USPTO Issues Final Rule Establishing Patent Agent Privilege

Earlier on November 7, 2017, the U.S. Patent and Trademark Office's Patent Trial and Appeal Board ("PTAB") published its Final Rule establishing the attorney-client privilege for application in PTAB proceedings.[1] Before the PTAB, any communications between a client and a patent practitioner reasonably necessary and incident to the practitioner's authority will be protected by the attorney-client privilege applicable under Federal law. But "patent practitioner" is defined far more broadly than just as attorneys, it includes both U.S. patent agents and foreign patent practitioners. Thus, in 30 days when the rule takes effect, patent agent-client communications will be protected in inter partes review, post-grant review, the transitional program for covered business method patents, and derivation proceedings.

The Final Rule reflects only small changes from a Proposed Rule published on October 18, 2016. That Proposed Rule, in turn, came about because the issue of whether patent agent-client communications were discoverable was clearly in play. In the USPTO, there was no clear rule on the issue and PTAB administrative law judges made discovery decisions on a case-by-case basis. A recent Federal Circuit case had recognized such a privilege in Federal court litigation, but a subsequent Texas state law case found otherwise. Based on the uncertainty over the rule, and a roundtable the USPTO had held in February 2015 to discuss privilege issues generally, the PTAB recognized the need for a clear rule.

Numerous government agencies, intellectual property organizations, companies, and individuals had participated in the roundtable. Nineteen parties also submitted comments afterward. The strong consensus was that a privilege on communications between a client and a patent agent or foreign practitioner should be adopted, but there were various proposals for how to do so. Suggested approaches included Federal legislation, a multilateral treaty, and the adoption of a rule by the USPTO. Notably, the last of the options was criticized for potentially not being able to bind courts.

However, in March 2016, the Federal Circuit held that communications between a client and a non-attorney patent agent that relate to Patent Office proceedings are privileged in Federal court cases. In re Queen's University at Kingston, 820 F.3d 1287 (Fed. Cir. 2016). In earlier cases, district courts had taken a variety of approaches ranging from fully recognizing such a privilege to finding that privilege applies only when the patent agent is supervised by a licensed attorney to rejecting the privilege entirely. Following the line of cases rejecting such a privilege, the District Court compelled a patentee to produce communications between its employees and its non-attorney patent agents; the Federal Circuit reversed that determination based on a petition for mandamus.

The Federal Circuit first considered which circuit's law to apply. The issue of choice of law has special importance in the area of privilege, because Federal Rule of Evidence 501 provides that "in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision." Fed. R. Evid. 501. But the Federal Circuit applies its own law if a question arises out of an issue of substantive patent law. Here, the Court found that a patentee's communications with its patent agent regarding prosecution of the patent are potentially relevant to substantive issues including claim construction, validity, and inequitable conduct. Thus, the Court applied its own law, rather than any specific state's law.

Then, to determine whether a patent agent privilege exists under Rule 501, the Court started with the Rule's indication that the common law -- "in light of [a court's] reason and experience" -- governs a claim of privilege. In doing so, the Rule did not intend to freeze the law of privilege as of any given time, but rather intended to allow courts "to continue the evolutionary development of testimonial privileges." The Federal Circuit found that the circumstances -- including the unique roles of patent agents, congressional recognition of their authority to act, the Supreme Court's characterization of their activities as the practice of law, and current realities of patent litigation -- counseled that the law had evolved to the point where it should recognize a patent-agent privilege independent of any involvement by a lawyer.

Over fifty years ago, the Supreme Court had established that patent agents have a unique role in American law. Sperry v. Florida ex rel. Florida Bar, 373 U.S. 379 (1963). They are not members of any state bar (and therefore are not attorneys), but are authorized to practice before the Patent Office. As the Sperry Court found, that practice is not law-like activity, it is actually the congressionally-authorized practice of law itself. In Queen's University, the Federal Circuit applied that holding and found that it would counsel the adoption of a privilege to allow communications between any patent practitioner (agent or attorney) to the same degree. As the Federal Circuit stated:

Whether those communications are directed to an attorney or his or her legally equivalent patent agent should be of no moment. Indeed, if we hold otherwise, we frustrate the very purpose of Congress's design: namely, to afford clients the freedom to choose between an attorney and a patent agent for representation before the Patent Office.

Queen's University, 820 F.3d at 1298.[2] Of course, because a patent agent is licensed to practice only before the Patent Office, the scope of the patent agent privilege is limited to communications in furtherance of, or reasonably necessary and incident to, patent prosecution tasks. Other communications, such as opinions on infringement or the validity of another party's patents, are not subject to a patent-agent privilege.

However, in August 2016, a Texas appellate court decided the Federal Circuit's Queen's University decision on patent-agent privilege would not apply in Texas state court proceedings. In re Silver, 05-16-00774-CV, 2016 WL 4386004 (Tex. Ct. App. Aug. 17, 2016). Unlike Rule 501 of the Federal Rules of Evidence, the Texas Rules of Evidence do not allow courts to recognize new discovery privileges. The Texas court then found that the Queen's University holding was not binding upon it because the Federal Circuit was applying its own law in a patent case, where Federal patent law provided the rules for decision. In contrast, the Silver case was a breach of contract case governed by Texas state law. The Court therefore did not recognize any privilege and required the documents to be produced. Interestingly, one of the judges dissented based on reasoning somewhat different from the Queen's University decision. Specifically, he relied on the Sperry finding that patent agents were practicing law to determine that patent agents would qualify as "lawyers" under Texas privilege law because they were "person[s] authorized . . . to practice law in any state or nation" under Rule 503 of the Texas Rules of Evidence. He therefore suggested that patent agent-client communications should be protected under the existing attorney-client privilege, rather than under a new privilege.

Against this background, the PTAB proposed a new rule. The proposed rule received wide, almost unanimous support among commentators. Indeed, as the promulgation of the Final Rule shows, the comments expressing concern related more to issues that the rule did not address than the rule itself. Most notably, several commentators expressed concern that the rule would expand the scope of permitted practice for patent agents to include PTAB proceedings. However, patent agents are already permitted to participate in PTAB proceedings, and privilege applies to communications during all aspects of USPTO practice, including traditional practice. That is, the only question addressed by the rule is whether such communications would later be discoverable in PTAB proceedings, not who can participate in such proceedings (which is addressed in 37 CFR § 11.5(b)). One key point changed from the proposed rule to the final rule, however, was how it addressed privilege for foreign patent agents and others permitted to practice before the USPTO in a limited capacity. The definitions in the rule were adjusted to reflected the PTAB's intent to protect communications between any such practitioners and clients from discovery. Thus, the final rule (soon to be 37 CFR § 42.57) reads as follows:

(a) Privileged communications. A communication between a client and a USPTO patent practitioner or a foreign patent practitioner that is reasonably necessary and incident to the scope of the patent practitioner's authority shall receive the same protections of privilege under Federal law as if that communication were between a client and an attorney authorized to practice in the United States, including all limitations and exceptions.

(b) Definitions. The term ''USPTO patent practitioner'' means a person who has fulfilled the requirements to practice patent matters before the United States Patent and Trademark Office under § 11.7 of this chapter. ''Foreign jurisdiction patent practitioner'' means a person who is authorized to provide legal advice on patent matters in a foreign jurisdiction, provided that the jurisdiction establishes professional qualifications and the practitioner satisfies them. For foreign jurisdiction patent practitioners, this rule applies regardless of whether that jurisdiction provides privilege or an equivalent under its laws.

(c) Scope of coverage. USPTO patent practitioners and foreign jurisdiction patent practitioners shall receive the same treatment as attorneys on all issues affecting privilege or waiver, such as communications with employees or assistants of the practitioner and communications between multiple practitioners.

[1] 82 Fed. Reg. 51570-75 (Nov. 7, 2017).

[2] The Queen’s University decision was a 2-1 decision with Judge Reyna dissenting both on the basis of any need for such a privilege and the evidentiary basis upon which the Court relied.