Appendix — Bender v. Dudas (No. 07-847)

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APPENDIX A

United States Court of Appeals

For The Federal Circuit

2006-1243

[Filed June 21, 2007]

S. MICHAEL BENDER,

Plaintiff-Appellant,

Vv.

Jon W. Dudas, DIRECTOR,

PATENT AND TRADEMARK OFFICE,

Defendant-Appellee.

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Before RADER, Circuit Judge, PLAGER, Senior

Circuit Judge, and LINN, Circuit Judge.

LINN, Circuit Judge.

S. Michael Bender (“Bender”) appeals from a final

decision by the United States District Court for the

- District of Columbia that granted summary judgment

upholding a disciplinary action taken by the director of

the United States Patent and Trademark Office (the

“PTO” or “agency”) to exclude Bender from practicing

before the PTO. Bender v. Dudas, No. 04-CV-1301

(D.D.C. Jan. 13, 2006) (“SJ Order”). Because the

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PTO’s findings were supported by substantial

evidence, and because the disciplinary action was not

arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with the law, we affirm.

I, BACKGROUND

This case involves the PTO’s continuing efforts to

regulate the conduct of patent agents and attorneys

registered to practice before it and to provide

assurance to inventors of effective counsel in filing and

prosecuting applications for patents in the United

States. The background of this case reads like a novel

but represents the true story of hopes dashed, fees ©

wasted, and dreams lost by hundreds of individual

inventors caught up in the world of self-interested

promoters who promise the world and deliver very

little.

In the area of patent law, as in most other areas of

the law, sophisticated clients generally are able to

determine the kinds of legal representation they need

and where to find counsel with the skills, integrity,

and character appropriate for the matter at hand.

Individual inventors, however, are often unfamiliar

with even the most basic principles of patent law, do

not know where to turn for help, and are vulnerable to

those who seek to take advantage of their

inexperience. Commonly available sources of guidance

often are of little help, either because they are too

simplistic or too generalized to be of any particular

assistance or because they are too complex to be

readily understood. Even mainstream media sources

frequently confuse and misunderstand basic

intellectual property law precepts. How often do we

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read articles confusing the forms of protection

applicable to an invention, to a symbol indicating

origin, or to a work of authorship with expressions

like, “copyrighted his invention,” “trademarked his

idea,” or “patented her textbook”?

The PTO has recognized the need to regulate those

who practice before it. To this end, the PTO has

determined minimum levels of legal competence and

has rigorously administered testing of those who seek

tc become registered patent agents and attorneys. It

has also established minimum standards of ethical

conduct expected of registered practitioners and has

promulgated rules implementing those standards and

providing a mechanism for their enforcement.

For individual inventors, the PTO’s listing of

registered patent agents and attorneys is a basic

resource and an assurance of legal competence and

good moral character. But as sophisticated as the PTO

is in regulating practitioners who appear before it and

in providing information about registered practitioners

on its website and in other publicly distributed

materials, it frequently finds itself challenged by

so-called “invention promoters” who exploit

unsophisticated inventors, heap every invention with

praise regardless of the merits or the real prospects of

legal protection, and entice inventors into engagement

agreements filled with hollow guarantees of patent

protection and promises of royalty-bearing licenses

that seldom yield anything of any significant value.

In seeking to protect the public from unscrupulous

invention promoters, the PTO has aggressively sought

to monitor and enforce its disciplinary rules against

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those registered practitioners who act in concert and

participation with these promoters in the prosecution

of patent applications before the PTO. This case is

about one such practitioner who became complicit in

the activities of an invention promoter involving over

1,000 unsuspecting inventors.

These unsuspecting inventors first sought help

from American Inventors Corporation (“AIC”), an

invention promoter. According to testimony and |

declarations of past employees and clients, AIC would

solicit inventors to present their ideas, tell each

inventor that their idea was great, and then perform

a patent search. After the search, AIC would conduct

a sales presentation that provided the inventor with a

positive evaluation of the invention and offered AIC’s

services in procuring a patent and promoting the

invention to manufacturers and other interested

parties. The inventor then signed a standard form

contract in which he or she paid a flat fee or a

combination of a flat fee and a percent of royalty .

income in exchange for AIC’s promise to hire a patent

attorney on the inventor's behalf, pay all legal fees

associated with prosecuting a patent application, and

conduct various marketing activities to promote the

invention. AIC also guaranteed that it would refund

100% of the inventor’s flat fee if a patent was not

procured. The contract did not specify what type of

patent would be obtained or in any way explain the

differences in protection between a design patent and

a utility patent. Indeed, according to past employees

-and clients, AIC’s general policy and practice was to

conceal those differences from the inventors.

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After the contract was signed, AIC would forward

the inventor’s disclosure to a patent attorney.

Initially, that patent attorney was Leon Gilden.

Although a number of the inventors’ disclosures

indicated that they sought to protect the useful and

functional features of the invention—as opposed to

ornamentation—Gilden drafted design patent

applications in every case. In addition, Gilden

allegedly employed draftsmen to add decorative

ornamentation or surface indicia to the drawings of the

inventions even though such embellishment was not

invented by the named inventor. Gilden would send

the completed design patent application to AIC, which

would get the inventor’s signature, and the application

would then be filed using Gilden’s registration

number. At no point did Gilden consult with the

inventors regarding the filing of a design patent

application or the embellished drawings because,

according to a former AIC employee, direct contact

between the inventors and the attorney was

emphatically discouraged by AIC.

The alleged purpose of this scheme was to make it

easier to obtain a patent and to avoid a refund of the

inventors’ fee under AIC’s money-back. guarantee.

Gilden’s alleged involvement in the embellishment

scheme prompted the PTO to initiate disciplinary

action against him in the early 1990s. The PTO also

sent each applicant a Request for Information (“RFI”)

asking the inventors whether they invented the

patterns on the drawings, whether they intended to

apply for a design patent over a utility patent, and

whether they understood the difference between a

design and a utility patent. Ultimately, Gilden

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entered into a settlement agreement with the PTO aindg

received a five-month suspension.

In 1993, AIC contracted with Bender, a register-ed

patent attorney, to continue the prosecution of ower

1,000 design applications that had formerly besen

handled by Gilden (the “Gilden applications”). The

contract provided Bender with up to $15,000 bi-weekly

as compensation for both attorneys fees aind

prosecution costs. Bender sent each Gilden applicant

an engagement letter that included, among other

things, the RFI that Gilden had failed to provide to tthe

client and a brief discussion of the differences between

a design patent and a utility patent. The engezeméent

. letter to each applicant was essentially the same; it (did

not provide any advice or inquiries that directly

related to the particular invention at issue, the typée of

patent best suited to protect the invention, or tthe

consequences of pursuing a design patent or a utillity

patent in each particular inventor’s§ caise.

Furthermore, other than instructing the inventors to

respond to the RFIs, Bender did not attempt, to

determine whether the Gilden applicants had intendled

to file design patent applications and whether tlhat

decision had been made on an informed basis. As ‘the

responses to the RFIs indicated, a number of ithe

inventors either did not understand the differeince

between a design and utility patent or had wanterd a

utility patent at the time the application was filled.

Bender nevertheless continued to prosecute the Gilaien

applications as design patent applications, takting

steps only to have Gilden’s improperly added

embellishments removed.

Ta

In the late 1990s, the Office of Enrollment and

Discipline at the PTO began investigating Bender after

receiving information indicating that he had violated

the PTO’s Code of Professional Responsibility. During

that investigation, the Office of Enrollment and

Discipline sent Bender several RFIs posing questions

about his actions and conduct. In August 1999, a

meeting of the Committee on Discipline was held in

which it was determined that there was probable

cause to bring charges against Bender for violations of

PTO regulations. An administrative Complaint and

Notice dated June 20, 2000, set forth ten counts

alleging violations of PTO rules governing attorney

conduct.

The charges against Bender were tried before an

administrative law judge from March 26 through

March 29, 2001. In a thorough 48-page opinion, the

administrative law judge found that Bender had

violated numerous PTO rules on attorney conduct and

that exclusion from practice was warranted. Bender

sought review of that initial decision under 37 C.F.R.

§ 10.154. In an equally thorough opinion, the general

counsel for the PTO issued a final decision that

adopted some of the violations found in the initial

decision and affirmed the sanction of exclusion.

Specifically, the general counsel found that Bender

had neglected an entrusted legal matter in violation of

37 C.F.R. § 10.77(c); accepted employment where

professional judgment may be affected in violation of

37 C.F.R. § 10.62(a) and accepted compensation from

a person other than a client without a full disclosure to

the client in violation of 37 C.F.R. § 10.68(aX1); and

engaged in conduct that was prejudicial to the

administration of justice in violation of 37 C.F.R.

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§ 10.23(b)(5). Bender requested reconsideration of the

final decision under 37 C.F.R. § 10.156(c).

Reconsideration was largely denied.

Bender then filed a petition in the U.S. District

Court for the District of Columbia to challenge the

PTO’s final decision. 35 U.S.C. § 32; 37 C.F.R.

§ 10.157. Based on the administrative record, Bender

and the government filed cross-motions for summary

judgment. Bender alleged procedural and due process

violations; lack of jurisdiction; improper application of

statutes, precedent, and agency regulations; and lack

of a factual basis for the administrative law judge’s

and general counsel’s decisions. See SJ Order, slip op.

at 5. The district court confirmed that there were no

genuine issues of material fact with respect to those

issues and—in a 50-page opinion—addressed each of

Bender’s arguments, finding them unpersuasive. See

id., slip op. at 7-49. Accordingly, the district court

denied Bender’s motion for summary judgment and

granted summary judgment to the government. ZId.,

slip op. at 50.

Bender filed a timely appeal to this court.

Following oral argument, we instructed the parties to

submit supplemental briefing addressing the standard

utilized by the PTO in determining the sanction of

exclusion and the proper standard of review for

reviewing that determination. We have jurisdiction

pursuant to 28 U.S.C. § 1295(a)(1). See Wyden uv.

‘Comm’r of Patents & Trademarks, 807 F.2d 934, 937

(Fed. Cir. 1986) (en banc).

Sa

Il. DISCUSSION

The PTO has statutory authority to suspend or

exclude “from further practice before the Patent and

Trademark Office, any person, agent, or attorney

shown to be incompetent or disreputable, or guilty of

gross misconduct, or who does not comply with the

regulations established under section 2(b)(2)(D) of this

title.” 35 U.S.C. § 32. Section 2(b)(2XD) delegates to

the PTO the authority to establish regulations

governing the conduct of attorneys prac cing before

the PTO. Id. § 2(bX2XD). Pursuant to that statutory

authority, the PTO has enacted disciplinary rules, see

37 C.F.R. § 10.20(b) (listing the various disciplinary

rules), and has established procedures and standards

for determining whether those rules have been

violated and what sanction should be imposed, 37

C.F.R. §§ 10.130-10.170.

The disciplinary action taken by the PTO is subject

to review by the U.S. District Court for the District of

Columbia according to the provisions of the

Administrative Procedure Act. See 5 US.C.

§§ 702-706; 35 U.S.C. § 32. Under that Act, the

agency’s choice of sanction is held unlawful only if it is

“arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.” 5 U.S.C. § 706;

see also Butz v. Glover Livestock Comm’n Co., 411 U.S.

182, 185-86 (1973) (“[W]here Congress has entrusted

an administrative agency with the responsibility of

selecting the means of achieving the statutory policy

‘the relation of remedy to policy is peculiarly a matter

of administrative competence.” (citation omitted)).

The underlying factual findings used to support such

a sanction are reviewed for substantial evidence.

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Lipman v. Dickinson, 174 F.3d 1363, 1367 (Fed. Cir.

1999). We review the district court’s decision on

summary judgment without deference, reapplying on

appeal the same standards applicable to the district

court. Lacavera v. Dudas, 441 F.3d 1380, 1382 (Fed.

Cir. 2006).

Bender argues that substantial evidence does not

support the PTO’s findings that he violated various

disciplinary rules, that the PTO exceeded its authority

and violated his constitutional rights, and that the

PTO abused its discretion in determining that

exclusion was an appropriate sanction. We disagree

and address each of Bender’s arguments in turn.

A. Substantial Evidence

The agency found that Bender violated multiple

regulations governing attorney conduct before the

PTO.

1. Section 10.77(c)

First, the PTO found that Bender “neglect/ied] a

legal matter entrusted to the practitioner” in violation

of 37 C.F.R. § 10.77(c). As the Gilden applicants’

responses to the PTO indicated, many of Bender’s

clients did not appreciate the substantive difference

between a design patent and a utility patent at the

time the application was filed. Some applicants

indicated that they had wanted to file a utility patent

application. Although Bender was aware of those

responses, he continued to prosecute the Gilden

applications as design patents. The brief discussion of

the difference between design and utility patents

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provided by Bender’s engagement letter was an

entirely hollow and formalistic gesture because it did

not provide any of the Gilden applicants with advice

that directly related to the particular inventions at

issue, the type of patent best suited to protect these

particular inventions and the inventor's interests

therein, or the consequences of pursuing a design

patent instead of a utility patent. This failure is even

more glaring in view of AIC’s money-back guarantee

that a patent would issue without regard to the type of

patent that would be procured. Because design

applications had already been filed in each case, and

because AIC’s money-back guarantee motivated

continued prosecution of those applications as design

applications, the information provided by Bender’s

engagement letter was an inadequate response to the

confusion demonstrated by his clients’ earlier

responses to the RFIs. Any reputable attorney would

have appreciated that the wholesale filing of design

applications under such circumstances and the

unauthorized addition of design embellishments were

driven in large measure if not entirely by AIC’s

money-back guarantee. Such an attorney would have

identified that motivation to each inventor, explained

that such a motivation was not necessarily in the

inventor’s best interests, educated that inventor on the

steps needed either to fix the improperly embellished

design applications or to file continuation utility

applications, and otherwise advised that inventor on

how best to proceed in his or her particular case. As

the PTO correctly found, Bender’s communications to

the Gilden applicants at the outset of his

representation fell far short of these minimum

standards.

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Bender also fell short in neglecting to notify some

of his clients of final rejections in their applications

until after the three-month period for responding to

those rejections had expired. Bender does not dispute

this failure, but instead explains that he purposefully

delayed action in those cases pending the resolution of

an appeal in a “test case” that directly related to the

rejections.’ While such an explanation might justify

advising the client to seek an extension of time under

37 C.F.R. § 1.136 or a stay of proceedings pending

resolution of the test case, it does not justify an

absolute failure to notify the client at all that a final

rejection had issued, let alone the response needed,

until after the period for response expired. Although

Bender argues that the delayed notification had no

adverse impact on the applications, prompt

notification of the final rejection accompanied with an

explanation of the available options would have given

+ After assuming the Gilden applications, Bender filed

continuation design applications on the applicants’ behalf that

amended the original applications by deleting the improperly

added patterns from the drawings. In one of those applications,

the Board of Patent Appeals and Interferences described the

matter as an issue of first impression and concluded that such an

amendment constituted “new matter” that did not benefit from

the earlier filing date. See In re Daniels, 144 F.3d 1452, 1455

(Fed. Cir. 1998). Bender was counsel for that applicant on appeal

to this court, and we ultimately reversed the Board’s decision. Jd.

at 1457.

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Bender’s clients the choice as to how best to proceed

and would have avoided depriving them of the right to

avoid paying late filing surcharges.”

Because substantial evidence supports the PTO’s

determination that Bender neglected to advise his

clients on how best to protect their inventions and

neglected to promptly inform his clients that final

rejections were received in their applications, we see

no basis to overturn the decision that Bender violated

37 C.F.R. § 10.77(c).

2. Sections 10.62(a) and 10.68(a\(1)

Second, the agency found that Bender’s financial

relationship with AIC created a conflict of interest.

. Specifically, the PTO concluded that Bender's

compensation from AIC affected Bender’s “professional

judgment on behalf of the client” in violation of 37

C.F.R. § 10.62(a) and constituted compensation by one

other than the client without “the consent of the

practitioner’s client after full disclosure” in violation of

37 C.F.R. § 10.68(aX(1). The PTO interpreted section

10.62(a) as requiring, at a minimum, that Bender

disclose the extent of his relationship with AIC and

explain how AIC’s money-back guarantee to procure a

patent and its alleged involvement in improperly

adding non-invented patterns to the drawings of the

Gilden applications could create divergent interests in

the continued prosecution of those applications. The

* At the time, AIC had declined to pay for such prosecution costs,

and Bender informed the individual clients that they were

responsible for any continued prosecution costs and fees.

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PTO also interpreted the “full disclosure” requirement

of section 10.68(aX1) as requiring disclosure of the

amount that Bender was being paid by AIC. Because

both regulations require “full disclosure”’—an

undefined term that is left to the agency to

determine—we defer to these interpretations of the

agency’s own regulations because they are not “plainly

erroneous or inconsistent with the regulation.”

Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512

(1994) (quoting Bowles v. Seminole Rock & Sand Co.,

325 U.S. 410, 414 (1945)). Because Bender fails to

point to any indication in the record that he met the

disclosure requirements of 37 C.F.R. §§ 10.62(a) and

10.68(a)(1) as interpreted by the agency, we again see

no basis to overturn the PTO’s determination that

Bender violated those regulations.

3. Section 10.23(bX5)

Finally, the agency found that Bender “[e]ngaged in

conduct that is prejudicial to the administration of

justice” in violation of 37 C.F.R. § 10.23(bX(5) by

providing the PTO with evasive responses to RFIs. In

the RFI dated September 18, 1999, Bender was asked

to explain when AIC made the offer to Bender to

assume prosecution of the Gilden applications and

when Bender accepted that offer. Bender responded

by referring to another answer in which he stated only

that he had represented the inventors since about

1993. The same RFI also asked Bender whether he

had disclosed his financial relationship with AIC to

certain clients and whether he had explained to both

those clients and AIC that he represented the clients’

interests and not AIC’s interests. Bender’s only

response to that question was to object that such a

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request was argumentative, indefinite, and based on

the false premise that he represented the interests of

AIC. The PTO’s questions were specific questions

directed to Bender’s relationship with AIC and his

disclosure of that relationship to his clients. His

failure to respond to those questions in any meaningful

way hindered the PTO’s investigation. We therefore

conclude that substantial evidence demonstrates that

Bender engaged in evasive conduct prejudicial to the

PTO’s investigation, and we see no basis to overturn

the PTO’s determination that Bender violated 37

C.F.R. § 10.23(b)(5).

B. The Propriety of the Agency's Regulations and

Actions

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Bender argues that 35 U.S.C. §§ 2(b2)(D) and 32

only authorize the PTO to establish regulations

governing the conduct of attorneys “before the Office”

and that the regulations at 37 C.F.R. §§ 10.62, 10.68,

and 10.77 exceed that authority because they relate to

client communications that are not made “before the

Office.” The language of those statutes indicates that

they are broadly directed to service, advice, and

assistance in the prosecution or prospective

prosecution of applications. See 35 U.S.C. § 2(bX2XD)

(ensuring that attorneys “render to applicants or other

persons valuable service, advice, and assistance in the

presentation or prosecution of their applications or

other business before the Office”); id. § 32 (providing

for the suspension or exclusion of any attorney that

defrauds, deceives, misleads or threatens “any

applicant or prospective applicant, or other person

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having immediate or prospective business before the

Office”). The regulations in question are well within

the scope of the enabling statutes. To the extent the

phrase “before the Office” in sections 2 and 32 is

ambiguous, we defer to the PTO’s reasonable

interpretation of that phrase as authorizing

regulations that govern a patent attorney's

communications with and disclosures to a client in

connection with the prosecution of applications before

the PTO. See Chevron, U.S.A., Inc. v. Natural Res.

Def. Council, Inc., 467 U.S. 837, 842-845 (1984);

Lacavera, 441 F.3d at 1383 (“Because the PTO is

specifically charged with administering [85 U.S.C.

§ 2(bX2)], we analyze a challenge to the statutory

authority of its regulations under the Chevron

framework.”).

2.

Bender also argues that the Fourth Circuit’s

decision in Goldstein v. Moatz, 364 F.3d 205 (4th Cir.

2004), establishes that the PTO’s use of RF is in his

disciplinary investigation lacked procedural

safeguards and was therefore constitutionally

defective. The constitutionality of such RFIs was not

at issue in Goldstein. Rather, the issue in that case

was whether employees of the PTO were entitled to

absolute or qualified immunity when conducting a

disciplinary investigation. Id. at 211. The Fourth

Circuit held that the employees were entitled only to

qualified immunity, a determination it supported by

the fact that such an investigation lacked procedural

safeguards to protect the investigated attorney's

rights. See id. at 217-19. The Fourth Circuit’s

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decision did not hold that the use of RFIJs in a

disciplinary investigation was unconstitutional.

As the Supreme Court has recognized, “when

governmental action does not partake of an

adjudication, as for example, when a_ general

fact-finding investigation is being conducted, it is not

necessary that the full panoply of judicial procedures

be used.” Hannah v. Larche, 363 U.S. 420, 442 (1960);

see also id. at 444-49 (surveying legislative, executive,

and judicial investigative agencies and noting that

those that appear before such agencies are generally

not accorded procedural safeguards). That is because

such procedures would unduly stifle the agency in its

gathering of facts. See id. at 443-44. Here, the PTO

issued to Bender RFIs in the course of conducting a

nonadjudicative, fact-finding investigation prior to the

initiation of any adjudicative proceedings. 37 C.F.R.

§ 10.181. This type of RFI not only assists the agency

in gathering facts, it also protects practitioners by

providing them with an opportunity to explain any

questionable conduct and present reasons why

disciplinary proceedings are not warranted. We

therefore reject Bender’s arguments based on

Goldstein that the PTO’s use of RF Is in its disciplinary

investigation violated his right to procedural due

process. We have considered Bender’s remaining

constitutional arguments and find them unpersuasive.

C. The Sanction of Exclusion

In deciding what sanction to impose, the PTO

normally considers “(1) the public interest; (2) the

seriousness of the violation of the Disciplinary Rule;

(3) the deterrent effects deemed necessary; (4) the

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integrity of the legal profession; and (5) any

extenuating circumstances.” 37 C.F.R. § 10.154(b).

Bender argues that exclusion was improper because

such a “draconian” sanction was motivated by malice,

was punishment oriented, and failed to account for

extenuating circumstances.

The PTO properly initiated disciplinary action in

this matter based on improper practices conducted in

the course of Bender’s representation of clients that

had been originally represented by Gilden and referred

by AIC. After the improprieties surrounding the

affairs of AIC came to light, Gilden agreed to a

five-month suspension from practice to avoid formal

disciplinary proceedings. That sanction was the result

of a settlement agreement in which Gilden admitted to

violating various regulations. Bender, however, has

maintained throughout these proceedings that he has

done nothing wrong. Moreover, he has continued to

demonstrate a complete lack of remorse despite the

clear findings, supported by substantial evidence, that

Bender neglected legal matters with which he was

entrusted, failed to disclose the conflict created by his

financial relationship with AIC, and engaged in

conduct prejudicial to justice. |

Bender’s sanction was not punishment oriented or

based on malice. To the contrary, the PTO carefully

evaluated and applied the factors outlined by section

10.154(b), including the extenuating circumstances

that Bender identified. Specifically, the PTO

considered Bender’s efforts in litigating the Daniels

case, the sanctions imposed in similar circumstances,

and Bender’s age. The PTO also noted that Bender

had violated multiple regulations, that his misconduct

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was aggravated by specific notice from the outset that

the arrangement with AIC was not resulting in

adequate consideration of the inventors’ needs, and

that Bender refused to recognize the impropriety of his

conduct or to express any remorse for his actions. The

PTO ultimately concluded that Bender's failure to

recognize that his conduct was improper created a

likelihood that he would continue to violate the same

disciplinary rules again and that, as a result, exclusion

was necessary. The district court agreed.

Although Bender may have only had the best

intentions in mind in assuming prosecution of the

Gilden applications, the best of intentions cannot

absolve Bender’s complicity with AIC in a scheme

fraught with deception and adversely affecting a large

number of unsuspecting inventors. As an experienced

patent practitioner, Bender had to have appreciated

that the wholesale practice of filing design applications

with unauthorized design embellishments in hundreds

of applications was not in the inventors’ interests but

instead was driven by AIC’s money-back guarantee.

He should have known that the kind of letter he sent

to his newly acquired clients fell far short of the

explanation needed to address the distressed

circumstances in which his clients were placed by his

new employer, AIC. His letter, even though well

written and perhaps sufficient as an engagement letter

of a client in the first instance, only perpetuated the

harm done to the Gilden applicants by treating what

had previously transpired as nothing out of the

ordinary when the circumstances of this entire

matter—and MBender’s conflicting interests in

particular—were quite extraordinary. Bender’s failure

to appreciate that fact supports the PTO’s

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determination that any sanction less than exclusion

would not provide the necessary deterrent eiffect.

Because we cannot conclude that the sanction of

exclusion is arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law, we

have no reason to disturb the PTO’s sanction of

exclusion from practice.

Ill. CONCLUSION

- For all of the foregoing reasons, we affirm the

district court’s grant of summary judgment.

AFFIRMED

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APPENDIX B

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

Civil Action No.: 04-1801 (RBW)

[Filed March 13. 2006]

S. MICHAEL BENDER,

Plaintiff,

Vv.

JON W. DUDAS,

Director of the United States

Patent and Trademark Office,

Defendant.

i i i i i a i

MEMORANDUM OPINION

The plaintiff, S. Michael Bender (“Bender”), brings

this action against the defendant, Jon W. Dudas

(“Dudas”), Director of the United States Patent and

Trademark Office (“PTO”), pursuant to 35 U.S.C. § 32

(2000), challenging the Director’s Final Decision

precluding him from practicing law before the PTO.

Complaint (“Compl.”) {{ 2, 6. Currently before the

Court is the Plaintiffs Motion for Summary Judgment

and Memorandum in Support Thereof (“Pl.’s Mot.”),

requesting this Court to vacate the Director’s Final

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Decision, and the defendant’s Cross-Motion for

Summary Judgment, which asks this Court to grant

summary judgment in its favor with respect to the

Director’s Final Decision on the grounds that it was

reasonable, lawful, and supported by substantial

evidence in the record. Defendant’s Cross-Motion for

Summary Judgment (“Def.’s Mot.”). For the reasons

discussed below, the plaintiffs motion for summary

judgment is denied and the defendant’s motion for

summary judgment is granted.

I. Background

Bender is an attorney who has been practicing

patent law since 1966. Plaintiffs Statement of

Undisputed Material Facts (“Pl.’s Stmt.”) { 59. In

1993, Bender assumed the prosecution of a large

number of patents before the PTO formerly handled by

another attorney, Leon Gilden (“Gilden”). P1.’s Stmt.

¥ 1. At that time, Gilden was involved in disciplinary

proceedings which stemmed from Gilden’s filing of

over 1000 patent applications “under the auspices” of

American Inventor’s Corporation (“AIC”), an invention

marketing company. Id. {{ 2, 3. The disciplinary

proceedings resulted from the PTO’s discovery that

Gilden, or someone associated with his office, had

“embellished the drawings in each application with a

unique decorative pattern of surface indicia,” a tactic

allegedly employed for the purpose of obtaining a

patent for each application and “avoid[ing] a refund of

AIC’s service fee under a guarantee clause contained

in some, but not all of the contracts between each

inventor and AIC.” Jd. 4 4. The matter was ultimately

settled with Gilden receiving a 5-month suspension

from practicing before the PTO. Id. { 2.

23a

In assuming Gilden’s cases, Bender entered into an

agreement with AIC that required the company to pay

him for his work and the associated costs on the patent

cases. Id. 4 6. At some point, the PTO discovered

Bender’s relationship with AIC and began sending him

“disciplinary letters in the form of Requirements for

Information” (“RF Is”); ultimately the PTO sent Bender

at least 20 such letters. Id. {¥ 7-8, 28. The letters

were all signed by Harry I. Moatz (“Moatz”), who was

at the time an investigator in the PTO’s Office of

Enrollment Discipline (“OED”); Moatz eventually

became the OED’s Director. Id. {{¥ 38, 42, 47. On

September 18, 1998, the PTO sent Bender an RFI that

required him to answer questions concerning his

representation of several clients associated with AIC.

Defendant’s Statement of Material Facts with respect

to which there is No Genuine Issue (“Def.’s Stmt.”)

¥ 17. In August, 1999, Moatz called a meeting of the

Committee on Discipline (“Committee”) to determine

whether there was probable cause to bring charges

against Bender and presented evidence to the

Committee procured during his investigation of

Bender. Compl. { 48, 50. The Committee determined

that there was probable cause, and an administrative

Complaint and Notice of Proceedings, dated June 20,

2000, and signed by Moatz, was served on Bender. Jd.

q 56. The complaint set forth 10 counts alleging

violations of the PTO’s rules governing attorney

conduct in conjunction with Bender’s representation of

nine AIC related clients and one other client that was

associated with another invention promotion company

named “Phase 2.” Pl.’s Stmt. {J 33-34. Each count of

the administrative complaint related to a particular

inventor and multiple rules violations. See generally

Administrative Complaint (“Admin. Compl.”).

24a

Administrative Law Judge (“ALJ”) William B.

Moran presided over Bender's hearing on the

allegations charged in the complaint, which occurred

on March 26 through March 29, 2001. Initial Decision

of the ALJ (“ALJ Decision”) at 1." The ALJ found that

Bender had violated several provisions of the PTO’s

rules on attorney conduct, which resulted in his

exclusion from practice before the PTO. ALJ Decision

at 44-48. Bender appealed the ALJ Decision and a

Final Decision (“GC Decision”) was then issued by

James A. Toupin (Toupin”), General Counsel of the

PTO, which concluded that some of the ALJ’s rules

violation findings against Bender were in error, but

that others were not.’ Specifically, the GC Decision

reversed the AL.J’s decision with respect to 18 of the

violation findings, and sustained the ALJ’s decision

with respect to 21 of the violation findings.’ GC

* Pursuant to Local Rule 83.7, Bender filed a copy of the

administrative record with this Court on September 24, 2004. See

plaintiffs Notice of Filing. The administrative record contains,

inter alia, the administrative complaint, the administrative law

judge’s decision and the general counsel’s decision. Because both

parties rely extensively on the content of these documents, and

because this Court’s review also depends in part on an

examination of these documents, they will be cited to directly

throughout this opinion.

* The Under Secretary of Commerce for Intellectual Property and

the Director of the PTO delegated to Toupin on January 31, 2002,

the authority to decide appeals from the initial decision and to

issue decisions pursuant to 37 C.F.R § 10.156. GC Decision at 47

n.5.

* As indicated, each count of the administrative complaint

pertains to a particular client of Bender. With the exception of

25a

Decision at 39-40. Toupin concluded that the ALJ

correctly found that Bender violated several PTO

disciplinary regulations, which are set forth in Chapter

37 of the Code of Federal Regulations (“C.F.R.”).

Namely, Toupin found that Bender violated 37 C.F.R.

§ 10.23(bX5) (2000), which prohibits PTO practitioners

from engaging in conduct that is prejudicial to the

administration of justice; 37 C.F.R. § 10.62(a) (2000),

which prohibits PTO practitioners from accepting

employment where the practitioners’s professional

judgment may be affected by his own interests; 37

C.F.R. § 10.68(aX1) (2000), which prohibits PTO

practitioners from accepting compensation from a

person other than his own client; and 37 C.F.R.

§ 10.77(c) (2000), which prohibits PTO practitioners

from neglecting a legal matter entrusted to the

practitioner. GC Decision at 1. As to these violations,

the GC Decision thoroughly explained why the ALJ’s

findings of the violations were both factually and

legally correct. GC Decision at 20-36 (internal

evidentiary references omitted). The GC Decision also

addressed and rebutted Bender’s challenges to the

ALJ’s findings, as well as various arguments raised by

Bender. Jd. Specifically, Bender raised several

questions with respect to the sufficiency of the

administrative complaint, id. at 4-9; the PTO’s

compliance with the Administrative Procedure Act

(“APA”), id. at 9-11; the PTO’s jurisdiction to sanction

practitioners like Bender and the related issue of state

count 2, which is not at issue in this case because the violation

therein was not sustained by the GC Decision, each count consists

of four or five core allegations that apply to each of Bender’s

clients.

26a

law preemption, id. at 12; the meeting conducted by

the Committee on Discipline and whether its finding

of probable cause to file the administrative complaint

constituted an adjudication, id. at 13; the AL.J’s

exclusion of certain evidence and whether the

exclusions were proper, id. at 14-16; whether the ALJ

was biased and whether his appointment was proper,

id. at 16-18; whether expert testimony was required in

the case, id. at 18; whether the ALJ’s decision not to

dismiss the counts where witness testimony was not

adduced was correct, id. at 18-19; whether certain

violations found by the ALJ cannot be sustained based

on the ALJ’s findings of fact and whether other

findings of fact were warranted, id. at 36-38, and

whether the sanction of exclusion from practice before

the PTO was appropriate, id. at 40.

In response to Bender’s Request for

Reconsideration of the GC Decision, the PTO,

pursuant to 37 C.F.R. § 10.156(c) (2004), issued its

decision on July 26, 2004, upholding the GC Decision

in its entirety.‘ Defendant’s Memorandum of Points

and Authorities in Support of his Cross-Motion for

Summary Judgment and in Opposition to Plaintiffs

Motion for Summary Judgment (“Defs Mem.”) at 5.

Now, in this action filed in this Court, Bender

raises many of the same objections and arguments

that he raised before the PTO, as well as new

arguments based on the GC Decision. Currently

before this Court are the parties’ cross-motions for

‘ The only correction of the GC Decision was the removal of an

erroneous footnote. Def.’s Mem. at 5.

27a

summary judgment. Some of these arguments question

the factual basis for the administrative law judge’s and

general counsel’s conclusions. Other arguments allege

procedural and due process violations, lack of

jurisdiction, and improper application of statutory and

case law and agency regulations. Each of these

arguments are discussed below.

I. Standard of Review

“Summary judgment is an appropriate procedure

for resolving a challenge to an agency’s administrative

decision when review is based upon the administrative

record.” R.D. ex rel. Kareem v. District of Columbia,

374 F. Supp. 2d 84, 89 (D.C. Cir. 2005) (citing

Richards v. I.N.S., 554 F.2d 1173, 1177 & n.28 (D.C.

Cir. 1977)). “By its very terms, [the summary

judgment] standard provides that the mere existence

of some alleged factual dispute between the parties

will not defeat an otherwise properly supported motion

for summary judgment; the requirement is that there

be no genuine issue of material fact.” Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986)

(emphasis in original).

The material facts in this case are those that

pertain to the disciplinary violations upheld in the GC

Decision.” This Court’s review of the parties’

statements of material fact as well as_ the

* To the extent that the parties’ statements of undisputed fact do

not address the facts relating to the violations found in the GC

Decision, the Court has reviewed the administrative record to

determine what facts were presented to the PTO.

28a

administrative record confirms that there are no

genuine issues of material fact in dispute with respect

to the questions to be decided by this Court.

Accordingly, the Court will review each of the parties’

claims under the appropriate standard, as set forth in

the Administrative Procedure Act. The specific issues

to be addressed by this Court are (1) whether the

Fourth Circuit's decision in Moatz v. Goldstein, 364

F.3d 205 (4th Cir. 2004), has any impact on the case

presently before the Court; (2) whether the PTO has

the authority to promulgate disciplinary rules and to

impose the sanction of exclusion for conduct such as

those found in this case; (3) whether the violations are

supported by substantial evidence in the record and

whether the PTO’s interpretations of its disciplinary

rules are reasonable; (4) whether there is evidence of

bias or prejudgment amounting to a denial of the

plaintiffs right to be adjudicated by a neutral

decisionmaker; (5) whether the PTO violated the APA

with respect to the separation of functions requirement

and in dispensing with the notice requirement; (6)

whether the administrative complaint was sufficiently

specific to comply with the APA; and (7) whether the

PTO or the ALJ commited significant procedural

errors regarding the plaintiffs hearing and

adjudication. Each issue will be discussed in turn.

Il. Analysis

A. Impact of the Fourth Circuit’s Decision in Moatz v.

Goldstein

Bender argues that “{a]s a matter of law, the GC

Decision in this proceeding is void in view of a

dispositive controlling decision handed down .. . in

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Goldstein v. Moatz, 364 F.3d 205 (4th Cir. 2004).” Pl.’s

Mot. at 17. He contends that the Goldstein decision

voids the GC Decision and compels this Court to grant

his motion for summary judgement. P1.’s Opp’n at 1-4.

Bender also claims, more specifically, that under

Goldstein, the RFI to which his answers were deemed

evasive and thus in violation of 37 C.F.R. § 10.23(b)(5),

constituted a request for improper discovery and that

the charge of evasion therefore “cannot be supported

by substantial evidence as a matter of law.” Plaintiffs

Opposition (“P1.’s Opp’n”) at 21-22. Further, Bender

argues that the PTO acted in bad faith in “concealing”

the Goldstein decision when issuing its Decision Upon

Reconsideration (“DUR”) by not mentioning or

following the Goldstein decision. PIl’s Mot. at 1920.

Finally, Bender argues that he did not waive the claim

that the RFIs amounted to requests for improper

discovery because (1) “he frequently contested the

‘appropriateness’ of the ‘improper RFIs” during the

investigation and (2) Goldstein is an “intervening

change in law” which permits him to advance the

argument even if he failed to do so before the agency if

the supervening decision has changed the law in his

favor and the law was so well-settled at the time of

trial that any attempt to challenge it would have

appeared pointless. Pl.’s Opp’n at 2 (citing United

States v. Washington, 12 F.3d 1128, 1139 (D.C. Cir.

1994)).

On the other hand, the PTO contends that

Goldstein v. Moaiz has no bearing on the instant case

for several reasons. First, the PTO argues that Bender

waived his argument with respect to the impropriety

of the RFIs and therefore cannot raise the argument at

this time. Def.’s Mem. at 20-21; Reply in Support of

30a

Defendant's Cross-Motion for Summary Judgment

(“Def.’s Reply”) at 1-3. The PTO further asserts that it

did not “conceal” the Goldstein opinion (to the extent

that was possible), but rather did not cite the opinion

because it was not relevant to its decision. Def.’s Mem.

at 21. Second, the PTO argues that while Goldstein is

characterized by the plaintiffs as a “dispositive

controlling decision,” as a Fourth Circuit decision it is

not binding on this Court. Jd. at 22. Third, the PTO

argues that the Goldstein decision did not reach the

questions of the constitutionality of RFIs and that its

discussion concerning the authority of the PTO to issue

RFIs was dictum. Id. at 23-25. Lastly, the PTO

argues that even if Goldstein does hold that RFT’s are

unconstitutional, application of the exclusionary rule

to the discovered information is inappropriate because

the rule does not apply to administrative proceedings.

Id. at 27-29.

In Goldstein, the plaintiff was a patent attorney

who was under investigation for misconduct and was

directed by the PTO to respond to RFIs. 364 F.3d at

207-08. Goldstein then filed suit against several PTO

officials in their individual capacities, seeking

damages and declaratory relief in a Bivens® action

arguing, inter alia, that the issuance of the RFIs

violated his constitutional rights to free speech and

due process. Jd. at 209-10. The district court had held

that the defendants were entitled to absolute

immunity, and the issue on appeal to the Fourth

Circuit was whether the district court’s absolute

* Bivens v. Six Unknown Named Agents of Fed. Bureau of

Narcotics, 403 U.S. 388 (1971).

3la

immunity ruling was correct. Id. at 210-11. The

Fourth Circuit reversed the district court’s decision

and found that the defendants were not entitled to

absolute immunity because they were performing

investigative, as opposed to prosecutorial activities.

Id. at 215. As a factor that supported denying the

officials absolute immunity, the Goldstein Court noted

that the process of requiring information through

RFETs prior to the initiation of formal charges lacked

any procedural safeguards. Id. at 217. The Court

made this point because the “Supreme Court hal[d]

indicated that, in assessing whether absolute

immunity applies in a particular situation, [courts]

should consider whether the system in question

contains adequate procedural safeguards, such that

private litigation is unnecessary to protect

constitutional rights.” Jd. at 217 (citing Butz v.

Economou, 438 U.S. 478, 512 (1978)). The Fourth

Circuit concluded that Goldstein lacked the protection

he would have been afforded by the formal discovery

process, and it therefore remanded the case to the

district court to determine whether the defendants

were entitled to qualified immunity. Id. at 219.

Although the Fourth Circuit noted that the PTO’s

process of obtaining information through RFIs lacked

any procedural protections, nowhere in the opinion did

the court hold that the PTO did not have the authority

to issue them. Rather, the Fourth Circuit’s finding

that the officials were not entitled to absolute

immunity was based on the notion that attorneys must

be provided procedural protections when RFIs are

submitted to them. The Court found that “the only

available limitation in this system is a private lawsuit;

therefore, it is all the more important that the

32a

{djefendants not be accorded absolute immunity.” Id.

at 219. In other words, the Goldstein Court recognized

that patent attorneys needed procedural protection

from coercive RFIs issued by the PTO, but it did not

hold that the PTO lacks the authority to issue them.

Lawyers may choose not to respond and seek redress

by filing a lawsuit, or they may choose to respond to

them. Goldstein therefore does not support the

proposition which Bender urges, i.e., that the PTO

lacks the authority to issue RF Is prior to the initiation

of an action under § 32. Accordingly, the Court

declines to address any arguments advanced by the

plaintiff that are based on the premise that the PTO

lacks such authority.

To the extent that Bender’s arguments regarding

the PTO’s lack of authority to issue RF Is are his own

independent positions and are not based on his

position that Goldstein is dispositive or binding, the

Court must first determine whether he is raising these

arguments for the first time on appeal from the GC

Decision, and if so, whether they have therefore been

waived. The District of Columbia has instructed that

“[tlo preserve a legal or factual argument, we require

its proponent to have given the agency a ‘fair

opportunity to entertain it in the administrative

forum before raising it in the judicial one.” Nuclear

Energy Institute, Inc. v. Envtl. Prot. Agency, 373 F.3d

1251, 1290-1291 (D.C. Cir. 2004). Thus, the general

rule with respect to waiver is that “claims not

presented to the agency may not be made for the first

time to a reviewing court.” Jd. at 1290 (quoting

Omnipoint Corp. v. FCC, 78 F.3d 620, 535 (D.C. Cir.

1996)).

33a

It is Bender’s position that he did not waive his

claim that coercive RFIs are, as a general matter,

improper. Pl.’s Opp’n at 2. In support of this position,

he points to several instances in which he challenged

certain specific RFIs as improper. Jd. In his response

to the August 21, 1998 RFI, for example, Bender

argued to the PTO that the RFI was “retaliatory,”

intended to “harass” him, and “[sought] to injure

invention marketing companies” and attorneys

associated with such companies. Jd. (citing response

to RFI of August, 21, 1998). In response to another

RFI, Bender made similar arguments, and also alleged

that the RFI was essentially repetitive and an abuse of

process. Id. (citing response to RFI of September 17,

1998).”? These and other objections must be considered

in light of the fact that Bender responded to numerous

other RFTs without objection. Indeed, as pointed out

by the PTO in its Opposition, the ALJ questioned

Bender about the duty of an attorney to respond to

RFIs, asking him, “if the Patent Office sends you a

letter and that letter is received by you and you do not

make a response would that be . . . at least a technical

violation of the duty that a patent attorney owes to the

Patent and Trademark Office... .?” Def.’s Reply at 2

(citing Administrative Hearing Transcript at 63-64.).

To this question, Bender replied: “Yes. It’s my opinion

that no response would definitely be a violation . . .

({bjut I responded to every letter and there were many,

many letters.” Id. It therefore appears that while

Bender objected to certain RFI’s on specific grounds,

he did not raise the objection that the mere issuance of

’ Bender references objections to four RFIs that were submitted

to him.

34a

RF Is to attorneys is improper, and that he agreed that

as a general matter, patent attorneys had a duty to

respond to them.

It therefore appears that Bender is raising his

claim about the general impropriety of RF Is for the

first time in his appeal to this Court. Nevertheless, it

is Bender’s position that the claim was not waived

because “it is well settled that an intervening change

in law permits assertion of a non-pleaded defense on

appeal, particularly when it would have been fruitless

to do-so below before the change in jurisprudence.”

Pl.’s Opp’n at 2 (citing Washington, 12 F.3d at 1139).

Thus, because this argument relies on the Fourth

Circuit’s decision in Goldstein, and because, as

explained above, Goldstein does not stand for the

proposition that issuance of RF Is prior to the initiation

of a § 32 action is beyond the PTO’s authority,

Bender’s claim that Goldstein constitutes a

supervening change in law must be rejected. This

Court therefore concludes that Bender waived his

general challenge to the propriety of the PTO even

issuing RFIs, and it therefore declines to address the

merits of this argument.®

® Even if there was no waiver, the information acquired from the

plaintiff was properly considered by the PTO because exclusion

pursuant to the exclusionary rule is not an appropriate remedy in

administrative proceedings.

35a

B. Does the PTO have the authority to promulgate

disciplinary regulations and to impose the sanction

of exclusion for the conduct found in this case?

1. The PTO’s Statutory Authority to Discipline

Attorneys

Bender argues that the PTO lacks the statutory

authority to discipline attorneys for conduct such as

that found in this case. Pl.’s Mot. at 10; Pl.’s Opp’n at

11, 21. He contends that the regulations promulgated

by the PTO with respect to the conduct and discipline

of attorneys are beyond the “federal objectives” of the

PTO as set forth in 35 U.S.C. § 2(bX2XD) (2000). P1.’s

Mot. at 10; Pl.’s Opp’n at 11, 21. Specifically, Bender

asserts that the term “before the Office” in § 2, restrict

the PTO’s authority to.regulate the conduct of patent

attorneys, and that the regulation in this case exceeds

that authority because the conduct at issue in this case

does not constitute a matter pending “before” the

agency. Pl.’s Mot. at 10; Pl.’s Opp’n at 11, 21.

Where an agency is charged with implementing the

statute at issue, the analysis in Chevron, U.S.A. v.

NRDC, 467 U.S. 837, 842-845 (1984) must be employed

to determine whether the agency’s interpretation of

the statute must be upheld. The familiar two-step

inquiry set forth in Chevron is as follows:

[courts] ask first whether ‘Congress has directly

spoken to the precise question at issue,’. . . if so

. .. this court must give effect to Congress's

‘unambiguously expressed intent.’ If ‘the

statute is silent or ambiguous with respect to

the specific issue,’ [courts] ask whether the

36a

agencys position rests on a ‘permissible

construction of the statute.’

Sec’y of Labor, Mine Safety and Health Admin. v.

Federal Mine Safety and Health Review Comm’n, 111

F.3d 913, 916 (D.C. Cir.1997) (citing Chevron, 467 U.S.

at 843). Where the text of the statute is ambiguous,

“the agency’s interpretation of the statute is entitled to

deference so long as it is ‘reasonable’ and not otherwise

‘arbitrary, capricious, or manifestly contrary to the

statute.” Motion Picture Ass’n of America v. F.C.C.,

309 F.3d 796, 801 (D.C. Cir. 2002) (citing Chevron, 467

U.S. at 843-44).

35 U.S.C. § 2(bX2XD) states that the PTO

may govern the recognition and conduct of

agents, attorneys, or other persons representing

applicants or other parties before the Office,

and may require them, before being recognized

as representatives of applicants or other

persons, to show that they are of good moral

character and reputation and are possessed of

the necessary qualifications to render to

applicants or other persons valuable service,

advice, and assistance in the presentation or

prosecution of their applications or other

business before the Office.

35 U.S.C. § 2 (emphasis added). Furthermore, 35

U.S.C. § 32 (2000) states, in relevant part, that:

The Director [of the PTO] may, after notice and

opportunity for a hearing, suspend or exclude,

either generally or in any particular case, from

37a

further practice before the Patent and

Trademark Office, any person, agent, or

attorney shown to be incompetent or

disreputable, or guilty of gross misconduct, or

who does not comply with the regulations

established under section 2(bX2XD) of this title,

or who shall, by word, circular, letter, or

advertising, with intent to defraud in any

manner, deceive, mislead, or threaten any

applicant or prospective applicant, or other

person having immediate or prospective

business before the Office.

32 U.S.C. § 32 (emphasis added). Pursuant to this

authority, the PTO promulgated regulations governing

the conduct of attorneys, several of which are

implicated in this case. See, e.g., 37 C.F.R. §§ 10.23,

10.62, 10.68, 10.77. Accordingly, this Court must

determine whether the PTO’s promulga®*ion and

enforcement of these regulations is within the

authority granted to it by Congress under the standard

set forth in Chevron, 467 U.S. at 842-845.

While it is clear from the language of 35 U.S.C. §§ 2

and 32 that Congress intended to provide the PTO

with the authority to regulate practitioners appearing

“before the Office,” including attorneys, what is not

clear is the scope of this authority. This authority can

be construed narrowly to include only those matters

“directly involving a proceeding” before the PTO. PIl.’s

Opp’n at 12. Under this narrow reading, which is

urged by Bender, a failure to disclose a conflict of

interest with respect to a particular patent application,

for example, would not qualify as being “before the

Office.” Id. at 21. On the other hand, helping a client

36a

to falsify a patent application would qualify. Jd. The

language of the statute may also be read broadly, and

would thus include a wider range of conduct relating

to representation of a patent applicant or a potential

patent applicant. An analysis of the text of the

statutes at issue here under Chevron, 467 U.S. at

842-45, supports the PTO’s broader interpretation.

In 35 U.S.C. § 2, Congress provides that the PTO

may adopt regulations to ensure that attorneys

“render to applicants or other persons valuable service,

advice, and assistance in the presentation or

prosecution of their applications or other business

before the Office.” 35 U.S.C. § 2 (emphasis added).

The language of § 2 is broad in its description of the

individuals intended to be covered by the provision,

and in the scope of the type of representation it covers.

The language in § 32 is also broad in its reach,

providing for the suspension or exclusion of an

attorney found to have defrauded, deceived, mislead or

threatened “any applicant or prospective applicant, or

other person having immediate or prospective business

before the Office.” 35 U.S.C. § 32 (emphasis added).

The language of these provisions indicates that the

phrase “before the Office” covers even prospective

applicants, and suggests that Congress intended the

statute to create broad authority. Although the

language in § 2 is vague as to the outer limits of the

authority intended by Congress, the second step of

Chevron compels this Court to give substantial

deference to the PTO’s interpretation and to uphold its

interpretation of the statute in this case. See Chevron,

467 U.S. at 842-45. Given the language of the statutes

at issue, the PTO’s interpretation is in no sense

“arbitrary, capricious, or manifestly contrary to the

39a

statute.” Id. at 844. In fact, it also appears that the

PTO’s interpretation of the statutes seems far more

realistic than the interpretation urged by Bender due

to the exceedingly narrow bounds of Bender's

interpretation. The Court therefore concludes that the

PTO did not exceed its statutory authority in

prescribing and enforcing the disciplinary rules the

plaintiff is challenging.

2. Preemption of state law

Bender cites the Supreme Court’s decision in

Sperry v. Florida, 373 U.S. 379, 402 (1963), for the

proposition that the PTO’s ability to preempt state law

is limited to its “federal objectives,” which are strictly

limited to the prosecution of patent applications before

the PTO, does not include matters that fall under the

disciplinary authority of the state bars. Pl.’s Mot at

11; Pl.’s Opp’n at 13-14, 21. While Sperry does hold

that the PTO’s authority to preempt state law is

limited to its federal objectives and that states retain

control over matters they would normally regulate, 373

U.S. at 402, Sperry does not hold that there is a

“toggle” switch with respect to state or federal

authority to discipline attorneys. The Federal Circuit

made this point clear in Kroll v. Finnerty, 242 F.3d

1359, 1365 (Fed. Cir. 2001), ruling that the PTO has

broad authority to discipline practitioners for

misconduct. In Kroll, the New York Attorney

Grievance Committee sought to discipline a patent

attorney who was licensed in New York for conduct

related to a patent application. Jd. The Federal

Circuit explained that the Committee was not

preempted from acting. Jd. The Court did not indicate

that only the state or the PTO has disciplinary

40a

authority, as Bender suggests. Id.; Pl.’s Mot. at 11.

Rather, Kroll concluded that the state and the PTO

share jurisdiction to discipline attorneys in cases

where a violation of both PTO regulations and state

ethical rules are alleged. Kroll at 1365. Accordingly,

the PTO’s actions in this case do not preempt state law

in an impermissible manner, and Bender’s contention

to the contrary is therefore without merit.

3. The sanction of exclusion

Bender challenges the ALJ’s decision to exclude

him from the practice of law before the PTO and the

GC Decision which uphedd the exclusion. Pl.’s Opp’n

at 41-46; Appeal Brief Pursuant to 37 C.F.R. § 10.155

(2000) (“Appeal Brief”) at 88-100.° While he presents

numerous arguments as to why the sanction is not

appropriate, this Court must adhere to the teachings

-of Chevron, 467 U.S. at 842-845, and Bowles v.

Seminole Rock & Sand Co., 325 U.S. 410, 413-414

(1945); and therefore must accord the PTO substantial

* In his Motion for Summary Judgment and Memorandum of

Points and Authorities in Support Thereof, Bender primarily

argues that the violations found by the PTO were not supported

by substantial evidence, that the PTO acted beyond its statutory

authority, and that Goldstein v. Moatz requires the dismissal of

this case. However, in his motion Bender incorporates by

reference the arguments raised in his Appeal Brief before the PTO

pursuant to37 C_F.R. § 10.155 (2000), and his subsequent Request

for Reconsideration filed pursuant to 37 C.F.R. § 10.156(c). Pl.’s

Mot. at 21. Bender sets forth these arguments in his Opposition

to the Defendant's Cross-Motion for Summary Judgement.

Accordingly, this Court will address all arguments that have been

raised by Bender.

4la

deference with respect to its decision that Bender’s

exclusion was reasonable under the applicable statutes

and regulations. Bender’s main argument is that 35

U.S.C. § 32 allows the agency to exclude him from

practice only if he is shown to be “incompetent or

- disreputable” or “guilty of gross misconduct.” P1.’s

Opp’n at 40; Appeal Brief at 88. The PTO responds,

and this Court agrees with its position, that this is not

a correct reading of the statute. 35 U.S.C. § 32

provides that

[t]he Director may, after notice and opportunity

for a hearing, suspend or exclude, either

generally or in any particular case, from further

‘practice before the Patent and Trademark

Office, any person, agent, or attorney shown to

be incompetent or disreputable, or guilty of

gross misconduct, or who does not comply with

the regulations established under section

2(bX2XD) of this title ....

35 U.S.C. § 32 (emphasis added). A plain reading of

the statute permits an attorney who violates

§ 2(bX2XD), including Bender, to be excluded from

practicing before the PTO. This reading clearly covers

Bender because as the ALJ Decision correctly

concluded, Congress has provided the PTO with

express statutory authority to bring cases such this

one. ALJ Decision at 5 (citing Goldsmith v. U.S. Board

of Tax Appeals, 270 U.S. 117, 122 (1926)). And the

sanction of exclusion is not inappropriate because the

ALJ did not provide a “reasoned discussion” of each of

the factors set forth in 37 C.F.R. § 10.154(b) (2001) as

argued by Bender, P1.’s Opp’n at 40, because this Court

is not free to disturb the PTO’s decision of exclusion so

42a

long as it is reasonable. Bowles, 325 U.S. at 413-414.

As explained in the GC Decision, Bender’s failure to

recognize that his conduct was improper, combined

with his assertion that he would continue to associate

himself with invention promotion companies,

warranted the sanction of exclusion to prevent him

from causing harm to future clients. GC Decision at

44. The GC Decision also considered Bender's

arguments that alleged improper conduct by the PTO

amounted to extenuating circumstances because it

hampered his efforts in litigating the Daniels” case, as

well as case law cited by Bender to support his claim

that exclusion from practice was excessive given the

facts. Id. at 41-45. The GC Decision provided an

explanation for its rejection of Bender’s arguments and _

provided support for the sanction of exclusion. Id.

Specifically, the GC Decision explained that 35 U.S.C.

§ 32 does not require a showing of “incompetent or

disreputable conduct” or “gross misconduct” because

the statute does not distinguish between the grounds

for suspension and exclusion. Id. at 40-41.

The GC Decision also explained that the alleged

improper PTO conduct with respect to Bender’s

litigation of the Daniels case did not preclude taking

disciplinary action against Bender because it was

ultimately his choice to take such a large number of

clients, and that it was therefore Bender’s actions and

© In re Daniels, 144 F.3d 1452 (Fed. Cir. 1998), was a case in

which Bender succeeded in “having a large number of design

applications revived, after they had been rejected by the PTO for

including non-invented indicia in design applications.” ALJ

Decision at 25 n.25.

43a

not the conduct of the FIO in reviewing the patent

applications that were at fault in this case. P1.’s Opp’n

at 41. Moreover, the sanction of exclusion was found

to be warranted because improper conduct by the PTO

did not mitigate Bender’s “failure to ensure that

continued prosecution of the application was in fact in

the clients’ best interests” and that conflicts of interest

on Bender’s part remained, despite any action of the

PTO. Id. at 41-42. The GC Decision went on to note

that while some violations found in the ALJ Decision

were not sustainable, “the core violations upon which

the recommended remedy rests, and the only ones

specifically discussed in the penalty section of the [ALJ .

Decision],” namely, Bender’s conflicts of interest and

failure to give adequate advice to his clients, “have

been upheld.” Jd.:at 42: The GC Decision further

explained that the reversal of the ALJ Decision’s

finding with respect to count 2 did not mitigate against

exclusion because the counts that were upheld

nevertheless supported the sanction of exclusion. Id.

The GC Decision also distinguished the cases cited by

Bender to show that the remedy in this case was

unduly harsh, explaining that Bender’s violations were

more serious than those in the cases he cited. Id. at

42-44. Finally, the GC Decision explained that

Bender’s stated intent to continue representing clients

associated with invention promotion companies and

his failure to recognize that his conduct was improper

created the possibility that he would again violate the

rules and cause further harm to clients. Id. at 44. In

light of the explanation provided in the record, both in

the ALJ Decision and the GC Decision, the sanction of

exclusion is in accordance with both 35 U.S.C. § 32 and

37 C.F.R. § 10.154(b). Accordingly, the Court has no

44a

basis to disturb the sanction of exclusion imposed by

the PTO.

C. Are the violations found by the PTO supported by

substantial evidence and are the PTO’s

interpretations of its disciplinary regulations

reasonable?

Bender challenges the PTO’s findings that his

actions violated its disciplinary rules. P!.’s Mot. at

15-17; Pl.’s Opp’n at 4-10, 14-20, 21-24 While the

parties agree that the standard of review is the

“substantial evidence” standard, several of Bender’s

arguments challenge the PTO’s interpretation and

application of its own disciplinary regulations, rather

than the evidence underlying the violations found by

the PTO. Pl.’s Mot. 15-17; Pl.’s Opp’n at 4-10, 14-20,

21-24. And there is no question that with respect to

the questioned interpretation and application of the

disciplinary regulations, the deferential standard set

forth in Bowles, 325 U.S. at 413-414, and its progeny

applies in this case. Under the APA, a reviewing court

must set aside agency decisions that are not supported

by substantial evidence. 5 U.S.C. § 706(2)(A) (2000);

Throckmorton v. Nat'l Transp. Safety Bd., 963 F.2d

441, 444 (D.C. Cir. 1992). The District of Columbia

Circuit has reiterated what the Supreme Court

explained amounts to “substantial evidence” sufficient

to uphold an agency decision. Morall v. Drug

Enforcement Admin., 412 F.3d 165, 176 (D.C. Cir.

(quoting N.L.R.B. v. Columbian Enameling &

Stamping Co., 306 U.S. 292, 299-300 (1939)). Morall

noted that “[s]ubstantial evidence ‘means evidence

which is substantial, that is, affording a substantial

basis of fact from which the fact in issue can be

45a

reasonably inferred. [Thus,] [s]ubstantial evidence is

more than a scintilla, and must do more than create a

suspicion of the existence of the fact to be established.”

Id. In reviewing a decision to determine whether it

was based on substantial evidence, “[t}he court’s

function is to determine only ‘whether the agency .. .

could fairly and reasonably find the facts that it did.”

Robinson v. Natl Transp. Safety Bd., 28 F.3d 210, 215

(D.C. Cir.1994) (internal citations omitted).

Importantly, “an agency decision ‘may be supported by

substantial evidence even though a plausible

alternative interpretation of the evidence would

support a contrary view.” Morall, 412 F.3d at 176

(quoting Robinson, 28 F.3d at 215). However, while

the substantial evidence standard is a deferential

standard of review, an agency decision must take

contradictory evidence into account in making its

determination, and must “reflect attentive

consideration” to the AL.J’s decision. Morall, 412 F.3d

at 177. In other words, an agency cannot simply

ignore contradictory evidence or the decision of an ALJ

in making its final determination. See, e.g., E. Tenn.

Natural Gas Co. v. F.E.R.C., 953 F.2d 675, 681 (D.C.

Cir.1992). Thus, in reviewing the agency’s decision to

assess the presence of substantial evidence, the

reviewing court must look to the administrative

record. Fed. Power Comm'n v. Transcontinental Gas

Pipe Line Corp., 423 U.S. 326, 331 (1976) (“[Tlhe focal

point for judicial review should be the administrative

record already in existence, not some new record made

initially in the reviewing court.”) (citing Camp v. Pitts,

411 U.S. 138, 142 (1973)).

With respect to an agency’s interpretations of its

own regulations, courts must give substantial

46a

deference to what the agency has concluded. Thomas

Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994).

The Supreme Court has explained that “[the courts’]

task is not to decide which among several competing

interpretations best serves the regulatory purpose.

Rather, the agency’s interpretation must be given

‘controlling weight unless it is plainly erroneous or

inconsistent with the regulation.” Jd. (internal

citations omitted) (quoting Bowles, 325 U.S. at 414);

see also Martin v. Occupational Safety and Health

Review Comm’n, 499 U.S. 144, 150-51 (1991) (courts

should give effect to agency’s interpretation as long as

it is reasonable where the meaning of the statute is

“not free from doubt.”); Lyng v. Payne, 476 U.S. 926,

939 (1986) (courts must confer substantial deference to

an agency’s construction of its own regulations.); Udall

v. Tallman, 380 U.S. 1, 16 (1965) (interpretation of a

statute by agency charged with its administration

generally is entitled to great deference.)

1. The neglect charges (neglect of entrusted

matters)

With respect to the charge that Bender, in violation

of 37 C.F.R. § 10.77(c)," neglected to notify several of

his clients about the rejection of their patent

applications in a timely manner, which then required

the clients to pay an extension fee if they desired to

appeal the réjection, Def.’s Mem. at 8, Bender argues

that both the ALJ Decision and the GC Decision failed

to take into account why he delayed notifying his

4 37 C.F.R. § 10.77(c) states that “[a] practitioner shall not

. . njeglect a legal matter entrusted to the practitioner.”

47a

clients about the rejection of their patents. Pl.’s Opp’n

at 5-6. Specifically, Bender argues that the timing of

the letters was based on the pending decision in the

Daniels case, and that his decision to delay notifying

his clients was therefore not neglect, but rather a

tactical decision on his part, designed to save his

clients from paying unnecessary appeal fees. Jd.

Bender also argues that the PTO’s failure to produce

an expert witness to testify as to the meaning of the

word “prompt” also resulted in erroneous holdings both

in the ALJ Decision and the GC Decision on the issue

of his alleged neglect. Id. at 6.

In response, the PTO argues that whaiever

“tactical advantages” Bender’s clients may have gained

by delaying the filing of appeals, there is no adequate

explanation for his failure to inform his clients of the

situation in a timely manner, a decision which “simply

deprived the client of the option to file within the

three-month period and so avoid fees.” Def.’s Mem. at

8-9 (citing GC Decision at 26-27). The PTO therefore -

argues that Bender’s failure to provide timely

notification with respect to five clients is supported by

substantial evidence. Def.’s Mem. at 8-9.

The GC Decision addressed these and other

arguments made by Bender with respect to the neglect

charges. GC Decision at 20-27. The GC Decision ©

based its conclusion that Bender violated rule 10.77(c)

on (1) his failure to advise his clients about the type of

patent that should be sought in letters he sent to them

on this point, id. at 20-25, and (2) his failure to

promptly notify his clients of the final rejections of

their applications. Id. at 25-27. The GC Decision

provides an explanation as to why Bender’s

48a

justifications for his conduct are not sufficient, and

refers to facts in the record in support of its conclusion.

Id. Specifically, the GC Decision explained that with

respect to Bender’s failure to promptly notify his

clients of the rejection of their design applications

(within the three-month period when the payment of

a fee to appeal the decisions was not required), his

clients would have had more time to decide on a course

of action and would have avoided payment of the late

filing surcharge. Id. The GC Decision found that

Bender’s justification for the delayed notification ofhis

clients was not plausible, because the action he

ultimately took (late notification) was inconsistent

with his justification for why he did not notify his

clients earlier. Id. at 26 (citing Appeal Brief at 31).

The GC Decision also concluded that Bender could

have notified his clients of the rejections with an

exylanation that options were available to them, and

was professionally obligated to do so. Id. at 27. Based

on these considerations, the GC Decision found that

Bender did not provide an adequate explanation of the

reasons for his delay. Id. Accordingly, the PTO’s

decision did not ignore Bender’s justifications for his

actions, but rather rejected them with specific and

persuasive explanations as to why Bender's

justifications for his actions were not convincing. The

explanation in the GC Decision therefore meets the

substantial evidence standard because it “could fairly

and reasonably find the facts that it did,” Mora/l, 412

F.3d at 176-77, namely, that Bender’s explanations for

his actions are not plausible.” The controversy is

* Importantly, there is no dispute as to when Bender notified his

clients of the rejections. GC Decision at 8 (citing ALJ Decision at

49a

therefore reduced to whether the undisputed time of

notification was or was not “prompt.” Furthermore, to

the extent that the PTO’s decision is based on its

interpretation of § 10.77(c), such as Bender’s argument

regarding the meaning of the term “prompt”, the PTO’s

decision is consistent with language of the regulation.

Therefore, it must be upheld by this Court. Thomas

Jefferson Univ., 512 U.S. at 512.

2. The conflicts of interest charges

Bender received substantial sums of money from

AIC, GC Decision at 27 (citing ALJ Decision at 23),

and the ALJ Decision and GC Decision concluded that

Bender should have recognized that his interests

might diverge from those of his clients and that he was

therefore required to inform them about the potential

conflict of interests and to obtain his clients’ informed

consent to represent them. ALJ Decision at 24; GC

- Decision at 31-32. The ALJ found that Bender violated

37 C.F.R. § 10.62(a)* by accepting employment

without disclosing that his professional judgment

could be affected by his own financial interests. GC

Decision at 27.

15-16, 30, 34, 36, 42). The only dispute then is whether his delay

in notifying his clients was neglectful, or whether it was justified.

* 37 C.F.R. § 10.62(a) states that “[e]xcept with the consent of a

client after full disclosure, a practitioner shal] not accept

employment if the exercise of the practitioner’s professional

judgment on behalf of the client will be or reasonably may be

affected by the practitioner’s own financial, business, property, or

personal interests.”

50a

Bender asserts that the conflicts of interest

findings under 37 C.F.R. § 10.62(a) cannot be upheld

because he viewed AIC as the agent of the inventors,

whom he characterized as his clients, and that his

relationship with AIC was not the same as that of a

client because he dealt with AIC at arms-length and

collected legal fees only after his work was completed.

Pl.’s Opp’n at 14. He further asserts that there was no

proof of a “conflict” arising from his relationship with

AIC based on the evidence adduced at the hearing and

that an agent or intermediary acting on behalf of the

client does not create a conflict per se, and that indeed,

the PTO’s own rules sanction such relationships. Id.

at 17. He also contends that the PTO did not present

any evidence that his relationship with AIC “would or .

reasonably might affect his professional judgment with

respect to his representation of his client at the outset

of his employment.” Id. at 18.

~The PTO argues, on the other hand, that there

were, at the very least, interests that were potentially

divergent because there was a 100% money-back

guarantee to the clients if the patents were not issued,

and further that Bender knew about this guarantee.

Def.’s Mem. at 11 (citing RX-31 at 3, 10).* While the

PTO acknowledges that a practitioner may represent

a client where potential conflicts of interest are

properly disclosed, the PTO contends that in this case,

Bender failed to provide adequate disclosures because

'* The parties utilize, as does the Court, the following references

to the record: Respondents’ Exhibits are referred to as RX, and the

PTO’s exhibits are referred to as GX, with both references

followed by Bates numbers.

5la

he did not explain the extent of his involvement with

AIC, and did not address the money-back guarantee

and the potential conflicts arising from AIC’s addition

of the non-invented features to the patent applications.

Id. at 12 (citing GC Decision at 31). The PTO also

contends that Bender violated 37 C.F.R. § 10.68(aX(1)”

because full disclosure pursuant to the regulation

requires disclosure as to the amount of the payments

a practitioner receives from other sources, and that the

record shows that Bender failed to do this. Def.’s

Mem. at 13-14 (citing ALJ Decision at 15; GC Decision

at 34-35).

The GC Decision addressed the very same

arguments Bender makes here, and concluded that the

conflict charges were amply supported by the evidence.

GC Decision at 27-33. The GC Decision discusses with

specificity the reasons supporting its conclusion that

there were conflicts between Bender’s interests and

those of his clients, pointing to Bender’s significant

financial interests, the issue of whether AIC or the

inventors were culpable for the added surface

drawings, and the money-back guarantee. Id. at

27-29. The GC Decision also explained why, in the

ALJ’s view, there was no full disclosure as to the

- conflicts and lack of effective consent by the clients.

Id. at 30-33. These explanations sufficiently establish

that there was substantial evidence in the record to

* 37 C.F.R. § 10.68(aX1) provides that “[e]xcept with the consent

of the oractitioner’s client after full disclosure, a practitioner shall

not . . .[aJccept compensation from one other than the

practitioner’s client for the practitioner’s legal services to or for

the client.”

52a

uphold the ALJ’s decision. Furthermore, the GC

Decision specifically addressed and rejected Bender’s

“arms-length” argument, the essence of which was that

Bender was not dealing closely with AIC, but was

representing his clients directly with AIC as their

agent. GC Decision at 33. The record therefore

establishes that there was sufficient evidenc to

conclude that Bender violated 37 C.F.R. § 10.62(a).

The GC Decision also explained why there was a

finding of a lack of full disclosure pursuant to 37

C.F.R.§ 10.68(aX1) with respect to Bender accepting

funds from a source other than his clients. GC

Decision at 34 (citing ALJ Decision at 15 (citing

Transcript at 231-233)). Specifically, the GC Decision

explained that “full disclosure” within the meaning of

the regulation includes disclosure of the amount of the

payment received from a third party. Id. at 34

(emphasis added). This conciusion was based on the

PTO’s interpretation of its own regulation and must

therefore be given substantial deference. Thomas

Jefferson Univ., 512 U.S. at 512. And the PTO’s

interpretation of the regulation is reasonable and is

not “plainly erroneous or inconsistent with the

regulation.” Id. (quoting Bowles v. Seminole Rock &

Sand Co., 325 U.S. 410, 414 (1945). Indeed, the

regulation states that “[e]xcept with the consent of the

practitioner’s client after full disclosure, a practitioner

shall not . . . [alccept compensation from one other

than the practitioner’s client for the practitioner’s legal

services to or for the client.” 37 C.F.R. § 10.68(a)(1)

(emphasis added). Therefore, Bender’s argument that

the rule was erroneously interpreted by the PTO must

be rejected. As additional support for this Court’s

conclusion, the GC Decision also pointed to evidence

53a

discussed in the ALJ Decision that demonstrated that

Bender failed to make full disclosure in accordance

with the regulations. GC Decision at 34; ALJ Decision

at 15 (noting that one of Bender’s clients “was not

apprised of the amount [he] was billing A.I.C. for his

legal services.”). Accordingly, the Court concludes that

the evidence set forth in the ALJ Decision and the GC

Decision with respect to Bender’s conflicts of interest

amounts to substantial evidence of this conclusion.

3. The evasion charges

The PTO found that Bender violated 37 C.F.R.

§ 10.23(bX5) by allegedly “engaging in conduct

prejudicial to the administration of justice, when he

provided evasive answers to RF Is served upon him on

September 18, 1998.” Def.’s Mem. at 14 (citing ALJ

Decision at 30-31; GC Decision at 35-36; GX-1 at 190).

Bender argues that the evasion charge under 37 C.F.R.

§ 10.23(bX5) was not supported by the record and that

the answers he provided in response to the RFI were

not evasive. Pl.’s Opp’n at 21-24. Further, he argues

that the ALJ failed to explain how the answers were

evasive. Id. at 23. He also argues that the

administrative complaint did not specify the questions

to which his answers were deemed evasive and that

the finding itself was based on the issuance of

“improper” RFIs."* Jd. at 22-24. On the other hand,

the PTO argues that “[t]he ALJ’s decision specifically

® Bender’s argument with respect to the RFIs was addressed in

the section of this opinion that addresses the impact of the

Goldstein decision on the RFIs at issue in this case. See supra

Section I1.A., pp. 7-11.

54a

addressed [Bender]’s evasion of several questions,”

identifying the relevant questions, and contends that

Bender “could and should simply have stated that he

did not make the disclosures which the [PTO]

required, and, if he wished, explained why he did not

believe they were legally required.” Def.’s Mem. at

14-15 (citing GX-1 at 193, 197-198, 212, 214-215).

37 C.F.R § 10.23(bX5) provides, in part, that “[a]

practitioner shall not . . . engage in conduct that is

prejudicial to the administration of justice.” 37 C.F.R

§ 10.23(b(5). Consequently, the GC Decision upheld

the evasion finding only with respect to the September

18, 1998 RFI, as it was the only one specifically

identified in the administrative complaint and “[o]nly

with respect to Count 1 [did] the ALJ Decision make

specific findings of evasion that clearly relate[d] to the

charged conduct.” GC Decision at 35. Specifically, the

ALJ considered Bender’s answers to several specific

questions and determined those answers to be evasive.

Def.’s Mem. at 14-15; ALJ Decision at 30. Moreover,

the GC Decision, which discussed the finding of

evasion alleged in Count 1, explainled] that the

answers were evasive on their face and that the record

therefore supported that finding. GC Decision at 35.

In reaching this conclusion, the GC Decision rejected

Bender’s argument that there was no evidence in the

record to support the charge. Id. Importantly, Bender

did not explain how the answers were not evasive, and

apparently did not do so at his hearing. Based on the

record, the finding of evasion was supported by

substantial evidence. The Court also finds that the

specific discussion of the answers deemed to be evasive

is sufficient to uphold the finding, given that the

55a

“evasive” nature of the answers is apparent on their

face, and the requirement that the agency's

determination of what constitutes evasion under

§ 10.23(b)(5) be accorded substantial deference.

Bowles, 325 U:S. at 414.

D. Is there evidence in the record of bias or

prejudgment amounting to a denial of the plaintiffs

right to be adjudicated by a neutral decisionmaker?

1. Prejudgment and Institutional bias

Bender contends that his case was prejudged, and

points to the statements of certain PTO officials as

evidence that an “institutional bias” pervaded the

PTO’s investigation and adjudication of his case. Pl.’s

Mot. at 4-5, 9; Pl.’s Opp’n at 24-26. For one, he relies

on the statements of Michael Kirk, former Deputy

Commissioner of Patents and Trademarks, made

during his testimony to the Senate Subcommittee on

Regulation and Government Information in 1994. Id;

Pl.’s Stmt.{ 12. Specifically, Kirk made the following

statements:

[W]le have taken two individuals off the rolls

and we have cases pending against four others

. . . G]it is a very small percentage fof the

registered patent attorneys], but nonetheless

bad apples create very bad situations . . . The

ones that we are dealing with were working

with the invention promotion companies

.. .[bJut J they are not properly representing

their clients’ interests. They are working more

for the invention development firm and so we

56a

have taken action against them to take them off

the rolls.

Id. Although Kirk did not mention him by name,

Bender contends that he was one of the attorneys

being referenced by Kirk as “bad apples” for three

reasons: (1) when the statement was made, he was

being investigated by the PTO; (2) the facts involving

the attorneys mentioned were the same as those in his

case, that is, situations where drawings had been

added to design applications; and (3) information he

has about three other attorneys who were excluded

from practice logically leads to the conclusion that he

was the fourth attorney Kirk mentioned. P1.’s Opp’n

at 26. He also points to the statement of Q. Todd

Dickinson, a former Commissioner of Patents and

Trademarks, who stated that invention promotion

companies are like “weeds” or “cockroaches” and need

to be “more aggressively stamped out.” Pl.’s Mot. at 9.

Bender contends that these statements reveal an

“institutional bias” against any attorney affiliated with

an invention promotion company, and thus an

institutional bias with respect to him personally,

making it impossible for him to receive a fair

adjudication. Pl.’s Opp’n at 24-26.

The PTO responds that Bender’s theory regarding

the PTO’s animus against invention promotion

companies and consequently against him are merely

“speculative allegations.” Def.’s Mem. at 15. The PTO

notes that the officials Bender identified never

referred to the situation involved in this case or

mentioned him by name. ZId. In addition, the PTO

contends that Bender fails to cite any record evidence

in support of his theory or even to allege that the

57a

theory would form a basis for overturning the PTO’s

decision, even if true. Id. at 16.

Where a violation of due process resulting from bias

is alleged, the complaining party bears the burden of

showing “a risk of actual bias or prejudgment” and

must “overcome the presumption of honesty and

integrity in those serving as adjudicators.” Withrow v.

Larkin, 421 U.S. 35, 47 (1975). The Supreme Court

has held that earlier statements about a position on an

issue of law or policy is not a sufficient basis to

disqualify a decisionmaker. See, e.g., Hortonville Joint

Sch. Dist. No..1 v. Hortonville Educ. Assn., 426 U.S.

482, 493 (1976) (“Mere familiarity with the facts of a

case gained by an agency in the performance of its

statutory role does not, however, disqualify a

decisionmaker. Nor is a decisionmaker disqualified

simply because he has taken a position, even in public,

on a policy issue related to the dispute . . . .”); Laird v.

Tatum, 409 U.S. 824, 831-838 (1972); Fed. Trade

Comm’n v. Cement Inst., 333 U.S. 683, 700 (1948). In

order to prevail on the claim that he was denied due

process because the decision maker was biased,

Bender must show that the “decision maker [was] ‘not

capable of judging a particular controversy fairly on

the basis of its own circumstances.” NEC Corp. uv.

United States, 151 F.3d 1361, 1373 (Fed. Cir. 1998)

(quoting Hortonville, 426 U.S. at 493) (internal

quotations omitted), cert. denied, 525 U.S. 1139 (1999).

This standard can be met, for example, by showing

that “the decision maker’s mind is ‘irrevocably closed

....” Id. (quoting Cement Inst., 333 U.S. at 701).

In Cement Institute, prior to the filing of a

complaint by the Federal Trade Commission (“FTC” or

58a

“Commission”) against, inter alia, cement industry

businesses, alleging antitrust violations, the

Commission, or some of its members, had concluded

that the system used in the industry amounted to a

restraint of trade in violation federal antitrust

legislation. Jd. at 687, 700-01. In ruling.on whether

the Commission should have granted the industry's

request that the Commission disqualify itself, the

Supreme Court assumed that “an opinion [on the

-issues under consideration] had been formed by the

entire membership of the Commission . . .” Id. at 700.

Nonetheless, the Court rejected the argument that the

Commission had prejudged the issues or was biased.

Id. at 700-701. The Court concluded:

the fact that the Commission had entertained

such views as a result of its prior ex parte

investigations did not necessarily mean that the

minds of the members were irrevocably closed

on the subject of the respondents’ basing point

practices. . . .[The members of the industry]

produced evidence-—volumes of it. They were

free to point ovt to the Commission by

testimony, by cross-examination of witnesses,

and by arguments, conditions of the trade

practices under attack which they thought kept

these practices within the range of legally

permissible business activities. _

Id. at 701. Similarly, in Keating v. Office of Thrift

Supervision, 45 F.3d 322 (9th Cir. 1995), the Director

of the Office of Thrift Supervision had made

statements which indicated that he had prejudged the

facts of a case that was before the agency. Id. at 327.

But, the Ninth Circuit held that these statements,

59a

along with other factors, did not result in an unfair

decision because the agency head resigned before the

ALJ issued his decision, and the final order was also

issued by another official. Jd. While finding the

former Director’s comments troubling, the Keating

Court determined that his role in the ultimate decision

was minor, and that the agency therefore did not

violate the neutral decisionmaker requirement. Id.

-On the other hand, in Cinderella Career and Finishing

Sch., Inc. v. FTC, 425 F.2d 583 (D.C. Cir. 1970), the

Circuit Court for this Circuit held that FTC committed

a due process violation because its Chairman made

statements that indicated prejudgment of both the law

and the facts ofa particular case while the appeal from

a hearing examiner’s decision the Examiner’s case was

pending before him. Jd. at 589-91.

Here, the facts of this case do not rise to a level that

would warrant a finding that there was prejudgment

or institutional bias against Bender. Like the agency

decisions in Keating, the initial and final decisions

here were not those of the individual who made the

comments at issue. Keating, 45 F.3d at 327. The

individuals in this case had left the PTO prior to the

issuance of the GC Decision, and the actual decision

makers (the ALJ and Toupin) did not personally make

any statements that would indicate bias. Thus, this

case is distinguishable from Cinderella on this crucial

point because there, the biased statements were made

by the decision maker, who at the time had the case

pending before him. Cinderella, 425 F.2d at 589.

Furthermore, Cinderella involved statements made in

a public speech, which the Court found different than

a pre-decision press release that expresses concern

about the activities of a party. Jd. at.590. The

60a

comments at issue in this case were general in nature

and reflected opinions essentially related to a policy

position. See Cement Inst., 333 U.S. at 700. In any

event, to the extent the statements made by Kirk and

Dickinson pertain to the facts of Bender’s case, they

are exceedingly vague and do not identify Bender by

name, and Bender’s contention that the statements

were specifically directed at him is highly conjectural.

Moreover, they do not provide an adequate basis for

this Court to conclude that the agency as a whole

prejudged the facts of his particular case, and thereby,

failed to provide him with a neutral decision maker.

Under these circumstances, the Court concludes that

Bender has not provided proof of prejudgment or

institutional bias sufficient to show a violation of the

neutral decision maker requirement. Keating, 45 F.3d

322 at 327.

Bender also alleges that the Committee on

Discipline was tainted because one of its members

(Rolla) knew that the PTO had a policy which was

hostile to invention promotion companies and that

Bender was affiliated with such a company. PI.’s

Opp’n at 30; Appeal Brief at 79. The Court rejects this

argument because Bender has failed to offer any proof

that this was indeed the case, and thus has not

established “a risk of actual bias or prejudgment,”

which is necessary to “overcome{] [the] presumption of

honesty and integrity in those serving as adjudicators

... Withrow, 421 U.S. at 47. Indeed, Bender

himself acknowledges that this argument is based on

speculation. Pl.’s Opp’n at 30 (“Even though Mr.

Rolla’s vote was not necessary for a majority, there is

no way to know whereby his influence upon the others

can be quantitatively measured.”). Accordingly,

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Bender has failed to show either prejudgment or

institutional bias.

2. Was there bias on the part of the ALJ?

Bender further argues that the ALJ was biased

because during his hearing the ALJ made remarks

that Bender characterizes as “intemperate” and

“hostile.” Pl.’s Opp’n at 35; see also Appeal Brief

102-109. He also argues that the ALJ

“mischaracterized” or “belittled” his evidence. P1.’s

Opp’n at 36. He further contends that the ALJ’s “sua

sponte” conclusions with respect to certain findings of

fact and law are not supported by evidence. Id. at

36-37."" In response, the PTO argues that there is no

indication of bias on the part of the ALJ, and that his

unfavorable statements about Bender constitute

“reasonable inferences from the record.” Reply in

Support of Defendant’s Cross-Motion for Summary

Judgment (“Def.’s Reply.”) at 21. Furthermore, the

PTO argues that there is no evidence in the record of

“deep-seated favoritism or antagonism” against Bender

by the ALJ. Id. (citing Liteky v. U.S, 510 U.S. 540, 555

(1994)).

'’ For the reasons explained above, the findings of the ALJ on the

charges upheld in the GC Decision are supported by substantial

evidence and this Court therefore declines to address in this

section of the opinion Bender’s argument that there was not

substantial evidence in the record to support the AL.J’s

conclusions.

62a

Bias on the part of a decision maker sufficient for

disqualification is difficult to prove. As the Supreme

Court has stated:

opinions formed by the judge on the basis of

facts introduced or events occurring in the

course of the current proceedings, or of prior

proceedings, do not constitute a basis for a bias

or partiality motion unless they display a

deep-seated favoritism or antagonism that

would make fair judgment impossible. Thus,

_ judicial remarks during the course of a trial

that are critical or disapproving of, or even

hostile to, counsel, the parties, or their cases,

ordinarily do not support a bias or partiality

challenge.

Liteky, 510 U.S. at 555. The Liteky Court cited Berger

v. United States, 255 U.S. 22 (1921), a German

espionage case from World War I where the Judge

stated that “[o]Jne must have a very judicial mind,

indeed, not {to be] prejudiced against the German

Americans’ because their ‘hearts are reeking with

disloyaltylI,]” as an example of impermissible bias, i.e. ,

“such a high degree of antagonism as to make fair

judgment impossible.” Liteky, 510 U.S. at 555 (quoting

Berger, 255 U.S. at 28). On the other hand, the Court

noted that “expressions of impatience, dissatisfaction,

annoyance, and even anger, that are within the bounds

of what imperfect men and women .. . sometimes

display” are not sufficient to show impermissible bias.

Id. at 555-56. Thus, the Court explained that only

rarely will remarks by the adjudicator rise to the level

of impermissible bias. 7d. at 555. Furthermore, the

Liteky Court explained that bias should not be imputed

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to a judge where the judge declines to find all or most

of the evidence put forth by a party credible. /d.

Indeed, as the Supreme Court has noted, “in the

determination of litigated facts, the testimony of one

who has been found unreliable as to one issue may

properly be accorded little weight as to the next.

Accordingly, total rejection of an opposed view cannot

of itself impugn the integrity of competence of a trier

of fact.” N.L.R.B. v. Pittsburgh S.S. Co., 337 U.S. 656,

659 (1949). Thus, the District of Columbia Circuit

explained, “[a] trial judge must be free to make rulings

on the merits without the apprehension that if he

makes a disproportionate number in favor of one

litigant, he may have created the impression of bias.

Judicial independence cannot be subservient to a

statistical study of the calls he has made during the

contest.” S. Pac. Commce’ns Co. v. Am. Tel. and Tel.

Co., 740 F.2d 980, 995 (D.C. Cir. 1984). And the

Circuit Court has applied the Liteky standard to ALJs

in the administrative hearing context. See e.g., Pioneer

Hotel, Inc: v. N.L.R.B., 182 F.3d 939, 944 (D.C. Cir.

1999).

Here, none of the ALJ’s remarks identified by

Bender reveal bias which “display a deepseated

favoritism or antagonism that would make fair

judgment impossible.” Liteky, 510 U.S. at 555. While

some of the remarks do evidence a frustration with

Bender and a sense that his positions and evidence

lack credibility, both the Supreme Court and the

District of Columbia Circuit have made it clear that a

judge who forms views or opinions within the context

of the hearing, including those causing frustration or

hostility toward one of the parties, do not exhibit

disqualifying bias. Liteky, 510 U.S. at 555; Pittsburgh

64a

S.S. Co., 337 U.S. at 658; S. Pac. Comme’ns Co., 140

F.2d at 995. Accordingly, Bender has failed to show

that the AL.J was impermissibly biased against him.

E. Did the PTO violate the APA by failing to provide

Bender with written notice of the disciplinary

violations and the opportunity to demonstrate or

achieve compliance with its disciplinary regulations

before initiating the disciplinary proceedings?

Bender next argues that the PTO violated § 558(c)

of the APA, 5 U.S.C. § 558(c) (2005), by failing to (1)

_give him notice of the facts or conduct which may

result in disbarment and (2) the opportunity to show

that he had complied or to bring himself into

compliance with the regulations he was found to have

violated. Pl.’s Opp’n at 27-29; Motion for

Reconsideration pursuant to 37 C.F.R. § 10.156(c)

(“Mot. for Recon.”) at 7-10. In essence, Bender argues

that the decision of the PTO to bring the case against

him was subject to the requirements of § 558(c) of the

APA, and therefore, he did not receive the required

notice and opportunity to demonstrate compliance, or

to bring himself into compliance, as called for by the

APA. Pl.’s Opp’n at 27-28. Further, Bender argues

that if PTO deemed these requirements unnecessary,

such a determination under § 558(c) could be made

only upon a finding of either willfulness or the need to

act in the public interest, and that an “adjudication” of

this nature was not made before the disciplinary -

proceedings against him were initiated. Id. The

precise question raised by Bender is therefore whether

the PTO’s decision to initiate disciplinary proceedings

against him had to be preceded by compliance with the

requirements of § 558(c).

65a

The PTO argues that its decisions made prior to the

ALJ hearing, such as the decision to bring the

administrative proceeding against Bender, “are not

subject to the APA’s judicial review provisions.” Reply

in Support of Defendant’s Cross-Motion for Summary

Judgment (“Def.’s Rep.”) at 16. The PTO contends that

Ҥ 558(c) does not, by its terms, require any proceeding

whatsoever to determine whether its notice and

opportunity requirements apply in a particular case”

because the decision does not constitute an “agency

proceeding.” . Id. at 16-17.

Section 558(c) of the APA states that “/e/xcept in

cases of willfulness or those in which public health,

interest, or safety requires otherwise, the withdrawal,

suspension, revocation, or annulment of a license is

lawful only if, before the institution of agency

proceedings therefor, the licensee has been given — (1)

notice by the agency in writing of the facts or conduct

which may warrant the action; and (2) opportunity to

demonstrate or achieve compliance with all lawful

requirements.” 5 U.S.C. § 558(c) (emphasis added).

“Willfulness” under § 558(c) has been defined as “an

intentional misdeed or such gross neglect of a known

duty as to be the equivalent thereof.” Capitol Packing

v. United States, 350 F.2d 67, 78-79 (10th Cir.1965).

In addition, a violation has been deemed willful if “the

violator (1) intentionally does an act which is

prohibited, — irrespective of evil motive or reliance on

erroneous advice, or (2) acts with careless disregard of

statutory requirements ....” Potato Sales Co., Inc. v.

Dep't of Agric., 92 F.3d 800, 805 (9th Cir.1996)

(quoting Lawrence v. Commodity Futures Trading

Comm’n, 759 F.2d 767, 773 (9th Cir.1985)). The

District of Columbia Circuit has held that a formal

66a

determination as to willfulness is not required prior to

bringing a complaint. Finer Foods Sales Co., Inc. v.

Block, 708 F.2d 774, 778 (D.C. Cir. 1983) (“The

petitioner arguefd], however, that the Secretary's

action was impermissible because, prior to instituting

the disciplinary proceeding, he did not make a formal

determination of willfulness. Nothing in the

Administrative Procedure Act imposes that

requirement or supports the petitioner's apparent

contention that the determination of willfulness itself

may be made only after a hearing.”). Rather, an officer

making a determination of willfulness must know the

“extent and character of the violations, [so as to

provide] an adequate basis for making that

determination.” Id.

Finer Foods dealt with the issue of what is required

for a finding of willfulness sufficient to dispense with

the APA’s “opportunity to demonstrate or achieve

compliance . .. requirements.” Jd. at 777. There, the

petitioner was “a licensee under the Perishable

Agricultural Commodities, 7 U.S.C. §§ 499a-499s . . .

,” id. at 776, who was found to have failed to pay for

agricultural goods acquired in 24 transactions in

violation of that Act. Jd. at 777. The petitioner did not

dispute that the payments had not been made, but

argued that the Secretary of Agriculture’s decision

that Finder Food’s conduct amounted to “flagrant and

repeated violations,” id., “was impermissible because,

prior to instituting the disciplinary proceeding, he did

not make a formal determination of willfulness.” Jd. at

778. The District of Columbia Circuit rejected the

petitioner’s argument, finding that “[nlothing in the

[APA] imposes that requirement or supports the .. .

contention that the determination of willfulness itself

67a

may be made only after a hearing;” that “[iJf. . . the

violations were willful, the requirement .. . of

opportunity for correction of the violations is

inapplicable;” that “[w]hen the Secretary instituted the

disciplinary proceeding without first giving [Finer

Foods} the opportunity to cure the violation,

necessarily he determined that the violations were

willful;” and, that “[s]ince at that time [the Secretary]

already knew the extent and character of the

violations, he had an adequate basis for making that

determination.” Id.

Here, Benders argument with respect to

willfulness must be rejected under the law of this

Circuit. First, there was no requirement that an

adjudication of willfulness be made prior to the

institution of the disciplinary proceedings. Second, in

any event, Bender’s conduct, which was found to

constitute neglect, failure to disclose conflicting

financial interests and evasion in violation of the

PTO’s regulations can properly be classified as

“willful” conduct as defined and found in Finer Foods.

Lastly, the Director of the OED had knowledge as to

both the extent and character of Bender’s violations,

and therefore had an adequate basis to conclude that

Bender’s conduct was willful and thus dispense with

the APA’s notice and opportunity to demonstrate or

achieve compliance requirements before disciplinary

proceedings were initiated.

F. Did the PTO violate the APA’s separation of

functions requirement?

Bender argues that the PTO violated the

separation of functions requirement, as mandated in

68a

5 U.S.C. § 554(d), by allowing Harry Moatz to

investigate the allegations against him, and then to

also permit Moatz to participate in the deliberations of

the Disciplinary Committee that decided to bring the

administrative complaint against him, as well as

allowing him to then prosecute Bender at the ALJ

hearing. P1.’s Opp’n at 29; Appeal Brief at 77-78. The

PTO responds that the determinations and processes

in which Moatz participated were not subject to the

proscription of § 554(d). Def.’s Rep. at 17-18.

Section 554(d) of the APA states that

lajn employee or agent engaged in the

performance of investigative or prosecuting

functions for an agency in a case may not, in

that or a factually related case, participate or

advise in the decision, recommended decision, or

agency review pursuant to section 557 of this

title, except as witness or counsel in public

proceedings.

5 U.S.C. § 554(d). Further, the relevant PTO

regulation provides that

[t]he Committee on Discipline shall meet at the

request of the Director and after reviewing

evidence presented by the Director shall, by

majority vote, determine whether there is

probable cause to bring charges under § 10.132

against a practitioner. When charges are

brought against a practitioner, no member of

the Committee on Discipline, employee under

the direction of the Director, or associate

solicitor or assistant solicitor in the Office of the

69a

Solicitor shall participate in rendering a

decision on the charges.

37 C.F.R. § 10.4(b) (2000). The question, then, is

whether the decision of the Committee to bring

charges against Bender is an “agency review pursuant

to section 557” of the APA. 5 U.S.C. § 554(d). Bender

contends that the Disciplinary Committee decision is

an “adjudication’ within the meaning of the APA

because it triggers a proceeding under § 32 of the

patent statute.” Pl. Opp’n at 29. This argument is

unpersuasive. 37 C.F.R. § 10.4(b) does not provide

that the Disciplinary Committee’s decision to bring a

complaint is an “adjudication” under § 557 of the APA.

The APA defines an adjudication as an “agency process

for the formulation of an order.” 5 U.S.C. § 551(7). An

order is defined in the APA as “the whole or a part of

a final disposition, whether affirmative, negative,

injunctive, or declaratory in form, of an agency in a

matter other than rule making but including

licensing.” 5 U.S.C. § 551(6). The decision to bring a

complaint in no way constitutes part of a final

disposition, and therefore is not an adjudication.

Furthermore, Bender’s argument fails because an

agency’s interpretations of its own regulations are

entitled to substantial deference, and the PTO’s

decision in this case to allow Moatz to proceed under

§ 10.4(b) is reasonable and must be upheld. See, e.g.

Thomas Jefferson Univ., 512 U.S. at 512. With respect

to Moatz’s subsequent prosecution of Bender, there

was likewise no violation of the separation of functions

requirement, as prosecution of a matter does not

constitute “participation” in the final decision, which

is what is prohibited by the APA.

70a

G. Was the administrative complaint sufficiently

specific to comply with the APA?

Bender makes several arguments with respect to

the complaint that initiated the administrative case

against him. Pl.’s Opp’n at 30-31; Appeal Brief at

75-77. He argues that the administrative complaint

“failfed] to give adequate notice of the grounds of

alleged misconduct” because it lists “averments” and

“disciplinary rules” separately, and does not provide a

“linkage” between the two sections. P1.’s Opp’n at 31.

This structure, argues Bender, makes the

administrative complaint “incoherent and confusing”

and thus failed to provide fair notice. Id. In addition

to these general arguments about the alleged

deficiency of the complaint, Bender also makes

arguments specific to the individually charged

violations.

Specifically, with respect to the claims pertaining

to neglect under 37 C.F.R. § 10.77(c), Bender argues

that the complaint fails to comport with the APA

because: (1) the allegations regarding Bender’s failure

to discuss the appropriateness of the pending patent's

design application with his client are not linked with

a particular rule, making it hard for him to determine

whether the allegation related to neglect or some other

charge, such as misrepresentation; and (2) that the

allegation in the complaint stating that Bender failed

to act with sufficient promptness in informing his

clients about the status of their patent applications is

similarly defective because it is not tied to any specific

rule violation identified in the complaint. Pl.’s Opp’n

at 10-11. Additionally, with respect to the charges

made under 37 C.F.R. §§ 10.62(a) and 10.68(a\X1),

7la

Bender argues that the complaint does not set forth

the charges with sufficient particularity. Pl.’s Opp’n at

20. Specifically, he contends that the factual

allegations that formed the basis for the alleged

violations of these regulations are set forth “in a

conclusory manner without any particularization ....”

Id. Accordingly, Bender claims that these allegations

‘are “non-specific, vague and ambiguous... .” and failed

to “sufficiently inform [him] before the [hjearing of a

conflict of interest under the rule, let alone what are

the alleged diverging conflicting interest.” Id.

The PTO argues, in response, that Bender was

adequately informed by the complaint of each of the

charges lodged against him. Def.’s Rep. at 7-8.

Furthermore, the PTO contends that the complaint

was sufficient to allow Bender to prepare a defense,

and that he was not misled by the complaint. Id. It is

therefore the PTO’s position that the complaint was

sufficient and contained all that was required

pursuant to 5 U.S.C. 37 § 554(b) (2000) and 37 C.F.R.

§ 10.134 (2000). Id. Def.’s Rep. at 7-8. Moreover,

posits the defendant, the complaint specifically states

the charges that were made against Bender, and

separately identified the facts on which those charges

are based. See Admin. Compl.

The required content of an administrative

complaint is set forth in § 554(b) of the APA. 5 U.S.C.

§ 554(b). This section provides that “[pJersons entitled

to notice of an agency hearing shall be timely informed

of — (1) the time, place, and nature of the hearing; (2)

the legal authority and jurisdiction under which the

hearing is to be held; and (3) the matters of fact and

law asserted.” Id. The Court notes that the language

72a

used by Congress in subsection three of § 554(b), while

specific in its directive that matters of law and fact

must be set forth in the notice, provides no guidance

about how matters of fact and law must be asserted.

As explained elsewhere in this opinion, an agency

regulation which construes this directive is entitled to

substantial deference as to its interpretation under

Chevron, 467 U.S. at 842-845. And, the PTO has

adopted a regulation (37 C.F.R. § 10.134), which

governs the content of its administrative complaints.

The regulation provides that the complaints filed by

the PTO must “[glive a plain and concise description of

the alleged violations of the Disciplinary Rules by the

practitioner.” 37 C.F.R. § 10.134(aX(2). And this

regulation does not on its face conflict with § 554(b) of

the APA.

The National Labor Relations Board (“NLRB”)

regulation which governs complaints filed by the

NLRB” is similar to the PTO regulation. Thus, the

District of Columbia Circuit’s cases addressing

complaints filed by the NLRB provide guidance with

respect to what must be provided in a complaint issued

by the PTO and under what circumstances a complaint

may be insufficient. In NLRB v. Blake Const. Co., 663

F.2d 272 (D.C. Cir. 1998), the Court of Appeals held

18 29 C.F.R. § 102.15 (2005) provides, in relevant part, that “[t]he

complaint shall contain: (a) A clear and concise statement of the

facts upon which assertion of jurisdiction by the Board is

predicated, and (b) A clear and concise description of the acts

which are claimed to constitute unfair labor practices, where

known, the approximate dates and places of such acts and the

names of respondent’s agents or other representatives by whom

committed.”

73a

that “[t]he Board may not make findings or order

remedies on violations not charged in the General

Counsel’s complaint or litigated in the subsequent

hearing.” Id. at 279; see also Gen. Teamsters and

Allied Workers Local Union No., 992 v. N.L.R.B., 427

F.2d 582, 588 (D.C. Cir. 1970). Thus, the NLRB’s

“own rules require that the complaint inform . . .[the

other party] of the violation asserted.” Id. (footnote

omitted). Therefore, an administrative complaint

must, at a minimum, set forth the charged violations

and the facts on which those violations are founded so

that the charged party may adequately prepare and

present a defense. Blake Const. Co., 633 F.2d at 283.

Although, in some instances, the PTO did not

specifically correlate the factual allegations with the

regulation violations charged in its complaint, this

Court finds that the complaint was sufficient to

provide Bender with sufficient notice of the charged

conduct. As explained above, the APA requires only

that the matters of law and fact be asserted in the

complaint, and the PTO has done this. The PTO has

also reasonably interpreted what its own regulation

requires be contained in its complaints and substantial

deference must be accorded to that interpretation.

And all of the violations which Bender was ultimately

found to have committed were sufficiently designated

in the complaint (or the violations found by the ALJ

were reversed by the GC Decision for a failure to do

so), as both the underlying factual conduct and the

regulations allegedly violated were asserted, consistent

with what the Court required in Blake Const. Co., 663

F.2d at 279, and General Teamsters, 427 F.2d at 588.

Accordingly, this Court finds that the additional step

of specifically identifying which particular facts

T4a

correspond with the particular disciplinary regulation

charged in the complaint is simply not required by

Congress or the law of this Circuit where it is

ascertainable, as here, which facts pertain to which

charges. Therefore, Bender’s challenge to the

sufficiency of the complaint must be rejected.

H. Did the PTO or the ALJ commit significant

procedural errors bearing on the plaintiffs hearing

and the adjudication?

1. Failure to permit discovery

Bender argues that the AL.J’s pre-hearing decision

not -to allow him to take the testimony of certain PTO

employees “adversely affected [his] ability to put on an

effective defense thereby denying him a full and fair

(hjearing.” Pl.’s Opp at 33; Appeal Brief at 80-83. It is

Bender’s contention that if he had been allowed to take

testimony from these individuals, he would have been

able to present “exculpatory evidence” about, inter

alia, improper agency conduct as to various aspects of

his case (some which are discussed elsewhere in this

opinion), improper agency motives, and institutional as

well as individual bias. Pl.’s Opp’n at 33-34.

The PTO contends, as a preliminary matter, that

the PTO’s rejection of certain patent applications is

“hardly germane to [the p)laintiffs duty to notify his

clients.” Def.’s Reply at 1920. Furthermore, the PTO

argues that Bender’s contention that such discovery

would show “unclean hands” on the part of the PTO

would not show bias on the part of the ALJ. Jd. at 20.

75a

With respect to discovery in agency proceedings,

the District of Columbia Circuit has explained that

[t]he extent of discovery that a party engaged in

an administrative hearing is entitled to is

primarily determined by the particular agency:

both the Federal Rules of Civil Procedure and

the Federal Rules of Criminal Procedure are

inapplicable and the Administrative Procedure

Act fails to provide expressly for discovery;

further, courts have consistently held that

agencies need not observe alli the rules and

formalities applicable to courtroom proceedings.

McClelland v. Andrus, 606 F.2d 1278, 1285 (D.C. Cir.

1979) (citations omitted) (footnotes omitted). 37 C.F.R.

§ 10.152(0B8) states that “[djiscovery shall not be

authorized . . . of any matter which: (1) will be used by

another party solely for impeachment or

cross-examination.” In seeking the testimony of the

. three PTO employees, Bender’s very purpose was to

illicit admissions that the PTO’s investigation and

complaint against him, in which these employees

participated or were involved, was unfair and flawed

on multiple levels. Pl.’s Opp’n at 33 Appeal Brief at

80-83. Therefore, the discovery sought by Bender was

-reasonably construed as designed to develop

“impeachment or cross-examination” material, and

according deference to the agency’s interpretations of

its own regulations the Court declines to disturb the

agency's decision. Accordingly, the Court does not

76a

agree that the ALJ’s denial of discovery was

improper.”

2. The ALJ’s failure to dismiss counts of the

administrative complaint

Bender argues that the ALJ erred by denying his

motion to dismiss eight of the ten counts filed against

him because “the PTO did not produce the inventors

named in the Counts as witnesses at the hearing even

though it owned the burden of proof.” Appeai Brief at

53-54; Pl.’s Opp’n at 35. Bender argues that the

failure to produce the inventors’ names was a violation

of § 556(d) of the APA, 5 U.S.C. § 556(d),” because “he

was deprived of an opportunity to cross-examine these

witnesses.” Jd. And, Bender contends that “the

remaining witnesses were incompetent to testify

probatively about any of the adopted charges with

respect to the eight other counts.” Jd. In response, the

1° The Court also declines to hold that the ALJ improperly denied

Bender’s request for discovery of the disciplinary files of other

PTO practitioners. Pl.’s Opp’n at 35. Bender contends that these

files might show that the PTO wrongly assumes that association

with AIC is considered a per se violation of the disciplinary rules.

Id. This argument is purely speculative and is not highly relevant

to the real issue in this case, ie, whether Bender’s own actions

violated the PTO’s regulations, and proof that he did is supported

by substantial evidence in the administrative record.

»” 5 U.S.C. § 556(d), provides in pertinent part that “[a] party is

entitled to present his case or defense by oral or documentary

evidence, to submit rebuttal evidence, and to conduct such

cross-examination as may be required for a full and true

disclosure of the facts.”

77a

PTO asserts that because Bender “has not alleged that

he was in any way prevented from calling the

inventors as witnesses and examining them on any

issue relevant to the matter,” he was not denied a “full

and fair” hearing. Def.’s Reply. at 20 (quoting Ritz v.

O’Donnell, 566 F.2d 731, 736 (D.C. Cir. 1977)).

The PTO is correct that there is nothing in the

record which indicates that Bender was prevented

from calling his own witnesses with respect to the

charges he claims should have been dismissed, and he

was therefore not precluded from “present[ing] his

defense by oral . . . evidence,” as required by the APA.

5 U.S.C. § 556(d). Neither was he prevented from

“submit[ing] rebuttal evidence” in the form of

testimony by witnesses he desired to call, as he must

be afforded the opportunity to do under § 556(d).

Bender’s argument implies that the PTO was required

to present as witnesses the investors with respect to

each charge so that he could cross-examine them, and

that without such witnesses the PTO could not support

the charges filed against him. The Court must reject

this argument. As explained in the GC Decision, the

ALJ’s determinations were based on “documents

prepared in the course of [Bender’s] representation of

his cliente” and were “for the most part, direct

evidence of [Bender’s] actions in the course of his

representation of the pertinent clients”. GC Decision

at 19.

As previously noted, the violations found by the

ALJ are supported by substantial record evidence.

And, in such circumstances, there is simply no

requirement that the PTO call witnesses to testify as

to each count of the complaint in order for them to be

78a

cross-examined by Bender. That Bender himself was

not prevented from calling such witnesses adds

additional support for this conclusion. Ritz, 566 F.2d

at 736. Accordingly, Bender’s argument must be

rejected.

3. Appointment of the ALJ

Bender contends that the appointment of the ALJ,

William B. Moran (“Moran”), was improper because it

was made in violation of 35 U.S.C. § 32 in that Moran

was not an employee of the PTO, and because he was

not intimately familiar with patent law and therefore

lacked the qualifications to decide his case. P1.’s Opp’n

at 31-32; Req. for Recon. at 23-24. The PTO responds

by arguing that § 32 does not mandate the

appointment of a PTO employee, but rather provides

for the appointment of a PTO employee at the

discretion of the Director. Def.’s Reply at 18-19 (citing

GC Decision at 16-18). With respect. to Bender’s

argument that the AL.J lacked expertise in patent law,

the PTO contends that it was Bender's “obligation to

provide any explanation necessary for the ALJ to

understand his arguments.” Z/d. at 19 (citation

omitted).

35 U.S.C. § 32 provides, in relevant part, that “[t]he

Director shall have the discretion to designate any

attorney who is an officer or employee of the United

States Patent and Trademark Office to conduct the

hearing required by this section.” (emphasis added).

Bender argues that this provision requires the PTO to

designate an officer or employee of the PTO, while the

PTO argues that the statute merely gives the Director

authority to make such a designation if in his

79a

discretion he chooses to do so. GC Decision at 16-18.

As acongressional enactment, the analysis required by

Chevron, 467 U.S. at 842-845, governs the resolution

of this dispute. Under Chevron, the language of the

provision at issue cannot be evaluated under Chevron’s

first step, as it is not clear whether the provision

permits a non-PTO employee to be appointed as the

ALJ. Id. Under Chevron’s second step, the agency

interpretation of the statute must be afforded

deference and upheld if it is reasonable. Jd. The PTO

points to the legislative history of the provision, which

indeed confirms that the PTO’s interpretation is

reasonable in light of the language of the statute itself.

GC Decision at 16-18. 35 U.S.C. § 32 was amended in

1999, and the legislative history of the amendment

indicates the ate a

Suspension or exclusion from practice. Under

existing .§ 32 of the Patent Act, the

Commissioner (the Director pursuant to § 632 of

this Act) has the authority, after notice and a

hearing, to suspend or exclude from further

practice before the PTO any person who is

incompetent, disreputable, indulges in gross

misconduct or fraud, or is noncompliant with

PTO regulations. Section 620 permits the

Director to designate an attorney who is an

officer or employee of the PTO to conduct a

hearing under § 32.

H.R. REP. 106-287 (1999) (emphasis added). As the

PTO correctly notes, the legislative history of the

amendment supports the conclusion that the

amendment was intended to be permissive, rather

than mandatory, with respect to the appointment of an

80a

ALJ. Therefore, the Court concludes that the PTO’s

interpretation is reasonable and that the appointment

of the ALJ was therefore proper.

This Court also rejects Bender’s challenge to the

appointment of the ALJ based on his lack of expertise

in patent law. The case before the ALJ concerned

issues of professional conduct of an attorney, and while

the issues presented implicated some aspects of patent

law, the ultimate question concerned whether Bender

engaged in conduct that violated the PTO’s

disciplinary regulations. While knowledge of patent

law might have provided some assistance to the ALJ,

it was not essential. The administrative record

contained ample information from which the ALJ

could reasonably assess whether there was substantial

evidence that Bender violated certain disciplinary

regulations without having the expertise in patent law.

This Court also finds the PTO’s argument and

reference to the record persuasive with respect to its

conclusion that Bender had an obligation to clarify

issues of patent law for the AL.J when clarification was

necessary. Furthermore, to the extent that there were

“misunderstandings’” of patent law by the ALJ bearing

on material facts undergirding the violations found by

the ALJ, his evaluation of the record was ultimately

scrutinized by the PTO’s General Counsel in his GC

Decision, which provided an additional analysis and

explanation of the relevant factual matters and legal

principles that led to the conclusions that were

reached in this case. Accordingly, the appointment of

Moran as the ALJ provides no basis for disturbing the

decision rendered by the PTO, as the appointment was

proper and not made in violation of 35 U.S.C. § 32.

8la

4. Was Bender prejudiced by the delay of the

proceedings?

Bender argues that the length of the proceedings

did not comport with due process and was prejudicial.

Pl’s Opp’n at 46-47; Appeal Brief at 86-87.

Specifically, he alleges that Moatz’s involvement in the

investigation of his case created a “will to win” on

Moatz’s part when he was then promoted to the

position of Director of the OED. PI1.’s Opp’n at 47.

Thus, Bender argues that if the complaint had been

brought earlier, there at least would not be an

“appearance of prejudgment and bias”. Jd. (emphasis

in original). He also argues that Moatz, due to his

extensive involvement in the case and his desire to

win, failed to engage in “reasonable” settlement

negotiations as called for in 37 C.F.R. § 10.131(g)

(2000). Pl.’s Opp’n at 47. Bender also contends that

because he complained to Moatz’s supervisor about

“abuses” that Moatz allegedly engaged in, “there is an

extremely high risk in the present case that the OED

Director harbored an intense “will to win.” Id. The

PTO counters, arguing only that Bender’s contention

that he was prejudiced because Moatz did not engage

in reasonable settlement negotiations lacks merit

because he had “no legally cognizable right to a

settlement of pending charges under any specific

terms” and because the range of settlement

™ Bender acknowledges that the Director entered into settlement

negotiations with his counsel during the hearing, but contends

that the Director's position was unreasonable because the

settlement offer called for Bender’s “immediate suspension which

was the equivalent of exclusion.”

82a

possibilities, or the decision not to enter into a

settlement at all, were “well within the agency’s

discretion.” Def.’s Rep at 23 (citing Heckler v. Chaney,

470 U.S. 821 (1985).

Bender’s challenge to the PTO’s decision predicated

on the delay in resolving his case is unpersuasive. His

claim that a complaint instituted prior to Moatz’s

promotion to the position of Director of the OED would

have been free of bias or the appearance of bias is

unfounded because, as already noted, Bender has not

specifically established any actual bias. His argument

concedes as much when he states that had a different

agency decision maker been involved, the “present

proceeding might have been avoided.” P1.’s Opp’n at 47

(emphasis supplied). This argument, combined with

the fact that only the “risk” and “appearance” of bias

are alleged, is insufficient to establish that the delay

resulted in actual prejudice. Similarly, Bender has

failed to identify any specific record evidence that

supports his supposition that Moatz had an intense

“will to win.” Rather, all he has offered is pure

speculation. And as to Bender’s argument regarding

settlement process, this Court’s review is again

constrained by the requirement that deference be

accorded to an agency’s interpretations of its own

regulations. See, e.g., Thomas Jefferson Univ., 512

U.S. at 512. Under this standard, the Court declines

to disturb the Director’s decision regarding what

constitutes a “reasonable” settlement under 37 C.F.R.

§ 10.131(g). Accordingly, there is no basis for this

Court to conclude that Bender was prejudiced by the

delay in resolving his case.

83a

IV. Conclusion

For the foregoing reasons, this Court denies

Plaintiffs motion for summary judgment and grants

Defendant’s motion to for summary judgment.”

SO ORDERED on this 13th day of January, 2006.

REGGIE B. WALTON

United States District Court Judge

* An order consistent with this memorandum opinion is being

issued contemporaneously herewith.

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

2006-1243

[Filed September 27, 2007]

S. MICHAEL BENDER,

| Plaintiff-Appellant,

Vv.

Jon W. Dudas,

DIRECTOR, PATENT AND

TRADEMARK OFFICE,

Defendant-Appellee.

i a a a a a a a

ORDER

A combined petition for panel rehearing and for

rehearing en banc having been filed by the Appellant,

and the petition for rehearing, having been referred to

the panel that heard the appeal, and thereafter the

petition for rehearing en banc having been referred to

the circuit judges who are in regular active service,

85a

UPON CONSIDERATION THEREOF, it is

ORDERED that the petition for panel rehearing be,

and the same hereby is, DENIED and it is further

ORDERED that the petition for rehearing en banc

be, and the same hereby is, DENIED.

The mandate of the court will issue on October 4,

2007.

FOR THE COURT,

fs/__

Jan Horbaly

Clerk

Dated: 09/27/2007

cc: S. Michael Bender

Stephen Walsh

BENDER V DUDAS, 2006-1243

(DCT - 04-CV-1301)