Trends in Intellectual Property Lawyers Professional Liability Claims 1983 - 2010

June 3, 2011

ABA 37th Annual Conference onProfessional Responsibilty

BY ANTHONY K. GREENE

CERTIFIED RISK MANAGERCERTIFIED INSURANCE COUNSELOR

HERBERT L. JAMISON CO.,L.L.C.

Relative Environment for Risk Management Relative Environment for Risk Management

Sources ofSources of RISKRISK

Internal to theInternal to the OrganizationOrganization

ClientsClients

ComplianceCompliance

CompetitorsCompetitors

SuppliersSuppliers

Law Firms Referenced in Law Firms Referenced in News Stories about IP Related News Stories about IP Related Professional Liability ClaimsProfessional Liability Claims

MoFo Sued For Malpractice Over MoFo Sued For Malpractice Over ““StaggeringStaggering”” $5 $5 Million Bill Million Bill –– April 13 2009April 13 2009Insurors Sue Artz,Dickenson Over Malpractice SpatInsurors Sue Artz,Dickenson Over Malpractice Spat-- April 8 2009April 8 2009Patent Malpractice Claims Hit Firms Higher Patent Malpractice Claims Hit Firms Higher Damages Make Firms SkittishDamages Make Firms Skittish–– December 2007 December 2007 Greenberg Traurig,Fish & Richardson,Buchanan Greenberg Traurig,Fish & Richardson,Buchanan Ingersoll & Rooney,Townsend & Townsend & Nixon Ingersoll & Rooney,Townsend & Townsend & Nixon Pruer Pruer Patent Malpractice Suits a Growing ThreatPatent Malpractice Suits a Growing ThreatNovember 14, 2007November 14, 2007-- Fulwider Patton Lee & Utecht, Fulwider Patton Lee & Utecht, Akin Gump Strauss Hauer & FeldAkin Gump Strauss Hauer & Feld LLP, Seyfarth LLP, Seyfarth Shaw LLP, Burnett Burnett & Allen, Katten Muchin Shaw LLP, Burnett Burnett & Allen, Katten Muchin Rosenman LLP, Thelen Reid Brown Raysman & Rosenman LLP, Thelen Reid Brown Raysman & Steiner LLPSteiner LLP

IP Related Lawyers IP Related Lawyers Professional Liability ClaimsProfessional Liability Claims

Katz v Holland & Knight LLPKatz v Holland & Knight LLP–– lawyers lawyers misrepresentation of strength & value of copyright misrepresentation of strength & value of copyright infringement claims infringement claims

TattleTale Portable Alarms Sys v. Calfee Halter & TattleTale Portable Alarms Sys v. Calfee Halter & Griswold LLPGriswold LLP –– Failure to pay maintenance feesFailure to pay maintenance fees

Premier Networks Inc v Stadheim and Gear LTDPremier Networks Inc v Stadheim and Gear LTD –– Inability to obtain reinstatement /revival of patentsInability to obtain reinstatement /revival of patents

Lockwood v Sheppard Mullins Richter & HamptonLockwood v Sheppard Mullins Richter & Hampton –– invalidity of patents based on fraudulent invalidity of patents based on fraudulent statements statements

MaxMax--PlanckPlanck--Gesellschaft ZUR Foerderung Der Gesellschaft ZUR Foerderung Der Wissenschaften E.V. v Wolf Greenfeild & Sacks PCWissenschaften E.V. v Wolf Greenfeild & Sacks PC –– Conflict of Interest related to patent prosecution Conflict of Interest related to patent prosecution

IP Related Lawyers IP Related Lawyers Professional Liability ClaimsProfessional Liability ClaimsTouchcom Inc. v Bereskin & ParrTouchcom Inc. v Bereskin & Parr –– Canadian Clients Canadian Clients sue Canadian attorneys in Virginia for errors in filing sue Canadian attorneys in Virginia for errors in filing national phase application in USPTO in Alexandria national phase application in USPTO in Alexandria VirginiaVirginia

Warrior Sports v Dickinson Wright PLLC – alleging negligence contributing to lapsed patent

Minton v Gunn – clients patent found invalid and lawyers charged with failing to raise the “experimental use doctrine”

Roof Technical Services Inc. v Hill – alleged failure to properly pursue a patent application

Rockwood Retaining Walls Inc v Paterson Thuente Rockwood Retaining Walls Inc v Paterson Thuente Skaar & Christensen PASkaar & Christensen PA –– errors in litigation of patenterrors in litigation of patent infringement suitinfringement suit

2010 Cases with implications for IP Lawyer Professional Liability Claims

Hasse v Abraham Watkins Sorrels Agosto and Friend LLP 2010 WL 519747 (E.D. Tex. 2010 )Lemkin v. Hahn Loeser & Parks LLP,2010- Ohio - 2074, 2010 WL 1881962 (Ohio Ct. App. 10th Dist. ) Protostorm , LLP v Antonelli, Terry , Stout & Kraus LLP 2010 WL 785316 (E.D. N.Y. 2010) Landmark Screens, LLC v. Morgan Lewis & Bockius LLP 183 Cal. App. 4th 238, 107 Cal Rptr. 3d 373 ( 6th Dist. 2010)Tethys Bioscience Inc v Mintz Levin Cohn Ferris Glovsky and PopeoP.C.2010 WL 2287474 (N.D. Cal.2010)Revolutionary Concepts Inc v. Clements Walker PLLC 2010 NCBA 4, 2010 WL 677508 ( N.C. Super. Ct. 2010) Danner, Inc v. Foley & Lardner LLP , 2010 WL 2608294 ( D.Or. 2010)SiRF Technology Inc v. Orrick Herrington and Sutcliffe LLP 2010 WL 2560076 (N.D. Cal. 2010)

2010 Cases with implications for IP Lawyer Professional Liability Claims

Minkins v. Gibbons PC 2010 WL 5419004, F. Supp. 2d (D.N.J. 2010 )Leviton Mfg. Co Inc v Greenberg Traurig LLP,2010 WL 49983183 (SDNY 2010) Protostorm , LLP v Antonelli, 2010 WL 2010 4052922 (ED Va 2010) Byrne v. Wood Herron & Evans LLP 2010 WL 3394678 (ED Ky 2010)Rockwood Retaining Walls Inc. V Patterson Thuente Skaar & Christensen PA 2010 WL 2777273 (D. Minn. 2010)Shamrock Lacrosse, Inc v Klehr Harrison Harvey Branzburg & Ellers LLP 416 N.J. Super . 3A. 3d 518 (App. 2010) E-Zpass Technologies, Inc v Moses & Singer, LLP , 189 Cal.App.Rptr.3d 516 (2010)Katims v Millen White Zelano & Branigan PC, 706 F. Supp. 2d 645 (D. Md. 2010)

American Intellectual Property Law Association 2007 & 2009 Reports of Economic Survey

Value of IP Liability Claims Paid in Last 5 years

Average Value of IP liability Claims Paid By Firms Insurer

2007 - $1,005,166 2009 – 980,987

Average Value of IP liability Claims Paid By Firm

2007 - $ 234,767 2009 – 306,960

ALAS 2009 STUDY OF 11,714 CLAIMS AGAINST FIRMS WITH 35 OR MORE ATTORNEYS

Area of Average Cost Number of Percent of Percent of AllPractice Per Claim Claims Total Claims Loss Incurred

Banking $ 1,372,200 237 2% 7%Administrative Law $ 1,013,700 134 1% 3%Securities $ 967,300 467 4% 10%Patent\Trademark\ $ 718,300 304 3% 5%CopyrightCorporate\Transactional $ 550,800 3,301 28% 42%Tax \ ERISA $ 478,500 484 4% 5%Bankruptcy $ 326,900 322 3% 2% Real Estate $ 240,300 774 7% 4%Estates\Trust\Probate $ 212,100 781 7% 4%Litigation $ 157,900 4,364 37% 15%Labor\Employment $ 144,400 138 1% Less than 1%Divorce\Family Law $ 99,500 267 2% Less than 1%

ALAS STUDIES OF CLAIMS AGAINST FIRMS WITH 35 OR MORE ATTORNEYS

AVERAGE PER CLAIM SEVERITY BY PRACTICE AREA

Area of Practice 2001 2007 2008 2009

Banking $ 1,336,737 $ 1,470,100 $ 1,436,400 $ 1,372,200( including S & L )

Administrative $ 1,015,677 $ 1,035,200 $ 1,343,400 $ 1,013,700

Securities $ 872,757 $ 891,500 $ 801,900 $ 967,300

Patent Trademark $ 1,308,539 $ 560,200 $ 624,000 $ 718,300& Copyright

Corporate $ 462,225 $ 625,300 $ 585,400 $ 550,800

Missed Patent Deadline Costs $30 MillionMissed Patent Deadline Costs $30 Million

AUGUST 4, 2003AUGUST 4, 2003 -- By Tyler CunninghamBy Tyler Cunningham Daily Journal Daily Journal

SAN FRANCISCO SAN FRANCISCO -- In one of the largest legal malpractice In one of the largest legal malpractice awards ever in California , a San Mateo County judge has awards ever in California , a San Mateo County judge has hit a prominent intellectual property firm with a $30 hit a prominent intellectual property firm with a $30 million decision, finding that it negligently missed a million decision, finding that it negligently missed a deadline to apply for a patent for a client. deadline to apply for a patent for a client.

San Mateo Superior Court Judge Carl Holm found that the San Mateo Superior Court Judge Carl Holm found that the Law Firm and one of its partners cost Kairos Scientific, a Law Firm and one of its partners cost Kairos Scientific, a San Diego company, about $30 million in business.San Diego company, about $30 million in business.

The firm admitted its failure but maintained that its The firm admitted its failure but maintained that its mistake cost the company nothing. It claimed that lack of mistake cost the company nothing. It claimed that lack of a foreign patent did not affect the company's ability to a foreign patent did not affect the company's ability to market KCAT in the United States and argued that several market KCAT in the United States and argued that several other companies held foreign patents for substantially the other companies held foreign patents for substantially the same thing.same thing.

After presiding over a fiveAfter presiding over a five--week, expertweek, expert--intensive court intensive court trial,Judge Holm found otherwise. He issued an 85trial,Judge Holm found otherwise. He issued an 85--page page written statement of his decision. written statement of his decision.

AMERICAN BAR ASSOCIATION LAWYERS PROFESSIONAL LIABILITY STUDY

BREAKDOWN OF CLAIMS BY AREA OF LAW

1985 1995 1999 2003 2007 29,227 19,158 36,844 29,637 40,486 Claims Claims Claims Claims Claims Practice Area25% 21% 25% 19% 22% Personal Injury-Plaintiff 23% 14% 17% 16% 20% Real Estate

3% 3% 4% 10% 3% Personal Injury - Defense10% 8% 8% 8% 7% Collection and Bankruptcy

8% 9% 10% 10% 10% Family Law 7% 8% 9% 9% 10% Estate,Trust & Probate3% 4% 4% 4% 5% Criminal 5% 9% 9% 6% 5% Corporate/Business

Organization

AMERICAN BAR ASSOCIATION LAWYERS PROFESSIONAL LIABILITY STUDY

BREAKDOWN OF CLAIMS BY AREA OF LAW

1985 1995 1999 2003 2007 29,227 19,158 36,844 29,637 40,486 Claims Claims Claims Claims Claims Practice Area

3% 11% 4% 3% 5% Business Transactions.04% 1% .02% .04% 2% International

2% 2% 1% 2% 1% Securities (S.E.C.).50% 1% 1% 2% 2% Patent Trademark & Copyright

1% 1% 2% 1% 1% Labor Law2% 2% 1% 1% 1% Taxation1% 1% 1% 2% 1% Civil Rights DiscriminationAll other areas of practice represented less than 1% of Claims

ALAS STUDIES OF CLAIMS AGAINST FIRMS WITH 35 OR MORE ATTORNEYS FREQUENCY ANALYSIS

Area of Practice 2001 2008 % Increase

Patent\Trademark\ 147 304 101% Copyright

Estate & Trust 505 781 55%

Litigation 2,979 4,364 47%

Bankruptcy 219 322 47%

Corporate 2,503 3,301 32%

Securities 360 467 30%

Jamison Jamison \\ AIG AIG -- IP Firms IP Firms Patent/Trademark/Copyright ClaimsPatent/Trademark/Copyright Claims

Combined Trends 1983 Combined Trends 1983 -- 19951995

FrequencyFrequency

Claims > 100KClaims > 100K

Multiple ClaimsMultiple Claims

Jamison Jamison \\ AIG AIG -- IP FirmsIP FirmsPatent/Trademark/Copyright 1990Patent/Trademark/Copyright 1990’’s Claimss Claims

Breakdown by Cause of Action/Area of PracticeBreakdown by Cause of Action/Area of Practice

104

225

69

1416

2025

30

0 5 10 15 20 25 30

# of Claims

Foreign Patents

Domestic Patents

Litigation

Failure to File (Domestic)

Patent Application

Opinions

Fee Suites Counterclaim

Malicious Prosecution

Trademark

Copyright

Non-Intellectual Property

Jamison IP Firms Patent\Trademark\Copyright Claims

Frequency 1996 - 2005AREAS OF PRACTICE CLAIMS CAME FROM

37.1% - Patent – Mechanical / Industrial

17.0% - Patent – Other

15.0% - Trademark

10.6% - Patent Electronics/Computers/Semiconductors

7.5% - Patent Pharmaceuticals / Biotech

2.9% - Copyright

2.6% - Non-Intellectual Property Matters (Corporate, Securities)

SUBJECT MATTER CONFLICT”Law firm obtains a patent for Client A. Law firm represents Client B in “related” IP matters.

Client A and Client B become opposing parties in a suit and Law firm discovers conflict between Client A and Client B

Law firm wrote to Client A advising it would have to withdraw from representation.But Client A points out chance that its rights will be prejudiced if the law firm withdraws

Questions arise regarding firm’s use of confidential information provided by one client to aid another client

Client A brings conflict suit against law firm and seeks to have firm disqualified from representing Company B

Client B fires law firm and makes a claim against the firm.

Both Clients try to obtain info from firm while preserving their own privileged communications

Clients appear to be using malpractice suit to supplement their discovery efforts in patent infringement suit.

Clients are seeking to avoid payment firm’s past fees

Legal fees “alone”in malpractice action are six figures per month!

Lawyer represents Exclusive Licensee against third-party infringer Licensee asks lawyer to jointly represent Patent Owner.Lawyer sees no actual or potential conflict.Patentee must be joined when licensee has fewer than “ all substantial rights” in patent Interest in enforcing patent appear aligned. Economic and tactical advantages of joint representation Potential conflicts between exclusive licensee and patentee are “landmines”

Patent owner & licensee disagree on litigation strategy and give lawyer conflicting instructionsPatent owner tells lawyer in confidence about potentially invalidating prior art not disclosed to PTO during prosecution .

Sublicense institutes DJ action against Patent owner & Licensee to invalidate patent. Licensee sees opportunity to eliminate royalty obligations to Patent owner. Patent owner can’t get Licensee to settle.

How does lawyers resolve conflict between Duty of Loyalty ( Model Rule 1.7 cmt 33 ) to one client with Duty of Confidentiality ( Model Rule 1.7 cmt 31 ) to other client? .

Representing Patent Owner & Exclusive Licensee

Law firm works with Client A in connection with Intellectual Property matters

Firm then represents former owner & relative of Client A after getting a “written conflict waiver”

Client A brings suit against firm alleging representation of former Owner was ” outside scope of conflict waiver”.

Client A alleges that firm helped former owner steal trade secrets & set up a competing Company

Defense counsel characterized malpractice action as “a lawsuit in search of a theory of liability

Plaintiff claims attorney - client privilege prevents lawyer from testifying about issues relevant to firms defense.

Plaintiff files amended complaint adding new party plaintiff that had a business relationship with Client A.

During discovery testimony arises regarding law firm being aware of issues related to financing of the competing company former owner started

While other counsel is reviewing all work done by firm new malpractice allegations arise

Case settles with $700,000 of legal fees and $275,000 “economic settlement” paid

THE MOBILE CLIENT”

Law firm takes share in business setup for clients to mange & profit from the client’s intellectual property.

Client agrees that Law firm receive equity in client’s “New Co” Company in return for legal work.

Legal work to include Patent , Trademark & Copyright work, working on licenses & providing “other assistance”

The law firm sets up a “New” corporate entity . 19 patents are assigned to the “new corporate entity”

It’s a successful venture earns $50 million in royalties

Acrimonious break - up of law firm. Lawyer who left firm continues to work “diligently”on Intellectual Property matters.

Dispute arises over unpaid legal fees. Lawyer commences suit against client over legal fees

Client counter claim seeks: fee forfeiture, damages for acts of malpractice, unethical activity and negligence in connection with legal work

“LAWYERS FOR THE DEAL”

Jamison IP Firms Patent\Trademark\Copyright Claims

Frequency 1996 - 2005MOST COMMON TYPE OF ERROR ALLEGED18.3% - Incomplete \ Inaccurate Info. In Application10.6% - Missed Annuity|Maintenance Payment 10.0% - Missed Application Deadline

8.7% - Trial Tactical Error8.0% - Failure to designate or file application in proper country7.7% - Inequitable Conduct6.9% - Failure to Locate Prior Art5.1% - Fraud 4.6% - Conflict of Interest4.0% - Failure to File Document2.0% - Untimely Performance

ALAS Patent Related Malpractice Claims 1979 Thru July 31, 2006

MOST COMMON TYPE OF ERROR ALLEGED

43.0% - Failure to Timely File12.0% - Conflict of Interest

9.0% - Negligent Advice7.0% - Negligent Drafting7.0% - Improper Opinions6.0% - Breach of Duty1.0 % - Sanctions17.0% - Other Miscellaneous Causes *

*A number of claims have arisen from patent litigation, particularly in cases where the litigation team did not include a patent lawyer

Sources ofSources of RISKRISK

Internal to theInternal to the OrganizationOrganization

ComplianceCompliance

CompetitorsCompetitors

SuppliersSuppliers

ClientsClients•• Financial ConditionFinancial Condition

•• Industry ChangesIndustry Changes

•• Changes in ManagementChanges in Management

•• Changes in OwnershipChanges in Ownership

•• Contractual ObligationsContractual Obligations

INSURANCE COVERAGES THAT ADDRESS INTELLECTUAL PROPERTY

LAWYERS PROFESSIONAL LIABILITYEMPLOYED LAWYERS COVERAGE PART-TIME LAWYERS COVERAGEGENERAL LIABILITY COVERAGE – ADVERTISERS LIABILITYUMBRELLA LIABILITY COVERAGEDIRECTORS & OFFICERS LIABILITYCYBER LIABILITYDEFENSE COST REIMBURSEMENT INSURANCEINTELLECTUAL PROPERTY INFRINGEMENT COVERAGEINTELLECTUAL PROPERTY ENFORCEMENT COVERAGEFIDELITY COVERAGE FOR TRADE SECRETSREPRESENTATIONS & WARRANTIES INSURANCELOSS MITIGATION INSURANCESUCCESSOR LIABILITY INSURANCE

Sources ofSources of RISKRISK

Internal to theInternal to the OrganizationOrganization

SuppliersSuppliers

ClientsClients

ComplianceCompliance

CompetitorsCompetitors

•• Aggressive MarketingAggressive Marketing

•• Lateral HiresLateral Hires

•• MergersMergers

•• AcquisitionsAcquisitions

LATERAL LAWYER MOVEMENT RELATED MALPRACTICE CLAIMS

Lateral hire brings in new client & 10 boxes of files including records on numerous pending prosecution matters .

Records and Docketing Manager focused on U.S. files & failed to discover that there were problems with a Foreign Filing until it was to late to correct the error

Practice of two lawyers is “being considered for merger “ into the insureds practice and act as Of Counsel. During the “ Engagement ”period the two ESQ’s were allowed to maintain a separate docketing system for all annuity payments .

Eight months later the insured filed an infringement action on behalf of one of the clients of the two ESQ’s.

During the litigation it was discovered that some of the patents had lapsed do failure to pay fee’s .

Lawyer while in firm A represents client who makes medical devices .

Client believes while at firm A lawyer is expected to obtain patents for a set of medical devices in United States, Western Europe, Canada, and Japan.

Lawyer moves to firm B and takes Client with him to firm B.

Client discovers that patent protection had not been obtained in Western Europe, Canada, and Japan.

Client sues firm A alleging the firm missed some patent-filing deadlines.

Firm A in its cross complaint accused attorney of failing to timely and properly manage his prosecution docket “and” claimed that firm B could have mitigated some of clients damages.

Firm A claims that there was still time to fix some of damage done with Japanese patent when lawyer was servicing client at firm B.

Firm B in tenuous position because the need to defend themselves can conflict with their role as counsel for client

“ DOCKETING ERROR & NEW FIRM SUCCESSOR COUNSEL LIABILITY ”

Apeldyn Corp. V Samsung Elecs. Co. LTD ( D. Del. 2010 )

District Court granted motion to disqualify lawyer & firm

Prior to leaving Firm A in April 2006 lawyer represented defendant in DRAM chip technology patent litigation

April 2005 Firm B began speaking with lawyer about move

Firm B was pursuing case against above defendant in connection with liquid crystal display technologies

Firm B hires lawyer in April 2006 , determines that there no conflict and did not impose an ethical screen

September 2008 plaintiff filed a complaint against defendant and named lawyer as counsel for plaintiff

Court relied on Model Rule 1.10 and found that new firms failure to institute a screening measure and involve him in case was basis for disqualifying both lawyer and firm. Court found “substantial relationship” between the two litigations.

Law firm does IP Counseling for Client A .

Firm also represents Client B in connection with technology that is “related” to technology on which the firm has counseled Client A .

Later firm helps Client B get a patent on “related “ technology.

Client A sues law firm and Client B for misappropriation of trade secrets and conversion.

Plaintiff alleges damages in excess of $50,000,000 stemming from depressed value of its initial public offering and other issues

Firm settles malpractice claim with one of the clients and a claim is made by other client.

The firm does not have sufficient policy limits in its professional liability policy to cover claims by the other client or any other clients.

The firm advises all lawyers who were partners in the firm at the time of these claims that the firm will seek their contribution to defense fees and any loss payments in connection with this matter.

Partners that left the firm to join other law firms report this claim for possible coverage under their new firm’s policy

“CONFLICTS & LATERAL HIRES ”

Sources ofSources of RISKRISK

Internal to theInternal to the OrganizationOrganization

ClientsClients

ComplianceCompliance

CompetitorsCompetitors

SuppliersSuppliers

•• Foreign AssociatesForeign Associates

•• Annuity Payment Co.Annuity Payment Co.

•• Local Counsel/Lead Local Counsel/Lead CounselCounsel

•• Temp. AgenciesTemp. Agencies

•• Software/HardwareSoftware/Hardware VendorsVendors

Sources ofSources of RISKRISK

Internal to theInternal to the OrganizationOrganization

ClientsClients

ComplianceCompliance

CompetitorsCompetitors

SuppliersSuppliers

•• Client Acceptance & Client Acceptance & Continuance ProceduresContinuance Procedures

•• Engagement &Engagement & NonNon--Engagement LettersEngagement Letters

Training & Supervision of Lawyers Training & Supervision of Lawyers & Non& Non--Legal StaffLegal Staff

•• Assessment of Liabilities with Assessment of Liabilities with Lateral Hires, Mergers, or Lateral Hires, Mergers, or AcquisitionsAcquisitions

•• Engagement &Engagement & NonNon--Engagement LettersEngagement Letters

•• Clearly Defined ScopeClearly Defined Scope of Servicesof Services

•• Due DiligenceDue Diligence

•• Indemnification andIndemnification and Hold HarmlessHold Harmless

•• Proof of InsuranceProof of Insurance

Any questions or commentsAny questions or comments

contact me at contact me at

agreene@jamisongroup.comagreene@jamisongroup.comoror

www.jamisongroup.comwww.jamisongroup.com

11--800800--526526--4766 ext 3234766 ext 323

Ethics and the Law of Lawyering in the

Intellectual Property Field

37th

ABA National Conference on

Professional Responsibility

The Peabody Memphis

Friday, June 3, 2011

Pamela A. Bresnahan, Esquire

Vorys, Sater, Seymour and Pease LLP

1909 K Street, N.W., Suite 900

Washington D.C. 20006

(202) 467-8800 – Phone

pabresnahan@vorys.com – e-mail

Overview

The United States Patent and Trademark Office (“USPTO”) has the statutory power to

establish regulations governing the conduct of attorneys and patent agents practicing before the

agency. See 35 U.S.C. § 2(b)(2)(D) (2006). Attorneys are subject to the disciplinary rules set

out in the Code of Professional Responsibility, which are enforced by the USPTO’s Office of

Enrollment and Discipline (“OED”). See 37 C.F.R.§§ 10.20 et. seq.

The Role of OED and the Disciplinary Process

The OED has been charged with the power to discipline practitioners for violations of the

disciplinary rules. The OED Director is charged with investigating allegations of misconduct

and disciplinary grievances. See 37 C.F.R. § 11.22(a). Once a grievance is received from an

aggrieved party, OED will review the information to determine whether there is sufficient

grounds to institute an investigation. Following the initial investigation phase, if there is

probable cause to believe that the practitioner has violated a disciplinary rule, the matter will be

referred to the USPTO’s Committee on Discipline (“Committee”). The Committee will evaluate

the matter and decide whether there is probable cause to bring formal disciplinary charges. See

37 C.F.R. § 11.23(b)(1). Unless the practitioner and counsel for the OED Director are able to

come to a mutual resolution of the matter, discipline may only be implemented after a full

hearing on the merits. If the matter proceeds to a formal hearing, the OED Director has the

burden of proving the alleged violation(s) by clear and convincing evidence. See 37 C.F.R.

§ 11.49. The Respondent has the burden of proving all affirmative defenses by clear and

convincing evidence. Id. Depending upon the seriousness of the offense, a practitioner can be

given a warning; reprimanded; suspended from practice before the USPTO; or, disbarred.

A disciplinary hearing is conducted similarly to a non-jury trial, but with a few notable

exceptions. For example, an Administrative Law Judge (ALJ) working outside of the intellectual

property field, generally from the U.S. Environmental Protection Agency, is appointed as the

Hearing Officer and presides over the matter. See 37 C.F.R. § 11.39. The Federal Rules of

Evidence do not apply in the hearing and the Hearing Officer has the ability to exclude evidence

considered irrelevant, immaterial or repetitious. See 37 C.F.R. § 11.50(a).

Common Ethical Violations

Several of the most common violations of the Code of Professional Responsibility are

described below.1

Misconduct – 37 C.F.R. § 10.23

37 C.F.R. § 10.23 is a broad regulation which sets out many of the prohibitions of

conduct in practicing before the USPTO and precludes a practitioner from doing the following:

(1) Violating a Disciplinary Rule;

1 The USPTO Rules of Professional Conduct are patterned after the ABA Model Rules.

(2) Circumventing a Disciplinary Rule through actions of another;

(3) Engaging in illegal conduct involving moral turpitude;

(4) Engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation;

(5) Engaging in conduct that is prejudicial to the administration of justice; and,

(6) Engaging in any other conduct that adversely reflects on the practitioner’s fitness to

practice before the USPTO.

Examples of specific conduct which violates the above rules are set out in 37 C.F.R.

§ 10.23(c)(1)-(20). The examples provided are not intended to limit the type of conduct

considered to violate the disciplinary rules.

Examples of misconduct constituting violations of 37 C.F.R. § 10.23 include the

following:

Attorney failing to notify client of Notice of Abandonment constituted violation

of 37 C.F.R. § 10.23(c)(8). In the Matter of Van Der Wall, D2004-02, Final

Order May 27, 2004 (attorney received public reprimand).

Counsel intentionally backdated several certificates of mailing and failed to

communicate with clients, violating 37 C.F.R § 10.23 and § 10.23(b)(6). Moatz v.

Bode, D2002-14 (U.S. Dep’t of Commerce July 28, 2004) (suspending

practitioner before USPTO for seven (7) years, with four (4) years of the

suspension stayed, pending probation).

Attorney admitted to practice before USPTO received public reprimand based

upon reciprocal discipline entered by the attorney’s state bar. The discipline was

based upon a finding the attorney had knowingly made false statements to a

tribunal and the state bar in connection with a disciplinary matter arising out of a

complaint filed by a pro se plaintiff who disputed the date on which he received a

copy of a counter claim filed by the attorney. In the Matter of Vincent Mark

Amberly, D2009-07, Final Order November 18, 2010.

Patent attorney excluded from practice before USPTO for violating 37 C.F.R.

§ 10.23(b)(6) via 37 C.F.R. § 10.23(c)(5) due to disbarment by attorney’s state

bar. Attorney was disbarred for violating certain Washington State Rules of

Professional in connection with his handling of filing a European patent

application. The attorney failed to maintain all funds of a client paid to him in an

identifiable trust account; stole client funds and engaged in conduct involving

dishonesty, fraud, deceit, or misrepresentation. In the Matter of Robert M.

Storwick, D2009-31, Final Order June 17, 2010.

Neglect – 37 C.F.R.§ 10.77

A practitioner shall not:

(a) Handle a legal matter which the practitioner knows or should know that the

practitioner is not competent to handle, without associating with the practitioner another

practitioner who is competent to handle it.

(b) Handle a legal matter without preparation adequate in the circumstances.

(c) Neglect a legal matter entrusted to the practitioner.

Establishing “neglect” does not require a showing of willfulness or intent. See In the

Matter of Klein, 6 U.S.P.Q.2d 1528 (U.S. Department of Commerce 1988). A single incidence

of neglect can constitute a violation of the disciplinary rules.

Examples of violations where the practitioner failed to act competently and/or neglected a

matter entrusted to him include the following:

Counsel did not sufficiently explain the difference between utility and design

patents to the inventor/client. See Moatz v. Colitz, 68 U.S.P.Q.2d 1079, 1081

(U.S. Dep’t of Commerce 2003).

Attorney failed to adequately communicate with a client about the status of the

client's patent application and failed to inform her of correspondence from the

USPTO which had a significant effect on the application. Counsel’s failure to

prosecute the application led to it becoming abandoned. In the Matter of Michael

I. Kroll, D2008-15, Final Order May 25, 2010 (suspension for 60 months, the

entire period was stayed pending probation).

Patent attorney failed to explain the difference between a provisional and a

non-provisional patent application to his client. The attorney also did not file

non-provisional applications before the abandonment of related provisional

applications took place. He further failed to advise the client that non-provisional

applications must be filed prior to abandonment of the provisional applications in

order to claim priority status. In the Matter of Raymond Galasso, D2009-17,

Final Order August 20, 2010 (registered patent attorney tendered Affidavit of

Resignation).

Discipline instituted for patent attorney’s failure to timely pay fees to the USPTO

for which the client had advanced funds to the attorney. In the Matter of Stephen

R. Grenier, D2011-01 (practitioner suspended for two years).

Misappropriation of Client Funds – 37 C.F.R. § 10.23(c), 37 C.F.R. § 10.112(c)

“A practitioner shall not…[m]isappropriat[e], or fail to properly or timely remit, funds

received by a practitioner or the practitioner’s firm from a client to pay a fee which the client is

required by law to pay to the Office.” 37 C.F.R. § 10.23(c)(3).

Attorney who deposited a check in the amount of $240,000 on behalf of a client

and spent the funds, knowing that a significant portion of the money did not

belong to him was excluded from practice before the USPTO. The attorney also

failed to segregate funds and did not deposit funds into a separate account. In the

Matter of Peter Mitrano, D2009-06, Final Order June 10, 2010 (exclusion from

practice before USPTO following filing of Complaint for Reciprocal Discipline

from the District of Columbia).

“A practitioner shall…promptly pay or deliver to the client as requested by a client the

funds, securities, or other properties in the possession of the practitioner which the client is

entitled to receive.” 37 C.F.R. § 10.112(c)(4)

Attorney disciplined for not promptly paying to several clients the portion of

advance fees for patent legal services which the attorney had not performed and

for which the clients were entitled to receive a refund. In the Matter of Sung I.

Oh, D2010-19, Final Order January 18, 2011 (suspended for 60 months with

ability to apply for reinstatement after 18 months).

Conflict of Interest – 37 C.F.R. § 10.66

(a) A practitioner shall decline proffered employment if the exercise of the

practitioner’s independent professional judgment in behalf of a client will be or is likely

to be adversely affected by the acceptance of the proffered employment, or if it would be

likely to involve the practitioner in representing differing interests.

(b) A practitioner shall not continue multiple employment if the exercise of the

practitioner’s independent professional judgment in behalf of a client will be or is likely

to be adversely affected by the practitioner’s representation of another client, or if it

would be likely to involve the practitioner in representing differing interests

(c) In the situations covered by paragraphs (a) and (b) of this section, a practitioner

may represent multiple clients if it is obvious that the practitioner can adequately

represent the interest of each and if each consents to the representation after full

disclosure.

Attorney disciplined for violating conflict of interest rules when representing

multiple clients referred from an invention referral service. OED found the

attorney’s ability to exercise his independent professional judgment on behalf of

clients was likely to be adversely affected by the acceptance of the proffered

employment from the invention referral service. Alternatively, the employment

would be likely to cause the attorney to represent differing interests. The attorney

could not adequately represent the interest of each without first obtaining the

consent of each client to the representation after full disclosure. In the Matter of

Sung I. Oh, D2010-19, Final Order January 18, 2011 (suspended for 60 months

with ability to apply for reinstatement after 18 months).

Reciprocal discipline – 37 C.F.R. § 11.24

Within 30 days of being disciplined or disbarred from practicing before another

jurisdiction, a practitioner before the USPTO is required to provide written notice of the

discipline to the OED Director. The OED Director is required to file a complaint predicated

upon the discipline from the other jurisdiction and will impose the identical discipline unless

there is a genuine issue of material fact that there was a deprivation of due process, or the

imposition of the same public discipline would be inappropriate.

A practitioner disciplined by OED has a duty to report the discipline to all state bars to

which the attorney is admitted.

Duties of Disciplined Practitioner - 37 C.F.R. § 11.58

A disciplined practitioner has an obligation to undertake certain procedures to wind-down

his practice following the entry of the order of discipline.

Among the items a disciplined attorney is required to undertake are:

Filing a notice of withdrawal as of the date of the Final Order with along with a

copy of the Final Order for every matter pending before the USPT;

Provide notice of the OED discipline to each state bar to which the practitioner is

admitted;

Provide notice of the discipline to current clients with matters pending in the

USPTO advising them to retain other counsel and the current status of their case;

Return clients their files as well as well as any unearned fee or advance costs the

client paid for but which was not used; and

Remove practitioners name from any directory or adverting in which the

practitioner is held out as being admitted to practice before the USPTO.