Top Seven Ethics Risks When Patent Practitioners Work With Invention Marketing Companies

Michael E. McCabe, Jr.Client Funds, Communications, Fee-Splitting, Invention Promoters, IP Ethics0 Comments

Working with invention promotion or marketing companies can be hazardous to your law license.  That is the clear message coming from the USPTO’s Office of Enrollment and Discipline, which is in charge of policing and enforcing the Rules of Professional Conduct governing patent attorneys, patent agents, and others who practice before the Office.   The OED has been coming down hard on practitioners who service clients referred by such invention companies.

Invention promoters, invention marketing companies and invention assistance companies are ubiquitous on the Internet.  They go by names such as “Invent Help,” “Invention Home,” “World Patent Marketing,” “Invention Partner” and “The Inventor’s Platform.”

The typical “invention promoter” offers a very compelling solution to thousands of individual or small-time inventors with big-time dreams but who are generally clueless about how to protect, manufacture, market or monetize their idea.  The typical invention promoter offers a combination of legal, technical, business and marketing-related services.

This blog is not suggesting that any particular invention promoter or marketing company is per se fraudulent or a scam or is out to cheat inventors.  That is a matter for others to decide, such as the Federal Trade Commission and the courts.

The point of this post is to again warn USPTO registered patent attorneys and agents about the ethical risks involved when doing business with such promotion entities.  This is not the first time we have spoken on this subject. See “OED Cracks Down on Patent Practitioners Working With Invention Promoters” posted here.  And it likely will not be the last.

Because issues are continuing in this field, the message is worth repeating.

Top Seven Ethics Risks When Dealing With Invention Promoters

Many ethics rules are implicated by the invention promoter working relationship.  Here are the top seven that seem to come up in every ethics investigation in which I have been involved:

First, there is the duty to communicate.  The agent or attorney owes an ethical duty to their client (the inventor, not the promoter) to ensure that both the practitioner and the client understand who is their lawyer, what is the scope of the representation, and whether the service that the lawyer has been asked to provide is the service that the client wants or needs.  Many inventors have not the slightest idea of the differences between a provisional application or a non-provisional application, or between a design patent and a utility patent.  So just because an inventor has contracted with an invention promoter for a particular type of legal service (say, the preparation of a provisional patent application), it is incumbent upon the attorney or agent to communicate directly with the inventor at the outset.

Second, clients are not commodities.  We are not dealing with pork bellies.  Each client inventor needs personal attention.  The attorneys or agents who are given bulk numbers of cases to handle from invention promoters are ethically required to confirm with the inventor in each case the various forms of intellectual property that are potentially available.  The agents and attorneys need to understand the client’s objectives and make sure that what the attorney or agent has been asked to do (by the promoter on behalf of the inventor) is in fact what the inventor really wants and that the inventor has been counseled on his or her options.

Third, the scope of the legal representation must be confirmed with the inventor and should be in writing signed by the inventor before taking on the representation.  Remember, these inventors are usually novices on legal matters.  The engagement agreement should memorialize the results of the earlier client communications.  The engagement agreement also should confirm in writing the lawyer or agent’s fee.  If the practitioner is being paid by a promoter for the service, then that fact must be disclosed in the engagement agreement, including the amount the practitioner received from the promoter.  The inventor should be counseled on the advantages and disadvantages of having a third-party pay for their legal services.  And the engagement agreement should make clear what is the scope of the engagement.

In this regard, most inventors contact with promoters for some limited type of legal service, such as a patentability search and/or the filing of a provisional or non-provisional patent application.  But, of course, that is not going to get the inventor a patent.  There will definitely be other fees along the way, and in all likelihood office actions will be issued.  Who is going to do that work?  How much is that going to cost?  Are post-filing services included within the scope of the representation?  Are you contracting with the client up through issuance or final rejection of a patent?  The temporal and subject matter scope of the engagement must be clearly spelled out so there can be no ambiguity.

One of the worst things that can happen for the attorney or agent is for the client to be under the perception that when they contacted with the invention promoter, they “paid for a patent.”  It is incumbent upon the practitioner to disabuse the inventor-client of any such preconceived notion.  And the inventors must be told about who is going to handle any one of the myriad numbers of issues that may arise post-filing.  Most inventors will believe that it is the attorney or agent who filed the application who is responsible.  That can be a major problem when something as basic as the scope of the representation is unclear, an office action issues, it is not reported to the client, and the case goes abandoned.

Fourth, the practitioner must recognize that they cannot split legal fees with a non-practitioner.  Thus, if a portion of the fee that the inventor paid the promoter is for legal services, 100% of that portion must go to the practitioner.  The promoter cannot skim legal fees.  And, of course, the only way the practitioner is going to know if the promoter is engaged in skimming is by asking the right questions of both the promoter and the client.

Fifth, patent agents and attorneys must handle funds they receive for client services ethically.  If the funds are received from an invention promoter as a third-party payor, or directly from the inventor, then the funds cannot be deposited in the practitioner’s operating account until the fees have been earned.  If fees or expenses are paid in advance, the practitioner must deposit those funds in a trust account until they are earned (normally, when the contracted-for services have been completed).  This, too, should be spelled out in the client engagement agreement.

Sixth, no quid pro quo.  Some invention promoters will want the lawyer or agent to pay them a “referral fee” for any inventor-clients.  Giving anything of value to an invention promoter for a referral is unethical.

Seventh, beware of aiding the unauthorized practice of law.  The regulators at the OED are very concerned about non-practitioners offering legal services.  Many invention promoters offer legal services, such as searches and patent applications.  Offering such services may constitute the unauthorized practice of law–which is a crime in many states. The USPTO lacks disciplinary jurisdiction over the non-practitioners who typically own or operate invention promotion firms.  They can, however, exercise their disciplinary authority over practitioners under the theory that the practitioner is aiding a non-practitioner in the unauthorized practice of law.

Is The Risk Worth The Reward? 

The USPTO’s Office of Enrollment and Discipline (“OED”) is hammering patent practitioners who do business with invention promotion companies.   The grinding usually starts with an ethics investigation pursuant to 37 CFR Section 11.22 and can end with a substantial disciplinary complaint. Practitioners who innocently started working with invention promoters are finding themselves being subject to severe disciplinary consequences, including multi-year suspensions and disbarments, arising from their work with invention promoters.

The OED is trying very hard to clean up the invention promotion industry by exercising its disciplinary authority over patent attorneys and agents who do business with or through those service providers. Unfortunately, many patent agents and attorneys fail to realize that when doing business with invention promoters, they are in a very dangerous place.

It is not impossible for a practitioner ethically to provide legal services for clients who contract with invention promoters.  That said, one has to ask if the risk is worth the reward.  Indeed, the landscape is a minefield littered with ethics issues just waiting to explode.  For the unsuspecting patent attorney or agent, servicing these invention promotion referral clients can result in unexpected–and very painful–outcomes.  Anyone looking to work for, or through, an invention marketing company is advised to proceed with extreme caution

Your law license may very well depend on it.

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