Courts Sanction Patent Counsel for Litigation Misconduct–Will USPTO Discipline Be Next?

shark signWhat happens in patent litigation does not necessarily stay in litigation.  This is especially true if a court sanctions counsel for litigation misconduct.  News about such conduct travels quickly. Inevitably, it catches the attention of a different, and potentially more dangerous, audience–the Office of Enrollment and Discipline (OED).  Depending on the nature and severity of the litigation misconduct, an OED ethics investigation followed by formal charges alleging litigation counsel violated the USPTO’s Rules of Professional Conduct may prove far more devastating to the practitioner than whatever sanction is meted out by the court.

Two recent district court patent cases illustrate the types of “bad” litigation conduct that could very easily morph into bar disciplinary matters. One caveat before discussing the cases–bar investigations are conducted in secret, and no public record is available to confirm whether in fact either matter is being investigated by bar counsel.  Thus, the following only serves as examples of what can happen based on past USPTO disciplinary precedent and the OED’s penchant for investigating counsel for potential ethics violations based on litigation misconduct.

district of idahoIn one recent case, a federal district court judge sanctioned two patent attorneys for engaging in “vexatious litigation.”  Fleming v. Escort Inc., No. 1:12-cv-00066 (D. Idaho Sept. 29, 2014).  In Fleming, defendant, Escort, Inc. (“Escort”), was sued for infringing three patents relating to radar detectors. In an earlier lawsuit between the same parties, several Escort products were found to infringe two of the three patents asserted in the second action. Because of that prior adjudication, the court in the second action dismissed claims for infringement to the extent they were predicated on the same products adjudicated in the first action.

Escort subsequently moved to dismiss another accused product from the second action because it was allegedly the “same” as the products adjudicated in the first litigation. Escort’s counsel represented to Fleming’s counsel that the source code that operated the accused devices in the first action was the same source code that operated the accused devices in the second action.

In opposing the motion, plaintiff spent thousands of dollars comparing thousands of lines of source code that operated the accused devices in the first action with the source code that was represented to operate the accused products in the second action. Plaintiff determined from this analysis that there were “thousands of differences” between the source codes. The court agreed with plaintiff.  According to the court, “the differences were so profound and obvious that Escort’s argument to the contrary appeared frivolous at best and fraudulent at worst.”

Fleming filed a motion for an order to show cause compelling Escort to appear and explain why it should not be sanctioned. In response to that motion, Escort filed a declaration in which it represented, for the first time, the source code used to operate the devices in the first case was not, in fact, used in the devices involved in the second action.

This “about face,” after much litigation and expense incurred as a result of the previous representations, led to an order imposing sanctions.  Chief United States District Judge B. Lynn Winmill found that defendant’s litigation counsel made “false,” “reckless” and “bad faith” representations in discovery responses and other documents, which needlessly increased the costs of litigation. According to the court, “This false representation was beyond reckless and was made in bad faith because Escort’s counsel knew it was not true.” The court awarded monetary sanctions for vexatious litigation “to be paid by Escort’s counsel Gregory Ahrens and Brett Schatz at the firm of Wood Herron & Evans.”

In another recent patent infringement action involving litigation misconduct, Tesco Corporation v. Weatherford International Inc., 4:08-cv-02531 (S.D. Tex.), the district court dismissed the case with prejudice as a sanction for plaintiff’s counsel’s misrepresentations to the court.  For a complete discussion of the Tesco case, see our September 22, 2014 post (click here)

USPTO logoThe sanctions orders in Tesco and Fleming are likely to have negative consequences beyond the courthouses.  The OED monitors published court decisions for evidence of possible ethics violations.  When district courts find that a registered practitioner has engaged in litigation misconduct, the OED can, and often will, initiate an investigation into whether the litigation conduct violated the USPTO Rules of Professional Conduct.

The OED is authorized to initiate an ethics investigation whenever it receives “information” that a registered practitioner may have violated the USPTO Rules of Professional Conduct. USPTO precedent confirms the Office will impose ethical discipline against registered practitioners based on litigation misconduct.  See, e.g., In re Hicks, No. D2013-11 (USPTO Dir. Sept. 10, 2013) (publicly disciplining patent attorney for making misleading statements in Federal Circuit brief).

Pursuant to 37 C.F.R. § 11.22(a), the “OED Director is authorized to investigate possible grounds for discipline. An investigation may be initiated when the OED Director receives a grievance, information or evidence from any source suggesting possible grounds for discipline.” The OED Director interprets “grievance, information or evidence from any source” quite broadly. Indeed, the OED Director has written that “common sources of information” include “published decisions” as well as “news articles.” When the source of the “information” is a court order, the OED assumes the findings of fact and conclusions of law in the court’s order are true. This might seem unfair to some since sanctions orders are typically interlocutory and thus subject to modification on appeal.

The court orders issued in the Fleming and Tesco cases could very well lead the OED Director to investigate for “possible grounds for discipline.” When the OED Director commences an investigation, it issues a “request for information and evidence,” commonly referred to as an “RFI.” An RFI can consist of requests for admission of facts, requests for production of documents, and/or requests to respond to specific questions – in other words, discovery. Depending upon the relative complexity of the matter, responding to an RFI can be a time-consuming and risky endeavor.

Everything stated in response to an RFI can be used against the practitioner. Moreover, the OED staff will not simply accept whatever the practitioner states in their response as true. On the contrary, the OED staff attorneys and investigators (usually persons with law enforcement backgrounds) carefully review RFI responses, as well as other sources of information, looking for  inconsistencies, inaccuracies, or misrepresentations.

Making a false or misleading statement in response to an RFI can have serious disciplinary consequences independent of the conduct that led the OED to open its investigation in the first place. Consequently, great care must be exercised in responding to an RFI.  For practitioners as well as their counsel, every word in the response should be carefully vetted to ensure the response submitted to the Office is complete, accurate, responsive, and most important of all, truthful.


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