United States: Divided Federal Circuit Panel Creates Patent Agent Privilege

[W]e find that the unique roles of patent agents, the congressional recognition of their authority to act, the Supreme Court's characterization of their activities as the practice of law, and the current realities of patent litigation counsel in favor of recognizing an independent patent-agent privilege.

Litigators – put your discovery pencils down. Inventors –pick up the phone and call your patent agent. The Federal Circuit is continuing the Jaffee1 "evolutionary development of testimonial privileges" by way of creating a new patent agent-client privilege.

On March 7, 2016, the Federal Circuit resolved a split in the district courts over whether a patent agent-client privilege exists independent from the attorney-client privilege. The majority held it does. "Indeed, if we hold otherwise, we frustrate the very purpose of Congress's design: namely, to afford clients the freedom to choose between an attorney and a patent agent for representation before the Patent Office."

Creating new privileges is actually no small matter, and this new protection of inventor confidences to a patent agent will likely be a very narrow privilege. What makes this case interesting is its unique spot in the crossfire of Congressional authority to act, powers of the federal courts, and the current realities of patent litigation counsel.

In In re: Queen's University at Kingston, No. 15-145, 2016 U.S. App. LEXIS 4259 (Fed. Cir. March 7, 2016), the U.S. Federal Circuit (Lourie, O'Malley,* Reyna) reversed and remanded the district court's order compelling the production of communications Queen's University had been withholding as privileged. Not one of these communications involved counsel but rather a patent agent. Samsung therefore argued that where counsel is not involved in communications, the court should "neither expand the scope of the attorney-client privilege nor recognize an independent patent-agent privilege" to protect such communications. The Federal Circuit disagreed.

In its opinion, the Federal Circuit reasoned that decades ago, in Sperry v. State of Florida ex rel. Florida Bar,2 the Supreme Court found that patent agents perform a service that "constitutes the practice of law." This practice is only for the performance of services "reasonably necessary and incident" to the preparation and prosecution of patent applications before the Patent Office – but the practice of law nonetheless. Sperry acknowledged this agent practice may translate into an equally strong need for candor with, and protection for, patent agent communications. But regardless, it held Florida could not regulate patent agent practice, as Congress dictated this to be the job of the Patent Office.

The waters have remained a bit muddied for years, and in no small part because a client has a "reasonable expectation" that communications surrounding patent prosecution will be kept privileged. Inventors and clients do not necessarily take the time to split hairs over whether there is an "Esq." in a signature block when receiving opinions on patentability or on how to best prosecute a patent. The majority referenced the Federal Circuit decision in In re Spalding Sports Worldwide, Inc.,3 for support on this public policy concern. Indeed, Congress gave clients the option of choosing attorneys or agents, and it "frustrates this choice" to afford privilege only to attorneys.

Tellingly, in a 2015 Patent Office Roundtable with various domestic and international patent practitioners, stakeholders expressed the same range of concerns about the lack of agent-client privilege, including that it: 1) creates uncertainty over what is privileged and how to protect it, 2) hinders full and frank discussion between clients and their representatives, 3) increases business costs and judicial costs, and 4) degrades the effectiveness of patent agents.4 The commentators unanimously advocated for the recognition of a patent agent-client privilege. And the Patent Office is taking this issue to the Hill – democracy at work. But in the meantime, given the unrest percolating at the Patent Office, the Federal Circuit tries here to put a lid on the confusion arising when patent law at the Patent Office is at odds with patent law in the courts. This "expos[ure of] sensitive client information to discovery during litigation" in turn increases the cost of obtaining patents, increases the cost of litigation, and artificially limits client opportunities for patent agents.

The solution: the Federal Circuit created a new privilege under Rule 501 of the Federal Rules of Evidence5 to cover patent agent communications, requiring the privilege to be "carefully construed." A key step of assessing the patent agent privilege will be to study the communications and assert the privilege only for that which falls under patent agents' congressionally "authorized" practice of law before the Patent Office. The burden will remain on the party asserting the privilege. The court pointed specifically to 37 C.F.R. § 11.5(b)(1) to help define that scope and then listed some communications that would not be considered privileged (and incidentally, might be unauthorized practice of law): "communications with a patent agent who is offering an opinion on the validity of another party's patent in contemplation of litigation or for the sale or purchase of a patent, or on infringement, are not reasonably necessary and incident to the preparation and prosecution of patent applications. . . ."

Judge Reyna dissented, tackling the majority's opinion in a line-item fashion vaguely reminiscent of the originalist sentiments one would read from the late Justice Scalia. At the heart of Judge Reyna's dissent are two beliefs: (1) there is no pressing need to create an agent-client privilege, and (2) if even if there were such a need, Congress or the Patent Office, not the courts, would have jurisdiction. Judge Reyna wove in both Supreme Court-mandated presumptions and public policy arguments against recognizing new privileges, discussed the uncertainties that will arise when defining such a privilege, and then offered a counter interpretation of the congressional record showing intent by Congress that agents not have the same privileges as practicing attorneys.

Judge Reyna first addressed the Jaffe Supreme Court's general presumption against recognizing new privileges. "That the demand for the truth is not to be derogated lightly is a cornerstone in the legitimacy of the U.S. system of justice." He criticized the majority's assumption of an "imperative need for confidence and trust" in communications with agents when most patent agents working with or under attorneys in firms are cloaked in the privilege anyway. And under Patent Office regulations, patent lawyers, agents, inventors, and assignees already have "a duty of candor and good faith in dealing with the Office." This includes a duty to disclose all information known to be material to patentability of an application.6 It begs the question – what nonmaterial communications are really at stake in the first place?

Moreover, Judge Reyna was displeased with how administering this new privilege could be difficult, for example, in situations relating to AIA proceedings or other PTAB practice, where patent agents may have more freedom to perform services akin to the conventional practice of law. Further confusion might likewise arise where applicable state definitions of the practice of law abut the Patent Office's regulations. The irony is not lost on Judge Reyna that a patent agent would likely have to hire an attorney just to figure out which part of his daily work routine is or is not privileged.

Ultimately, it became increasingly clear that Judge Reyna remains "leery" of how the majority interprets the purpose of attorney-client privilege7 as well as believes the court is overstaying its welcome in an arena the Constitution has dubbed for Congress and the Patent Office. An attorney-client-like privilege should not and does not apply merely because someone is enabled to practice limited law before a single, specific administrative agency. The Sperry Court similarly recognized a distinction between nonattorney patent agents and lawyers,8 and the commissioner of patents in 1928 testified before Congress about how patent agents' rights in court would be different from those of patent lawyers in two respects: patent agents "would not be able to represent their clients in court, and they would also not be able to claim privilege for their clients in court."9 Is the majority wrong, as Judge Reyna proffers, to put their nose in where it doesn't belong? Congress has had ample opportunity to speak to the patent agent-client privilege issue – although the Hill notoriously moves at a sluggish speed at best – but it has chosen to remain silent.

In summary, this decision is of considerable importance to organizing practices (corporate and private) that incorporate patent agents. Although it extends a protective privilege in a way that could give organizations more flexibility, the majority opinion leaves plenty of room to argue over the nuances and leaves more residual risk than Judge Reyna's bright-line position does. Given the intersection of congressional intent, public policy, and Supreme Court precedent, Supreme Court review is a strong possibility.


1. See Jaffee v. Redmond, 518 U.S. 1, 8-9 (1996).

2. 373 U.S. 379, 383 (1963).

3. 203 F.3d 800, 804-06 (Fed. Cir. 2000).

4. The Patent Office issued a "Request for Comments on Domestic and International Issues Related to Privileged Communications Between Patent Practitioners and Their Clients." 80 Fed. Reg. 3953 (Jan. 26, 2015). In response, the Patent Office received comments from a number of domestic and international trade groups, individuals, and companies. See Roundtable on Domestic and International Issues Related to Privileged Communications Between Patent Practitioners and Their Clients, Feb. 2015, available at: http://www.uspto.gov/learning-and-resources/ip-policy/roundtable-domestic-and-international-issues-related-privileged

5. Rule 501: The common law – as interpreted by United States courts in the light of reason and experience – governs a claim of privilege unless any of the following provides otherwise: the Constitution, a federal statute, or the Supreme Court.

6. 37 C.F.R. § 1.56. See also, e.g., Kingsland v. Dorsey, 338 U.S. 318, 319 (1949).

7. Judge Reyna counters the majority opinion with this distinction: "The attorney-client privilege is not accorded to attorneys because they provide legal advice or practice law, but because of their professional status as attorneys." (Emphasis added). The court in Spalding actually held "that an invention record constitutes a privileged communication, as long as it is provided to an attorney 'for the purpose of securing primarily legal opinion, or legal services, or assistance in a legal proceeding.'" Nor has the Supreme Court ever held that patent agents practice law. Sperry just held that Florida could not bar patent agents from practicing before the USPTO as the unauthorized practice of law. 373 U.S. at 404. That holding does not necessitate the finding that patent agent communications are privileged. Congress authorized the Patent Office to permit nonlawyers to practice before the U.S. Patent and Trademark Office in patent matters, but recognized that clients who chose to use agents would have some disadvantages. One disadvantage was that their communications with their agent would not be privileged.

8. 373 U.S. at 394–96.

9. Prevention of Fraud in Practice Before the Patent Office: Hearing on H.R. 5527 Before the H. Comm. on Patents, 70th Cong., 1st Sess. 15 (1928). Excerpt of the testimony was as follows:

Mr. JENKINS. They will be employing as a patent lawyer to represent them a man who is not a patent lawyer here in the courts?

Commissioner ROBERTSON. Not that, but if their clients get mixed up in civil proceedings in the courts, the one who has a lawyer for his attorney will have a lawyer who is able to claim privilege for his client; but the man who has an agent for his attorney will not be able to claim that privilege.

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