When I came on board with Caldwell, I reached out to the Committee of Professional Ethics in Massachusetts to request an opinion concerning fee-sharing between patent attorneys and patent agents. My request was prompted by an apparent conflict between ethics rules governing patent practitioners and the typical code of conduct adopted by states, including Massachusetts, for lawyers.
In the interest of maintaining the integrity of the legal profession, state ethics rules typically forbid to lawyers to form firms offering legal services or to share fees with non-lawyers. The purpose of this rule is to prevent a person other than the client from influencing the lawyer’s representation of a client through remuneration of the lawyer, particularly when that person is not bound by ethics rules such as those binding lawyers.
In contrast, the ethics rules governing patent attorneys and agents define a person licensed to practice before the USPTO as a “practitioner,” whether that person is a lawyer or not, and permits “practitioners” to form legal partnerships and share fees. Of note, the USPTO ethics rules also impose many similar ethical duties on “practitioners” to those imposed on lawyers by state bars. My view, as communicated to the Committee of Professional Ethics, was that under Sperry v. Florida, 373 U.S. 379 (1963), the USPTO authorization to share fees, when practicing before the USPTO, should preempt the Massachusetts prohibition on fee-sharing.
In an informal advisory issued in March, 2017, the Committee of Professional Ethics agreed. Noting that the USPTO ethics rules did require obedience to state ethics rules generally, the Committee acknowledged the conflicting provisions regarding fee-sharing, and concluded that the Federal rule controls: patent attorneys and agents may share fees in employer-employee relationships as well as legal partnerships, as long as the services they offer are limited to practice before the USPTO. In so concluding, the Committee noted that not only Sperry, but decisions by other state Ethics boards, such as Virginia State Bar Legal Ethics Opinion 1843 (2008), supported this position. The Committee also drew a parallel to Mass. R. Prof. C. 5.5(d)(2), “permitting lawyers admitted elsewhere but not in Massachusetts to provide here ‘services that the lawyer is authorized to provide by federal law.’”
The interplay between state and federal rules can be complex and baffling, whether concerning Constitutional law, conflicting state and federal statutes, or administrative rules governing professional licenses. It is encouraging to see that in this case, at least, a simple rule that comports with common-sense is being adopted.
At its meeting on March 1, the Committee on Professional Ethics addressed your inquiry of January 31, 2017. You explain that you are a lawyer admitted to practice in Massachusetts and licensed to prosecute patents before the United States Patent and Trademark Office. You have the opportunity to work with, and perhaps become a partner of, a non-lawyer patent agent registered with the USPTO at his Cambridge Office. “Our work would be limited to the scope of practicing law before the USPTO.”
You raise whether you as a Massachusetts lawyer can be employed by such a patent agent-controlled firm, share legal fees with the patent agent, and perhaps become his partner. As you recognize, Mass. R. Prof. C. 5.4 generally forbids such arrangements between lawyers and non-lawyers as follows:
RULE 5.4: PROFESSIONAL INDEPENDENCE OF A LAWYER
(a) A lawyer or law firm shall not share legal fees with a nonlawyer, except that:
[irrelevant exceptions]
(b) A lawyer shall not form a partnership or other business entity with a nonlawyer if any of the activities of the entity consist of the practice of law.
(c) A lawyer shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer’s professional judgment in rendering such legal services.
(d) A lawyer shall not practice with or in the form of a limited liability entity authorized to practice law for a profit, if:
(1) a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold the stock or interest of the lawyer for a reasonable time during administration;
(2) a nonlawyer is a corporate director or officer thereof or occupies the position of similar responsibility in any form of association other than a corporation including a limited liability company; or
(3) a nonlawyer has the right to direct or control the professional judgment of a lawyer.
Comment [1] The provisions of this Rule express traditional limitations on sharing fees. These limitations are to protect the lawyer’s professional independence of judgment. Where someone other than the client pays the lawyer’s fee or salary, or recommends employment of the lawyer, that arrangement does not modify the lawyer’s obligation to the client. As stated in paragraph (c), such arrangements should not interfere with the lawyer’s professional judgment.
….
But, as you also recognize, that is not necessarily the final word. In the leading case of Sperry v. Florida, 373 U.S. 379 (1963), the Supreme Court held that nonlawyer practitioners admitted to practice before the United States Patent Office could not be prosecuted by Florida for the unauthorized practice of law. Were Massachusetts to prosecute for unauthorized practice of law a nonlawyer representative admitted to practice before the USPTO, we have no doubt that Sperry would dictate the outcome. But Sperry did not say that lawyers practicing before the patent office need not abide by any and all state rules of professional conduct. The interplay of federal and state regulation of lawyers is recognized by a patent office regulation, 37 C.F.R. Ch. 1, §11.1, as follows:
This part governs solely the practice of patent, trademark, and other law before the United States Patent and Trademark Office. Nothing in this part shall be construed to preempt the authority of each State to regulate the practice of law, except to the extent necessary for the United States Patent and Trademark Office to accomplish its Federal objectives….
The Restatement of the Law Governing Lawyers (Third) in §1, Reporter’s Note to Comment b, describes the regulation by the USPTO of those admitted to practice before it as follows:
Typical of agencies that have a highly developed set of internal lawyer-code rules and a system and procedures for enforcing them, including debarment from practice before the agency, is the Patent and Trademark Office….
Of current relevance, 37 C.F.R. Ch. 1, §11.1 defines a practitioner to include an “attorney or agent registered to practice before the Office in patent matters,” and §11.504, entitled Professional independence of a practitioner, states, “A practitioner should not form a partnership with a non-practitioner if any of the activities of the partnership consist of the practice of law.” It seems implicit that partnerships among practitioners, be they lawyers or patent agents, are the permitted norm.
Faced with reconciling the Massachusetts prohibitions in rule 5.4 with the USPTO regulations of those admitted to practice before it, we have no trouble concluding that the federal law governs. See United States Constitution, Article VI, 2d paragraph (the Supremacy Clause) and 35 U.S.C. §2(b)(2)(D) (authorizing the USPTO to “govern the recognition and conduct of agents, attorneys, or other persons representing applicants or other parties before the Office…).” This is not a situation in which the state rule can be applied without interfering with the federal scheme. In contrast, prosecution of a patent lawyer by Massachusetts Bar Counsel for stealing client funds would not interfere with federal objectives.
Also, the policy behind rule 5.4, as suggested by its title and as stated in comment 1, is to “protect the lawyer’s professional independence of judgment.” When a practice, as you contemplate, is confined to work before the USPTO, any impact on the patent lawyer’s independence by a patent agent is primarily a matter for federal, not state, regulation.
This conclusion is supported by Virginia State Bar Legal Ethics Opinion 1843 (2008), which you cite (permitting patent lawyers to practice with patent agents “as long as that practice is devoted solely to patent law before the USPTO”). Much older support also exists. In ABA Formal Opinion 318 (1967), dealing primarily with firm names, the committee stated:
A somewhat similar situation exists in the case of the patent bar. Certain laymen are licensed by the United States Patent Office as “Patent Agents” with all the rights and privileges insofar as that body is concerned of a duly licensed attorney, but without of course any right to appear in court or otherwise practice law. As early as 1931 this Committee held that a partnership between such a patent agent and a lawyer was improper…. However, in its lengthy and closely reasoned Formal Opinion 257, rendered some years later, with a dissent by one member, this Committee … held that a partnership between a lawyer and a patent agent is permissible so long as “the activities of the partnership and the lawyer member are confined to those which may be carried out by the layman” and “provided the lawyer renounces or refrains from holding himself out as a lawyer and from carrying on any activities which may not be property carried on by the layman.” Just what are the permitted and prohibited activities is not clearly spelled out; but in Opinion 148 of the Committee on Professional and Judicial Ethics of the State Bar of Michigan they are discussed at length.
We therefore hold that it is not improper for a lawyer to permit his name to be used in the firm name of a firm of patent agents so long as the firm’s activities are limited to such as are permitted laymen under Patent Office rules, and so long as the lawyer does not engage in the practice of law or hold himself out as a lawyer, but if the firm or the lawyer does engage in the practice of law, then use of his name would be improper.
Mass. R. Prof. C. 5.5(d)(2), in permitting lawyers admitted elsewhere but not in Massachusetts to provide here “services that the lawyer is authorized to provide by federal law…,” recognizes the Sperry principle. See comment 18 to rule 5.5.
To summarize, so long as your practice with the patent agent is confined to practicing law before the USPTO, we believe you can share legal fees and be associated as employee or partner with him.
We hope that this advice is of assistance to you.
Very truly yours,
Andrew L. Kaufman, Chair
For the Committee on Professional Ethics
Massachusetts Bar Association