Narrow Scope of “Patent Agent Privilege” Creates Ethical Traps for the Unwary

Michael E. McCabe, Jr.IP Ethics, Office of Enrollment and Discipline, Patent Agent, Patent Ethics, Unauthorized Practice of Law0 Comments

canstockphoto13549883The Federal Circuit’s 2-1 decision yesterday in In re Queen’s University at Kingston resolved a split in the district courts over whether a “patent agent”-client privilege exists independent from the attorney-client privilege. The majority held it does. While the court’s holding provides clarification in this case of first impression, patent agents, their law firm employers, and their clients should not read too much into the Queen’s University decision. The court’s holding is narrow. Moreover, failure to heed the limits of the court’s decision could create a number of ethical risks for patent agents and their practitioner supervisors.

The Federal Circuit in Queen’s University held that:

To the extent Congress has authorized non-attorney patent agents to engage in the practice of law before the Patent Office, reason and experience compel us to recognize a patent-agent privilege that is coextensive with the rights granted to patent agents by Congress. A client has a reasonable expectation that all communications relating to “obtaining legal advice on patentability and legal services in preparing a patent application” will be kept privileged. . . . Whether those communications are directed to an attorney or his or her legally equivalent patent agent should be of no moment. Indeed, if we hold otherwise, we frustrate the very purpose of Congress’s design: namely, to afford clients the freedom to choose between an attorney and a patent agent for representation before the Patent Office.

Several important observations are noted regarding the Queen’s University decision.

First, the scope of the new patent agent-client privilege, like the attorney-client privilege, is narrow.  As one court observed, the attorney-client privilege is “[n]arrowly defined, riddled with exceptions, and subject to continuing criticism.” United States v. Schwimmer, 892 F.3d 237, 243 (2d Cir. 1989). For a communication between a patent agent and a client to be privileged, it must meet the requirements needed for establishing the attorney-client privilege (and even then, it is more limited).

The requirements articulated by the district court’s decision in United States v. United Shoe Machinery Corp., 89 F. Supp. 357, 358–59 (D. Mass. 1950) are often used in patent cases as the yardstick against which courts measure attorney-client privilege claims. Per the United Shoe standard, the attorney-client privilege applies only if:

(1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication is made (a) is a member of the bar of a court, or his subordinate and (b) in connection with the communication is acting as a lawyer; (3) the communication related to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) or legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.

Federal Circuit sealThe Federal Circuit’s decision in Queen’s University tweaks subpart (2) of the United Shoe test by expanding “member of the bar of a court” to “member of the bar of” the USPTO.  If a patent agent is going to be able to establish the privileged nature of a communication, the agent (just like an attorney) will still need to show that all of the requirements for establishing the privilege are met.  Thus, for example, the “communication” at issue (whether it is conveyed orally or in a document) must be one that was made by a client to the agent for the purpose of obtaining legal advice or services. In addition, confidentiality is another critical threshold for establishing an attorney-client privilege, and it is well established that “[t]he attorney-client privilege evaporates upon any voluntary disclosure of confidential information to a third party.” Carter v. Gibbs, 909 F.2d 1450, 1451 (Fed. Cir. 1990). Furthermore, if a privilege exists, it can be waived; waiver of the attorney-client privilege will apply “to all other communications relating to the same subject matter.” Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1349 (Fed. Cir. 2005). These limitations would apply with equal force to any putative claim of a patent agent-client privilege.

slowA second significant observation about the Queen’s University decision is that the case does not expand the scope of what legal services a registered patent agent is authorized to provide.  In the seminal case of Sperry v. Florida, 373 U.S. 379 (1963), the Supreme Court summarized the functions of a registered patent agent as follows:

Such conduct inevitably requires the practitioner to consider and advise his clients as to the patentability of their inventions under the statutory criteria as well as to consider the advisability of relying upon alternative forms of protection which may be available under state law. It also involves participation in his drafting of the specification and claims of the patent application which this Court long ago noted constitute(s) one of the most difficult legal instruments to draw with accuracy. And upon rejection of the application, the practitioner may also assist in the preparation of amendments which frequently requires written argument to establish the patentability of the claimed invention under the applicable rules of law and in light of the prior art.

The scope of what a patent agent may do based on their USPTO registration is strictly limited to patent matters before the USPTO.  Indeed, as the Court explained in Sperry, a patent agent’s registration before the USPTO “does not authorize the general practice of patent law, but sanctions only the performance of those services which are reasonably necessary and incident to the preparation and prosecution of patent applications.”  Sperry, 373 U.S. at 386.  The USPTO’s regulations, consistent with the reasoning in Sperry, provide that registered patent agents may prepare and prosecute patent applications, consult with or give advice to clients in contemplation of filing a patent application, draft the specification or claims of a patent application, draft an amendment or reply to an Office Action, and draft a communication for a proceeding before the Patent Trial and Appeal Board. See 37 C.F.R. § 11.5(b)(1).

Patent agents and their supervisors must continue to be mindful of the limited scope of the agent’s authority.  As one court explained, “[n]o case provides blanket attorney-client privilege between a USPTO recognized non-lawyer patent agent and his client over all intellectual property matters.” John Labatt Ltd. v. Molson Breweries, 898 F. Supp. 471, 475 (E.D. Mich. 1995).   District courts that recognized a U.S. patent agent privilege even before yesterday’s decision from the Federal Circuit have limited the scope of that privilege to encompass only those services that such agents are legally licensed to perform, that is, representation in preparing and prosecuting patent applications, as well as other patent matters before the USPTO.  See id.

When a U.S. patent agent ventures out and provides services beyond their limited right, their “status” as a patent agent provides no special protection to assert the attorney-client privilege in their own right. As one district court explained:

A patent agent’s claim to attorney-client privilege has its foundations in the USPTO’s limited authorization to non-lawyer patent agents to practice law. Essentially, the authorization provides the individual with the status of an attorney, but only for a limited purpose, i.e., the purpose for which the USPTO registered the non-attorney as an agent to practice before it. Thus, by definition, communications between a patent agent and a client beyond that limited purpose are not privileged.

898 F. Supp. at 475 (internal citations omitted).

The express limitation on patent agents is consistent with the general rule that the attorney-client privilege does not apply to communications with an attorney who is acting in a non-legal capacity. See, e.g., In re Lindsey, 158 F.3d 1263, 1270 (D.C. Cir. 1998). For example, communications between a client and a U.S. patent agent concerning the licensing or enforcement of an issued patent ordinarily would not be covered under the patent agent privilege unless the patent agent is acting under the supervision or control of an attorney. This is because the USPTO bar membership does not extend to litigation or licensing.

Notably, the Federal Circuit’s decision in Queen’s University reiterated the narrow subject matter scope of the patent agent-privilege, explaining that:

Communications that are not reasonably necessary and incident to the prosecution of patents before the Patent Office fall outside the scope of the patent-agent privilege. For instance, communications with a patent agent who is offering an opinion on the validity of another party’s patent in contemplation of litigation or for the sale or purchase of a patent, or on infringement, are not “reasonably necessary and incident to the preparation and prosecution of patent applications or other proceeding before the Office.

stop signThe Federal Circuit’s footnote 8 expanded on the significance of an agent acting beyond the scope of their license.  The court warned: “Not only would such communications fall outside the scope of the patent-agent privilege, they likely would constitute the unauthorized practice of law.”

The Federal Circuit’s footnote should not be taken lightly.  Not only is engaging in the unauthorized practice of law (UPL) unethical, in some states it is also illegal. Thus, while this comment was relegated to a footnote, registered patent agents (and their employers) need to be mindful of the limitations on their authority.

Another important ethics takeaway from the Queen’s University decision is that the creation of the agent-client privilege does not “trump” or create an exception to the agent’s duty of candor.  The USPTO’s ethics rules, as well as Rule 1.56, impose a duty of candor on practitioners.  Violation of the duty of candor to the USPTO can be grounds for discipline for violation of, among other ethics rules, 37 C.F.R. § 11.303 (candor to the tribunal).  Indeed, the dissent noted that, “[a]s patent agents and clients are subject to a duty of candor before the USPTO, the Majority’s agent-client privilege can be effective only to encourage the disclosure of information that the client does not believe is material to whether the invention is patentable.”

manage and superviseFinally, the Queen’s University decision also does not limit the exposure to ethical supervisory liability where a patent agent is employed by a law firm or as in-house counsel. In such settings, managers are required to put in place systems to ensure that their employees, including patent agents, abide by the rules of ethics.  Moreover, in certain circumstances a supervising manager may face ethical charges for failing to supervise when attorneys and patent agents whom they manage violate the USPTO’s rules of professional conduct.

In sum, while Queen’s University may create a new privilege, that is all it has done.  The rules of ethics still apply to a patent practitioner’s conduct.  Patent agents and their supervisors must remain vigilant in ensuring that their conduct comports with ethical norms, and the Federal Circuit’s recognition of an agent-privilege does not relax any of the USPTO’s Rules of Professional Conduct.

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