Patent Attorney’s Complicity in Deceptive Invention Promotion Scheme Justified Exclusion from PTO Practice
June 21, 2007
Judges: Rader, Plager, Linn (author)
[Appealed from: D.D.C., Judge Walton]
In Bender v. Dudas, No. 06-1243 (Fed. Cir. June 21, 2007), the Federal Circuit affirmed a district court’s verdict that upheld the PTO’s exclusion of registered patent attorney S. Michael Bender from practice based on his complicity in a deceptive invention promotion scheme run by American Inventors Corporation (“AIC”).
AIC, using the services of patent attorney Leon Gilden, preyed on unsuspecting inventors utilizing its fee-based “invention promotion” services by providing a “moneyback guarantee” if it failed to procure a patent on their behalf. To avoid refunding inventors, Gilden allegedly filed over a thousand design patent applications (“the Gilden applications”) embellished with design ornamentation often in the face of invention disclosures reflecting a desire to patent functional features. The PTO awarded Gilden a five-month disciplinary suspension for his role in the embellishment scheme.
Subsequently, AIC retained Bender to continue the prosecution of the Gilden applications. Although Bender removed Gilden’s improperly added embellishments, he continued to prosecute the design applications without ascertaining whether the inventors wished to pursue utility applications. In addition, his generic engagement letter failed to adequately inform inventors of the distinctions between design and utility patent applications, or provide case-specific information. As a consequence of complaints related to Bender’s actions, the PTO commenced an investigation, ultimately finding Bender in violation of several sections of the code of professional responsibility.
Specifically, the PTO determined that Bender neglected an entrusted legal matter and violated 37 C.F.R. § 10.77(c) by failing to inform his inventor clients of the differences between design and utility patents. The PTO also found that Bender violated 37 C.F.R. § 10.62(a) by not disclosing the conflict of interest created by his financial relationship with AIC in view of AIC’s money-back guarantee. Bender was further found to have violated 37 C.F.R. § 10.68(a)(1) by failing to fully disclose and obtain the consent of his inventor clients for payments received from AIC. Finally, the PTO held that Bender engaged in conduct that was prejudicial to the administration of justice and violated 37 C.F.R. § 10.23(b)(5) by providing evasive answers to the PTO’s requests for information (“RFI”) during its investigation. On account of the above violations, the PTO ordered Bender excluded from practice.
The Federal Circuit appeal ensued after the U.S. District Court for the District of Columbia entered SJ for the PTO in response to Bender’s petition challenging the PTO’s exclusion order. In reviewing the district court’s SJ decision de novo, the Federal Circuit found substantial evidence to support the PTO’s exclusion order.
In particular, the Federal Circuit affirmed the 37 C.F.R. § 10.77(c) violation, finding that Bender did not adequately address the issues raised by Gilden’s wholesale filing of embellished design applications driven by AIC’s money-back guarantee in his engagement letter. Further, in arriving at its decision to uphold the PTO’s determination that Bender violated 37 C.F.R. § 10.62(a), the Court deferred to the PTO’s interpretation of “full disclosure” as requiring Bender to disclose (i) that he was being compensated by AIC, and (ii) the potentially divergent interests of AIC in filing and prosecuting the pending applications as design applications. The Federal Circuit also affirmed both the PTO’s decision holding Bender in violation of 37 C.F.R. § 10.68(a)(1), and its interpretation of “full disclosure” under that section as requiring disclosure of the amount that Bender was being paid by AIC. Additionally, the Court found that Bender did not respond meaningfully to questions in the RFI (i) directed to his relationship with AIC, and (ii) disclosure of that relationship to clients, thereby violating 37 C.F.R. § 10.23(b)(5). The Federal Circuit found the sanction of exclusion from practice before the PTO proper in view of Bender’s lack of remorse and his refusal to recognize his misconduct, which created the likelihood of recurrence.