Privilege: Patent Agents and In-House Counsel

David Hricik Professor, Mercer University School of Law

Of Counsel, Taylor English Duma LLP

January 2017

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TABLE OF CONTENTS

1. Choice of Law........................................................................................................................3a. Choice of Law for Discipline and Legal Ethics..................................................................3b. Choice of Law for Privilege...............................................................................................4

2. Scope of Authorized Practice of Patent Agents......................................................................63. The Basics of the Privilege.....................................................................................................9

a. Patent Agents: The USPTO Position and Case Law Before the 2-1 Panel Decision in Queen’s University on the Existence of a Patent Agent-Client Privilege....................9b. The Split Panel in Queen’s University.............................................................................10c. Texas Rejects Queen’s University....................................................................................13d. Other Case Law After Queen’s University.......................................................................14e. In-House Privilege............................................................................................................14

4. When Must a Patent Attorney Supervise a Patent Agent or In-House Counsel?..................15a. If Patent Agent is Acting Within the Scope of Authority to Practice Patent Law, Supervision is Needed Only to Support a Privilege Only if Queen’s University Does not Control; if a Patent Agent is Acting Outside Scope of Authority to Practice Patent Law, a Patent Attorney Must Supervise Both to Avoid the Unauthorized Practice of Law, and Perhaps to Fulfill the Obligation to Supervise Non-Practitioners, and to Provide a Basis for Attorney-Client Privilege to Subsist...........................................................................17c. What Does “Supervision” Mean in the Privilege Context?..............................................19d. What About Communications from Patent Agent to Lawyer, But not Client, or After Issuance and Not Related to Maintenance Fees or Post-Grant Proceedings?................20

5. Conclusion............................................................................................................................21

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1. Choice of Law a. Choice of Law for Discipline and Legal Ethics This paper discusses ethical issues and also privilege issues. Different choice of law analyses may be required for those issues, and in a particular case the analysis may be different than presented here, which is, however, typical. The primary ethical issue discussed in this paper is the duty of a lawyer to not engage in the unauthorized practice of law, to ensure others are not doing so, and to supervise non-lawyers working on behalf of the lawyer when they are doing so, or to be supervised when the lawyer is doing so. Those related issues typically would arise in a disciplinary proceeding, an issue where the unauthorized practice of law is alleged, in a fight over privilege, or in a malpractice suit. A disciplinary proceeding could be brought by a state bar or the Office of Enrollment and Discipline (“OED”) at the United States Patent & Trademark Office (“USPTO”). As the following shows, no matter which forum a disciplinary proceeding is brought in, the OED or a state bar should apply the same set of rules if the conduct consists of practicing before the USPTO. As for the OED, its disciplinary authority is stated in this rule:

All practitioners engaged in practice before the Office… are subject to the disciplinary jurisdiction of the Office….. A person not registered or recognized to practice before the Office is also subject to the disciplinary authority of the Office if the person provides or offers to provide any legal services before the Office.

“Proceeding before the Office” is itself defined: “Proceeding before the Office means an application for patent, an application for reissue, a reexamination, a protest, a public use matter, an inter partes patent matter, correction of a patent, correction of inventorship, an application to register a trademark, an inter partes trademark matter, an appeal, a petition, and any other matter that is pending before the Office.” So, plainly a patent practitioner who is involved in a proceeding before the Office can be disciplined by the OED. Another subsection of that same USPTO regulation in title 37 of the CFR identifies what is a ground for OED discipline:

(i) Conviction of a serious crime; (ii) Discipline on ethical grounds imposed in another jurisdiction or disciplinary disqualification from participating in or appearing before any Federal program or agency; (iii) Failure to comply with any order of a Court disciplining a practitioner, or any final decision of the USPTO Director in a disciplinary matter; (iv) Violation of any USPTO Rule of Professional Conduct; or (v) Violation of the oath or declaration taken by the practitioner. See § 11.8.

(37 C.F.R 11.19 emph. added.) So, unless some other agency or court has already disciplined a practitioner, or one of the other enumerated acts has occurred, the OED must find that a practitioner

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violated a USPTO Rule. What if a state bar sought to discipline a lawyer for conduct occurring before the USPTO? While the state bar will have power to discipline a lawyer for conduct no matter where it occurs, most states have choice of law rules expressly for discipline. While they vary, the most common ones follow ABA Model Rule of Professional Conduct 8.5. That rule gives a licensing state authority to discipline a lawyer no matter where his conduct occurs, but makes it clear that the bar may or may not apply its rules to that conduct, depending on where the conduct occurred or other circumstances. Model Rule 8.5(b), as adopted by many states, provides:

In any exercise of the disciplinary authority of this jurisdiction, the rules of professional conduct to be applied shall be as follows:

(1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and (2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred, or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.

Significantly, (a) some states have rules that say that a lawyer must appear in the tribunal for subpart (a) to apply, and (b) complex problems arise if the matter is not pending, such as activities occurring before a patent application is filed. To conclude, at least once a matter is pending before the USPTO and in most states, a practitioner can rely solely upon the USPTO Rules to determine what is “ethical” or not, in terms of discipline. Finally, if state law somehow does apply to conduct about a matter pending before the USPTO, then it may be that a preemption analysis is required, because the USPTO Rules only narrowly preempt state law to the contrary. With respect to malpractice, many states hold that breach of an applicable rule is admissible, but to varying extents. Usually, states provide that breach of an applicable rule can be evidence of breach of the standard of care. See generally Stephen E. Kalish, How to Encourage Lawyers to Be Ethical: Do Not Use the Ethics Codes as a Basis for Regular Law Decisions, 13 GEO. J. LEGAL ETHICS 649 (2000). A court in a malpractice case that allows admission of such evidence should, for obvious reasons, follow the analysis above. b. Choice of Law for Privilege Patent cases must be appealed to the Federal Circuit, but Federal Circuit law does not apply to all issues in patent cases. Instead, regional circuit law applies to “procedural” issues, but Federal Circuit law applies to “patent” issues. See Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1360, 50 U.S.P.Q.2d 1672 (Fed. Cir. 1999), overruled on other grounds, Zoltek Corp. v.

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United States, 672 F.3d 1309, 102 U.S.P.Q.2d 1001 (Fed. Cir. 2012) (en banc). More specifically, the Federal Circuit applies regional circuit law to procedural matters “that are not unique to patent issues,” but it applies its own law to procedural matters that “are related to patent issues.” Panduit Corp. v. All States Plastic Mfg. Co., 744 F.2d 1564, 1574–75, 223 U.S.P.Q. 465 (Fed. Cir. 1984). The division between issues “unique to patent law” and those that are not can be critical. In its latest pronouncements, the Federal Circuit stated that a procedural issue is subject to Federal Circuit law if it (1) “pertain[s] to” the substance of a patent right, (2) “bear[s] an essential relationship to matters committed to [the Federal Circuit’s] exclusive control by statute,” or (3) “clearly implicate[s] the jurisprudential responsibilities of [the Federal Circuit] in a field within its exclusive jurisdiction.” Bose Corp. v. JBL, Inc., 274 F.3d 1354, 1360, 61 U.S.P.Q.2d 1216 (Fed. Cir. 2001). The Federal Circuit has so far held that most ethical issues are not unique to patent law and has applied the law of the regional circuit where the district court sits. Celgard, LLC v. LG Chem, LTD., No. 2014-1675, 2014 WL 7691765, 594 Fed. Appx. 669 (Fed. Cir. Dec. 10, 2014); Sun Studs, Inc. v. Applied Theory Assocs., Inc., 772 F.2d 1557, 1566, 227 U.S.P.Q. 81 (Fed. Cir. 1985). However, the panel in In re Queen’s Univ., __ F.3d __, 2016 WL 860311 (Fed. Cir. March 7, 2016) (two-one panel decision) held that privilege over patent agent-client communications are governed by Federal Circuit law. The reason it held that Federal Circuit law applies to whether there is, and if so, the communications are covered by patent agent-client privilege is because patent law determined whether the documents would be “relevant” to an issue in a patent case. Specifically, it stated:

Applying these standards, we have held that we apply our own law when deciding whether particular documents are discoverable in a patent case because they relate to issues of validity and infringement. We have also held that we apply our own law when making a determination of the applicability of the attorney-client privilege to a party’s invention record because it clearly implicates, at the very least, the substantive patent issue of inequitable conduct. Similarly, this case involves the applicability of privilege for a patentee’s communications with a non-attorney patent agent regarding prosecution of the patents-in-suit. Those types of communications are potentially relevant to numerous substantive issues of patent law, including claim construction, validity, and inequitable conduct. Accordingly, we apply our own law.

Queen’s University, (citations, quotations, and various alterations omitted). This does not make a lot of sense. Determining whether an issue is unique to patent law does not turn on whether it is relevant to an issue that arises in litigation, since whether something is privileged turns on the events when the communication occurred, not whether it is relevant to some dispute later. For example, what if the issue in the Queen’s University case had been whether the patent agent’s client had breached a contract with a third party, and the communication at issue was relevant to formation of a contract. Patent law has nothing to do with breach of contract claims.

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More reasonably, the focus should be on whether the issue of privilege over patent agent-client client communications is unique to patent law. By definition, it is. But whether, or not, the communication is relevant to an issue in the later case is irrelevant to whether a privilege exists. Federal Circuit law should apply whether or not the communication is relevant to the later dispute. This same muddled choice of law analysis led a Texas appellate court to hold that privilege over communications between a patent agent and his client was controlled by state law, not Federal Circuit law, because there was no patent infringement claim in the case where privilege was implicated. That decision is discussed further below, and also makes no sense.

2. Scope of Authorized Practice of Patent Agents. Congress authorized the USPTO to “establish regulations, not inconsistent with law, which—may govern the recognition and conduct of agents, attorneys, or other persons representing applicants or other parties before the Office.” 35 U.S.C. § 2(b)(2)(D). Acting under this authority, USPTO regulations provide that “[a]ny citizen of the United States who is not an attorney, and who fulfills the requirements of this part may be registered as a patent agent to practice before the Office.” 37 C.F.R. § 11.6(b). The Supreme Court has made clear that, so long as a patent agent limits his practice to that authorized by the USPTO, a state cannot interfere with the agent’s rights to so practice. Sperry v. State of Florida, 373 U.S. 379 (1963). As becomes clear below, to determine the privilege issues that arise when a firm uses patent agents, or a client is communicating solely with a patent agent, a critical question is: what has Congress (and, through that power, the USPTO), authorized patent agents to do? The available case law is discussed next. As shown later, where a patent agent limits his activity to those matters which he is authorized to do, a lawyer need not supervise the agent’s work, and the agent’s communications to a client may be privileged; if the patent agent acts outside the scope authorized, however, then an attorney must supervise both to avoid assisting the agent in the unauthorized practice of law, and to give some basis to claim privilege. Patent agents and patent lawyers are authorized can prepare and prosecute applications even though they are not lawyers and even though the “preparation and prosecution of patent applications for others constitutes the practice of law.” Patent practice is the practice of law, which of course normally requires licensure by the state in which the agent or attorney resides or has an office. The problem is that Congress gave patent agents and patent lawyers only a limited grant of authority to practice law. The USPTO currently codifies both the authority for, and limitations on, a patent agent’s power in 37 C.F.R. § 11.5. That same authority would apply to a lawyer registered before the Office, but not in the state where the practitioner offices. In full, it provides:

(a) A register of attorneys and agents is kept in the Office on which are entered the names of all individuals recognized as entitled to represent applicants having prospective or immediate business before the Office in the preparation and prosecution of patent applications. Registration in the Office under the provisions of this part shall entitle the individuals so registered to practice before the Office only in patent matters.

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(b) Practice before the Office. Practice before the Office includes, but is not limited to, law-related service that comprehends any matter connected with the presentation to the Office or any of its officers or employees relating to a client’s rights, privileges, duties, or responsibilities under the laws or regulations administered by the Office for the grant of a patent or registration of a trademark, or for enrollment or disciplinary matters. Such presentations include preparing necessary documents in contemplation of filing the documents with the Office, corresponding and communicating with the Office, and representing a client through documents or at interviews, hearings, and meetings, as well as communicating with and advising a client concerning matters pending or contemplated to be presented before the Office. Nothing in this section proscribes a practitioner from employing or retaining non-practitioner assistants under the supervision of the practitioner to assist the practitioner in matters pending or contemplated to be presented before the Office.

(1) Practice before the Office in patent matters. Practice before the Office in patent matters includes, but is not limited to, preparing and prosecuting any patent application, consulting with or giving advice to a client in contemplation of filing a patent application or other document with the Office, drafting the specification or claims of a patent application; drafting an amendment or reply to a communication from the Office that may require written argument to establish the patentability of a claimed invention; drafting a reply to a communication from the Office regarding a patent application; and drafting a communication for a public use, interference, reexamination proceeding, petition, appeal to or any other proceeding before the Patent Trial and Appeal Board, or other proceeding. Registration to practice before the Office in patent cases sanctions the performance of those services which are reasonably necessary and incident to the preparation and prosecution of patent applications or other proceeding before the Office involving a patent application or patent in which the practitioner is authorized to participate. The services include:

(i) Considering the advisability of relying upon alternative forms of protection which may be available under state law, and (ii) Drafting an assignment or causing an assignment to be executed for the patent owner in contemplation of filing or prosecution of a patent application for the patent owner, where the practitioner represents the patent owner after a patent issues in a proceeding before the Office, and when drafting the assignment the practitioner does no more than replicate the terms of a previously existing oral or written obligation of assignment from one person or party to another person or party.

(2) Practice before the Office in trademark matters. Practice before the Office in trademark matters includes, but is not limited to, consulting with or giving advice to a client in contemplation of filing a trademark application or other document with the Office; preparing and prosecuting an application for trademark registration; preparing an amendment which may require written argument to establish the registrability of the mark; and conducting an opposition, cancellation,

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or concurrent use proceeding; or conducting an appeal to the Trademark Trial and Appeal Board.

As a result, there are some obvious examples of things that a patent agent or lawyers not licensed in a jurisdiction cannot do: They cannot:

• Draft a will for someone else; • Appear as counsel in court for another person; • Draft contracts for the sale of a business for another person; • File a trademark application for another person.

In the middle are the interesting issues that may not be intuitive. The two examples in the somewhat long and unusual language of the regulation is itself laden with limitations. First, the regulation does not state that registration means the person can advise a client about state law alternatives to patent protection. It also does not permit advising on trademark matters, or copyright law. Instead it states that services reasonably related to patent prosecution include “[c]onsidering the advisability of relying upon alternative forms of protection which may be available under state law.” Thus, a practitioner, without state licensure or other authority, can consider advising a client about state law protections. Second, the language about assignments is particularly carefully worded. It states that the following task pertaining to assignments are “reasonably necessary and incident to the preparation and prosecution of patent applications:”

Drafting an assignment or causing an assignment to be executed for the patent owner in contemplation of filing or prosecution of a patent application for the patent owner, where the practitioner represents the patent owner after a patent issues in a proceeding before the Office, and when drafting the assignment the practitioner does no more than replicate the terms of a previously existing oral or written obligation of assignment from one person or party to another person or party.

Although this regulation read literally does not make sense, it would seem clear that a the patent offices does not authorize practitioners to advise who owns an invention if ownership turns on a contractual relationship, draft policies about assignments or advise about the scope of state law. A particularly interesting and also counter-intuitive issue concerns opinions. Whether a practitioner is authorized to give certain advice depends upon the purpose for which the client will use the advice and, in some instances, the forum in which the opinion will be used. For example, what limitations are there on practitioner’s ability to opine on infringement of an issued patent? If the advice is sought by a client seeking to determine whether to file an infringement suit, the answer is clearly no, the practitioner is not authorized to advise on infringement for purposes of filing a suit. Likewise, it would seem clear a practitioner cannot advise a client whether its product infringes a claim of a patent owned by a third-party.

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But what if the client asks whether a claim in an issued patent it owns covers a competitor’s product, and asks not to file suit, but to know whether to file a CIP to prosecute to hopefully obtain different claims, or to pursue reissue? The skill set involved is identical, but the latter circumstances appear to constitute unauthorized practice. Likewise, an opinion about validity of an issued patent would seem unauthorized if the purpose is to provide guidance to a client as to whether it is free to operate or market a product. Yet, a practitioner can advise a client that an issued patent would not enable the claims of a potential new filing to advise the client whether a client should file an application on a new invention.

3. The Basics of the Privilege Analyzing privilege in federal court begins with Rule 501 of the Federal Rules of Evidence, which states:

The common law—as interpreted by United States courts in the light of reason and experience—governs a claim of privilege unless any of the following provides otherwise:

• the United States Constitution; • a federal statute; or • rules prescribed by the Supreme Court.

But 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. a. Patent Agents: The USPTO Position and Case Law Before the 2-1 Panel Decision in Queen’s University on the Existence of a Patent Agent-Client Privilege The Queen’s University panel included the following footnote collecting cases on the split:

Compare, e.g., Buyer’s Direct Inc. v. Belk, Inc., No. SACV 12-00370-DOC, 2012 WL 1416639, at *3 (C.D. Cal. Apr. 24, 2012) (recognizing patent-agent privilege); Poly- vision Corp. v. Smart Techs. Inc., No. 1:03-cv-476, 2006 WL 581037, at *2 (W.D. Mich. Mar. 7, 2006) (same); Mold Masters Ltd. v. Husky Injection Molding Sys., Ltd., No. 01 C 1576, 2001 WL 1268587, at *4–*5 (N.D. Ill. Nov. 15, 2001) (same); Dow Chem. Co. v. Atl. Richfield Co., No. 83- cv-3763, 1985 WL 71991, at *5 (E.D. Mich. Apr. 23, 1985) (same); In re Ampicillin Antitrust Litig., 81 F.R.D. 377, 383–84, 391–94 (D.D.C. 1978) (same); Vernitron Med. Prods., Inc. v. Baxter Labs., Inc., No. 616-73, 1975 WL 21161, at *1–*2 (D.N.J. Apr. 29, 1975) (same), with Prow- ess, Inc. v. Raysearch Labs. AB, No. WDQ-11-1357, 2013 WL 247531, at *5 (D. Md. Jan. 18, 2013) (declining to recognize patent-agent privilege); Park v. Cas Enters., Inc., No. 08-cv-0385 2009 WL 3565293, at *3 (S.D. Cal. Oct. 27, 2009) (same); In re Rivastigmine Patent Litig., 237 F.R.D. 69, 102 (S.D.N.Y. 2006) (same); Agfa Corp. v. Creo Prods., No. Civ. A. 00-10836-GAO, 2002 WL 1787534,

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at *3 (D. Mass. Aug. 1, 2002) (same); and Snei- der v. Kimberly-Clark Corp., 91 F.R.D. 1, 5 (N.D. Ill. 1980) (same).

Id. b. The Split Panel in Queen’s University. The Queen’s University panel explained the starting point for its analysis as follows:

“Rule 501 of the Federal Rules of Evidence authorizes federal courts to define new privileges by interpreting ‘common law principles.’” Jaffee v. Redmond, 518 U.S. 1, 8 (1996). Rule 501 “did not freeze the law governing the privileges of witnesses in federal trials at a particular point in our history, but rather directed federal courts to ‘continue the evolutionary development of testimonial privileges.’” Jaffee, 518 U.S. at 8–9 (quoting Trammel v. United States, 445 U.S. 40, 47 (1980)). Samsung does not contend that recognition of a patent-agent privilege is foreclosed by the United States Constitution, any federal statute, or any rule prescribed by the Supreme Court. We thus turn to “reason and experience” in order to determine whether a patent-agent privilege is now appropriate.

Queen’s University, supra. Although noting that the Supreme Court had warned courts not to create new privileges too easily, and in fact numerous attempts to protect communications from other non-lawyers, such as accountants, “jail house lawyers,” and others had failed, the court explained that “we find that the unique roles of patent agents, the congressional recognition of their authority to act, the Supreme Court’s characterization of their activities as the practice of law, and the current realities of patent litigation counsel in favor of recognizing an independent patent-agent privilege.” Id. The panel-majority emphasized that under Sperry patent agents in fact “practice law.” It wrote:

Sperry, thus, confirms that patent agents are not simply engaging in law-like activity, they are engaging in the practice of law itself. To the extent, therefore, that the traditional attorney-client privilege is justified based on the need for candor between a client and his or her legal professional in relation to the prosecution of a patent, that justification would seem to apply with equal force to patent agents.

Id. Because of the implications of this, the fact that the OED regulates patent agents and subjects them to the same ethical standards as patent attorneys, the panel majority held the privilege should be recognized. Judge Reyna emphasized the statements from the Supreme Court warning against creation of new privileges. But he also stated that allowing a privilege would frustrate the duty of candor to the USPTO, seeming to believe that privileged information need not be disclosed to the Office:

Additionally, the unique nature of patent prosecution practice reduces any public interest benefit achieved by a privilege in encouraging full and frank communication between a client and agent. Under Patent Office regulations, patent lawyers, patent agents,

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inventors, and assignees, among others, have “a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability” of an application. 37 C.F.R. § 1.56. See also, e.g., Kingsland v. Dorsey, 338 U.S. 318, 319 (1949). As a result, the interest of encouraging full and frank communication is less effectively served by creating an agent-client privilege. For example, a client who is seeking a patent may be uncertain whether certain activity the client has performed would make the invention she seeks to patent unpatentable. If her attorney or agent has properly informed her of the duty of candor to the Patent Office, however, the client will know that she has a duty to reveal this information to her attorney or agent, and that he must reveal it to the Pa- tent Office if he believes it is material to patentability. And such information revealed to the Patent Office during the prosecution of a patent necessarily becomes public information. As patent agents and clients are subject to a duty of candor before the USPTO, the Majority’s agent-client privilege can be effective only to encourage the disclosure of information that the client does not believe is material to whether the invention is patentable.

Queen’s Universiy, supra, (Reyna, J., dissenting). It has long been the law that privileged information must be disclosed to the USPTO if it is material to a patent application, and, in all events, it would be unusual for privilege to attach to material information, since facts do not become privileged by being disclosed to a lawyer. He also asserted that there was no need for a privilege because of the ability for lawyer supervision:

While some agents work as solo practitioners, “patent agents are more commonly found in law firms or as part of an in- house patent team for a large company.” Lisa Kennedy, Patent Agents: Non-attorneys Representing Inventors Before the Patent Office, 49 Advocate 21 (2006). A com- pany desiring to use a patent agent but maintain a privilege may have its counsel, be it in-house or outside counsel, supervise the agent or hire an agent already working for a law firm Next, he stated that most documents in patent prosecution are destroyed because usually prosecution ends years before litigation occurs: Further, any purported need for an agent-client privilege is greatly minimized by the fact that patent agents and their clients have the opportunity to delete and destroy emails and other correspondence in the period of time between when they are exchanged and when they would be sought in litigation. Particularly for patent prosecution, which often occurs years before any litigation involving the patent, patent agents and their clients may influence any obligation to produce documents and correspondence in litigation via their retention and destruction policies. Under most circumstances, a patent agent helping a client prepare, file, and prosecute a patent application before the Patent Office has no duty to maintain in perpetuity all correspondence with the client regarding the patent application. Similarly, it is considered

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good practice among attorneys to have thoughtful document retention and destruction policies, and to encourage such practices for their clients.

Id. Of course, the reasons he cites also would support not providing privilege to prosecution attorneys. Judge Reyna presciently explained the difficulties of recognizing the privilege:

The Majority gives a few examples of activities that would not be privileged if conducted by an agent: “[f]or instance, communications with a patent agent who is offering an opinion on the validity of another party’s patent in contemplation of litigation or for the sale or purchase of a patent, or on infringement.” Maj. Op. at 25 (citing Changes to Representation of Others Before the United States Patent and Trademark Office, 73 Fed. Reg. 47,650-01, 47,670 (Aug. 14, 2008)). However, 73 Fed. Reg. 47650 indicates that in some circumstances preparing an “opinion of the validity of another party’s patent when the client is contemplating litigation” is properly within the scope of a patent agent’s practice. The regulation explains that such an opinion is properly within the scope of an agent’s practice when the client is “seeking reexamination of the other party’s patent.” Id. This analysis regarding reexaminations would also be true of inter partes review and other practice before the Patent Trial and Appeal Board. Therefore, under the Majority’s newly created agent-client privilege, some validity opinions drafted by an agent will be privileged and others will not be, depending on the client’s intent in seeking the opinion from the agent. But how do we determine which is which, and what does such contentious activity say about the demand for truth? As another example, complications arise when we consider the scope of an agent’s authority to prepare assignments and other contracts. Under 37 C.F.R. § 11.5(b)(1)(ii), in certain circumstances an agent may properly draft assignments “in contemplation of filing or prosecution of a patent application,” as long as the agent “does no more than replicate the terms of a previously existing oral or written obligation of assignment.” The USPTO’s comments on this regulation indicate that this express statement of what an agent is permitted to do does not necessarily exclude agents from preparing contracts in other circumstances. The USPTO explained that “[t]he Office’s long-standing position has been that ‘[p]atent agents * * * cannot * * * perform various services which the local jurisdiction considers as practicing law. For example, a patent agent could not draw up a contract relating to a patent, such as an assignment or a license, if the state in which he/she resides considers drafting con- tracts as practicing law.’’’ Changes to Representation, 73 Fed. Reg. at 47,668 (ellipses in original). Therefore, in some respects, the scope of a patent agent’s authorized practice varies based on state law. Activities not expressly authorized by the USPTO’s regulation are

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neither clearly prohibited or permitted, and instead are permitted or prohibited based on state law regarding the unauthorized practice of law.

As the regulation only permits an agent to prepare contracts for assignments occurring before an application is filed, the regulation does not address when it is appropriate for an agent to prepare assignments while an application is pending or after a patent issues. However, the USPTO comments on the regulation indicate that, in some circumstances, an agent may properly draw up an assignment for an issued patent. Id. Yet, in some circumstances, doing so would be outside the scope of an agent’s authorized practice before the USPTO. Id. I believe that advising clients on whether a privilege would apply in court to the various acts a patent agent might be asked to perform is itself outside the scope of an agent’s authorized practice before the USPTO. Therefore, a client concerned about maintaining a privilege may need to hire an attorney to determine whether this court’s newly created agent-client privilege would apply in her circumstances.

Id. c. Texas Rejects Queen’s University. A decision from the court of appeals in Texas has given another reason to be careful. In re Andrew Silver (Tex. App. -- Dallas Ct. App. 05-160074-CV, Aug. 17, 2016). In that case, the plaintiff filed a patent application and apparently used a patent agent to do the work. When the defendant refused to pay the plaintiff for using the invention (it seems), the defendant sought discovery of all communications between the patent agent and the plaintiff. The trial court ordered their disclosure. The plaintiff sought mandamus review. The court of appeals refused to grant that extraordinary relief, stating in part:

No Texas statute or rule recognizes or adopts a patent-agent privilege. The trial court declined to recognize such a privilege here. Relator asks this Court to recognize a new discovery privilege and determine that the trial court abused its discretion for not recognizing the new privilege. Neither this Court nor the trial court has the authority to adopt a new discovery privilege. In re Fischer & Paykel Appliances, Inc., 420 S.W.3d at 848. We decline to do so here and, therefore, conclude the trial court did not abuse its discretion by refusing to adopt the privilege. Further, Queen’s University is not binding here. The Federal Circuit applies its own law for substantive and procedural issues if those issues are “intimately involved in the substance of enforcement of the patent right.” 820 F.3d at 1290. This includes determination of whether documents are discoverable “in a patent case because they relate to issues of validity and infringement.” Id. at 1291. If the case involves substantive issues of patent law, such as claim construction, validity, and inequitable conduct, then the Federal Circuit applies its own patent law precedent. Id. Communications between a non-

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attorney patent agent and his client “that are not reasonably necessary and incident to the prosecution of patents before the Patent Office,” however, are outside the scope of a patent-agent privilege. Id. at 1301–02. Whereas the federal common law governs privilege in a federal case, “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Id. at 1294 (quoting FED. R. EVID. 501).

This case is not a patent infringement case. It is a breach of contract case governed by Texas law. The underlying dispute does not involve a determination of the validity of the patent or whether Tabletop Media, LLC infringed on the patent. The Queen’s University court expressly excluded such cases from the scope of the privilege, and neither this Court nor the trial court is required to apply federal patent law to the merits of the case. Where, as here, the substantive claims are governed by state law, the state privilege law also applies. Texas does not recognize a patent-agent privilege, and we decline to create a new common law privilege.

Id. As noted above, what is missing from the decision is an appropriate choice of law analysis. Much like the Queen’s University case did, the Texas appellate court seemed to make whether a communication is privileged turn on the scope of the proceeding in which it is sought in discovery, or what law gave rise to the claim. (For example, the Dallas approach would mean that a communication that is not privileged under some foreign country’s law would be privileged if suit were filed in the United States.) d. Other Case Law After Queen’s University. As of the date of this paper, there have been no other case law developments. However, the USPTO apparently is studying whether it can recognize this privilege. See Amendments to the Rules of Practice Before the PTAB, 81 Fed. Reg. 18750-02 (explaining that the USPTO had previously asked for comments and stating that the USPTO may continue to act on this proposal). e. In-House Privilege Privilege subsists over communications between a lawyer who works for a corporation just as they do for outside counsel representing a corporate client. While there are some wrinkles – often whether the lawyer is acting as a “lawyer” or as a “business person” is more of an issue with in-house lawyers than outside counsel, the basics of attorney client privilege are essentially the same. However, what that means is that if a patent lawyer is living in a state where she is not licensed, then if the advice goes beyond the scope of patent practice, one would think that the same analysis for patent agents would apply: unless the advice is within the scope of authority granted by the USPTO, there would be no privilege. Strangely, there are only a few cases that have analyzed the issue, and although they have not analyzed the issue closely (nor after Queen’s University), they have essentially reasoned that

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if the person receiving the advice thought the person was authorized to provide the advice, then privilege subsisted. Whether that approach is correct, or consonant with Queen’s University, is an interesting but open question.

4. When Must a Patent Attorney Supervise a Patent Agent or In-House Counsel? At the outset, a practitioner can ask even non-practitioners to assist the practitioner to provide legal services. But delegation of legal work requires supervision for two distinct reasons, interrelated though they are. First, “a practitioner shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, or assist another in doing so.” The USPTO is another jurisdiction for the purposes of this rule. See, e.g., In re Peirce, 128 P.3d 443, 444 (Nev. 2006) (holding that “another jurisdiction” includes the USPTO). Thus, while a practitioner can have a non-practitioner assistant, assisting the non-practitioner to practice patent law would violate this rule. A lawyer has an obligation to avoid assisting in the unauthorized practice of law, which is related to the second duty. Second, a non-practitioner must be supervised or the practitioner violates the affirmative obligation to use reasonable efforts to ensure that a non-practitioner supervised by the practitioner are not violating a rule, including the rule against the unauthorized practice of law. To put it simply: a lawyer likely cannot say “I didn’t know that a patent agent I was supervising was engaged in the unauthorized practice of law,” because the lawyer has an obligation to use reasonable efforts to make sure the patent agent is not doing so. Patent agents create an odd issue: if a patent agent is acting outside the scope of authority, are they “practitioners” or not? Likewise, a lawyer who is employed by a client, but not licensed in the state where she resides, may face similar issues. The following shows that this does not matter to the supervising practitioner, but it does to the patent agent or patent lawyer. There are two different rules in both the USPTO Rules and most states that address supervision by lawyers. State rules distinguish between lawyers and non-lawyers; the USPTO Rules distinguish between practitioners and non-practitioners. In substance, however, the duties are the same so far as the supervising lawyer (or, presumably, supervising patent agent) is concerned. The USPTO Rules regarding supervision of practitioners, and non-practitioners, are substantively identical, however: § 11.501 Responsibilities of partners, managers, and supervisory practitioners.

§ 11.503 Responsibilities regarding non-practitioner assistance.

With respect to a non-practitioner assistant employed or retained by or associated with a practitioner:

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(a) A practitioner who is a partner in a law firm, and a practitioner who individually or together with other practitioners possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all practitioners in the firm conform to the USPTO Rules of Professional Conduct. (b) A practitioner having direct supervisory authority over another practitioner shall make reasonable efforts to ensure that the other practitioner conforms to the USPTO Rules of Professional Conduct. (c) A practitioner shall be responsible for another practitioner’s violation of the USPTO Rules of Professional Conduct if: (1) The practitioner orders or, with knowledge of the specific conduct, ratifies the conduct involved; or (2) The practitioner is a partner or has comparable managerial authority in the law firm in which the other practitioner practices, or has direct supervisory authority over the other practitioner, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

(a) A practitioner who is a partner, and a practitioner who individually or together with other practitioners possesses comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the practitioner; (b) A practitioner having direct supervisory authority over the non-practitioner assistant shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the practitioner; and (c) A practitioner shall be responsible for conduct of such a person that would be a violation of the USPTO Rules of Professional Conduct if engaged in by a practitioner if: (1) The practitioner orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or (2) The practitioner is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.

Although essentially the same, there is one important difference that applies, not to the supervising lawyer or practitioner, but to the person supervised: only lawyers – or practitioners under the USPTO Rules – have a “safe harbor” that allows a lawyer/practitioner being supervised to defer to a supervising lawyer in certain circumstances. Specifically, § 11.502, entitled “Responsibilities of a subordinate practitioner,” provides:

(a) A practitioner is bound by the USPTO Rules of Professional Conduct notwithstanding that the practitioner acted at the direction of another person. (b) A subordinate practitioner does not violate the USPTO Rules of Professional Conduct if that practitioner acts in accordance with a supervisory practitioner’s reasonable resolution of an arguable question of professional duty.

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See Model Rule 5.2. What if, for example, a patent agent is asked to do something by a supervising lawyer that is arguably within the scope of the agent’s authority, but the supervising lawyer, and agent, turns out to be wrong. Can the agent take advantage of the rule that allows for a safe harbor, or not?

a. If Patent Agent is Acting Within the Scope of Authority to Practice Patent Law, Supervision is Needed Only to Support a Privilege Only if Queen’s University Does not Control; if a Patent Agent is Acting Outside Scope of Authority to Practice Patent Law, a Patent Attorney Must Supervise Both to Avoid the Unauthorized Practice of Law, and Perhaps to Fulfill the Obligation to Supervise Non-Practitioners, and to Provide a Basis for Attorney-Client Privilege to Subsist.

There obviously is no ethical obligation to supervise a patent agent who is acting within the scope of authority granted by the USPTO in Section 11.5 and recognized by Sperry. Patent agents can practice on their own and – assuming competent delegation to the patent agent – no reason for a patent lawyer to supervise. Likewise, if there is a privilege for patent agent-client communications, the lawyer need not supervise the patent agent in those communications within the scope of the agent’s authority. That is the consequence of Queen’s University, as that court explained:

Communications between non-attorney patent agents and their clients that are in furtherance of the performance of these tasks, or “which are reasonably necessary and incident to the preparation and prosecution of patent applications or other proceeding before the Office involving a patent application or patent in which the practitioner is authorized to participate” receive the benefit of the patent-agent privilege. Id.; see also id. § 11.5(b)(1)(i)–(ii).

Communications that are not reasonably necessary and incident to the prosecution of patents before the Patent Office fall outside the scope of the patent-agent privilege…. [L]itigants must take care to distinguish communications that are within the scope of activities authorized by Congress from those that are not. The burden of determining which communications are privileged and which communications fall outside the scope of the privilege rests squarely on the party asserting the privilege.

Queen’s University, supra. See John Labatt Ltd. v. Molson Breweries, 898 F.Supp. 471 (E.D. Mich. 1995) (no privilege over communications from patent agent about trademarks). But, if the agent is providing legal advice or services beyond the authority granted by the USPTO, then the practitioner is not authorized to practice law, and must be supervised. That may be because the patent agent is now a “non-practitioner” or because of the duty to avoid assisting with the unauthorized practice of law. In addition, it is settled that privilege can exist over communications between a non-lawyer and a client if the non-lawyer is “supervised” by the lawyer; it is enough if the client is seeking

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advice from the lawyer indirectly. See HPD Labs., Inc. v. Clorox Co., 202 F.R.D. 410 (D. N.J. 2001) (discussing discoverability in patent suit of communications from in-house non-lawyer who had provided advice to corporate employees concerning various issues). Thus, to the extent that a patent agent provides services beyond those authorized by the USPTO, a claim of privilege may fail unless the patent agent is “supervised.” See, e.g., John Labatt Ltd. v. Molson Breweries, 898 F. Supp. 471 (E.D. Mich. 1995) (no privilege over communications from patent agent about trademarks). Likewise, a cautious practitioner may want to “supervise” all communications between a patent agent and practitioner because of the uncertainty concerning the existence, and scope, of privilege after Queen’s University. Which raises the question of: can “supervision” exist short of the lawyer actually receiving and actively reviewing every communication from a patent agent to the client? b. Does the Same Hold True for Patent Lawyers Not Licensed by the State in Which They Reside? Some states allow in-house counsel to provide advice to their corporate employer (and, sometimes, affiliates), even if the lawyer is not licensed in the state. A list of these states and links is below. I’ve put the ABA’s first, but many of the links are broken, and so the correct ones follow:

• http://www.americanbar.org/content/dam/aba/administrative/professional_responsibility/in_house_rules.authcheckdam.pdf

• AL: https://www.alabar.org/assets/uploads/2014/08/Auth.-House-Counsel-ruleVIII.pdf

• CA: http://www.courts.ca.gov/cms/rules/index.cfm?title=nine&linkid=rule9_46

• DE: http://courts.delaware.gov/rules/pdf/SupremeCourtRules.pdf RULE 55.2

• ID: https://isb.idaho.gov/pdf/rules/ibcr.pdf RULE 225

• IA: https://www.legis.iowa.gov/docs/ACO/CourtRulesChapter/06-14-2012.31.pdf RULE

31.16

• KS: http://www.kscourts.org/rules/Rule-List.asp?r1=Rules+Relating+to+Admission+of+Attorneys RULE 712

• KY:

https://govt.westlaw.com/kyrules/Document/NC4429FD0A91C11DA8F5EE32367A250AE?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default)

• MI:http://courts.mi.gov/courts/michigansupremecourt/rules/documents/rules%20for%20t

he%20board%20of%20law%20examiners.pdf RULE 5

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• MN: https://www.revisor.mn.gov/court_rules/rule.php?type=pr&subtype=admi&id=9

• NE: https://supremecourt.nebraska.gov/supreme-court-rules/ch3/art12

• OH: http://www.supremecourt.ohio.gov/LegalResources/Rules/govbar/govbar.pdf RULE VI SECTION 6

• OK: http://www.okbar.org/Portals/13/PDF/Governance/Rules-Creating-Control.pdf ART

II SECTION 5

• RI: https://www.courts.ri.gov/Courts/SupremeCourt/Supreme%20Court%20Rules/AdmissionBar-ArticleII.pdf RULE 9

• TN: http://tncourts.gov/rules/supreme-court/7 SECTION 10.01

• VA: http://www.vsb.org/pro-guidelines/index.php/corp-council/

If a lawyer registers, several issues arise: First, does the scope of authority extent to giving advice to corporations other than the actual corporate employer? Some of the rules expressly say so, some seem limited to just the “employer,” and have been so interpreted, and others seem limited to the employer but are interpreted to give authority to advise not just the employer, but related entities. Second, if the corporation receiving advice is not the actual employer but makes some sort of charge (internal accounting) for the lawyer’s time, this can create real fee splitting and other problems. There are some Texas ethics opinions on the point. If a patent lawyer is registered, but goes beyond the scope of authority permitted by the state registration statute, then it would seem that unless the activity is “practice before the office,” the lawyer is engaged in the unauthorized practice of law. As noted above, under the Queen’s University approach, this would mean no privilege. Also as noted above, courts have not, yet, taken that approach but instead say that if the person receiving the advice reasonably believed the in-house lawyer was authorized to give it, there is privilege. Whether that remains the law remains to be seen. c. What Does “Supervision” Mean in the Privilege Context? The foregoing shows that to the extent a patent agent or in-house lawyer not license din a state provides services beyond those reasonably necessary to practice before Office and, in the case of in-house lawyers, goes beyond state registration permission, the agent or lawyer exceeds the scope of authority granted by the Office and so must be supervised if working at the behest of a practitioner. Likewise, for privilege to exist over communications in that circumstance, supervision is required for patent agents and, presumably, for patent lawyers. What is sufficient for a practitioner to satisfy the requirement, when it exists, of “supervising” a patent agent or lawyer?

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A communication from a non-lawyer to a client may be privileged if the communication is made at the direction or request of the lawyer, or if there is supervision by the lawyer. HPD Labs., Inc. v. Clorox Co., 202 F.R.D. 410 (D. N.J. 2001). There are easy cases, and then the uncharted middle about what is “enough” to be supervision. On one end of the spectrum, if there is no supervision at all, then it is clear that – even if the person is an “expert” on the subject and even if the person is dispensing legal advice, if the person is not an attorney there can be no attorney-client privilege. In HPD Labs., Inc. v. Clorox Co., 202 F.R.D. 410 (D. N.J. 2001), a woman who was not an attorney but who worked in the corporation’s legal department had become relied upon and seemingly an expert in giving corporate employees legal advice. The employees approached her for her advice, and she did not convey their questions – or her answers – to any lawyers. Nor was there evidence the recipients of the advice thought she had been a lawyer. In those circumstances, the court held that there was no privilege. The court noted that functioning “under the theoretical direction of an attorney” was no enough because “she did not receive any discernable supervision or guidance” from a lawyer. See Hanwha Azdel, Inc. v. C&D Zodiac, Inc., 2013 WL 5918518 (W.D. Va. Sept. 11, 2013) (no privilege over advice among in-house personnel “developed and disseminated by the paralegal”). On the other end of the spectrum, documents prepared by a non-lawyer at the direction of an attorney, and then transmitted to the client directly, may be privileged. See id. (collecting cases). A document sent from a lawyer to a patent agent asking for input to allow the lawyer to advise the client is subject to privilege just as if it had been sent from a lawyer to a junior associate. Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136 (D. Del. 1977) The exact degree of supervision has been expressed variously, but actual involvement or control appear to be the touchstones. John Labatt Ltd. v. Molson Breweries, 898 F. Supp. 471 (E.D. Mich. 1995). “Theoretical” involvement, or the mere presence of the non-lawyer in a legal department are not enough. Clorox, supra. See Stryker Corp. v. Intermedics Orthopedics, Inc., 145 F.R.D. 298 (E.D.N.Y. 1992) (“patent agents acting under the authority and control of counsel”); Cuno, 121 F.R.D. at 201 (“if that patent agent is working on behalf of and under the direction of the attorney”); Willemijn Houdstermaatschaapij BV v. Apollo Computer, Inc., 707 F. Supp. 1429 (D. Del. 1989) (“constructive employee”); Congoleum Indus., Inc. v. GAF Corp., 49 F.R.D. 82 (E.D. Pa. 1969) (“agents or immediate subordinates”), aff’d, 478 F.2d 1398 (3rd Cir. 1973); Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136 (D. Del. 1977) (in-house patent agent “may qualify as a ‘subordinate’ of an attorney if he is working at the direction or under the supervision of an attorney”); Burlington Indus. v. Exxon Corp., 65 F.R.D. 26 (D. Md. 1974) (“The agents of the attorney for purposes of the privilege … are those persons essential to the lawyer’s performance of legal services.”) d. What About Communications from Patent Agent to Lawyer, But not Client, or After Issuance and Not Related to Maintenance Fees or Post-Grant Proceedings? Suppose a patent agent prepares a prior art search report, and sends it only to the patent lawyer. Ordinarily, that document would not be privileged, since it is not a communication to the client. Ordinarily, work product protection would not be available, either. The courts are split on

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this issue. See Cargill, Inc. v. Sears Petroleum & Transp. Corp., 2003 WL 22225580 (N.D.N.Y. Sept. 17, 2003) (collecting cases and discussing split). Similarly, once a patent issues, a communication from a patent agent to a client would not – absent something occurring before the Office such as a due date for a maintenance fee, or a post-grant proceeding – would not seem to be likely to be reasonably incident to patent prosecution. John Labatt Ltd. v. Molson Breweries, 898 F. Supp. 471 (E.D. Mich. 1995) (explaining that “a patent agent’s discussions with a client after a patent issued, concerning the patent having been infringed or its legal validity if challenged in court are not privileged….”).

5. Conclusion. A two-one panel decision on this issue provides some comfort to patent practitioners and their clients that a privilege exists between patent agents and clients. But it could turn out to be cold comfort if, as did the Texas appellate court, a court applies state law to the question, or if later the Federal Circuit en banc rejects or limits the holding of Queen’s University. Further, the circumscribed nature of the privilege, even under Queen’s University, makes it clear that there is no basis to act as if the same protection afforded by the patent attorney-client privilege applies to patent agent-client communications. This issue, incidentally, is not one that arises only in patent practice. See, e.g., N.J. Comm. on Unauthorized Practice of Law Op. 53 (May 16, 2016) (while nonlawyers are authorized to provide some services to Medicaid applicants, they cannot give advice regarding tax advice, guardianships, and other related subjects without engaging in the unauthorized practice of law). Thus, patent agents should be sure to advise clients on the risks of communication, particularly if the agent is providing representation at the “edges” of practice before the office. Likewise, patent attorneys who work with or employ patent agents – including in-house counsel – should to the extent practicable supervise patent agents, again particularly with activities at the edges of patent practice. With patent lawyers, in-house counsel should carefully examine the scope of state registration and when acting outside of it, ensure either than the activity constitutes “practice before the office” or that the communication is “supervised” by a lawyer licensed in the appropriate jurisdiction. Finally, and not to lose the forest from the trees, most issues concerning privilege do not arise from the definitions of practice before the Office or other niceties, but from the common problems that lead to loss of privilege. These are well known but include clients forwarding privileged communications beyond those who need to know the information, inadvertent production during litigation, and the failure to properly claim privilege.