IP Litigators Beware: Bad News May Be Hazardous To Your Law License (Part 1 of 2)

Michael E. McCabe, Jr.IP Litigation Sanctions, Patent Litigation Ethics, USPTO OED0 Comments

Bad NewsMany years ago, before Al Gore invented the internet and teenagers rode their bicycles before dawn, their palms black with ink, to deliver “the paper,” science fiction novelist Douglas Adams observed, “Nothing travels faster than the speed of light with the possible exception of bad news, which obeys its own special laws.”  Truer words today could not be spoken.

Indeed, today the on-line press instantaneously generates and delivers at the speed of light “bad news” for attorneys across all practice areas.  This is no revelation.  We are, according to neuroscientists, “hard wired” to seek out bad news. Which may be why bad news sells papers (or at least it used to).

And which is also why attorneys need not look far for bad news to be delivered, at the speed of light, as soon as they turn on their desktops, laptops, smart phones, PDAs or tablets.  One can almost always find an article in Law360 or similar on-line resources for breaking news discussing the latest motion for, or court decision on, “bad news” such as litigation disqualifications, sanctions, discovery abuses, and all other manner of actual or alleged litigation attorney misconduct.

As bad enough as such bad news decisions are for the practitioners and their clients on the receiving end, many IP attorneys are surprised to learn that it is not just clients and other practitioners who like to read bad news. Like a moth to a flame, bad news inevitably finds its way into the hands of the USPTO’s disciplinary police – the Office of Enrollment and Discipline (OED). Law360

Anyone subject to the USPTO’s disciplinary jurisdiction may be sanctioned for violating the Office’s Rules of Professional Conduct.  The USPTO takes a broad view of who is subject to its ethics rules.  The disciplinary reach of the OED extends beyond registered patent attorneys and patent agents and includes:

All practitioners engaged in practice before the Office; all practitioners administratively suspended; all practitioners registered to practice before the Office in patent cases; all practitioners inactivated; all practitioners authorized under § 11.6(d) to take testimony; and all practitioners transferred to disability inactive status, reprimanded, suspended, or excluded from the practice of law by a duly constituted authority, including by the USPTO Director.

Moreover, voluntarily resigning their USPTO membership will not avoid discipline for conduct committed prior to resignation.  One cannot simply run away from their ethical violations.

The possible sanctions that may be imposed by the USPTO for violation of its ethical rules range from a private reprimand to disbarment. Furthermore, even if counsel does not care whether they maintain their right to practice before the USPTO, any discipline imposed by the Office will likely be reciprocally imposed by every other state and federal bar in which the attorney is a member.  This is known as “reciprocal discipline.”  In other words, a suspension or disbarment from practice before the USPTO likely will result in the imposition of the same discipline by the state and federal bars.  In short order, the USPTO disciplined attorney may find themselves looking for a new line of work.

It make no difference whether the conduct forming the basis of USPTO discipline occurred in matters before the Agency. Personal misconduct is always fair game.  Moreover, attorneys who never step foot in the USPTO may still be sanctioned for misconduct in litigation.

When an IP litigator (or team of litigators) is publicly “called out” in the news media for some type of misconduct, the OED is fast to respond.  The OED may sua sponte initiate an ethics investigation. IP litigators who are placed in the cross hairs of the OED are frequently unaware of the disciplinary risk they face when they are the subject of “bad news.”  That is until they receive a “Personal and Confidential” letter from the Office of Enrollment and Discipline.  Certified mail, return receipt requested.  That is never “good news.”

USPTO Discipline Game Changers

Created in 1985 to administer the USPTO bar examination and investigate complaints of unethical conduct, the OED initially focused its resources on admission issues. The tide began to change after an audit by the Inspector General in the late 1990s criticized the USPTO for understaffing the OED and not promptly investigating ethical misconduct. In the years since the IG’s report, the OED has put more emphasis on the “D” (discipline) side of its office and less on the “E” (enrollment) side.

Even so, it was not until the last few years when the OED became the rocket docket for attorney discipline.  Two relatively recent changes in law have combined to cause the OED to rewrite its playbook.

The first game changer occurred in September 2011 when Congress amended Title 35, Section 32 to include two alternative limitations periods for the OED to file a disciplinary complaint – the earlier of: (1) 10 years after the date on which the misconduct forming the basis for a disciplinary proceeding occurred; or (2) 1 year after the date on which the misconduct forming the basis for the disciplinary proceeding is made known to the OED.

USPTO logoThe one-year “made known” limitations period is the fastest of any state or federal attorney disciplinary agency in the United States; in fact, in many jurisdictions, no statute of limitations exists for attorney discipline (for more information about the OED’s “rocket docket”, click here).

In 2012, the USPTO promulgated 37 C.F.R. § 11.34(d) to implement the one-year “made known” limitations period. Pursuant to this regulation, a complaint for ethical discipline of a USPTO practitioner “shall be filed within one year after the date on which the OED Director receives a grievance forming the basis of the complaint . . . .” The regulation defines a “grievance” as “a written submission from any source received by the OED Director that presents possible grounds for discipline of a specified practitioner.”

The OED Director interprets “written submission from any source” broadly to include news articles and published court decisions passively received by the OED. As long as such written information presents “possible” grounds that a particular practitioner may have violated a USPTO disciplinary rule, the OED has received a “grievance.”  When that occurs, the one-year clock starts to tick.

The second OED game-changer is the Supreme Court’s 2014 decisions in Octane Fitness LLC v. Icon Health & Fitness Inc. and Highmark, Inc. v. Allcare Health Management System Inc., which made it easier for prevailing parties in patent cases to recover attorneys’ fees based on a finding that the case is “exceptional” under 35 U.S.C. § 285.

In Octane Fitness, the Court ruled that an “exceptional” case is “simply one that stands out from others with respect to the substantive strength of a party’s litigating position … or the unreasonable manner in which the case was litigated.” The Court refused to define a “precise rule or formula for making these determinations,” relying instead on lower courts to exercise equitable discretion. The Court identified a nonexclusive list of factors that could support an exceptional case finding, including frivolousness, motivation, objective unreasonableness, and “the need in particular circumstances to advance considerations of compensation and deterrence.”

As a result of these two game-changers, the OED is now, more than ever before, actively on the lookout for ethical misconduct.  Such vigilance is unprecedented among state and federal disciplinary authorities.  Indeed, most state bar counsel are perfectly content to wait passively until someone files a complaint; they are not in the habit of looking for trouble.  Not so at the OED.

Tomorrow:  Bad News at the OED (Part 2).

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