June 21, 2007
Michael Bender's involvement in an invention promotion scheme got him excluded from USPTO prosecution. He fought his exclusion all the way to the appeals court (CAFC 06-1243). If only Bender had been so diligent on behalf of the people he represented.
AIC, American Inventors Corporation, took a fee from inventors to patent their invention. Without consultation, AIC, filed design patent applications, regardless that a utility application was what should have been filed. Bender worked for AIC, prosecuting the design patent applications.
This case involves the PTO’s continuing efforts to regulate the conduct of patent agents and attorneys registered to practice before it and to provide assurance to inventors of effective counsel in filing and prosecuting applications for patents in the United States. The background of this case reads like a novel but represents the true story of hopes dashed, fees wasted, and dreams lost by hundreds of individual inventors caught up in the world of self-interested promoters who promise the world and deliver very little.
In the area of patent law, as in most other areas of the law, sophisticated clients generally are able to determine the kinds of legal representation they need and where to find counsel with the skills, integrity, and character appropriate for the matter at hand. Individual inventors, however, are often unfamiliar with even the most basic principles of patent law, do not know where to turn for help, and are vulnerable to those who seek to take advantage of their inexperience. Commonly available sources of guidance often are of little help, either because they are too simplistic or too generalized to be of any particular assistance or because they are too complex to be readily understood. Even mainstream media sources frequently confuse and misunderstand basic intellectual property law precepts. How often do we read articles confusing the forms of protection applicable to an invention, to a symbol indicating origin, or to a work of authorship with expressions like, “copyrighted his invention,” “trademarked his idea,” or “patented her textbook”?
The PTO has recognized the need to regulate those who practice before it. To this end, the PTO has determined minimum levels of legal competence and has rigorously administered testing of those who seek to become registered patent agents and attorneys. It has also established minimum standards of ethical conduct expected of registered practitioners and has promulgated rules implementing those standards and providing a mechanism for their enforcement.
For individual inventors, the PTO’s listing of registered patent agents and attorneys is a basic resource and an assurance of legal competence and good moral character. But as sophisticated as the PTO is in regulating practitioners who appear before it and in providing information about registered practitioners on its website and in other publicly distributed materials, it frequently finds itself challenged by so-called “invention promoters” who exploit unsophisticated inventors, heap every invention with praise regardless of the merits or the real prospects of legal protection, and entice inventors into engagement agreements filled with hollow guarantees of patent protection and promises of royalty-bearing licenses that seldom yield anything of any significant value.
In seeking to protect the public from unscrupulous invention promoters, the PTO has aggressively sought to monitor and enforce its disciplinary rules against those registered practitioners who act in concert and participation with these promoters in the prosecution of patent applications before the PTO. This case is about one such practitioner who became complicit in the activities of an invention promoter involving over 1,000 unsuspecting inventors.
These unsuspecting inventors first sought help from American Inventors Corporation (“AIC”), an invention promoter. According to testimony and declarations of past employees and clients, AIC would solicit inventors to present their ideas, tell each inventor that their idea was great, and then perform a patent search. After the search, AIC would conduct a sales presentation that provided the inventor with a positive evaluation of the invention and offered AIC’s services in procuring a patent and promoting the invention to manufacturers and other interested parties. The inventor then signed a standard form contract in which he or she paid a flat fee or a combination of a flat fee and a percent of royalty income in exchange for AIC’s promise to hire a patent attorney on the inventor’s behalf, pay all legal fees associated with prosecuting a patent application, and conduct various marketing activities to promote the invention. AIC also guaranteed that it would refund 100% of the inventor’s flat fee if a patent was not procured. The contract did not specify what type of patent would be obtained or in any way explain the differences in protection between a design patent and a utility patent. Indeed, according to past employees and clients, AIC’s general policy and practice was to conceal those differences from the inventors.
After the contract was signed, AIC would forward the inventor’s disclosure to a patent attorney. Initially, that patent attorney was Leon Gilden. Although a number of the inventors’ disclosures indicated that they sought to protect the useful and functional features of the invention—as opposed to ornamentation—Gilden drafted design patent applications in every case. In addition, Gilden allegedly employed draftsmen to add decorative ornamentation or surface indicia to the drawings of the inventions even though such embellishment was not invented by the named inventor. Gilden would send the completed design patent application to AIC, which would get the inventor’s signature, and the application would then be filed using Gilden’s registration number. At no point did Gilden consult with the inventors regarding the filing of a design patent application or the embellished drawings because, according to a former AIC employee, direct contact between the inventors and the attorney was emphatically discouraged by AIC.
The alleged purpose of this scheme was to make it easier to obtain a patent and to avoid a refund of the inventors’ fee under AIC’s money-back guarantee. Gilden’s alleged involvement in the embellishment scheme prompted the PTO to initiate disciplinary action against him in the early 1990s. The PTO also sent each applicant a Request for Information (“RFI”) asking the inventors whether they invented the patterns on the drawings, whether they intended to apply for a design patent over a utility patent, and whether they understood the difference between a design and a utility patent. Ultimately, Gilden entered into a settlement agreement with the PTO and received a five-month suspension.
In 1993, AIC contracted with Bender, a registered patent attorney, to continue the prosecution of over 1,000 design applications that had formerly been handled by Gilden (the “Gilden applications”). The contract provided Bender with up to $15,000 bi-weekly as compensation for both attorney’s fees and prosecution costs. Bender sent each Gilden applicant an engagement letter that included, among other things, the RFI that Gilden had failed to provide to the client and a brief discussion of the differences between a design patent and a utility patent. The engagement letter to each applicant was essentially the same; it did not provide any advice or inquiries that directly related to the particular invention at issue, the type of patent best suited to protect the invention, or the consequences of pursuing a design patent or a utility patent in each particular inventor’s case. Furthermore, other than instructing the inventors to respond to the RFIs, Bender did not attempt to determine whether the Gilden applicants had intended to file design patent applications and whether that decision had been made on an informed basis. As the responses to the RFIs indicated, a number of the inventors either did not understand the difference between a design and utility patent or had wanted a utility patent at the time the application was filed. Bender nevertheless continued to prosecute the Gilden applications as design patent applications, taking steps only to have Gilden’s improperly added embellishments removed.
The PTO has statutory authority to suspend or exclude “from further practice before the Patent and Trademark Office, any person, agent, or attorney shown to be incompetent or disreputable, or guilty of gross misconduct, or who does not comply with the regulations established under section 2(b)(2)(D) of this title.” 35 U.S.C. § 32. Section 2(b)(2)(D) delegates to the PTO the authority to establish regulations governing the conduct of attorneys practicing before the PTO. Id. § 2(b)(2)(D). Pursuant to that statutory authority, the PTO has enacted disciplinary rules, see 37 C.F.R. § 10.20(b) (listing the various disciplinary rules), and has established procedures and standards for determining whether those rules have been violated and what sanction should be imposed, 37 C.F.R. §§ 10.130–10.170.
In the late 1990s, the Office of Enrollment and Discipline at the PTO began investigating Bender after receiving information indicating that he had violated the PTO’s Code of Professional Responsibility. During that investigation, the Office of Enrollment and Discipline sent Bender several RFIs posing questions about his actions and conduct. In August 1999, a meeting of the Committee on Discipline was held in which it was determined that there was probable cause to bring charges against Bender for violations of PTO regulations. An administrative Complaint and Notice dated June 20, 2000, set forth ten counts alleging violations of PTO rules governing attorney conduct.
The charges against Bender were tried before an administrative law judge from March 26 through March 29, 2001. In a thorough 48-page opinion, the administrative law judge found that Bender had violated numerous PTO rules on attorney conduct and that exclusion from practice was warranted. Bender sought review of that initial decision under 37 C.F.R. § 10.154. In an equally thorough opinion, the general counsel for the PTO issued a final decision that adopted some of the violations found in the initial decision and affirmed the sanction of exclusion. Specifically, the general counsel found that Bender had neglected an entrusted legal matter in violation of 37 C.F.R. § 10.77(c); accepted employment where professional judgment may be affected in violation of 37 C.F.R. § 10.62(a) and accepted compensation from a person other than a client without a full disclosure to the client in violation of 37 C.F.R. § 10.68(a)(1); and engaged in conduct that was prejudicial to the administration of justice in violation of 37 C.F.R. § 10.23(b)(5). Bender requested reconsideration of the final decision under 37 C.F.R. § 10.156(c). Reconsideration was largely denied.
Bender then challenged his exclusion in the District of Columbia district court, where he lost. Bender appealed to the appeals court, from whence our story comes. The CAFC denouement -
Although Bender may have only had the best intentions in mind in assuming prosecution of the Gilden applications, the best of intentions cannot absolve Bender’s complicity with AIC in a scheme fraught with deception and adversely affecting a large number of unsuspecting inventors. As an experienced patent practitioner, Bender had to have appreciated that the wholesale practice of filing design applications with unauthorized design embellishments in hundreds of applications was not in the inventors’ interests but instead was driven by AIC’s money-back guarantee. He should have known that the kind of letter he sent to his newly acquired clients fell far short of the explanation needed to address the distressed circumstances in which his clients were placed by his new employer, AIC. His letter, even though well written and perhaps sufficient as an engagement letter of a client in the first instance, only perpetuated the harm done to the Gilden applicants by treating what had previously transpired as nothing out of the ordinary when the circumstances of this entire matter—and Bender’s conflicting interests in particular—were quite extraordinary. Bender’s failure to appreciate that fact supports the PTO’s determination that any sanction less than exclusion would not provide the necessary deterrent effect.
Affirmed. Adios Bender.
Posted by Patent Hawk at June 21, 2007 12:24 PM | The Patent Office
This pro se proceeding normally would have warranted no more than a simple per curiam affirmance without an opinion under local court Rule 36. There is no special new rule of law, no necessity for an elaborate, precedential opinion in terms of reaching the result mandated by the fact of this case.
The Bully Pulpit of Madison Place: Here, the panel saw the need to provide a message to the public. It provided an elaborate explanation of the conduct involved. The opinion implicitly suggests that more should be done to protect the unsuspecting individual inventors from invention promotion schemes. The fact that the process took far, far too long to resolve cannot be missed from the opinion.
The Need to Protect Individual Inventors from Bad Practices: As the court points out, “sophisticated clients [for patent or other legal services] generally are able to determine the kinds of legal representation they need and where to find counsel with … skills, integrity, and character…. Individual inventors, however, are often unfamiliar with even the most basic principles of patent law, do not know where to turn for help, and are vulnerable to those who seek to take advantage of their inexperience.”
Fourteen (14) Year Bleak House Prosecution Trail: Shockingly, fourteen (14) years ago, the PTO had concluded a successful disciplinary action against a previous participant in the same invention scheme that had ended with a substantial slap on the wrist – a five month exclusion from practice.
The PTO was almost instantly aware of the current situation fourteen (14) years ago – in 1993 – but took the full fourteen years to gain the final verdict of exclusion from practice.
Return Disciplinary Jurisdiction to the States: Clearly, for lawyer practice, what is needed is to return the disciplinary powers either to state bars or to an integrated national patent bar (that could then take actions not only to bar practice at the PTO but also make recommendations to local state bars.)
Agent Practice: For agent practice, the state bars have no jurisdiction to the extent that an agent is not practicing “law”. An option short of abolition of the status of patent agent must be found. In the interim, the PTO as the sole disciplinary body for agent practice should focus all its resources into dealing with agents, while referring lawyer disciplinary actions, where possible, to the local state authorities. The option of abolition of agent practice altogether is perhaps too draconian and unnecessary if other options can be discovered
Bringing Patent Practice within the APA Mainstream: On a more macroscopic scale, the question must be asked: Why should the arcane licensure of patent attorneys be continued as an odd agency practice, when the APA practice open to all attorneys licensed in any state bar works well on an across the board basis for other government agencies?
Posted by: Hal Wegner at June 21, 2007 10:11 PM