Thomas D. Morgan
United States Department of Commerce
Patent and Trademark Office
Notice of Proposed Rulemaking:
Changes to Representation of Others
Before the United States Patent and Trademark Office
Docket No. 2002-C-005
Comments of Professor Thomas D. Morgan
June 2, 2004
Identification and Experience
I am the Oppenheim Professor of Antitrust and Trade Regulation Law at The George Washington University Law School and author of Cases and Materials on Modern Antitrust Law and Its Origins (2nd ed. 2001). I have also taught and extensively written in the field of attorney professional responsibility for over 25 years. I am co-author of Problems and Materials on Professional Responsibility (8th ed. 2003), and I am the only person to have served as Associate Reporter for both the American Law Institute’s Restatement Third, The Law Governing Lawyers (1986-2000) and the American Bar Association’s Ethics 2000 Commission (1998-1999).
I am a member of the American Bar Association, its Center for Professional Responsibility, the American Law Institute and an academic member of the American Intellectual Property Law Association. These comments are my own and not those of any of the identified institutions or organizations. I have been compensated for time spend in preparation of these comments, but I have complete authority over and responsibility for their content.
I. Subpart D of the Proposed Rule is Seriously
Anticompetitive in Its Regulation
of Practitioners’ Dealings With Invention Promoters
Much of the language of Subpart D of the Proposed Rule directly parallels that found in the ABA Model Rules of Professional Conduct. One might doubt the need for federal regulation that duplicates rules to which attorneys are already subject, but I will not comment on that issue further. The need to have all patent practitioners – whether or not attorneys – subject to the same rules may indeed justify some duplication.
Subpart D notably diverges from the ABA Model Rules,
however, in its recurring attempt to regulate dealings
between practitioners and “invention promoters,”
a term defined in proposed § 11.1 as “any person
or corporation ... who is neither a registered practitioner
nor law firm, who (1) advertises in media of general
circulation offering assistance to market and patent an
invention, or (2) enters into a contract or other agreement
with a customer to assist the customer in marketing and
patenting an invention.”
In specific provisions of Subpart D, at least a dozen references to invention promoters appear. Specifically, attorneys and others practicing before the office are required:
1) to “communicate directly with the inventor,” and presumably not rely on the invention promoter to do so (§ 11.104(a)(1));
2) to get written consent after full written disclosure to representation of both an inventor and an invention promoter who referred the inventor to the attorney (§§ 11.107(a)(2), (b) & (c));
3) to “not accept compensation for representing a client having immediate or prospective business before the Office from one other than the client [such as an invention promoter]” unless specific conditions are met (§ 11.108(f));
4) “in rendering patentability advice to a client referred by an invention promoter” to “identify the element(s) of the references and invention considered, and specify the element or combination of elements of the invention that are believed to support a conclusion that the invention may be patentable” (§ 11.201(b));
5) before “undertaking intermediation between clients who are an inventor and an invention promoter,” to provide “both clients with full disclosure of all potential and actual conflicts of interest, and obtain from each client informed consent, confirmed in writing” (§ 11.202(d));
6) to treat the inventor as a client if the attorney “provides an evaluation regarding a patent, trademark or other non-patent matter before the Office to an invention promoter, which the invention promoter forwards in whole or in part to an inventor, and the evaluation includes any evaluation of patentability” (§ 11.203(c));
7) to not disclose or base any evaluation of an invention to an invention promoter, upon “knowledge that the inventor regards as confidential” (§ 11.203(c));
8) to “not divide legal fees paid by the client with the promoter for legal services rendered in regard to practice before the Office” (§ 11.504(b));
9) to be subject to the Office rules if “law related services” are provided by the attorney to “an invention promoter which refers legal services to the practitioner if the practitioner fails to take reasonable measures to assure that a person obtaining the law-related services of the invention promoter are not legal services” and thus that normal attorney-client protections do not apply to the services (§ 11.507(a)(3));
10) to “not seek by in-person contact, employment ... by a potential client” if “the solicitation involves the use of an invention promoter” unless the client is fully informed of “the specific amount of all legal fees and expenses included in funds the client delivers or is obligated to deliver to the promoter,” and “the discount (expressed as a percent) from the customary fee the practitioner gives or will give in the fees charged for legal services rendered for a client referred by the promoter (§ 11.701(b)(5));
11) to not represent “a joint venture comprising an inventor and an invention promoter or an inventor referred to the [attorney] by an invention promoter” when the attorney knows or is advised that “a formal complaint filed by a Federal or State agency, alleging a violation of any law relating to securities, unfair methods of competition, unfair or deceptive acts or practices ... is pending before” a Federal or State court or agency “or has been resolved unfavorably by such court of agency, against the invention promoter in connection with marketing an invention” and the attorney fails to “fully advise” the inventor of the charge or finding (§ 11.804(h)(2));
12) to not accept “referral of a matter or inventor from an invention promoter” if the inventor’s contract with the invention promoter does not “specify the total amount of funds constituting legal fees [costs and expenses] the inventor becomes obligated to pay the invention promoter,” the inventor “delivers funds for legal fees ... to the invention promoter,” a patentability opinion is “included in, accompanies or is referenced in any report issued by the invention promoter,” an inventor’s contract with an invention promoter “provides for the preparation, drafting, or filing of a patent application for a design or a utility invention,” or the contract with the invention promoter “guarantees a patent” (§ 11.804(h)(3)).
I realize that some invention promoters have engaged in practices that properly concern any responsible observer. Indeed, in 1999, Congress adopted the Inventors’ Rights Act, 35 U.S.C. § 297, that regulates “improper and deceptive invention promotion.” That statute prescribes specific information that must be disclosed in any contract for invention promotion services and creates a civil remedy for damage caused by a failure to make such disclosures.
By not prohibiting invention promotion companies entirely, however, Congress implicitly recognized that invention promotion services are an important complement to services of law firms and others in providing guidance through the maze a small inventor sees between the idea he or she has and actually patenting and marketing an invention.
Many patents, of course, are obtained by large companies whose in-house staff interact with lawyers both inside and outside the companies to obtain and promote inventions. An invention promotion company can help the small inventor obtain many of the same essential services. An invention promotion company may get an inventor lower fees for legal services, for example, because lawyers know the company will be a source of repeat business. If the ability of a small inventor to consult an invention promotion company were to be burdened by excessive regulation, the consequence would be to deny such an inventor an often less expensive alternative to retaining a law firm to perform all functions. The antitrust law calls that “anticompetitive.” While it would, of course, be wrong to require a small inventor to use an invention promotion company; it is similarly wrong to burden unnecessarily an inventor’s right to do so.
Some usefully illustrative analogies to invention promotion services come from the health care industry. Wilk v. American Medical Association, 895 F.2d 352 (7th Cir. 1990), for example, challenged the A.M.A.’s standards making it unethical for doctors to work with “unscientific practitioners” such as chiropractors. The doctors presumably believed they were aiding patients by these efforts, but the court recognized that the patients had a right to make medical care choices for themselves. It held that the A.M.A.’s conduct had violated Section 1 of the Sherman Act. Similarly, in Sweeney v. Athens Regional Medical Center, 709 F.Supp. 1563 (M.D. Ga. 1989), the court found the same cause of action stated by a failure of doctors to allow midwives to deliver their services to patients of a local hospital.
The issue in such cases was not whether patients should prefer chiropractors or midwives to medical doctors; frankly, my family and I choose to go to doctors. The issue was whether the law permitted doctors to make it hard for patients to make such choices for themselves. The courts saw that the effort to do so was anticompetitive, pure and simple, and struck them down.
If a private group of lawyers banded together to boycott all invention promoters who took or failed to take actions the lawyers did not like, I can say with virtual certainty that – like the doctors cited above – the lawyers would violate § 1 of the Sherman Act. Compliance with lawfully-issued rules of the Office could theoretically protect the lawyers from prosecution, but when the Office issues patently anticompetitive regulations, the validity of the regulations themselves are subject to doubt and the Office should certainly rethink their adoption.
I am not objecting here to the proposed requirement that a practitioner communicate with the inventor, for example, or hold client information confidential against the outside world. However, the Proposed Rule consistently seems to posit a conflict of interest relationship between the inventor and an invention promotion company. Indeed, the Proposed Rule imposes disclosure and consent requirements that are likely to create a sense of conflict where none in fact exists. The required content of an attorney’s letter to the client proposed in § 11.201(b), for example, goes well beyond any requirement regulating lawyers generally. The proposed elements might be appropriate to include in some cases, but the content of communications between a lawyer and client should not be dictated by the Office.
Clearly, if a lawyer believes an invention promoter is taking advantage of an inventor, a lawyer should so inform the client and withdraw from the representation, but complicating what should be a team effort with excessive regulation is both unnecessary and unwise. I respectfully submit that the Proposed Rule should be stripped of all but the most basic descriptions of the obligation of the lawyer to represent an inventor competently, attentively and loyally, whether or not the inventor is also using the services of an invention promotion company.
II. The Proposed Rule Regulating Practice By Patent Practitioners Should Not Be Used
to Impose Indirect Regulation on Invention Promoters
On cannot help but read in the Proposed Rule regulating the relationship between lawyers and invention promoters a concern about the integrity of some such promoters. The history of that industry provides understandable basis for that concern. But Congress itself undertook to provide the regulatory standards for that industry in the Inventors’ Rights Act of 1999, 35 U.S.C. § 297, and the proposed rule goes well beyond those statutory standards.
Furthermore, and very significantly, Congress specifically rejected the proposal made by Senator Lieberman in S. 909, the “Inventor Protection Act of 1995," that the Patent and Trademark Office be authorized to enroll and thereby regulate invention developers. Instead, current § 297 simply gives the Office the important – but limited – role of making publicly available any complaints it receives about invention promoters, along with any responses of those promoters. The Proposed Rule cannot be construed as in support of that statutory function.
The requirement of proposed § 11.804(h)(2) that attorneys tell clients about past or present enforcement actions against the invention promoter is particularly excessive and inappropriate. If an attorney believes the invention promoter is taking advantage of the client in the current matter, all rules governing lawyers would require that the attorney not undertake the representation at all, inform the client about the promoter’s conduct, or both. Thus, if a current enforcement action against the promoter would reasonably be relevant to the client’s concerns about promoter integrity, a lawyer would be required to disclose it. Extending that requirement to other patent practitioners makes sense as well. If, however, the invention promoter had been charged years earlier and never again, a requirement that the practitioner now disclose that charge or settlement as well is utterly arbitrary and has no proper place in regulations of the Office.
In short, I respectfully submit that references to invention promoters in the Proposed Rule do not advance the Office’s stated objective of improving attorney practice before the Office. The use of attorney regulation rules to indirectly regulate the invention promotion industry represents an unseemly – and almost certainly illegal – effort to impose regulatory authority that Congress has expressly denied the Office. I respectfully suggest that those references be deleted.
I appreciate the opportunity to submit these comments and
thank the Office for considering them.