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Aaron Steimle

Moatz, Harry

From: oed@...
Sent: Tuesday, February 10, 2004 8:48 PIVI
To: ethicsrules comments
Subject: Comments to Subparts A, B & C of proposed rules (37 CFR 11)


February 10, 2004

Mr. Harry I. Moatz OED Director United States Patent and Trademark Office P.O. Box 1450 Alexandria, VA 22313-1450

In re: Comments to Proposed Rules
37 CFR 11 - Representation of Others Before the United States Patent
and Trademark Office as published in 68 Federal Register 69442
(December 12, 2003)

Forwarded by email & U.S. mail

Dear Mr. Moatz:

I would like to proffer comments with respect to Subparts A, B and C of the newly proposed rules.

Request for Additional Time

At the outset and from the standpoint of fairness to all practitioners involved, I would suggest that these newly proposed rules, if implemented and enforced as now written, could preclude Patent Agents from practicing patent law. As such, I would suggest that the Patent Office (PTO) consider extending the period of time for receiving comments relating to Subparts A, B and C of the proposed rules. Such an extension of time has already been granted for Subpart D.

In this regard, the allotted period of time for providing comments for Subparts A, B and C was extremely short, especially in view of the fact that the newly proposed rules and the associated request for comments was published at the beginning of the Christmas holidays (December 12). Due to the immense volume of material to disseminate, and the many incongruities, inconsistencies and potential inequities that seem to be present, it is extremely difficult to provide a complete evaluation of the proposed rules in such a short period of time. What is clear is that many practitioners, and especially patent agents, would be severely impacted by these new rules if adopted and enforced as proposed. In addition to providing these comments to OED, I intend to publish a copy of this letter on the chat board of the National Association of Patent Practitioners (NAPP) so that members thereof will at least be afforded the opportunity to comment on Subpart D of the proposed rules.

As such, an extension of time to comment on Subparts A, B and C is requested on behalf of the many patent attorneys and patent agents who may not yet be aware of how the proposed rules could adversely affect their practices.


Introductory Statement

Initially, I would like to note that the Patent Office is alleging that the newly proposed rules follow the format of the Model Rules of Professional Conduct designed by the American Bar Association. In reality, it appears that a number of substantive changes have been made to the Model Rules with the result that a patent agent's ability to practice patent law could be severely limited.

For example, as I will discuss below, the Patent Office has a new term "full disclosure" and a definition thereof which is not discussed in, or required by the Model Rules. If patent agents are compelled to comply with this new definition, irreconcilable differences with State law would arise, whereby they could be charged with the unauthorized practice of law. In contrast to "full disclosure", the Model Rules only require "informed consent" and do not create any conflicts with State law.

Similarly, as also will be discussed below, the Model Rules do not provide for unregulated contact with non-complaining inventors. The Model Rules to the contrary provide for such contact only by way of subpoena, thereby providing safeguards which protect the inventor's attorney-client privilege.

The proposed rules also present conflicts with existing State and Federal laws, such as with respect to libelous communications.

My comments are as follows:

Comments re: § 11.1 - Definitions

Definition of an "Invention Promoter"

Initially, there is a problem determining what kinds of corporations could be classified as invention promoters. The PTO is offering a definition that states (in part) that an "invention promoter" can be

"any person, or corporation... who (2) enters into a contract or other agreement with a customer to assist the customer in marketing and patenting an invention."

This is an extremely broad definition that could include many different types of corporations. Throughout the new rules (to include Subpart D which will be commented on at a later date), it is made clear that a practitioner must provide a "full disclosure" to an inventor-client if an "invention promoter" is involved.


Definition of a "customer"

When providing the definition of "invention promoter", the Patent Office did not provide a definition of the term "customer" as contained there within; however, Title 35 of the United States Code (35 USC 297 - Improper and deceptive invention promotion), which is a part of the U.S. Patent Act, defines a "customer" as follows:

"a "customer" is any individual who enters into a contract with an invention promoter for invention promotion services; and the term "invention promotion services" means the procurement or attempted procurement for a customer of a firm, corporation, or other entity to develop and market products or services that include the invention of the customer."

Corporations that qualify as "invention promoters"

It is important to note here that the definition of "invention promoter" does not require a corporation or person to engage strictly in the practice of invention promotion. Similarly, the definition of "customer" does not state that a customer cannot be an employee of a corporation. As such, companies like IBM that routinely offer to assist in the patenting and marketing of their employees' inventions would fall into the category of invention promoters. Many large corporations assist employee and non-employee inventors with patenting and marketing, often entering into licensing agreements and then making the patented or "patent pending" inventions available for licensing to other entities. Employee and non-employee inventors become customers by entering into these various types of contracts ("shop rights", royalty agreements, license agreements, etc.) with their employers and thus meet the definition of being a "customer".

Many corporations assist in the patenting and marketing of new inventions. Where would you draw the line? Brokerage firms help to match venture capital seekers with capital sources wherein the need for money is clearly identified as being for the procurement of patent protection and marketing. Many management consulting companies, accountancy firms, business advisory firms, corporate investors, advertising agencies, product development companies, university inventor assistant centers, research foundations, venture development firms, investment bankers, finance companies, etc., "assist" financially and in other ways in the patenting and marketing of inventions. All of these various corporations would be defined as "invention promoters".

Definition of "full disclosure"

The newly provided definition of "full disclosure" does not exist in 37 CFR 10 and is proposed as an addition in the new rules. The definition reads as follows:


"Full disclosure means a clear explanation of the differing interests involved in a transaction, the advantages of seeking independent legal advice, and a detailed explanation of the risks and disadvantages to the client entailed in any agreement or arrangement, including not only any financial losses that will or may foreseeably occur to the client, but also any liabilities that will or may foreseeably accrue to the client."

Model Rules require only "informed consent"

As noted above, the Patent Office is not following the guidelines of the Model Rules with respect to the definition of "full disclosure." Very substantive changes have been made to the requirement of "informed consent" as contained in the Model Rules, and these changes create irreconcilable conflicts with State law.

Discussion regarding conflicts with State law

The new rules repeatedly state that a practitioner must provide a "full disclosure" to any inventor-client who happens to be receiving "assistance" from an "invention promoter". Accordingly, the requirement for a "full disclosure" by practitioners to inventor-clients could be required in almost every situation where an inventor is referred by a corporation to the practitioner, or where the inventor is receiving assistance from any of the above-identified entities, e.g., banks, advertising companies, product development companies, etc. Any existing or potential assignment of an invention to a corporation would most likely trigger the "full disclosure" requirement since the presumption would be that the inventor-client received some kind of "assistance" in return for considering or granting the assignment.

Compliance with the requirements of "full disclosure" requires an attorney. An agent could not comply. This fact arises from the statement wherein a practitioner would have to give a "detailed explanation of the risks and disadvantages to the client entailed in any agreement or arrangement" that must also include an explanation of "any liabilities" that may forseeably accrue.

Obviously, a thorough knowledge of State contract law would be required, along with the remedies available in the event of a breach, to include a clear understanding of the terms and requirements of each and every statement in a contract. While a layman or patent agent might understand the terms present in a contract, only an attorney would recognize what is missing, i.e., what protective provisions should have been in the contract under State law. Further, the U.S. Supreme Court has ruled that patent agents cannot engage in the practice of contract law, to wit:

"In 1963, the U. S. Supreme Court ruled on Sperry v. Florida (373 U. S. 379) and changed who can give patent advice in the U. S. The


Court ruled that the states may not prohibit a federally licensed patent agent (non-lawyer practitioner) from giving advice on patent law, even though it would constitute unauthorized practice of law at

the state level. Below, Joy Bryant discusses the role of the patent agent today, 25 years after Sperry v. Florida...

The patent agent's practice is limited to patent matters before the Office. Unlike a patent attorney, an agent is not allowed to practice contract law such as drafting assignments; take an appeal to the Federal Circuit; or advise a client on matters relating to patent infringement . .... "

Depending upon the requirements of the local jurisdiction, an agent attempting to provide a contractual evaluation could easily be charged with the unauthorized practice of law. As such, patent agents could be precluded from working with any inventor receiving other "assistance" since the agents could not evaluate and comment on any associated agreements or "foreseeable", presumably legal, liabilities.

Comments re: § 11.3 - Suspension of rules, qualified immunity

Rule 11.3 (d)

Newly proposed rule 11.3(d) states:

"Complaints submitted to the OED Director or any other official of the Office shall be qualifiedly privileged for the purpose that no claim or action in tort predicated thereon may be instituted or maintained. "

Section (d) of this rule is new and effectively offers a grant of immunity from any action in tort in those situations where a dishonest ethics complainant submits a statement to the Patent Office. If a practitioner were to file a State action in tort against such a complainant, it would arguably be barred by Rule 11.3(d).

Qualified immunity already defined by Federal and State laws

Whether this qualified privilege exists depends upon the context and content of a complaint, and it is defined by existing Federal and State laws. These laws would be controlling with respect to any potentially libelous document mailed to the Patent Office or to any other entity. The Patent Office's attempt to modify existing Federal and State laws is beyond the scope of its authority.


Comments re: § 11.5 (b) - Practice before the Office

Rule 11.5(b)

This new rule is clearly intended to substantially expand the jurisdiction of the Patent Office to matters "outside" of the Office. More particularly, 11.5(b) defines "Practice before the Office" as follows:

"Practice before the Office: (1) In patent matters includes, but is not limited to, ... considering and advising a client as to the patentability of an invention under statutory criteria; considering the advisability of relying upon alternative forms of protection that may be available under State law; ..."

Patent agents precluded from practice

Additionally, as a part of this expansion of jurisdiction, 11.5 may preclude patent agents from preparing and prosecuting patent applications and from providing patentability opinions without the cooperation of a patent attorney.

The rule would require that practitioners consider "the advisability of relying upon alternative forms of protection that may be available under State law" and this requirement is "included" as part of a patent matter, i.e., it is not an optional consideration. This puts an agent practitioner in the perilous position of engaging in the unauthorized practice of law. How can an agent suggest to an inventor that patent protection is or is not better than, for example, State trademark protection, a trade secret protected by State law, or perhaps a State corporation, etc.? Requiring a patent agent practitioner to consider and advise regarding matters regulated by State law creates an irreconcilable conflict. Perhaps it was the intent of Congress to limit the jurisdiction of the Patent Office to "matters before the Office" just to avoid conflicts such as these.

Expansion of jurisdiction without Congressional approval

Rule 11.5 may exceed the permissible scope of what Congress authorizes the Patent Office to administer.

Title 35 of the United States Code (35 U. S. C. 2 - Powers and Duties) clearly defines the limit of the powers of the United States Patent and Trademark Office. 35 U.S.C. 2 (b)(2)(D) states in part:

"The United States Patent and Trademark Office .... may govern the recognition and conduct of agents, attorneys ... before the Office ...


in the presentation or prosecution of their applications or other business before the Office. "

The key terminology here is "before the Office." The Code of Federal Regulations (C.F.R.) must be in compliance with and cannot exceed the authority granted by Congress as set out in the United States Code (U.S.C.). More specifically, only the legislative branch of the Government, i.e., Congress, can expand the jurisdiction of administrative agencies, such as the Patent Office. While the Patent Office can write rules, those rules can only execute what Congress has already given the Patent Office authority to do.

Comments re: § 11.16 - Financial books and records

Rule 11.16

This newly proposed rule provides another example of jurisdiction outside of the Office. This rule in part states:

"A practitioner, in return for being registered ... agrees that 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, including any trust account that may not be in compliance with the Rules of Professional Conduct, fiduciary accounts, and operating accounts maintained by the practitioner or his or her law firm. The OED Director may also examine any trust account maintained by a practitioner whenever the OED Director reasonably believes that the trust account may not be in compliance with the Rules of Professional Conduct. "

Authority to review financial records

Nothing in 35 U.S.C. 2 gives the Patent Office the authority to expand its jurisdiction so as to be allowed to investigate a practitioner's financial records. Most, if not all, State bars will investigate trust accounts only when a complaint has been filed against an attorney. The Patent Office here proposes to have even greater authority than State bars by stating that it can:

"examine any trust account ... whenever the OED Director reasonably believes that the trust account may not be in compliance

No complaint needs to be filed by a complainant in this situation, and no clear definition is provided of what would constitute "reasonably believes". Again, it would appear that such a review of financial records would exceed the Patent Office's authority.

Comments re: § 11.22 - Investigations

Rule 11.22(j)

This rule could create nightmares for many innocent practitioners and their inventorclients. The provisions of 11.220) state:

"U) Request for information by OED Director.

(1) In the course of the investigation, the OED Director may request information concerning the practitioner's actions from:

(i) The complainant,

(ii) The practitioner,

(iii) Another individual as defined by § 11.19(a)(2), or

(iv) Any party who may reasonably be expected to have information.

(2) The OED Director, or staff attorney or other representative may also request information from a noncomplaining client after obtaining either the consent of the practitioner or, upon a written showing of good cause, the authorization of the Director (see § 11.23(a)). Neither a request for, nor disclosure of, information shall constitute a violation of any of the Rules of Professional Conduct contained in § § 11.100 et seq. "

The appearance of impropriety

Seeking to obtain information from a non-complaining client, i.e., notifying the client "out of the blue" that his attorney or agent is being investigated, creates the "appearance of impropriety" and most clients would certainly be upset. The Patent Office in its comments regarding this new rule states:

"We recognize that such contact can create the possibility of conflicts with the attorney... "


Waiver of the attorney-client privilege

Most importantly, contacting a non-complaining client without the attorney's knowledge could result in a waiver of the attorney-client privilege without the inventor's knowledge. Where an attorney-client relationship is in effect, the Patent Office would become a third party seeking information forming a part of that relationship. An unsophisticated inventor could quickly become distraught upon learning that his attorney or agent is being investigated, and thus inadvertently and/or unknowingly destroy the confidentiality of the attorney-client relationship by divulging privileged information.

Different from the Model Rules

The Patent Office has again made substantive changes from what is to be found in the Model Rules with respect to the issue of contacting non-complaining clients. The Model Rules permit such contact only by way of subpoena, and this leaves many avenues of protection available for the attorney-client privilege. For example, the client could be advised and would have time to seek independent counsel, motions to quash the subpoena could be considered, etc. The attorney-client relationship would be protected. Apparently, most State bars are opposed to the type of practice defined in 11.220) since the Patent Office noted that it found only one State which actually contacted a non-complaining client prior to notifying the client's attorney.

Thank you for receiving and posting these comments so that they can be examined by others.

Kind regards,

Aaron Steimle

United States Patent and Trademark Office
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