In re Michael I. Kroll, Proc. No. D2014-14 (USPTO Dir. Mar. 4, 2016)

Michael E. McCabe, Jr.Misrepresentation, Neglect, USPTO

Disposition: Initial decision recommending suspending a patent practitioner from practice before the USPTO for two years was affirmed on appeal in a final decision issued by the USPTO Director. The USPTO Director denied the practitioner’s subsequent request for reconsideration of the Agency’s final decision.  Final decision here, and denial of request for reconsideration here.

Summary: The USPTO Director issued an Order affirming an administrative law judge’s initial decision to suspended a patent attorney for two (2) years for violating three (3) USPTO ethics rules arising out of the attorney’s neglect of a patent application, which caused the applicant to lose all rights to obtain patent protection for an invention, and out of the attorney’s filing a patent application that the attorney knew was not patentable as a matter of law, in violation of the attorney’s certification to the Office that he had conducted a reasonable pre-filing investigation. The Director found that the attorney’s conduct violated 37 C.F.R. §§ 10.23(a) (proscribing disreputable or gross misconduct); 10.23(a) and (b) via 37 C.F.R. § 10.23(c)(15) (proscribing signing a paper filed with the USPTO in violation of the provisions of 37 C.F.R. § 10.18); and § 10.77(c) (proscribing neglecting a legal matter entrusted to the practitioner). The USPTO issued a subsequent Order denying the attorney’s request for reconsideration.

Related Decisions:  Reconsideration denied, In re Michael I. Kroll, Proc. No. D2014-14 (USPTO Dir. May 18, 2016)

Facts: This case involved a patent practitioner, Michael Kroll, a New York licensed attorney who has been registered to practice before the USPTO in patent matters since 1973. In addition to providing legal services, Mr. Kroll also provided a service in which, for a fee, he offered clients’ inventions for sale through various websites. Mr. Kroll’s standard practice was not to offer a client’s invention for sale until after the client’s patent application has been filed.

In 2004, a client engaged Mr. Kroll to pursue a patent for a traffic control device. On or about October 15, 2005, the client provided Mr. Kroll with all documents necessary to file a patent application for the traffic control device. Mr. Kroll prepared a patent application in October 2005 but inexplicably failed to file it at that time. Mr. Kroll did, however, publish the invention on his website on December 3, 2005. The web site erroneously noted “U.S. Patent: Pending” for the traffic control device.

After posting the traffic control device to his web site, Mr. Kroll, or one of his employees, placed the file in a file cabinet reserved for filed patent applications. Mr. Kroll did not file a patent application for the traffic control device within twelve (12) months of his posting the invention for sale on his web site.

By chance, in early August of 2007, Mr. Kroll discovered the traffic control device application file and determined that it had never been filed with USPTO. He realized the application should have been filed in October 2005. Mr. Kroll filed the traffic control device application on August 13, 2007. Prior to filing the application, Mr. Kroll failed to check his web site to determine if the invention had already been posted online. Mr. Kroll also failed to inform his client that the patent application was not filed until 2007.

On December 28, 2009, the USPTO issued an Office Action related to the application. Mr. Kroll informed his client of the Office Action on February 15, 2010, and requested a $2,375 payment to respond to the Office Action. That payment included a $750 fee for a “personal interview” and a $1,625 fee for a “written amendment.” The client was advised by Mr. Kroll that a failure to file a response to the Office Action would result in an abandonment of the application.

The client never responded to Mr. Kroll’s February 15, 2010 letter. Mr. Kroll made no further attempt to communicate with the inventor about the December 28, 2009 Office Action. On July 7, 2010, the USPTO sent Mr. Kroll a Notice of Abandonment related to the application. Mr. Kroll did not inform his client that the application had been abandoned, and he did not subsequently communicate with his client.

After learning of the OED Director’s investigation into his handling of the client’s patent application, Mr. Kroll refunded all of the client’s fees associated with the invention.

The USPTO Director’s decision noted that a registered practitioner prosecuting a client’s application before the Office has a duty of candor and good faith in dealing with the Office. 37 C.F.R. § 1.56(a) (2006). That duty includes a duty to disclose to the Office all information known to that individual to be material to patentability. Id. Furthermore, an attorney publishing a client’s invention on the internet and offering it for sale more than twelve (12) months before the client’s application is filed with the USPTO, as was the case here, is information material to patentability. See 35 U.S.C. § 102(b). By presenting (whether by signing, filing, submitting, or later advocating) a paper to the Office, a registered practitioner certifies to the Office that (a) all statements made therein of the practitioner’s own knowledge are true and all statements made therein on information and belief are believed to be true; and (b) to the best of the practitioner’s knowledge, information, and belief formed after an inquiry reasonable under the circumstances (i) the paper is not being presented for any improper purpose and (ii) the claims and other legal contentions therein are warranted by existing law or by a non-frivolous argument for the extension, modification, or reversal of existing law or the establishment of new law.

Notably, Mr. Kroll had several prior disciplinary infractions. On June 27, 2002, the New York Grievance Committee issued him a letter of caution for neglect of a patent matter for a client. He was reminded of his obligation not to neglect patent applications in a public censure by the New York Supreme Court in 2006. On February 24, 2004, the USPTO suspended Mr. Kroll from practice before the Agency for a period of three (3) years, which was stayed pending compliance with the terms of a settlement agreement between Mr. Kroll and the USPTO. The bases for the suspension included charging and collecting an excessive fee, giving false or misleading information to the USPTO, and participating in the creation of false evidence in violation of USPTO’s disciplinary rules. On May 25, 2010, as a result of a settlement agreement with the OED Director, Mr. Kroll was suspended for a period of sixty (60) months from the practice of patent, trademark, and non-patent law before the USPTO for engaging in conduct that violated 37 C.F.R. § 10.23(b)(6) by engaging in conduct that adversely reflected on his fitness to practice before the Office; 37 C.F.R. § 10.23(c)(8) by failing to inform a client of correspondence from the Office having a significant effect on a matter pending before the Office; and 37 C.F.R. § 10.77(c) by neglecting matters entrusted to him. Mr. Kroll’s misconduct involved neglecting a client’s patent application and allowing it to become abandoned and allowing other clients’ U.S. patent applications to become abandoned as a matter of law because Mr. Kroll failed to inform the USPTO that he had filed foreign patent applications on the same invention claimed in the U.S. Patent applications. Again, the entirety of the suspension was stayed. Furthermore, on June 22, 2011, Mr. Kroll received a warning letter from the USPTO’s OED in response to a grievance filed by another client; the letter reminded Mr. Kroll of his obligations under 37 C.F.R. § 10.77(c), proscribing neglecting a legal matter entrusted to the practitioner.

The ALJ rejected Mr. Kroll’s argument that this misconduct involved a singular inadvertent act. The USPTO Director agreed with the ALJ. The Director found that the misfiling of the patent application was only the beginning of Mr. Kroll’s missteps, which included that he forgot about the application for nearly two years and, thus, failed to timely file the application within 12 months of publication of the invention on his own web site. The Director explained that, “[a]n attorney has a duty to maintain awareness of his cases as they wind their way through the patent process” and concluded that “the nature of [Appellant’s] filing system -as he describes it – ensures that forgetfulness – and thus neglect – is an ever-present threat in his legal practice.” In other words, the absence of an electronic docket or “tickler” system was fatal. See In re DeMarco, 733 F.3d 457, 463 (2d. Cir. 2013) (noting that although counsel of record need not constantly monitor the Court’s docket, counsel cannot allow lengthy periods of time to pass without review); U.S. ex rel. McAllan v. City of N.Y., 248 F.3d 48, 53 (2d. Cir. 2001) (“[P]arties have an obligation to monitor the docket sheet to inform themselves of the entry of orders they wish to appeal.”); Davila-Alvarez v. Escuela de Medicina Universidad Central de Caribe, 257 F.3d 58, 65 (1st Cir. 2001) (“[A]n attorney has an ongoing responsibility to inquire into the status of a case.”).

The ALJ stated the neglect was avoidable because Mr. Kroll’s filing and docketing processes were nothing more than a set of filing cabinets and a manual listing on a computer that required active checks to ensure compliance with deadlines, something he admitted he failed to do here. Further, the USPTO Director found that Mr. Kroll’s backup system was not working on multiple occasions. In sum, the USPTO Director concluded that Mr. Kroll did not take sufficient steps to protect against his own errors or those of his staff and “expos[ed] all of his clients to the fate that befell this client.”

The Director further found that Mr. Kroll violated the USPTO’s certification requirement, which provides that: “By presenting (whether by signing, filing, submitting, or later advocating) a paper to the USPTO, a registered practitioner’s signature certifies to the USPTO that (a) all statements, made therein of the practitioner’s own knowledge are true and all statements made therein on information and belief are believed to be true; and (b) to the best of the practitioner’s knowledge, information, and belief formed after an inquiry reasonable under the circumstances (i) the paper is not being presented for any improper purpose and (ii) the claims and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law. See 37 C.F.R. § 10.18(b)(l) and (2) (now 37 C.F.R. § 11.18).”   The Director stated that Mr. Kroll knew, in 2007, that he should have filed the application in 2005 and that when he filed in 2007, he made no attempt to determine whether the invention was still patentable. The Director further found that even though a large part of his business is marketing inventions on the internet, he did not even visit his own web site to check if he had already published the traffic control device for sale and “he simply assumed that the traffic control device remained viable and filed the application.” The ALJ concluded that “an unchallenged assumption is not an inquiry” and rejected Mr. Kroll’s contention that he undertook a reasonable inquiry prior to filing the application.

Mr. Kroll argued that he did not realize the on sale bar applied to his client’s application. The Director rejected this argument, finding that he took no steps whatsoever to verify any of the significant information on the application, including checking his own web site to see if the client’s invention had been published there and was affected by the on sale bar. “In other words, any lack of specific knowledge as to the patentability . . . . was solely the result of his own failure to act. This failure to conduct even the most minimal inquiry as to the traffic control device’s patentability is misconduct.”

After considering all of the evidence, the USPTO Director determined the appropriate discipline was a two-year suspension.

Request for Reconsideration

Mr. Kroll filed a request for reconsideration. The USPTO Director reiterated the higher standard needed to obtain this extraordinary relief, as follows:

It is long-settled that Requests for Reconsideration are not a vehicle to state a party’s disagreement with a final judgment. See Hutchinson v. Staton, 994 F.2d 1076, 1082 (4th Cir. 1993) (“mere disagreement does not support a Rule 59(e) motion”). A request for reconsideration should not be used to “rehash arguments previously presented” or to submit evidence which should have been previously submitted. See Wadley v. Park at Landmark, LP, No. 1:06CV777, 2007 WL 1071960, at *2 (E.D. Va. 2007) (citing Hutchinson, 994 F.2d at 1081- 82); Above the Belt, Inc. v. Mel Bohannan Roofing, Inc., 99, F.R.D. 99, 101 (E.D. Va. 1983) (holding improper a motion for reconsideration “to ask the Court to rethink what the Court had since May 3, 2013.”).

The Director found that Mr. Kroll presented no new evidence and was simply rehashing arguments already made and rejected. See Durkin v. Taylor, 444 F. Supp. 879, 889 (E.D. Va. 1977) (stating that Rule 59(e) is not intended to give “an unhappy litigant one additional chance to sway the judge”). Reconsideration “would be appropriate where, for example, the Court has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension.” The Director found no “extraordinary” circumstances warranting reconsideration.