DOJ Says Patent Examiner Will Pay $500,000 to Resolve Alleged Ethics Reform Act Violation

U.S. Department of Justice

The U.S. Department of Justice (DOJ), Office of Public Affairs, on Wednesday, February 25, issued a press release announcing that a U.S. Patent and Trademark Office (USPTO) examiner will pay $500,000 to settle allegations that she worked “personally and substantially” on a number of patent applications “in which she held a direct financial stake.”

Daxin Wu is alleged to have examined at least nine applications for companies she held stock in between January 2019 and May 2022. Specifically, the DOJ said that she reviewed applications for companies in which she held more than $300,000 and $140,000 worth of stock, respectively, and that she reviewed applications for companies that were competitors of a firm in which she owned more than $900,000 worth of stock.

Wu’s conduct allegedly violates the Ethics Reform Act of 1989, which “prohibits executive branch employees from participating personally and substantially in particular matters that will affect their own financial interests,” said the DOJ release.

While Wu agreed to pay a civil penalty to resolve the allegations, the settlement does not mean she has been found liable.

“The Department of Commerce Office of Inspector General works hard to investigate alleged conflicts of interest at USPTO and throughout the Department of Commerce — and hold offenders accountable,” said Special Agent in Charge Laura Barsczewski of the Department of Commerce Office of Inspector General, Office of Investigations. “We will continue to be resolute in our charge for justice and work closely with the Department of Justice.”

Associate Dean for Government Procurement Law Studies at George Washington University Law School, Jessica Tillipman, noted in a social media post that such enforcement cases have been rare lately.

A February 14, 2024, Department of Commerce report conducted jointly by the Office of Inspector General and Office of Audit and Evaluation (Final Report No. OIG-24-013-I), titled “The Department Needs to Strengthen Its Ethics Oversight for USPTO Patent Examiners,” identified weaknesses in the USPTO’s ethics oversight program, including inadequate financial conflict review, insufficient specialized training for patent examiners on stock-holding restrictions, and inconsistent guidance that may have led some examiners to believe they could hold up to $50,000 in industry stock without triggering recusal obligations.

The Commerce report recommended in part that the USPTO Director instruct the Chief Administrative Officer to “[s]trengthen controls to ensure that human resource officials identify examiner appointments to positions requiring financial disclosure and notify [the Office of the General Counsel’s Ethics Law and Programs Office] ELPO in a timely manner.”

The report was conducted in response to hotline calls Commerce received “alleging that several patent examiners violated ethics rules by owning stock in one or more companies that could be affected by their decisions on patent applications.”

“The report’s findings provide important background for understanding how the conduct alleged against Wu may have occurred and went undetected for several years,” Peter Harter of the Farrington Group. told IPWatchdog.