Is The USPTO’s One-Year Statute Of Limitations For Filing An Ethics Complaint Triggered By The OED’s Failure To Investigate Or Willful Blindness?

Michael E. McCabe, Jr.Patent Attorney Disciplinary Matters, Statute of limitations, USPTO OED0 Comments

clockOne of the lesser publicized changes to patent law made by the America Invents Act was the amendment to Title 35, Section 32, which included two separate limitations periods for USPTO disciplinary complaints. As amended, Section 32 states a USPTO disciplinary proceeding must be commenced:

not later than the earlier of either the date that is 10 years after the date on which the misconduct forming the basis for the proceeding occurred, or 1 year after the date on which the misconduct forming the basis for the proceeding is made known to an officer or employee of the Office as prescribed in the regulations established under section 2(b)(2)(D).

35 U.S.C. § 32 (eff. Sept. 16, 2011).

At first glance, the amendment to Section 32 appears to be more beneficial to the USPTO than the practitioners whose conduct it regulates. Prior to the amendment to Section 32, the OED was required to file a disciplinary complaint within five years from the date the misconduct occurred.  By its terms, Section 32 now gives the USPTO twice as much time to investigate, prepare, and file a disciplinary complaint from the date when the misconduct occurred.

In practice, however, the benefit of the 10-year provision is in most cases illusory and as been rendered practically nugatory by the 1-year “made known” limitations period. Indeed, since the amendment of Section 32, it appears that most OED complaints for ethical discipline are governed by the 1-year limitations period and not the 10-year period.

The 1-year limitations period is the fastest of any attorney disciplinary statute of limitations in the United States.  As a result of this new limitations period, the OED has had to ramp up its forces by hiring more staff attorneys who are charged with conducting, among other things, disciplinary investigations.  The increase in OED staff is the natural result of the Office’s attempt to meet competing demands of, on the one hand, conducting timely investigations that do not become time-barred yet, on the other hand, conduct comprehensive and thorough investigations.    The reason why the 1-year limitations period applies in most cases is based on the breadth of the 2012 regulations promulgated by the USPTO to implement the AIA’s statute of limitations.

37 C.F.R. § 11.34(d) states, “[a] complaint shall be filed within one year after the date on which the OED Director receives a grievance forming the basis of the complaint . . . .” A “grievance,” in turn, is defined as “a written submission from any source received by the OED Director that presents possible grounds for discipline of a specified practitioner.” 37 C.F.R. § 11.1 (emphasis added).

Thus, in accordance with the USPTO’s 2012 regulations, the one-year limitations period is triggered when: (1) the OED Director; (2) receives a written submission; (3) from any source; (4) that presents “possible” grounds for discipline; (5) of a specified practitioner.

Two of these factors are mostly to blame for the broadened applicability of the 1-year limitations provision. First, the regulation’s use of the word “possible,” as opposed to “probable” or “likely,” means that a relatively low threshold of information is needed to start the running of the one-year limitations clock.  Indeed, the ordinary meaning of “possible” is something that “may or may not occur” or that “may or may not be true.” The realm of “possibility” is quite broad.

Second, the OED also interprets the “written submission from any source” provision quite broadly. The “written submission” need not come from disgruntled clients or opposing counsel or judges.  In fact, the OED considers “a written submission from any source” to include court decisions and even news articles. Common sources of “grievance” considered by the OED include IP 360 and Legal Ethics 360, which regularly publish articles about intellectual property lawyers who are sanctioned, arrested, sued, disqualified, or otherwise committed any number of personal or professional acts of misconduct that “possibly” run afoul of one or more USPTO disciplinary rules.

To date, no published decision from the USPTO or any court has interpreted either the 2011 amended statute of limitations or the 2012 regulations implementing the statute of limitations. This absence of judicial or administrative gloss has left a number of important questions unanswered.

For one, no case or USPTO decision has addressed whether the adequacy of the written submission is determined based on an objective or subjective standard. Thus, if the written submission presents facts that a reasonably objective person would understand as presenting possible grounds for discipline, can the OED avoid triggering of the one-year limitations period by taking the position it did not read “all” of the facts included in the written submission or that it “focused” its inquiry on certain facts while ignoring others?

Yet another unanswered question is whether “made known” in 35 U.S.C. § 32 means actual knowledge only, or whether it also includes knowledge the OED reasonably could have discovered from information it already received based upon the exercise of ordinary diligence. If, for example, the OED is made aware that an attorney has been fired and sued from her law firm for matters arising from her work as an attorney with the law firm, but fails to review a copy of the complaint which would have revealed ethical misconduct, can the OED take the position it was unaware of the misconduct because it did not bother to review the complaint? Such a position would appear to be contrary to many statutes of limitations, which require a plaintiff to investigate whenever he is on notice of possible wrongdoing or harm.

Support for a diligence requirement is found in Merck & Co. v Reynolds, 559 U.S. 633, 645 (2010).  In that case, the Supreme Court interpreted 28 U.S.C. § 1658(b)(1), which requires filing a complaint within the earlier of “two years after the plaintiffs ‘discover[ed] the facts constituting the violation’” or “five years after violation” to mean a claim accrues when the litigant first knows, or with due diligence should know, facts that will form the basis for an action.

The legislative history of Section 32 also supports an interpretation of “made known” as requiring the exercise of diligence. Congress stated its intent in enacting Section 32 was for the USPTO act “promptly” in instituting disciplinary proceedings when misconduct “reasonably could have been discovered.” Congressional Record S1372-1373 (Mar. 8, 2011) (emphasis added).

Requiring the OED to exercise diligence is also consistent with the OED’s purpose. The OED is no ordinary plaintiff. It is an investigatory agency of the United States Government whose main reason for being is to investigate whether USPTO practitioners have violated the USPTO’s ethics rules. It seems odd and unfair that an “ordinary plaintiff” would be required to make a reasonably diligent inquiry but an investigatory agency such as the OED, with all of its investigatory resources, would not.

blindfoldYet another unanswered question is whether the willful blindness doctrine applies to the OED in starting the clock for bringing a disciplinary complaint. As the Supreme Court explained, willful blindness is the legal equivalent of actual knowledge. Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011). Also known as the “ostrich defense,” a willfully blind party “is one who takes deliberate actions to avoid confirming a high probability of wrongdoing and who can almost be said to have actually known the critical facts.” 131 S. Ct. at 2070-71. As the Court in Global-Tech made clear, the willful blindness doctrine applies in civil as well as criminal cases.

A number of cases have observed that willful blindness applies in the context of statutes of limitations. See Edes v. Verizon Commc’ns., 417 F.3d 133, 142 (1st Cir. 2005) (holding “we do not think Congress intended the actual knowledge requirement” of statute of limitations to excuse willful blindness by a plaintiff.”); Reeves v. Airlite Plastics, Co., No. 8:04CV56, 2005 U.S. Dist. LEXIS 23628, at *15-17 (D. Neb. Sept. 26, 2005) (holding plaintiff may not deliberately disregard facts that would put him on notice that a violation of the statute has occurred). Prohibiting a plaintiff from benefitting from his own “willful blindness” at another party’s expense furthers the public policies underlying statutes of limitations. See also United States v. Tusaneza, 116 F. App’x 305, 306 (2d Cir. 2004) (“[W]illful blindness” may be inferred from the presence of a pattern of “red flags” putting defendant on notice of  the illegal source of the funds.”), cert. denied, 546 U.S. 874 (2005).

If the OED is presented with evidence of “red flags” putting it on notice of a high probability that ethical misconduct occurred, then should it be able to benefit from failing to investigate and essentially sticking its head in the sand? If the willful blindness doctrine applies, then the answer should be “no.”

In defending a USPTO disciplinary action, counsel should consider whether evidence exists that the OED actually knew, should have known through diligence, or was willfully blind to, the facts alleged in its disciplinary complaint. Counsel must be mindful, however, that the pre-hearing schedule in USPTO disciplinary proceedings is much shorter than in ordinary civil cases. Furthermore, the scope of discovery is quite limited and is not allowed as a matter of right. Therefore, if the issue of limitations appears viable in a USPTO disciplinary case, defense counsel must act quickly both in pleading this affirmative defense and in requesting discovery reasonably necessary to support the defense and prepare for the administrative hearing.

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