District Court Holds USPTO’s Reciprocal Discipline Rule Requires Agency To Impose “Identical” Sanction As State Bar

Michael E. McCabe, Jr.Patent Ethics, Reciprocal Discipline2 Comments

Reciprocal Discipline Mandatory

Reciprocal Discipline Mandatory

USPTO practitioners take heed — if you are publicly disciplined on ethical grounds by a State Bar, the USPTO must impose the identical disciplinary sanction as the State Bar.  Moreover, Section 11.24 provides practitioners notice regarding the procedure to be followed if a practitioner is disciplined on ethical grounds by another jurisdiction.  Those are the key takeaways from a recent case interpreting and applying the USPTO’s rule on reciprocal discipline, 37 C.F.R. Section 11.24.  See Haley v. Lee, No. 1:15-cv-102 (GBL/TRJ), 2015 U.S. Dist. Ct. LEXIS 120324, at *26 (E.D. Va. Sept. 8, 2015).

In Haley, the district court agreed with the USPTO’s arguments and held a patent attorney who resigned from his state bar in order to avoid facing a disciplinary sanction in the state shall be treated by the USPTO as if he had been disbarred.  Furthermore, pursuant to Title 37, Section 11.24, in light of the attorney’s resignation in lieu of discipline, the USPTO is required to impose the “identical” sanction–which in this case is exclusion from practice before the Office.

The Haley case is important because it is believed to be the first time a court has substantively interpreted and applied Title 37, Section 11.24. Judge Lee’s decision is consistent with years of USPTO Director precedent, which has consistently held the USPTO is required to impose identical reciprocal discipline whenever a practitioner is disciplined by a State or Federal Bar.

canstockphoto1176225 (1)In addition, the court’s decision confirms Section 11.24 serves an important “notice” function. Thus, practitioners are entitled to rely upon the plain language of Section 11.24, which both: (i) dictates the disciplinary procedure the USPTO must follow when a practitioner is disciplined by a State or Federal Bar; and (ii) requires the USPTO Director to impose the “identical” disciplinary sanction ordered by the other jurisdiction.  The only exception to the mandatory nature of Section 11.24 is if the practitioner submits, and the USPTO Director finds, clear and convincing evidence that imposition of the identical discipline is improper because the practitioner was denied due process in the other jurisdiction’s disciplinary proceeding, the other proceeding suffered from an infirmity of proof, or identical reciprocal discipline would result in “grave injustice.”

Background and Procedural History

The Background of this case was discussed in detail in our February 22, 2015 post.  The matter arose from a compensation dispute between Haley and his former law partners.

In 1979, Mr. Haley became a member of the State of Washington bar.  From approximately 1990 until 2006, he was a member of the intellectual property law firm formerly known as Graybeal Jackson Haley LLP (“Graybeal”). He also was a member of the USPTO bar.

money fightUpon Mr. Haley’s departure from Graybeal, Mr. Haley and Graybeal disputed how much compensation Mr. Haley was owed under the firm’s partnership agreement. The compensation dispute was submitted to arbitration, and in 2012, the arbitrator issued a final award that fully resolved all claims concerning the compensation dispute. The arbitrator awarded Mr. Haley a sum of money, which the firm paid.  The arbitrator ruled that Mr. Haley would not receive his attorney fees or costs for the arbitration.

Dissatisfied with the arbitrator’s denial of his request for attorney’s fees and arbitration costs, Mr. Haley began sending email messages to members of his former law firm demanding that they pay him for his attorney fees and arbitration costs, with interest. No good faith basis existed for the award of such fees or costs.  Nevertheless, Mr. Haley repeatedly threatened to post publicly a negative review of the Graybeal firm on the internet unless the firm paid him the arbitration attorney fees and costs.  The Graybeal firm dissolved in 2014 for reasons unrelated to this matter.

Washington State Discipline

In August 2013, the Washington State Bar filed an ethics complaint against Mr. Haley.  The state bar complaint alleged Mr. Haley “had no plausible claim of right” to his attorney fees and arbitration costs.  As a result, his threats to post publicly a negative review were “wrongful threats” that constituted the crime of extortion under Washington law. The Washington bar complaint further alleged that “[b)y committing the crime of extortion in the second degree, Respondent violated RPC 8.4(b) and/or RPC 8.4(i).”  Washington Rule of Professional Conduct 8.4(b) prohibits a lawyer from committing a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer.  Rule 8.4(i) prohibits a lawyer from committing any act involving moral turpitude, corruption, or any illegal act which reflects disregard for the rule of law, regardless of whether the lawyer was criminally convicted for such act.

Washington state sealMr. Haley failed to contest the Washington bar complaint and instead, in January 2014, he filed a “Resignation in Lieu of Discipline.”  In re Jeffrey T. Haley, Proceeding No. 1300055 (Wash. State Bar Ass’n Disciplinary Bd.)  Under Washington ethics rules, a lawyer who desires not to contest or defend against allegations of ethical misconduct may resign in lieu of facing further disciplinary proceedings.

Mr. Haley’s resignation from the Washington state bar acknowledged that he was permanently disbarred and that he will not challenge the charges filed in the state bar disciplinary complaint.  Furthermore, the resignation provided that Mr. Haley must resign from “all other jurisdictions” and “all other professional licenses” involving the practice of law and that his resignation could be treated as a disbarment by all other jurisdictions in which he was a member.

History of Reciprocal Discipline Regulation at the USPTO  

Effective September 15, 2008, the USPTO promulgated rules governing the disciplinary process that must be followed whenever a USPTO practitioner has been publicly disciplined by any other jurisdiction. The USPTO rule on reciprocal discipline, 37 C.F.R. § 11.24, was promulgated “to provide procedures for reciprocal discipline of a practitioner” before the USPTO. 73 Fed. Reg. 47650, at 47655 (Final Rule Aug. 14, 2008). The rule applies whenever “a practitioner who is subject to the disciplinary jurisdiction of the Office [] has been publicly censured, publicly reprimanded, subjected to probation, disbarred or suspended in another jurisdiction.”  Id.; see also 72 Fed. Reg. 9196, at 9201 (Supp. Not. of Prop. Rule Making Feb. 28, 2007) (explaining under section 11.24 that, “If an attorney has been disbarred or suspended in another jurisdiction, reciprocal discipline before the Office applies regardless of whether the practitioner remains registered as an attorney or agent.”).

The USPTO Director has explained that, “[w]hen a practitioner subject to the disciplinary jurisdiction of the Office is disciplined by another jurisdiction, the USPTO Director is required to impose reciprocal discipline that is identical to the discipline imposed by the other jurisdiction” pursuant to 37 C.F.R. § 11.24.  In re Conners, No. D2011-55, at 3 (USPTO Dir. May 30, 2012); In re Shippey, No. D2012-02, at 7 (USPTO Dir. June 11, 2012) (“§ 11.24 requires reciprocal discipline when a practitioner before the office is censured, publicly reprimanded, subject to probation, disbarred or suspended by another jurisdiction.”).  The only time the USPTO may not impose the identical discipline is if the attorney or agent, “clearly and convincingly demonstrates, and the USPTO Director finds there is a genuine issue of material fact, as to the standards identified in 37 C.F.R. § 11.24(d).”   In re Shippey, No. D2012-02, at 6.

Consistent with prior USPTO decisions, the USPTO was required to impose the same discipline as that imposed by the Washington bar unless Mr. Haley met his burden of proving he was denied due process, the state proceeding suffered from an infirmity of proof, or an identical sanction would impose a grave injustice.  See In re Conners, No. D2011-55, at 3 (USPTO Dir. May 30, 2012) (ordering reciprocal jurisdiction pursuant to section 11.24 and holding “when a practitioner subject to the disciplinary jurisdiction of the Office is disciplined by another jurisdiction, the USPTO Director is required to impose reciprocal discipline that is identical to the discipline imposed by the other jurisdiction”); In re Portner, No. D2011-44, at 5 (USPTO Dir. June 22, 2012) (ordering reciprocal discipline pursuant to section 11.24 and holding “The Office reiterates that, to prevent the imposition of reciprocal discipline, Respondent is required to demonstrate that he meets one of these [section 11.24(d)] factors – a task that is particularly difficult for Respondent because he stipulated to the facts” in the prior proceeding).

kicked outThe USPTO Orders Haley Excluded

In September 2014, Mr. Haley filed a response to the Notice and Order contesting imposition of reciprocal discipline of exclusion before the USPTO. In his response, Mr. Haley raised four arguments. None of his arguments were accepted, however, by the USPTO Director.  See In re Haley, D2014-27  (USPTO Dir. Dec. 31, 2014).

First, Haley asserted the state disciplinary matter was resolved with a resignation, not a disbarment. The USPTO Director found Mr. Haley submitted a Resignation in Lieu of Discipline and his resignation “could be treated as a disbarment by all other jurisdictions” and he agreed to be bound by the restrictions and duties applicable to a disbarred attorney. The USPTO further found Mr. Haley was registered with the USPTO as a member of the patent bar and thus engages in the practice of patent law before USPTO. Furthermore, a voluntary resignation in lieu of contesting disciplinary charges in other jurisdictions is routinely treated as the equivalent of a disbarment for purposes of reciprocal discipline. See e.g., In re Jaffe, 585 F.3d 118, 124 (2d. Cir. 2009) (“[t]he rules of all of New York’s judicial departments permit reciprocal discipline to be imposed on a New York attorney who resigns from another jurisdiction’s bar while under investigation for possible professional misconduct in that other jurisdiction.”); In re Day, 717 A.2d 883, 886 (D.C. 1998) (attorney’s permanent resignation in the face of a pending disciplinary proceeding was discipline upon which reciprocal discipline may be imposed).

Second, Haley argued his threats of negative publicity for non-payment of arbitration attorney’s fees and costs were not extortionate “wrongful threats” but rather were a lawful exercise of his free speech rights. The USPTO rejected this argument as well, noting Haley had been charged by the Washington bar with committing criminal extortion, he unsuccessfully presented his free speech argument in Washington, and ultimately decided to voluntarily submit his Resignation in Lieu of Discipline “rather than defend against [the disciplinary] allegations.”

Third, he argued there was an “infirmity of proof” because he resigned before the state disciplinary proceeding had gone to an evidentiary hearing and adjudicated findings. The USPTO stated to successfully invoke infirmity of proof as a defense to reciprocal discipline, Haley must demonstrate there was “such an infirmity of proof” establishing the charges against him “as to give rise to the clear conviction” that accepting the state discipline would be “inconsistent with [our] duty.”  This showing, the USPTO Director confirmed, was particularly difficult because Haley voluntarily resigned in the face of pending disciplinary charges, and with the explicit knowledge his resignation would be treated as a disbarment.

Fourth, Haley argued the USPTO’s disciplinary jurisdiction applies only to registered patent attorneys not registered patent agents, and thus imposition of a reciprocal disbarment would be a “grave injustice.”  The USPTO rejected this argument too because the same ethical standards apply to registered patent agents as well as attorneys who practice before the Office.

ED VaHaley Files Petition To Review USPTO’s Final Decision

Unsatisfied with the USPTO’s decision, Haley filed a Petition under the Administrative Procedures Act in the U.S. District Court for the Eastern District of Virginia.  Haley argued: (1) the USPTO was not authorized to promulgate reciprocal disciplinary rules; and (2) the USPTO’s application of the Section 11.24(d) factors (i.e., due process, grave injustice, and infirmity of proof) was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law .

In its opposition to the Petition, the USPTO argued in accordance with Title 37, Section 11.24, “any practitioner disciplined by another jurisdiction will receive reciprocal discipline from the USPTO” unless the practitioner demonstrates clearly and convincingly that one of four factors warrants a different sanction.  See Response of USPTO Director’s Response to Petition for Review Pursuant to 35 U.S.C. Section 32, ECF No. 5 at 2 (Apr. 20, 2015) (emphasis added).

The USPTO also argued, pursuant to Section 11.24(a), a practitioner who has resigned in lieu of a disciplinary proceeding “is deemed to be disbarred.”  Because the Director “shall impose the identical” discipline, the USPTO argued Haley must “receive identical reciprocal discipline — i.e. exclusion from the patent bar.”  Id. at 9.

The USPTO further explained the purpose of reciprocal discipline as follows:

the agency’s reciprocal discipline regulation makes common sense, allowing, when possible, that disciplinary matters be investigated and resolved in the jurisdiction where charges are brought, ensuring comity between jurisdictions, and preserving the agency’s limited resources. . . . This is especially so because the USPTO governs a national bar of patent practitioners who are dispersed around the country . . . and should not be forced to expend its limited resources chasing evidence and witnesses across the country.

Id. at 13.

In opposing Haley’s Petition, the USPTO further argued Section 11.24 serves an important public notice function.  Indeed, Haley had argued in his Petition the imposition of reciprocal discipline would impose a “grave injustice” because the USPTO Director must make a case-specific determination of the appropriate sanction.  Id. at 17.  The USPTO Director countered Haley’s grave injustice argument by relying upon the plain letter of Section 11.24, explaining:

The USPTO’s reciprocal discipline regulation on its face provided clear notice to Petitioner that the agency would treat his resignation as a disbarment for purposes of imposing reciprocal discipline.

Id. at 13-14 (citing 37 C.F.R. Section 11.24(a).

In light of the “clear notice” provided by Section 11.24, the USPTO contended, if Mr. Haley had grounds to challenge the misconduct alleged in the State of Washington proceeding, then “he had the opportunity to fully present those grounds during the Washington disciplinary proceedings” and he “cannot now brush aside the consequences of his choice or re-litigate those charges here.”  Id. at 18.

shoot self in footDistrict Court Holds Reciprocal Discipline Mandatory And Section 11.24 Provides Notice

U.S. District Judge Gerald Bruce Lee of the Eastern District of Virginia agreed with the USPTO’s arguments and ordered Haley disbarred.  Judge Lee held in relevant part that when a USPTO practitioner is disciplined by a State Bar, Title 37, Section 11.24 “requires the USPTO to impose identical punishment” as the other jurisdiction.  See Haley v. Lee, No. 1:15-cv-102 (GBL/TRJ), 2015 U.S. Dist. Ct. LEXIS 120324, at *26 (E.D. Va. Sept. 8, 2015).

The district court further held when a USPTO practitioner agrees to resign from a State Bar in lieu of facing state disciplinary charges, pursuant to Section 11.24, the resignation is treated by the USPTO as if the practitioner had been disbarred by the other jurisdiction.  The district court held this result was dictated by the plain language of Section 11.24, which states “[a] practitioner is deemed to be disbarred [from another jurisdiction] if he or she . . . has resigned [from that other jurisdiction] in lieu of a disciplinary proceeding.”  Id. at *25.

The court further agreed with the Agency’s position of the important notice function served by Section 11.24 for those practitioners who are facing discipline in another jurisdiction and who are also members of the PTO Bar.  The Court noted, per the language of Section 11.24:

The USPTO argues that when Haley voluntarily chose to resign in lieu of discipline he had notice that the USPTO’s reciprocal discipline regulation would treat it as disbarment.

Id. at *29 (emphasis added).

Accordingly, Judge Lee entered an Order in favor of the USPTO and dismissed Haley’s petition.

Conclusion

Simply no good faith basis in law exists to argue the procedure dictated by Section 11.24 is “discretionary” or it does not apply whenever a practitioner is publicly disciplined on ethical grounds by another jurisdiction.

Indeed, the USPTO has uniformly interpreted Section 11.24, based on its plain language, as mandating reciprocal discipline.  The USPTO Director has applied Section 11.24 in 84 disciplinary proceedings in which a practitioner was disciplined by another jurisdiction.  In every one of those 84 cases, the USPTO imposed the “identical” discipline imposed by the other jurisdiction.  Now, a federal court has agreed with the Agency’s prior interpretation of section Section 11.24 as mandating “identical” reciprocal discipline.

Moreover, Title 37, Section 11.24 serves an important notice function.  Notice is essential in discipline because many Patent Bar members also are members of a State or Federal Bar.  A practitioner facing discipline in another jurisdiction need not guess what affect such discipline will have on the practitioner’s right to practice before the USPTO.  Practitioners are entitled to rely upon the plain language of Section 11.24.  Such public notice function is critically important because many practitioners only care about maintaining their right to practice before the USPTO, and some may believe they can simply avoid their disciplinary problems by resigning from their State Bar.  Not true.  That discipline shall follow them to the doors of the USPTO.

Practitioners who are facing a disciplinary proceeding in another jurisdiction must be aware of the legal implications of Section 11.24.  Whatever discipline is imposed by another jurisdiction, the USPTO shall impose the identical punishment pursuant to Title 37, Section 11.24.  USPTO practitioners facing suspension or disbarment in another jurisdiction who wish to maintain their USPTO registration cannot simply “walk away” from their other disciplinary proceeding without receiving identical punishment in the USPTO.

2 Comments on “District Court Holds USPTO’s Reciprocal Discipline Rule Requires Agency To Impose “Identical” Sanction As State Bar”

    1. Many bars treat a resignation while a bar investigation is pending as the equivalent of a disbarment. Not sure if that is the case here in light of the terms of the settlement with the OED.

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