Updates from the USPTO and OED: Patent Issues (Part IV): Referrals and Reciprocal Discipline

Part IV of this series will address the USPTO Rules of Professional Conduct related to referrals and reciprocal discipline.

Parts I, II and III of this series have focused on updates at the USPTO and OED relating to issues that arise when the practitioner is being paid by someone other than the client. As a quick recap, in recent years the USPTO and OED have been stepping up enforcement of the USPTO’s Rules of Professional Conduct, particularly with regard to rules involving interactions between practitioners, clients and third parties. To assist in highlighting these rules I (as well as the OED) have focused on interactions involving Invention Assistance Companies (IAC’s), particularly where the IAC directly pays the practitioner on behalf of an inventor/applicant. If you missed Part I it can be read here, Part II can be read here, and Part II can be read here.

Referral Agreements

As discussed in previous entries of this series, the United States Patent and Trademark Office Rules of Professional Conduct (USPTO RPC) are generally stricter that most states bar ethical rules, as well as the ABA model rules. Generally, attorneys in the U.S. are not permitted to share referral fees with non-attorneys. This rule is clearly part of the USPTO RPC and cannot be subverted. However, U.S. attorneys under certain circumstances, in accordance with at least ABA Rules 1.5 and 1.7, can make reasonable payments for referrals to practicing attorneys when certain ethical and monetary considerations are followed. The USPTO Rules of Professional

Conduct, with regard to referrals to or from practitioners are less clear than the ABA rules, partially because the USPTO has chosen not to define the conditions under which practitioners can have agreements with other practitioners and non-practitioner professionals related to referrals.

Specifically, Rule 702 states:
§ 11.702 Advertising.
(a) Subject to the requirements of §§ 11.701 and 11.703, a practitioner may advertise services through written, recorded or electronic communication, including public media.
(b) A practitioner shall not give anything of value to a person for recommending the practitioner’s services except that a practitioner may:
  (1) Pay the reasonable costs of advertisements or communications permitted by this
      section;
   (2) [Reserved]
   (3) Pay for a law practice in accordance with § 11.117; and
   (4) Refer clients to another practitioner or a non-practitioner professional pursuant to an
       agreement not otherwise prohibited under the USPTO Rules of Professional Conduct
       that provides for the other person to refer clients or customers to the practitioner, if:
          (i) The reciprocal referral agreement is not exclusive, and
          (ii) The client is informed of the existence and nature of the agreement.
(c) Any communication made pursuant to this section shall include the name and office address of at least one practitioner or law firm responsible for its content.

As stated in Rule 702 (b)(4) “A practitioner shall not give anything of value to a person for recommending the practitioner’s services except that a practitioner may…” “Refer clients to another practitioner or a non-practitioner professional pursuant to an agreement not otherwise prohibited under the USPTO Rules of Professional Conduct that provides for the other person to refer clients or customers to the practitioner, if: (i) The reciprocal referral agreement is not exclusive, and (ii) The client is informed of the existence and nature of the agreement”

Therefore, it is clear that practitioners and non-practitioner professionals (non-U.S. registered U.S. attorneys) may have non-exclusive agreements in which they refer work to each other, as long as the agreement is “not otherwise prohibited under the USPTO [PRC]”, and understood and consented to by the client. What is not clear is whether the agreement can provide any monetary compensation between practitioners and non-practitioner professionals. In view of the detailed requirements laid down by the ABA and other state bar ethics rules (at least Rules 1.5 and 1.7), and the lack of such detail in the USPTO RPC, it appears that monetary payments cannot be a part of any referral agreement for USPTO practitioners.

Reciprocal Discipline

The OED requires that any disciplinary actions taken against registered practitioners must be disclosed in every jurisdiction in which the practitioner is licensed. This includes actions taken by the OED or actions taken by your state or federal bar. This rule applies equally to trademark practitioners whether or not they are registered USPTO patent practitioners. Therefore, any

attorney that “dabbles” in trademark practice needs to be cognizant of their ethical and practical duties with regard to reciprocal discipline at the USPTO.
Rule 24 states as follows:

§ 11.24 Reciprocal discipline.

     Notice to the OED Director. Within 30 days of being publicly censured, publicly
     reprimanded, subjected to probation, disbarred or suspended by another jurisdiction, or
     disciplinary disqualified from participating in or appearing before any Federal
     program or agency, a practitioner subject to the disciplinary jurisdiction of
     the Office shall notify the OED Director in writing of the same.
 
Rule 24 read in conjunction with Rule 58 informs practitioners that not only are all USPTO/OED disciplinary actions required to be provided to your state and local bar, but that all state and local disciplinary actions are required to be provided to the USPTO.

Specifically, Rule 58 (c)(2) states:
  
   (c) Thirty-day requirements. Within 30 days after the date of the order of exclusion,              suspension, or transfer to disability inactive status, an excluded
   or suspended practitioner, or practitioner transferred to disability inactive status, shall:
     ……
     (2) Provide written notice of the order of exclusion, suspension, or transfer to disability       inactive status to all State and Federal jurisdictions and administrative agencies to               which the practitioner is admitted to practice;

Further, the OED actively monitors disciplinary actions in other jurisdictions and sanctions can be brought against practitioners if they do not affirmatively bring all disciplinary action to the attention of the OED. As discussed above, this is true for registered patent practitioners and any attorney that practices trademark law before the USPTO.

The Final Order in In Re Djiba (D2022-12) discuses a Texas personal injury attorney that was reprimanded by the OED for failure to self-report a disciplinary action (non-IP related) brought by the Texas bar. Mr. Djiba, while not affirmatively holding himself out as a trademark professional was involved in trademark application filings and therefore was under the jurisdiction of OED. While the OED originally sought stronger sanction (suspension), it ultimately agreed to a reprimand in a settlement agreement. See In Re Djiba D2022-12 (April 7 2022) (viewable at the OED reading room via foidocuments.uspto.gov, search “Djiba”).

The Djiba case is a warning to all practitioners, patent and otherwise, to be aware of the USPTO Rules of Professional Practice and ensure that all disciplinary actions are reported from the OED to their state and federal bars, and to report all state and federal bar disciplinary actions to the USPTO. These rules apply equally to IP and non-IP related conduct. ​

If you have made it through all four parts of this series on USPTO practice and ethical obligations I thank you for your efforts and fortitude. If there is one takeaway you should not forget, it is to know who your client is, and that your ethical duties and obligations are always to your client.

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