Each year, a number of patent and trademark practitioners agree to exclusion from the USPTO rather than face an OED ethics investigation or USPTO disciplinary action. While not always the case, such consent exclusions usually involve very serious–and often criminal–practitioner misconduct. One such matter is the case of former patent attorney David N. Caracappa. See In re David N. Caracappa, Proc. No. D2015-37 (USPTO Dir. Jan. 5, 2016).
Mr. Caracappa previously served as an outside patent prosecution counsel for Siemens Corporation.
Another USPTO practitioner (Alexander Burke) worked as in-house patent counsel for Siemens and was authorized to hire outside contractors to provide patent services on Siemens’ behalf. One of those contractors was Mr. Caracappa.
In September 2008, Mr. Caracappa and Mr. Burke entered into a scheme to defraud Siemens. The way their scheme worked was as follows:
Mr. Burke would purportedly assign patent application and prosecution work to Mr. Caracappa. Unbeknownst to Siemens, Mr. Burke himself would perform the legal services that had been “assigned” to Mr. Caracappa. Mr. Caracappa billed Siemens for the work, which he did not perform. Mr. Burke, using his position at Siemens, authorized payment of Mr. Caracappa’s invoices, and Siemens would pay Mr. Caracappa the amount invoiced.
When Mr. Caracappa received a payment of his invoice from Siemens, he rerouted the majority of the payment to Mr. Burke. Mr. Burke allegedly would then wire the funds he received from Mr. Caracappa to an offshore bank account.
In one example of the scheme, Mr. Caracappa billed Siemens $8,000 ostensibly to prepare a patent application. Mr. Caracappa did not prepare any patent application. Rather, the work was performed by Mr. Burke, who forwarded it to Mr. Caracappa essentially in its completed form. Mr. Caracappa then filed the application in the USPTO. When Mr. Caracappa received payment of his invoice, he forwarded $7,000 to Mr. Burke and kept the remainder for himself.
This scheme went on for approximately five (5) years, until it was eventually discovered by Siemens. In total, Mr. Caracappa issued 588 fake invoices to Siemens in the total amount of approximately $2.5 million.
In March 2015, Mr. Caracappa was charged in the United States District Court for the Eastern District of Pennsylvania with one felony count of conspiracy to commit wire fraud and one felony count of conspiracy to commit money laundering. See United States v. Caracappa, No. 2:15-cr-00078-JHS (E.D. Pa. Mar. 3, 2015). He promptly pled guilty and is awaiting sentencing.
Mr. Caracappa was later investigated by the OED for his conduct arising from the Siemens’ conviction. Mr. Caracappa never responded to the OED’s Requests for Information. In 2015, the OED filed disciplinary charges against him. Rather than respond or take a default judgment, Mr. Caracappa agreed voluntarily to resign from the USPTO. The USPTO Director, pursuant to 37 C.F.R. Section 11.27, accepted Mr. Caracappa’s resignation and excluded him on consent from practice before the USPTO in patent, trademark, and non-patent matters. Mr. Caracappa is technically eligible to apply for reinstatement after serving five (5) years of his suspension.
Separately, in 2014, Mr. Burke, the Siemens’ former in-house counsel, was charged for the same fraudulent scheme as Mr. Caracappa. See United States v. Burke, No. 2:14-cr-00565-JHS (E.D. Pa. Oct. 16, 2014). The indictment against Mr. Burke charges him with 12 counts of money laundering, nine counts of wire fraud, and one count of conspiracy to commit wire fraud. If convicted on all counts, Mr. Burke faces up to 340 years in prison and $6 million in fines. Presumably, Mr. Caracappa has agreed to testify against Mr. Burke, which would explain why he has not yet been sentenced.
Unlike Mr. Caracappa, Mr. Burke has contested the allegations and seeks a trial. According to the district court’s records, trial had been scheduled to commence in late November 2016, but it has apparently been postponed until 2017.
Mr. Burke has not received any public discipline from the USPTO–at least not yet. According to the OED records, Mr. Burke is said to reside in England and is still registered to practice before the USPTO.
Other Cases of In-House Theft
Mr. Burke is not the first in-house patent counsel to allegedly abuse his power of trust and authority to defraud his employer for fake legal services. Undoubtedly, he will not be the last.
As we discussed in our post of July 15, 2016 (here), Jason Throne, a former senior in-house patent counsel for Hunter Douglas recently was sentenced to six years in prison for his role in fraudulently billing his client and employer of $5 million for patent searches that were never performed. Mr. Throne evaded detection for 14 years, fraudulently billing Hunter Douglas between $30,000 and $40,000 per month during that time. Like Mr. Caracappa, Mr. Throne was excluded on consent from the USPTO.
The Case for Consent Exclusions
For those practitioners who seek the remedy of exclusion on consent, usually the conduct is so serious that there is little doubt that if the case went to trial, the practitioner would be excluded from the USPTO. An exclusion on consent is thus a convenient way for the USPTO to weed the ranks of the patent and trademark bar of individuals who commit very serious misconduct without the cost to the government of putting on a disciplinary trial. Because exclusions on consent are relatively short, following this procedure may allow the practitioner to avoid the indignity of having an administrative law judge issue, or having the USPTO Director publish, a full-blown ethics opinion that ends with the practitioner’s disbarment.