HOW DO THE USPTO’S NEW ETHICS RULES AFFECT TEXAS
PATENT ATTORNEYS?
GREGORY M. HASLEY
JENNIFER A. HASLEY
Hasley Scarano, L.L.P.
5252 Westchester, Suite 125
Houston, Texas 77005
713.667.6900
[email protected]
[email protected]
State Bar of Texas
27th ANNUAL
ADVANCED INTELLECTUAL PROPERTY LAW COURSE
March 20-21, 2014
Dallas
CHAPTER 12
Gregory M. Hasley
Intellectual Property Law
Greg Hasley is an experienced intellectual property attorney focusing his practice on patents, trade secrets,
and trademarks. After having spent 20 years practicing IP law, including 10 years as a partner at a large
international law firm, Greg Hasley founded the IP practice at Hasley Scarano to provide a forum for highlevel intellectual property counsel and personal service to clients. He has represented clients as lead counsel
or intellectual property counsel in patent infringement cases, trade secret and migrating employee litigation,
trademark and unfair competition suits, and post-grant administrative proceedings before the United States
Patent & Trademark Office. In addition to litigation, a substantial portion of his practice relates to strategic
counseling on intellectual property matters, including practice before the United States Patent and
Trademark Office, maintenance of significant patent and trademark dockets, technology licensing and
acquisition, freedom to operate opinions, corporate due diligence on intellectual property matters, and other
intellectual property protections issues.
Greg is admitted to practice before the U.S. Patent and Trademark Office. He has been repeatedly named as
one of Houston's Top Lawyers by H Texas Magazine (2007-2013). Greg received his J.D. in 1994, his
LL.M. in intellectual property law in 1998, and his M.B.A. in 1989 from the University of Houston. He
received his B.S. in chemical engineering in 1984 from the University of Texas at Austin. Before beginning
his legal career, he spent nine years working for The Dow Chemical Company in various technology areas
including polyurethanes, isocyanates, and hydrocarbons.
Jennifer A. Hasley
Professional Responsibility Law
Jennifer Hasley's statewide trial practice focuses on civil litigation, professional responsibility, attorney
disciplinary and disability law, and a broad range of professional liability and legal malpractice claims
involving negligence, breach of fiduciary duty, breach of contract, fraud and other deceptive practices.
Prior to forming the law firm of Hasley Scarano in 2006, she spent more than eight years as an Assistant
Disciplinary Counsel in the Office of the Chief Disciplinary Counsel of the State Bar of Texas. She
represented the State Bar of Texas and the Commission for Lawyer Discipline in disciplinary and disability
proceedings involving attorney misconduct. Jennifer is a recognized speaker on legal ethics and
professionalism.
Jennifer is board certified in civil trial law by the Texas Board of Legal Specialization. She has been
selected by H Magazine as one of Houston's top legal malpractice attorneys. In 2010, she received her
second HBA President's Award in recognition of her service as co-chair of the Minority Opportunities in
the Legal Profession Committee. In 2007, she was also a recipient of the HBA President's Award for her
service as co-chair of the CLE Committee. In 2005, Jennifer was selected as one of the top 50 in-house
lawyers in Texas and nicknamed the "Public's Champion." (Texas Lawyer, The In-House Crowd, Nov.
2005).
Jennifer is a member of the State Bar of Texas, Texas Bar Foundation (Life Fellow), College of the State
Bar of Texas, Houston Bar Association, Houston Bar Foundation, and Garland Walker Chapter of the
American Inns of Court (Executive Committee 2004-present). Jennifer is currently serving as President of
the Houston Lawyer Referral Service Board of Trustees (2012-13), and as a Director of the Dispute
Resolution Center (2012-14). As an active member of the Houston Bar Association, Jennifer is serving her
third term as an elected Director (2009 - present). She is a past Chair of the HBA’s Law Practice
Management Section (Chair 2008-10), and previously served on the Lawyers Against Waste Committee
(Co-Chair 2011-12), Campaign for the Homeless Committee (Co-Chair 2010-11), Minority Opportunities
in the Legal Profession Committee (Co-Chair 2009-10), Fee Dispute Committee (Chair 2007-09),
Professionalism Committee (2008-09), Continuing Legal Education Committee (Committee Co-Chair
2006-07, Institutes Co-Chair 2005-06, Seminars Co-Chair 2004-05), and Interprofessional Drug Education
Alliance Committee (Co-Chair 2002-03). She has also served on the State Bar of Texas Continuing Legal
Education Committee (2004-07), and the Texas Disciplinary Rules of Professional Conduct Committee
(2000-01)
How Do the USPTO’s New Ethics Rules Affect Texas Patent Attorneys
Chapter 12
TABLE OF CONTENTS
I.
INTRODUCTION ................................................................................................................................................... 1
II.
NEW USPTO ETHICS RULES PROVIDE SOME MUCH NEEDED CONSISTENCY ..................................... 1
A. Why is Consistency Between USPTO Rules and Texas Rules Important?..................................................... 1
B. The New USPTO Rules Make Comparison of Ethical Obligations Much Easier .......................................... 1
C. The New USPTO Rules Provide a Wider Body of Legal Precedents ............................................................. 2
III. THERE ARE SIGNIFICANT DIFFERENCES BETWEEN THE USPTO RULES AND THE MODEL
RULES, AS WELL AS THE TEXAS RULES ....................................................................................................... 2
A. Inclusion of Patent Agents in the USPTO Rules Creates Practice Traps for Patent Lawyers ......................... 2
B. The USPTO Rules’ Duty of Disclosure Exception to Confidentiality Causes Strain for Texas Patent
Lawyers ........................................................................................................................................................... 2
C. USPTO Rules Allow Patent Lawyers to Take an Interest in a Patent or Patent Application .......................... 3
IV. THERE HAVE LONG BEEN SUBSTANTIAL DIFFERENCES BETWEEN THE MODEL RULES AND
THE TEXAS RULES.............................................................................................................................................. 4
i
How Do the USPTO’s New Ethics Rules Affect Texas Patent Attorneys
HOW DO THE USPTO’S NEW
ETHICS RULES AFFECT TEXAS
PATENT ATTORNEYS?
Chapter 12
We are of the opinion that the patent attorney
is entitled to the benefit of the same rule. He
performs all the functions of an agent, but
more besides. For example, he can handle
patent litigation in the courts. This, however,
is only a difference in degree. We can detect
no logic in the idea that while the lesser
activity is to enjoy the protection to be
derived from the federal statutory scheme the
major function may not. Silverman v. State
Bar of Texas, 405 F.2d 410 (5th Cir. 1968).
I.
INTRODUCTION
The United States Patent and Trademark Office
announced the adoption of a new set of professional
conduct rules for lawyers and agents that practice
before the USPTO. The USPTO Rules of Professional
Conduct (“USPTO Rules”), which took effect on May
3, 2013, are based upon the American Bar
Association’s Model Rules of Professional Conduct
(“Model Rules”). The USPTO’s stated goal is to bring
the standards of ethical practice into closer conformity
with state ethical rules, at least as much as possible
given that each state tends to modify the Model Rules.
While the adoption of these rules has generally been
viewed as a positive step, there have been several
criticisms of the new USPTO Rules. Also, since there
are significant differences between the Texas
Disciplinary Rules of Professional Conduct (“Texas
Rules”) and the Model Rules, Texas patent lawyers
must consider two distinct sets of professional conduct
rules for guidance.
While there are limits to the State of Texas’s
ability to regulate patent practice, there are a number of
reasons patent lawyers should keep an eye on both sets
of rules. First, the restrictions on state regulation do
not extend to trademark law, trade secrets, and other
types of intellectual property practice areas. To the
extent a patent lawyer’s practice is broader that patents,
that portion of the practice is subject to state
regulation. Second, there is a certain grey area
surrounding where the patent lawyer’s activities are
necessary to accomplish the federal objective, and
where they are not. For example, for a client making
the decision to patent an invention, as opposed to
maintaining it as a trade secret, legal advice related to
patents and Texas trade secret law is required.
Arguments can be made for either side on whether or
not this advice takes the lawyer outside of a purely
patent practice. Further, it is not clear that a patent
lawyer
handling foreign
patent
prosecution
communications with a foreign associate would be
exempted from state regulation.
Regardless of the actual limits of the state to
regulate patent lawyers, the USPTO has not been
consistent in its publications on this issue. In the
Executive Summary of the final rule publication for the
new USPTO rules, the USPTO said, “Attorneys who
practice before the Office are subject to professional
conduct rules established by the Office as well as the
appropriate State Bars.” 78 Fed. Reg. 20181. And lest
there be any doubt about overlapping obligations, new
USPTO Rule 11.804(h) makes it a violation of the
USPTO Rules to be disciplined by any State for
violation of ethical rules.
II. NEW USPTO ETHICS RULES PROVIDE
SOME MUCH NEEDED CONSISTENCY
A. Why is Consistency Between USPTO Rules and
Texas Rules Important?
Many patent lawyers who restrict their practice to
patent prosecution before the USPTO view the Texas
Rules as nothing more than an interesting side story.
They are quick to point out that in Sperry v. Florida,
the U.S. Supreme Court limited the state’s abilities to
regulate patent practice, those tasks which are incident
to the preparation and prosecution of patent
applications before the USPTO. What the Sperry court
said was:
[S]ince patent practitioners are authorized to
practice only before the Patent Office, the
State maintains control over the practice of
law within its borders except to the limited
extent necessary for the accomplishment of
the federal objectives. Sperry v. Florida, 373
U.S. 379, 402 (1963)
B.
The New USPTO Rules Make Comparison of
Ethical Obligations Much Easier
One advantage of adopting the new rules is that
while the USPTO Rules, the Model Rules, and the
Texas Rules are all somewhat different, they do have
the same basic format and similar numbering systems.
The USPTO Rules are generally of the form 11.xxx,
where the xxx is comparable to that of the Texas Rules
and the Model Rules. For example, USPTO Rule
11.102, Texas Rule 1.02, and Model Rule 1.2 are all
There were those, such as the State Bar of Texas, that
doubted Sperry extended beyond patent agents and
prevented regulation of patent lawyers, as opposed to
patent agents. The Fifth Circuit quickly put that
distinction to rest, and in fact made clear that the state
was not only precluded from regulating lawyers
practicing patent prosecution, but also those practicing
patent litigation in the federal courts:
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How Do the USPTO’s New Ethics Rules Affect Texas Patent Attorneys
Chapter 12
to both lawyers and patent agents. The USPTO Rules
use the term “practitioner” throughout in lieu of the
term “lawyer.” Under USPTO Rule 11.1, practitioner
is specifically defined to include non-lawyer patent
agents.
Inclusion of patent agents leads to an
awkwardness in many rules. For example, USPTO
Rule 11.504(a) says “a practitioner or law firm shall
not share legal fees with a non-practitioner” except in
certain circumstances. To the extent this rule suggests
that patent lawyers can share fees with patent agents
(who would not be excluded by this rule), the
counterpart Model Rule 5.4 and Texas Rule 5.04 make
clear that “a lawyer or law firm shall not share legal
fees with a non-lawyer” which would specifically
exclude patent agents. Similarly, 11.504(b) and (d)
prohibit formation of partnerships and professional
corporations with non-practitioners (again not
excluding patent agents), while the Model Rule and
Texas Rule counterparts make clear that the prohibition
extends to all “non-lawyers” which would include
patent agents. While a purely patent practice by a
lawyer may be beyond Texas’s ability to regulate, it is
not clear that these surrounding business arrangements
are necessary to achieve the objectives of the U.S.
patent laws. To the extent they are not, such
arrangements which are allowed by the USPTO Rules
are in conflict with the Texas Rules.
The blurred distinction between practitioner and
lawyer also complicates the traditional conflicts of
interest and imputation of conflicts analysis of law
firms. Conflicts for patent agents might be analyzed as
a non-lawyer conflict under the Texas Rules or Model
Rules, both of which impute conflicts only from lawyer
to lawyer (see for example Model Rule 1.10 and Texas
Rule 1.06(f)). In contrast, under USPTO Rule 11.110,
a patent agent’s conflicts are imputed to the lawyers
and other agents in a firm.
While in many
circumstances the results may work out the same,
Texas patent lawyers should take special care to
analyze potential conflicts involving patent agents, and
additional client notices, waivers, etc. may be required
depending upon the circumstances.
comparable rules related to scope of representation.
There are some Texas Rules that do not line up
directly, but for the most part the numbering is
consistent. While this formatting is not perfect, it does
allow a Texas patent lawyer to quickly compare the
obligations under the different sets of rules.
C. The New USPTO Rules Provide a Wider Body
of Legal Precedents
An advantage cited by the USPTO is that adoption
of the USPTO Rules provides a large body of state
case law and opinions written by disciplinary
authorities for the states that have adopted the Model
Rules. This is a significant advantage that other Model
Rule states enjoy.
Given the total number of
disciplinary rules and the relatively limited published
case law in any given state, for any given state, there
are wide gaps in precedent for disciplinary rules.
Having a comment set of rules for many jurisdictions
helps to fill in these gaps. Additionally, the USPTO
also directs practitioners to the Model Rules comments
for useful information on how to interpret the USPTO
Rules.
While having a wider body of case law may be a
valued benefit, the USPTO has made clear that the
comments to the Model Rules and other jurisdictions’
interpretations of their counterparts to the Model Rules
are not binding precedent for the USPTO Rules. The
USPTO precedent based upon the now replaced
USPTO Code of Professional Responsibility (“USPTO
Code”) is still considered to be precedential under the
USPTO Rules as the USPTO considers the new rules
“fundamentally carry forward the existing and familiar
requirements of the USPTO Code.” 78 Fed. Reg.
20180. The USPTO expects that its own precedent for
the new rules will be developed over time.
III. THERE ARE SIGNIFICANT DIFFERENCES
BETWEEN THE USPTO RULES AND THE
MODEL RULES, AS WELL AS THE TEXAS
RULES
Despite the similarities between the USPTO Rules
and the Model Rules, the USPTO did make many
changes to address the nuances of practicing before the
USPTO. Initially, the USPTO did not adopt rules that
are specific to other practice areas such as criminal or
family law. Also, rules that may be controversial to
some, such as the Model Rule 1.8(j) regarding sexual
relations with clients rule and Model Rule 1.2(b)
regarding non-endorsement of client’s views, have
been eliminated.
B.
The USPTO Rules’ Duty of Disclosure
Exception to Confidentiality Causes Strain for
Texas Patent Lawyers
The major public complaint about the new
USPTO Rules relates to an exception to confidentiality
of information found in USPTO Rule 11.106. The
comments to the Model Rules point out that
confidentiality is of paramount importance to the
lawyer-client relationship:
A. Inclusion of Patent Agents in the USPTO Rules
Creates Practice Traps for Patent Lawyers
A major difference between the Model Rules and
the USPTO Rules is that the USPTO Rules are directed
A fundamental principle in the client-lawyer
relationship is that, in the absence of the
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How Do the USPTO’s New Ethics Rules Affect Texas Patent Attorneys
Chapter 12
internal configuration that is very similar (from a
patentability standpoint) to the invention of Client A.
Assume also that the internal configuration was not
readily determined by the public. Under the new
USPTO Rules, it appears that it could be mandatory to
disclose Client B’s product to the USPTO (and thereby
the public at large). Under the Texas Rules, the
lawyer, without Client B’s consent, is absolutely
prohibited from disclosing Client B’s confidential
information. The discretionary exceptions under the
Texas Rules do not appear to apply. It cannot be a
fraudulent act (Texas Rule 1.05(c)(7) because Client B
has no obligation to disclose and Client A is not aware
of the prior art. One might argue that Texas Rule
1.05(c)(4) applies, which allows disclosure if necessary
to comply with “other law,” but that requires an
interpretation that the USPTO Rules and the duty of
disclosure are tantamount to law and not simple
regulations of a federal agency.
Responding to the numerous critical comments of
this new mandatory disclosure requirement, the
USPTO argued that this addition is not a change from
the USPTO Code. Despite this argument, the USPTO
Code Section 10.57 specifically dealt with client
confidential information and had no mandatory
requirement. The USPTO correctly points out that
USPTO Code 10.23(c)(10) does say it is a violation to
knowingly violate the duty of disclosure, but at best
this indicates a conflict in the USPTO Code. There
was clearly no exception to confidentiality that
required a mandatory disclosure.
The USPTO also suggests that in some
circumstances, USPTO Rule 11.116 allows for a
practitioner to withdraw as a solution to the situation
where a practitioner learns of information from one
client that might be relevant to the duty to disclose in
another client’s application. Rule 11.116 does set out
circumstance the allow withdrawal, but there is nothing
specific regarding obtaining confidential information
from one client that is relevant to the duty to disclose
in another client’s case. Also, it is not at all clear that a
withdrawal satisfies a practitioner’s duty to disclose
information obtained during the representation.
Hopefully, the USPTO will clarify at some point
whether withdrawal can satisfy the duty of disclosure.
Interestingly, the comments to Texas Rule 1.05(e)
specifically state that withdrawal of the attorney
satisfies the mandatory disclosure requirement.
client's informed consent, the lawyer must
not reveal information relating to the
representation. … This contributes to the
trust that is the hallmark of the client-lawyer
relationship. The client is thereby encouraged
to seek legal assistance and to communicate
fully and frankly with the lawyer even as to
embarrassing or legally damaging subject
matter. The lawyer needs this information to
represent the client effectively and, if
necessary, to advise the client to refrain from
wrongful conduct. Model Rule 1.6, comment
2.
USPTO Rule 11.106(a) prohibits a practitioner
from revealing information related to the
representation unless the client has given informed
consent or the disclosure is impliedly authorized in
order to carry out the representation. Rule 11.106(b)
provides a list of specific circumstances in which a
practitioner may disclose information related to the
representation. These two provisions closely match
Model Rule 1.6, except additional permissive
exceptions have been added to allow disclosure to
prevent or rectify a client’s inequitable conduct before
the USPTO. Texas Rule 1.05, the comparable Texas
confidentiality rule, while structured differently and
more specifically detailed, has the same general
prohibition with enumerated exceptions when the
lawyer may disclose confidential information.
The USPTO Rule deviates from the Model Rule
by adding provision (c) which requires that “a
practitioner shall disclose to the Office information
necessary to comply with applicable duty of disclosure
provisions.” That is, duty to disclose solidly trumps
client confidentiality. The Model Rule has no such
provision requiring disclosure of confidential
information and generally recognizes the paramount
importance of confidentiality in the lawyer client
relationship
Texas Rule 1.05(e) similarly provides a
mandatory disclosure of confidential information for
Texas lawyers, but is this mandatory obligation is
limited to information clearly establishing that a client
“is likely to commit a criminal or fraudulent act that is
likely to result in death or substantial bodily harm to a
person.” That is, the USPTO Rules roughly equate the
duty of disclosure to the death or substantial bodily
harm of the Texas Rule.
There can be directly conflicting obligations for a
Texas patent lawyer whose practice is more broad that
a simple patent practice. For example, assume that a
Texas patent lawyer, who has filed a patent for Client
A, is hired to do the intellectual property diligence for
a divestiture by Client B. In the process, the lawyer
learns that Client B once sold a product with an
C. USPTO Rules Allow Patent Lawyers to Take
an Interest in a Patent or Patent Application
One other anomaly in the USPTO Rules allows a
practitioner to take an interest in a patent or patent
application to satisfy his fee.
USPTO Rule
11.108(i)(3) says that in a patent case or a proceeding
before the Office, the practitioner may “take an interest
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How Do the USPTO’s New Ethics Rules Affect Texas Patent Attorneys
Chapter 12
occurrence. Each practitioner should take the time to
review the new rules which are available at 78 Fed.
Reg. 20180 (Apr. 3, 2013).
in the patent or patent application as part of or all of his
or her fee.” There is no direct counterpart to this
USPTO Rule in the Model Rules or the Texas Rules.
While one might argue that this type of arrangement
may be allowed under certain circumstances spelled
out in Texas Rule 1.08(a), it seems to be a particularly
bad idea given the potential for conflict with the client.
There is certainly good reason for concern that the
standard practitioner’s engagement letter could add a
provision assigning a patent application upon nonpayment of bills. This which would be allowable
under this provision of the USPTO Rules, but
potentially damaging to the reputation of practitioners
in general.
IV. THERE HAVE LONG BEEN SUBSTANTIAL
DIFFERENCES BETWEEN THE MODEL
RULES AND THE TEXAS RULES
As is generally well known to Texas attorneys,
there are substantial differences between the Texas
Rules and the Model Rules. These differences are
carried over into the USPTO Rules. In certain
circumstances, the Texas Rules are more permissive
that the USPTO Rules. For example, in the realm of
conflicts, the Texas Rules more broadly permit waiver
of conflicts. For example, Texas Rule 1.06(b) arguably
allows waiver of conflicts for any representation except
being on both sides of a litigation.
In other circumstances, the Texas Rules can be
more narrow than the USPTO Rules. For example, the
Texas Rules on advertising (the 700 series) are
particularly more narrow and detailed. One particular
example of a narrow Texas Rule is the prohibition on
use of trade names which is specifically allowable
under the USPTO Rules. Texas Rule 7.01(a) says “A
lawyer in private practice shall not practice under a
trade name ….” The USPTO Rule 7.05, like the
counterpart Model Rule 7.05, specifically authorizes
this activity:
A trade name may be used by a practitioner
in private practice if it does not imply a
connection with a government agency or
with a public or charitable legal services
organization….”
While there may be significant jurisdictional
issues with regard to whether state ethics laws can be
applied to a purely patent practice, the safest path for a
Texas patent attorney confronted with conflicting rules
is to subscribe to the more restrictive rule.
V. CONCLUSION
Despite these criticisms and departures from the
Texas Rules, the USPTO’s adoption of the new
USPTO Rules seems to be a generally favorable
4