Today you can hardly do a search on any search engine on the topic patents or trademarks without stumbling across an ad from LegalZoom.com, or one of the other numerous companies that promise to prepare and file patent or trademark applications on your behalf. On September 15, 2008, the United States Patent & Trademark Office issued new rules that should have stopped those who are not attorneys or patent agents from preparing and filing both patent applications and trademark applications, but sadly the USPTO has decided not to enforce those rules. This is unfortunate because those who commit fraud in the patent application process or the trademark application process will ultimately find that any patent or trademark that ultimately issues is completely worthless and unenforceable. The rule is no doubt draconian, but it is intended to prevent false and misleading activity, and what could be more fraudulent than a representative engaging in the unauthorized practice of law. This complete loss of rights is unfortunately necessary because the USPTO needs to be able to rely on what is presented. Unfortunately for those that use the services of non-attorney corporations to provide legal services, they are paying good money to obtain an asset that when challenged will all but certainly be irretrievably lost. So not only will those unsuspecting individuals be scammed, they will also open the door to competitors to be able to do exactly what it is that they were supposed to be able to prevent.
I have been writing about this for some time now, and the General Counsel for LegalZoom.com has threatened to sue me if I did not retract my article written on December 10, 2008 titled Sadly, Invention Promotion is Alive & Well. In that article I explain what LegalZoom.com is doing with respect to filing trademark applications is the unauthorized practice of law. For some reason the General Counsel for LegalZoom.com felt I did not have a right to offer that opinion because there is no court decision that says they are engaged in the unauthorized practice of law. Notwithstanding, I obviously have the right to provide my own opinion and analysis even in the absence of a judicial decision that supports my view. Furthermore, I don’t know how anyone can read new Rule 11.5(b) and come to any other conclusion. The fact that the Patent Office has no intention of enforcing Rule 11.5(b), a sad reality on its own, doesn’t mean that what LegalZoom.com or others are doing is acceptable under this new definition of the practice of law. It merely means that the Patent & Trademark Office is not administering its own rules.
The rule at the heart of the debate is new Rule 11.5(b), which states:
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.
On the Patent Office side of the building, the rule regarding the duty of candor owed to the Patent Office is exceptionally well defined and clear. Anyone who is substantively involved in the filing and prosecution of a patent application owes a duty of candor to the Patent Office. Insofar as the Patent Office is concerned this duty is defined by 37 C.F.R. 1.56, which is simply known as Rule 56. The United States Court of Appeals for the Federal Circuit, the main patent law court in the US, applies an even stricter standard with respect to what it believes needs to be conveyed to the Patent Office. Regardless of whether the Patent Office view or the Federal Circuit view is the correct view, the reality is that US patent laws take very seriously the obligation of honesty that is imposed upon all those who seek a patent. If the obligation of honesty and fair dealing is breached then any patent that issues would be unenforceable due to what the law calls inequitable conduct. What this means is that there would be no exclusive rights and no ability to prevent others from infringing because it would be as if no patent ever existed.
On the Trademark Office side of the building, the law is a little less clear, but over the past few years the Trademark Trial & Appeal Board (TTAB) has become much more active with respect to finding that there has been fraud committed on the Trademark Office, which results in a loss of trademark rights. As Carrie Webb Olson explains, “fraud occurs at the time of submission of a sworn document to the PTO. Once a fraudulent statement has been made, there is no remedy.” Attorneys David Leit and Frank LeFebvre also explain:
[T]he TTAB has canceled numerous trademark registrations based upon what often appeared to be little more than innocent errors by applicants who were not well-versed in the technical aspects of trademark procedures. In effect, the USPTO has established a strict liability standard for statements made by trademark owners in connection with the registration and renewal of their marks. As a result, trademark owners face the prospect of losing valuable registration rights based upon honest mistakes in trademark applications.
If you can lose your trademark rights for honest mistakes, in my opinion it would be foolish to think that a trademark would be valid and enforceable if you hire someone who is not an attorney to prepare and file the application. Are you willing to run the risk that your trademark will be permanently tainted and rights forever lost when you file an application using the services provided by someone that is not an attorney? It is a large risk to take, and not one that I would or could advise is worth taking.
While I know of no case that has held that trademark rights are lost of forfeited because the application was filed by an individual or entity that is not an attorney, new Rule 11.5(b), which applies to both patents and trademarks, is only a few months old, so the fact that there are no cases is not at all surprising. By its explicit terms only those who are attorneys are able to prepare the documents necessary to file a trademark application, and certainly only those who are attorneys can file trademark applications. LegalZoom.com hides behind the disclaimer that they are not attorneys, but when you are providing legal services that really isn’t at all helpful or legally relevant. Their own literature on their website explains “we’ll create your trademark application and email it to you for electronic signature.” (See Step 4). They then say: “After you sign the application, we file the application and supporting material with the U.S. Patent and Trademark Office.” (See Step 5). I see no way of reading Rule 11.5(b) as allowing this activity. Rule 11.5(b) specifically prohibits those who are not attorneys from preparing necessary documents in contemplation of filing the documents with the Trademark Office. Rule 11.5(b) also specifically prohibits corresponding and communicating with the Trademark Office, as well as communicating with an applicant concerning matters pending or contemplated to be presented to the Trademark Office. It seems that by their own admission that is exactly what LegalZoom.com is promising to do, and in fact does.
Based on all that I have seen, read and know to be true, it is my believe and opinion that what LegalZoom.com is doing is engaging in the unauthorized practice of law. Based on the law associated with the required duty of candor and honesty owed to the Patent & Trademark Office, I believe that any trademark application filed by LegalZoom.com on or after September 15, 2008, will result in any issued trademark being worthless because upon challenge it will be struck down. I just cannot see any other way to rationalize what ultimately would happen. If the person or people you hire to prepare and file a trademark application are not attorneys and they themselves are are committing fraud on the Trademark Office and violating Rule 11.5(b) how could the TTAB or any court do anything other than strike down the trademark? At the very least this risk is so real and the punishment so severe that you ought to think twice about using LegalZoom.com or anyone else in the market who is not an attorney.
With respect to patent applications, even though LegalZoom.com only files provisional patent applications, I suspect that any breach in the duty of candor at the provisional application stage would taint any nonprovisional patent application filed, which would mean that any patent that would issue would be unenforceable. This is because related patents can be struck down when there is inequitable conduct, so inequitable conduct in a provisional application that is the basis for a nonprovisional application would seem to certainly taint the utlimately issued patent. I have reason to know that LegalZoom.com did file provisional patent applications after September 15, 2008, and filed them in the name of an individual who is not a patent attorney or patent agent. I don’t know whether they are continuing to do this, and see that their website says they are using an unidentified attorney or attorneys to do the filing. I would just caution inventors to be sure that is the case before allowing LegalZoom.com to file a patent application on your behalf.
The moral of the story is that when you hire someone to provide legal services they really ought to be an attorney or registered patent agent. You run significant risks when you hire a cut-rate corporation to do legal work. You might save money up front, but at the cost of obtaining a patent or trademark that has no associated rights. Hardly a bargain if you ask me.
About the Author
|Eugene R. Quinn, Jr.
President & Founder of IPWatchdog, Inc.
US Patent Attorney (Reg. No. 44,294)
B.S. in Electrical Engineering, Rutgers University
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Gene is a US Patent Attorney, Law Professor and the founder of IPWatchdog.com. He teaches patent bar review courses and is a member of the Board of Directors of the United Inventors Association. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, CNN Money and various other newspapers and magazines worldwide
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6 comments so far.
DJ FlesherJune 26, 2010 03:09 am
Very well said. Returning to the LegalZoom issue, I think some sharp patent attorney could take their lead. For example you could prepare a check list and set of guidelines for inventors to use in preparing a patent. In the margin add a column with two or three bits of information relevant to each step: A) level of technical effort required B) level of legal expertise required, and C) estimated cost for an Attorney to lead the inventor through that specific step.
That list should end with lead-ins to the steps “following” (or parallel to) the patent, They would suggestng the options available to inventors that could make a profit. Then add a list of local resources (including SCORE) and references for info on meeting those challenges. (Wow. This sounds like a publishable, widely needed booklet to me, especially if there are blanks for other (local) patent attorneys to insert their cards, letterheads, and/or contact data. Hint-hint.)
The fears most people have when they approach me with a new concept (I am a SCORE Counselor) are both real and competitive. There is the fear of revealing the concept inappropriately and losing their rights. Competing with that fear is the fear of the high costs of a patent Attorney to ensure those rights. To the novice inventor, these are palpable, stomach churning thoughts: they are between a rock and a hard place. They often ask me the generic question “What does it cost to get a Patent?” And I must give a generic answer “Well it depends.”
Each of my clients is at a different level in the process, some having just a top of the head concept, to others having received a patent (usually after spending thousands) and wondering what to do with it: how to license/manufacture/promote/market the item. LZ appears to resolve the dollar fear by quoting a low fixed fee, but all you are assured of getting from LZ is a list of things to do, similar to what I described above, each step of which has an undisclosed cost.
If I had such a list or work pages (with your card or letterhead at the top) I would be able to hand it to them. We could review and decide where they were in the whole process, and they could then make a reasonably informed decision on how to proceed. Print these as booklets, offer them through bank counter displays and through business counselors, and watch the inventors come out of hiding.
So I see the answer to LegalZoom is to provide your prospective clients with more useful information with realistic options, and beat them at their own game…. Just a thought.
Gene QuinnJune 24, 2010 01:06 pm
You raise an issue that is hard to disagree with. Here are my thoughts…
First, back when I was a litigator and before I became a patent attorney (12 years ago, hard to believe it is that long ago), I had almost no friends that were attorneys, or not people that you would call close friends at least. Since becoming a patent attorney now almost all of my closest friends are patent attorneys, patent agents or former patent examiners. I agree that for the most part patent attorneys rise above the fray (generalization of course). We may be personality deprived, but by and large a good bunch of folks.
Litigation sucks on every level. When it is necessary the best thing you can do (in my opinion) is fight like hell to be taken seriously and procedurally before someone takes an advantage settle the case. Mediation works when you have a good mediator who can get the parties to see the dispute is one of a business nature and has a solution. The best end to a litigation is one that ends quickly with an agreement between the parties, and with an eye toward how to handle any future disputes without litigation, assuming there is that possibility of continued dealing or industry involvement.
Flipping a coin is not a strategy that most would employ, but it would be far cheaper. Save the very few windfall decisions each year both parties would fare better. But I suppose it is human nature to fight.
DJ FlesherJune 24, 2010 12:56 pm
My complaints are from long experience (I’ll skip the morbid details). Out of 15 attorneys through my life who were supposed to be on my side (I was paying them) only three (3) have remained on my ‘I would recommend’ list. And one of those is a long time friend and a patent attorney, and Patent attorneys do seem to rise above the “fray”.
My recommendation to others about legal conflicts, when asked, is based on this factoid: On average attorneys win LESS THAN half of their cases. Therefore if you must go to court, agree with your opponent to just flip a coin. You will save two attorneys fees and BOTH of your chances of winning are actually HIGHER (50% each).
Gene QuinnJune 22, 2010 03:43 pm
You have every right to think I protest too much, and you also have every right to complain about lawyers. You also have the right to complain about the complex legal system, and the right to use cheap legal alternatives to lawyers who make mistakes and compromise rights.
The world is full of choices, and as long as you are willing to accept the consequences then go right ahead and pretend that do it yourself solutions are just as good as a competent attorney.
D J FlesherJune 22, 2010 03:17 pm
It seems to me that the legal profession has, through its own lack of internal housecleaning, left itself and all of us potential clients open to scams. Attorneys charge inordinate fees to fill in standard paperwork. They provide a protectionist front for their buddies, no matter how vile they become.
My own business efforts were delayed by months, for example, when a “Securities” attorney, a member of a 30-man office, was ill and incapacitated. When he recovered, we found that the delay was because of a single form that he needed to sign, and submit to the SEC. It had only five lines of new information, that any secretary could have completed for him, the rest was boilerplate . That business delay contributed to the failure of our business, but of course, the attorney got paid by us, in full, for his “services”. Otherwise his firm would have sued us.
This is a case (e pluribus unum) where the complex system you have built is more important to you than the interests or finances or well being of your clients. Such contrived complexity is evident in your own article, where each sentence must be read two or three times just to be sure you understand it.
Methinks you protest too much.
Susan WoodsFebruary 6, 2009 07:40 pm
Thanks so much for your article. I am in the process of trying to obtain an patent for an idea I have been working on for about 5 years now. I was just about to send LegalZoom the initial $299.00 for the patent search with the intention of using their services to obtain the patent.
After reading your article, I think I will speak with a cousin in corporate law before going any further with this matter.
This project is, in some ways, like my child and I would be livid to know that I had been mislead to think I would not be putting it in peril.