May 10, 2004
The Honorable Jon Dudas
Acting Under Secretary of Commerce for Intellectual Property
&
Acting Director of the United States Patent and Trademark
Office
2121 Crystal Drive
Crystal Park II, Suite 906
Arlington, VA 22202
Notice of Proposed Rulemaking
Changes to Representation of Others Before
the United States Patent and Trademark Office
68 Federal Register 69442 (December 12, 2003)
By U.S. Mail and by email to ethicsrules.comments@uspto.gov
Dear Mr. Under Secretary,
In response to the Office’s call for comments, published
at 69 Fed. Reg. 4270 (Jan. 29, 2004), please find my comments
attached. Some of these are likely to be included in the submission
by the American Intellectual Property Law Association. If
I can provide further assistance, please let me know.
Very Truly Yours,
David C. Hricik
1. The phrase “immediate or prospective” which
appears throughout the rules is vague. Does “immediate”
mean “pending”? When is a representation “prospective.”
It should be defined. The word “prospective” and
“prospective business” appears in various rules.
E.g., 11.402(a).
2. The comment on page 69467 stating that the payment of
maintenance fees is a very useful comment, since it is often
overlooked by practitioners, but it creates the wrong presumption.
It states that the receipt, without more, of a periodic notice
of maintenance fees “may well” create a subjective
belief that the firm sending the notice represents the client.
The presumption should be stated otherwise: absent other facts,
the mere receipt by a client of a fee maintenance reminder
does not create a reasonable basis for believing there is
an attorney client relationship.
3. The comments and rules make exception for adverse use
of “generally known” information. E.g., page 69481.
One ambiguity in the current rules is whether public information
(e.g., patents) can ever be “confidential” and,
if so, if it is always deemed “generally known.”
The rules should provide that, at minimum, U.S. patents and
published US applications can never be “confidential.”
4. The comments go a long way toward eliminating the existing
ambiguity about whether confidential information must be turned
over under 1.56. See, e.g., 11.106(c). However, one key uncertainty
facing practitioners is whether they must disclose confidential
information received by one client that is material to another
client’s application, as recognized by the split in
Molins v. Textron. See David Hricik, Aerial Boundaries: The
Duty of Candor as a Limitation on the Duty of Patent Practitioners
to Advocate for Maximum Patent Coverage, 44 So. Tex. L. Rev.
205 (Winter 2002). Neither the comments nor the rules do anything
to resolve that issue, and leave it vague. Similarly, Section
11.106(g) permits disclosure of confidences when 1.56 requires
but only after the representation has ended. Is it the Office’s
position that a lawyer who receives confidences from one client
that are material to another client’s application may
not disclose that information until the representation has
ended? That would appear to be the impact of 11.106(g) along
with the comments. Is that correct?
5. In 11.101, the rules lack scienter, and thus are grossly
overly broad. Specifically, Section 11.101(c)(2), (3) &
(4) are violated – and thus is “misconduct”
under 11.804(a). We believe the word “knowingly”
should be included after the word “practitioner”
in the first line of each of subsections (2), (3) and (4).
6. 11.102(g) does not require disclosure of conduct which
constitutes inequitable conduct, since it is not “fraud.”
Should 11.102(g) be re-worded to state: “A practitioner
receiving information clearly establishing that the client
has, in the course of the representation, perpetrated a fraud
upon a person or tribunal, or violated section 1.56 of this
Chapter, in connection with practice before the Office...”
7. Section 11.103(a) requires practitioners exercise “zeal.”
The word “zeal” was deliberately omitted from
the Model Rules and seems inconsistent with the predominantly
ex parte nature of Office practice, and further inconsistent
with the fact that all matters before the Office are affected
with the public interest. Requiring “zeal” in
the text of the rule seems odd when the Model Rules do not
contain that requirement.
8. 11.105(b) goes too far in requiring the lawyer to distinguish
between the rates for preparing the application and prosecuting
applications. If the requirement is left in, would it comply
with this provision for a practitioner to simply state: “My
hourly rate for preparation and prosecution of patent applications
$200.00 per hour.”
9. 11.105(c) permits contingency fees in prosecuting patents.
If this is the intent of the Office, then the Office should
remind lawyers that entering into a contingency fee arrangement
with a patent prosecution client would create some of the
same conflicts of interest that arise when a lawyer takes
an interest in an application. It may be that 11.08(j)(3)
could be amended to explain that it covers contingency fees.
Another way to address this might be to amend 11.08(a) to
provide: “A practitioner shall not enter into a business
transaction with a client having immediate or prospective
business before the Office, or knowingly acquire an ownership,
possessory, security, contingent, or other pecuniary interest
adverse to a client having immediate or prospective business
before the Office unless...” At minimum, the comments
to 11.08(a) should clarify whether that rule applies to contingency
fees taken in applications. Contingent fees in patent cases
create unique issues not shared with normal litigation-made
contingent fees, and the rules should reflect those unique
issues.
10. Section 11.105(c) has a clause that does not make sense.
It says that “except in a matter in which a contingent
fee is prohibited by paragraph (d) of this section.”
Paragraph (d) relates to division of fees. As written, it
would prohibit a division of a contingent fee between firms,
which seems odd. We assume this is a mistake in need of correction.
11. Rule 11.07, in light of the choice of law provision
in 11.805 does not appear to be workable. Under 11.805(b)(1),
a lawyer who is representing a client for conduct in the Office
is governed by the PTO Rules. Under 11.07(a) and (b), a practitioner
faces a conflict of interest only if he is representing both
clients before the Office. Is this what the office intends?
In light of the choice of law provision, 11.07(a) would permit
a lawyer to represent a client before the office even where
(1) representation of that client is directly adverse to another
client, (2) the lawyer does not reasonably believe the representation
will not be adversely affected; and (3) the clients do not
give informed consent – so long as the client to whom
the lawyer is adverse is not being represented by the practitioner
before the Office. State law would, ostensibly, be preempted.
Presumably, in 11.107(a) the clause “having immediate
or prospective business before the Office” following
“will be directly adverse to another client” should
be deleted, and the same change made to (b) to remove the
clause “where any of the clients or third party have
immediate or prospective business before the Office”.
12. The preceding comment raises a much more important but
more general concern. The rules repeatedly (upwards of 30
times) use the phrase “immediate or prospective business
before the Office” which, apparently, is designed to
avoid imposition of the PTO Rules to state ethical matters
which are not implicated by the PTO’s federal objectives.
The current PTO Code achieves this result through a much more
elegant means, by simply stating that the PTO Code is not
intended to preempt state law beyond that necessary for the
PTO to achieve its federal objectives. Indeed, during adoption
of the PTO Code, the PTO repeatedly refused to put into specific
rules language like “immediate or prospective business
before the Office,” instead relying on the general preemption
provision which, in turn, relied upon the scope of federal
preemption recognized by the Supreme Court in Sperry. E.g.,
50 FR 5158, 5163-64; 50 FR 5158, 5165; 50 FR 5158, 5166. The
approach the PTO took in the mid-1980's avoided many drafting
problems present with the current draft. That approach should
be taken today. Rather than inserting “immediate or
prospective business” into various rules -- which can
lead to awkward and unforeseen issues -- the PTO should either
use the choice of law provision to establish the boundaries
of PTO practice or adopt a rule essentially like current 10.1
to establish that same proposition. The current approach is
going to lead to mischief since it is a limitation that has
not ever been adopted previously. Further, it may make the
question of whether the PTO can enforce its rules turn on
interests of clients and third parties are involved in PTO
proceedings – rather than on the broad reach identified
by the Sperry court. (Additional issues concerning this limitation
are discussed below. E.g., items 16, 17. Sometimes the limitation
is not in places where it “should” be. Each rule,
if the PTO intends to continue this approach, must be reviewed
to see if the phrase has been inadvertently left out, not
just incorrectly included.)
13. 11.108(e)(3) refers to advancing costs of medical exams.
Is this necessary?
14. 11.108(e)(3) does not appear to permit a practitioner
who takes over a matter after another practitioner has withdrawn
or been terminated to advance fees to prevent or remedy abandonment
of a client’s application caused by the prior practitioner
unless the client agrees to be ultimately responsible for
those. It seems odd to permit a practitioner who fouls up
the client’s case to advance those costs, but not the
lawyer who is brought in to remedy the situation, and in an
emergency the rule as written could create difficulties.
15. Section 11.108(j) refers to “papers received from
a client.” This appears too narrow, since it would permit
the practitioner to have a proprietary interest in papers
he obtained from third parties (e.g., foreign patent offices;
foreign libraries; research facilities) on the client’s
behalf without complying with subsections (1) to (3) of this
section. The phrase “papers received from a client”
should be changed to: “papers received from, or acquired
on behalf of a client.”
16. Section 11.108(j)(2) permits lawyers to contract for
contingent fees “in civil cases.” This rule would
appear to be unnecessary, given that representation in civil
cases would appear to be governed by state or other law, not
these Rules. If the provision is intended to permit lawyers
to agree with clients that, prior to issuance of a patent,
the client can agree that the lawyer will represent the client
on contingent basis in infringement suits, perhaps it should
so state.
17. Section 11.108(j)(3) states “in a patent case.”
Does that mean that it applies in a patent suit in federal
court, or only while a practitioner is prosecuting an application?
18. As written, Section 11.109(a) does not prevent a lawyer
from acting adversely to a former client in a substantially
related matter, so long as the lawyer did not represent the
former client before the Office. Under the choice of law rules,
this would allow lawyers to be adverse in the Office to former
clients under circumstances where no state would permit it
– where the lawyer is in position to misuse confidential
information against the former client, for example. This,
again, appears to be an example of where insertion of the
phrase “in practice before the office” in the
first clause creates unintended issues. See item 12, above.
Subsection (b) of this rule, because of the location of that
clause, appears to be broader than (a), and would appear to
be correct in its application. One way to fix (a) may be to
delete “in practice before the Office.” Subsection
(c) creates the same issues as (a), and in combination with
the choice of law rules would allow a lawyer to prosecute
a patent by using information against a former client –
so long as the lawyer gained that information in a representation
that was not “in a matter before the Office.”
This phrase needs to go! These are fundamental mistakes which
were avoided in 1985 by the Office’s persistent refusal
to put these phrases into the rules.
19. The phrase “associated on a continuing basis”
is vague. In ethics parlance, “associated” implies
that sort of relationship – lawyers in a firm are associated
with each other, for example. The use of “on a continuing
basis” could also be argued to mean that a practitioner
who is merely temporarily associated with a firm creates imputation
under 11.110(a).
20. With respect to 11.110(c) and 11.107, does the patent
office have a position on whether, and if so when, so-called
“advanced waivers” are enforceable? Providing
guidance to practitioners on this issue, particularly in commentary
to 11.107 would be useful.
21. With respect to 11.113, the PTO should consider adopting
the Ethics 2000 version of Model Rule 1.13, which takes into
account various issues created by Sarbanes-Oxley and related
law.
22. Section 11.115(a) is not substantially the same as current
rule 10.112(a), as the comments state, but it should be. As
written, it creates two problems. First, it limits the banks
into which client funds may be deposited. The current rule
was deliberately written (in response to a comment, even)
to allow lawyers to deposit funds into any bank account in
the US (and some foreign accounts). The new rule limits the
lawyer to banks licensed to do business in the same state
as the lawyer or his firm. The old rule was written the way
it was to benefit clients, and the new rule should be the
same. The second problem is that, as written, this rule would
require lawyers who receive funds from a client to deposit
those funds into a limited number of state banks – even
if those funds were received by the lawyer in connection with
something other than Office-related activities. For example,
under this rule as written all money received by a firm representing
X Corporation must be deposited into specific banks, even
if the money was received for purposes having nothing to do
with the office.
To remedy the first problem, the existing language of 10.112(a)
should be used. If the requirement that the bank be FDIC or
FSLIC insured, then that language could be added in. To remedy
the second, the phrase “in connection with activities
before the Office” should be inserted in existing 10.112a)
after the first use of “a practitioner’s firm”.
23. The phrase “fiduciary relationship” in 11.115(f)(4)
should be deleted since it is a comment on law. “Practitioner-client
relationship” would be better.
24. In Section 11.116(1), the phrase “or other law”
leads to confusion concerning choice of law. Must a lawyer
withdraw if the representation violates state ethics rules,
but not the PTO Rules? Based on the choice of law provision,
the answer would appear to be “no” but “other
law” invites this argument. If the intent is to preclude
representations in the Office which violate state law, then
the choice of law rule needs to be amended, or this point
made clearer. (I do not believe that should be done; the PTO
Rules, alone, should apply; but this phrase leaves that door
open. The comments should, at minimum, shut it.) In a similar
vein, the comments state that the “court” may
need an explanation, again confusing choice of law
25. The preemption issue concerning 11.117 is worth addressing.
Does this provision mean that the state cannot preclude a
practitioner from selling a practice (and, likewise, a practitioner
from acquiring one)? This rule has not been widely adopted,
and the question of whether the PTO has authority to adopt
11.117 – is it necessary to achieve its federal objectives?
-- is not addressed by the comments, and would appear to be
a tenuous matter. Before the PTO adopts this rule –
and practitioners rely on it – the PTO should expressly
state that state law to the contrary is preempted in order
for the PTO to achieve its federal objectives. .
26. Section 11.202 has a broader “reach” than
the other rules, allowing a lawyer to intermediate if only
one of two clients has business before the Office. Was this
intended? On the other hand, this rule is limited to “business”
and not “prospective or impending” business. Was
that intended? See comment 12 regarding these phrases, above.
The phrase “may make it” in (d) should be changed
to “make it”.
You will no doubt have people argue that 11.202 should be
deleted because it was deleted in the Ethics 2000 version
of the Model Rules. Most states, however, still have 2.02
as a distinct rule, and it is a useful rule for lawyers. Keep
it in.
27. 11.203 also implicates the choice of law issue and the
authority of the PTO to regulate the practice of law. The
rule would appear to apply (based on choice of law rules)
even where the practitioner’s evaluation does not relate
to the matter pending before the office. For example, it would
purport to apply where the practitioner is providing an evaluation
for a patent client, even if the matter being evaluated is
not before the Office. To remedy this, insert “pending
before the Office” between “matter” and
“affecting a client” and delete the phrase “where
either the client or other person has immediate or prospective
business before the Office”. At the same time, as written,
it would govern the conduct of a practitioner on behalf of
a third party simply where that third party has activity before
the Office. Is that necessary for the PTO to achieve its federal
objectives? Again, these phrases create ambiguity which was
avoided in the mid-1980's and which should be avoided again.
28. The introductory phrase if 11.302(b) is confusing. I assume
it’s meant to say that if the information is subject
to rule 1.56, it must be disclosed. I don’t think you
need to have the clause since information which is subject
to 11.106 still must be disclosed if covered by 1.56, and
the absence of the clause in other rules could be argued to
show that information need not be disclosed.
29. In 11.303, what does “in regard to practice before
the Office” mean? For example, is 11.303 violated where
a practitioner while representing an infringer in federal
court misrepresents something concerning practice before the
office? Is that necessary for the PTO to achieve its federal
objectives? The phrase should be deleted.
30. 11.303(a)(3) would not, as written, require a practitioner
to disclose to the Office controlling adverse authority not
known to the examiner during prosecution or other ex partes
proceedings. The rule should require that, by adding “or
Office” after “opposing counsel”.
31. In 11.303(c), what does “in regard to practice
before the Office” mean? Does it include the hypothetical
in number 29, for example? This phrase should be deleted.
32. As written, 11.303(d), last sentence, would require disclosure
of information favorable to patentability. Is that wise? The
clause “whether or not such information is adverse”
should be deleted.
33. 11.303(e)(5) -- is “or any employee of the Office”
necessary? If it is necessary here, then it probably needs
to be inserted in numerous places elsewhere. Deleting it is
probably wise.
34. In 11.304(a), should the phrase “or the Office’s”
be inserted after “another party’s” in order
make it unethical for lawyers to unlawfully obstruct the Office’s
access to evidence? That would seem to be wise.
35. In 11.304(e), should “the guilt or innocence of
the accused” be deleted as superfluous?
36. 11.304(f) would seem to permit lawyers to advise nonclients
to refrain from providing to parties during interference proceedings
information covered by Rule 1.56, and which should have been
submitted to the Office. As worded, for example, a lawyer
who represents the corporation, and not a former-employee
inventor, could advise the former employee not to submit information
(as a former employee, he is not an “agent”) to
the opposing party, since doing so will not harm the interests
of the inventor. I am not sure if this was what is intended.
37. In 11.307(a), should this be limited to inter partes
proceedings? If so, insert “inter partes proceeding”
between “a” and “proceeding” in the
first clause. It may be unworkable if it applies to prosecution,
for example, and probably would not normally apply there,
anyway, so why not make it clear that it doesn’t.
38. Should a new (c) be added to 11.401 which states: (c)
Fail to comply with 37 C.F.R. 1.56. The reason for that is
to avoid making it seem as if there is tension between complying
with 11.106 (confidentiality) and 1.56 (candor). See Molins.
39. Section 11.402(b) defines “party” more narrowly
than the ABA Model Rules since it does not include either
(a) a person who supervises, directs or regularly consults
with the organization’s lawyer concerning the matter
or (b) whose act or omission in connection with the matter
may be imputed to the organization for purposes of civil liability.
This is a substantial retrenchment of the scope of Model Rule
4.02, and we believe it unwise. The scope should be the same
as the Model Rule.
The PTO should clarify that, as seems to be its intent, 11.402
does not reach former employees.
40. With respect to 11.504(a)(3), see the comments concerning
11.117, above, and PTO authority to promulgate this rule as
written.
41. With respect to 11.505, does the PTO have authority to
regulate the practice of law by lawyers in matters that are
not before the Office? Subsection (a) would allow the office
to discipline practitioners for violations of state unauthorized
practice law. Is that within the scope of the PTO’s
authority under Sperry? The same is true for comment (b).
Items (c), (d), and (e) seem appropriate.
42. Section 11.701, as written, allows lawyers to make false
or misleading statements about the practitioner’s services
for former clients before the Office. Again, this is an example
where insertion of the phrase “business before the office”
and the like has created unintended consequences. To remedy
this, delete “for persons...” to the end of the
sentence and replace it with: before the Office.
43. Throughout the 700's, the phrase “immediate or prospective”
is used. Is the phrase “prospective” unduly broad
in this context? Likewise, there is no scienter requirement
– the practitioner need not know about the client’s
prospective need for office service. Is that the intended
balance?
44. 11.705(c) may conflict with state law. What is the federal
objective of the PTO which supports this rule?
45. Should 11.803(a) include examiners, or “employees
of the Office”?
46. 11.803(a) should refer to the OED, not “the appropriate
professional authority.” Should this not be required
to be in writing?
47. In 11.803(b), “section” should be “subsection”.
Here, the rule refers to the PTO Rules by a different term
than it does elsewhere. There should be consistency, and clarity,
and so perhaps “PTO Rules of Professional Conduct”
should be used each time to avoid confusion with state rules,
for example.
48. Is Section 11.803(f)(3) intended to apply if a practitioner
is representing a party in federal court, and alleges inequitable
conduct there? If so, this creates interesting separation
of powers problems. We believe 803(f)(3) should be limited
to alleging in a proceeding before the Office that inequitable
conduct has occurred.
49. As written, there is no scienter requirement for a violation
of 11.804(h)(4) -- a lawyer can be disciplined if he unwittingly
accepts assistance forma former employee of the Office in
certain matters. Scienter should be required by amending this
rule to insert “Knowingly” at the beginning of
the subsection.
50. Same comment with respect to subsections (6) and (7).
51. Concerning subsection (8), which “codes of professional
responsibility” apply? This rule seems vague, and it
may be that the reference is intended to be to th PTO Rules
of Professional Conduct.
52. Should item 10 be expanded to include, not just frivolous
complaints about practitioners, but also employees of the
Office?
53. Subsection (I) of 11.804 seems to be a definition, not
a rule, and belongs elsewhere unless this definition applies
only to 11.804, in which case it should say so. If it applies
more broadly, then it should not be wedged into this rule.
54. Choice of Law. Rule 11.805 does a better job than the
old rules of noting when PTO rules apply. However, there is
no statement of intent to preempt. If the PTO Code preempts
under 11.805, it should so state, since right now it merely
states that the PTO Rules apply -- and not necessarily to
the exclusion of state rules. Is it the office’s position
that the PTO rule preempt state law when they apply? If there
is no intent to preempt, then the PTO Code should so state,
since otherwise practitioners are still left with their existing
dilemmas. Indeed, the comments can be read as not preempting
state law. See 69504 (“It would be appropriate to apply...”).
If the PTO Code does not preempt state law, the PTO should
so state, to avoid lawyers believing they can rely only on
it if PTO law applies to their conduct. 11.805(b)(3)(ii) should
be amended to state that where the PTO rules apply, other
law to the contrary is preempted.
What is the purpose of 11.805(b)(2)? The PTO cannot make
choice of law determinations for courts. This provision seems
unwise and unworkable.
55. What does “participate in the representation of
the client” mean for purposes of 11.806? What if the
client pays hourly, and the practitioner receives a share
of profits from the client. This needs definition.
56. I have advised clients who have run into this problem:
suppose client advises the practitioner of material prior
art. Practitioner advises the client of the duty to disclose.
Client takes action which, under state law, constitutes termination
of the attorney-client relationship. Must the practitioner,
nonetheless, discloses the prior art to the office? Under
the current PTO Code, the answer is “yes” according
to the PTO’s response to comments. 50 FR 5158, 5165.
Under the new rules, is the answer the same?
57. Definitions:
“Attorney.” As written, a lawyer who is licensed
in two states, but disbarred in one, is an “attorney.”
Is that what is intended? |