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Bender v. Dudas

Posted in Opinion Commentary by Jake Ward on July 3, 2007

Patent Attorney Excluded From Practice for Being Complicit in Activities of an Invention Promoter.

(Fed. Cir. 2007, 06-1243)

JW Note:  As succinctly articulated by the CAFC in this case, the USPTO “frequently finds itself challenged by so-called “invention promoters” who exploit unsophisticated inventors, heap every invention with praise regardless of the merits or the real prospects of legal protection, and entice inventors into engagement agreements filled with hollow guarantees of patent protection and promises of royalty-bearing licenses that seldom yield anything of any significant value.”

Mr. Bender appealed from a final decision of the U.S. District Court (DC) that granted summary judgement upholding a disciplinary action taken by the USPTO.  The disciplinary action excluded Bender from practicing before the USPTO.  The CAFC affirmed.

This case is about a patent practitioner (Bender) who became complicit in the activities of an invention promoter involving over 1,000 unsuspecting inventors.  The inventors first sought help in patenting their inventions from American Inventors Corporation (“AIC”), an invention promoter.  Inventors would be provided a standard engagement letter in which he or she generally paid a flat fee in exchange for AIC’s promise to hire a patent attorney on the inventor’s behalf, pay all legal fees associated with prosecuting a patent application, and conduct various marketing activities to promote the invention. AIC also guaranteed that it would refund 100% of the inventor’s flat fee if a patent was not procured.  The contract did not describe the differences between different types of patents (design versus utility), and AIC generally concealed this information from inventors.

AIC originally employed a different patent attorney, a Mr. Leon Gilden (who, incidentally, is now on the U.S. Wanted listing for mail fraud).  Gilden drafted and filed design patents for every invention forwarded to him by AIC, instead of seeking protection for any useful and functional features of the inventions.  In the course of obtaining the design patents, Gilden would add decorative ornamentation to drawings, even though such embellishment was not provided by the inventors.  Gilden was pursued for these activities by the USPTO, and eventually received a five-month suspension.

AIC then contracted with Bender to continue prosecution of the patent applications filed by Gilden.  Bender received up to $15,000 bi-weekly compensation for his services.  Bender sent new engagement letters to each of the inventors with a brief description of design versus utility patents.  However, the engagement letters did not explain the type of patent best suited to protect the specific inventions.  Bender also did not determine whether the inventors intended Gilden to file design applications instead of utility applications. 

The USPTO Office of Enrollment and Discipline got wind of Bender’s activities and sent him several RFIs (Requests for Information) inquiring about his conduct.  Charges were brought and an administrative law judge found Bender had violated a number of USPTO rules.  Bender challenged the USPTO’s decision at District Court, and upon a summary judgement against him, appealed to the CAFC. 

According to the CAFC, the PTO has statutory authority to suspend or exclude “from further practice before the Patent and Trademark Office, any person, agent, or attorney shown to be incompetent or disreputable, or guilty of gross misconduct, or who does not comply with the regulations established under section 2(b)(2)(D) of this title.” 35 U.S.C. § 32.  The USPTO’s choice of sanction is held unlawful only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”  The underlying factual findings used to support such a sanction are reviewed for substantial evidence.

Bender argued that substantial evidence does not support the PTO’s findings that he violated various disciplinary rules, that the PTO exceeded its authority and violated his constitutional rights, and that the PTO abused its discretion in determining that exclusion was an appropriate sanction.  However, the CAFC disagreed. 

Substantial evidence showed that Bender neglected to advise his clients on how best to protect their inventions and neglected to promptly inform his clients that final rejections were received in their applications.  Among other violations identified by the CAFC, Bender continued to prosecute design applications even after some inventors informed him that they wanted utility patents.  The engagement letter provided by Bender was a “formalistic gesture” and did not provide the Gilden applicants with advice relating to their particular inventions.  “This failure is even more glaring in view of AIC’s money-back guarantee that a patent would issue without regard to the type of patent that would be procured.”  The CAFC further noted that “[a]ny reputable attorney would have appreciated that the wholesale filing of design applications under such circumstances and the unauthorized addition of design embellishments were driven in large measure if not entirely by AIC’s money-back guarantee.”

Additionally, Bender’s financial relationship with AIC created a conflict of interest and affected Bender’s “professional judgment on behalf of the client.”  At a minimum, Bender needed to disclose the extent of his relationship with AIC and explain how AIC’s money-back guarantee to procure a patent and its alleged involvement in improperly adding non-invented patterns to the drawings of the Gilden applications could create divergent interests in the continued prosecution of those applications.  He did not do this.

Finally, the CAFC found that Bender failed to responde to numerous RFIs from the USPTO in a meaningful way.  Thus, Bender also engaged in evasive conduct prejudicial to the USPTO’s investigation.

The USPTO properly initiated disciplinary action in this matter based on improper practices conducted in the course of Bender’s representation of clients that had been originally represented by Gilden and referred by AIC.  

AFFIRMED. 

JW Note:  The USPTO public forum for invention promoters/promotion firm complaints and responses, providing a listing of complaints against specific invention promotion companies, may be found here

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