TM Lawyer’s Attack on Constitutionality of OED Investigation Dismissed–For Now

A federal district judge has dismissed a trademark lawyer’s complaint alleging that the USPTO’s Office of Enrollment and Discipline’s (“OED’s) investigation of him violated his rights under the Fourth and Fifth Amendments of the U.S. Constitution.  The Court held that dismissal of his federal complaint was appropriate because the matters raised in the complaint are currently being adjudicated by the USPTO and the practitioner may raise his constitutional claims in federal court only after the Agency’s administrative process is concluded.  A copy of the Court Swyers Decision (1) is here.

By way of background, as we previously reported (here), trademark attorney Matthew H. Swyers filed suit in January 2016 seeking to enjoin the OED from investigating him for alleged ethics violations because the process employed in conducting the ethics investigation violates his rights under the Fourth and Fifth Amendments.  Matthew H. Swyers v. United States Patent and Trademark Office, et al., No. 16-cv-00015-LO-IDD (E.D. Va. Jan. 6, 2016).

Mr. Swyers’ complaint (here) challenged the OED’s process for obtaining information that it uses in determining whether a USPTO practitioner may have engaged in unethical conduct.  Pursuant to 37 CFR Section 11.22(f), the OED Director is authorized to “request information and evidence regarding possible grounds for discipline of a practitioner” by issuing what it refers to as “Requests for Information” (or “RFIs”). The USPTO’s regulations impose no numerical, temporal, or subject matter restriction on the RFIs themselves.

The complaint alleged that the OED overwhelmed Mr. Swyers by issuing multiple RFIs seeking information on as many as 15,000 trademark applications.  The complaint further alleged that “no avenue exists” in the USPTO to challenge OED’s RFIs based on breadth, privilege, vagueness, harassment, or relevance.

The USPTO moved to dismiss Mr. Swyers’ complaint for failure to pursue and exhaust administrative remedies.  The USPTO argued that its regulations afforded two levels of internal agency review–specifically, a petition to the OED Director followed by a petition to the USPTO Director–for any practitioner who seeks to challenge the propriety of an OED ethics investigation.  See 37 CFR Section 11.2(e).  According to the USPTO, Mr. Swyers failed to pursue the agency’s available remedies during the course of the investigation.

In addition, the USPTO argued the case was not ripe for judicial review because shortly after Mr. Swyers’ complaint was filed in federal court, the OED ended its ethics investigation and filed an administrative disciplinary complaint against him pursuant to 37 CFR Section 11.34.  The administrative complaint, which alleges violations of various USPTO rules of ethics arising from Mr. Swyers’ trademark practice, has since been assigned to an ALJ for an administrative hearing.  Any party that is unhappy with the outcome of that hearing may seek review by filing an appeal with the USPTO Director.  Finally, once the USPTO Director issues a final Agency decision, an aggrieved practitioner may file a petition for review in the U.S. District Court for the Eastern District of Virginia.

The Agency argued that in light of its filing of the administrative disciplinary complaint, Mr. Swyers’ federal court complaint was premature because he could still raise his constitutional challenges during the course of the proceedings before the ALJ.

On May 27, the district court (Judge Liam O’Grady) issued a memorandum opinion granting the motion to dismiss.  The Court’s decision essentially agreed with the Government’s arguments.

The Court held that the regulatory scheme promulgated by the USPTO for adjudicating ethics charges against patent and trademark practitioners, which includes an administrative adjudication and the availability for review of the ALJ’s decision by the USPTO Director, precludes the exercise of Article III jurisdiction “at this stage” of Mr. Swyers’ case.

160px-Virginia-easternIndeed, the Court noted that a disciplinary complaint had already been filed alleging eight counts of ethical misconduct–only one of those counts arose from Mr. Swyers’ conduct during the OED ethics investigation, allegedly for failure to fully cooperate in the investigation.  The other seven counts of the disciplinary complaint are based on substantive ethics rules violations in connection with Mr. Swyers’ trademark practice.

Further still, the Court explained, the USPTO disciplinary complaint has been assigned to an ALJ, and Mr. Swyers has filed an answer to that complaint.  Notably, Mr. Swyers’ answer to the administrative disciplinary complaint raises the same Constitutional challenges that are asserted in his district court complaint.

The Court determined that 35 U.S.C. Section 32 provides for exclusive federal district court jurisdiction for review of USPTO disciplinary actions.  The Court reasoned that it “finds it is fairly discernible” that:

Congress intended to preclude district court jurisdiction over pre-enforcement challenges to, or collateral attacks on, PTO disciplinary proceedings.

The Court rejected Mr. Swyers’ allegation in his complaint that “no means existed . . . to seek review and relief from the abusive requests” for information.  The Court held this assertion is “not accurate” because Mr. Swyers had the opportunity to raise his concerns by petition to the OED Director and, ultimately, the USPTO Director, pursuant to 37 C.F.R. Section 11.2(e).

The Court explained that its finding that Mr. Swyers was precluded at this time from raising his constitutional claims in federal court “will not deny Swyers all meaningful judicial review.”  Indeed, the Court observed that “Swyers will be able to raise these arguments in his defense during the disciplinary proceedings (and he already has) because he can only be disciplined for failing to respond to a ‘lawful’ RFI.”  Moreover, the Court determined that Swyers claims are not “wholly collateral” to the statutory review scheme set forth in 35 U.S.C. Section 32 and the “constitutional nature of Swyers’ claims will ultimately reach ‘an Article III court fully competent to adjudicate.'”

Mr. Swyers argued that judicial intervention was appropriate because his complaint alleged a “pure question of law,” he has suffered irreparable harm, and awaiting final Agency disposition would be futile.   The Court rejected those arguments.  First, the Court found that the claims are not “pure” questions of law but are based on the OED’s conduct during a one-year investigation, which “is necessarily a fact-bound inquiry.”  Second, the Court held that reputational harm and litigation expenses incurred do not “rise to the level of an irreparable injury.”  Third, the Court stated the administrative proceedings were not “futile” and, in fact, the “outcome is far from a foregone conclusion” and that his claims will be heard “by an independent ALJ with extensive process.”

In addition to the dismissal of his constitutional attack against the USPTO, Mr. Swyers’ complaint also asserted individual Bivens claims against several OED employees who were involved in his investigation.  The Court dismissed those claims as well on the ground that Mr. Swyers failed to pursue the administrative process in 37 C.F.R. Section 11.2(e), which permitted him to petition the OED Director and USPTO Director if dissatisfied with “any action or notice of any employee of the [OED] during or at the conclusion of a disciplinary investigation.”  The Court again reasoned that he may raise his claims in the ongoing USPTO disciplinary proceeding and will ultimately be able to submit such claims to the Court at the conclusion of the Agency’s proceedings.

Finally, the Court held that even if a Bivens remedy existed against the OED employees, Mr. Swyers’ claims could not proceed because those employees–who are staff attorneys employed to investigate disciplinary complaints–are entitled to qualified immunity.  The Court concluded that the individual defendants’ actions “did not constitute a violation of a clearly established right at the time they conducted the investigation.”

The court’s order was without prejudice, and thus Mr. Swyers is not precluded from raising his Constitutional claims in the future–only after the conclusion of the administrative hearing and, if necessary, appeal to the USPTO Director.  Given the timing anticipated for the administrative hearing as well as the USPTO Director appeal process, it is unlikely that Mr. Swyers will see his day in federal court until sometime in 2017.


2 thoughts on “TM Lawyer’s Attack on Constitutionality of OED Investigation Dismissed–For Now”

  1. The Swyers decision is based upon the application of the Supreme Court’s decision the Thunder Basin case and misapplied this test – the issue is now pending in an appeal from denial of a Petition for Writ of Mandamus Faro v Director

    The Faro case, unlike Swyers, is based upon the OED failure to comport it’s investigation of allegation of misconduct with 37 CFR 11.22(d) Unlike Squires, Faro’s challenge is to failure to adequately investigate and therefore the PC finding was tainted as having been based upon an incomplete and biased investigation

    To be continued – John Faro

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