Patent Attorneys: Ethics of Representing Out-of-State Clients

The USPTO today released a proposed rewrite of how patent attorneys and agents may represent others before the PTO.

Role of a Patent Practitioner: The new rules broadly define the meaning of “practice before the Office” to include patent preparation & prosecution, providing advice regarding patents vs. other protections, and handling petitions & appeals within the PTO. Proposed 37 CFR 11.5.

Missing from the enumerated roles are activities incident to the preparation and prosecution of patent applications. The notes accompanying the proposal spell out that these incidental roles “are no longer included in the definition” of PTO practice. The primary incidental activity is the drafting of assignments and licenses.

According to the proposal, “a registered patent agent is not authorized by his or her registration to practice before the Office to draw up a contract or to select contract forms for a client relating to a patent, such as an assignment or a license.” The PTO is unsure whether merely ‘causing an assignment to be executed’ might be appropriate and asks for comment.

Attorneys Implicated As Well: As Russ Krajec pointed-out earlier [link], this reading of the rules would potentially impact patent attorneys as well since many represent a large number of out-of-state clients.  (Are you practicing New York law when you advise your New York client about an assignment from its New York employee that will be interpreted under New York laws? Are you a licensed attorney in New York?) 

Role of Foreign Drafters: “Nothing in this section proscribes a practitioner from employing non-practitioner assistants under the supervision of the practitioner to assist the practitioner in preparation of said presentations.” According to the notes, allowed activities include patent drafting.

What is Missing: The new rules leave out (1) any CLE suggestions as well as (2) any thought of an ethical duty to ensure access to legal representation (i.e., pro bono).  I’m not a fan of mandates, but the patent bar (both attorneys and agents) is lacking in both of these areas.  (You should note that the rules package is fairly comprehensive and covers many other details of practice in addition to those mentioned above.)

I would like to hear comments on (1) how attorneys and agents deal with state-representation issues; (2) has the idea of a nationwide practice became the de facto rule; (3) are bar associations too compliant with this activity; (4) are there examples of attorneys being disciplined for out-of-court activities in states where they have no clients?

Notes & Docs:

  • Any comments are due by May 29, 2007 and should be e-mailed to Harry Moatz: ethicsrules.comments@uspto.gov. (Mr. Moatz is the director of the OED). The PTO wants to find a good solution here.
  • For those of you with a memory, these proposed changes are a revision of the December 2003 proposal based on the 100+ comments received from the public.
  • If you leave an anonymous comment, please use a fake email address – otherwise we can see who you are. . .
  • Comparison of Proposed Rules to Current Rules
  • Read the New Rules (204 KB)

22 thoughts on “Patent Attorneys: Ethics of Representing Out-of-State Clients

  1. “the preparation and prosecution of patent applications for others constitutes the practice of law” Sperry v Florida, 373 US 379, 383, USSC 1963

    “a practitioner authorized to prepare patent applications must of course render opinions as to the patentability of the inventions brought to him” Sperry, Footnote 47

    “registration in the Patent Office does not authorize the general practice of patent law, but sanctions only the performance of those services which are reasonably necessary and incident to the preparation and prosecution of patent applications” Sperry, 373 US 379, 386

    There is exactly zero case law on what may or may not be “reasonably necessary and incident to the preparation and prosecution of patent applications”.

    IMHO, it will be “reasonably necessary” to fill in the names on a generic assignment as a prerequisite to be able to represent a corporation, for just as long as it remains necessary to file in the name of the inventors and not the corporation. Until the courts rule otherwise I beleive that’s as valid a point of view as any, and there is very little chance of seeing any decision on this point any time soon.

    That’s notwithstanding Chicago v Kellog, as that case predates Sperry.

    And for those who care to point out that I haven’t quoted the actual holding in Sperry, it says:

    “It follows that the order enjoining petitioner must be vacated since it prohibits him from performing tasks which are incident to the preparation and prosecution of patent applications before the Patent Office. The judgment below is vacated and the case is remanded for further proceedings not inconsistent with this opinion.”

    “performing tasks which are incident to the preparation and prosecution of patent applications before the Patent Office” doesn’t differ much from “the performance of those services which are reasonably necessary and incident to the preparation and prosecution of patent applications”, although it leaves out the words “reasonably necessary”, so arguably it may actually be more expansive.

  2. I believe that advising a client in any matter that requires an interpretation of law or legal language is “practicing law.” Giving legal ADVICE is the heart of what it means to practice law. A patent agent’s authority to give advice is limited to advising a client as to how a patent application and other prosecution-related documents (IDS, Office Actions, etc.) are to be prepared and does not extend to advising about patentability searches, assignments, licenses or other non-prosecution legal matters. Even if a patent agent does not draft a customized assignment document but rather ADVISES his client to use PTO form PTO/SB/15 or some other generic document, he is practicing law to some extent in my opinion. A patent agent can get around this problem, I suppose, by carefully telling his client that the CLIENT can supply or at least select the assignment document, and that the client can consider using PTO form PTO/SB/15 or whatever, but the patent agent should make it clear that he cannot comment in any way upon the document or its effect, or whether some other document might be more suitable in the client’s particular situation. Yes, I think it is “protectionist” as some have put it, hamstringing patent agents against being able to do all that patent lawyers can do in relation to a patent application, but nobody ever said the playing field was level. Patent agents can crank out patent applications and Office Action responses and that’s all. If they want to do all that patent lawyers do for their clients, they can go to law school and pass the bar exam, including the professional responsibility exam that most states require, and obtain malpractice insurance, etc.–all hoops that we lawyers have to jump through.

  3. The interesting thing that most seem to have missed is that proposed new rule 11.5 **would not** bar anyone from preparing assignments, it merely proposes to enlarge the list of activities that the PTO deem to be included in the “before the office” language of 35 USC 2(b)2(D).

    The Sperry decision in the Supreme Court, based on the earlier but similar 35 USC 31, **does not** in fact limit the activities of a registered patent practitioner to practice “before the office” anyway, but (amongst other things) specifically permits performance of tasks that are reasonably “incident to prosecution”.

    So, regardless of the **commentary** to the proposed rules, the unanswered question is whether a court would find that preparing an assignment was reasonably “incident to prosecution”. No doubt our learned friend Mr. Harry Moatz beleives that the answer would always be no, but I personally beleive the correct answer would be yes, albeit with the caveat that there would have to be at least some nexus with prosecution, e.g. if it were part of a merger or acquisition, then it would likely not be “incident to prosecution”.

    Only the courts can decide, and no court has done so.

  4. Let me amend the earlier hypothetical. The three inventors are in three states, being paid by a Delaware corporation for their R&D. Can the corporation’s patent attorney, not admitted in any state, do assignments from the inventors (assuming no conflicts and w/waivers)?

  5. Why not sponsor a new uniform code similar to the UCC or Uniform Securities Act which will enact privileges for the patent bar, specifically the right to draft assignments (agents and attorneys) and licenses (attorneys only)? Call it the Uniform Patent Practitioners Act. It would be adopted by all states over a period of years, thus entrenching a national patent practice. Politically it is a win-win. The patent bar already engages in de facto national practice and its members are loath to lose that privilege. The PTO gets a hot potato off their hands. Businesses get to ensure a cost competitive national pool of patent practitioners. And state lawmakers get to boast they are doing something to lower legal costs by maximizing competition among lawyers.

    If your stock broker (registered under the Federal Securities Act) can transact via the states Uniform Securities Act a large amount of “property” on your behalf, it is ridiculous not to let patent practitioners (registered under the Patent Act) have a similar privilege to convey patents (a special form of property) via the proposed Uniform Patent Practitioners Act?

    Has anyone tried this before?

  6. OK, I would be willing to register and pay dues in all states that I have clients in.

    But, for example, states like Indiana will not allow you to enter their bar as an out of state attorney unless you file an affidavit stating your intent to engage in the practice of law predominantly in Indiana. “Predominantly” means that the applicant’s practice in Indiana must exceed, or be equal to, his or her practice in all other jurisdictions combined.

    Catch 22. There really is no practical way for an out of state attorney to register without effectively giving up their practice in other states.

    Unless the state bars all agree to respect each others members – this proposed rule change places a huge chill on patent attorneys performing the basic service of filing an assignment along with a new application.

    The result being higher costs to obtain intellectual property.

  7. My question is: What prompted all of these rule changes? Why re-write the rules at all? What is wrong with the existing rules?

  8. This is an interesting topic which definitely requires some clarification by all.

    I am a European Patent Attorney and now also a US Patent Agent. It seems to me unrealistic to separate the practice of preparing assignments from patent filing and prosecution. From my experience, most US attorneys have a general law education which does not teach them a great deal about drafting patent assignments (this is my experience only). It would make sense for the USPTO to include drafting patent assigments as part of “patent practice ” and integrate this topic into the patent bar exam rather than exclude it from their patent practice definition. This would benefit all practitioners (US Patent Attorneys and Patent Agents) and would avoid the whole out of state issue because the patent bar is nationwide.

    Interestingly enough, if I understand it correctly (maybe someone out there can confirm this), a US Attorney who has not passesd the US patent bar can theoretically draft a patent assignment which, if true, really shows how out of step the system is. After all, how can one prepare a patent assigment document without a fundamental background in patent practice?

    The UK and Europe patent bar exams are specifically directed towards all aspects of patent practice including drafting assignments and infringement & validity. I think such an approach would work well here in view of the fact that patent law is so specialised and patent pratitioners have clients nationwide.

    As for making this change in the interest of the public, I cannot see how making it more difficult for a client to proceed with a patent agent or out of state US patent attorney is in the interest of the clients at all.

  9. The various state bar organizations and/or state statutes control the unauthorized practice of law for activities performed within their jurisdiction. As a Virginia attorney, I am able to represent a Japanese client by preparing a license agreement. There are no activities taking place in either New York or Delaware, so those jurisdictions have no control over my activities. But, I am ethically bound to be familiar with New York and Delaware law in the preparation of the agreement.

    The more interesting question is do I need to be licensed in New York if I am a Virginia attorney representing the New York licensee.

  10. If a Japanese client wants to license his patent to a New York based company selling its product nationwide, who is authorized to represent the Japanese client? (The licensing agreement designates a Delaware court for future dispute).
    a. a New York attorney
    b. a Delaware attorney
    c. a Japanese attorney
    d. none of the above
    c. all of the above

  11. For the record, I am a patent agent.

    See PTO form PTO/SB/15 which is as generic as it gets.
    There is a vast difference between providing an assignment document to a cleint for use with an inventor who signs the form acknowledging the transfer of ownership and such things as drafting a licensing agreement. The two issues should not be conflated. One is clearly incident to practicing before the PTO, just as are administrative appeals, interferences and the like, whereas the other is a strictly commercial matter.
    The comments made by others also suggest that lawyers would have similar ethical problems if the “assignment” document were considered a sales contract under the laws of either of the partie’s states.

  12. Does the fact that most assignements are simple boilerplate take them outside the practice of law in many states anyway? I think they do in mine…

  13. In all cases, the client’s in-house counsel provides us with assignment documents. Even foriegn entities have thier respective in-house counsel prepare the translated Enlish language assignment documents since, in most cases, they will be enforceable in the country where the inventor and the corporation reside and are subject to the exigencies of that country.

    Some interesting questions are posed when one of the inventors is, say, a U.S. citizen and resident, but these questions are usually handled, again, by the client. A less sophisticated client would require more careful representation in such an area for sure.

    Declarations, on the other hand, I would think transcend the state law question as they are required by the patent statute. The rule seems to be then, if asked for assignment document boilerplate or if asked to prepare other documents or agreements, make sure to avoid any cross-state practice issues.

  14. I have to wonder what drives these changes. Do the states urge the OED to cede back to them jurisdiction over the relatively few patent attorneys there are in each state? Do states want the enrollment fees for patent attorneys who are not members of that state’s bar? Drafting an outright assignment may not be the hardest thing any attorney has to draft, so what’s the big deal?
    What good do clients get by some administrative agents requiring them to have one attorney prepare and prosecute their applications, and then have to go to another attorney to get a contract drafted for the same matter?

  15. I’ve seen the out-of-state attorney problem addressed in the retainer letter. The retainer letter states: (a) the attorneys are not admitted in the foreign jurisdiction, (b) the attorneys will provide advice as if the client were in the local jurisdiction, (c) the relevant law between the foreign and local jurisdiction is probably similar, (d) the client should have their general/corporate counsel involved if the client has any concerns.

  16. On a completely different tack, has anyone noticed that proposed new rule 11.25 would require that we report all routine traffic tickets to the OED, as the exemption was taken out.

  17. I will comment publicly, and not anonymously. I don’t care who reads it, and I especially hope that Mr Moatz does.

    The commentary to the rule changes says that agents cannot prepare assignments where state law considers it to be the practice of law, and indeed the PTO have been saying that for some time, but the changes to rule 11.5 don’t say that, leaving the definitions of practice before the office open ended as before and merely lengthening a list of things positively included.

    Moreover, I beleive the commentary to be a significant misstatement of the law. No court has ever ruled on whether preparation of patent assignments is ‘incident to prosecution’ (and therefore held to be within the scope of the registration) as per Sperry v Florida, 373 US 379, USSC 1963, leaving that question undecided.

    What’s more, the Sperry decision also stated (albeit perhaps dicta?) that patent agents already practice law by preparing and prosecuting applications, which would mean that simply whether or not a state considers preparing assignments to be the practice of law is absolutely not dispositive of whether a patent agent can do that, but also whether it falls within the licence. Hence the statement in the commentary implying that this question is dispositive is simply wrong, as it asks the wrong question. The commentator (Harry Moatz himself?) clearly believes it does not fall within the licence, and so beleives that the latter question is unnecessary, but the new rules themselves remain silent, thankfully.

    If only those patent agents who were employees of the assignee could prepare even a standard pro forma patent assignment, as the commentary says, then no patent agent could represent a corporation that itself had no in-house patent counsel, given as we know that US (and no other) patent applications must be filed in the name of the inventor(s). This would render registration as a patent agent a hollow useless thing, absent legislation to enable filing of patent applications in the name of corporations as the rest of the world does. As another poster pointed out, no client wants to be sent elsewhere to get an assignment done.

    Even if the commentary were right, and I don’t think it is, many states have case law that form filling is not the practice of law.

    And that’s not all, as Dennis himself points out, there are negative implications for attorneys as well, it being common for patent attorneys to be admitted in a state other than where they practice, and to have clients from many states (and countries).

    If new rule 11.5 itself said that patent agents (and out-of-state patent attorneys) could not prepare assignments, that might be one thing, but as long as it is mere commentary it seems like the courts get to decide, and the controlling law of the land is still Sperry, which asks whether it is incident to prosecution.

    I have no desire to start a flame war on your blog, Dennis, but this same question has lead to that happening elsewhere.

  18. I believe that in Ohio the recently revised rules of professional conduct would cover situations such as Ohio assignments and license agreements written/negotiated by an attorney not admitted in Ohio. For example, a lawyer admitted in another jurisdiction is permitted to engage in negotiations that arise out of or are reasonably related to the lawyer’s practice in another jurisdiction in which the lawyer is admitted. Although this is supposed to be permitted only on a “temporary basis,” one the official comments indicates that this could include services done on a “recurring basis.” Another comment also indicates that the required relationship between the work and the lawyer’s practice in another jurisdiction could include situations where the “Ohio services” draw on the “lawyer’s recognized expertise developed through the regular practice of law on behalf of clients in matters involving a particular body of federal, nationally-uniform, foreign or international law.” On the other hand, another comment states that the lawyer may need to inform the client that they are not licensed to practice in Ohio and the work requires knowledge of Ohio law.

  19. I hope the intent is to codify that an agent is not an attorney and cannot do contract work.

    As for attorneys, I certainly hope it does not affect out of state practice – as this would be very bad for the profession. Clients do not want to go to one attorney for prep and pros and another for assignements, licenses and the like – in fact the idea is silly on its face.

  20. Maybe I am just a curmudgeon these days, but I think the PTO should butt out of non-patent related business. I am a registered patent attorney and a member of the Nevada Bar, so I am authorized to prepare both patent applications and license agreements. All my clients are Nevada entities, so I am not forced to make unauthorized practice of law decisions.

    The Nevada State Bar wouldn’t have a clue what patent attorneys do. It can barely get lawyers to pay their dues on time.

    Attorneys should know the rules of what they can do and cannot do. It’s not the PTO’s beeswax to check behind the documents they file to see if they have been legally prepared.

    Big firm lawyers have this issue all the time. It’s between them, their clients and their malpractice insurers as to how they handle this.

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