Opinions of the United
1997 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-28-1997

Carnegie Mellon Univ v. Schwartz
Precedential or Non-Precedential:

Docket 95-3440




Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1997

Recommended Citation
"Carnegie Mellon Univ v. Schwartz" (1997). 1997 Decisions. Paper 20.
http://digitalcommons.law.villanova.edu/thirdcircuit_1997/20


This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1997 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
                 UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT



                          No. 95-3440



                   CARNEGIE MELLON UNIVERSITY,

                                        Appellant.

                               v.

                   ANSEL M. SCHWARTZ, ESQUIRE;
                      COHEN & GRIGSBY, P.C.

                    UNITED STATES OF AMERICA,

                                        Third-party Defendant




         On Appeal from the United States District Court
            for the Western District of Pennsylvania
               (D.C. Civil Action No. 92-cv-01554)



                    Argued on March 26, 1996

          Before: SLOVITER, Chief Judge, GREENBERG and ROTH,
                          Circuit Judges

                (Opinion Filed January 28, 1997)



Walter P. DeForest, Esq. (Argued)
Jacqueline A. Koscelnik, Esq.
DeForest & Koscelnik
3000 Koppers Building
436 Seventh Avenue
Pittsburgh, PA 15219




                               1
William S. Schweers, Jr., Esq.
Harrington, Schweers, Dattilo & McClelland, P. C.
100 Ross Street
Pittsburgh, PA 15219

            Attorneys for Appellant

Vincent J. Grogan, Esq. (Argued)
Richard D. Kalson, Esq.
Grogan, Graffam, McGinley & Lucchino, P.C.
Three Gateway Center, 22nd Floor
Pittsburgh, PA 15222

            Attorneys for Appellee Ansel M. Schwartz

Frank W. Hunger, Esq.
Assistant Attorney General
Frederick W. Thieman, Esq.
United States Attorney
Frank A. Rosenfeld, Esq. (Argued)
William Kanter, Esq.
United States Attorneys Office
Appellate Staff, Civil Division
Room 7124
Department of Justice
Washington, D.C. 20530-0001

Amy R. Hay, Esq.
Office of United States Attorney
633 United States Post Office & Courthouse
Pittsburgh, PA 15219

           Attorneys for Appellee United States of America

Patrick G. Barry, Esq.
Manion, McDonough & Lucas
600 Grant Street
Suite 882
Pittsburgh, PA 15219

          Attorney for Appellee Cohen & Grigsby




                      OPINION OF THE COURT




                               2
ROTH, Circuit Judge:



          Carnegie Mellon University (CMU) brings this action for

professional negligence against Cohen & Grigsby, P.C. (C&G) and a

former C&G associate, Ansel M. Schwartz, alleging that they were

negligent in their handling of two CMU patents.     Schwartz joined

the United States as a third-party defendant, alleging that the

United States Patent and Trademark Office (PTO) is responsible

for any damages suffered by CMU.    The district court granted

summary judgment against CMU on the ground that CMU could not

have suffered any actual loss as a result of Schwartz's alleged

professional negligence.   Because we believe that the district

court's conclusion that CMU suffered no actual loss is premature,

we will vacate the district court's order and remand the case for

further proceedings consistent with this opinion.

          The district court had jurisdiction pursuant to 28

U.S.C. § 1346(b) because this is a civil action sounding in tort

in which the United States is a defendant.    We have jurisdiction

of the district court's summary judgment order.   28 U.S.C. §§

1291, 1295(a)(2).
                                I

          CMU commenced this action against C&G, a professional

corporation rendering legal services, and Ansel M. Schwartz, a

former C&G associate, for alleged professional negligence in

connection with their handling of two patents owned by CMU.      The



                                3
crux of CMU's complaint is that Schwartz erroneously and

negligently disclaimed a CMU patent and that the error was not

corrected for fifteen months after the PTO published notice of

the disclaimer in its Official Gazette.    CMU argues that during

these fifteen months, third parties who relied on the published

disclaimer might have acquired intervening rights to the patent

and that the disclaimer diminished the value of CMU's patent.

CMU argues that Schwartz and C&G are liable to it for any damages

that CMU suffers as a result of their alleged professional

negligence.   Schwartz argues that the PTO negligently published

notice of a statutory disclaimer when he had filed only a

terminal disclaimer to obviate a double patenting rejection.

           The district court adopted the Supplemental Report and

Recommendation of the magistrate judge, which granted Schwartz's

and C&G's motions for summary judgment and also granted the

United States's motion to dismiss or, in the alternative, for

summary judgment.   Order, No. 92-1554 (July 7, 1995) (citing

Supplemental Report and Recommendation, No. 92-1554 (May 4, 1995)

(hereinafter Supplemental Report)).   On appeal, we view all facts

in the light most favorable to CMU, the non-moving party, and

give CMU the benefit of all reasonable inferences from those

facts.    Travitz v. Northeast Dept. ILGWU Health and Welfare Fund,

, 708 (3d Cir. 1994), cert. denied, 

(1994).   We apply the same legal test that the district court

should have applied initially, and we have plenary review of the



                                 4
legal issues underlying the district court's order granting

summary judgment.    

that it retained C&G and Schwartz to

prosecute and transact all business related to United States

Patent No. 4,767,708, issued August 30, 1988 (708 Patent), and

related United States Continuation Patent Application Serial

Number 07/117,279, filed November 5, 1987 (279 Application).

After the PTO entered an obviousness-type double patenting

rejection in connection with the 279 Application, Schwartz

prepared a terminal disclaimer to obviate the double patenting

rejection.    See 37 C.F.R. 1.78(d).

            According to CMU, Schwartz inadvertently placed the

serial number and filing date of the 708 Patent (rather than the

279 Application) on the disclaimer and mailed it to the PTO on

March 15, 1990.    In May 1990 the PTO advised Schwartz that no

terminal disclaimer had been filed for the 279 Application,

whereupon Schwartz refiled the incorrect disclaimer.1   Although

the PTO published a notice of disclaimer pertaining to the 708

Patent on May 29, 1990, Schwartz did not note that the patent had

been disclaimed.    After Schwartz was notified again on July 23,

1990, that a terminal disclaimer was needed for the 279

Application and that the previously filed disclaimer had gone to

another case,2 Schwartz made no effort to determine the status of
     1
       Schwartz denies that he resubmitted an incorrect
disclaimer.
     2
         Schwartz denies receiving such notification.


                                  5
the 708 Patent or to correct the disclaimer.   Finally, on

November 23, 1990, Schwartz filed a correct terminal disclaimer

form for the 279 Application, and the PTO granted the disclaimer.

          On July 25, 1991, Schwartz learned for the first time

that more than a year earlier, the PTO had published a statutory

disclaimer for the remaining term of the 708 Patent.      Upon

learning of the statutory disclaimer, Schwartz immediately filed

a Petition to Expunge with the Commissioner of Patents and

Trademarks.   On September 10, 1991 (more than fifteen months

after the disclaimer of the 708 Patent was originally published

on May 29, 1990), the PTO published an Erratum in the Official

Gazette, which stated that "all references to [the 708 Patent]

should be deleted as the patent should not have been disclaimed."

 Supplemental Report at 4 n.2.   On December 5, 1991, the PTO

directed that the erratum be attached to all soft copies of the

708 Patent furnished by the PTO.

          As a result of the mistaken disclaimer, CMU filed this

action for professional negligence against Schwartz and C&G.     In

his third party complaint against the United States, Schwartz

contends that the PTO negligently processed a statutory

disclaimer, see 35 U.S.C. § 253; 37 C.F.R. § 1.321(a), in
response to his request for a terminal disclaimer.     He asserts

that the PTO is jointly liable to the CMU or liable directly to

him for all of CMU's alleged damages.

          In their first motion for summary judgment, appellees,



                                 6
Schwartz, C&G, and the United States argued that publication of

the erratum operated retroactively to cure the mistaken

disclaimer.    They argued, therefore, that even if there were

potential infringers of the 708 Patent or the 270 Patent,3 CMU

could have suffered no damages as a result of the disclaimer

because no legitimate intervening rights (rights arising between

publication of the disclaimer and publication of the erratum)

could be asserted by individuals infringing the patent.      On

February 7, 1994, the district court denied this first motion for

summary judgment based upon the magistrate judge's conclusion

that it was unclear whether the erratum would operate

retroactively so as to eliminate intervening rights.

Supplemental Report at 5 (citing 1993 Report).    The court

reasoned that to the extent that third parties might have derived

intervening rights from reasonable reliance on the disclaimer,

CMU might have a viable claim for damages against appellees.4

            After a settlement conference, the magistrate judge

ordered CMU to file infringement lawsuits against any alleged

infringers of its patents.    CMU thereafter filed a claim for

infringement of the 708 Patent and the 270 Patent.    That

infringement action is currently pending in the United States

     3
         The 270 Patent was the result of the 279 Application.
     4
       Prior to publication of the erratum, Schwartz had written
an opinion letter to CMU identifying several infringers of the
279 Application and several potential infringers of the 708
Patent. Supplemental Report at 5.



                                  7
District Court for the Northern District of California.         CMU

notes that the defendants' answers in that action preserve their

right to raise as an affirmative defense intervening rights

allegedly acquired during the apparent lapse in the 708 and 270

Patents.   Thus, CMU argues that summary judgment is inappropriate

in this case.    CMU contends that it might still suffer damages as

a result of Schwartz's alleged negligence if defendants in CMU's

infringement action successfully assert their reliance on the

published disclaimer as a defense to liability for infringement.

           In renewing their motions for summary judgment in 1995,

appellees again argued that the erratum had retroactive effect

and that it therefore eliminated any intervening rights that

might have been acquired by infringers.         Appellees maintained

that the erratum was published in lieu of a certificate of

correction and that it was equivalent thereto.         Supplemental

Report at 6.    In support of these contentions, appellees

submitted an affidavit from Jeffrey V. Nase, Director of the

PTO's Office of Petitions.    

the Nase affidavit

with an affidavit from Donald W. Banner, former United States

Commissioner of Patents and Trademarks, which stated that the

sale value of the 708 Patent had been diminished by the

disclaimer, issuance of the erratum notwithstanding.         The

magistrate judge found that the retroactive legal effect of the

erratum was unclear and recommended again in his 1995 Report and

Recommendation that appellees' motions for summary judgment be



                                    8
denied.   App. at 71, 75-79.

          Subsequent to the magistrate judge's 1995 Report, the

PTO issued a certificate of correction to the 708 Patent, which

it published in the Official Gazette on April 18, 1995.      Nase

represented by letter that "[t]he Certificate corrects any

residual error in [the 708 Patent] . . . that may not have been

corrected by the Erratum . . .."      Supplemental Report at 7.   In

light of the issuance of the certificate of correction, the

district court remanded the case to the magistrate judge for

further consideration. The magistrate judge ruled that
when a Certificate of Correction is issued to correct a patent
          without changing the scope of its claim, as here, "the
          correction is given retroactive application in order
          that intervening rights may not be alleged." Eagle
          Iron Works v. McLanahan Corporation, 

,
          1383 (3d Cir. 1970). Since issuance of the Certificate
          has corrected the improper disclaimer of the 708
          Patent, and such correction applies retroactively, no
          intervening rights, nor damages, may be asserted by
          CMU.

magistrate judge concluded that the

certificate of correction foreclosed any possibility that an

alleged infringer of the patents could assert intervening rights

based on the disclaimer.    He therefore recommended in his

Supplemental Report that the district court grant summary

judgment to appellees.     

  The district court granted

the motions for summary judgment and adopted the magistrate

judge's Supplemental Report as the court's opinion.      Order, Civil

Action No. 92-1554 (July 7, 1995).


                                  9
                                II

           CMU brought this action for professional negligence,

claiming that Schwartz and/or C&G is liable to CMU for any

damages that CMU sustains as a result of the errant disclaimer

filed by Schwartz.   Under Pennsylvania law, an action for

professional negligence requires proof of actual loss.    Rizzo v.

Haines, 

, 

, 68 (1989).   "The mere breach of

a professional duty, causing only nominal damages, speculative

harm, or the threat of future harm--not yet realized--does not

suffice to create a cause of action for negligence."     

& Co. v. Anderson, 

, 73-74, 

,

617 (1980)).   Because it concluded that Schwartz's alleged

negligence could not cause CMU actual damages, the district court

granted summary judgment to appellees.

           According to the district court, the certificate of

correction precludes any possibility that alleged infringers of

the 708 and 270 Patents acquired valid intervening rights in the

fifteen months between the publication of the disclaimer and the

publication of the erratum.   If the certificate of correction

precludes any third-party intervening rights in the patents, the

court reasoned, CMU cannot prevail on its negligence claim

because the allegedly negligent disclaimer could cause CMU no

damages.   Thus, the district court's holding is premised on the

conclusion that under any factual scenario, alleged patent

infringers will not have valid defenses to CMU's claims for



                                10
infringement based upon Schwartz's allegedly negligent

disclaimer.

          We are not so confident in the broad ameliorative

powers of the certificate of correction.     The legal effect of the

PTO's certificate of correction on third-party intervening rights

turns on a number of difficult issues, many of which were not

raised in the district court.   These include the question of

whether the certificate of correction changed the scope of the

708 Patent from what it was immediately prior to the issuance of

the certification of correction.     In order to render a definitive

ruling that would bar intervening rights for all potential third

parties, we would have to resolve difficult questions of first

impression involving the proper construction of 35 U.S.C. §§ 254

and 255--the statutes that authorize and define certificates of

correction.   Furthermore, we would have to consider the

implications of Eagle Iron Works v. McLanahan Corp., 

(3d Cir. 1970), concerning the retroactive effect of

certificates of correction, as well as fundamental principles of

patent law.   Thus, although we have no concrete infringement

action before us, we would need to fashion a broad rule that

addresses important issues of first impression regarding

certificates of correction.   We would then have to determine how

the rule would apply to a large, hypothetical class of alleged

patent infringers, who are not currently before this court.

          We decline to decide these difficult questions in a



                                11
factual vacuum.    CMU's patent infringement case is currently

proceeding in the Northern District of California, and that court

will likely decide the legal effect of the certificate of

correction in the context of an actual patent infringement

action.    We cannot confidently predict that the certificate of

correction will shield CMU from an "actual loss" in that case.

Moreover, even if we were to render a definitive holding

regarding the effect of the certificate of correction on all

intervening rights, we could not ensure that a district court

sitting in the Ninth Circuit would find our reasoning persuasive.

            Under these circumstances, we believe it best to hold

this negligence action in abeyance until we can determine whether

CMU suffered an "actual loss" as a result of intervening rights

arising from the disclaimer.    We will, therefore, vacate the

district court's order granting summary judgment to the

defendants and dismissing the complaint against the third party

defendant, and we will remand the case to the district court with

instructions to proceed in a manner not inconsistent with this

opinion.    We recommend that the court wait for an outcome in the

California infringement action and in any other relevant

infringement actions currently pending before it rules on the

professional negligence claim against Schwartz and C&G and the

crossclaim against the United States.    In coming to the above

conclusion, we are certainly cognizant of the fact that appellees

are entitled to a final disposition of the charges against them.



                                 12
 This ruling should not be used to forestall prompt resolution of

the negligence claim once the issue of actual loss is clarified.5




       5
          In this regard, we consider it to be CMU’s obligation to identify any other potential
infringers and to take appropriate action against them in order to preclude further prolongation of
the present litigation.



                                                13