In re David J. Mahalek, Proc. No. D2016-31 (USPTO Dir. Jan. 27, 2017)

Michael E. McCabe, Jr.Misrepresentation, USPTO

Disposition:  Eighteen (18)-month suspension of patent attorney, pursuant to settlement agreement, arising from misconduct during course of litigation in which two patents were found to have been procured by inequitable conduct.  Final decision here.

Summary:  A patent attorney was charged with ethical misconduct arising from his representation in two patent infringement litigations. The attorney was counsel with other attorneys who filed lawsuits, Intellect Wireless, Inc. v. HI’C Corp., Case No. 1 :09-cv-2945 and Intellect Wireless, Inc. v. Sharp Corp., Case No. 1:10-cv-6763, alleging that HTC Corp. and Sharp Corp. had infringed their client’s patents.  The patents were issued as a result of the client submitting a declaration to the USPTO that falsely stated that the client had actually reduced the invention to practice prior to the date of a prior art reference cited in a rejection. While the practitioner did not represent the client with regard to the declaration submitted to the USPTO, during the litigation of these cases, the client informed the practitioner that he did not actually build the claimed invention disclosed in the patents as he had stated in the declaration to the USPTO.  The practitioner took the position in pretrial pleadings that the declaration was not false, and served documents which stated that there was a working prototype. Although his office hired independent counsel, they failed to comply with court orders to produce documents. As a result of his participation in these cases, the district court judges held that the practitioner’s actions unreasonably and vexatiously multiplied the proceedings and ordered that he, and the other attorneys involved, be liable under 28 U.S.C. § 1927 for defendants’ attorneys’ fees.

Related to USPTO Practice?  No

Facts:   David Mahalek was a junior litigation attorney at the law firm of Niro, Haller & Niro.  Mr. Mahalek and other attorneys at the Niro firm represented an individual inventor, Daniel Henderson, in district court proceedings for infringement of Mr. Henderson’s patents.

During prosecution, the inventor and his counsel filed a Rule 131 declaration to antedate references cited by the USPTO.  The declaration originally stated that the inventor had actually reduced his invention to practice.  The inventor thereafter told his patent attorney that he had not reduced the invention to practice.  His patent attorney amended the declaration to omit the reference to actual reduction to practice but there was still language in the amended declaration that referenced actual reduction to practice.  A family of patents eventually issued.

In 2009, Mr. Henderson filed suit for patent infringement against HTC Corporation, HTC America, Inc., and AT&T Mobility LLC (collectively, “HTC”).  The complaint alleged that the inventor’s “prototype” for his invention, a wireless device, was part of the Smithsonian Institution’s permanent collection. Paragraph 12 of the complaint alleged that HTC infringed Henderson’s patents by “providing wireless portable communication devices that receive and display caller ID information, [and] non-facsimile pictures.”

On November 6, 2009, Mr. Henderson sent Mr. Mahalek and other Niro attorneys an email in which he admitted that the device he constructed of the inventions “did not operate” because it “did not actually receive caller id” or pictures as claimed in the patents.

On February 19, 2010, attorneys from the Niro law firm advised HTC that “there was not an actual reduction to practice of the inventions of the” asserted patents “either before or after the constructive reduction to practice.”  HTC subsequently filed a counterclaim alleging inequitable conduct in connection with Mr. Henderson’s Rule 131 declaration.

On February 25, 2011, Mr. Mahalek and the other Niro attorneys served HTC with interrogatory responses, wherein they asserted that there may been an actual reduction to practice earlier than the date of constructive reduction to practice as Mr. Henderson created a working prototype with functional electronics which he showed at the Winter Consumer Electronics Show in January 1994.  Also on February 25, 2011, Mr. Mahalek sent an email to Mr. Henderson, explaining that, with respect to the claimed invention, “[ w]e’re not taking the position that it wasn’t an actual reduction to practice. We’re trying to be more circumspect than that and convey an impression that we’re unsure.”

Throughout the litigation in various papers, Mr. Mahalek and other Niro attorneys argued at various stages that the inventor’s statement that he had never actually reduced to practice his invention was not false or misleading.

In September 2012, the district court, after conducting a bench trial solely on inequitable conduct, found that the asserted patents were unenforceable due to inequitable conduct based on false statements in the Rule 131 declarations.  The court further found that the written record before the USPTO was never corrected during prosecution.   In 2013, the Federal Circuit affirmed.  Intellect Wireless v. HTC Corp., 732 F.3d 1339 (Fed. Cir. 2013).

In 2015, the district court issued an Opinion and Order awarding HTC’s attorneys’ fees and granting an adverse inference that Mr. Mahalek and other attorneys at the Niro firm knew that the inventor had not actually reduced his invention to practice but continued to advance the position in pleadings that the declarations were not false.

In 2015, the district court in the Sharp litigation, which also had been filed around the same time as the HTC litigation, awarded sanctions against Mr. Mahalek arising from the same conduct that arose during the HTC litigation.

In short, the courts found that Mr. Mahalek and other Niro attorneys: (1) knew or should have known that the inventor’s statements in the Rule 131 declaration were false; (2) failed to withdraw their infringement claims; (3) Filed an amended complaint when they reiterated the allegation about the Smithsonian prototype, when they knew or should have know that Mr. Henderson had not actually reduced his invention to practice; and (4) failed to comply with court orders to produce documents.  The courts thus found that Mr. Mahalek’s actions unreasonably and vexatiously multiplied the proceedings and ordered that he, and other involved attorneys, be liable for the defendants’ attorneys fees pursuant to 28 U.S.C. Section 1927.

The USPTO settlement agreement found that Mr. Mahalek’s conduct in the HTC and Sharp litigations violated multiple USPTO ethics rules, including false representations to a tribunal, violation of his ethical duties to others, engaging in fraudulent or dishonest conduct, and engaging in conduct prejudicial to the administration of justice.

Notably, the USPTO found that Mr. Mahalek was the most junior attorney on the litigation team and that he relied on the knowledge and expertise of senior partners in lawyers.  Nevertheless, Mr. Mahalek, as part of the settlement agreement, acknowledged the seriousness of the false or misleading statements made to the USPTO.