Moatz, Harry
From: akandare...
Sent: Tuesday, February 10, 2004 10:34 AM
To: ethicsrules comments
...
Subject: Comments on Rulemaking Notice of December 12, 2003
Mail Stop OED-Ethics Rules
United States Patent and Trademark Office
P.O. Box 1450
Alexandria, Virginia 22313-4134
Attn. Harry I. Moatz

Mr. Moatz,

The attached file contains comments from the Bar Association of the District of Columbia Patent, Trademark and Copyright Section concerning the proposed Modification to the Code of Federal Regulations, Changes to Representation of Others Before the United States Patent and Trademark Office, Rulemaking Notice of December 12, 2003, 68 Fed. Reg. 69442. We respectfully request consideration of the same prior to implementation of any portion of the proposed rules.

Respectfully submitted,

Anthony W. Kandare
Patent Rules Chair

Patent, Trademark and Copyright Section Bar Association of the District of Columbia 1225 19th Street, N.W., Suite 800 Washington, DC 20036

Anthony W. Kandare Banner & Witcoff, Ltd. 1001 G Street, N. W. Washington, D.C. 20001 202-824-3244 202-824-3744 (fax)
akandare...

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2/10/04

DEPARTMENT OF COMMERCE
Patent and Trademark Office

Statement of the Bar Association of the
District of Columbia PTC Section

concerning the proposed Modification to the Code of Federal Regulations, Changes to
Representation of Others Before the United States Patent and Trademark Office,
Rulemaking Notice of December 12, 2003, 68 Fed. Reg. 69442.

Ralph P. Albrecht, Chair
Susan M. Dadio, Chair-Elect
Anthony Kandare, Chair, PTO Rules Committee

The Bar Association of the District of Columbia, Patent, Trademark & Copyright Section ("Bar Association") appreciates the opportunity to present the following testimony to the United States Patent and Trademark Office's (PTO) notice of proposed rulemaking, Changes to Representation of Others Before the United States Patent and Trademark Office, December 12, 2003, 68 Fed. Reg. 69442 ("Changes to Representation").

The Bar Association is one of the senior intellectual property bar associations in the United States uniquely situated in the nation's capital having a broad cross-section of members from government, industry and private practice, with some members specializing in patents who are involved primarily in patent procurement, some entirely in litigation and counseling, some with a mixed practice and others who may participate in patent procurement issues by advising others on strategy. Since members frequently represent applicants for patent and trademark before the PTO, they are thus concerned with recognition to practice before the PTO, investigation and disciplinary proceedings conducted by the PTO, and rules of professional conduct for practitioners before the PTO. The interest of the Bar Association is entirely pro

Statement of the Bar Association of the District of Columbia PTC Section Responsive to
Proposed Changes to the Code of Federal Regulations
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bono to help advance the patent profession. The views expressed herein only represent those of the PTC Section of the BADC, and not those of the BADC or of its Board of Governors.

Changes to Representation includes three major areas: Part 11, subpart B - Recognition to Practice Before the USPTO; Part 11, subpart C - Investigations and Disciplinary Proceedings; and Part 11, subpart D - Rules of Professional Conduct. On January 29, 2004, the PTO published an extension to the period for providing comments on Part 11, Subpart D - Rules of Professional Conduct, which includes proposed rules 11.100 through 11.900. As such, the comments below are directed to Part 11, Subparts B and C of Changes to Representation.

I. Introduction

The Bar Association applauds the PTO effort to adopt rules for promoting improvements in patent and trademark quality in accordance with the USPTO 21 St Century Strategic Plan. The Bar Association, however, has significant concerns with the magnitude and scope of Changes to Representation and, as more fully elaborated below, specific concerns with many of the rules. Further, The Bar Association and its members are concerned that our opportunity for thorough evaluation of the proposal has been compromised by the timing for release of this proposed rulemaking in conjunction with the 60 day period set for comments, that included both the end of December holidays together with a number of other PTO notices of either practice changes or proposed rules on which the PTO seeks comments. The Bar Association and its members were also concerned that a public hearing was not formally conducted by the PTO on such significant changes. As a result, the Bar Association conducted its own forum on January 21, 2004 which was open to the public. This public forum, which was cosponsored by the Intellectual Property Sections of the Virginia State and DC Bars, was attended by numerous prominent registered practitioners from private, corporate and government practice. In addition, several representatives from the PTO were in attendance, including James A. Toupin, General Counsel of the PTO; Stephen G. Kunin, Deputy Commissioner for Patent Examination Policy; and Harry I. Moatz, Director of OED.

Changes to Representation puts forward significant changes to the existing rules for enrollment and discipline of practitioners, as well as offers completely new rules for many

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Proposed Changes to the Code of Federal Regulations
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issues, without providing a substantial justification or basis for them. Accordingly, the Bar Association respectfully recommends that an independent study be performed of current PTO enrollment and discipline problems with the goal of proposing solutions narrowly tailored to address genuine and significant problems, and thereby respectfully recommends against the adoption of Changes to Representation.

In the alternative, the Bar Association respectfully requests that specific rules identified below be modified or not adopted at all. In particular, the Bar Association has concerns with proposed rules pertaining to practitioner recertification, annual fees, mandatory continuing training, PTO authority regarding financial records, and disciplinary sanctions that include financial restitution.

II. Part 11, Subpart B - Recognition to Practice Before the USPTO

The Bar Association appreciates PTO efforts to simplify the process of becoming registered as a practitioner. Our section, however, has serious concerns about this part of Changes to Representation and questions whether it expands the scope of PTO authority beyond what was intended by Congress. We are also concerned about the implementation costs, which will assuredly be passed on to practitioners and ultimately to their clients. We believe that such cost increases are not in the public interest.

Section 11.5 (b) Practice Before the Office

"Practice before the Office" according to this section includes an overly broad spectrum of matters, such as "law-related service that comprehends all matters connected with the presentation to the Office ... for ... conduct of other non-patent law." This would provide the PTO jurisdiction over matters beyond it statutory authority.

Section 11.5(b)(1) provides, "[p]ractice before the Office [] in patent matters includes ... considering the advisability of relying upon alternative forms of protection under State law." This is beyond the statutory authority of the PTO, particularly because such activity by patent

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agents may be considered practicing law without a license, which should not be considered practice before the PTO in patent matters.

Section 11.5(b)(3) provides that practice before the PTO "in private as well as other professional matters includes conduct reflecting adversely on a person's fitness to practice law ... ." The Bar Association questions the PTO's jurisdiction to include private activity within the meaning of "practice before the Office," and therefore recommends deletion of this section.

Section 11.7(g) Requirements For Registration

In the summary of this section on page 69449 of Changes to Representation, the PTO seeks comments on two options for accepting state bar determinations of moral character. Of the two, the Bar Association favors the second option, which gives deference to state bar determinations and reserves authority by the PTO for further investigation in the event of a substantial discrepancy between information given to the state bar and information given to the PTO.

Section 11.8(d) Oath, Registration Fee and Annual Fee

The Bar Association is concerned that the proposed annual fee will be subject to fee diversion as part of the overall PTO budget. As such, the proposed annual fee is not in the public interest, as it will likely be diverted beyond its intended purpose and will ultimately be passed on to clients. Rather, the Bar Association recommends efforts to reduce enrollment and discipline related costs at the PTO.

In addition, the Bar Association opposes the collection of annual fees each quarter for selected practitioners based on last names. This is likely to create accounting burdens for large firms and to cause confusion among practitioners. If an annual fee is implemented, the Bar Association recommends adoption of an annual due date for all practitioners.

Section 11.11(d) Inactive Status

Section 11.11(d) would allow a practitioner to assume inactive status, but nevertheless would require payment of an annual fee and compliance with ongoing CLE. This provision is

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inconsistent with the customary understanding of "inactive status" as a member of a State Bar, and would be onerous to someone who is temporarily ill, out of the country, or not practicing before the PTO. The Bar Association recommends modification of this section to remove annual fee and CLE compliance requirements for inactive status.

Sections 11.12 and 11.13 Mandatory Continuing Training

The Bar Association is in favor of efforts to maintain and improve the competence of patent practitioners and, therefore, generally supports continuing legal education (CLE). Consistent with most state bars that have mandatory CLE requirements, however, we recommend flexibility of subject matter in satisfying CLE requirements. Such flexibility permits practitioners to maintain and improve their skills in accordance with their specific practice areas of intellectual property law, which will directly benefit their clientele and will serve to overall increase public confidence in the national patent system. The Bar Association has offered a variety of intellectual property related CLE courses for many years and plans to continue doing so. Many CLE courses offered by the Bar Association have addressed and will continue to address PTO rules and patent/trademark prosecution-related training.

Section 11.12(a) allows the PTO to require continuing education requirements on an asneeded basis from one to every three years. Although this may provide maximum flexibility for the PTO, it works against the goal of consistent professional development for practitioners and may lead to misunderstanding and inadvertent noncompliance by practitioners. The PTO should set specific CLE requirements for specific time periods against which practitioners can plan.

Section 11.13(e)(3) states that approved programs must "be directed to legal, procedural, and policy subject matter approved by the USPTO Director ... ." The Bar Association is concerned that approved subject matter will be unduly restricted to narrow ranges of PTO procedures outside the scope of many practitioners' ordinary practice.

The Bar Association opposes in principle Section 11.13(g)(4) of Changes to Representation, which specifically excludes law firms, professional corporations, and corporate law departments as potential sponsors of eligible CLE courses. The legal profession has a long

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Proposed Changes to the Code of Federal Regulations
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history of governing itself and the qualifications of its members. Attorneys from various circumstances, including those working in law firms, corporations, legal organizations and private corporations, have traditionally provided continuing legal education to other attorneys. Most, if not all, states that require CLE credits successfully permit these types of entities to sponsor CLE approved training. Excluding these entities from sponsoring PTO CLE programs would unduly limit the amount of CLE opportunities available to practitioners.

Accordingly, the Bar Association recommends revising section 11.13(g)(4) to permit law firms, corporations and private organizations to sponsor PTO-approved CLE programs. Further, to satisfy CLE requirements, the Bar Association supports allowing practitioners to choose between the proposed PTO online question-and-answer program and attending an appropriate course sponsored by a law firm, private organization, professional organization, and/or local bar association.

In summary, the Bar Association favors reasonable CLE requirements in concert with most state bars. We suggest permitting a wide range of intellectual property related CLE subject matter, which may be sponsored by public and private organizations.

Sections 11.16, 11.22(k) and 11.115(a) Financial Books and Records

The Bar Association is concerned that the proposed rule, section 11.16, gives the Office overly broad authority to examine, without limitation, any and all financial books and records maintained by the practitioner for practice before the Office. The Bar Association opposes such broad authority and questions its statutory basis. This is a new section, for which Changes to Representation neither provides a legal source nor any Part 10 concordance. (See Table 1, page 69505). It is noted that this section applies to any practitioner before the Office including patent practitioners and individuals who practice in trademark and other non-patent matters under section 11.14.

Section 11.16 states, "the OED Director may examine financial books and records maintained by or for the practitioner for the practice before the Office, including, without limitation, any and all trust accounts... fiduciary accounts, and operating accounts maintained

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Proposed Changes to the Code of Federal Regulations
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by the practitioner or his or her law firm." (Emphasis added). With the exception of proposed section 11.22 discussed below, the rule fails to provide any criteria for examination of the mentioned accounts, and it fails to provide conditions precedent for enabling the OED Director to examine the mentioned accounts. The proposed rule appears to allow unannounced inspections of the "accounts" for any purpose of the OED Director. Further, the proposed rule appears to permit an overly broad reach into the private businesses of the practitioners via inspection of "operating accounts." Specifically, Changes to Representation does not provide any basis for nor reasons to inspect such "operating accounts."

Section 11.22(k) authorizes the OED Director to investigate possible violations of the Rules of Professional Conduct and, with respect to financial books and records, restates the authority given in proposed section 11.16. Section 11.22(k) further states that the OED Director may exercise this authority whenever he or she "reasonably believes that the trust account may not be in compliance with Rules of Professional Conduct." In addition, section 11.22(k) states, "[i]n the exercise of this authority, the OED Director ... may seek the assistance of State bar counsel to obtain such summons as he or she may reasonably deem necessary for the effective conduct of an investigation or examination of a trust account."

The Bar Association recommends limiting the power to examine escrow and fiduciary accounts to circumstances in which a complaint has been issued with respect to such accounts for a specific disciplinary proceeding, and limiting such examination to the accounts and issues in controversy. The parties involved should have proper notice to obtain a protective order or similar confidentiality treatment for financial information related to the accounts. This is in concert with the current rules, which permit an administrative law judge to order the production of documents in a disciplinary proceeding "when a party establishes in a clear and convincing manner that discovery is necessary and relevant." 37 C.F.R. § 10.152. Judicial oversight by at least an administrative law judge, if not a state court via a subpoena, protects clients, practitioners, law firms and corporations regarding highly confidential information.

The Bar Association recommends against the adoption of section 11.22(k), which pertains to OED investigations into possible violations of the Rules of Professional Conduct

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Proposed Changes to the Code of Federal Regulations
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outside the scope of a disciplinary proceeding. The Bar Association does not favor providing the OED Director with unlimited authority to compel examination of escrow, fiduciary or operating accounts. The Bar Association recommends that the OED Director seek the assistance of State bar counsel to obtain summons or subpoenas as necessary, which will provide the OED Director with limited authority to exam specific records on an as needed basis. As stated above, such judicial oversight protects clients, practitioners, law firms and corporations with regard to highly confidential and potentially privileged information.

In summary, the Bar Association recommends limiting the OED Director's access to financial records to only escrow and fiduciary accounts that are specific to issues of a disciplinary proceeding before the PTO, and only after all practitioners and other parties to whom the escrow and fiduciary account(s) relate have received notice of the specific request for records and have had an opportunity to respond to the request. For investigations of potential violations of Rules of Professional Conduct, the Bar Association recommends that the PTO seek limited authority as needed via summons or subpoenas in accordance with the current rules.

In concert with objections to sections 11.16 and 11.22(k), the Bar Association opposes section 11.115(a) with respect to escrow account member bank criteria. Section 11.115(a) requires that "all funds received ... shall be deposited in one or more identified escrow accounts at a financial institution ... which is a member of the Federal Deposit Insurance Corporation, or the Federal Saving and Loan Insurance Corporation." (Emphasis added). This section is a significant expansion of the current rules. FDIC and FSLI accounts are only insured up to $100,000 in the case of the bank failure. The practitioner managing personnel should be entrusted to make the decision of which banks to use based on the state bar rules and their professional responsibility requirements. Further, it is possible that a state or a U.S. territorial possession where a practitioner is located may not have an FDIC or FSLI insured member bank, but local banks may be approved to operate by state and/or national governments. Thus, a practitioner can be in clear compliance with the state bar requirement, but in violation of Changes to Representation.

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III. Investigations and Disciplinary Proceedings
The Bar Association recommends a non-confrontational, cooperative approach to the PTO disciplinary process that fosters cooperation between the Office and registered practitioners. Many states that have adopted the Model Rules encourage self-regulation by registered practitioners. The Bar Association recommends reconsideration of Changes to Representation in this section to follow such a cooperative approach.

Section 11.20 Disciplinary Sanctions

Section 11.20 claims to give the PTO authority to require practitioners or other individuals (e.g., an assignee) to pay restitution to persons financially injured by the practitioner's or other person's misconduct. The BADC contends that the Patent Office lacks authority to discipline applicants or other individuals, such as assignees, beyond penalties associated with matters before the Patent Office.

Section 11.22(k) Investigations

As discussed above along with section 11.16, The Bar Association recommends against the adoption of section 11.22(k), which pertains to OED investigations into possible violations of the Rules of Professional Conduct outside the scope of a disciplinary proceeding. In concert with current rules, The Bar Association recommends that the OED Director seek the assistance of State bar counsel to obtain summons or subpoenas as necessary, which will provide the OED Director with limited authority to exam specific records on an as needed basis.

Section 11.49 Proposed Standard

In Changes to Representation, the PTO requests comments on the standard to be used by the Hearing Officer in finding a violation of the Rules of Professional Conduct. Given the detrimental nature of the sanctions, the Bar Association favors the clear and convincing standard in disciplinary proceedings.

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Proposed Changes to the Code of Federal Regulations
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II. Conclusion

The Bar Association favors adopting rules to promote improvements in patent and trademark quality and to promote improvement the profession as a whole. However, the Bar Association has significant concerns with the magnitude and scope of enrollment and discipline changes put forward in Changes to Representation, and has specific concerns with many of the rules. Accordingly, the Bar Association respectfully recommends that an independent study be performed of current PTO enrollment and discipline problems with the goal of proposing solutions narrowly tailored to address genuine and significant problems, and thereby respectfully recommends against the adoption of Changes to Representation. In the alternative, as detailed herein, the Bar Association recommends that many rules of Part 11, subparts B and C be modified as indicated or not adopted at all. The Bar Association intends to supply recommendations for proposed rules contained in Part 11, Subpart D before the extended due date of April 12, 2004.

Respectfully submitted,

Anthony W. Kandare (Patent Rules Chair)
Ralph P. Albrecht (Chair)

Patent, Trademark & Copyright Section
Bar Association of the District of Columbia
1225 19th Street, N.W., Suite 800
Washington, DC 20036