Squires Updates Conflict of Interest Guidance for Examiners Following DOJ Settlement Announcement

Following a Department of Justice (DOJ) press release issued last week announcing that a patent examiner agreed to pay $500,000 to settle allegations that she worked on a number of patent applications in which she held a direct financial stake, U.S. Patent and Trademark Office (USPTO) Director John Squires on Monday issued new guidance directing patent examiners to recuse themselves in all instances where they have a financial stake in a patent applicant’s company.

The current USPTO guidance instructs examiners to recuse themselves when they hold more than $15,000 in stocks or bonds in an assignee of an application they are examining. Squires’ guidance reduces that threshold to zero, noting that “[f]or patents to be born strong, and the public to have confidence that they are, we must ensure strict adherence to USPTO’s ethical standards and avoid (real or apparent) conflicts of interest.”

Last week, examiner Daxin Wu agreed to pay $500,000 over allegations that she 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.

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

The settlement follows 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,” which 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.

Squires’ memo was careful to note that the updated guidance is not meant to “imply or suggest that patent examiners or their supervisors, in any past or pending cases, have been anything but fair, impartial and acted in good faith.”

The memo directs examiners to voluntarily inform their supervisors of any companies in which they, their spouse, or their minor children hold stocks or bonds, regardless of the dollar value. Supervisors signing off on applications must also recuse themselves, and if examiners or supervisors only later become aware of the conflict, the case will be reassigned.

The guidance is effective immediately.