Steven E. Lipman v. Q. Todd Dickinson, Acting Commissioner of Patents and Trademarks

174 F.3d 1363, 50 U.S.P.Q. 2d (BNA) 1490, 1999 U.S. App. LEXIS 7553, 1999 WL 225784

• Court: Court of Appeals for the Federal Circuit
• Decided: April 20, 1999
• Docket: 96-1548
• Status: Published

Opinions

Opinion for the court filed by Senior Circuit Judge ARCHER. Dissenting opinion filed by Circuit Judge PAULINE NEWMAN.

ARCHER, Senior Circuit Judge.

Steven E. Lipman appeals the July 23, 1996 judgment of the United States District Court for the District of Columbia, 95-CV-774, granting summary judgment to the Commissioner of Patents and Trademarks (Commissioner). On undisputed facts, the district court held as a matter of law that substantial evidence supported the Commissioner’s determination that Lipman violated his duty of candor under 37 C.F.R. § 10.23(b)(4) and (c)(2)(h) (1996) to the United States Patent and Trademark Office (PTO) and that the sanction imposed, a public reprimand, was not an abuse of discretion. We affirm.¹

BACKGROUND

The facts are contained in the Memorandum Opinion and Order of the district court dated July 19, 1996 and in the decisions of the Commissioner of the PTO and the ALJ. To the extent pertinent, they are set out below.

Steven E. Lipman represented Ronald Wallace whose application for registration to practice before the PTO was disapproved on March 5, 1990 by the PTO’s Office of Enrollment and Discipline (OED). Wallace’s application was denied despite the submission of seventeen letters and affidavits attesting to his character and reputation. These included four affidavits executed by attorneys who were members of the Vinson and Elkins (V & E) law firm. The V & E attorneys went into detail about the character and trustworthiness of Wallace, who was then an employee of that firm. In its disapproval of Wallace’s application, the OED noted the supportive nature of the V & E affidavits, and specifically advised that' Wallace might want to refer to the V & E affidavits if he reapplied.

Lipman prepared a draft of a petition to the Commissioner appealing the OED decision, which was due to be filed on May 7, 1990. The draft appeal petition was sent to Wallace for comment on April 27, 1990. In this draft Lipman relied heavily on the four V & E affidavits.

On April 30, 1990 Lipman received a sixteen page, single-spaced letter from J. Clark Martin, one of the V & E affiants. The letter stated that Martin and the three other V & E attorneys, who had previously filed affidavits in support of Wallace, had now changed their opinions of Wallace. Martin’s letter stated that V & E had discovered new, additional facts that led the four affiants to believe that Wallace had not been candid with them or V & E’s clients, had acted improperly while employed at V & E, and had acted.improperly upon his separation from V & E. Martin’s letter stated that the four V & E affidavits were not to be used “for any purpose whatsoever,” and opined that Wallace and Lipman had a duty to notify the PTO of all of the activities outlined in his letter that ■bore directly on the issue of Wallace’s candor and moral character. Martin’s letter also asked for a copy of Wallace’s appeal documents to ensure that the V & E affiants’ request had been followed.

On receipt of Martin’s letter, Lipman immediately telephoned Wallace and sent him a facsimile copy of the letter. Wallace told Lipman that Martin’s accusations were based on misunderstandings and incorrect statements of fact. Lipman asked Wallace to prepare a written response to Martin’s letter with Wallace’s version of the events.

Lipman also consulted with Mr. Mittel-berger, a lawyer in his firm, and had him modify the draft appeal petition to remove the references to the V & E attorneys by name and to remove quotations from their affidavits. The modified petition was filed with the Commissioner on May 7, 1990. The filed petition continued to refer to and rely on “seventeen” affidavits and letters, i.e. the same number as originally filed with the OED in support of Wallace’s application. The number of affidavits and letters was not reduced to reflect the disavowal of the four V & E affidavits.

Before the modified appeal petition was filed Lipman wrote to Martin on May 4, 1990. Responding to Martin’s request for a copy of the appeal documents as filed, Lipman stated that the appeal petition would not “directly refer to or quote from the Vinson & Elkins affidavits.”

On May 7, 1990 Martin wrote Lipman another letter that was received by Lip-man on May 8, 1990, the day after the appeal petition was filed. In this letter Martin informed Lipman that all the facts in his April 27 letter had been verified, and reiterated that the opinions of the four V & E attorneys regarding Wallace’s character had changed since their affidavits were executed. Martin’s letter also stated:

Mr. Wallace and you had ample time last week to disclose to the PTO in the documents you are filing today with the PTO the matters recited in my April 27, 1990 letter. However, in your May 4, 1990 letter you assert only that the papers you are filing with the PTO today no longer directly refer to our affidavits ....

I am concerned that Mr. Wallace and you somehow indirectly gave the PTO the impression that our attorneys still maintain the same beliefs and opinions as are stated in the affidavits that are on file with the PTO.

In response Lipman wrote Martin on May 8, 1990, stating that he would not provide him with a copy of the appeal petition filed with the Commissioner but that a complete response to his April 27 letter would be forthcoming. On May 15, 1990 Lipman received Wallace’s description of the events referred to in Martin’s April 27 letter. Lipman then sent Martin a detailed 28-page letter describing Wallace’s account of the events. In this letter and in a subsequent letter, Lipman asked for Martin’s response.

On July 23, 1990 Lipman received a response from Martin which again confirmed the V & E affiants continued to hold their changed opinions as to Wallace’s character. In the meantime, Martin had notified the PTO directly on June 29, 1990 that the four V & E affidavits were no longer valid and that they should not be relied on by the PTO. Lipman was not informed of Martin’s direct contact with the PTO.

Based on Martin’s response on July 23, 1990 Lipman wrote Wallace on July 30, 1990, to inform him that they must disclose to the PTO that the V & E affidavits had been withdrawn. Lipman began preparing a supplement to the appeal petition to that effect which he sent to Wallace on August 2, 1990. The supplement was not filed, however, because on August 2, 1990 Lipman received notice from the PTO that Wallace’s registration proceeding was being returned to the OED in order that an investigation of the information received from Martin could be made.

In September of 1991, the OED initiated a disciplinary action against Lipman based on one count of violating his duty of candor as required, inter alia, under 37 C.F.R. § 10.23(b)(4) and (c)(2)(h). Section 10.23(b)(4) provides that “[a] practitioner shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation.” Section 10.23(c)(2)(h) provides that “[cjonduct which constitutes a violation ... includes, but is not limited to ... knowingly giving false or misleading information or knowingly participating in a material way in giving false or misleading information ... to the [Patent and Trademark] Office or any employee of the Office.”

According to the OED, Lipman violated his duty of candor by misrepresenting the number of valid affidavits. The charge read as follows:

By participating in a material way in preparing and filing a petition with .the Commissioner wherein the petition relied on affidavits and opinions of the affiants when [Mr. Lipman] knew the Affiants had said the affidavits could not be used for any purpose, and by withholding from the PTO the fact that affidavits and opinions expressed therein had been withdrawn by the affiants pri- or to the filing of the petition, [Mr. Lipman] was not candid with the PTO, [Mr. Lipman] misrepresented facts in the petition, and [Mr. Lipman] otherwise engaged in professional misconduct.

After conducting a hearing, the Administrative Law Judge (ALJ) issued an Initial Decision on April 28, 1994 in which he concluded that the OED had proved by clear and convincing evidence that Lipman had violated his duty of candor under the above-quoted regulation sections. The ALJ recommended that Lipman receive a public reprimand. In support of his decision, the ALJ made the following specific finding:

8. By filing a petition with the Commissioner of Patents and Trademarks which referred to the 17 affidavits and letters which had previously been filed and urging their consideration despite the fact that [Mr. Lipman] had been informed and therefore knew that the opinions expressed in four of those' affidavits had changed and that the affidavits had been withdrawn and therefore were no longer valid, [Mr. Lipman] knowingly gave misleading information to the PTO and in so doing [Mr. Lip-man] intended to mislead the PTO in to [sic] believing the opinions expressed in those affidavits were still valid.

McLandish v. Lipman, No. D91-18, Initial Decision at 12, (April 28, 1994) (Initial Decision).

Lipman appealed this decision to the Commissioner, who adopted the factual findings and the recommended sanction of the ALJ. See McLandish v. Lipman, No. D91-18, Commissioner’s Decision at 19, (Mar. 27, 1995) (Commissioner’s Decision). Lipman then sought review in the district court, which held that the decision was supported by substantial evidence and that the chosen sanction of a public reprimand was not an abuse of discretion. Lipman now appeals to this court.²

DISCUSSION

A. We review the district court’s grant of summary judgment de novo. See Litton Sys., Inc. v. Honeywell, Inc., 87 F.3d 1559, 1566, 39 U.S.P.Q.2d 1321, 1324 (Fed.Cir.1996); Burroughs Wellcome Co. v. Barr Labs., Inc., 40 F.3d 1223, 1227, 32 U.S.P.Q.2d 1915, 1919 (Fed.Cir.1994). Therefore, like the district court, we review for substantial evidence the Commissioner’s decision that Lipman violated his duty of candor to the PTO when he relied on the V & E affidavits in the appeal petition. See Klein v. Peterson, 866 F.2d 412, 414, 9 U.S.P.Q.2d 1558, 1559 (Fed.Cir.1989) (holding that in a disciplinary case, the Federal Circuit reviews the Commissioner’s decision for substantial evidence). “To affirm under the substantial evidence standard, a court must conclude that the record as a whole contains ‘such relevant evidence as a reasonablé mind might accept as adequate to support a conclusion.’ ” Klein, 866 F.2d at 414, 9 U.S.P.Q.2d at 1559 (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 95 L.Ed. 456 (1951)).

B. In this appeal, Lipman argues that the Commissioner, and in turn the district court, erred by failing to consider the totality of the evidence in determining whether Lipman intended to mislead the PTO by filing the May 7, 1990 appeal petition which contained references to the disavowed V & E affidavits. More specifically, Lipman contends that the PTO presented no evidence of intent to mislead and that the events occurring after the filing of the appeal petition, which showed that Lipman was acting in good faith and would correct the affidavit references if necessary, were “basically ignored.” Lipman also argues that the Commissioner and the district court did not properly consider his professional obligation to his client. Finally, Lipman contends that the district court failed to “accord any real relevance or weight to the substantial and unrefuted testimony” of Lipman’s seven distinguished experts.

The PTO argues that the district court correctly concluded that substantial evidence supported the finding that Lipman intended to deceive the PTO, that he knew the four V & E affidavits had been disavowed, and that they were material. It also contends that Lipman’s duty of candor and good faith in dealing with the PTO was not inconsistent with any duty owed to his client and that the Commissioner did not fail to consider the entire record in reaching his decision.

C. The undisputed facts in this case demonstrate that Lipman filed an appeal petition with the PTO on Wallace’s behalf that referred to and relied on seventeen affidavits and letters, including the four disavowed V & E affidavits. The appeal petition stated, in part:

While OED states that the 17 sworn and/or executed factual statements by third parties attesting to petitioner’s [Mr. Wallace’s] character, integrity and remorse over the conflict of interest were “considered,” OED refers to these statements as mere “testimonials” [FN14] and gives them no weight in determining the sanction imposed on [Mr. Wallace]. Indeed, OED has postponed actual consideration of the weight to be given these 17 statements [FN15] until “applicant reappl[ies] for registration.”

[Footnote 14 reads, “Although OED refers to these 'testimonials’ in the pejorative sense, they are not merely ‘testimonials’; they are sworn statements and signed letters from lawyers and lay persons that testify to many factual matters with which the affiants/deelarants/sig-nees have first hand, personal knowledge and, based upon those factual matters, contain their personal opinions. As such, they are entitled to significant weight in determining the appropriate sanction to be imposed on [Mr. Wallace], and it would be entirely arbitrary and capricious to accord them little or no weight in the context of the nature and scope of the sanction determination.” ] [Footnote 15 reads in pertinent part, “The 17 statements referenced by OED were submitted by [Mr. Wallace].”]

‡ ‡ ‡ ‡ $ ‡

In fact, the evidence of good moral character and repute is substantial. Each of the 17 letters and affidavits [FN23] details particular facts which underlie the author’s/affiant’s opinion that petitioner is honest and reliable and is of good moral character and repute.

[FN28 reads, “See notes 14 and 15, supra.”]

‡ ‡ ‡

Details of his work in these various associations are given in a number of the 17 letters of recommendation and affidavits.

See Initial Decision at 6 (emphasis in original).

These excerpts show that the appeal petition left the impression that all 17 affidavits and letters continued to be true and correct and were supportive of Wallace’s character. For example, in one of the above excerpts, Lipman represented that “each” of the affidavits and letters (which included the four disavowed affidavits) “details particular facts” supporting the opinions as to Wallace’s character. Nowhere in the appeal petition was there any indication that any facts or opinions expressed in the 17 affidavits and letters had changed.

At the time of filing the appeal petition, Lipman knew that the V & E affiants had withdrawn their affidavits because of newly discovered facts about Wallace and because their opinions of him had changed. Lipman had received the 16 page letter of April 27,1990 from Martin, which stated in part:

While the facts stated in our prior Affidavits are true, the relevant facts stated therein are now incomplete: the Affidavits do not state the additional facts we have now learned about Ron Wallace which are stated in this letter. Moreover, our conclusions and opinions about Ron Wallace have changed by reason of the additional facts set forth in this letter. Since we are now aware of additional facts involving Mr. Wallace and the conclusions and opinions expressed in those prior Affidavits are no longer valid, the Affidavits provided by [the four V & E attorneys] are no longer to be used by Ron Wallace or you [Lip-man] with respect to his efforts to obtain registration with the [PTO] or for any purpose whatsoever. If you have not already filed an appeal, you must not refer to our affidavits in any appeal documents. If you have already filed an appeal, you must file an amended appeal removing all reference to our affidavits.

This letter is unequivocal in advising Lipman not to use the V & E affidavits in support of Wallace’s application for registration or for any purpose. In a second letter, received by Lipman the day after the appeal petition was filed, Martin reinforced his April 27 letter by advising that all of the facts recounted in it had been verified and that the opinions about Wallace’s character as set forth in the V & E affidavits had changed. Martin also expressed his concern that the appeal petition “somehow indirectly gave the PTO the impression that our attorneys still maintain the same beliefs and opinions as are stated in the affidavits that are on file with PTO.” This concern arose because in Lipman’s May 4 letter to Martin he stated that the appeal petition would not “directly refer to or quote from the Vinson & Elkins affidavits.”

The evidence fully supports the findings that Lipman knew the V & E affidavits had been withdrawn and could not be relied on, and that Lipman “knowingly gave misleading information to the PTO.” Initial Decision at 12, Commissioner’s Decision at 9. Lipman explained in his testimony that although the V & E affidavits had been disavowed he hoped the V & E affiants would change their minds. Even if Lip-man initially believed that there could be some modification of the V & E position set forth in the April 27 letter, the Commissioner properly determined that this position could not reasonably be held after Lipman received Martin’s second letter on May 8 stating that all of the facts in his April 27 letter had been verified.

Lipman was also aware that the V & E affidavits were highly material. When the OED disapproved Wallace’s application for registration, it noted:

The testimonials from members of the Vincent [sic] and Elkins firm were of particular interest. They were very supportive of applicant’s competence as a patent practitioner and his high standards dealing with clients and other members of the firm.... Any reapplication for registration by applicant must include evidence that he possesses good moral character and repute.... [Applicant] may refer to the affidavits from the Vincent [sic] & Elkins firm ... as establishing applicant’s awareness of the proscription under 37 CFR 10.10(b) and efforts he has undertaken to comply with the proscription.

In preparing the draft of the appeal petition, Lipman relied heavily on the four V & E affidavits and directly quoted numerous sections. Lipman also acknowledged the importance of these affidavits during his testimony, calling the four affidavits “the most critically favorable evidence in the record.” The OED’s favorable reference to the V & E affidavits, Lipman’s reliance on them in the draft appeal petition, and Lipman’s own testimony show that Lipman understood the materiality of the four affidavits. Knowing that the PTO regarded the V & E affidavits to be very important, Lipman did not disclose that they had been withdrawn.

Lipman contends that the PTO presented “no competent evidence” that he intended to mislead the PTO when he filled the appeal petition on May 7, 1990. He urges that when the totality of the evidence is considered, including events occurring after that date and his actual state of mind, he did not subjectively intend to mislead. Instead, he wanted to “get to the bottom of things,” and to supplement the appeal petition, if necessary, as soon as this had been done. We are not persuaded by Lipman’s argument that direct evidence of his subjective intent is required to show that he intended to mislead the PTO. The law is clear that direct evidence of intent is not necessary. Rather, intent is “most often proven by a showing of acts, the natural consequences of which are presumably intended by the actor.” See Molins PLC v. Textron, Inc., 48 F.3d 1172, 1180, 33 U.S.P.Q.2d 1823, 1828-29 (Fed.Cir.1995). The fact of misrepresentation coupled with proof that the party making it had knowledge of its falsity is enough to warrant drawing the inference that there was a fraudulent intent. See Jaskiewicz, 822 F.2d at 1058, 3 U.S.P.Q.2d at 1299, Digital Equip. Corp. v. Diamond, 653 F.2d 701, 709, 210 U.S.P.Q. 521, 532 (1st Cir.1981) Thus, circumstantial evidence may permit an inference of intent. See Klein, 866 F.2d at 415, 9 U.S.P.Q.2d at 1560; Rohm & Haas Co. v. Crystal Chem. Co., 722 F.2d 1556, 1571, 220 U.S.P.Q. 289, 300 (Fed.Cir.1983) (intent to deceive inferred from likely result of filing affidavits based on falsified data). In determining whether an inference of intent can be drawn from circumstantial evidence, it is proper to consider the degree of materiality of the information. See KangaROOS U.S.A., Inc. v. Caldor, Inc., 778 F.2d 1571, 1573, 228 U.S.P.Q. 32, 33 (Fed.Cir.1985) (“[T]he more material the misrepresentation before the PTO, the lower the burden of proving intent.”).

The ALJ expressly found that Lipman “knowingly gave misleading information to .the PTO and in so doing, [he] intended to mislead.the PTO in to [sic] believing the opinions expressed in those affidavits were still valid.” Initial Decision at 12. The Commissioner adopted the ALJ’s finding of intent to mislead. He concluded that the ALJ had properly considered the totality of the evidence, including the materiality of the information regarding the affidavits, the knowledge that it was incorrect, the surrounding circumstances and evidence of good faith. Commissioners Decision at 11. Because Lipman knew that the V & E affidavits had been disavowed and that these affiants’ opinions of Wallace had changed based on new additional facts that had been verified and because he also knew that the V & E affidavits were deemed highly matérial by the OED, there is substantial evidence to support the findings of the ALJ and Commissioner that Lipman intended to mislead the PTO.

Furthermore, we consider Lipman’s argument also to be unpersuasive because there is substantial evidence in the record, including Lipman’s own testimony, to support a finding that Lipman subjectively intended to mislead the PTO at the time he filed the appeal petition. During his deposition testimony, Lipman discussed his decision not to reduce the references to the affidavits from 17 to 13 in the appeal petition:

If you just explain 17 to 13 and not give any explanation, don’t you think someone is going to pick up the paper and say, “Well, gee, only 13 out of 17, why[?] Why[?]”

What I wanted to avoid was why, the why question at least until I got Mr. Wallace’s statement of the facts and the reaction [of the] V & E people.

i|i ‡ ❖ ‡

You’re raising a red flag about the most critically favorable evidence in the record supporting Mr. Wallace’s position. I think it’s one of those Hobson’s choice type of things. You either remove all explicit reference to the V & E affidavits, to the position that was taken and correct it later. Or you do something minimal to draw attention to the problem, but in a way it seems to me would simply be [ ] extremely counterproductive and all before you know the facts....

(Emphasis added); see also, Initial Decision at 10.

Further, Mittelberger testified that he expressed concern to Lipman that the seventeen should be changed to thirteen in fight of Martin’s letter. Lipman decided to leave the references to “seventeen” affidavits and asked Mittelberger to remove all quotations from the V & E affidavits, “without explicitly stating that the V & E affidavits had been withdrawn.”

Because of the materiality of the four Y & E affidavits, the record establishes clearly that Lipman purposely was trying to mislead the PTO for at least some indefinite period of time. During this time he wanted to investigate the allegations against Wallace and apparently hoped he might be able to resurrect the affidavits. His own testimony that he would correct the appeal petition later if necessary confirms that in the meantime the factual representation as to the number of valid affidavits was intentionally misstated. The deliberate, calculated deception about the number of affidavits, after twice being informed that the affidavits were no longer to be used in support of Wallace’s PTO appeal, proves the subjective intent that Lipman claims is missing.

Lipman argues on appeal that his duty to his client, and to maintain his client’s confidences, justified his action in failing to inform the PTO about the withdrawn affidavits until he completed his investigation. He contends there was a conflict between this duty and the requirement of candor in dealing with the PTO. We agree with the district court that there was no such conflict in this case. The PTO relies, and should be able to rely, upon attorneys registered to practice before it to act in an honest and forthright manner in their dealings with the PTO. See Kingsland v. Dorsey, 338 U.S. 318, 319, 70 S.Ct. 123, 94 L.Ed. 123 (1949) (“[T]he relationship of attorneys to the Patent Office requires the highest degree of candor and good faith.”).

The OED did not charge Lipman with failing to disclose the contents of Martin’s letter and the allegations of Wallace’s misconduct contained therein. The OED charged that he violated his duty of candor by misrepresenting the number of valid affidavits. No client confidences were involved in the disclosure that the V & E affidavits were no longer valid.

Lipman contends that he had a duty to investigate the allegations of Martin’s April 27, 1990 letter. We disagree. From that letter and certainly from the time of Martin’s May 7, 1990 letter Lipman was fully aware that the V & E affidavits no longer reflected the opinions of the V & E attorneys regarding Wallace’s character. The accuracy of the allegations against Wallace that were disclosed in Martin’s April 27, 1990 letter was not relevant to the question of whether or not the withdrawal of affidavits by the V & E attorneys should have been disclosed. The fact that the V & E attorneys no longer held their former opinions as to the character and fitness of Wallace and that the previously filed V & E affidavits could not be relied on was highly relevant. By continuing to refer to seventeen letters and affidavits, i.e., including those from the V & E attorneys, Lipman’s appeal petition on behalf of Wallace intentionally left the impression that no change in the opinions of the V & E attorneys had occurred.

Lipman’s contention on appeal that he was acting in good faith in investigating the V & E allegations against Wallace and, if required, would have corrected any misrepresentation to the PTO does not absolve him of violating his duty of candor to the PTO. The evidence shows that Lipman had not corrected the misleading appeal petition by the time he received the August 1, 1990 notice from the PTO that Wallace’s case had been remanded to the OED to consider Martin’s April 27, 1990 letter. That Lipman may have been planning to correct the appeal petition and even took some steps in that direction does not show a good faith effort to cure the known misrepresentation. Lipman failed for nearly three months to begin the preparation of a correcting supplement to the appeal petition. We cannot consider these belated efforts to be a cure for the lack of candor exhibited when the appeal petition was filed. Further, the record shows that the steps Lipman took toward correcting the misleading appeal petition were fully considered by the Commissioner in rendering his decision and were explicitly cited as one of the reasons for the leniency of the sanction imposed. We agree that mitigating the sanction was the proper way to take into account the proposed correcting supplement that was being worked on by Lipman at the time of the PTO’s notice of remand.

CONCLUSION

Upon consideration of all the facts and circumstances involving Lipman’s conduct, we agree with the district court that substantial evidence supports the decision of the Commissioner that Lipman violated 37 C.F.R. § 10.23 when he submitted the May 7, 1990 appeal petition to the Commissioner that relied on the four V & E affidavits that had been repudiated and withdrawn.

Accordingly, the judgment of the district court is affirmed.

AFFIRMED.

1 . The district court had jurisdiction pursuant to 35 U.S.C. § 32 (1996) and Local Rule 213. This court has jurisdiction over this appeal under 28 U.S.C. § 1295(a)(1) (1996). See Jaskiewicz v. Mossinghoff, 822 F.2d 1053, 1057 n. 10, 3 U.S.P.Q.2d 1294, 1297 n. 10 (Fed.Cir.1987).

2 . Because Lipman has not appealed the propriety of the sanction imposed, we need not review the district court's determination that the sanction was not an abuse of discretion.