Case details

Bad office procedures caused patent to be abandoned: suit

SUMMARY

$61587000

Amount

Verdict-Plaintiff

Result type

Not present

Ruling
KEYWORDS
emotional distress
FACTS
In August 2006, plaintiff Hooman Asbaghi, the president of HBA Medical Group Inc., had a patent that unintentionally was abandoned. Asbaghi initially hired attorney Neil Nydeggar to help HBA Medical Group obtain patent rights for a dental needle, and the patent was ultimately obtained in March 2003. However, in August 2006, a maintenance fee was due. Nydeggar’s firm subsequently sent out notices about patent maintenance fees to clients, including Asbaghi. The notices were standard forms in which the client needed to check a box if he or she wanted to renew the patent, and subsequently pay a maintenance fee, or abandon it. Asbaghi checked the box to abandon the patent, but included a check in the envelope with “Patent Maintenance” written on the check memo line. As a result, the law firm let the patent go abandoned, and deposited the check into the firm’s account. During the next five years, Asbaghi and his partners flew all around the world to market their product, but once companies found out that the patent was abandoned, they would not call HBA back. Asbaghi and HBA sued Nydeggar and his firm, Nydeggar & Associates. Asbaghi and HBA alleged that the defendants’ actions constituted a breach of fiduciary duty. They also alleged that Nydeggar’s actions constituted professional negligence that Nydeggar & Associates was comparatively liable for Nydeggar’s actions. Plaintiff’s counsel argued that Nydeggar failed to properly handle or monitor HBA’s patent file. Counsel contended that, instead, Nydeggar had his administrator handle most, if not all, of the legal work in the office and that one of the administrator’s tasks was to send out notices about patent maintenance fees to clients. As a result, she allegedly sent one to Asbaghi, asking if he would like to renew the patent or let it go abandoned. Asbaghi claimed that he checked the wrong box on the patent renew notice, but still included a check for the exact amount of the renewal in the envelope, as well as included “Patent Maintenance” on the check memo. However, plaintiff’s counsel argued that the firm’s administrator did not show Nydeggar the letter or the check, and let the patent go abandoned while depositing the check into law firm’s account. Thus, counsel contended that neither Asbaghi nor anyone else at HBA knew that the patent was abandoned in August 2006 until five years later, at which point it was too late to revive the patent. Counsel contended that as a result, Asbaghi and his partners flew around the world during those five years, marketing the product and getting initial due diligence contracts, but that once companies found out about the patent being abandoned, they would stop calling HBA back. The plaintiff’s liability expert on intellectual properties opined that the office procedures at Nydeggar & Associates fell below the standard of care. Specifically, the expert opined that that it is below the standard of care to have a patent file close and let a patent go abandoned without a lawyer ever looking at the file. Defense counsel moved for nonsuit as to Asbaghi, and the motion was granted. In addition, HBA dismissed its breach-of-fiduciary-duty claim with prejudice after the court indicated that it was inclined to grant the nonsuit motion as to it. Thus, the trial continued with only HBA’s claims of professional negligence based on the abandonment of the HBA patent on a dental needle in 2006, and the firm’s comparative fault for that event and the negligent handling of a 2012 petition to revive the patent filed with the United States Patent and Trademark Office. The defense’s liability expert, a patent attorney, opined that Nydeggar and his firm met the standard of care in both establishing and implementing appropriate procedures to notify their clients, including HBA, concerning patent maintenance fees. The expert also opined that Nydeggar and his firm appropriately followed the express written directive of HBA to not pay the maintenance fee on the HBA patent and to, instead, abandon it., Plaintiff’s counsel contended that HBA lost business opportunities to market and license the patent product, which was worth between $90 million to $150 million. The plaintiff’s damages expert on business testified that, based on his experience and knowledge, he believed the product would have been licensed and would have been valued at $90 million to $150 million. Asbaghi’s claim for emotional-distress damages was eliminated by defense counsel’s motion in limine. Thus, the only damages pursued at trial were for lost profits of HBA based on future patent royalties. Defense counsel argued that the HBA dental needle could never be developed into a working prototype necessary for clinical trials and approval by the U.S. Food and Drug Administration, let alone a marketable product, despite the efforts of a major Japanese medical device manufacturer, which spent three years and more than $1 million under a licensing agreement to do so. Counsel also argued that HBA had abandoned both its European patent and Japanese patent application on the dental needle long before discovering that the U.S. patent had lapsed in 2011. Thus, the defense’s damages experts on business and marketing opined that the subject product was not marketable and would not have sold, and that if it did sell, the amounts alleged by the plaintiff’s damages expert would have been inflated.
COURT
Superior Court of San Diego County, San Diego, CA

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