Updates from the USPTO and OED: Patent Issues (Part I)

In recent years the United States Patent and Trademark Office (“USPTO”) through their ethics enforcement arm, the Office of Enrollment and Discipline ("OED") has been stepping up enforcement of the USPTO’s Rules of Professional Conduct. As many patent and trademark practitioners are aware the USPTO has their own Rules of Professional Conduct codified at 37 C.F.R. §11 et al. While the USPTO Rules of Professional Conduct (“USPTO RPC”) generally track the American Bar Association’s (“ABA”) Model Rules, the USPTO RPC are notoriously stricter and often more diligently enforced. Specific rules that have received heighten attention in recent years, at least on the patent side of the OED enforcement docket, pertain to: fee-splitting; establishment of practice with non-practitioners; conflict of interest; and client communications.

One major reason for the focus on these rules has been the increased prevalence of Invention Assistance Companies (“IAC’s”). The history of Invention Assistance Companies (and Invention Promotion Companies) is replete with scams, false promises, stolen money and unhappy customers. To be fair, not all IAC’s are created equal, and some have relatively good reputations. However, in recent years there has been a substantial increase in the public's willingness to engage in all manner of commerce, including obtaining legal or quasi-legal assistance, over the internet. This has resulted in a substantial increase in the size and number of Invention Assistance Companies as well as the associated complaints at the Federal Trade Commission (“FTC”), local regulatory authorities, and/or the USPTO.

The USPTO sees it as their duty to protect the patent system and the inventing public, be they trillion-dollar companies or a first-time solo inventor. Unfortunately, the authority of the USPTO to regulate and/or sanction individuals is limited to registered U.S. patent attorneys, patent agents and U.S. counsel that file trademark applications. In an attempt to ensure that customers of Invention Assistance Companies are being treated fairly and obtaining proper assistance with patent filings the USPTO (often through the OED) have sought to enforce a few key sections of the USPTO RPC, particularly rules associated with third parties (i.e., involvement of third parties outside of the practitioner-client relationship).
Invention Assistance Companies such as Invent Help, World Patent Marketing, Invention Home, Invention Partner and The Inventor’s Platform (some of which no longer exist) generally rely on non-attorney models that offers a combination of assistance with patent filing, developing prototypes, marketing, and general business start-up. Prior legislation aimed at “Invention Promotion Companies” temporarily slowed some of the activities of these types of organization in the 1990’s, but the limited scope of the legislation ultimately led to easy work arounds, and a revival of Invention Assistance Companies.

While there are many questions about what if any of the services provided by Invention Assistance Companies fall under the category of the practice of law (e.g., providing patent landscapes, opinions on prior art searches, and/or patentability opinions) patent filing for another in the U.S. must be done by a registered patent attorney or patent agent. Therefore, under the current iteration of the IAC model when they seek to assist their clients with actual patent filing the IAC must engage licensed patent attorneys or patent agents. The engagement can be accomplished either via referral or direct contract with the practitioner on behalf of the inventor/application. It can be done lawfully and in compliance with the USPTO Rules of Professional, if it is done correctly, however, this requires a detailed understanding of the RPC, which most practitioners and very few IAC’s possess.

The following discussion will analyze a few of the key rules and how patent practitioners can run afoul of the Rules of Professional Conduct when engaging with a third party on behalf of the client, be it an Invention Assistance Company or Foreign Counsel (more on this in Part II).

Professional Independence of a Practitioner

37 C.F.R. § 11.504(a) states “A practitioner or law firm shall not share legal fees with a non-practitioner.”

37 C.F.R. § 11.504(b) states “A practitioner shall not form a partnership with a non-practitioner if any of the activities of the partnership consist of the practice of law.”

These rule limits the ability of Invention Assistance Companies from partnering with patent practitioners and making the filing of patent applications a part of the IAC’s direct service. The focus behind these rules is to maintain the professional independence of the practitioner. A concern (one of many) is that the non-practitioner will be directing the actions of the practitioner based on what is in the commercial interest of the business, and not what is best for the client.

As a side-note, patent attorneys and patent agents can partner together under the USPTO RPC because patent agents are considered practitioners under the USPTO rules. 37 C.F.R. § 11.1 defines practitioner as “[a]n attorney or agent registered to practice before the Office in patent matters.” Further, patent agents can operate businesses offering legal service solely before the USPTO even if they are not licensed to practice law in their state of residence. Sperry v. Florida, 373 U.S. 379 (1963) exempts patent agents from being charged with unlawfully engaging in the practice of law as long as the services offered by the patent agent are limited to work done before the USPTO.

Instances of registered patent attorneys and patent agents flouting the non-practitioner partnership/fee splitting rules (often without knowledge and/or understanding of the rules) have become increasingly common in the attempts to create internet-based businesses that provide patent filing services. While the intention may be to reduce cost and increase convenience for patent filers, a noble goal, the hard fact is that filing patent applications is the practice of law and in at least 48/50 states (Arizona and Utah being the current exceptions) partnership/ownership of businesses conducting the practice of law, is limited to attorneys, law firms and patent agents.

Specifically, in my home state, the New York State Bar citing Model ABA Rule 5.4 has stated that non-attorneys cannot invest in New York law firms. See December 7, 2021 Opinion 1234 from Committee on Professional Ethics, New York State Bar Association.

In Re Mikhailova D2017-18, an OED decision discussed below, provides an explanation of how the independent judgement of a practitioner can be usurped when RPC 504 is violated.
This case involves the Invention Assistance Company World Patent Marketing (“WPM”). Initially WPM hired Dr. Mikhailova as a patent agent to provide patent filings for WPM customers. Later in their relationship, WPM referred clients to Dr. Mikhailova. Throughout the relationship, WPM instructed Dr. Mikhailova on what types of patents to file for each client, and further not to communicate directly with the clients. The arrangement was in violations of over a dozen USPTO RPC. In particular, Dr. Mikhailova was in violation of RPC 504(a) and/or (b) because she was either sharing legal fees with WPM a non-practitioner and/or had effectively formed a de facto partnership with WPM. Additionally, Dr. Mikhailova was assisting WPM in committing the unauthorized practice of law under 37 C.F.R. § 11.505), she had violated her duty of communication to the client under at least 37 C.F.R. § 11.104(a) and (b), and was not in compliance with several sections of 37 C.F.R. § 11.108 related to conflict of interest.

Dr. Mikhailova’s case provides a pertinent example of what can happen when the practitioner’s professional judgement is delegated to a third-party non-practitioner. WPM was instructing Dr. Mikhailova to file design patent applications for many of their customers. For WPM the quickest and easiest patent filing is for a design patent. Design patent applications require less work by the patent practitioner, can generally be obtained quicker and faster, and allow WPM to say they filed for a “patent” (and potentially charge the same fees for a design patent as for a utility patent, which often costs 3-10 times as much). However, a design patent may or may not be in the best interests of the client. The patent practitioners ethical and legal duty is to the client, and to fulfill its duty to the client the practitioner must communicate and discuss what is best and most appropriate for the client based on his/her specific circumstances. What is best for the commercial interest of the third party are irrelevant and should not be a factor in the decision of what, if anything, should be filed. The business relationship Dr. Mikhailova had entered into with WPM led to a situation where she allowed herself to take directions from a third party without first considering the needs of her actual client, the inventor/applicant. While the above factual situation runs afoul of multiple Rules of Professional Conduct (which will be discussed in later posts on this topic), the partnering and/or fee-splitting with the non-practitioner, was the first step down the rabbit hole of ethical violations.
The Dr. Mikhailova Order can be viewed at the OED Reading Room at:

https://foiadocuments.uspto.gov/oed/
(enter “Mikhailova” or “D2017-18” in the search bar).

Part II and III of this series will address additional aspects of USPTO Rules of Professional Conduct related to communication, conflict of interest, fee splitting, referrals, and reciprocal discipline.

If you have any questions about patents, trademarks, and practitioner professional responsibility, please contact me at [email protected] or visit my website at www.chiaraiplaw.com