The U.S. Court of Appeals for the Federal Circuit upheld disciplinary action by the U. S. Patent and Trademark Office (USPTO), excluding from practice a practitioner who acted in concert with an invention promoter so that the invention promoter would not have to honor a money-back guarantee to inventors. Bender v. Dudas, Case No. 06-1243 (Fed. Cir., June 21, 2007) (Linn, J.).
The licensed practitioner, Mr. Bender, prosecuted patent applications on behalf of customers of American Inventors Corporation (AIC), an invention promoter. Through advertising, individual inventors would contact AIC and provide invention disclosures. For a fee, AIC would do a patent search. The search results were invariably positive and the inventors were told by AIC’s sales personnel that their idea should be patented. The inventor was then enticed by AIC sales personnel to sign a contract with AIC and pay a flat fee in exchange for AIC’s promise to promote the invention to manufacturers and to pay legal fees associated with prosecuting a patent application.
Most of the inventors using AIC’s services were unfamiliar with the basics of patent law and the patent system. The contract included a guarantee to refund 100 percent of the fee paid by the inventor if a patent was not procured. The contract did not specify the type of patent that would be obtained, i.e., utility or design. According to past employees of AIC, it was AIC’s general policy and practice was to conceal the differences between these types of patents, mainly because if the invention disclosure did not merit a utility patent application, a design patent application would be filed on the device or article.
After a contract was signed, the inventor’s disclosure was sent to a patent attorney, Mr. Gilden. To ensure ornamentation, it was Gilden’s practice to have his draftsman add decorative ornamentation or surface indicia to the drawings. Almost all inventors signed the applications with the added embellishment. AIC personnel would file the design patent applications using Gilden’s registration number. In 1993, the USPTO brought a disciplinary action against Gilden because he failed to explain to inventors the difference between design and utility patents and because he failed to add his draftsman as a co-inventor in those applications with added embellishments. After the USPTO initiated the disciplinary action, AIC contacted another attorney, Bender, to take over prosecution of Gilden’s applications already on file.
Bender wrote letters to each of Gilden’s applicants that included a brief discussion of the differences between a design and utility patent. As for those applications with the added embellishments, Bender filed amendments to remove the added indicia.
Eventually the USPTO successfully brought a disciplinary action against Bender, based on the design patent application switch. On appeal the Court agreed there was substantial evidence that Bender neglected a legal matter by continuing to prosecute design applications knowing that the inventor wanted a utility patent application instead. The Court further found Bender’s discussion of the difference between design and utility patents in his letter to Gilden’s applicants to be "an entirely hollow and formalistic gesture" because it did not advise the inventor of the type of patent best suited to protect the inventor’s invention and that Bender’s motive for not advising the inventor was, according to the Court, "driven in large measure if not entirely by AIC’s money-back guarantee."
Moreover, the USPTO found that Bender improperly failed to advise inventors of final rejections until after the three-month shortened statutory period had expired. Bender admitted the delay, but argued that he was awaiting a decision in a test case to determine if deletion of ornamentation from a file patent drawing constituted new matter. According to the Court, "[w]hile such an explanation might justify advising the client to seek an extension of time … or a stay of proceedings pending resolution of the test case, it does not justify an absolute failure to notify the client at all that a final rejection had issued, let alone the response needed."
Further, the USPTO found that Bender did not get the consent of his client after "full disclosure," including the extent of his relationship with AIC, and also failed to explain the money-back guarantee and disclose the amount he was being paid by AIC. The Court agreed with the USPTO that Bender’s financial relationship with AIC created a conflict of interest. Bender was compensated by AIC, a fact that the USPTO found affected his professional judgment on behalf of the client. While the Court noted that the term "full disclosure" was undefined, it deferred to the USPTO interpretation of the term.
Finally, the USPTO found that Bender engaged in conduct prejudicial to the administration of justice. This is a catch-all ground for disciplinary actions. In Bender’s case, the Court agreed with the USPTO that he was evasive in his answers to the USPTO’s requests for information with respect to his financial relationship with AIC.
Bender also challenged the authority of the USPTO to discipline him, arguing that it exceeded its authority under the patent statutes and that the USPTO’s request for information lacked procedural safeguards. The Count easily dismissed this argument, noting that the disciplinary rules were well within the scope of §§ 2(b)(2)(D), 32 patent statutes and that the request for information "not only assists the agency in gathering facts, it also protects practitioners by providing them with an opportunity to explain any questionable conduct and present reason why disciplinary proceedings are not warranted."
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