Federal Circuit Affirms District Court’s Sanctions; Enters its Own for Frivolous Appeal

The case — Walker v. Health Int’l. Corp. (CAFC Jan. 6, 2017)  (here) — isn’t written very well, and doesn’t seem to break a lot of new ground, but it’s rare for the CAFC to enter sanctions on its own, so it’s worth a read.  From what I can tell, the lawyer was sanctioned by the district court because he settled a case, but then consistently asserted that he hadn’t; he was sanctioned on appeal for making some unsupported arguments and falsely attacking opposing counsel, it seems.

My Letter to the USPTO About Duty of Candor Amendments



Dear Mr. Sked:

I write solely in my personal capacity as someone who advises patent practitioners on ethical issues and litigates patent cases.  These views are not those of my employer or my clients.

I have one broad concern and several more specific ones.

The USPTO Should Interpret the Patent Act Correctly and not Give False Security to Practitioners. 

            At a broad level, I agree uniformity is a good thing.  However, there will not be uniformity because of the different claim constructions given in litigation than in proceedings before the Office. I also agree with the USPTO that it need not follow the Federal Circuit’s definition of materiality (or anything else) from Therasense. However, it seems incongruous for the agency, as the entity charged by Congress with implementing the Patent Act, to adopt a definition that it rejected. Given than uniformity will not exist, what does the USPTO believe is required by the Patent Act of applicants?

More troublesome, however, is the real likelihood that the narrow definitions from Therasense will be rejected by the Supreme Court.  The Supreme Court has in recent years routinely rejected the Federal Circuit’s rigid, cabined interpretations of the Patent Act.  While no one knows what the future holds, today’s practitioner’s conduct may be judged by a more stringent standard than suggested in Therasense and proposed here. That has happened with eligibility, obviously.  Given that the Supreme Court could hold that the Patent Act requires more than avoiding intentionally obtaining a patent that you know you shouldn’t get, and given that that interpretation will likely be applied to all issued patents, and given the USPTO’s statement that it hopes that the new definition will result in less disclosure, one can see a trap for the unwary practitioner.  This may give practitioners a false sense of security.

My more specific comments relate primarily to “who” is covered by these rules.  They don’t make sense.

Rule 1.56 Makes Sense as to Who is Covered; Rule 1.555 Does Not.

As written, Rule 1.56 applies to “[e]ach individual associated with the filing and prosecution of a patent application,” and is further narrowed by subsection (c) which requires “substantive involvement.”  The rule ties the individual to substantive involvement in prosecution or filing.

Rule 1.555, in contrast, is (I think) unintentionally broad.  It states that the duty is owed by “the patent owner, each attorney or agent who represents the patent owner, and every other individual who is substantively involved on behalf of the patent owner.”  The way this is worded, every attorney and other person “associated with” the patent owner must disclose material information, even if the person has no involvement whatsoever in the reexamination. I believe if the sentence were written much like 1.56(c) is, this would clear this up: “The persons who owe a duty to disclose to the Office all information known to them to be material to patentability in a reexamination proceeding are every person who is substantively involved in the reexamination and who is associated with the patent owner, including each attorney or agent who represents the patent owner in the proceeding.”

            Who, in Both Rules, can Commit “Affirmative Egregious Misconduct?”

             The amendment to Rule 1.555 seems to limit who can commit “affirmative egregious misconduct” to the patent owner and those who act “on behalf of” the patent owner.  Rule 1.56 is not so limited, and is also written in the passive voice.

These differences and wordings raise three questions.

First, as noted above, the definition for reexamination would seem to allow for a patent to be held unenforceable due to conduct by every person “associated with” a patent owner, whether that person was involved in the reexamination, or not.  Granted, it likely won’t be affirmative egregious misconduct if the person wasn’t involved, but having a clear definition may help.

Second, under Rule 1.555, can someone other than “the patent owner, each attorney or agent who represents the patent owner, and every other individual who is substantively involved on behalf of the patent owner” in a reexamination commit affirmative egregious misconduct?  Presumably so; but is that the intent of the Office? Again, the comment in the prior paragraph may make this an academic point, but the way the rule is worded the person doesn’t need to be substantively involved in prosecution (and, as noted above, presumably substantive involvement is what was intended).

Third, when read in pari materia, Rule 1.56 is broader than Rule 1.555, since Rule 1.56’s “affirmative egregious misconduct” prong is not limited in the same way as Rule 1.555.  When read together, under Rule 1.56 a person’s conduct can result in non-issuance of a patent even if that person was not acting on behalf of the patent owner.  This seems harsh and unintended.  My suggestion would be to make the two provisions in the different rules have the same scope, and affirmative egregious conduct “by or on behalf of the patent owner” probably is reasonably clear and meaningfully limited in scope.

A Closing Thought:  Uniformity.

In closing, as noted at the outset, uniformity can be a good thing.  To that end, the USPTO has rules that relate to the same general concept – candor and disclosure – but which cover different groups of people. While there may be a policy basis to make the distinctions the rules make, I am not able to guess them.

For example, in addition to the differences discussed above, I note that Section 42.11 – the “rule 11” of IPR — applies to “parties and individuals involved” in an IPR.  Section 42.11 does not require “substantive involvement,” just “involvement.”  Further, because it includes “parties,” it creates the same problem discussed above with respect to Rule 1.555:  everyone who works for a “party” apparently is covered by 42.11, even if that person has nothing to do with the IPR.  As a final example of the varying coverage of these somewhat related rules, Section 42.51(b)(1)(iii) – the obligation in IPR to disclose inconsistent information — requires disclosure by “inventors, corporate officers, and persons involved in the preparation or filing of the documents or things.” Again, substantive involvement is not required, merely “involvement,” but “parties” are not subject to this rule.

It may be helpful to strive toward a single definition in these different rules is my point in closing.  These create practical problems and potential traps and needless litigation.

Glad to provide further information if I can.

Very truly yours,


David Hricik



Peace and Happy Holidays.

As a lot of you know, this past year was quite a challenge for me.  Here is to putting that year behind me, and to blessed times for you, yours, our country, and our planet.  The year ahead is not going to be like the year behind.

AIPLA comes out in favor of USPTO rule for patent agent-client privilege

The AIPLA letter to director Lee is here.

First, I’m not sure the USPTO has power to do this.  Whether or not there is privilege turns, under Fed. R. Evid. 501, on federal common law, federal statutes, or the Constitution, not agency rule-making.

Second, the scope of the privilege is a quagmire.  The problem is that the scope of privilege, at least so far as the Federal Circuit in a 2-1 panel decision in Queen’s University (and other courts) has said, turns on the scope of authority of patent agents.  So, a patent agent who, for example, emails after a patent has issued about, say, its potential infringement: no privilege.

And don’t get me started about the incomprehensible approach of the USPTO on whether patent agents can write assignments.  (“Drafting an assignment or causing an assignment to be executed for the patent owner in contemplation of filing or prosecution of a patent application for the patent owner, where the practitioner represents the patent owner after a patent issues in a proceeding before the Office, and when drafting the assignment the practitioner does no more than replicate the terms of a previously existing oral or written obligation of assignment from one person or party to another person or party.”).  Why on earth would it be competent for a patent agent to simply “replicate” an agreement, without first determining what it does?  And how does one “replicate” an oral agreement?  And why — in order to draft the assignment before filing — must the patent agent represent the patent owner “after a patent issues”?  More fundamentally, how does a patent agent write an assignment before a case is filed, but also is representing the owner after the patent issues? I like time travel movies, but…

But I digress.

For now, and I would say even after/if the USPTO adopts a rule, be very careful if you have patent agents communicating directly with clients, without supervision of a lawyer, because there’s also the possibility that a court won’t follow the Queen’s University case and hold there is no privilege, anyway. That’s already happened in Texas.

Stay tuned.

ABA Issues Opinion Addressing Disputes over Fee Division

The ABA today issued Formal Opinion 475, entitled “Safeguarding Fees That Are Subject to Division With Other Counsel.”  The abstract provides:

A lawyer may divide a fee with another lawyer who is not in the same firm if the arrangement meets the requirements of Model Rule 1.5(e). When one lawyer receives an earned fee that is subject to such an arrangement and both lawyers have an interest in that earned fee, Model Rules 1.15(a) and 1.15(d) require that the receiving lawyer hold the funds in an account separate from the lawyer’s own property, appropriately safeguard the funds, promptly notify the other lawyer who holds an interest in the fee of receipt of the funds, promptly deliver to the other lawyer the agreed upon portion of the fee, and, if requested by the other lawyer, provide a full accounting.

The opinion is available here.  I’ve dealt with lawyers fighting over fees a few times, and the opinion in my view is pretty straightforward… however, always be sure to check the particular state rules, since not all states follow the Model Rule, either by adopting different text or by interpretation.

Effective December 1: No more 3 additional days in federal court to respond for papers served by e-mail

Federal Rule of Civil Procedure 6 has, since it first allowed for service by electronic means, treated it like other means of service, adding 3 days to the deadline to respond (under some circumstances).  It’s now been deleted from the types of service that give the extra there days.  A link is here to this and other rule changes.

Enter the possibility of making life miserable for opposing counsel by serving on the weekend, etc.  A reviser’s note states:

“Electronic service after business hours, or just before or during a weekend or holiday, may result in a practical reduction in the time available to respond. Extensions of time may be warranted to prevent prejudice.”

I can only imagine judges, already in Rule 12 hell because of 101 jurisprudence, now dealing with this.

More Pressure on Texas Supreme Court to Enforce Ethical Rules Despite Arbitration Clauses

Dennis wrote about this case involving Jenner & Block and Parallel Networks on the main page, and I was an expert in the underlying case for the client.  Boiled down, Jenner agreed to represent Parallel Networks on a contingent fee.  The firm got upset when the client fell behind on expenses, and the client paid up.  Then the firm lost  on summary judgment, and dumped the client.

The law in Texas is pretty clear that there’s a big distinction between whether you can quit a case — withdrawal — and whether you can quit a case and be paid.  The former is pretty narrowly circumscribed but the latter is severely so:  without “just cause” you lose any right to any money.  Makes sense, otherwise a contingent fee is illusory:  I get in a case, and it’s a loser, I withdraw but still get paid.  Undermines the entire notion of contingent fees.

Although Jenner gave up on its client’s case, the client didn’t.  But the client had to pay another firm hourly fees to handle the appeal and get the case out of the ditch into which Jenner had put it, and left it.

Then that firm (my old firm, Baker Botts), turned the case around on appeal,  resulting in settlement money.

Believe it or not, Jenner then demanded that — even though it had left its own client in the ditch to fend for itself — because of the contingent fee agreement, it was entitled to its fully hourly fees. Yes, full hourly fees because supposedly that’s what the agreement provided.  The arbitrator awarded the firm some money, but not full hourly fees.  The agreement is quite something to read and Jenner pointed out that the client had used it in another case (long story), and so, presumably, was the cause of any unethical provisions in it.  (Think on that.)

The Texas courts have, so far, refused to even examine the merits  of the award because, supposedly, the Federal Arbitration Act precludes review unless the award was fraudulent, etc.

As you can imagine, the prevailing notion in Texas that we’ve outsourced ethics to arbitrators (aka, lawyers), and as a result insulated their decisions from review by the judiciary — supposedly independent and constitutionally charged in many states with enforcing ethics —  has caused some people to wonder about what is wrong in Texas courts.  If anything, the Texas Supreme Court should say, clearly:  “if there’s an arbitration clause it will be enforced even if the conduct is unethical because that’s what the FAA requires,” so the Supreme Court can take corrective action.

The latest amicus brief is here.  Dennis’ post which links to my earlier one, is here.

I don’t mean to be flippant but, the way things stand, suppose you hire a hit man and, being the good lawyer you are, you include an arbitration clause in your written agreement. He then decides it’s not right to murder someone. So you bring an arbitration proceeding for damages. Hooray for you.  That arbitrator is free to ignore public policy saying that contract is no good, and make then hitman pay, and a Texas court will enforce the award.  Yes, a silly example and obviously extreme, but that’s where Texas now is. It’s obviously wrong, seriously misguided, and needs to be corrected by that court or the one above it.

Prosecution Bars, Experts, and IPR

I’ve written a lot about so-called prosecution bars (buy some of the books for Christmas gifts here!  They make great stocking stuffers for toddlers), and this case is in many ways not that unusual but it does raise one interesting issue and serves as a reminder to both check your side and the other’s for folks who may need to be subjected to a bar, and its scope.

The opinion is not online that I can find but is Emerson Electric Co. v. Sipco, LLC, 2016 WL 6833741 (N.D. Cal. Case No.16-mc-80164-DMR, Nov. 21, 2016).  A third party, Linear Technologies Corporation (“LTC”) was served with a subpoena that included a request for its source code.  LTC sought to ensure that one of the party’s experts, Ameroth, would not have access to it because he was participating in IPRs.  LTC had not instituted the IPRs and was not a party to the litigation.

Everyone agreed to amend to include a prosecution bar in the protective order (apparently it did not, before the subpoena, contain one), but the dispute was over whether Ameroth could view LTC’s source code and still participate in the IPR.

The magistrate granted a prosecution bar that precluded the accused party’s expert from participating in an IPR if the expert gained access to source code from the patentee.  In that sense, the case doesn’t add a whole lot to the mix.  But in its plain reasoning are three hidden lessons.

First, two lessons arise out of the way that courts (and the parties) define the “activities” that courts (and lawyers) focus on to determine whether someone should be barred, or not.  The typical court focuses on patent prosecution, and whether a particular practitioner is doing rote prosecution or is instead in position to be doing “competitive decision making” in terms of prosecution bars.  This court wrote:

[C]ompetitive decisionmaking may be a regular part of representation for counsel or experts who are engaged in work such as: obtaining disclosure materials for new inventions and inventions under development, investigating prior art relating to those inventions, making strategic decisions on the type and scope of patent protection that might be available or worth pursuing for such inventions, writing, reviewing, or approving new applications or continuations-in-part of applications to cover those inventions, or strategically amending or surrendering claim scope during prosecution.

That definition raises the first two lessons.

The first lesson is don’t use a form that simply says “prosecution.”  Even when applying this definition to practice before the USPTO, courts continue to split on whether IPRs (reeexam, reissue, etc.) are “prosecution.”  Some courts formalistically say “prosecution isn’t IPR” and so a protective order may not prevent someone from receiving highly confidential information but being involved in IPR.  (Or, it might:  therein is the issue). Other courts, even if they go beyond formalistically reading the protective order, hold that IPR does not create the same risk as prosecution, and so is not covered. Given the initial differences between the realistic probability of the PTAB in allowing claim amendments, you can understand why some courts had held that IPR did not present the risk of “shaping” claims that ordinary prosecution did.  (Given the slightly more moderate view of the PTAB in allowing amendments, maybe the reason for the split is dissipating?)

The take away on this first lesson?  If your prosecution bar does not specifically address IPR you may want to amend it.  Without clarity, you may be violating it, or the other side may be doing things you “think” they’re not supposed to do but which may be proper.  Many “forms” out there are not very good if you want clarity.

The second lesson is:  don’t stop at patent prosecution when figuring out what activities need to be covered, and as a result who needs to be covered.  Instead, imagine who else besides the lawyers on the other side who are prosecuting patent applications might need to be barred, and who on your side may need to be barred.  A good protective order will go beyond “prosecution” and cover other activities that present risk for misuse. Those could include IPR, reissue, reexam, or licensing activities, patent acquisition, or a host of other things).  Those activities may mean that people far beyond patent prosecutors will be covered, including experts, inventors, owners of NPEs, and so on.  Folks besides patent practitioners can misuse information.  Again, you need to be sure you know who is covered, and be sure you look at the other side’s folks, too.

The third lesson is procedural.  In this case, the magistrate imposed a burden on the party receiving information to establish that an individual is “exempt” from the bar.  This makes sense, since there (often) will be no way for Party A to know what Party B’s lawyers, and so on, are doing.  But, some courts require the party seeking a bar to show that a person working for the other side should be included. That can be awkward, to say the least.  But that also reiterates lessons one and two above, and the need for diligence — for protecting your client’s information and protecting your side from being accused of misusing information when the bar was not clear.


Sedona Conference Guidance on Parallel Litigation and PTAB Proceedings

The pithily named publication, “Commentary on Patent Litigation Best Practices: Parallel USPTO Proceedings Chapter (“Stage One”),” lays out 33 “best practices” and is available here. Those practices contain several that relate to competency and so I thought they’d be of interest:

  • Parties should be familiar with the limited categories of discovery available in postgrant proceedings.
  • Parties seeking additional discovery in a post-grant proceeding should identify the material sought with particularity and make a required showing why additional discovery should be granted.
  • Parties seeking additional discovery should explore whether each side might want and benefit from certain discovery beyond what is normally permitted by the PTAB; and, if so, then the parties should consider voluntarily exchanging such discovery.
  • Litigation counsel should not be barred from litigating patentability in the PTAB.
  • Parties seeking a litigation stay during post-grant proceedings should promptly provide the district court with complete information about: the patents-in-suit; the parties; the claims; the defenses; any other existing cases involving any of the patents-in-suit or the same parties; the instituted, pending, or forthcoming PTAB review petitions involving the patents-in-suit; and any timing or jurisdictional issues that may arise.
  • The district court should consider asking key questions relevant to stays for all patent cases at the earliest possible stage of the litigation. .
  • If a PTAB review petition has been or is likely to be filed, parties should confer with opposing counsel as early as possible regarding possible joint stipulations for a stay of district court litigation.
  • The patentee should disclose as early as possible to the district court any intent to amend asserted claims in post-grant proceedings.
  • Parties to a litigation who avail themselves of the PTAB should be required to disclose as early as possible to the district court all real parties-in-interest to the PTAB proceedings, and make an effort to disclose any parties in privity.
  • Parties to joint defense groups should confer as early as possible about which defendants, if any, will petition for an IPR proceeding; and, if moving for a stay of the district court litigation, the parties should agree to be estopped on any ground that is raised or that could reasonably be raised before the PTAB to maximize the chances of obtaining a stay.
  • Parties seeking a litigation stay should demonstrate to the district court how potential estoppel may simplify the issues.
  • If a party requests a litigation stay, the district court should determine whether a post-grant proceeding will simplify the issues with respect to the asserted claims and the prior art. .
  • If a party requests a litigation stay, the district court should inquire whether all codefendants, including those not participating in the post-grant proceedings at the PTAB, will agree to a limited estoppel on any ground actually raised and adjudicated in exchange for granting the stay.
  • If a petitioner files an IPR or a PGR concurrently with a declaratory judgment action, the district court should strongly consider maintaining the automatic stay pursuant to statute.
  •  If PTAB review has been instituted before the filing of a district court infringement action on the claims, the court may consider this as weighing in favor of a stay. .
  • A litigation stay request after a CBM proceeding has been instituted may weigh in favor of a stay.
  • A litigation stay request filed before the institution of a post-grant proceeding may weigh against a stay, but the district court may instead deny without prejudice so that the party can refile its request if and when institution occurs.
  • If a post-grant proceeding would likely result in cancellation of all claims at issue in the district court before a final judgment, this may weigh heavily in favor of a stay.
  •  If a party requests a litigation stay, the district court should consider ruling on the motion as soon as possible, and to the extent that the defendant unreasonably delays in filing the motion, that should weigh against a stay.
  • If a party requests a litigation stay, the district court should consider denying the stay if Markman proceedings are substantially complete, or if discovery is already closed.
  • A potential of a loss of evidence over time may weigh against a stay, but the risk must be demonstrated, serious, and not otherwise preventable.
  • If the lack of full and complete discovery may unduly prejudice a party before the PTAB on critical issues, this may weigh against a stay.
  • If the parties are direct competitors, this may weigh against a stay due to potential prejudice to the patentee.
  • A post-grant proceeding that will likely require additional time to fully resolve the issues may weigh against a stay.
  • Throughout any post-grant proceeding, and especially at its conclusion, the parties to a stayed litigation should meet and confer to reassess settlement positions, the terms for having the stay lifted, and the means to streamline the case going forward.
  • Upon lifting a stay, the district court may consider a conference with the parties to evaluate the case going forward. .
  • The district court should consider issuing a detailed written decision on any stay motion, and seek to have opinions published such that they are available to the public as this area of law develops.
  • Parties considering post-grant proceedings should consider the extent of the estoppel created by each type of post-grant proceeding.
  • Parties should consider, where appropriate, forgoing PGR and IPR proceedings to avoid the risk of being estopped from raising unasserted invalidity theories that they “reasonably could have raised” in the PGR or IPR.
  • Potential estoppels arising from PGR, CBM, and IPR proceedings should be considered claim-by-claim.
  • Those with a potential interest in the outcome of a post-grant proceeding should evaluate if they would likely be considered to be a real party-in-interest or in privity with the petitioner.
  • Parties to a joint defense group or an indemnitor-indemnitee relationship should consider the possibility that estoppel (whether legal or practical) will apply notwithstanding their lack of direct participation in the post-grant proceeding.
  • The potential for remand should be considered before lifting a stay to apply PGR, CBM, and IPR estoppels where the Final Written Decision of the PTAB has been appealed to the Federal Circuit.

USPTO Proposed to Revise Rule 56

by David Hricik [Originally published on Nov 1]

The announcement is here.  I will be submitting comments before the 12/27 deadline, and so if you have any ideas or thoughts, please post away.  The proposed amendment include responses to comments made back in 2011 when the USPTO was initially pondering this, and the proposed rule now reads:

(a) A patent by its very nature is affected with a public interest. The public interest is best served, and the most effective patent examination occurs when, at the time an application is being examined, the Office is aware of and evaluates the teachings of all information material to patentability. Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability under the but-for materiality standard as defined in paragraph (b) of this section. The duty to disclose information exists with respect to each pending claim until the claim is cancelled or withdrawn from consideration or the application becomes abandoned. Information material to the patentability of a claim that is cancelled or withdrawn from consideration need not be submitted if the information is not material to the patentability of any claim remaining under consideration in the application. There is no duty to submit information which is not material to the patentability of any existing claim. The duty to disclose all information known to be material to patentability is deemed to be satisfied if all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by §§ 1.97(b) through (d) and 1.98. However, no patent will be granted on an application in connection with which affirmative egregious misconduct was engaged in, fraud on the Office was practiced or attempted, or the duty of disclosure was violated through bad faith or intentional misconduct. The Office encourages applicants to carefully examine:

(1) Prior art cited in search reports of a foreign patent office in a counterpart application, and

(2) The closest information over which individuals associated with the filing or prosecution of a patent application believe any pending claim patentably defines, to make sure that any material information contained therein is disclosed to the Office.

(b) Information is but-for material to patentability if the Office would not allow a claim if the Office were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction consistent with the specification.

* * * * *
■ 3. Section 1.555 is amended by revising paragraphs (a) and (b) to read as follows:

§ 1.555 Information material to patentability in ex parte reexamination and inter partes reexamination proceedings.

(a) A patent by its very nature is affected with a public interest. The public interest is best served, and the most effective reexamination occurs when, at the time a reexamination proceeding is being conducted, the Office is aware of and evaluates the teachings of all information material to patentability in a reexamination proceeding. Each individual associated with the patent owner in a reexamination proceeding has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability in a reexamination proceeding under the but-for materiality standard as defined in paragraph (b) of this section. The individuals who have a duty to disclose to the Office all information known to them to be material to patentability in a reexamination proceeding are the patent owner, each attorney or agent who represents the patent owner, and every other individual who is substantively involved on behalf of the patent owner in a reexamination proceeding. The duty to disclose the information exists with respect to each claim pending in the reexamination proceeding until the claim is cancelled. Information material to the patentability of a cancelled claim need not be submitted if the information is not material to patentability of any claim remaining under consideration in the reexamination proceeding. The duty to disclose all information known to be material to patentability in a reexamination proceeding is deemed to be satisfied if all information known to be material to patentability of any claim in the patent after issuance of the reexamination certificate was cited by the Office or submitted to the Office in an information disclosure statement. However, the duties of candor, good faith, and disclosure have not been complied with if affirmative egregious misconduct was engaged in, any fraud on the Office was practiced or attempted, or the duty of disclosure was violated through bad faith or intentional misconduct by, or on behalf of, the patent owner in the reexamination proceeding. Any information disclosure statement must be filed with the items listed in § 1.98(a) as applied to individuals associated with the patent owner in a reexamination proceeding and should be filed within two months of the date of the order for reexamination or as soon thereafter as possible.

(b) Information is but-for material to patentability if, for any matter proper for consideration in reexamination, the Office would not find a claim patentable if the Office were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction consistent with the specification.

No Common Interest Privilege in NY Without Anticipated Litigation

This case is going to cause some problems.

Normally, if Client A and Lawyer A have a confidential communication, disclosure of it to a third party waives any privilege.  However, if Client A and the third party have a “common interest,” there is no waiver.  So, for example, if a licensor communicates with patent prosecution counsel for the licensee about prosecution of a foreign counterpart of the licensed patent, there might be a privilege.

But not under New York law.  The Court of Appeals, inaptly named highest court of New York, held that only if there is pending or anticipated litigation is the common interest exception to waiver available.  Ambac Assurance Corp. v. Countrywide Home Loans, Inc., (June 9, 2016).

9th Circuit en banc follows others and adopts Octane for Trademark Fee Shifting

In SunEarth, Inc. v . Sun Earth Solar Power Co., (9th Cir. Oct. 24, 2016), the court held that the same interpretation given to the patent act’s fee shifting statute, 35 U.S.C. § 285, applies to the trademark statute, 15 U.S.C. § 1117(a).  The court noted:

Following [Octane], the Third, Fourth, Fifth, and Sixth Circuits have recognized that Octane Fitness changed the standard for fee-shifting under the Lanham Act. Baker v. DeShong, 821 F.3d 620, 621–25 (5th Cir. 2016); Georgia- Pacific Consumer Prods., 781 F.3d at 720–21; Slep-Tone Entm’t Corp. v. Karaoke Kandy Store, Inc., 782 F.3d 313, 317–18 (6th Cir. 2015); Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303, 313–15 (3d Cir. 2014). Only the Second and Seventh Circuits have applied earlier case law to Lanham Act fee disputes, and both did so without mentioning Octane Fitness or Highmark. Merck Eprova AG v. Gnosis S.p.A., 760 F.3d 247, 265–66 (2d Cir. 2014); Burford v. Accounting Practice Sales, Inc., 786 F.3d 582, 588 (7th Cir. 2015).

My guess is that pretty soon those latter circuits will flip, too.

Sleeping During CLE

I do a lot of CLE speaking.  People say I’m funny and I try to scare people into the realities of patent practice and malpractice.  I’ve seen folks who read newspapers, play on their computers, and work during CLEs, and of course there’s a zone of reasonableness about what is required before someone can say they “attended” a CLE.

Fair enough.

I’ve also observed folks leave CLEs before I speak — often they sponsors put the ethics guy last to keep people present — and wondered if they claimed to have attended my hour of ethics.  That seems… unethical.

This case doesn’t get me that precedent, but it’s close.  A lawyer was snoring at a CLE and had to be woken up, and also he apparently had been drinking at it, and eventually had been led out of the room by someone to stop disruption.  Both DC and Virginia gave the fellow a six month suspension — not for sleeping, it seems, but for denying it.  In re Hartke, (D.C. Ct. App. No. 15-BG-984, May 12, 2016).

When Co-Counsel’s Violations are Your Own.

This case, Martin v. Giordano, (E.D.N.Y. Aug. 18, 2016) is not a patent case, but it is a sad and awful read with a sad and awful lesson that should be known to patent litigators, which is:  sometimes you may be held responsible, jointly, with co-counsel who has violated court orders, including Rule 16 scheduling orders.

This one is a doozy, with the judge “sadly but without hesitation” publicly reprimanding two lawyers.  The lead lawyer, Lawyer A, repeatedly missed deadlines and, in the final straw, actually lied to co-counsel who got a continuance based upon the lie that Lawyer A’s mother had died.  (The court correctly holds that, though false, the statements did not violate Rule 11 because they weren’t presented in writing to the court.  I’m not making that up.)

The judge found co-counsel “should have known” that a lot of the earlier excuses were also suspect, and publicly reprimanded both lawyers.

It’s quite a sad read all around.

Texas Issues Several New Ethics Opinions

The Texas ethical rules have some bearing on federal court litigation in the Fifth Circuit, although they do not control. See In re American Airlines, Inc., 972 F.2d 605 (5th Cir. 1992).  Nonetheless, the Eastern District will consider the Texas rules as part of determining “national standards” of ethics in federal court.  (I practiced in Texas for a long time, and am still licensed there and advise lawyers there, and this “national standards” of ethics thing can be a real trap for unwary lawyers who think they can rely on the Texas rules, alone.)

So, a few brand new opinions from Texas are worth mentioning:

  • Opinion 662:  This is a fun one:  what can you do if a client writes a nasty on-line review of you that, you think, is untrue or unfair?  They use Avvo.com (or Yelp?) and say you’re terrible as a patent prosecutor.  What can you do?  There are handful of opinions and they’re coming out the same way as this one, more or less:  You can’t reveal confidential information and you should be “restrained.”
  • Opinion 644:  Basically concludes that a firm that hires a lawyer who, before he became a lawyer, worked for the adversary’s firm as a paralegal, is not disqualified so long as it screens the lawyer from the work.  (Texas does not generally permit screening of lawyers moving from one private practice job to another, but does permit screening of non-lawyers who migrate, so this opinion addresses the odd hybrid scenario.)
  • Opinion 658:  Basically concludes that a firm may not bill a client more than the actual expenses paid on behalf of the client to third party vendors (like Fed Ex, etc.), unless the client agrees to pay more and if the lawyer has an ownership interest in the  vendor, that must be disclosed and make other disclosures.
  • Opinion 661:  Basically concludes that a lawyer can use the name of some other lawyer in Google ads and the like, so that if a person searches for the other lawyer, this lawyer’s name will appear as a sponsored ad.  (Of course, various caveats about truthful advertising still apply.)  (Trademark issue, anyone? I don’t know.)

Update: If Alice was always the law, why did you get so many “invalid” patents for your clients?

I blogged about this case — Encylopaedia Britannica, Inc. v. Dickstein Shapiro LLP (D. D.C. Aug. 26, 2015) — way back when it came out.  The case was summarily affirmed in June.  A cert petition has been filed, and it’s worth reviewing this case again.  If the law stays the way it is, then maybe clients should start suing lawyers to get their fees back for patents that the lawyers “should have known” were “invalid” years before Alice came out…

The Dickstein Shapiro firm had been retained by Encyclopaedia Britannica, Inc. (EB) in 1993 to file a patent application. The patent issued, and in 2006 EB sued several companies for infringing it. The patent was held invalid due to “an unnoticed defect” in the 1993 application.  The basis for invalidity was not 101, and is not clearly stated in the opinion, but seems to have been a break in the chain for priority.

EB then sued the law firm for malpractice in prosecuting the 1993 application.  EB contended that, but for the firm’s negligence, it would have made a lot of money in the infringement suit.

After the malpractice suit was filed, Alice was decided.  The defendant law firm then argued that — had the defendants in the 2006 case not prevailed on the “unnoticed defect” defense (the break in the chain for priority) — they would have prevailed because the patents were “invalid” under 101.  Because the claims would have been “invalid” in the 2006 litigation under 101, there was no harm caused by the actual basis for invalidity — the priority problem.

To put this in context:  Because of a 2014 Supreme Court decision, the 2006 infringement case would have been lost in 2009 anyway because the court in 2009 would have applied Alice’s standard and found the claims ineligible.

And the argument worked.  The district court granted a motion to dismiss for failure to state a claim (actually, for judgment on the pleadings under 12(c), but same standard), finding (holding?) the subject matter ineligible on the face of the patent.

What is interesting is the court’s approach to retroactive application of Alice.  The issue was whether in the 2006 litigation asserting the patent, even had the firm’s alleged malpractice not caused the invalidity of the patent because of the break in priority, the claims were “invalid” under 101 in 2006 — years before Alice was decided.  The district court held that Alice did not change the law, but merely stated what it had always been.    Specifically, the district court stated:

When the Supreme Court construes a federal statute… that construction is an authoritative statement of what the statute has always meant that applies retroactively.  Alice represents the Supreme Court’s definitive statement on what 101 means — and always meant.  Because the underlying case is governed by 101, it is appropriate for this Court to apply the Supreme Court’s construction of 101 as set forth in Alice.

(Citations omitted).

For this and other reasons, the court reasoned that “the only rule that makes sense in this context is to apply the objectively correct legal standard as enunciated by the Supreme Court in Alice, rather than an incorrect legal standard that the [district court in the 2006 infringement case] may have applied prior to July 2015 [when the court was deciding the motion.]”  The court then applied Alice and found the claims “invalid” under 101.  Thus, the firm’s failure to maintain priority did not cause harm — the “invalidity” under 101 did.

There’s a lot to unpack here.

Let’s start with a basic statutory interpretation principle: as a matter of statutory construction the retroactivity principle relied upon by the district court is correct in that retroactivity does not ordinarily apply when an interpretation is changed.  (This perhaps explains why the Supreme Court is careful to avoid saying it is changing an interpretation, because changes to interpretations of a statute are prospective, only, as a general rule.  In that regard, think about Therasense for a moment.) So, if Alice changed the law, then the district court was likely wrong to apply it retroactively.

Let’s be real:  the Supreme Court will never say that Alice changed the law.  We all know it did, or I guess a better way of putting it is:  we were wrong about what the pre-Alice law meant — despite reading the cases as best we could, and so was the USPTO (which is why it issued all those bad patents, and had to put in place, post-Alice, all of those new guidelines, etc.).  So, we were all wrong and Alice merely said what we all were not smart enough to understand the law always was and had been.

Shame on us.

But now let’s look at Dickstein Shapiro’s conduct through that lens: if the law was that clear — that you could 12(b)(6) or summary judgment this patent for “invalidity” under Section 101, why did you get the for the client in the first place?    If the law about 101 “always” was this way, why did you advise EB to spend so much money on a patent so clearly invalid that a judge could decide it by looking at it?

If cert is not granted, patent prosecutors should be ready to disgorge a lot of fees, I guess is what I’m saying.  Remember:  fee disgorgment doesn’t require damages — it requires (usually) a clear and serious breach of duty.  How can this not be?

So now let’s say prospective litigation counsel looks at a patent and in evaluating it, says to the patentee “no, this one’s bad under Alice.  It’s worthless.”  If the client then sues the lawyer who prosecute the patented, you’d think the client would have an easy case: “Lawyer, the law was always the way Alice says it was, and yet you got me this stupid patent, and charged me $25,000 to get it. Give that money back.”

Now, we can get into what is called judgmental immunity — but if the law was settled and clear, how can that help?  We could also argue the law changed — but it didn’t, or so the courts tell us.

But we can’t obviously do this: Allow lawyers to escape liability for bad patents because the law was “clear” back then, and so the client would never have prevailed in an infringement suit, but then allow lawyers to say “the law was unclear” and allow them to avoid disgorging fees.

Someone got any ideas?  The intellectually honest way to approach it is to say that the EB case was wrongly decided:  whether the patent would have been “invalid” under 101 in the 2006 litigation should be decided under the law at the time of trial, not the law in 2014, just as the decision to seek the patent in 1993 should turn on 101 law in 1993, not the law in 2014.  More to that point, we all know that certain claim formats have fallen out of favor (e.g., means-plus-function). If the law was favorable to them in, say, 1993, and a lawyer picked them, why should we use standards developed in 2014 to judge the lawyer’s conduct, even though the “change” is more subtle than occurred in Alice?

And now one more wrinkle.  Suppose a firm represents the client, and sues.  Suppose the judge shifts fees onto the client under 285.  Unless the court holds that those fees are the responsibility of the lawyer bringing the suit, not the client, then the client’ going to be responsible for having sued on an “invalid” patent. Is it going to sue the prosecution firm and say: the law was clear back then, why did you get this patent for me? Look at the damages you caused…?

Stay tuned.


Judgmental Immunity in Patent Malpractice Cases

I serve as an expert in patent cases, sometimes for clients and sometimes for lawyers.  Before offering an opinion, I look very closely at every case, but more closely before opining that a lawyer has violated the standard of care or breached a fiduciary duty to a client. Why?  First, it’s easy to second-guess decisions made in patent prosecution:  reasonable care is required, but what is reasonable under the budget and time constraints (and then-current knowledge) in patent practice may not stand up to the glare of fly-specking that goes on in malpractice litigation, just as a patent that is well-prosecuted may not withstand the scrutiny of litigation.  Second, and it probably is related to the first point, some decisions in patent practice are inherently judgment calls and so there’s a zone of “discretion,” if you will, that should be afforded to those decisions.

The law recognizes these notions in the form of a doctrine called “judgmental immunity.”  The D.C. Circuit recently applied this doctrine in a patent malpractice,  Seed Co. v. Westerman, (D.C. Cir. Aug. 12, 2016).

The malpractice claim arose out of an interference proceeding and has an interesting twist.  The lawyer needed to claim priority to an earlier-filed Japanese patent application that had been domesticated through a PCT.  The Japanese application and the PCT were in Japanese.  Regulations required that a motion to claim benefit had to include English translations of the earlier applications in the claim.  The lawyer filed a US translation of the (first-filed, obviously) Japanese application, but not the PCT.

The Board awarded the earlier Japanese filing date.  Seed won.

The Federal Circuit reversed.  It held that without the English translation of the PCT, the Board erred in awarding  giving the application the filing date of the Japanese application, and, as a result, Seed lost the interference.

Hence the malpractice case.

The district court granted summary judgment to the defendant lawyers, relying upon the “judgmental immunity doctrine.”  It reasoned that, because the law was not settled that a translation of the PCT was required, their decision not to file one was immune from second-guessing.

This court, however, reversed.  It stated that the judgmental immunity doctrine was limited to circumstances where “a lawyer makes a strategic choice between two options, each of which has costs and benefits.”  Thus, an interpretation of unsettled law that “manifestly risks the loss of a client’s claim for no plausible advantage” was subject to a jury’s inference that “a reasonable lawyer would err on the side of caution by filing the translation if the requirements were ambiguous and there were no reason not to do so.”

(The case also has an interesting discussion of the continuous representation rule, a rule that basically says so long as a lawyer is representing a client, limitations does not begin to run.  Here, lawyers who represented the client while at Firm A left and took Seed Co. with them; as to them, limitations continued to be tolled; but not as to Firm A.)


Lawyer who copied and filed substantial portion of draft brief of co-party on appeal held to have violated copyright laws

The court in Newegg Inc. v. Ezra Sutton, PA (CV 15-01395 TJH C.D. Cal. Sept. 2016) (here), faced some interesting facts.  Boiled down, a lawyer representing a co-appellee of Newegg at the Federal Circuit copied a substantial portion of a draft brief written by a lawyer for Newegg, and filed it.

According to news reports, after that, the lawyer withdrew that brief and filed a shorter one which, allegedly, still was based substantially on Newegg’s draft brief.  Newegg then registered copyright for its brief after they were filed, covering both the draft and final brief.  (My mind wonders… if you register copyright on a draft brief, what’s the scope of waiver?) Then Newegg sued the lawyer for copyright infringement.

Rather than raising fair use right away, the defendant lawyer late in litigation moved to amend the final pre-trial order to add fair use as an affirmative defense; and the plaintiff moved for partial summary judgment on infringement.  In an order granting the defendant lawyer’s motion to amend the final pre-trial order to add fair use, the district court held that there was no fair use on summary judgment.  Thus, the lawyer was liable.

This creates some very interesting problems for lawyers, and calls to my mind the case a few years ago where a patent prosecutor was sued for using language from a patent in a specification for another client.  I’m not a copyright lawyer, and so just raise this case for you to think.

Report: Examiner Billing Fraud at the USPTO

The report is here.  This is the summary:

For the 9-month period, the OIG reviewed specific work activities of approximately 8,100 patent examiners and identified 137,622 unsupported hours. This equates to a one-year average of nearly 180,000 unsupported hours. For the 15-month period, the OIG analyzed work activities for roughly 8,400 examiners and identified 288,479 unsupported hours.

The OIG adopted a conservative approach in considering the evidence. These considerations resulted in the OIG excluding a significant amount of unsupported hours in order to ensure that the methodology did not assume unfairly that a particular examiner was not working. Based on certain examiner records, however, the OIG found that the total unsupported hours over the 9- and 15-month periods could be twice as high as reported in this investigation.

The OIG’s analysis further determined that for the 9-month period:

  •   The 137,622 unsupported hours equate to nearly $8.8 million in potential waste.
  •   Approximately 28% of the total unsupported time consisted of overtime hours. The overtime hours equate to over $2.1 million in potential waste.
  •   296 of all examiners covered in this analysis had 10% or more unsupported hours and accounted for 39% of the total unsupported hours. The USPTO paid over $1.4 million in bonuses to these examiners.
  •   226 of those 296 examiners accounted for over 42,000 unsupported hours and also received above-average annual performance ratings.
  •   36 of the same 296 examiners claimed unsupported hours equivalent to three days for every 80 hours of computer-related work time.
  •   The total unsupported hours could have reduced the patent application backlog by 7,530 cases.

For the 15-month period:

  •   The 288,479 unsupported hours equate to over $18.3 million in potential waste.
  •   Approximately 28.5% of the total unsupported time consisted of overtime hours. The overtime hours equate to over $5.4 million in potential waste.
  •   415 of all examiners covered in this analysis had 10% or more unsupported hours and accounted for 43% of the total unsupported hours. The USPTO paid approximately $7.8 million in bonuses to the 415 examiners.
  •   310 of those 415 examiners received above-average annual performance ratings and accounted for nearly 98,000 unsupported hours.
  •   56 of the same 415 examiners claimed unsupported hours equivalent to three days for every 80 hours of computer-related work time.
  •   The total unsupported hours could have reduced the patent application backlog by approximately 15,990 cases.

    The OIG also found that the USPTO policies limit the agency’s ability to prevent and detect time and attendance abuse. For example:

  •   The USPTO does not require teleworkers to log in to their computers on workdays if they do not telework full-time.
  •   Although the majority of examiners with unsupported hours received average or better performance ratings, the USPTO requires that only poor performers provide their supervisors with work schedules.
  •   The USPTO does not require that on-campus examiners use their USPTO-issued ID badges to exit through the access control turnstiles during weekday working hours.
  •   The data suggest that USPTO’s production goals are out of date and do not reflect current efficiencies.

Texas Appellate Court Lets Trial Court Ruling of no Patent-Agent-Client Privilege Stand

Earlier this year, the Federal Circuit in a 2-1 panel decision in In re Queen’s University held there was a privilege over communications between a patent agent and client with respect to patent prosecution.  That decision is here.  I gave a talk earlier this year about how I think this case creates some risks even if it is followed, and the powerpoint for that talk is here.

A civil case in Texas has given another reason to be careful.  Plaintiff filed a patent application and apparently used a patent agent to do the work.  When the defendant refused to pay the plaintiff for using the invention (it seems), the defendant sought discovery of all communications between the patent agent and the plaintiff.  The trial court ordered their disclosure.

The plaintiff sought mandamus review.  The court of appeals refused to grant that extraordinary relief, stating in part:

No Texas statute or rule recognizes or adopts a patent-agent privilege. The trial court declined to recognize such a privilege here. Relator asks this Court to recognize a new discovery privilege and determine that the trial court abused its discretion for not recognizing the new privilege. Neither this Court nor the trial court has the authority to adopt a new discovery privilege. In re Fischer & Paykel Appliances, Inc., 420 S.W.3d at 848. We decline to do so here and, therefore, conclude the trial court did not abuse its discretion by refusing to adopt the privilege.

Further, Queen’s University is not binding here. The Federal Circuit applies its own law for substantive and procedural issues if those issues are “intimately involved in the substance of enforcement of the patent right.” 820 F.3d at 1290. This includes determination of whether documents are discoverable “in a patent case because they relate to issues of validity and infringement.” Id. at 1291. If the case involves substantive issues of patent law, such as claim construction, validity, and inequitable conduct, then the Federal Circuit applies its own patent law precedent. Id. Communications between a non-attorney patent agent and his client “that are not reasonably necessary and incident to the prosecution of patents before the Patent Office,” however, are outside the scope of a patent-agent privilege. Id. at 1301–02. Whereas the federal common law governs privilege in a federal case, “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Id. at 1294 (quoting FED. R. EVID. 501).

This case is not a patent infringement case. It is a breach of contract case governed by Texas law. The underlying dispute does not involve a determination of the validity of the patent or whether Tabletop Media, LLC infringed on the patent. The Queen’s University court expressly excluded such cases from the scope of the privilege, and neither this Court nor the trial court is required to apply federal patent law to the merits of the case. Where, as here, the substantive claims are governed by state law, the state privilege law also applies. Texas does not recognize a patent-agent privilege, and we decline to create a new common law privilege.

A copy of that decision, In re Andrew Silver (Dallas Ct. App. 05-160074-CV, Aug. 17, 2016) is here.

I am not sure that reasoning makes sense, since the choice of law analysis underlying it is missing:  whether a communication is privileged doesn’t turn on where the proceeding is filed or what law gave rise to the claim, which seems to be the Dallas court of appeals’ view.  (For example, the Dallas approach would mean that a communication that is not privileged under some foreign country’s law would be privileged if suit were filed in the US.)

Hopefully the Texas Supreme Court will fix this, since it seems to be wrong and is going to make a mess.