Survey of Discipline of Practitioners by the USPTO in 2018

Practitioners before the United States Patent & Trademark Office (USPTO) must comply with the USPTO Rules of Professional Conduct, 37 C.F.R. §§ 11.10, et seq. Within the USPTO, the Office of Enrollment and Discipline is responsible for registering attorneys and agents to practice before the USPTO and investigates allegations of misconduct by practitioners.

In connection with a presentation I gave at the 2018 Annual Meeting of the National Association of Patent Practitioners, I had the opportunity to analyze discipline imposed with respect to violations of the USPTO Rules of Professional Conduct.  Specifically, between January 1 and June 7, 2018, the USPTO issued seventeen final orders (including two orders on reconsideration), imposing discipline related to ethics violations. While not necessarily a sample from which any statistically accurate disciplinary trends can be made, the matters should be seen as representative of discipline facing practitioners before the USPTO.

Reciprocal Discipline

Of the seventeen matters, eleven cases involved the imposition of "reciprocal discipline," which provides that a lawyer disciplined for misconduct in one state is subject to reciprocal discipline in every other jurisdiction in which he or she is admitted to practice.  See D2017-28 (March 5, 2018); D2017-29 (Feb. 9, 2018); D2017-30 (Jan. 25, 2018); D2017-32 (Jan. 5, 2018); D2018-01 (April 12, 2018); D2018-03 (March 6, 2018); D2018-09 (Feb. 23, 2018); D2018-11 (May 2, 2018); D2018-13 (March 23, 2018); D2018-16 (March 23, 2018); and D2018-19 (April 13, 2018).  Consistently, a large percentage of USPTO disciplinary matters concern the imposition of reciprocal discipline.

Substantive Discipline

Of the six non-reciprocal matters originating with the Office of Enrollment and Discipline, a summary of the discipline follows:

1. Inn re Louis Piccone (D2015-06) (Feb. 9, 2018) (appeal and request for reconsideration from final order of director denied) (three-year suspension imposed based upon a finding of a "pattern of misconduct" for engaging in the unauthorized practice of law, failing to comply with court orders and pro hac vice admission standards, neglecting client matters and making false statements to the court).

2. In re John Faro (D2015-27) (Feb. 9, 2018) (appeal and request for reconsideration from final order of director denied) (eight month suspension ordered on finding that practitioner failed to properly communicate with client, neglected a patent application and improperly refused to return the file to the client).

3. In re Robert Montgomery (D2018-02) (January 10, 2018) (settlement approved providing for 48 month suspension with possible reinstatement after 24 months) (providing a cautionary tale in the pitfalls associated with using a closely aligned non-practitioner company to retain and refer inventor clients to practitioner and share fees). The final order summarized the facts leading to the misconduct findings (and I apologize in advance for the length of the excerpt):

Respondent is the President of Montgomery Patent & Design, L.P. (hereinafter "MP&D"). Between 2005 and April 2017, Respondent's father, who is a non-practitioner, owned a percentage of MP&D and held himself out as MP&D's Administrative Director. The Montgomery family businesses include Montgomery IP Associates, LLC ("MIPA"), MP&D, Invest SAI Network, LLC ("SAI"), and Advertising-Generation LLC ("FSBI"). MIPA/SAI/FSBI and MP&D worked from a shared office environment. At all times relevant, Respondent held an ownership interest in MIP A/SAI/FSBI. MIPA/SAI/FSBI and MP&D maintained a business practice and pattern in selling patent law related services to inventors.

MIP A/SAI/FSBI entered into business transactions with inventors to sell invention services and patent law and law related services using template documents, namely: a Research Engagement Letter and a Professional Services Contract (the "PSC"). Only MP&D employed registered practitioners. MIP A/SAI/FSBI referred inventors only to MP&D, and 90 % of MP &D's patent legal business came from inventors referred to it from MIP A/SAI/FSBI. Inventors became clients of Respondent and MP&D after the inventors' invention made it through an initial suitability review by MIPA/SAI/FSBI. Approximately, twenty percent (20%) of inventions that were submitted for suitability review were recommended by MIP A/SAI/FSBI for a Research Report, and eight-percent (80%) were rejected for suitability for a Research Report. If recommended for a Research Report, the inventor was contacted by a MIP A/SAI/FSBI non-practitioner commissioned salesperson and invited to fully submit their invention for a Research Report via the Research Engagement Letter. In the Research Engagement Letter, the MIP A/SAI/FSBI non-practitioner commissioned salesperson recommended that the inventor purchase certain engineering, marketing, and legal research services. The legal research included a "patent search" and an "opinion of patentability." The inventor contracted with MIP A/SAI/FSBI for the Research Report and paid the fees to MIP A/SAI/FSBI. In tum, MIP A/SAI/FSBI paid MP&D for patent law and patent law-related services.

MP&D prepared 100% of the patent searches and opinions of patentability for MIP A/SAI/FSBI's Research Reports. The opinions of patentability prepared by Respondent and MP&D were template documents with recommendations as to whether the inventor should pursue provisional, design, or utility applications for his or her invention. Contrary to how "opinions of patentability" were described on MIP A/SAI/FSBI's website, the opinions did not describe the likelihood that an inventor would receive a patent of "useful scope," as described on MIP A/SAI/FSBI websites, if they pursued provisional, design, or utility patent protection; instead, they merely stated what type of application was suitable for an invention. Respondent understood the general lack of sophistication of his clients, but neither Respondent nor MP&D ever explained to inventors the likelihood that the inventor would receive a patent of "useful scope," as described on MIP A/SAI/FSBI websites, if they pursued provisional, design, or utility patent protection.

Once the patentability search and the "opinion of patentability" were completed, MP&D forwarded them to MIP A/SAI/FSBI for inclusion in a Research Report without a prior discussion of the search or opinion with the inventor. The Research Report was then forwarded to the inventor by a MIP A/SAI/FSBI non-practitioner commissioned salesperson who contacted the inventor, in writing and on the telephone, to discuss recommended licensing and patent packages being sold by MIP A/SAI/FSBI.

After the inventor discussed the options for patent protection (e.g., provisional, design, or utility patent applications) with a MIP A/SAI/FSBI non-practitioner commissioned salesperson, the inventor decided what type of patent protection package he or she wanted to purchase and signed the PSC without consulting with a registered practitioner, prior to signing. The inventor contracted with MIP A/SAI/FSBI for the invention services and patent law and patent law-related services, and paid MIP A/SAI/FSBI directly. The PSC set out the invention services and patent law services (e.g., provisional, design, or utility patent applications) sold to the inventor by MP A/SAI/FSBI. The PSC stated it would coordinate and direct MP&D to perform patent law and patent law-related services (i.e., consulting with the inventor; producing a specification and drawings; and preparing and filing a patent application). The PSC purported to identify, define, and/or limit the scope of the legal services to be provided by MP&D, all before an inventor consulted directly with a registered practitioner. The PSC did not state that MP&D might refer patent law work to outside registered practitioners who were not in the MP&D firm. Depending on the services purchased, the PSC would contain a provision where the inventor agreed to pay a royalty fee to FSBI from any commercialization earnings resulting from any efforts by FSBI.

On, or around, the same day MIP A forwarded the PSC to the inventor MIP A also forwarded an MP &D Patent Engagement Letter to the inventor. The client, without consulting with a registered practitioner, was asked to sign the Patent Engagement Letter. The Patent Engagement Letter did not state that MP&D might refer the work to other registered practitioners who are not in the MP &D firm, did not discuss conflicts of interest that stem from Respondent's ownership interests in MIP A/SAI/FSBI, did not obtain informed consent to represent the inventors notwithstanding the actual or potential conflicts of interest, did not discuss the scope of legal services provided, and did not discuss what portion of the fees paid to MIP A/SAI/FSBI was allocated to legal services. The patent law services provided under the PSC changed in the 2014-2015 time frame. Previously, all patent prosecution services were covered up to the issuance of a Final Office Action. With the change, the cost of a design application included one non-final Office action response and the cost of a utility application included no prosecution at all. There was no discussion between the inventor and a registered practitioner before the inventor decided on the scope of legal services required.

Respondent's ownership of, financial interests in, and familial ties to MIP A/SAI/FSBI were not disclosed to the clients. Respondent and MP&D did not disclose that MP&D received 90% of its income from business referred from MIP A/SAI/FSBI. Respondent and MP&D referred some of the legal work required by some of the clients referred to MP&D by MIP A/SAI/FSBI to registered practitioners who were not in the MP&D firm without the consent of the inventors to share confidential client information. Respondent and MP&D paid the outside registered practitioners for the legal work provided, thereby, splitting fees with the outside registered practitioners without the informed consent of the inventors to share the fee. MIP A/SAI/FSBI did not deposit unearned legal fees paid in advance by the clients for either the Research Engagement Letter or the PSC into a client trust account. Respondent did not have or use a client trust account and did not deposit unearned legal fees paid in advance for his and MP&D's patent application preparation, filing, and prosecution services to be rendered into a trust account.

4. In re Darcell Walker (D2018-04) (March 23, 2018) (suspended for four years by agreement) The final order provided a summary of the misconduct:

Mr. Walker filed multiple patent applications but did not pay filing fees to the USPTO, even though his clients had paid those fees to him in advance. When he received communications from the Office, Mr. Walker ignored them. As a result, the applications went abandoned. Mr. Walker did not tell his clients about the communications from the Office, that their applications had gone abandoned, or discuss with them how to respond to these communications, and then he lied to his clients about the status of their applications. In some cases, he filed Petitions to Revive, without the clients' knowledge or consent, but failed to pay the filing fees with the Petitions and, as a result, those Petitions to Revive were also dismissed. When his clients learned of the fate of their applications and contacted him, Mr. Walker agreed to refund their money, but did not do so. Additionally, Mr. Walker did not put his clients' prepaid fees and expenses into a trust account and did not keep the financial records required by the ethics rules. Furthermore, Mr. Walker was suspended for over a year by the Texas State Bar yet continued to practice trademark law before the Office during that period, which constituted the unauthorized practice of law.

5. In re Mark Levenda (D2018-21) (Feb. 27, 2018) (practitioner resigned and excluded in connection with patent referrals received from non-practitioner third-party and not properly handled).

6. In re Raymond Ho, (D2018-23 & D2018-32) (practitioner resigned and excluded per his federal convictions for money laundering).

I offer the following "take aways" from the disciplinary decisions:

First, it is "professional misconduct" for a practitioner to be publicly disciplined by on ethical or professional misconduct grounds by another state.  37 U.S.C. § 11.804(h).

Second, practitioners are subject to discipline by the USPTO irrespective of whether the conduct was related to practice before the USPTO.

Third, practitioners can be subject to discipline for conduct that is not related directly to the practice of law.   For example, it is professional misconduct to commit a criminal act that reflects adversely on the practitioner's honesty or fitness ability per 37 U.S.C. § 11.804.  See, e.g., In re Raymond Ho, (D2018-23 & D2018-32) (practitioner resigned and excluded per federal convictions for money laundering).  See also In re George Reardon (D2012-19) (patent agent resigned and excluded for misappropriation of non-profit organization's funds).

Fourth, practitioners must recognize that the ethics rules warrant consideration as to the business practices employed in providing representation to clients and in practicing before the USPTO.  See, e,g., In re Mikhailova (D2017-18) (June 16, 2017) (suspending agent for 20 months based upon misconduct related to provision of patent services for clients obtained from entity engaged in deceptive practices aimed at inventors); In re Robert Montgomery (D2018-02) (January 10, 2018).

For example, in In re Mark Levenda (D2018-21) (Feb. 27, 2018), the registered patent agent agreed to receive referrals from a third-party non-practitioner and to file patent applications on behalf of the third-party's customers.  The agent provided an engagement letter to a customer noting (1) the lack of any affiliation between his firm and the third-party firm, and (2) the amount he would charge to the third-party for the filing of the customer's patent application.  The agent filed the application for the customer and invoiced the third-party for the work.  The agent was unaware that an office action had been issued until the customer brought it to his attention.  He advised her that the cost to file a response was between $1,000 and $3,000 and that he could prepare a response for her.  The customer had paid the third-party $16,995 and was under the impression that any additional costs would be covered.

The final order reflects the Office of Enrollment and Discipline's position that the agent's conduct violated the USPTO Rules of Professional Conduct as follows:

• 37 U.S.C. § 1 l.102(a) (requiring that a practitioner abide by a client's decisions regarding objectives of representation and consult with the client as to the means to achieve representation)
• 37 U.S.C. § 11.104 (requiring that a practitioner shall reasonably consult with the client about the means by which the client's objectives are to be accomplished, keep the client reasonably informed about the status of the matter, promptly comply with reasonable requests for information from the client, consult with the client about any relevant limitation on the practitioner's conduct and explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation)
• 37 U.S.C. § 11.105(b) (requiring a practitioner to consult with client regarding the scope of the representation and the basis or rate of the fee and expenses for which the client will be responsible)
• 37 U.S.C. § 11.107(a) (setting forth a practitioner's duty regarding conflicts of interest where the representation may be limited by practitioner's responsibilities to another client, a third person or by a personal interest of the practitioner)
• 37 U.S.C. § 11.108(f) (setting forth that a practitioner shall not accept compensation from a third party without informed consent from the client)
• 37 U.S.C. § 11.116 (setting forth a practitioner's duties in terminating a representation of a client)
• 37 U.S.C. § 11 .504(a) (setting forth that a practitioner shall not share legal fees
• with a non-practitioner)
• 37 U.S.C. § 11 .504(c) (setting forth that a practitioner shall not permit a person who recommends, employs, or pays the practitioner to regulate the practitioner's professional judgment in rendering legal services)
• 37 U.S.C. § 11.804(d) (proscribing conduct that is prejudicial to the administration of justice)
• 37 U.S.C. § 11.804(i) (proscribing conduct that adversely reflects on the practitioner's fitness to practice before the Office)

Jeff Geiger assists attorneys, practitioners and law firms with ethics and professional responsibility matters.  If you have any questions about this post or other issues, please contact Jeff at (804) 783-7248 or jgeiger@sandsanderson.com