Virginia, for Appellee.
OPINION
NIEMEYER, Circuit Judge:
In our earlier review of the district court’s final order
dismissing this case under Federal Rule of Civil Procedure
12(bX6), we held:
Because the conduct of the [Patent and
Trademark Office] that is the subject of this ac-
tion did not constitute “final agency action” as
used under the [Administrative Procedure Act],
the district court did not have subject matter ju-
risdiction to evaluate the complaint under Rule
12(bX6) and should have dismissed this case un-
der Rule 12(b)(1). We therefore vacate its order of
October 30, 2002, as well as the supporting opin-
ion, and remand with instructions to dismiss this
case under Federal Rule of Civil Procedure
12(b\(1).
Invention Submission Corp. v. Rogan, 357 F.3d 452, 460
(4th Cir. 2004). By order dated May 5, 2004, the district
court did vacate its earlier dismissal order and dismissed
this case under Federal Rule of Civil Procedure 12(b)(1).
App. 3
Invention Submission Corporation filed a motion to
vacate the district court’s May 5, 2004 order and to grant
Invention Submission leave to file an amended complaint
for the purpose of avoiding the jurisdictional issue. The
district court denied this motion and reaffirmed its earlier
dismissal order. Invention Submission now challenges the
district court’s order denying its motion to vacate and for
leave to amend.
Because the district court was bound by the mandate
of this court to dismiss this case for lack of subject matter
jurisdiction, we affirm.
I
In January 2002, the Patent and Trademark Office
(“PTO”) launched a media campaign to counter invention
promotion scams. The print advertisements featured an
inventor named Edward Lewis, along with text that
identified him by name and read, “I spent $13,000 and
three years ‘spinning my wheels’ with a company that
promised my idea would make lots of money. They were
right. It made lots of money . for them. I havent seen a
penny.” The advertisement ended with a general state-
ment about avoiding “invention promotion scams” and
contact information for the PTO.
A journalist for a cable television network, who saw
the PTO’s advertisements, interviewed Lewis and pub-
lished a story revealing that Lewis was referring in the
advertisements to his relationship with Invention Submis-
sion, a business engaged in assisting inventors with
obtaining patents. The article revealed that Lewis had
filed a complaint with the PTO in August 2001 that was
“being processed.” The article also revealed that Invention
App. 4
Submission was one of several companies investigated by
the FTC in the 1990s “for misrepresentation in patent
marketing schemes.” The article concluded with Invention
Submission’s response that it did nothing wrong and that
its representations and commercials misled neither Lewis
nor anyone else.
After the article appeared, Invention Submission
commenced this action under the Administrative Proce-
dure Act (“APA”), 5 U.S.C. § 704, against the PTO, alleging
that the PTO’s advertising campaign was aimed at Inven-
tion Submission to penalize it and ultimately to put it out
of business. Invention Submission claimed that the cam-
paign was an illegal final agency action that was arbitrary
and capricious and exceeded any statutory authority
conferred on the PTO.
The PTO filed a motion to dismiss Invention Submis-
sion’s complaint under Federal Rule of Civil Procedure
12(bX1), contending that the PTO advertising campaign
was not a “final agency action” and therefore that the
district court lacked subject matter jurisdiction to review
its actions. The district court granted the motion to dis-
miss but based its decision on Rule 12(b)(6), finding that
“it is clear as a matter of law that no relief could be
granted under any set of facts that could be proved consis-
tent with the allegations.” The court observed that “(t]he
PTO’s publications in this case were merely generic
advertisements of agency programs not specifically nam-
ing the plaintiff. Any harm to the plaintiff was, at most,
indirect.” Finally, the court found that the agency’s con-
duct was not a “final agency action” and that Invention
Submission had not alleged any specific harm caused by
the PTO’s actions.
App. 5
On Invention Submission’s first appeal, we agreed
with the district court that the PTO’s alleged conduct did
not constitute final agency action and therefore was not
reviewable under the APA. We observed:
The text of the advertising material can only be
construed to be an effort by the
any right or obligation of any party.
Invention Submission, 357 F.3d at 460 (emphasis added).
In response to Invention Submission’s contention that in
conducting the advertising campaign, the PTO harbored
an intent to put Invention Submission out of business and
that therefore the advertising campaign was agency action
adversely affecting Invention Submission, we stated:
acted the Inventors’ Rights Act — into a PTO
sanction imposed on Invention Submission that
would be reviewable in court, especially when the
material itself does not reference an intent to pe-
nalize any particular company.
Id. Focusing particularly on the effect of the advertising
campaig. on Invention Submission, we observed:
If the PTO’s advertising made business more dif-
ficult for Invention Submission by raising the
public’s awareness, the decisions of members of
Id. (internal quotation marks and citation omitted). We
summarized our holding as follows:
In short, the PTO’s advertising campaign
warning the public about invention promotion
scams was consistent with the PTO’s commission
granted by the Inventors’ Rights Act of 1999, and
in the circumstances of this case, the decision to
pursue such a campaign, as well as its content,
did not create a final agency action that is re-
viewable in court.
id. (emphasis added). Accordingly, we concluded that the
district court did not have subject matter jurisdiction over
the case and remanded it “with instructions to dismiss this
case under Federal Rule of Civil Procedure 12(b)(1).” Id.
During the course of its prior appellate briefing,
Invention Submission argued that the district court's
jurisdiction over its complaint could have rested on gen-
eral equity jurisdiction under the holding of American
School of Magnetic Healing v. McAnnulty, 187 U.S. 94
(1902), an argument that it raised for the first time on
appeal. In response, we stated, “we do not address
whether the ‘McAnnulty Doctrine,’ which Invention Sub-
mission raises for the first time on appeal, provides a basis
for judicial review of unlawful agency action.” Invention
Submission, 357 F.3d at 457 n.“.
After the case was remanded to the district court and
the district court had dismissed the case under Rule
App. 7
12(b\1), Invention Submission filed a motion to vacate the
dismissal order and for leave to amend its complaint to
allege jurisdiction under the McAnnulty doctrine. The
district court, relying on the scope of our mandate on
remand, denied Invention Submission’s motion and
reaffirmed its dismissal under Rule 12(b)(1). In addition,
the court observed that to reopen the case at that point in
time “would defeat notions of judicial economy and final-
ity.”
Invention Submission now appeals the district court's
order denying its motion to vacate and for leave to amend
its complaint.
II
In challenging the district court’s reliance on the plain
language of our mandate on remand, Invention Submis-
sion contends that on remand, the district court was “free
to pass upon any issue which was not expressly or impli-
edly disposed of on appeal so long as consideration of the
issue raised on remand is not inconsistent with the appel-
late mandate.” Invention Submission argues that it would
not have been inconsistent with our mandate to permit it
to amend its complaint to rest jurisdiction on the McAn-
nulty doctrine. It relies heavily on our statement made in
the opinion on the first appeal that Invention Submission
“relied exclusively on the APA” to establish subject matter
jurisdiction, an issue that we disposed of on that appeal,
and our observation that “we do not address whether the
‘McAnnulty Doctrine’ ... provides a basis for judicial
review of unlawful agency action.” Invention Submission,
357 F.3d at 457 n.“.
App. 8
The force of our prior mandate is governed by well-
established principles. In general, once a case has been
decided on appeal and a mandate issued, the lower court
may not deviate from that mandate but is required to give
full effect to its execution. See Stamper v. Baskerville, 724
F.2d 1106, 1107 (4th Cir. 1984). This “mandate rule” is a
more powerful version of the law of the case doctrine and
is based on “the principle that an inferior tribunal is
bound to honor the mandate of a superior court within a
single judicial system.” 18B Charles Alan Wright, Arthur
B. Miller, & Edward H. Cooper, Federal Practice and
Procedure § 4478.3 (2d. ed. 2002). As we observed in
United States v. Bell, 5 F.3d 64, 66 (4th Cir. 1993) (quoting
Sprague v. Ticonic National Bank, 307 U.S. 161, 168
(1939)), “[flew legal precepts are as firmly established as
the doctrine that the mandate of a higher court is ‘control-
ling as to matters within its compass.’” Under the man-
date rule, therefore, a lower court generally may not
consider questions that the mandate has laid to rest.
Sprague, 307 U.S. at 168.
Deviation from the mandate rule is permitted only in
a few exceptional circumstances, which include (1) when
“controlling legal authority has changed dramatically”; (2)
when “significant new evidence, not earlier obtainable in
the exercise of due diligence, has come to light”; and (3)
when “a blatant error in the prior decision will, if uncor-
rected, result in a serious injustice.” United States v.
Aramony, 166 F.3d 655, 662 (4th Cir. 1999) (quoting Bell, 5
F.3d at 67) (internal quotation marks omitted). But it is
clear that none of these exceptions applies here. Our
review, therefore, is limited to consideration of the scope of
our mandate and a determination of whether the district
court faithfully executed it in dismissing this case without
App. 9
permitting Invention Submission leave to file an amended
complaint.
The language of our mandate directed the district
court to dismiss this case for lack of subject matter juris-
diction and, on its face, does not authorize the district
court to open the case for further adjudication. Because
our order stated that the district court lacked jurisdiction,
the court was not free to do anything else but to dismiss
the case. As we have explained previously, “[clompliance
with an order to relinquish jurisdiction necessarily pre-
cludes the lower court from taking any further action
other than dismissal, for to do so would involve retaining
jurisdiction.” Baskerville, 724 F.2d at 1108. Thus, to
comply with our mandate, the district court could only
dismiss the case. [Alny action by the lower court other
than immediate and complete dismissal [would have been]
by definition inconsistent with and therefore a violation
of - the order [to dismiss]. Jd. In short, our instruction to
the district court was clear, direct, and limiting, and we
conclude that the district court followed the mandate as
directed. Thus, in restricting its action to that directed by
the mandate, the district court did not err.
Invention Submission’s reliance on our previous
opinion’s footnote, 357 F.3d at 457 n.*, is misplaced. In
limiting our discussion to whether the district court had
jurisdiction under the APA, as invoked by Invention
Submission, we simply took note that Invention Submis-
sion had not properly raised the McAnnulty doctrine as a
jurisdictional basis before the district court and therefore
had not preserved that issue for consideration on appeal.
While we noted this fact in the footnote, we did not in-
struct the district court to consider that doctrine on
remand. Had the district court done so anyway, it would
App. 10
have had to violate what we did instruct: to dismiss the
case for lack of subject matter jurisdiction.
Because the district court was bound by the mandate
of this court to dismiss this case for lack of subject matter
jurisdiction, and the district court did dismiss this case we
conclude that there is no basis to reverse its order.
AFFIRMED.
App. 11
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
INVENTION SUBMISSION
CORPORATION,
Plaintiff
v 1:02cv1038 (LMB)
)
)
)
)
)
JAMES E. ROGAN, Undersecretary ?
of Commerce for Intellectual )
Property and Director, )
United States Patent )
and Trademark Office, )
U.S. Department of Commerce,
in his official capacity,
)
Defendant.
ORDER
(Filed Aug. 13, 2004)
Before the Court are plaintiff's Response to the
Court’s Order Dated April 22, 2004, Motion to Vacate
Order of May 5, 2004, and Motion for Leave to File an
Amended Complaint. The government has filed its Opposi-
tion, and the plaintiff has filed a reply. For the reasons
that follow, plaintiff’s motions will be DENIED.
On July 17, 2002, plaintiff filed its Complaint under
the Administrative Procedures Act (APA), alleging that the
U.S. Patent and Trademark Office (PTO) had violated the
Inventors’ Rights Act, 35 U.S.C. § 297. Plaintiff seeks both
declaratory and injunctive relief. Defendant moved to
dismiss the Complaint under Fed. R. Civ. P 12(b)(1) for
lack of subject matter jurisdiction on the ground that the
PTO action at issue did not constitute final agency action.
App. 12
Plaintiff did not seek to amend its complaint in response
to the Motion to Dismiss, but opposed the motion on its
merits. On October 30, 2002, this Court dismissed the
Complaint under Fed. R. Civ. P 12(b\6) for failure to state
a claim upon which relief could be granted. That decision
was appealed to the United States Court of Appeals for the
Fourth Circuit, which on February 11, 2004, affirmed the
dismissal but remanded with instructions to dismiss the
Complaint under Rule 12(b)(1) because the court lacked
subject matter jurisdiction. After the mandate was re-
turned, the Court, on April 22, 2004, advised the parties
that it intended to dismiss the Complaint under Rule
12(bX1) unless they filed an objection within ten days.
May 5, 2004 was the deadline for filing any objection to
dismissal. On May 5, 2004, the Court, not having heard
from the parties, entered an Order dismissing the Com-
plaint. Apparently, plaintiff filed its opposition on the
same day. Although the Complaint has been dismissed, the
Court has considered plaintiff's motion.
The original Complaint was brought under only one
legal theory, that the APA had been violated. In affirming
the dismissal of plaintiff’s Complaint, the Fourth Circuit
held that the conduct of the PTO that is the subject of the
Complaint did not constitute final agency action under the
APA, and therefore this Court did not have subject matter
jurisdiction over the Complaint. Invention Submission
Corporation v. Rogan, 357 F.2d 452, 460 (4th Cir. 2004). In
its Opinion, the Fourth Circuit noted plaintiff's argument
that subject matter jurisdiction may rest outside the APA
under the McAnnulty Doctrine, but declined to address
that argument because plaintiff had pled its claims only
under the APA, not the McAnnulty Doctrine. Id. at 457, n“.
App. 13
Plaintiff has filed a petition for certiorari with the Su-
preme Court, but has not asked for a stay.
In its Motion for Leave to File Amended Complaint,
plaintiff essentially seeks to re-plead its allegations under
an entirely new legal theory, the McAnnulty Doctrine,
which provides that the lack of final agency action may not
necessarily deprive this Court of subject matter jurisdic-
tion to hear the Complaint. Defendant opposes any effort
by plaintiff to amend its Complaint at this stage in the
proceedings, arguing that under the mandate rule, this
court should not allow the Complaint to be amended to
include entirely new claims.
The government's argument has merit. The mandate
rule “compels compliance on remand with the dictates of a
superior court and forecloses relitigation of issues ex-
pressly or impliedly decided by the appellate court. In
addition, the rule forecloses litigation of issues decided by
the district court but foregone on appeal or otherwise
waived, for example because they were not raised in the
district court.” United States v. Bell, 5 F.3d 64, 66 (4th Cir.
1993).
In discussing plaintiff's argument that jurisdiction
would lie under the McAnnulty Doctrine, the Fourth
Circuit held that the issue had not been properly raised in
the district court for consideration on appeal. It then
remanded the case to this Court only with instructions to
dismiss the Complaint for lack of subject matter jurisdic-
tion. The Fourth Circuit did not direct the Court to reopen
the case or consider the applicability of the McAnnulty
Doctrine. Under the mandate rule, all this Court is au-
thorized to do is dismiss this civil Complaint. To allow
plaintiff to raise the McAnnulty Doctrine issue in an
App. 14
amended complaint would be inconsistent with the Fourth
Circuit’s opinion, because the Fourth Circuit found that
plaintiff had waived that issue.
In addition to violating the mandate rule, to allow the
Plaintiff to amend its Complaint by adding a completely
new legal theory at this stage would defeat notions of
judicial economy and finality. “Although amendment of
pleadings following remand may be permitted, such
amendment cannot be inconsistent with the appellate
court’s mandate. ... The general rule that leave to amend
under rule 15 should be freely granted will not be ex-
tended without limit when a rule 15 motion is brought
after a claim has been fully litigated on the merits through
appeal. At some point, there must be finality. Permitting
amendment in this case would not enhance finality, but
instead would encourage seriatim judgments in the same
basic dispute, as a plaintiff continues to put forth new
theories of recovery.” In re Beverly Hills Bancorp, 752 F.2d
1334, 1337-38 (9th Cir. 1984) (internal citations omitted).
See also Rolo v. City Investing Co. Liquidating Trust, 155
F.3d 644, 654 (3d Cir. 1998) (leave to amend after remand
properly denied when plaintiff sought to add claims that
“could have been pled much earlier in the proceedings”).
For these reasons, plaintiff’s Motion to Vacate Order
of May 5, 2004, and motion for Leave to File an Amended
Complaint are DENIED, and it is hereby
App. 15
ORDERED that the Court’s Order of May 5, 2004,
dismissing this action under Rule 12(bX1) be and is
reaffirmed and this civil action is dismissed.’
The Clerk is directed to forward copies of this Order to
counsel of record.
Entered this 13th day of August, 2004.
/s/ Leonie M. Brinkema
Leonie M. Brinkema
United States District Judge
Alexandria, Virginia
' No Stay has been filed pending Supreme Court action on
the
petition. Because the mandate has been returned to the Court, the
Court has the authority to dismiss this Complaint.
App. 16
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
4] ria Divisi
INVENTION SUBMISSION
CORPORATION,
Plaintiff
1:02cv1038 (LMB)
*
)
)
)
)
. )
JAMES E. ROGAN, Under )
Secretary of Commerce for )
Intellectual Property and )
Director, United States )
Patent and Trademark Office, )
U.S. Department of Commerce,
in his official capacity,
Defendant. )
ORDER
(Filed May 5, 2004)
The parties have not filed any objections to the pro-
posed dismissal of this civil action as described in our
Order of April 22, 2004. Accordingly, it is hereby
ORDERED that pursuant to the decision issued by
the United States Court of Appeals for the Fourth Circuit,
the October 30, 2002 Order and Memorandum Opinion
issued by this Court are VACATED; and it is further
ORDERED that this civil action be and is DIS-
MISSED under Fed. R Civ. P 12(b\1).
The Clerk is directed to forward copies of this Order to
counsel of record.
App. 17
Entered this 5th day of May, 2004.
/s/ Leonie M. Brinkema
Leonie M. Brinkema
United States District Judge
Alexandria, Virginia
App. 18
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
INVENTION SUBMISSION
CORPORATION,
Plaintiff
Civil Action No.
1:02cv 1038
Vv
)
)
)
)
)
JAMES E. ROGAN, Under
Secretary of Commerce for )
Intellectual Property and )
Director, United States )
Patent and Trademark Office, )
U.S. Department of Commerce,
in his official capacity,
Defendant. )
ORDER
(Filed Apr. 22, 2004)
The United States Court of Appeals for the Fourth
Circuit has returned the mandate in this civil action with
instructions to dismiss this civil action under Fed. R. Civ.
P 12(bX1) rather than Rule 12(b)(6), and to vacate the
Court’s memorandum opinion. Accordingly, it is hereby
ORDERED that the parties advise the Court within
ten days of any reason why the Court should not comply
with this Order at this time.
The Clerk is directed to forward copies, of this Order
to counsel of record.
App. 19
Entered this 22nd day of April, 2004.
/s/ Leonie M. Brinkema
Leonie M. Brinkema
United States District Judge
Alexandria, Virginia
App. 20
125 S. Ct. 415; 160 L. Ed. 2d 317;
2004 U.S. LEXIS 7119; 73 U.S.L.W. 3272
Invention Submission Corporation, Petitioner
v. Jonathan W. Dudas, as Undersecretary of Commerce
for Intellectual Property and Director, Patent and
Trademark Office, Department of Commerce.
No. 04-40.
SUPREME COURT OF THE UNITED STATES
November 1, 2004, Decided
JUDGES: Rehnquist, Stevens, O’Connor, Scalia, Ken-
nedy, Souter, Thomas, Ginsburg, Breyer.
OPINION: Petition for writ of certiorari to the United
States Court of Appeals for the Fourth Circuit denied.
App. 21
357 F.3d 452
No. 02-2461
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
INVENTION SUBMISSION CORPORATION,
a Pennsylvania Corporation, Plaintiff-Appellant,
v. JAMES E. ROGAN, Under Secretary of
Commerce for Intellectual Property and Director,
United States Patent and Trademark Office,
U.S. Department of Commerce, in his
official capacity, Defendant-Appellee.
October 30, 2003, Argued
February 11, 2004, Decided
COUNSEL: Edward B. Friedman, FRIEDMAN &
FRIEDMAN, Pittsburgh, Pennsylvania, for Appellant.
Rachel Celia Ballow, Assistant United States Attorney,
Alexandria, Virginia, for Appellee.
ON BRIEF: J. Stephen Purcupile, Carolyn M. Corry,
FRIEDMAN & FRIEDMAN, Pittsburgh, Pennsylvania;
Richard C. Sullivan, Jr, REED SMITH, L.L.P, Falls
Church, Virginia, for Appellant.
Paul J. McNulty, United States Attorney, Alexandria,
Virginia, for Appellee.
JUDGES: Before WILKINS, Chief Judge, and NIE-
MEYER and SHEDD, Circuit Judges. Judge Niemeyer
wrote the opinion, in which Chief Judge Wilkins and
Judge Shedd joined.
OPINION BY: NIEMEYER
App. 22
OPINION: NIEMEYER, Circuit Judge:
Invention Submission Corporation commenced this
action under the Administrative Procedure Act (“APA”)
against James E. Rogan in his official capacity as Under
Secretary of Commerce for Intellectual Property and
Director of the United States Patent and Trademark Office
(“PTO”), alleging that the PTO’s 2002 advertising cam-
paign to alert the public about “invention promotion
scams” was aimed at Invention Submission to penalize it
and ultimately put it out of business. Invention Submis-
sion alleged that the advertising campaign was an illegal
final agency action that was arbitrary and capricious and
exceeded any statutory authority conferred on the PTO.
On the PTO’s motion to dismiss the complaint under
Federal Rule of Civil Procedure 12(bX1), based on the
ground that the PTO advertising campaign was not a
“final agency action” and therefore that the district court
lacked subject matter jurisdiction, the district court
dismissed the action. See Invention Submission Corp. v.
Rogan, 229 F. Supp. 2d 498 (E. D. Va. 2002). The district
court, however, acted under Federal Rule of Civil Proce-
dure 12(b\6), concluding that “under any set of facts that
could be proved consistent with the [complaint’s} allega-
tions,” no relief could be granted to Invention Submission.
Reviewing the district court’s order de novo, we agree
that the complaint must be dismissed, but not under Rule
12(b)(6). As we explain below, we conclude that because
the PTO’s advertising campaign was not a final agency
action a conclusion that the district court also reached in
its opinion — the district court had no subject matter juris-
diction to review it. See 5 U.S.C. § 704. We must therefore
vacate the district court's order of October 30, 2002, as well
App. 23
as the supporting opinion, and remand with instructions
to dismiss Invention Submission’s complaint for lack of
subject matter jurisdiction.
I
Congress enacted the Inventors’ Rights Act of 1999, 35
U.S.C. § 297, to protect inventors from invention promo-
tion scams and the deceptive advertising related to them
by authorizing the PIO to publicize complaints that it
receives against invention promoters. See 145 Cong. Rec.
814521 (Nov. 10, 1999). The Act and the regulations
adopted under it impose a duty on the PTO “to provide a
forum for the publication of complaints concerning inven-
tion promoters.” 37 C. FR. 54.1, see also 35 U.S.C.
§ 297(d). The Act and regulations do not, however, author-
ize the PTO to conduct any independent investigations of
invention promoters, authorizing instead enforcement by
injured persons through civil actions. See 35 U.S.C.
§ 297(b), (d) 37 C. FR. § 4.1.
In connection with its duty to publicize complaints
concerning invention promoters, the PTO initiated an
advertising campaign in January 2002 to alert the public
to “invention promotion scams,” and its advertisements
stated, “Make sure your ideas — and your money don't
wash away. To learn more, call the U.S. Patent and
Trademark Office toll-free.” In launching the media
campaign, the PTO stated in a press release:
This week, the United States Patent and
Trademark office (USPTO) unveils a television
and radio campaign in five media markets to
counter the flood of deceptive advertising aimed at
App. 24
America’s independent inventors. ... The Agency
also will be placing print ads.
“USPTO’s ads caution inventors that ‘if it
sounds too good to be true, it is, said James E.
Rogan, Under Secretary of Commerce for Intel-
lectual Property. “Our ads offer practical infor-
mation, guiding inventors to USPTO’s Office of
Independent Inventor Programs, where they can
get real help with patenting and marketing their
inventions.”
Every year invention promotion scams cost
U.S. inventors an estimated $200 million. The
spots feature an actual inventor, Edward Lewis,
who lost several thousand dollars.
In the print advertising published by the PTO, Edward
Lewis is quoted as saying, “I spent $13,000 and three
years ‘spinning my wheels’ with a company that promised
my idea would make lots of money. They were right. It
made lots of money . for them. I havent seen a penny.”
A journalist for a cable television network, who saw
the PTO’s advertising campaign, contacted the PTO and
requested contact information for Lewis. After the PTO
provided the information, the cable television network
interviewed Lewis and published a story that revealed
that, in the PTO-published quotation of Lewis, Lewis was
referring to his relationship with Invention Submission
Corporation, an invention promoter The article revealed
that Lewis had filed a complaint with the PTO in August
2001 that was “being processed.” The article also revealed
that Invention Submission was one of several companies
investigated by the FTC in the 1990s “for misrepresenta-
tion in patent marketing schemes.” It stated that in 1994,
“without admitting or denying guilt, the company agreed
App. 25
to pay a $1.2 million settlement for refunds in the case, as
well as change its business practices.” The article included
Invention Submission’s response to Lewis’ accusations that
it did nothing wrong, that neither its representatives nor
commercials misled Lewis or any other inventor.”
Edward Lewis, from Sicklerville, New Jersey, who
invented “BodyGuard” to “shield automobile paint while
tough wheel-cleaning products do their work,” had indeed
filed a complaint with the PTO against Invention Submis-
sion on August 1, 2001, and the PTO sent a copy of the
complaint for response to Invention Submission on March
1, 2002. Sometime before March 26, 2002, Invention
Submission and Lewis resolved Lewis’ complaint, and, on
that date, Lewis withdrew his complaint from the PTO.
Accordingly, Invention Submission advised the PTO that it
was not submitting a response to the complaint, and the
PTO did not post Lewis’ complaint on the agency’s web
site.
A few months after Lewis withdrew his complaint
from the PTO, Invention Submission commenced this
action against the PTO under the APA, alleging that
because the PTO was authorized only to receive customer
complaints, provide invention promoters with notice and
reasonable opportunity to respond, and provide a forum to
publicize complaints and responses, the PTO exceeded its
authority in publicizing Lewis’ complaint in its media
advertising and illegally used the public media to single
out Invention Submissicn to penalize it. As it alleged:
[T)he PTO intentionally publicized ISC [Inven-
tion Submission] as the invention company
which was the subject of the Lewis complaint, for
the purpose of stigmatizing ISC.
App. 26
*
The PTO knew that, if the Lewis complaint
was not withdrawn, and was subsequently made
publicly available on the PTO’s web site under
the [Inventors’ Rights Act], ISC would be further
identified with the PTO’s unfair and untrue tele-
vision and print advertisements, and an addi-
tional link would be established between ISC and
the PTO’s statements about “scams” and false
promises of money to Lewis.
The PTO thereby knowingly violated the
Unventors Rights Act's] requirement that it
make the Lewis complaint publicly available only
in a neutral forum, without comment or judg-
ment, together with ISC’s response.
In addition, Invention Submission’s complaint alleged that
John Calvert, the Acting Director of the Office of Inde-
pendent Inventor Programs at the PTO, “demonstrated
lan] animus of the PTO against ISC when he stated an
intention to solicit and investigate customer complaints
despite the PTO’s lack of authority to do this.” Invention
Submission’s complaint described a meeting of inventors
at which Calvert was alleged to have said:
The only way that we do not post it [a customer
complaint] is if you withdraw it, and we have one
company that Bob ... and I were talking about
that has a tendency to settle quickly ... but
we're going to get them up there yet. We got to
find somebody that doesn’t want to settle and get
their name on our Internet, on the Internet site,
and we will have them up eventually. We have
one up there now, and you can look at it.
App. 27
The complaint concluded with allegations that in pursuing
these actions directed against Invention Submission, the
PTO “has taken final agency actions in the nature of
imposing sanctions and/or failing to act in accordance with
the [Inventors’ Rights Act] and the regulations,” and
therefore, under the APA, the actions were “arbitrary,
capricious, an abuse of discretion|[,] . . . contrary to consti-
tutional right l.] in excess of statutory jurisdiction, author-
ity, or short of statutory right.” Invention Submission
sought declaratory and injunctive relief, as well as attor-
neys fees.
The PTO filed a motion to dismiss Invention Submis-
sion’s complaint for lack of subject matter jurisdiction,
asserting that the federal courts could review only “final
agency actions” and that the PTO’s alleged conduct did not
qualify as a final agency action. The district court granted
the PTO’s motion, but it did so under Federal Rule of Civil
Procedure 12(b\(6). The court assumed the facts of the
complaint to be true and concluded that “it is clear as a
matter of law that no relief could be granted under any set
of facts that could be proved consistent with the allega-
tions.” The court ruled first that because it was Lewis, not
the PTO, who identified Invention Submission, it could
only be speculation that the PTO was referring to Inven-
tion Submission by quoting Lewis in the advertising.
Focusing on Calvert’s statements, the district court ob-
served that they were merely consistent with the congres-
sional intent behind passage of the Inventors’ Rights Act
that “invention promotion scams harm individual inven-
tors and ought to be eliminated.” In addition, the court
concluded that such statements could not be considered
agency action. The district court also found that any harm
sustained by Invention Submission was indirect because it
App. 28
was not based directly upon what the PTO included in its
advertising campaign. Therefore, the court concluded,
“The PTO’s publications in this case were merely generic
advertisements of agency programs not specifically nam-
ing the plaintiff. Any harm to the plaintiff was, at most,
indirect.” Finally, the district court rejected the plaintiff’s
contention that PTO violated its own regulations by using
the media to enforce a private complaint. It concluded:
Even if plaintiff could demonstrate that the de-
fendant violated agency regulations, an agency’s
failure to follow its own regulations is only ac-
tionable under the APA if it results in a final
agency action. A violation of agency regulations
alone, absent some harm to the plaintiff, is not
reviewable. As discussed above, plaintiff has not
alleged any specific harm caused by the defen-
dant’s actions.
Accordingly, the district court entered an order dated
October 30, 2002, dismissing the complaint “with preju-
dice.”
This appeal followed.
II
Invention Submission contends that PTO’s advertising
campaign was both false and unauthorized, targeting
Invention Submission in order to penalize it and put it out
of business. It argues that the Inventors’ Rights Act of
1999 granted the PTO only limited authority to create a
forum to publish complaints and responses to them and
that the PTO’s 2002 advertising campaign directed at
Invention Submission went beyond this stated authoriza-
tion. Therefore, it asserts that the campaign was illegal
App. 29
agency action. Invention Submission relies heavily on
Industrial Safety Equipment Association, Inc. v. EPA, 267
U.S. App. D.C. 112, 837 F.2d 1115 (D.C. Cir. 1988), to
justify court review of this agency conduct under the
APA.“
In Industrial Safety, the D.C. Circuit held that an
agency's publication of a report evaluating respirators for
their effectiveness in protecting against asbestos exposure
was not an “agency action,” as used in the APA, that was
reviewable in court, even though the report recommended
against using several respirators that had already been
certified for use. Observing that its own precedent in
* In its brief, Invention Submission also seeks to justify the federal
court's jurisdiction on its general equity jurisdiction to review unlawful
actions of officials of an administrative agency, under the “McAnnulty
Doctrine,” citing American School of Magnetic Healing u McAnnulty,
187 U.S. 94, 47 L. Ed. 90, 23 S. Ct. 33 (1902), and a plurality opinion in
Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 95 L.
Ed. 817, 71 S. Ct. 624 (1951)
Invention Submission did not, however, bring this action against
the PTO under the “McAnnulty Doctrine,” but rather relied exclusively
on the APA. In addition, it did not present this theory to the district
court. In its brief, it argues that its reliance in the district court on
Industrial Safety was the same as reliance on the “McAnnulty Doc-
trine,” and because it relied on Industrial Safety before the district
court, it therefore was, by implication, relying on the “McAnnulty
Doctrine.” But this syllogism mischaracterizes Industrial Safety. The
court in Industrial Safety did not discuss the “McAnnulty Doctrine,” a
doctrine of equity jurisdiction apart from the APA, but rather was
construing the APA itself. The discussion in Industrial Safety on which
Invention Submission relied related to whether an agency's penalizing
a party through adverse publicity was a “sanction” as defined by 5
U.S.C. § 551(10), which in turn was included as a component of “agency
action,” defined in § 551(12).
For these reasons, we do not address whether the “McAnnulty
Doctrine,” which Invention Submission raises for the first time on
appeal, provides a basis for judicial review of unlawful agency action.
App. 30
Hearst Radio, Inc. v. FCC, 83 U.S. App. D.C. 63, 167 F.2d
225 (D.C. Cir. 1948) (holding that “agency action,” includ-
ing its component term “sanction,” does not include an
agency's publication of a report, even if the report is false
and amounts to libel causing actual damage), might be too
restrictive, the D.C. Circuit explained that Hearst Radio
created a problem because it failed “to . protect l] parties
from false or unauthorized agency news releases.” 837
F.2d at 1118. Inasmuch as the APA's definition of “agency
action” includes agency sanctions, adverse publicity might
be a “sanction” and therefore an agency action in certain
Thus, though adverse impact alone would not
necessarily make agency publicity reviewable as
a sanction, an agency intent on penalizing a
party through adverse publicity, especially false
or unauthorized publicity, might well merit a re-
view of its action. This conclusion would be espe-
cially compelling if an information release caused
destruction of property,” or “revocation .. . of
a license.”
Id. at 1119 (quoting 5 U.S.C. § 551(10)) (citation omitted).
The court found no facts in the record before it to justify
an exploration of the interpretation that adverse publicity
might amount to a sanction, and it concluded that the
agency's publication of the asbestos respirator report was
not an agency action under any other component of the
APA definition that would make it reviewable by a court.
Id.
Invention Submission’s argument that the district
court had jurisdiction thus rests on its advancement of an
interpretation of “agency action” that would include
through the “sanction” component of the definition of
App. 31
agency action — false or unauthorized advertising aimed at
the plaintiff. See 5 U.S.C. §§ 551(10), 551(13).
The PTO argues that our recent decision in Flue
Cured Tobacco Cooperative Stabilization Corp. v. EPA, 313
F.3d 852 (4th Cir. 2002), which does not construe “agency
action” so broadly as might be indicated by Industrial
Safety, controls the outcome of this case. In Flue-Cured
Tobacco, we held that publication of an EPA report that
classified environmental tobacco smoke as a potentially
harmful human carcinogen was not an agency action
reviewable under the APA, even though the report was
allegedly arbitrary and capricious and created harm to the
plaintiff. The PTO argues that even though Invention
Submission was displeased with the advertising campaign,
it cannot challenge the campaign in the courts because the
campaign at most produced only “coercive pressures on
third parties” and did not signal the “consummation of the
agency's decisionmaking process so as to ‘give rise to legal
consequences, rights, or obligations.’” Addressing Inven-
tion Submission’s reliance on Industrial Safety, the PTO
argues that the D.C. Circuit’s statements in that case were
only posited as potential holdings and were no more than
dicta. In addition, the PTO argues that our decision in
Flue-Cured Tobacco followed the D.C. Circuit’s decision in
Hearst Radio, which the Industrial Safety decision criti-
cized but did not overrule. For these reasons, the PTO
contends that Industrial Safety is hardly persuasive
precedent in this circuit.
Thus, the issue presented is whether the PTO’s
advertising campaign, allegedly aimed at Invention
Submission to penalize it, constituted final agency action
under the APA so as to be reviewable in court. See 5 U.S.C.
§§ 702, 704. As a question of subject matter jurisdiction,
App. 32
see Flue-Cured Tobacco, 313 F.3d at 857, we must address
this issue before evaluating Invention Submission’s
complaint for whether it states a claim upon which relief
can be granted, see Steel Co. v. Citizens for a Better Env't,
523 U.S. 83, 93-95, 140 L. Ed. 2d 210, 118 S. Ct. 1003
(1998), although these questions are close to one another
in circumstances such as are presented in this case, see
Montana-Dakota Utils. Co. v. Northwestern Pub. Serv. Co.,
341 U.S. 246, 249, 95 L. Ed. 912, 71 S. Ct. 692 (1951).
Section 704 of the APA provides that “final agency
action for which there is no other adequate remedy in a
court lis] subject to judicial review.” 5 U.S.C. § 704.
“Agency action” is defined to include “the whole or a part
of an agency rule, order, license, sanction, relief, or the
equivalent or denial thereof.” Id. § 551(13). Although each
of the constituent elements of “agency action” are in turn
defined in § 551, at bottom, a final agency action as used
in §704 must be the “consummation of the agency's
decisionmaking process ... [and] must be lan action] by
which rights or obligations have been determined, or from
which legal consequences will flow.” Bennett v. Spear, 520
U.S. 154, 178, 137 L. Ed. 2d 281, 117 S. Ct. 1154 (1997)
(internal quotation marks and citations omitted); Flue-
Cured Tobacco, 313 F.3d at 858. In Flue-Cured Tobacco, we
explained that the persuasive value of agency reports or
publications did not create a reviewable agency action
under the APA because such reports or publications in
themselves did not “create any rights, obligations, or
consequences.” 313 F.3d at 860. As we summarized it:
We do not think that Congress intended to create
private rights of actions to challenge the inevita-
ble objectionable impressions created whenever
App. 33
controversial research by a federal agency is pub-
lished. Such policy statements are properly chal-
lenged through the political process and not the
courts.
Id. at 861. Those principles govern the disposition of this
case.
In this case, the advertising mater'al published by the
PTO under the Inventors’ Rights Act did not name or
single out Invention Submission or any other invention
promoter. The advertisements were facially neutral, aimed
at all invention promotion scams scams that the adver-
tisements asserted were causing the public to lose $200
million each year. While the advertising did include a
quotation from “Edward Lewis, Inventor,” it quoted his
experience with an unidentified company. Lewis is quoted
as saying that “I spent $13,000 and three years ‘spinning
my wheels’ with a company that promised my idea would
make lots of money.” (Emphasis added).
Invention Submission argues that the advertising
cause a journalist was able to irterview Lewis and obtain
the details of his experiences with Invention Submission
and because the PTO made ‘hat possible by providing the
journalist with Lewis’ telephone number. Whether a third
person could obtain sufficient information to link the two,
however, does not taint the otherwise nonspecific advertis-
ing. The PTO did not publish any material that linked
Lewis with Invention Submission, and it did not post
Lewis’ complaint on its web site.
“(The Administrative Procedure Act does not provide
judicial review for everything done by an administrative
agency,” Hearst Radio, 167 F.2d at 227, and the PTO’s
App. 34
advertising campaign, including its conduct in giving a
journalist Lewis’ telephone number, is not the type of
conduct that constitutes agency action that is reviewable
in court under the APA. Other than the administrative
decision to conduct an advertising campaign at all — a
decision that Invention Submission has not challenged —
the content of the campaign was not the consummation cf
any decisionmaking process that determined rights or
obligations or from which legal consequences flowed. See
Bennett, 520 U.S. at 178; Flue-Cured Tobecco, 313 F.3d at
858. Moreover, by looking at the campaign material, the
public would see only that a consumer complained about
an invention promoter and that invention promotion
scams are causing the public $200 million in losses every
year. Surely Invention Submission would not suggest that
the attribution in the advertisements of $200 million in
losses to patent scams was in any respect focusing the
public's eye on it. The text of the advertising material can
only be construed to be an effort by the PTO to inform
inventors of the perils and potential scams that they might
encounter during the patent process. Such advertising did
not crvate “legal consequences” for Invention Submission
or any other member of the public cognizable as final
agency action, and the campaign itself did not determine
any right or obligation of any party.
While Invention Submission points to the adverse
effect it suffered as a result of the campaign, that effect
was based on the fact that a journalist linked Invention
Submission with Lewis, and such an indirect unpact does
not transform the agency's conduct into final agency action
under the APA. See Flue-Cured Tobacco, 313 F.3d at 860. If
the PTO’s advertising made business more difficult for
Invention Submission by raising the public’s awareness,
App. 35
the decisions of members of the public “are attributable to
independent responses and choices of third parties” and
cannot be imputed to the PTO for purposes of determining
whether its conduct was a final agency action. See id. at
861.
Invention Submission argues that the advertising
must not be considered only facially but also in light of the
intent of PTO officials whose purpose was more clearly
focused on Invention Submission. Such underlying intent
of agency officials, however, does not convert the PTO’s
legal advertising material warning generally of invention
promotion scams the purpose for which Congress en-
acted the Inventors’ Rights Act — into a PTO sanction
imposed on Invention Submission that would be review-
able in court, especially when the material itself does not
reference an intent to penalize any particular company.
The measure of the advertising campaign must be made
by the information conveyed by it to the public. As we have
noted, the effect of the PTO’s campaign so measured was
not a regulatory effect reviewable in court, but at most an
indirect effect from third parties and market forces.
In short, the PTO’s advertising campaign warning the
public about invention promotion scams was consistent
with the PTO’s commission granted by the Inventors’
Rights Act of 1999, and in the circumstances of this case,
the decision to pursue such a campaign, as well as its
content, did not create a final agency action that is re-
viewable in court. As we said in Flue-Cured Tobacco, this
type of a campaign is “properly challenged through the
political process and not the courts.” 313 F.3d at 861.
App. 36
III
Because the conduct of the PTO that is the subject of
this action did not constitute “final agency action” as used
under the APA, the district court did not have subject
matter jurisdiction to evaluate the complaint under Rule
12(b\6) and should have dismissed this case under Rule
12(b)(1). We therefore vacate its order of October 30, 2002,
as well as the supporting opinion, and remand with
instructions to dismiss this case under Federal Rule of
Civil Procedure 12(b)(1).
VACATED AND REMANDED WITH INSTRUCTIONS
App. 37
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JUDGMENT FILED: February 11, 2004
NO. 02-2461
CA-02-1038-A
INVENTION SUBMISSION CORPORATION,
a Pennsylvama Corporation
Plaintiff-Appellant
Vv.
JAMES E. ROGAN, Under Secretary of Commerce
for Intellectual Property and Director, United States
Patent and Trademark Office, U. S. Department of
Commerce, in his official capacity
Defendant-Appellee
Appeal from the United States District Court for the
Eastern District of Virginia at Alexandria
In accordance with the written opinion of this Court
filed this day, the Court vacates the judgment of the
District Court. This case is remanded to the District Court
for further proceedings consistent with the Court’s opin-
ion.
App. 38
A certified copy of this judgment will de provided to
the District Court upon issuance of the mandate. The
judgment will take effect upon issuance of the mandate.
/s/ Patricia S. Connor
CLERK
App. 39
229 F. Supp. 2d 498
Civil Action No. 02-1038-A
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA,
ALEXANDRIA DIVISION
INVENTION SUBMISSION CORPORATION,
Plaintiff, v. JAMES k. ROGAN, UNDERSECRETARY
OF COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR, UNITED STATES PATENT
AND TRADEMARK OFFICE, U.S. DEPARTMENT
OF COMMERCE, Defendant.
October 30, 2002, Decided
October 30, 2002, Filed
COUNSEL: FOR PLAINTIFF: Richard C. Sullivan, Jr.,
Reed Smith LLP, Falls Church, VA.
FOR DEFENDANT: Rachel C. Ballow, Asst. U.S. Attor-
ney, U.S. Attorney s Office, Alexandria, VA.
JUDGES: Honorable Leonie M. Brinkema, United
States District Judge.
OPINION BY: Leonie M. Brinkema
OPINION:
MEMORANDUM OPINION
This matter is before the Court on defendant’s Motion
to Dismiss plaintiff's complaint. For the reasons set forth
below, the motion will be granted.
BACKGROUND
This case arises out of efforts by the United States
Patent and Trademark Office (“PTO”) to implement the
Inventors’ Rights Act of 1999 (“IRA”). 35 U.S.C. § 297
App. 40
(2002). The IRA was designed to protect inventors who
each year “lose tens of millions of dollars” to “invention
promotion scams.” 141 Cong. Rec. 814521 (Nov. 10, 1999).
The IRA mandates certain disclosures by invention
promoters to their customers and provides for a private
right of action against invention promoters. The IRA also
requires the Commissioner of Patents to receive com-
plaints regarding invention promoters and make these
complaints available to the public. 35 U.S.C. § 297. Spe-
cifically, the IRA provides that the PTO
shal! make all complaints received by the Patent
and Trademark Office involving invention pro-
moters publicly available, together with any
response of the invention promoters. The Com-
missioner of Patents shall notify the invention
promoter of a complaint and provide a reason-
able opportunity to reply prior to making such
complaint publicly available.
35 U.S.C. § 297(d(1).
In September of 2000, the PTO adopted regulations
implementing the IRA, and set up a website on which to
publish complaints received under the IRA. The regula-
tions state that “the invention promoter named in the
complaint will be notified of the complaint and given 30
days to rc spond. The invention promoters response will be
made available to the public along with the complaint.” 37
CFR § 4.4 (2002).
In August 2001, the PTO received a complaint from
Edward Lewis regarding the plaintiff, Invention Submis-
sion Corporation (“ISC”), in which Lewis alleged that he
paid ISC for help patenting and marketing his invention
and received nothing in return. Lewis wrote in his complaint
App. 41
“the representative indicated to me that I would make a
lot of money with my invention and I have made nothing.”
Shortly after receiving Lewis’ complaint, the PTO con-
tacted Lewis and solicited his participation in a PTO
media campaign regarding invention promotion compa-
nies. Lewis agreed to participate by appearing in televi-
sion and print advertisements.
On January 10, 2002, the PTO issued a press release
announcing a nationwide media campaign “to counter the
flood of deceptive advertising aimed at America’s inde-
pendent inventors.” The campaign included television and
print advertisements that featured a picture of Lewis and
his statement that he spent $13,000 and three years and
“fhasn't] seen a penny.” The advertisements, which ran
from January through May of 2002, did not mention 180
by name. However, in response to a request from TechTV,
a cable television network, the PTO disclosed contact
information for Lewis to a TechTV reporter. After inter-
viewing Lewis, TechTV ran a story in which it identified
ISC as the invention promoter involved in the Lewis
complaint.
On March 1, 2002, after the general media campaign
had begun, but before Lewis’ complaint was posted on the
PTO website, the PTO gave ISC notice of the Lewis com-
plaint. On March 26, 2002, Lewis attempted to withdraw
his complaint, apparently after settling with ISC, and
requested that the PTO discontinue using him in their
media campaign. By letter that same day, John Calvert of
the PTO informed Lewis that his request to withdraw his
complaint was received and the complaint would not be
posted on the website. The record establishes that Lewis’
complaint never appeared on the website. The TV ads,
however, continued to run until March or April of 2002.
App. 42
Plaintiff alleges in its complaint that the PTO’s
actions with respect to ISC are motivated by bias. As
evidence of this bias, plaintiff cites public statements by
John Calvert, Acting Director of the Office of Independent
Inventor Programs, in which he states that he hates “these
invention marketing firms” and wants to “put these people
out of business.” None of these statements mention [SC
specifically.
On June 17, 2002, plaintiff brought the instant
complaint in which it claims that the PTO’s use of Lewis’
complaint in its media campaign was a final agency action
which is reviewable under the Administrative Procedures Act
(“APA”). Plaintiff seeks declaratory and injunctive relief.
DISCUSSION
A. Standard of Review
A motion to dismiss pursuant to Rule Ibs) of the
Federal Rules of Civil Procedure is properly granted
where, assuming the facts in the complaint are true, it is
clear as a matter of law that no relief could be granted
under any set of facts that could be proved consistent with
the allegations. Hishon v. King & Spalding, 467 U.S. 69,
73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984). Here, assuming
the truth of plaintiff’s allegations regarding the PTO’s
actions with respect to the Lewis complaint and the
statements made by PTO officials, defendant makes two
arguments for dismissal. First, defendant argues that the
action taken by the PTO was not a final agency action
within the meaning of the APA. Second, defendant argues
that plaintiff’s claim is moot because all advertisements
and references to the Lewis complaint have been discon-
tinued. Because we find that plaintiff's complaint fails to
App. 43
state a cause of action under the APA, we decline to
address defendant's mootness argument.
B. Administrative Procedures Act Claim
The APA authorizes review of “final agency action” for
which there is no other adequate remedy in a court. 5
U.S.C. § 704 (2002). The Act defines agency action as “the
whole or part of an agency rule, order, license, sanction,
relief, or the equivalent or denial thereof, or failure to act.”
5 U.S.C. § 551013) An agency action will be considered
final for purposes of judicial review if it is definitive and
has direct or immediate legal force or practical effect, if
the questions at issue are purely legal, and if immediate
judicial review would foster agency and judicial efficiency.
Federal Trade Comm'n v. Standard Oil Co. of Cal., 449
U.S. 232, 239-40, 66 L. Ed. 2d 416, 101 S. Ct. 488 (1980).
Although plaintiff's complaint is extremely vague as
to the specific final agency action at issue, in its opposition
to the Motion to Dismiss plaintiff makes clear that it
claims the PTO’s conduct in publicizing the Lewis com-
plaint outside the neutral forum mandated by the IRA,
together with its purported determination that Lewis was
a victim of a ‘scam,’ was final agency action which is
reviewable under the APA.” Pl. Opp. at 14. We construe
this explanation as an allegation that the PTO’s actions
were in the form of a sanction against ISC. Plaintiff also
alleges that the PTO’s actions are reviewable because they
constitute a violation of the PTO’s own regulations regard-
ing inventor complaints.
At. oral argument, plaintiff's counsel represented that
its view of final agency action rests upon the reasoning in
Indus. Safety Equip. Assoc., Inc. v. EPA, 267 U.S. App.
App. 44
D.C. 112, 837 Fu 1115 (D.C. Cir. 1988) (HEAD In ISA
the court held that an EPA report recommending industry
use of only two types of asbestos protection respirators did
not constitute final agency action because it was advisory
in nature and, therefore, did not have a direct impact on
the plaintiffs. 837 F.2d at 1121. In dicta, however, the
court appeared to reject absolute immunity for agency
publications because such immunuty fails to protect parties
from false or unauthorized agency news releases. Id. at
1118. The court said that “an agency intent on penalizing a
party through adverse publicity, especially false or unau-
thorized publicity, might well merit a review of its action.”
Id. at 1119. Plaintiff contends that its complaint squarely
presents the situation contemplated in ISEA
Initially, we observe that this Court is not bound by
dicta announced by an appellate court in another jurisdic-
tion. However, even if we were bound by the ISEA dicta,
the plaintiff would not prevail because it has failed to
plead facts that would warrant judicial review of the
PTO’s actions.
First, the PTO’s media campaign hardly supports
plaintiff's view that the PTO was “intent on penalizing”
the plaintiff because the plaintiff is not named anywhere
in the PTO materials. Plaintiff argues that it was “inevi-
table” that ISC would be identified with these advertise-
ments after the Lewis complaint was published on the
PTO website, as required by the IRA. Had the PTO pub-
lished Lewis’ complaint on their website as required by the
IRA, ISC would have been identified as the subject of a
complaint, regardless of the media campaign. However,
the Lewis complaint was never posted on the website. It
was Lewis, not the PTO, who publicly identified the plain-
tiff to the media. ISC’s allegation that the combination of
App. 45
the two publications would create the impression that the
PTO considered ISC a “scam” operation is too speculative.
Even if such an impression were created, an impression
alone cannot constitute agency action.
Plaintiff also cites to extemporaneous statements of
try as a whole as evidence of the PTO’s desire to sanction
plaintiff. This argument is unpersuasive because such
statements by agency officials do not, without more,
constitute final agency action. See Hazardous Waste
Treatment Comm'n v. Reilly, 291 U.S. App. D.C. 131, 938
F.2d 1390, 1396 (D.C. Cir. 1991); Robinshaw Engineering,
Inc. u United States, 891 F. Supp. 1134, 1150-51 (K. D. Va.
1985). Moreover, these statements, like the advertise-
ments, do not mention the plaintiff in particular, but are
directed at the industry generally. The PTO officials
merely expressed a view, consistent with the Congres-
sional intent behind passage of the IRA, that invention
promotion scams harm individual inventors and ought to
be eliminated. We find, therefore, that the PTO’s genera!
statements about the invention promotion industry cannot
be considered equivalent to the agency imposing a sanc-
tion on the plaintiff.
Second, the PTO media campaign does not order the
plaintiff or any third party to engage in or refrain from
any action. In cases considering agency publication as a
sanction, courts are careful to distinguish agency publica-
tions which are merely advisory in nature, and therefore
not deemed agency action, from those that are agency
action because they effect a parties’ legal rights. See ISKA.
837 F.2d at 1120; Pharmaceutical Mfrs. Asso. v. Kennedy,
471 F Supp. 1224, 1231 (D. Md. 1979). The PTO’s actions
in this case do not even rise to the level of advising the
App. 46
public not to deal with the plaintiff. The advertisements
merely alert the public to the PTO’s concern about the
invention promotion industry and how individual inven-
tors may file complaints against invention promoters.
Finally, plaintiff has not alleged that it has been
directly harmed by the defendant's actions. Even if plain-
tiff had alleged that its business had been harmed by the
media campaign, the mere fact that activity by an agency
has a “substantial impact” on a party, does not transform
that activity into final agency action of which a party may
seek judicial review under the APA. JSEA, 837 F.2d at
1121. Any harm to plaintiff's business based upon the
PTO’s statements about invention promoters in general
would be indirect and the result of the reactions and
choices of individual inventors. Such an indirect impact is
not sufficient to support a finding of agency action. See id.
(rejecting appellant’s claim that an EPA report recom-
mending certain asbestos protection respirators consti-
tuted an agency sanction because it would likely result in
decreased consumer demand).
Plaintiff argues that the risk of a public connection
between it and the PTO advertisement forced it to settle
the Lewis complaint. Even if plaintiff felt forced to settle
the Lewis complaint, such “harm” is also too indirect to
render defendant’s actions agency action. It is mere
speculation that plaintiff would not have settled the Lewis
complaint in the absence of the advertisements. As counsel
admitted at oral argument, plaintiff settles the majority of
complaints against it and may well have settled this
complaint unce it received the thirty-day notice of publica-
tion on the website, regardless of defendant’s media
advertising.
App. 47
For all these reasons, we conclude that plaintiff's
argument that its complaint states a claim for judicial
review of the PTO’s publications under the APA fails. The
PTO’s publications in this case were merely generic adver-
tisements of agency programs not specifically naming the
plaintiff. Any harm to the plaintiff was, at most, indirect.
In its opposition to defendant's Motion to Dismiss,
agency action because they were taken in violation of the
IRA statute and agency regulations. However, plaintiff points
to no specific regulation that the PTO has violated. Plaintiff
complains that it was only notified of Lewis’ complaint after
the media campaign had begun and seven months after the
complaint was received by the PTO. The regulations do not
designate a time limit within which the PTO must notify the
invention promoter of a complaint. Instead, they require that
a promoter receive sufficient time to respond to the com-
plaint. “The invention promoter named in the complaint will
be notified of the complaint and given 30 days to respond.” 37
CFR 544. Plaintiff was notified of the complaint and
resolved it within thirty days of notification, thereby avoid-
ing publication of the Lewis complaint on the PTO website.
Even if plaintiff could demonstrate that the defendant
violated agency regulations, an agency's failure to follow
its own regulations is only actionable under the APA if it
results in a final agency action. A violation of agency
regulations alone, absent some harm to the plaintiff, is not
any specific harm caused by the defendant’s actions.
For these reasons we find that plaintiff's complaint
fails to state e claim upon which relief can be granted and
must be dismissed. An appropriate Order shall issue.
App. 48
The Clerk is directed to forward copies of this Memo-
randum Opinion to counsel of record.
Entered this 30th day of October, 2002.
Leonie M. Brinkema
United States District Judge
Alexandria, Virginia
ORDER
For the reasons stated in the accompanying Memo-
randum Opinion defendant’s Motion to Dismiss is granted
and it is hereby
ORDERED that plaintiff’s complaint be and is DIS-
MISSED WITH PREJUDICE.’
The Clerk is directed to forward copies of this Order to
counsel of record.
Entered this 30th day of October, 2002.
Leonie M. Brinkema
United States District Judge
Alexandria, Virginia
* This ruling renders moot all pending motions.
App. 49
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
FILED
April 9, 2004
No. 02-2461
CA-02-1038-A
INVENTION SUBMISSION CORPORATION,
a Pennsylvania Corporation
Plaintiff-Appellant
V.
JAMES E. ROGAN, Under Secretary of Commerce
for Intellectual Property and Director, United States
Patent and Trademark Office, U.S. Department of
Commerce, in his official capacity
Defendant-Appellee
On Petition for Rehearing and Rehearing En Banc
The appellant’s petition for rehearing and rehearing
en banc was submitted to this Court. As no member of this
Court or the panel requested a poll on the petition for
rehearing en banc, and
As the panel considered the petition for rehearing and
is of the opinion that it should be denied,
IT IS ORDERED that the petition for rehearing and
rehearing en banc is denied.
App. 50
Entered for a panel comprised of Judge Wilkins,
Judge Niemeyer, and Judge Shedd.
For the Court
/s/ Patricia S. Connor
CLERK
App. 51
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
INVENIION SUBMISSION
CORPORATION,
Plaintiff,
v.
JAMES E. ROGAN, UNDER Civil Action No.:
FOR INTELLECTUAL
PROPERTY AND DIRECTOR,
UNITED STATES PATENT AND
TRADEMARK OFFICE, U.S.
DEPARTMENT OF COMMERCE.
in his official capacity,
)
)
)
)
)
)
)
SECRETARY OF COMMERCE =) “99. 1038-A
Judge Brinkema
)
)
)
)
)
Plaintiff Invention Submission Corporation (“ISC”), by
counsel, files the following Response to the Court’s Order
Dated April 22, 2004, and Motion to Vacate the Court’s
Order of May 5, 2004, and Motion for Leave to File
Amended Complaint, as follows:
PROCEDURAL BACKGROUND
1. ISC filed suit against the U.S. Patent and Trade-
mark Office (PTO) in this Court alleging that a PTO
advertising campaign wrongfully targeted ISC for adverse
App. 52
publicity. The PTO filed a Motion to Dismiss the Com-
plaint for lack of subject matter jurisdiction pursuant to
Fed. R. Civ. P. 12(6)(1), asserting sovereign immunity.
2. By Memorandum Opinion and Order dated
October 30, 2002, this Court dismissed ISC’s Complaint
pursuant to Fed. R. Civ. P 12(b)(6), for failure to state a
claim upon which relief maybe granted.
3. ISC filed an appeal with the Fourth Circuit Court
of Appeals, seeking review of the October 30, 2002 Order
dismissing the Complaint.
4. On February 11, 2004, the Fourth Circuit Court of
Appeals issued its opinion in Invention Submission Corpo-
ration v. Rogan, 357 F.3d 452 (4th Cir. 2004), vacating this
Court’s Order of October 30, 2002, and remanding with
instructions to dismiss this case under Fed. R. Civ. P.
12(bM1). The Fourth Circuit concluded that the conduct
alleged in the Complaint did not constitute final agency
action under the APA. The Fourth Circuit Court of Appeals
has returned the mandate to this Court and jurisdiction
has been reacquired by this Court.
5. By Order dated April 22, 2004, this Court re-
quested that the parties advise the Court within ten days
of any reason why the Court should not comply with the
returned mandate to dismiss th civil action under Fed.
R. Civ. P 12(b)(1), rather than Kule 12(b\(6), and to vacate
the Court’s Memorandum Opinion and Order at this time.
6. ISC is currently preparing a Petition for Writ Of
Certiorari to the United States Supreme Court asserting
that the Fourth Circuit Court of Appeals’ decision raises
important questions of federal jurisdiction pertaining to
judicial review of ultra vires agency action under the APA
App. 53
in cases where a party alleges that an agency utilized false
or unauthorized adverse publicity to penalize that party.
The Petition is due to be filed by July 8, 2004. The man-
date entered by the Fourth Circuit Court of Appeals is not
currently subject to a stay order issued by the Fourth
Circuit Court of Appeals or the United States Supreme
Court.
RESPONSE TO THE COURT'S
ORDER DATED APRIL 22, 2004
7. Prior to complying with the mandate returned in
this action, ISC requests that the Court grant ISC leave to
amend its complaint to plead its claims under equity
jurisdiction and the McAnnulty Doctrine.
8. After reacquiring jurisdiction on remand, a
district court may permit the plaintiff to amend pleadings
and to vary or expand issues, provided that the amend-
ment does not involve an issue disposed of on appeal.
MOTION TO VACATE THE COURT’S
ORDER OF MAY 5, 2004
9. The Court’s Order of April 22, 2004, ordered that
the parties advise the Court within 10 days of any reason
why the Court should not comply with the Fourth Circuit’s
order. Under Rule 6(a) of the Federal Rules of Civil Proce-
dure, the computation of any period of time prescribed or
allowed by any order of court which is less than 11 days
does not include intermediate Saturdays and Sundays.
Thus, the Court’s Order of April 22, 2004, required re-
sponse by the parties on or before May 6, 2004.
App. 54
10. By filing this response to the Court's Order, and
its Motion for Leave to File an Amended Complaint on
May 5, 2004, ISC is within the time limits prescribed by
the Court's April 22, 2004 Order. ISC now moves under
FRCP 60 to vacate the May 5, 2004 Order, and asks this
Court to do so to enable ISC to be heard on the issues
timely raised in ISC’s response to the April 22, 2004 Order
and its Motion for Leave to File Amended Complaint.
Counsel for Defendant has informed counsel for ISC that
Defendant has no objection to ISC’s Motion to Vacate, and
indeed has only today filed Defendant’s response to the
Court’s April 22, 2004 Order, having calculated the re-
sponse date in the same manner as ISC.
MOTION FOR LEAVE TO FILE
AMENDED COMPLAINT
11. The relief requested by ISC is in response to the
Fourth Circuit Court of Appeals’ statement that ISC had
not pled claims under equity jurisdiction and the McAn-
nulty Doctrine. In its opinion, in a footnote, the Fourth
Circuit stated, as follows:
... Invention Submission Corporation seeks
to justify the federal court's jurisdiction on its
general equity jurisdiction to review unlawful ac-
tions of officials of an administrative agency, un-
der the “McAnnulty Doctrine,” citing American
School of Magnetic Healing u McAnnulty, 187
U.S. 94, 47 L.Ed. 90, 23 S.Ct. 33 (1902), and a
plurality opinion in Joint Anti-Fascist Refugee
Committee v. McGrath, 341 U.S. 123, 95 L.Ed.
817, 71 S.Ct. 624 (1951).
Invention Submission did not, however, bring this
action against the PTO under the “McAnnulty
App. 55
Doctrine,” but rather relied exclusively on the
APA.
For these reasons, we do not address whether the
“McAnnulty Doctrine, provides a basis for
judicial review of unlawful agency action.
357 F.3d at 457.
12. The Fourth Circuit Court of Appeals concluded
that the Court’s authority to review ultra vires agency
actions under equity jurisdiction and the McAnnulty
Doctrine is separate and apart from the APA. In light of
this distinction, the mandate requires this Court to dis-
miss under Rule 12(b)\(1) for lack of subject matter juris-
diction because the conduct of the PTO that is the subject
of this action did not constitute final agency action under
the APA.
13. ISC seeks leave to amend its complaint in
accordance with Fed. R Civ. P 15 and 28 U.S.C. § 1653 in
order to address the distinction raised by the Fourth
Circuit Court of Appeals in its opin’»n and plead jurisdic-
tion for its claim under equity jurisdiction and the McAn-
nulty Doctrine.
14. Under Fed. R. Civ. P. 15(a), a party may amend
its pleading once as a matter of course at any time before a
responsive pleading is served, otherwise a party may so
amend its pleading only by leave of court or by written
consent of the adverse party, which leave shall be freely
given when justice so requires. Amendment of pleadings to
show jurisdiction is broadly authorized by 28 U.S.C.
§ 1653 at any stage of the proceeding.
App. 56
15. Except for the jurisdictional basis for its claim,
ISC’s Amended Complaint does not raise new or additional
matters. See Amended Complaint attached hereto as
Exhibit A.
16. Granting leave for ISC to amend its Complaint is
not inconsistent with the Fourth Circuit Court of Appeals’
mandate which, while requiring dismissal under Rule
12(bX 1), does not address amendment of the Complaint
pursuant to Fed. R. Civ. P. 15 and 28 U.S.C. § 1653 to
plead jurisdiction in accordance with its opinion.
17. Justice requires that leave be granted to ISC in
order to plead its claims under equity jurisdiction and the
McAnnulty Doctrine.
18. The PTO is not prejudiced, as no responsive
pleading has been filed, the parties have not engaged in
discovery, and by statute any party may amend the juris-
dictional allegations to show a basis for jurisdiction at any
time whether in the trial or appellate court. 28 U.S.C.
§ 1653. The amended cause of action under the Court’s
general equity jurisdiction and the McAnnulty Doctrine is
not barred by any applicable statute of limitations.
19. Justice requires that ISC be afforded judicial
review of the ultra vires actions of the PTO, as otherwise
there would be no remedy afforded for what ISC contends
was false or unauthorized adverse publicity used by the
PTO to target and penalize ISC.
20. Fairness requires that ISC be afforded the
opportunity to amend the jurisdictional basis for review to
conform with the appellate decision issued by the Fourth
Circuit Court of Appeals.
App. 57
WHEREFORE, plaintiff Invention Submission Corpo-
ration respectfully requests that the Court vacate the
Order of May 5, 2004 and grant it leave to file the attached
Amended Complaint and that the Court thereafter comply
with the Fourth Circuit Court of Appeals’ mandate by
dismissing only Count I of the Amended Complaint under
the Administrative Procedures Act, leaving for considera-
tion ISC’s claims in Count II of the Amended Complaint
under equity jurisdiction and the McAnnulty Doctrine.
Respectfully submitted,
INVENTION SUBMISSION
CORPORATION
By Counsel
REED SMITH LLP
/s/ Ri
Richard C. Sullivan, Jr., Esq. (VSB #27907)
3110 Fairview Park Drive, Suite 1400
Falls Church, Virginia 22042
Telephone: (703) 641-4200
Facsimile: (703) 641-4340
Edward B Friedman (Pa. I D. 09688)
J. Stephen Purcupile (Pa. I. D. 39174)
Elliot S. Katz (Pa. ID. 31454)
FRIEDMAN and FRIEDMAN
900 Fifth Avenue
Pittsburgh, PA 15219
(412) 261-5834
App. 58
CERTIFICATE OF SERVICE
I hereby certify that a true and accurate copy of the
foregoing Plaintiff's Response to the Court's Order Dated
April 22, 2004, Motion to Vacate Order of May 5, 2004, and
Motion for Leave to File Amended Complaint was hand
delivered this 5th day of May, 2004 to:
Rachel C. Ballow, Esq.
Assistant United States Attorney
2100 Jamieson Avenue
Alexandria, Virginia 22314
Richard. C. Sullivan, Jr.
Richard C. Sullivan, Jr.
App. 59
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Alexandria Division
INVENTION SUBMISSION ) Civil Action No.:
CORPORATION,
a Pennsylvania Corporation,
217 Ninth Street
Pittsburgh, PA 15222
Plaintiff,
AND DIRECTOR, UNITED STATES
PATENT AND TRADEMARK OFFICE,
U.S. DEPARTMENT OF COMMERCE, )
in his official capacity, )
2121 Crystal Drive )
Arlington, VA 22202 )
)
Invention Submission Corporation files the following
Amended Complaint against James E. Rogan, Under
Secretary of Commerce for Intellectual Property and
Director, United States Patent and Trademark Office, U.S.
Department of Commerce, in his official capacity.
JURISDICTION AND VENUE
1. This court has federal question jurisdiction over
the instant case under 28 U.S.C. 51331 as Invention
App. 60
Submission Corporation (hereinafter “ISC”) seeks judicial
review under the Administrative Practices Act (hereinafter
“APA”) and nonstatutory judicial review under the court’s
general equity jurisdiction and the McAnnulty Doctrine of
the United States Patent and Trademark Office’s (herein-
after “PTO”) conduct in acting and/or failing to act in an
official capacity or under color of legal authority. Venue in
the Eastern District of Virginia, Alexandria Division, is
proper under 28 U.S.C. §1391(e), and 35 U.S.C. §1(b).
PARTIES
2. The plaintiff is ISC, a Pennsylvania corporation,
with an address at The Renshaw Building, 217 Ninth
Street, Pittsburgh, Pennsylvania, 15222. Invention Sub-
mission Corporation provides inventor-related services to
the public. ISC has been treated by the Patent and Trade-
mark Office as an “invention promoter,” as that term is
defined in the Inventors’ Rights Act of 1999 (hereinafter
IRA“), 35 U.S.C. §297(cX3).
3. Defendant James E. Rogan is Under Secretary of
Commerce for Intellectual Property and Director of the
United States Patent and Trademark Office, U.S. Depart-
ment of Commerce, and Assistant Secretary of Commerce,
and is named in his official capacity.
GENERAL ALLEGATIONS
4. The IRA, e PTO regulations implementing
the IRA, require it the PTO receive customer com-
plaints against invention promoters, and provide the
promoters with notice of the complaints and a reasonable
opportunity to respond. The IRA and the regulations
App. 61
further require that the PTO provide a neutral forum in
which it makes publicly available customer complaints
against invention promoters, and any responses of the
invention promoters, without any judgment or comment
relative to the complaints or responses. The IRA does not
provide the PTO with any investigative or enforcement
function or authority relative to customer complaints
against invention promoters.
5. With respect to customer complaints concerning
invention promoters, the IRA, 35 U.S.C. §297(d), provides
in relevant part, as follows:
“(t]he Commissioner of Patents shall make all
complaints received by the Patent and Trade-
mark Office involving invention promoters pub-
licly available, together with any response of the
invention promoters. The Commissioner of
Patents shall notify the invention promoter
of a complaint, and provide a reasonable
opportunity to reply, prior to making such
complaint publicly available.“ [Emphasis
added]
6. The regulations of the Patent and, Trademark
Office at 37 C. FR. §4.1, which implement the IRA, provide
in relevant part as follows:
“These regulations govern the Patent and
Trademark Office’s (Office) responsibilities under
the Inventors’ Rights Act of 1999[.] ... The Act
requires the Office to provide a forum for the
publication of complaints concerning invention
promoters. The Office will not conduct any
independent investigation of the invention
promoter. Although the Act provides additional
civil remedies for persons injured by invention
promoters, those remedies must be pursued by
App. 62
the injured party without the involvement of the
Office.” [Emphasis added]
7. On its web site, the PTO acknowledges that the
IRA gives the PTO no authority relative to invention
promoters except to receive customer complaints and any
responses from invention promoters and make them
publicly available in a neutral forum. In this regard, the
text of the PTO’s “Independent Inventors” web page states
in relevant part, as follows:
... The USPTO has no jurisdiction over mat-
ters relating to the promotion or utilization of
patents or inventions, other than providing a
public forum for complaints against invention
promoters/promotion firms. The USPTO cannot
act for or advise inventors concerning the busi-
ness transactions or arrangements that are in-
volved in the development and marketing of an
invention
* * *
While the USPTO does not investigate com-
plaints or participate in any legal proceedings
against invention promoters / promotion firms, un-
der the American Inventors Protection Act of
1999, the USPTO will provide a public forum
for the publication of complaints concerning
invention promoters/promotion firms. Also,
in the forum, the USPTO will publish re-
sponses to the complaints from the inven-
tion promoters/promotion firms.”
[Emphasis added]
8. The regulations at 37 C.F.R. §4.3(b) contain
requirements for complaints sent to the PTO for publica-
tion, including that each complaint must be
“clearly
8 App. 63
marked, or otherwise identified, as a complaint under
these rules”, and must contain:
(1) The name and address of the complainant;
(2) The name and address of the invention pro-
moter;
(3) The name of the customer;
(4) The invention services offered or performed
by the invention promoter;
(5) The name of the mass media in which the
invention promoter advertised providing
such services;
(6) An explanation of the relationship between
the customer and the invention promoter;
and
(7) Asignature of the complainant.
9. The PTO’s regulations at §4.3(c) provide further
requirements for the contents of complaints, as follows:
“The complaint should fairly summarize the ac-
tion of the invention promoter about which the
person complains. Additionally, the complaint
should include names and addresses of persons
believed to be associated with the invention pro-
moter. Complaints, and any replies, must be ad-
dressed to the Office of Independent Inventor
Programs, U.S. Patent and Trademark Office,
Washington, D.C. 20231.”
10. The PTO's regulations at 54. 30d) state the
method by which the PTO is to handle complaints which
do not conform to its regulations, as follows:
“Complaints that do not provide the information
requested in paragraphs (b) and (c) of this section
App. 64
will be returned. If complainant’s address is not
provided, the complaint will be destroyed.”
11. The regulations at §4.3(f) provide for withdrawal
of complaints by customers prior to publication by the
PTO, as follows:
“A complaint [against an invention promoter] can
be withdrawn by the complainant or the named
customer at any time prior to its publication.”
12. The regulations at 37 C. FR. §4.4(a), relative to
the PTO’s duty to provide invention promoters with notice
of a complaint and a reasonable opportunity to respond,
provide in relevant part, as follows:
“If a submission appears to meet the require-
ments of « complaint, the invention promoter
named in the complaint will be notified of the
complaint and given 30 days to respond. The in-
vention promoter’s response will be made
available to the public along with the com-
plaint. If the invention promoter fails to reply
within the 30-day time period set by the Office,
the complaint will be made available to the pub-
lic. Replies sent after the complaint is made
available to the public will also be published.”
{Emphasis added}
13. The PTO’s regulations interpret the IRA as only
providing the PTO with authority to receive customer
complaints, provide invention promoters with notice and a
reasonable opportunity to respond, receive the responses,
and provide a neutral forum for both customer complaints
and invention company responses to the complaints.
Accordingly, the regulations set forth a specific course of
action to be taken by the PTO relative to complaints.
App. 65
14. The PTO acknowledges on its web site that it has
no jurisdiction over what it calls the “promotion or utiliza-
tion of patents or inventions,” except to provide a neutral)
forum for complaints and responses; that it has no investi-
gative power relative to invention promoters; and that it
cannot even advise inventors relative to what it calls the
“development and marketing of an invention.”
15. The PTO violated the IRA and acted contrary to
its own regulations by targeting ISC, an invention pro-
moter, for a media campaign, by publicizing a customer
complaint regarding ISC (hereinafter “Lewis’ complaint”)
outside the neutral forum required by the IRA, by stigma-
tizing ISC as an “invention promotion scam,” by using the
news media to identify ISC with the Lewis complaint and
with the PTO’s comments about “scams,” and by otherwise
engaging in a course of conduct calculated to deny ISC’s
right to a neutral public forum.
16. The actions of the PTO in illegally publicizing
Lewis’ complaint, identifying ISC with that complaint, and
otherwise mishandling customer complaints contrary to
the IRA and its own regulations, are final agency actions
taken by the PTO because of an animus against ISC, for
the purpose of putting ISC out of business.
FIRST CAUSE OF ACTION-
ADMINISTRATIVE PROCEDURES ACT
17. In or about August of 2001, the PTO received a
complaint concerning ISC from an ISC customer, Edward
Lewis, who states that he invented the Bodyguard,“ an
invention which is intended to protect the body of an
automobile while the tires are washed.
App. 66
18. Instead of complying with the IRA and the PTO’s
regulations, by providing ISC with notice of Lewis’ com-
plaint and an opportunity to respond, the PTO singled out
ISC for a media campaign, even though it had no author-
ity to do so. Pursuant to the decision to target ISC in this
manner, and without any authority, the PTO contacted
Lewis concerning his complaint, and solicited his partici-
pation in PTO advertisements pwhlicizing his complaint
regarding ISC.
19. Although the PTO has no authority to reformu-
late inventor complaints, it nonetheless worked with
Lewis to reformulate his complaint for the PTO’s television
and print advertisements publicizing his complaint. In
addition, the PTO expended funds and worked with
advertising professionals and consultants to prepare
television and print advertisements, with the intention of
publicizing Lewis’ complaint in a manner which was
contrary to the IRA and withou! any statutory authority.
20. The PTO issued a press release on January 10,
2002, announcing a nationwide media campaign, purport-
edly to counter “patent scams,” “invention promotion
scams” and “deceptive advertising,” but in actuality
focusing on one invention company, ISC, and one customer
complaint, Edward Lewis’ complaint. See copy of press
release, Exhibit 1. N
21. In January of 2002, the PTO launched its media
campaign publicizing the Lewis complaint, which con-
sisted of television and print media advertisements which
were run from approximately January through Ma 2002.
The media campaign included an article on the PTO web
site, publicizing the Lewis complaint and referring to
“scams,” and false promises that the invention would
App. 67
make money. See Exhibit 2, excerpt from the PTO web
site. In conducting this advertising campaign, the PTO
violated the IRA, which requires that complaints about
invention promoters only be made publicly available in a
neutral forum, together with the invention promoters’
responses, and which does not permit the PTO to single
out a particular complaint or a particular company.
22. In a further effort to target ISC, the PTO se-
lected Pittsburgh, Pa., the location of ISC’s headquarters,
and also some of ISC’s other markets, San Francisco/
San Jose, Tampa, New York and southern Florida, as the
markets in which to run its illegal television advertise-
ments of the Lewis complaint, which contained references
to “scams” and to false promises of financial gain.
23. As part of its illegal media campaign targeting
ISC, the PTO intentionally publicized ISC as the invention
company which was the subject of the Lewis complaint, for
the purpose of stigmatizing ISC. In order to connect ISC
with its comments in its advertisements about “invention
promotion scams,” for the purpwse of causing harm to ISC,
the PTO informed Peter Barnes of Tech TV, a cable televi-
sion network, that ISC was the invention company which
had contracted with Lewis. As a result, in a story on Tech
TV on January 22, 2002, and in an articie on the Tech TV
web site, which is also published on the ABC News web
site, Barnes reported on the PTO commercial involving
Lewis which warned against scams and identified ISC as
the invention company which had contracted with Lewis.
See Exhibit 3 hereto. The Barnes story was picked up and
sinked by InventorEd and United Inventors Association
(UIA), which are adversaries and critics of ISC, and
Franklin Gray Patents, LLC, and placed on their web
sites. As a result of the PTO’s contacts with Barnes, it
App. 68
became widely known that ISC was the company which
was the subject of the Lewis complaint, and of the PTO’s
unfair advertisements. Thus, the PTO intentionally, and
without any statutory authority, publicized ISC as an
“invention promotion scam” and publicized that ISC had
“scammed” Lewis and falsely promised him money from
the “Bodyguard” invention.
24. The PTO knew that, if the Lewis complaint was
not withdrawn, and was subsequently made publicly
available on the PTO’s web site under the IRA, ISC would
be further identified with the PTO’s unfair and untrue
television and print advertisements, and an additional
link would be established between [SC and the PTO’s
statements about “scams” and false promises of money to
Lewis. Through its advertisements concerning Lewis’
complaint, and the prospect of the Lewis complaint being
made publicly available on the PTO’s web site, the PTO
placed enormous pressure on ISC to settle Lewis’ com-
plaint, although that complaint was unjustified.
25. In addition, ISC believes and therefore avers
that the PTO revealed information on customer com-
plaints involving ISC, and connected ISC to Lewis’ com-
plaint, in communications with persons who are critics
and adversaries of ISC, and in communications with other
members of the public. This action was in violation of the
IRA, which only permits customer complaints to be made
publicly available in a neutral forum, after providing the
invention promoters wi u notice and an opportunity to
respond.
26. Despite ISC’s objections that advertisements of
customer complaints violated the IRA, the PTO continued
its media campaign against ISC. In approximately March
App. 69
through May, 2002, the PTO ran advertisements of Lewis’
complaint in Inventors Digest and Popular Mechanics,
containing statements referring to “invention promotion
scams,” stating “don’t get scammed,” referring to false
promises of money, and directing the public to the PTO
web site. See copies of advertisements, Exhibit 4 hereto.
The PTO stated on its web site that it also intended to run
advertisements of Lewis’ complaint in Popular Science and
Family Handyman. By publicizing ISC as the company
involved with Lewis through its contacts with Barnes and
others, the PTO connected these advertisements to ISC,
and thereby unfairly identified ISC as a “scam” and as a
company which made false promises of money to custom-
ers.
27. The PTO, by publicizing the Lewis complaint in
PTO advertisements with its unfair comments about
“invention promotion scams” and “don’t get scammed,” and
statements about alleged false promises of money, en-
dorsed the Lewis complaint as factually correct. The PTO
thereby knowingly violated the IRA’s requirement that it
make the Lewis complaint publicly available only in a
neutral forum, without comment or judgment, together
with ISC’s response. Further, because the PTO had inten-
tionally connected the Lewis complaint to ISC through its
contact with Barnes, the PTO’s advertisements of Lewis’
complaint labeled ISC as a “scam.”
28. Edward Lewis’ complaint was the only customer
complaint which the PTO publicized in a media campaign,
and was the only complaint which the PTO had made
public in any way at the time of this media campaign. No
invention company other than ISC was targeted by the
PTO in its media campaign, unfairly labeled as a “scam”
by the PTO, or identified with a customer complaint
App. 70
through contacts with the news media. Thus, the PTO
demonstrated an animus against ISC, by singling it out for
a media cara un labeling it a “scam,” while not treating
any other con. . ay in this manner.
29. After two months of conducting its media cam-
paign regarding Mr. Lewis’ complaint with television and
print advertisements concerning “invention promotion
scams,” after it identified Lewis’ complaint with ISC
through its contacts with Barnes and Tech TV, and after it
publicized Lewis’ complaint on its own web site, the PTO
for the first time provided ISC with notice of the Lewis
complaint and an opportunity to respond on March 1,
2002. This was approximately eight months after the PTO
first received the Lewis complaint, in or about August of
2001. This extensive delay in providing ISC any opportu-
nity to respond to the Lewis complaint demonstrates the
PTO’s intentional violation of the IRA and its animus
against ISC, since making Lewis’ complaint publicly
available subsequent to the unfair media campaign, even
with an ISC response, would only exacerbate the harm to
ISC.
30. Mr. Lewis attempted to withdraw his complaint
with the PTO by letter dated March 26, 2002, and re-
quested that the PTO discontinue using him in its media
campaign. However, contrary to its own regulations, the
PTO ieft Lewis’ complaint on its web site after the com-
plaint had been withdrawn, and continued to use Lewis in
its media campaign. The PTO’s failure to remove Lewis’
complaint from its web site after Lewis withdrew it was
arbitrary and capricious, because it was contrary to the
PTO’s own regulations, and was the result of an animus
against ISC.
App. 71
31. In addition to publicizing Lewis’ complaint
contrary to the IRA and its own regulations, identifying
Lewis’ complaint with ISC through contacts with Barnes
and Tech TV, and publicizing Lewis’ complaint after it was
withdrawn, the PTO also took other agency actions which
exceeded its statutory authority under the IRA, and which
demonstrated an animus against ISC, as follows:
a. soliciting complaints against ISC; n
contacting ISC customers who have com-
plaints and suggesting content for com-
plaints;
c. contacting ISC customers who complained to
make investigative inquiries into the facts of
their complaints and any settlement efforts
by ISC;
d. sending complaints later than the date on
the transmittal letter, so that ISC will not
have the full thirty days’ notice to attempt to
investigate and resolve the complaints.
32. John Calvert, the Acting Director of the Office of
Independent Inventor Programs at the PTO, demonstrated
the animus of the PTO against ISC when he stated an
intention to solicit and investigate customer -complaints
despite the PTO’s lack of authority to do this, and an
intention to circumvent the required neutrality of the
PTO’s forum for customer complaints and invention
promoters’ responses. In this regard, in his remarks at the
Midwest Inventors’ Council meeting on April 5, 2002, at
which he spoke as a representative of the PTO, Calvert
stated, as follows:
“The only way that we do not post it [a customer
complaint] is if you withdraw it, and we have one
App. 72
company that Bob ... and I were talking about
that has a tendency to settle quickly ... but
we're going to get them up there yet. We got to
find somebody that doesn’t want to settle and get
their name on our Internet, on the Internet site,
and we will have them up eventually. We have
one up there now, and you can look at it.”
33. ISC believes and therefore avers that the com-
pany to which Calvert was referring in the remarks quoted
above was ISC, which has a policy and practice of attempt-
ing to resolve customer complaints, which predates the
PTO’s illegal publicity campaign against ISC. Thus,
Calvert stated the PTO’s intention to target ISC and to
make certain that the PTO publicized complaints against
ISC before ISC could settle the complaints, contrary to the
IRA and the PTO’s regulations, thereby demonstrating the
PTO’s animus against ISC.
34. In addition, Calvert made other statements as a
representative of the PTO, which demonstrate the PTO’s
animus against invention companies in general and ISC in
particular. In this regard, at the Midwest Inventors’
Council meeting, Calvert stated, as follows:
“But, anyway, we are really trying to work
and get these invention marketirg firms
put out of business.
* * *
I've also got Bob ... out here. and I talked to
Bob about this, a very, very informative gentle-
man that hates them as much as I do.
* * *
Before I leave the Office of Independent In-
ventor Programs, I want to see at least one
— = — a . — = n — — *
— — e — —
— — — — — — — — — — — — — — — — —Vꝓꝓ p — * —
App. 73
of these major companies out of business.
That is my goal.” [Emphasis added]
35. At the Minnesota Inventors Congress on June
14, 2002, John Calvert, speaking as a representative of the
PTO, repeated the PTO’s goal of putting ISC out of busi-
ness, stating, as follows:
“My goal in life is to put these people out of
business.”
36. Based on Calvert’s comments about a company
which settles complaints quickly, and based on the PTO
media campaign targeting ISC, ISC believes that it is the
company which the PTO seeks to put out of business.
37. Calvert further manifested his and the PTO’s
animus against ISC when he stated publicly at the Minne-
sota Inventors Congress on June 14, 2002, that he would
continue his illegal activities and challenged ISC to bring
suit against the PTO. In this regard, Calvert stated, as
follows:
“...I say, come and get me. Come and file
suit. I'd love you to file suit and take me to
federal court and [ll expose you as the
bums you are.”
38. In addition, at the Midwest Inventors’ Council
Meeting, on April 5, 2002, Calvert made statements which
indicated that the PTO is investigating invention promot-
ers and customer complaints concerning invention pro-
moters, and is soliciting complaints against invention
promoters. In this regard, Calvert stated, as follows:
“We need your help. If you run across any-
body that’s got or has been taken by an in-
vention marketing firm, see us. Get them in
App. 74
touch with us. I want to know about it. Im
really serious about this.
* * *
My daughter is a senior in college this year
... and she said I have a project due ... [at] the
end of April. It’s her last project for college,
and it’s to do an investigative report. She
said, what do you think I should do? What do you
think I told her? I told her that I can be a
source, but I couldn’t be named, because I
can’t say anything. Pm not allowed to, not
without my handler, as they call him. So,
she’s going to talk to me. I also told her of an 800
number that she’s going to call that she was on
the T.V. the other day that she can actually call.
She’s got five questions she’s going to ask
that 800 number and get some information
about it. That’s her investigative report.
* * *
Hopefully, this will start some other people
thinking. Td like to see more of this. I keep
getting phone calls from newspaper pe_ple
around the country, and this is what I talk
about more than anything else.” (Emphasis
added]
Although the IRA provides the PTO with no investigative
authority, the PTO by its actions has attempted to assume
the role of an investigative agency, contrary to the IRA and
the PTO’s regulations.
39. The PTO’s actions in targeting ISC for its media
campaign, publicizing Lewis’ complaint outside the neutral
forum without statutory authority and without providing
ISC with an opportunity to respond, identifying ISC as the
App. 75
company with which Lewis dealt through its contacts with
Barnes of Tech TV, publicizing Lewis’ complaint after it
was withdrawn, and otherwise denying ISC its rights,
demonstrate the PTO’s animus against ISC and intent to
put ISC out of business.
40. As a result of the PTO’s actions contrary to the
IRA and its own regulations, ISC has been subjected to a
sanction by the PTO in being singled out for a media
campaign in which the PTO endorsed allegations against
ISC, identified ISC as the company which was the subject
of publicity campaign though contacts with Barnes and
Tech TV, and falsely characterized ISC as “invention
promotion scam.” ISC has thereby been harmed by being
subjected to public identification as a “scam.” No other
invention company has ever been subjected to such a
sanction by the PTO.
41. The PTO imposed the sanction of a publicity
campaign against ISC, in which it use the word “scam” in
connection with Lewis’ complaint, and attached ISC’s
name to Lewis’ complaint through identifying ISC to Peter
Barnes of Tech TV as the company with which Lewis had
dealt. The PTO took these actions without providing ISC
with notice of Lewis’ complaint and an opportunity to
respond, or any process at all. These actions were per-
formed without any statutory authority, either under the
IRA or otherwise.
42. ISC objected to the PTO’s publication of Lewis’
complaint in its media campaign because the PTO had not
made Lewis’ complaint publicly available along with ISC’s
response in a neutral forum, because the PTO had unfairly
characterized ISC as a “scam,” and because the PTO had
App. 76
gone to the news media, i. e., Peter Barnes of Tech TV, to
publicly identify ISC with Lewis’ complaint.
43. The PTO’s actions in illegally publicizing Lewis’
complaint outside a neutral public forum, and in illegally
denying ISC the right to notice and an opportunity to
respond, are final, and are not subject to any administra-
tive review or appeal procedu~es. The only review of the
PTO’s action which ISC may obtain is through this court.
44. In conducting its illegal media campaign in
which it targeted ISC and publicized Lewis’ complaint
through television advertisements and on its web site, and
identified ISC with Lewis’ complaint through its contacts
with Barnes of Tech TV, and in failing to provide ISC with
notice of Lewis’ complaint and an opportunity to respond,
and failing to make the Lewis complaint and response
available only in a neutral public forum, the PTO has
taken final agency actions in the nature of imposing
sanctions and/or failing to act in accordance with the IRA
and the regulations. These final agency actions are unlaw-
ful within the meaning of the Administrative Procedures
Act, 5 U.S.C. §706(2), in that they are:
“(A) arbitrary, capricious, an abuse of discretion
[and] otherwise not in accordance with law [the
IRA);
(B) contrary to constitutional right
(C) in excess of statutory jurisdiction, authority,
or limitations, or short of statutory right (under
the IRA]; [and]
(D) without observance of procedure required
by law [the [RA]...
App. 77
45. ISC has been subjected to irreparable harm
through the PTO’s actions in singling out ISC for a public-
ity campaign which unfairly characterized ISC as a “scam”
and included Lewis’ allegations to which ISC had not been
permitted to respond; and publicly identifying ISC with
Lewis’ complaint to Peter Barnes of Tech TV at the same
time it was conducting the publicity campaign. ISC has
also been subjected to continuing irreparable harm in
being denied rights which are guaranteed under the IRA
and are provided to other invention companies, that is, the
right to notice of complaints and an opportunity to re-
spond, and the right to have the response published along
with the complaint, only in a neutral forum. Through the
PTO’s illegal actions, ISC has been singled out as the only
invention company stigmatized by the PTO as a scam in a
publicity campaign.
WHEREFORE, ISC requests that the court issue a
permanent injunction and/or a declaratory judgment and
order the following:
a. That the PTO and its officers, employees,
agents and/or representatives be prohibited
from conducting any media campaign which
targets ISC and/or which publicizes the
Lewis complaint or any other customer com-
plaint concerning ISC;
b. That the PTO and its officers, employees,
agents and/or representatives be prohibited
from conducting any educational campaign
or activity which targets ISC and/or which
publicizes the Lewis complaint or any other
customer complaint concerning ISC, except
in the neutral forum provided for in the IRA,
App. 78
That the PTO and its officers, employees,
agents and/or representatives be required to
remove any and all references to the Lewis
complaint, and to any other customer com-
plaint, from its web site, except in the neu-
tral forum provided for in the IRA;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from stating that they intend to conduct an
investigation or conducting an investigation
of invention promoters; categorizing any in-
vention promoter or invention promoters as
good, bad, or scams; stating or publishing
any negative information regarding any in-
vention promoters or invention promoters,
except in the neutral forum provided for in
the IRA; or stating an intention to or at-
tempting to put any invention promoter or
invention promoters out of business;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from making any complaints from ISC cus-
tomers publicly available unless it provides
ISC at least thirty days from the date of
ISC’s receipt of notice of the complaints to
respond to such complaints, and makes the
complaints publicly available, together with
ISC’s responses, in the neutral forum pro-
vided for in the IRA;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from publicizing complaints which the cus-
tomers have withdrawn within the time lim-
its provided by the PTO;
App. 79
g. That the PTO and its officers, employees,
agents and/or representatives be prohibited
from soliciting complaints against ISC;
h. That the PTO and its officers, employees,
agents and/or representatives be required to
publicize on its web site and elsewhere a
statement that it has no authority to regu-
late invention promoters or invention com-
panies, and that it has no intention to put
invention promoters or invention companies
out of business;
i. That ISC be reimbursed for its reasonable
attorneys’ fees and costs; and
j. Such other relief as the court shall deem ap-
propriate.
SECOND CAUSE OF ACTION-JUDICIAL REVIEW
UNDER GENERAL EQUITY JURISDICTION
AND THE MCANNULTY DOCTRINE
46. The allegations contained in Paragraphs 1-45 of
the Amended Complaint are incorporated by reference and
repleaded herein as if fully set forth at length.
47. The IRA and the PTO’s regulations require that
the PTO provide a neutral public forum to publicize
customer complaints together with the invention promot-
ers’ responses. The PTO was not granted authority to
make complaints publicly available outside the neutral
public forum and without the invention promoter’s re-
sponse.
48. The Lewis complaint received by the PTO on or
about August 2001 was clearly marked as being made
pursuant to the IRA.
App. 80
49. The PTO knowingly acted in excess of its author-
ity with an intent to penalize ISC and put ISC out of
business and otherwise interfere with ISC’s business
relationships by using the Lewis complaint to proclaim
publicly the misleading and untrue message that it had, in
effect, verified the truth of the customer’s allegations and
determined, based on an investigation, that Lewis was
scammed by ISC and that other inventors and third
parties should not deal with ISC.
50. The content and context of the PTO’s publication,
as well as the PTO’s public efforts to connect Lewis’
complaint to ISC, resulted in the audience knowing that
ISC was the company featured in the PTO media cam-
paign.
51. In conducting its illegal media campaign in
which it targeted ISC and publicized Lewis’ complaint
through television advertisements and on its web site, and
identified ISC with Lewis’ complaint through its contacts
with Barnes of Tech TV, and in failing to provide ISC with
notice of Lewis’ complaint and an opportunity to respond,
and failing to make the Lewis complaint and response
available only in a neutral public forum, the PTO has
engaged in ultra vires actions which are reviewable under
the Court’s general equity jurisdiction and the McAnnulty
Doctrine. It is further alleged that tie various actions
alleged in this complaint were ultra vires and subject to
review by this Court.
52. Under equity jurisdiction and the McAnnulty
Doctrine, ISC is entitled to judicial review of the PTO’s
ultra vires actions which are in excess of its statutory
authority and/or violates ISC’s individual rights.
App. 81
53. ISC has no adequate remedy at law, as the PTO’s
ultra vires actions and violation of ISC’s individual rights
are not subject to any administrative review or appeal
procedures. The only review of the PTO’s action which ISC
may obtain is through this court and Congress has not
expressly precluded review of the PTO’s actions under the
IRA.
54. As a direct and proximate consequence of the
Pro's ultra vires actions, ISC has suffered irreparable
harm to its business in being stigmatized by the PTO in a
publicity campaign which illegally characterized ISC as a
“scam” and included Lewis’ false allegations to which ISC
had not been permitted to respond; and publicly identify-
ing ISC with Lewis’ complaint to Peter Barnes of Tech TV
at the same time it was conducting the publicity cam-
paign. ISC has been denied constitutional and other
individual rights, as well as rights which are guaranteed
under the IRA, and are provided to other invention pro-
moters, that is, the right to notice of complaints and
opportunity to respond, and the right to have the response
published along with the complaint, only in a neutral
forum. Through the PTO’s ultra vires actions, ISC has
suffered harm in the form of lost business and damage to
its relationships with third parties as a result of these
actions.
WHEREFORE, ISC requests that the court issue a
permanent injunction and/or a declaratory judgment and
order the following:
a. That the PTO and its officers, employees,
agents and/or representatives be prohibited
from conducting any media campaign which
targets ISC and/or which publicizes the
App. 82
Lewis complaint or any other customer com-
plaint concerning ISC;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from conducting any educational campaign
or activity which targets ISC and/or which
publicizes the Lewis complaint or any other
customer complaint concerning ISC, except
in the neutral forum provided for in the-
IRA;
That the PTO and its officers, employees,
agents and/or representatives be required to
remove any and all references to the Lewis
complaint, and to any other customer com-
plaint, from its web site, except in the neu-
tral forum provided for in the IRA;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from stating that they intend to conduct an
investigation or conducting an investigation
of invention promoters; categorizing any in-
vention promoter or invention promoters as
good, bad, or scams; stating or publishing
any negative information regarding any in-
vention promoters or invention promoters,
except in the neutral forum provided for in
the IRA; or stating an intention to or at-
tempting to put any invention promoter or
invention promoters out of business;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from making any complaints from ISC’s cus-
tomers publicly available unless it provides
ISC at least thirty days from the date of
ISC’s receipt of notice of the complaints to
App. 83
respond to such complaints, and makes the
complaints publicly available, together with
ISC’s responses, in the neutral forum pro-
vided for in the IRA;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from publicizing complaints which the cus-
tomers have withdrawn within the time lim-
its provided by the PTO;
That the PTO and its officers, employees,
agents and/or representatives be prohibited
from soliciting complaints against ISC;
That the PTO and its officers, employees,
agents and/or representatives be required to
publicize on its web site and elsewhere a
statement that it has no authority to regu-
late invention promoters or invention com-
panies, and that it has no intention to put
invention promoters or invention companies
out of business;
That ISC be reimbursed for its reasonable
attorneys’ fees and costs; and
Such other relief as the court shall deem ap-
propriate.
Respectfully submitted,
INVENTION SUBMISSION
CORPORATION
By Counsel
App. 84
REED SMITH LLP
/s/ Richard. C. Sullivan, Jr.
Richard C. Sullivan, Jr., Esq. (VSB #27907)
3110 Fairview Park Drive, Suite 1400
Falls Church, Virginia 22042
Telephone: (703) 641-4200
Facsimile: (703) 641-4340
Edward B. Friedman (Pa. I. D. 09688)
J. Stephen Purcupile (Pa. I.D. 39174)
Elliot S. Katz (Pa. I.D. 31454)
FRIEDMAN and FRIEDMAN
900 Fifth Avenue
Pittsburgh, PA 15219
(412) 261-5834
CERTIFICATE OF SERVICE
I hereby certify that a true and accurate copy of the
foregoing Amended Complaint was hand delivered this 5th
day of May, 2004 to:
Rachel C. Ballow, Esq.
Assistant United States Attorney
2100 Jamieson Avenue
Alexandria, Virginia 22314
/s/ Richard C. Sullivan, Jr.
Richard C. Sullivan, Jr.
2 | PT aac
DCC - 2005
72 ——.—
{
No. 05-376
In the Supreme Court of the Gnited States
INVENTION SUBMISSION CORPORATION, PETITIONER
V.
JONATHAN W. DUDAS, UNDERSECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY AND
DIRECTOR, PATENT AND TRADEMARK OFFICE
ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
BRIEF FOR THE RESPONDENT IN OPPOSITION
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