Patent Office Contested Proceedings and the Duty of Candor

• Publication year: 2014
• Citation: Vol. 22 No. 1

Patent Office Contested Proceedings and the Duty of Candor

Lisa A. Dolak

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Dolak: Patent Office Contested Proceedings and the Duty of Candor

JOURNAL OF INTELLECTUAL PROPERTY LAW

ARTICLES

PATENT OFFICE CONTESTED PROCEEDINGS AND THE DUTY OF CANDOR

Lisa A. Dolak^*

TABLE OF CONTENTS

I. INTRODUCTION...............................................................................................2

II. APPLICABLE CANDOR AND DISCLOSURE OBLIGATIONS........................3

A. NEW ETHICAL DUTIES.............................................................................3

1. 37 C.F.R. § 42.11 ("Duty of Candor")...............................................3
2. 37 C.F.R. § 42.51 ("Discovery").........................................................7

B. THE CONTINUING DUTY TO REFRAIN FROM INEQUITABLE CONDUCT.................................................................................................10

III. CANDOR OBLIGATIONS IN THE CONTEXT OF POST-GRANT PROCEEDINGS................................................................................................18

A. REPRESENTATIONS RE BARS AND ESTOPPELS..................................20
B. IDENTIFICATION OF REAL PARTIES-IN-INTEREST AND PRIVIES......21
C. REPRESENTATIONS IN MOTIONS.........................................................22
D. SUBSTANTIVE EVIDENTIARY SUBMISSIONS.......................................23
E. "RELEVANT INFORMATION THAT IS INCONSISTENT WITH A POSITION ADVANCED DURING THE PROCEEDING"........................24
F. OTHER DISCOVERY DISCLOSURES, RESPONSES, AND OMISSIONS................................................................................................25
G. TRANSLATIONS........................................................................................27

IV. CONCLUSION..................................................................................................28

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I. Introduction

The implementation of post-grant trial proceedings in the U.S. Patent and Trademark Office (USPTO or Office) is one of the most significant aspects of the Leahy-Smith America Invents Act.¹ Practitioners have a great deal of new subject matter to master. In addition to the relevant statutes governing derivation proceedings,² inter partes review,³ post-grant review,⁴ and transitional post-grant review proceedings for covered business method patents,⁵ there are several new corresponding USPTO final rule packages⁶ and a USPTO trial guide⁷ to study.

All of this new law is superimposed, however, on an existing legal landscape relating to the practitioner's and patent owner's duties of candor and the potential consequences for candor violations. And the new law creates additional candor and disclosure obligations specifically applicable in post-grant contested proceedings.

This Article discusses the "old" and "new" candor obligations of practitioners and their clients—their source, their reach and applicability, and the potential consequences for their breach—in the context of the representation of clients in the new USPTO post-grant contested proceedings. Following a discussion of the relevant USPTO rules and other applicable law, this paper identifies several examples of statements and conduct in post-grant proceedings that may particularly implicate the practitioner's duties of candor and/or disclosure and, accordingly, warrant heightened care on the part of practitioners (registered and unregistered)⁸ and parties who participate in the new proceedings.

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II. Applicable Candor and Disclosure Obligations

A. NEW ETHICAL DUTIES

1. 37 C.F.R. § 42.11 ("Duty of Candor"). New USPTO Rule 42.11 expressly imposes an obligation of candor and good faith on participants in post-grant proceedings. It provides: "Parties and individuals involved in the proceeding have a duty of candor and good faith to the [USPTO] during the course of a proceeding."⁹ The reason for the rule, according to the USPTO, is that "honesty before the [USPTO] is essential to the integrity of the proceedings."¹⁰

The USPTO has given some guidance regarding the nature of the obligation imposed by this new rule: "The scope of the duty is comparable to the obligations toward the tribunal imposed by Rule 11 of the Federal Rules of Civil Procedure."¹¹ That rule requires attorneys and unrepresented parties to

certify] that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) [litigation papers are] not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;
(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.¹²

Accordingly, new Rule 42.11 requires candor regarding the applicable law and assertions of fact in post-grant proceedings.

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The USPTO has indicated that the duty imposed by Rule 42.11 will be enforced via the Patent Trial and Appeal Board (PTAB or Board) sanctions regime, outlined in 37 C.F.R. § 42.12(a).¹³ Rule 42.12(a) identifies several categories of sanctionable "misconduct," including:

(1) Failure to comply with an applicable rule or order in the proceeding;
(2) Advancing a misleading or frivolous argument or request for relief;
(3) Misrepresentation of a fact;
(4) Engaging in dilatory tactics;
(5) Abuse of discovery;
(6) Abuse of process;
(7) Any other improper use of the proceeding, including actions that harass or cause unnecessary delay or an unnecessary increase in the cost of the proceeding.¹⁴

Rule 42.12(b) specifies available sanctions which may "include entry of one or more of the following"¹⁵ :

(1) An order holding facts to have been established in the proceeding;
(2) An order expunging or precluding a party from filing a paper;
(3) An order precluding a party from presenting or contesting a particular issue;
(4) An order precluding a party from requesting, obtaining, or opposing discovery;
(5) An order excluding evidence;
(6) An order providing for compensatory expenses, including attorney fees;
(7) An order requiring terminal disclaimer of patent term; or
(8) Judgment in the trial or dismissal of the petition.¹⁶

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A comment submitted while the Trial Rules were being promulgated questioned how the duty of candor, imposed on both petitioners and patent owners by Rule 42.11, could be enforced against petitioners, "particularly when the violation is discovered after the proceeding is terminated."¹⁷ It is the case that most of the potential sanctions delineated by Rule 42.12(b) would be effective only during a proceeding, as they relate to the exclusion or preclusion of evidence, discovery, or advocacy,¹⁸ or would result in judgment or dismissal of the proceeding.¹⁹ Of the two other specified potential sanctions—"[a]n order providing for compensatory expenses, including attorney fees"²⁰ and "[a]n order requiring terminal disclaimer of patent term"²¹ —the former would be available against petitioners as well as patent owners. However, since the PTAB would presumably lose jurisdiction over a given post-grant proceeding (and the parties thereto) after the expiration of the statutory period of its pendency,²² it is unclear how it could impose any sanction on a party after that point. Indeed, in response to the comment that raised this issue, the USPTO stated:

During the proceeding, an appropriate sanction under §42.12 may be sought and at any time, including after the final written decision, the matter may be submitted to the Office of Enrollment and Discipline, or an appropriate sanction under §42.12 may be sought as the [PTAB] has both statutory and inherent authority to enforce its protective order.²³

Thus the USPTO appears to take the position that "the proceeding" continues beyond the point at which the PTAB issues a final written decision—at least for purposes of the PTAB's authority to impose sanctions. Specifically, the

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USPTO's view, apparently, is that the PTAB has the authority to impose sanctions even after the PTAB has issued a final written decision, but the PTAB's power in this regard terminates at the conclusion of "the proceeding"—presumably, at the expiration of the 12- or 18-month statutory outer limit.²⁴

However, the sanctions delineated in Rule 42.12 are not the only potential consequence for a violation of Rule 42.11. According to the USPTO, "[i]f appropriate, the misconduct may be reported to the Office of Enrollment and Discipline for consideration of a sanction directed to the attorney or firm."²⁵ Obviously, registered practitioners are subject to the disciplinary jurisdiction of the USPTO.²⁶ But the USPTO has also authorized the Board to permit unregistered practitioners to serve as counsel, pro hac vice, in the new post-grant contested proceedings, subject to conditions the Board may impose.²⁷ And the USPTO has made clear that "[i]ndividuals appearing pro hac vice under § 42.10(c) are subject to the USPTO Code of Professional Responsibility set forth in §§ 10.20 et seq. and disciplinary jurisdiction under § 11.19(a)."²⁸ Accordingly, both registered practitioners and counsel recognized pro hac vice in post-grant proceedings are subject to sanctions and disciplinary consequences for candor

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and other rule violations.²⁹ However, "[b]ased on past experience, the [PTAB] expects such instances to be rare."³⁰

2. 37 C.F.R. § 42.51 ("Discovery"). The second important new candor obligation imposed by the rules governing the new USPTO contested proceedings is a...