Bad news on the doorstep. I couldn’t take one more step. Don McLean – American Pie
In the last year, many “bad news” articles have been published arising from IP litigation. Not surprisingly, a growing number of those articles have been based on exceptional case findings and awards of attorneys’ fees under the Octane Fitness standard. Other “bad news” IP decisions involve a litany of litigation misconduct, including Rule 11 violations, sanctions orders, spoliation, misrepresentations, and conflicts of interest.
OED “Bad News” Investigations
Many of the “bad news” articles are highlighted by colorful headlines using “bad words” drawn from court decisions or motions for fees under Octane Fitness or for other IP-related litigation misconduct. If a court in a patent or trademark infringement case (or “bad news” article about an IP case) characterizes the conduct or positions of one of the parties using certain choice “bad words,” an OED ethics investigation is likely to follow.
Some of the more popular “bad words” that have been known to capture the attention of the OED Director and his staff when published to describe an IP litigator’s conduct include “frivolous,” “willful,” “baseless,” “unreasonable,” “reckless,” “extremely weak,” “should have known,” “nonsensical,” “inappropriate,” “unprofessional,” “vexatious” and “harassing.” Many of these bad words appear in post-Octane Section 285 exceptional case decisions, although plainly these terms can be used to describe many types of alleged litigation misbehavior. The more “bad words” in the publication or court decision, the more likely it is that the OED will open an investigation.
Whenever the OED receives “bad news,” the first step it takes is to determine whether any of the attorneys on the receiving end are subject to the USPTO’s disciplinary jurisdiction. The OED’s jurisdiction encompasses not only individuals registered to practice before the USPTO in patent matters, but also those tens of thousands of non-patent attorneys nationwide who practice before the Office in trademark and “other non-patent matters.”
The USPTO defines “practice before the Office” to include “law-related service that comprehends any matter connected with the presentation to the Office or any of its officers or employees relating to a client’s rights, privileges, duties, or responsibilities under the laws or regulations administered by the Office for the grant of a patent or registration of a trademark, or for enrollment or disciplinary matters.”
Presentations before the Office “includes preparing necessary documents in contemplation of filing the documents with the Office, corresponding and communicating with the Office, and representing a client through documents or at interviews, hearings, and meetings, as well as communicating with and advising a client concerning matters pending or contemplated to be presented before the Office.”
Assuming it has jurisdiction, the next step is for the OED Director to screen the information to determine if it presents “possible” grounds for discipline. The screen does not present a high bar. If the source of the “bad news” is a court decision, the OED presumes the correctness of the court’s findings of fact and conclusions of law—even if the decision is interlocutory or on appeal. Conduct that is characterized or described in a court decision (or news report discussing the decision) using one or more of the magic “bad words” is likely to be covered by any number of USPTO disciplinary rules.
For example, litigation misconduct that involves lying to the court or opposing party may arguably violate the USPTO ethical rules proscribing conduct prejudicial to the administration of justice, conduct reflecting adversely on a practitioner’s fitness to practice, or violation of the duty of candor.
Once the OED Director determines that the conduct passes the “smell” or screening test, at that point the one-year statute of limitations clock starts to run. Consequently, the OED must move relatively quickly to conduct an ethics investigation if it wants to avoid an SOL defense. The investigation commences with a “request for information or evidence” (or RFI). The RFI is the formal mechanism by which the OED conducts disciplinary investigations. The RFI serves several purposes.
First it is a tool for formal discovery and to elicit admissions from the practitioner under investigation. The OED may use the RFI to ask the practitioner to admit or deny facts, produce documents, or answer questions. It is not uncommon for an RFI to request all three types of discovery. Consider the RFI to be like a Rule 33, Rule 34 and Rule 36 request all rolled into one document.
Second, the RFI serves notice to the practitioner that the information was initially screened by the OED and that it was sufficient to raise the possibility of an ethics violation. The RFI will also notify the practitioner about what the OED understands to be the relevant facts or conduct in question and the USPTO’s disciplinary rules under consideration by the Office.
Third, the RFI requests the practitioner to provide the OED with his or her side of the “story.” In the case where an RFI is generated arising from a court opinion in an IP litigation, the practitioner is provided with a chance to explain either why the court was incorrect, or if the court was not incorrect, why the conduct violated no USPTO Rule of Professional Conduct.
Often responses to RFIs require counsel being investigated to provide the OED with a detailed chronology, supporting documents, witness statements, or other evidence or information. The practitioner’s response to the USPTO’s RFI may challenge the legal issues and raise arguments to rebut the alleged applicability of the ethical rules under consideration. The receiver of an RFI must be careful to note whether the USPTO is applying the correct rules to the alleged misconduct. For conduct occurring before May 3, 2013, the pertinent ethics rules are set forth in the USPTO Code of Professional Responsibility. For conduct occurring on or after May 3, 2013, the USPTO Rules of Professional Conduct apply. The practitioner needs to make sure whether the USPTO has correctly identified the rules that are “in play” based on the date of the alleged misconduct.
If the USPTO applies the wrong set of rules, the practitioner may wish to challenge the legal basis for the RFI. A non-exhaustive list of other defenses or objections that may be raised in responding to an RFI, depending on the circumstances, includes attorney-client privilege, work product, confidentiality, protective order issues, and protected health information, to name a few.
The OED Investigation
The OED is required to conduct a thorough investigation. As part of its investigatory function, it must review and verify all of the information it receives in response to an RFI. Quite often, the RFI answers provided by the practitioner open the door to additional questions. This can lead the OED to issuing a new set of RFIs. It is not uncommon during the course of an investigation for the OED to issue several RFIs. Great care, therefore, must be taken in responding to an RFI. The OED states that, as a matter of policy, it conducts “focused” investigations and will not embark on investigatory “fishing expeditions” looking for any type of possible misconduct.
Whether that is accurate or not, what the OED considers “focused” may be entirely different from what the practitioner considers to be “focused.” RFIs often are as broad as any discovery propounded under the Federal Rules of Civil Procedure. Moreover, RFIs may delve into other issues that seemingly have no relevance to the subject of the investigation, including prior discipline, malpractice claims, and criminal convictions. The OED’s position is that it may inquire into anything that reflects on the character and integrity of the practitioner.
The OED investigatory process takes on a life of its own and often strays from its original purpose. It is not unlike inviting a police officer into your home and permitting the officer to “look around.” Once the OED starts flashing its light under the bed and probing the boxes in the back of the closet, one never knows what “skeletons” might be found.
Although the OED has one year to file an ethics complaint, it generally makes a decision on whether it will proceed with discipline after approximately ten months into the one-year time period. This additional time is needed for the OED Director to draft a complaint and present it for internal review and approval by a three-member Committee on Discipline (COD). The COD operates as a kind of Agency grand jury. The meeting before the COD is completely the prosecutor’s show, and neither the practitioner nor his defense counsel is permitted to attend or participate.
If the COD determines probable cause exists, it authorizes the filing of a disciplinary complaint. At that point, the OED Director may commence formal disciplinary proceedings. Unless the matter is settled—which could occur either before or after the filing of a complaint—administrative agency litigation commences for adjudication of the OED Director’s disciplinary complaint in accordance with the Administrative Procedures Act and the USPTO rules of disciplinary procedure.
And so begins the process (beyond the scope of the present blog, but stay tuned for future discussions).
IP litigators who fall within the USPTO’s disciplinary jurisdiction should be mindful whenever a bad news decision “makes the papers.” Of course, simply because the OED opens an investigation does not mean discipline will follow. Many investigations, in fact, are closed with the OED Director determining no ethics rules were violated. In other cases, the OED Director may issue the practitioner a warning—which is not discipline—to remind the practitioner of the applicable ethical rules. Or the bad news that started the entire process may dovetail into even worse news – disciplinary charges.
Whatever the end result may be, IP litigators should be mindful that the OED takes bad news seriously.