Ethics & OED: Practitioner Discipline at PTO – Feb. 2013

Next year I will be speaking at the 8th Annual Patent Law Institute sponsored by the Practising Law Institute.  The event, like in previous years, will be bi-coastal. We will be live from New York City on February 3-4, 2013, and live from San Francisco, CA on March 17-18, 2013, with the San Francisco location also being webcast. My topic will be ethics, which will provide the all important and highly sought after ethics CLE credit.

In addition to discussing ethical issues generally raised by the practice of patent law, perhaps spending some time discussing the Traps for the Unwary within the America Invents Act, I also always like to do a rundown of recent OED disciplinary proceedings. For more articles on this topic please see Ethics & OED.

With this in mind, I will be publishing summaries of the disciplinary proceedings before the Office of Enrollment and Discipline at the United States Patent and Trademark Office from 2013. I have already published the first article in the series, which related to the reinstatement petition granted to Mr. B in June of 2013.

What follows are the OED decisions from the first quarter of 2013. There were no decisions in January 2013.

In the Matter of Hugh D. Jaeger (February 6, 2013)

This case was initially brought on September 25, 2012, when the OED filed a complaint against Jaeger alleging that he violated ethics rules by: (1) engaging in the unauthorized practice of law before the USPTO when he was not in good standing as an attorney in any jurisdiction; (2) falsely presenting himself to applicants as being authorized to practice before the USPTO; and (3) violating an order of the Minnesota Supreme Court prohibiting him from practicing before the USPTO. The complaint asked for an order excluding Jaeger from practicing before the USPTO.

Jaeger did not file a response to the complaint, despite being granted two extensions of time to do so. He did, however, send two brief fax messages to OED, in one pointing out that he was an honorably discharged veteran who served during the Vietnam era, and in another pointing out that the underlying complaint that initiated disciplinary involvement stemmed from a disagreement with a client who did not want to pay his bill. Unfortunately for Jaeger, however, he never filed an answer, which meant that the allegations within the complaint were all deemed to be admitted. See 37 CFR 11.36(d). Furthermore, pursuant to 37 CFR 11.36(e), a default judgment was entered. Jaeger has been excluded from practice before the USPTO, which means he has been disbarred.

The OED decision summarizes the facts in the penultimate paragraph of the Sanctions section as follows:

In the present case, Respondent was unequivocally proscribed from acting as an attorney or agent based on authority granted by the PTO in August 11, 2011 Order of the Minnesota Supreme Court and the July 9, 2012 Final Order of the PTO. Before the August 11, 2011 Order was issued, Respondent agreed not to act as an attorney or agent before the PTO in a Stipulation for Discipline. Notwithstanding these disciplinary orders and the Stipulation for Discipline, Respondent contented to represent trademark and patent applicants before the PTO from at least September 2011 to April 2012 in a number of filings and applications. Accepting the allegations in the Complaint as true, Respondent acted intentionally in holding himself out as an authorized practitioner before the PTO after the disciplinary orders were issued. Moreover, Respondent engaged in a pattern of misconduct by representing multiple patent and trademark applicants in numerous filing and applications over the period in question.

Even though there was no evidence that Jaeger’s actions caused actual harm to his clients, the OED decision explained that by engaging in representation where he was otherwise specifically prohibited it could potentially cause harm to clients and to the industry as a whole.

The OED decision also pointed out that his service in the Army, as well as his service both at the FCC and at the USPTO, “neither explain nor justify Respondent’s behavior, now warrant mitigation of the penalty in light of the facts of his case.” Indeed, in a footnote, the OED implied that his failure to respond with an Answer nullified any opportunity consideration of mitigating factors. Footnote 11 further stated, in relevant part: “Such non-compliance suggest to this Tribunal that, whatever his prior employment history may be, Respondent is not currently capable of acting as professional counsel or agent to others in PTO or other legal proceedings.”

To the extent there is a lesson to be learned here other than don’t continue representing clients after you have been prohibited from doing so, it has to be that the only way to realistically have mitigating factors considered is to participate in the proceeding. Many other cases also repeatedly show the importance of remorse and acceptance, as well as taking subsequent remedial measures. Of course, when you violate a prohibition order there isn’t much hope.

In the Matter of Steven Bruce Lehat (February 21, 2013)

This is a peculiar case. Steven Bruce Lehat is not now nor has he ever been admit to practice before the USPTO as a registered patent practitioner. Nevertheless, he engaged in co-representation on patent matters. His sanction was a public reprimand.

Lehat is a licensed attorney in good standing in both the State of California and the District of Columbia. He was also associated with Pre-Paid Legal Services, receiving a referral from an inventor, whose name was redacted from the decision. The inventor paid $5,000 to Lehat, which was not a retainer and which was characterized as non-refundable. Although difficult to follow due to redacting of inventor names, it seems that there were at least two inventors similarly situated, perhaps more.

Lehat contracted with a patent practitioner who was working as an independent contractor. The inventor(s) did not know that this independent contract was involved, or that a portion of the $5,000 was being paid to this unnamed independent contractor. Given that Lehat was not a registered patent practitioner and the independent contractor was not a part of his firm there was impermissible fee splitting as a result of this relationship.

Furthermore, one inventor attempted to terminate the attorney-client relationship after becoming dissatisfied. This particular inventor demanded that the full $5,000 be returned. Lehat made a quantum meruit claim based on the number of hours worked. He charged the client $1,000 per hour, thus charging the client $4,200. The stipulated facts found that “a practitioner of ordinary prudence would be left with a definite and firm conviction that the rate of $1,000 per hour exceeds a reasonable rate.”

Demonstrating the importance of mitigating factors, OED explained two factors in Lehat’s favor. First, he has never had any disciplinary history in any jurisdiction during his 32 year legal career. Second, he accepted responsibility and asserted that he fully understood why his conduct violated USPTO disciplinary rules. As a result, Lehat was only publicly reprimanded, although he was ordered to return fees to clients. The OED order also includes a possible 6 month suspension should he fail to satisfy the requirement that he return funds to clients as per ordered.

So how could someone who is not a registered patent practitioner be suspended for 6 months? It seems that suspension would have to apply to non-patent matters (i.e., trademarks) because Lehat is already not authorized to practice before the USPTO in patent matters.

The rules Lehat violated were:

1. 37 C.F.R. § 10.40(a) (proscribing failure to promptly refund any part of a fee paid in advance that has not been earned);
2. 37 C.F.R. §10.112(a) (proscribing failure to promptly payor deliver to the client as requested by a client the funds or other properties in the possession of the practitioner which the client is entitled to receive);
3. 37 C.F.R. §10.36(a) (proscribing entering into an agreement for, charge, or collect an illegal or clearly excessive fee); and
4. 37 C.F.R. §10.37(a) (proscribing dividing a fee for legal services with another practitioner who is not a partner in or associate of the practitioner’s law firm or law office unless (i) the client consents to employment of the other practitioner after a full disclosure that a division offees will be made, (ii) the division is made in proportion to the services performed and responsibility assumed by each, and (iii) the total fee ofthe practitioners does not clearly exceed reasonable compensation for all legal services rendered to the client).

Note that part 10 of Title 37 no longer exists and is now reserved. The USPTO does, however, keep old editions of the MPEP online, and the MPEP does contain Appendix R, which is the rules appendix. If  you are interested in taking a look at these part 10 violates I suggest Appendix R from MPEP 8th Edition, Revision 8.