Haley v. Under Secretary of Commerce of Intellectual Property and Director of the USPTO et al

Filing 22

MEMORANDUM OPINION and ORDER. ORDERED that Defendants' Motion to Dismiss 7 is GRANTED and that Haley's Cross-Motion for Partial Summary Judgment [13 is DENIED. Signed by District Judge Gerald Bruce Lee on 9/8/2015. (rban, )

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION

JEFFREY HALEY,
Petitioner-Plaintiff,
v.

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UNDER SECRETARY OF COMMERCE

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FOR INTELLECTUAL PROPERTY AND
DIRECTOR OF THE USPTO,

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Respondent,

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MICHELLE LEE AND SARAH HARRIS,

Defendants.

Case No. l:15-cv-102 (GBL/TRJ)

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MEMORANDUM OPINION AND ORDER

THIS MATTER is before the Court on Defendants Michelle Lee and Sarah Harris

("Defendants")'s Motion to Dismiss (Doc. 7) and Petitioner-Plaintiff Jeffrey Haley ("Haley")'s
Cross-Motion for Partial Summary Judgment ("Cross-Motion") (Doc. 13). This case involves

the Under Secretary of Commerce for Intellectual Property and Director of the United States
Patent and Trademark Office ("the USPTO")'s decision to disbar Haley (Admin. R. at 9-24) as
reciprocal punishment after Haley agreed to resign from the Washington State Bar Association
("the WSBA") in lieu of discipline (Id. at 28-31). Following disbarment, Haley jointly filed (1)
a petition for review of the USPTO's disciplinary ruling and (2) a Bivens action ("Complaint")
against Defendants.
There are five issues before the Court. One, whether the Court, given Haley's alternative

means of redress and the practical implications of allowing such a suit, should grant Defendants'
Motion to Dismiss because it would be inappropriate to devise a new Bivens remedy for Haley's

claims.

Two, whether the Court should grant Defendants' Motion to Dismiss because

Defendants are entitled to absolute immunity due to their quasi-judicial roles in adjudicating
agency disciplinary actions. Three, whether the Court should grant Defendants' Motion to

Dismiss because Defendants are entitled to qualified immunity as the constitutional right at issue
was not clearly established at the time of the alleged misconduct. Four, whether the Court

should grant Haley's Cross-Motion because the USPTO had no congressionally-granted

authority to impose reciprocal discipline against Haley. Five, whether the Court should grant
Haley's Cross-Motion because in punishing Haley, the USPTO exercised its authority in a
manner that was arbitrary and capricious. For the reasons that follow, the Court must GRANT

Defendants' Motion to Dismiss andthe Court must DENY Haley's Cross-Motion.
I. BACKGROUND

Petitioner-Plaintiff Jeffrey Haley was a patent attorney licensed to practice in the state of

Washington and before the United States Patent and Trademark Office ("Patent Bar"), but in

2005 Haley decided to leave the law and work instead as a patent agent.1 (Compl. ffl[ 9-11). In
2006, Haley failed to pay dues or complete the required continuing legal education classes

necessary for membership in the WSBA and the WSBA suspended him from practice. (Id. \ 12).
That same year, Haley resigned from the law firm which he helped found. (Id. \ 14). When the

firm refused to pay Haley his retirement, the parties entered arbitration. (Id. K15). While Haley
eventually prevailed, he did not receive attorneys' fees. The contract at issue did not allow for

such relief and accordingly, Haley incurred significant legal costs. (Id. ^ 14-15). In 2013,
Haley's former firm filed a complaint with the WSBA alleging that Haley had sent the firm a

1Patent attorneys and patent agents are both members ofthe Patent Bar. See Kroll v. Finnertv 242 F3d 1359 1366

(Fed. Cir. 2001).

message which it believed constituted criminal extortion and therefore ethical misconduct under

the WSBA's rules. (Id. 117). The message allegedly read,

I am not satisfied with the arbitrator's ruling on attorney fees. Giving all benefits
of doubts, a reasonable person might consider it fair to award no attorney's fees
for all litigation efforts through the summary judgment ruling. However, you
should have promptly paid up after that ruling. All theories you asserted and all
actions you took subsequently, including requesting extra time for discovery and
then taking no discovery, were frivolous and appeared calculated merely to run up
my attorney fees while you incurred no attorney fees.
The additional fees I incurred after the summary judgment were $22,390, and the
additional arbitration costs were $4,005, a total of $26,395.

To treat me with minimal fairness, I demand that the firm pay me this amount.

If you pay me $26,395, I will have no basis to warn patent lawyers that they
should not do business with you. If you do not, I will exercise my duty to others
and post the warning below in all suitable places on the web:

I was one of three founders of the Graybeal Jackson patent law
firm in 1990. To minimize risk of wasteful disputes, we wrote a
partnership agreement that spelled out with clear formulas who
was entitled to how much money in all scenarios, including
withdrawal or retirement.

I was the de-facto managing partner from 1995 to 2004. When

John Graybeal died, I ensured that the firm paid the appropriate
amount to his estate based on the partnership agreement. When
Larry Jackson retired, I ensured that the firm paid him the

retirement amounts he was due based on the partnership
agreement. There was not a single complaint or question raised in
either case.

But then, when I retired, with Josh King the leading partner, the
firm refused to pay my retirement buy-out ("departure benefits"
under the partnership agreement). The partners, Josh King, Dick
Gray, Brian Santarelli, Paul Rusyn, and Kevin Jablonski, asserted
frivolous legal theories why the departure benefits were not owed.

Although my lawyer frequently solicited offers of payment for
settlement, Josh King and the Graybeal firm partners offered
nothing. A reasonable business person would have assessed the
situation and made a reasonable offer. It appears that Josh King
and his partners seek a reputation for a scorched-earth approach to
any partner or employee who disagrees with them - not the sort of
people you want to do business with.

I was forced to take the matter all the way through arbitration. The

arbitrator awarded my full retirement benefits to the penny. But I

incurred $63,134 in attorney fees and $12,680 for arbitration costs,
a total of $75,814, to recover the $129,667 that I was owed. Josh

King represented the Graybeal firm so the firm incurred no legal
fees while it was running up my bill.
I write to warn associates and prospective partners of the risks of
joining this firm, at least so long as Josh King, Dick Gray, Brian
Santarelli, Paul Rusyn, and Kevin Jablonski make up a majority of
the partners. Spending your money and energy in litigation is not
worth the potential benefits.

If you would like me to send you a copy of the arbitrator's ruling,
please send an e-mail to haleyconsulting(at)gmail.com.
The WSBA filed a complaint against Haley alleging misconduct under the Rules of

Enforcement Lawyer Conduct ("ELC") on August 14, 2013. (Admin. R. at 32-35). In Haley's
response to the complaint he stated, "It is not worth the trouble for me to go through a disputed

proceeding on this matter, so I hereby permanently resign my former membership which has
been in suspension for more than seven years." (Id. at 36-37). After a series of negotiations with
the WSBA which allowed him to resign without actually admitting to the wrongful conduct,

Haley signed the Resignation in Lieu of Discipline (Id. at 28-31) pursuant to ELC Rule 9.3 (Id.
at 39; see Compl. fl) 19-22).

On June 20, 2014, the Director of the Office of Reciprocal Discipline ("OED") for the

Patent Bar filed a complaint for reciprocal discipline against Haley pursuant to 37 C.F.R. §
11.24. (Admin. R. at 42^16). After Haley filed a response (Id. at 56-70), the USPTO weighed
the arguments of Haley and OED and issued a final order (Id. at 9-25) on December 31, 2014
disbarring Haley. On January 26, 2015, Haley filed a joint petition for review of the USPTO's

disciplinary order and complaint against the two officials who signed the order. Haley's
Complaint alleged violation of his First Amendment and Fourteenth Amendment rights. (Doc.
1). On April 20, 2015, Defendants Michelle Lee and Sarah Harris filed a Motion to Dismiss

(Doc. 7), and on April 24, 2015, Haley filed a Cross-Motion (Doc. 13).

II. STANDARDS OF REVIEW

12(b)(6) Motion to Dismiss

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should be granted
unless the complaint "states a plausible claim for relief under Rule 8(a). Walters v. McMahen,

684 F.3d 435, 439 (4th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). In
considering a rule 12(b)(6) motion, the court "must accept as true all of the factual allegations
contained in the complaint," drawing "all reasonable inferences" in the plaintiffs favor. E.I. du

Pont de Nemours and Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011) (citations
omitted). No such assumption of truth is afforded to those "naked assertions" and "unadorned

conclusory allegations" devoid of"factual enhancement." Vitol, S.A. v. Primerose Shipping Co.,
708 F.3d 527, 543 (4th Cir. 2013) (citations omitted). The complaint must contain sufficient

factual allegations, taken as true, "to raise a right to relief above the speculative level" and
"nudge [the] claims across the line from conceivable to plausible." Vitol, 708 F.3d at 543
(quoting BellAtl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)).
Review ofAgency Action

Summary judgment is appropriate where a court finds there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56.

However, "when a party seeks review ofagency action under the APA before a district court, the

district judge sits as an appellate tribunal." Rempfer v. Sharfstein, 583 F.3d 860, 865 (D.C. Cir.
2009) (quotations omitted); see Marshall County Health Care Auth. v. Shalala, 988 F.2d 1221,
1226 (D.C. Cir. 1993) ("[W]hen an agency action is challenged ... the entire case on review is a

question of law."). Therefore, when reviewing agency actions there is no genuine issue of
material fact and judicial review is "confined to the agency's administrative record." Am. Canoe

Ass'n, Inc. v. U.S. E.P.A., 46 F. Supp. 2d 473, 475 (E.D. Va. 1999) (citing Camp v. Pitts, 411
U.S. 138,142(1973)).

When reviewing agency decisions, the standard is "highly deferential, with a presumption
in favor of finding the agency action valid." Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556
F.3d 177, 192 (4th Cir. 2009). "Even when an agency explains its decision with 'less than ideal

clarity,' a reviewing court will not upset the decision on that account 'if the agency's path may
reasonably be discerned.'" Alaska Dep't of Envtl. Conservation v. E.P.A., 540 U.S. 461, 497

(2004) (citations omitted). However, the reviewing court "may not supply a reasoned basis for

the agency's action that the agency itself has not given." Motor Vehicle Mfrs. Ass'n of U.S., Inc.
v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983).

The USPTO's disciplinary actions are subject to review by the United States District
Court for the Eastern District of Virginia according to the provisions of the Administrative
Procedure Act ("APA"). See 35 U.S.C. § 32 (setting the current forum for review of the

USPTO's disciplinary actions as the Eastern District of Virginia); Bender v. Dudas, 490 F.3d

1361, 1365-66 (Fed. Cir. 2007) (explaining that review of agency discipline is evaluated under
the APA, 5 U.S.C. § 706). Under the APA, "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.'" Bender, 490 F.3d at 1365-66 (quoting 5U.S.C. § 706).
III. ANALYSIS

A. Defendants' Motion to Dismiss

The Court GRANTS Defendants' Motion to Dismiss because the Court will not devise a

new Bivens claim and even ifit did, Defendants would be entitled to either absolute or qualified

immunity. Defendants move to dismiss counts II and III of Haley's Complaint2 on three
grounds. First, Defendants argue that the Court should not adopt a new type of implied claim
under Bivens. Second, Defendants argue that they are entitled to absolute immunity because of
their quasi-judicial roles in adjudicating agency disciplinary actions. Third, Defendants argue
that they are entitled to qualified immunity because the constitutional right at issue was not
clearly established at the time of the alleged misconduct.
1. The Court will not devise a new Bivens claim.

The Court will not extend Bivens to cover claims brought for an infringement of First

Amendment rights in the context of the present case because 35 U.S.C. § 32 provides Haley with
an alternate means of redress, and because the special factor of exposing government officials to

greater liability counsels against authorizing a new type of Bivens claim. Defendants argue that

this case does not pass the two-step analysis for devising a new Bivens remedy. Haley argues
that several courts have recognized Bivens claims under the First Amendment.

The Fourth Circuit has neither recognized a First Amendment cause of action under Bivens, nor

has it expressly stated that such a claim is not cognizable. See, e.g., Tobey v. Jones, 706 F.3d

379, 404 n.* (4th Cir. 2013) (refusing to reach the question of whether the plaintiffs First

Amendment cause of action would lie under Bivens); Zimbelman v. Savage, 228 F.3d 367, 370

(4th Cir. 2000) (holding that special factors counselled against recognizing a Bivens claim in

plaintiffs' particular case). Likewise, the Supreme Court has not, to this point, recognized a First

Amendment Bivens claim. Reichle v. Howards, 132 S. Ct. 2088, 2093 n.4 (2012) ("We have
never held that Bivens extends to the First Amendment."). Haley argues that some courts, the

District of Columbia Circuit in particular, have recognized Bivens actions brought under the First

2Count Iofthe Complaint is Haley's "Petition for Review" ofthe USPTO's disciplinary ruling. (Compl. fl 30). As
such, it does not relate to the Bivens claims against Defendants. Count I is a separate issue that the Court will
address below in Part B of its analysis.

Amendment. See, e.g., Spagnola v. Mathis, 809 F.2d 16, 19 (D.C. Cir. 1986); Dellums v. Powell,
566 F.2d 167 (D.C. Cir. 1977).

The question for the Court, however, is not whether First

Amendment claims are ever cognizable under Bivens, but whether the Court should recognize a
Bivens cause of action in this case. As Defendants correctly point out, the test for whether to

devise a Bivens remedy involves two questions. First, whether the plaintiff has access to an
alternate remedy; if the plaintiff has an alternate means of redress, then a Bivens claim is not

appropriate. Wilkie v. Robbins, 551 U.S. 537, 550 (2007). Second, if the plaintiff does not have

alternate means of redress, whether "any special factors counsel[] hesitation before authorizing a
new kind of federal litigation." Id.
Alternate Remedy

Haley has an alternate remedy because 35 U.S.C. § 32 grants Haley an opportunity to
petition this Court for review of the USPTO's disciplinary decision; thus, the Court will not

recognize his Bivens claim. The operative question for the Court is whether Congress created an
exclusive remedy for the grievance that Haley seeks to redress. See Richards v. C.I.A., 837 F.
Supp. 2d 574, 578 (E.D. Va. 2011)

In Zimbelman v. Savage, two Air Force employees were fired on suspicion of theft and

fraud following an investigation by the Air Force's Office of Special Investigations ("OSI"). 228
F.3d at 369-70. After failing in their initial appeals process, the ex-employees filed Fifth
Amendment Bivens claims against members of OSI because they claimed that OSI did not
provide them an opportunity for a name-clearing hearing. Id. at 369. The court held that because

Congress provided an exclusive remedial framework—in the ex-employees' case it was the Civil
Services Reform Act—a Bivens remedy for damages was inappropriate. Id. at 371.

Here, the U.S. Patent Act is analogous to the Civil Services Reform Act. See Animal

Legal Def. Fund v. Quigg, 932 F.2d 920, 938 (Fed. Cir. 1991) ("The structure of the Patent Act

indicates that Congress intended only the remedies provided therein to ensure that the statutory
objectives would be realized."). Haley argues that because this Court's review of the USPTO's

decision pursuant to 35 U.S.C. § 32 does not allow for damages, he does not have access to an

alternate means of redress.

While the Court appreciates Haley's point, it cannot simply

supplement Congress' intended remedy. Schweiker v. Chilicky, 487 U.S. 412, 423 (1988)
("When the design of a Government program suggests that Congress has provided what it
considers adequate remedial mechanisms ... for constitutional violations that may occur in the
course of its administration, we have not created additional Bivens remedies."). The Supreme

Court has held that "[s]o long as the plaintiff had an avenue for some redress, bedrock principles

of separation of powers foreclosed judicial imposition of a new substantive liability." Corr.
Servs. Corp. v. Malesko, 534 U.S. 61, 69 (2001) (emphasis added) (citing Chilicky, 487 U.S. at

425-427); see also Iqbal, 556 U.S. at 675 (noting that "implied causes of action are disfavored").

Because Haley has access to analternate means of redress, Haley's claims fail the first part of the
test for devising a Bivens remedy and the Court must dismiss his Bivensclaims.
Special Factors

Even if Haley had no alternate remedy, under the second part of the Bivens analysis—the

special factors test—the Court would not devise a new Bivens claim because opening up
government officials to increased liability is a factor that counsels against authorizing a new type

of federal litigation. "Bivens actions are inappropriate if there are 'special factors counseling
hesitation."' Medley v. Hawk-Sawyer, 133 F. Supp. 2d 883, 888 n.3 (N.D.W. Va. 2001) (quoting
Bivens v. Six Unknown NamedAgents ofFed. Bureau ofNarcotics, 403 U.S. 388, 396 (1971)).

Widening the scope of government employees amenable to suit for their official acts is a

factor weighing against this Court devising a new Bivens remedy. Defendants argue that the
USPTO's disciplinary process provides an important public role, and that exposing government
officials to greater liability could dissuade qualified individuals from seeking positions to serve

that role. Their argument tracks the Supreme Court's opinion in Schweiker v. Chilicky where the
Court noted that "[t]he prospect of personal liability for official acts, moreover, would

undoubtedly lead to new difficulties and expense in recruiting administrators for the programs
Congress has established." 487 U.S. at 425. Haley argues that exposing officials to greater
liability would not dissuade qualified individuals from seeking government positions because

those individuals "will not have to pay any damages awarded. Their employer will pay the
damages forthem," andthat such a suit would be "undoubtedly very rare." (Doc. 21 at 17).
Haley's argument does not persuade the Court.

In F.D.IC. v. Meyer, the Supreme Court

declined to extend Bivens to cover agencies specifically because "we would be creating a
potentially enormous financial burden for the Federal Government." 510 U.S. 471,486 (1994).
It follows then that exposing federal employees—and by extension the federal

government—to even more liability by allowing First Amendment Bivens suits stemming from
agency disciplinary proceedings would be imprudent . While Haley claims that such a suit

would be "undoubtedly very rare," it would seem an attractive option for anyone challenging an
agency disciplinary decision to tack on a Bivens claim as Haley has done here. Therefore,

because special factors counsel hesitation in devising a new Bivens remedy, Haley's claims fail
the second part of the Bivens analysis in addition to the first, and the Court will not devise a new

Bivens remedy.

Thus, Haley does not state a claim under Bivens and the Court grants

Defendants' Motion to Dismiss.

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2. Defendants are entitled to absolute immunity.
Even if the Court were to devise a new claim under Bivens, Defendants would not be

liable to suit under the doctrine ofabsolute immunity. Defendants argue that due to their quasijudicial roles, absolute immunity should insulate them from liability. Haley argues that because
there were no "parties on each side presenting evidence and making arguments" there was no
quasi-judicial proceeding and Defendants did not act in quasi-judicial roles.

Absolute immunity protects some government officials from suit when acting within the
scope oftheir duties. Harlow v. Fitzgerald, 457 U.S. 800, 807 (1982). "The purpose ofabsolute

immunity 'is not to protect an erring official, but to insulate the decision-making process from

the harassment of prospective litigation.'" Goldstein v. Moatz, 364 F.3d 205, 212 (4th Cir. 2004)
(quoting Westfall v. Erwin, 484 U.S. 292, 295 (1988)). In Butz v. Economou, Respondent
brought suit against high-level United States Department ofAgriculture officials alleging that
they violated his constitutional rights by bringing an investigation against him in retaliation for
comments he made about the agency. 438 U.S. 478,480 (1978). The Court held that while some

ofthe officials could only raise the standard Bivens defense of qualified immunity, others, such

as the hearing examiner acting in aquasi-judicial role, were entitled to absolute immunity. Id. at
513-14. The Court stated that "adjudication within a federal administrative agency shares

enough of the characteristics of the judicial process that those who participate in such
adjudication should also be immune from suits for damages." Id. at512-13.

Haley's case is similar to Butz. Haley, upset by an agency decision, sued high-level

Patent Bar officials alleging violation of his constitutional rights. Unlike in Butz, though, Haley
only sued officials who adjudicated the claim against him.3 Thus, he only sued those who were

'Defendant Hams, General Counsel for the United States Patent and Trademark Office, signed the order disbarring
Haley on behalfofDefendant Lee. Their only involvement in this case was related to the quasi-judicial process that
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entitled to absolute immunity. Haley's argument that there was no quasi-judicial proceeding

because there were no "parties on each side presenting evidence and making arguments" is
particularly ill-conceived in light of his years practicing law. OED filed a complaint. (Admin. R.
at 42-46). The USPTO issued a notice and order to respond. (Id. at 48-50). The USPTO
granted Haley a time extension to file his response. (Id. at 53-54). Haley responded. (Id. at 5670). The USPTO, weighing the arguments of Haley and OED, issued an order. (Id. at 9-24).

Clearly the process was akin to that of a court. Because Haley is only suing Defendants in
relation to their capacity as adjudicators in his disciplinary proceeding, Defendants are entitled to
absolute immunity. Therefore, the Court must grant Defendants' Motion to Dismiss because
Haley cannot state a plausible claim for relief.
3. Defendants are entitled to qualified immunity.

Even if the Court were to accept Haley's Bivens claim and Defendants were not entitled

to absolute immunity, Defendants would still be entitled to qualified immunity.

Defendants

argue that because there was no clearly established constitutional right at the time of their

conduct, they are entitled to qualified immunity. Haley does not contest the qualified immunity

issue, but the Court will address it summarily. The first step in the qualified immunity analysis
is to ask whether the plaintiff has alleged the deprivation of a constitutional right. Wilson v.
Layne, 526 U.S. 603, 609 (1999).

Here, Haley attempts to make out claims that Defendants violated his First Amendment

free speech and Fourteenth (Fifth) Amendment due process rights. It is difficult to see how

Defendants' actions regulated Haley's speech at all. The USPTO disbarred Haley under a
mandatory reciprocal discipline rule set forth in 37 C.F.R. § 11.24. The disbarment related to

took place pursuant to 37 C.F.R. § 11.24. That process is laid out in the Administrative Record at 42^16, 48-51,
53-54, 56-70, and 9-24.
12

Haley's Resignation in Lieu of Discipline, not to the speech underlying the original WSBA

misconduct complaint. (See Admin. R. at 17 ("This reciprocal discipline proceeding is not
regulating Respondent's underlying speech, but rather is considering reciprocal discipline as a

result of his Resignation in Lieu of Discipline.")). Haley's due-process argument is completely
unsupported. Due process requires notice and an opportunity to be heard. See Goldberg v. Kelly,

397 U.S. 254, 267-68 (1970). The USPTO gave Haley notice and an opportunity to respond to
the allegations in the complaint. (Admin. R. at 48-51). The USPTO gave Haley atime extension

to file his response. (Id. at 53-53). Haley responded. (Id. at 56-70). Haley, possibly seeing the
futility of his due-process claim, does not address it at all after the Complaint. There is no
reading of facts in the 37Administrative Record that support a conclusion that Defendants
deprived Haley of any constitutional right. Therefore, if it were needed, Defendants would be
entitled to qualified immunity. The Court must GRANT Defendants' Motion to Dismiss because
Haley cannot state a plausible claim for relief.
B. Haley's Cross-Motion

The Court DENIES Haley's Cross-Motion because it finds that Congress implicitly
granted the USPTO the power to reciprocally discipline its members, and because it finds that

the USPTO's exercise of that power was not arbitrary and capricious. Haley's Cross-Motion

focuses largely on free speech and on the USPTO's duty to investigate the WSBA's case against
him. (See Doc. 12-17). However, this Court's review ofthe regulation under which the USPTO

disciplined Haley is limited. With that in mind, the Court sees two questions. First, whether
Congress intended to permit the USPTO to impose reciprocal discipline. Second, whether the
USPTO acted in a way that was "arbitrary and capricious."

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1. Scope of the USPTO's Authority

The USPTO did not act outside the scope ofits authority inadopting reciprocal discipline
because Congress gave the USPTO wide latitude to govern the conduct of the members of its

bar. The USPTO disciplined Haley under 37 C.F.R. § 11.24, which lays out the rules for
reciprocal discipline in the Patent Bar. (Admin. R. at 9-24). Normal review of a USPTO

disciplinary action is governed under the APA's "arbitrary and capricious" standard. Bender v.

Dudas, 490 F.3d 1361, 1365-66 (Fed. Cir. 2007). However, Haley argues that the USPTO's
actions fell outside the scope of its congressionally-granted authority because "there is no statute
which authorizes the Director to punish a patent agent who settles with a Bar Association rather
than litigate with the Bar Association." (Compl. \ 31). Thus, the Court will first look at whether

37 C.F.R. § 11.24 is permissible under the relevant enabling statute, 35 U.S.C. § 32. The Court
examines an agency's construction of its enabling statute under the test set forth in Chevron

U.S.A., Inc. v. Natural Resources Defense Council, Inc. 467 U.S. 837 (1974).

The Chevron test is a two-part inquiry: (1) whether Congress unambiguously spelled out
its answer to the question at issue and (2) if not, whether the agency's "answer is based on a

permissible construction of the statute." Nat'I Elec. Mfrs. Ass'n v. US. Dep't of Energy, 654
F.3d 496, 504 (4th Cir. 2011). "The power of an administrative agency to administer a

congressionally created . . . program necessarily requires the formulation of policy and the

making ofrules to fill any gap left, implicitly or explicitly, by Congress." Id. at 843. (quoting
Morton v. Ruiz, 415 U.S. 199, 231 (1974)).

Here, the language of the enabling statute, 35 U.S.C. § 32, does not refer to the USPTO

discipline required when an agent resigns from another bar association in lieu of discipline
specifically, or even to reciprocal discipline generally; instead, the relevant language provides,

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The 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(b)(2)(D)

35 U.S.C. § 32. Congress does not specify what it means by "incompetent or disreputable." By
failing to expound on language like "incompetent or disreputable," Congress implicitly leaves a
gap for the USPTO to fill as it sees fit. Congress also explicitly gives the USPTO the power to

promulgate regulations related to the conduct of its members. See 35 U.S.C. § 2(b)(2)(D) ("The
Office . . . may establish regulations, not inconsistent with law, which . . . may govern the
recognition and conduct of agents, attorneys, or other persons representing applicants or other
parties before the Office ...." (emphasis added)). It is clear that Congress, far from specifically
addressing the reciprocal disbarment question at issue here, gives the USPTO a wide berth to

govern the conduct of the members of its bar.4 The question then becomes, as per the second
part of the Chevron test, whether the USPTO's adoption of reciprocal disbarment is based on a
permissible construction of the statute.

The focus is not whether 37 C.F.R. § 11.24 is appropriate, but whether the USPTO's
view that it is appropriate is a reasonable one. See Chevron, 467 U.S. at 845. The Court will

"afford 'controlling weight' to an agency's reasonable interpretation even where [it] would have,

if writing on a clean slate, adopted a different interpretation." Nat'I Elec, 654 F.3d at 505 (citing
Regions Hosp. v. Shalala, 522 U.S. 448, 457 (1998)). This deference makes sense both because

agencies have an expertise in their areas that courts do not, and because agencies have a role to

play in the political sphere that courts do not. Chevron, 467 U.S. at 865-66 ("[F]ederaljudges—

4It is significant that neither statute referenced above distinguishes between how the USPTO may govern or punish
patent agents and how it may govern or punish patent attorneys. While Haley's disinterest in the legal profession
may serve to explain why he stopped paying dues to the WSBA and why later he resigned from the WSBA rather
thanfighting allegations of misconduct, it doesnot afford him any lower level of scrutiny by the USPTO.
15

who have no constituency—have aduty to respect legitimate policy choices made by those who
do.").

In the present case, the Court finds that the USPTO's regulation on reciprocal discipline

is a more than reasonable construction of 35 U.S.C. § 32. The regulation mandates that "[a]
practitioner is deemed to be disbarred if he or she . . . has resigned in lieu of a disciplinary
proceeding," and it calls for reciprocal discipline from the USPTO. 37 C.F.R. 11.24(a), (d)(1).
The USPTO cites multiple examples of bars and courts, including this Court, where aresignation

in lieu ofdisciplinary proceedings from another bar is grounds for reciprocal disbarment. (Doc. 5
at 13-14; see Admin. R. 16-17). Even a passing search turns up many more examples. See Lori

Jean Henkel, Annotation, Propriety ofattorney's resignation from bar in light ofpending or
potential disciplinary action, 54 A.L.R.4TH 264 (1987).

The Model Federal Rules of

Disciplinary Enforcement Rule 3(a) requires disbarment where an attorney "resignfs] from the

bar of any other Court of the United States or the District of Columbia, or from the Bar of any
state, territory, commonwealth or possession of the United States while an investigation into

allegations ofmisconduct is pending." 35 U.S.C. §32 gives the USPTO the power to discipline
members of the Patent Bar. It is clear that, even absent the high level of deference the Court
must give the USPTO under Chevron, 37 C.F.R. § 11.24 is not an unreasonable or even

unexpected construction of 35 U.S.C. §32. Therefore, the USPTO did not exceed the scope of
its congressionally-granted power in adopting reciprocal discipline.
2. Arbitrary and Capricious Standard

The USPTO's application of 37 C.F.R. §11.24 was not arbitrary and capricious. Haley
argues ifthe USPTO acted within the scope of its authority, then it did not properly apply 37
C.F.R. § 11.24. (See Doc. 13 at 14-17). The Court's review of an agency's application of its
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own regulation falls under the "arbitrary and capricious" standard set forth in the APA. See 5

U.S.C. §§ 702, 706. "Review under [the APA] is highly deferential, with apresumption in favor

offinding the agency action valid. Ohio Valley Envtl. Coal. v. Aracoma Coal Co., 556 F.3d 177,
192 (4th Cir. 2009) (citing Natural Res. Def. Council, Inc. v. EPA, 16 F.3d 1395, 1400 (4th Cir.
1993)). In evaluating an agency action under the arbitrary and capricious standard, the Court

will only reverse where there has been a"clear error ofjudgment." Voge v. Sec'y ofNavy, 35
F.3d 558 (4th Cir. 1994) (citations omitted).

Here, 37 C.F.R. 11.24 states that "[a] practitioner is deemed to be disbarred if he or

she ... has resigned in lieu ofadisciplinary proceeding." Not only was the document that Haley
signed with the WSBA entitled "Resignation in Lieu ofDiscipline," the parties also agreed to it
pursuant to terms ofELC Rule 9.3 which required that if Haley was ever allowed to reapply for
membership with the WSBA, the WSBA would treat Haley as "one who has been barred for

ethical misconduct." (Admin. R. at 39). It further stated that Haley acknowledges "that the

resignation could be treated as disbarment by all other jurisdictions" and that he must "comply
with all restrictions that apply to a disbarred lawyer." Id. Haley's argument that he was not
disbarred for the purposes of 37 C.F.R. § 11.24 is thus without merit.

The regulation then requires the USPTO to impose identical punishment unless it "finds
there is a genuine issue of material fact that":

(i)
(ii)

The procedure elsewhere was so lacking in notice or opportunity to be

heard as to constitute adeprivation of due process;

There was such infirmity ofproof establishing the conduct as to give rise
to the clear conviction that the Office could not, consistently with its duty,
accept as final the conclusion onthat subject;

(iii)

The imposition ofthe same public censure, public reprimand, probation,

disbarment, suspension or disciplinary disqualification by the Office
would result in grave injustice; or
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(iv)

Any argument that the practitioner was not publicly censured, publicly
reprimanded, placed on probation, disbarred, suspended or disciplinarily
disqualified.

Haley argues that the USPTO should have found a genuine issue of material fact under points (ii)
and (iii). (Compl. ffi[ 34-35). The Court will address each in turn.
Infirmity of Proof

There was not such a dearth of proof establishing Haley's conduct that the USPTO could

not accept the WSBA's final conclusion.

Haley argues that because the WSBA did not

investigate the complaint "there was a complete infirmity of proof because there was no

admissible evidence produced to support the bare allegation of wrongdoing." (Id. U 35). The
USPTO argues that because Haley voluntarily accepted the WSBA's punishment, the WSBA
had no further need for an investigation. (Admin. R. at 18).

Case law supports the USPTO's position. In In re Day, Respondent voluntarily resigned
from the Florida Bar rather than contesting allegations of misappropriations of client trust

account funds. 717 A.2d 883, 884 (D.C. 1998). Pursuant to a mandatory reciprocal discipline

rule in the Rules of Professional Conduct, the Board of Professional Responsibility
recommended that the District of Columbia Court of Appeals disbar Respondent from the

District of Columbia Bar. Id. Respondent argued that because the Florida Bar never completed
its investigation of Respondent, there was an infirmity of proof in establishing the conduct that

would call for her reciprocal disbarment. Id. at 888. The court rejected Respondent's argument
because it found that Respondent's actions created the infirmity of evidence. Id. at 888-89.
Similarly, because Haley voluntarily resigned from the WSBA and agreed not to seek

reinstatement, the WSBA would have no reason to continue its investigation. As Haley put it,
"This is exactly what he wanted—permanent disengagement with the WSBA." (Compl. 1) 22). If
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there were an infirmity of evidence, it would be the result of Haley's own actions. However, the
facts stated in the Administrative Record supply more than enough evidence to allow the USPTO
to find against Haley.

It was not for the USPTO to adjudicate the WSBA's misconduct complaint against
Haley. Its only question was whether there "was such infirmity of proofestablishing the conduct

as to give rise to the clear conviction that the Office could not, consistently with its duty, accept
as final the conclusion on that subject." 37 C.F.R. § 11.24 (emphasis added). Here, Haley does

not deny that the arbitrator's final word gave him no right to attorneys' fees, nor does he deny
that he sent his old partners a message which read, "If you pay me $26,395 I will have no basis

to warn patent lawyers that they should not do business with you." Haley correctly points out
that in the state of Washington, free speech provides a defense to extortion where clear evidence

shows that a sufficient nexus exists between a threat and a plausible claim of right. State v.
Pauling, 69 P.3d 331, 332 (Wash. 2003). It is clear from Haley's Complaint, however, that he

had absolutely no claim of right to attorneys' fees. (Compl. U14) ("The partnership agreement

provided for arbitration of disputes but did not provide for attorney fees to the prevailing
party."). The USPTO, therefore, made no clear error of judgment in failing to find a genuine
issue of material fact regarding infirmity of proof.
Grave Injustice

The USPTO's finding that imposition of equivalent punishment would not have resulted
in grave injustice was reasonable. Haley argues that because the WSBA did not determine what

Haley's punishment would have been had it found against him, it was not fair to impose the
harshest penalty possible. (Id \ 35). The USPTO argues that when Haley voluntary chose to

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resign in lieu of discipline he had notice that the USPTO's reciprocal discipline regulation would
treat it as disbarment. (Doc. 5 at 17-18).

In In re Davy, Respondent argued that an imposition of reciprocal discipline would result
in grave injustice because there had been a seven-year delay from the original imposition of
discipline. 25 A.3d 70, 73 (D.C. 2011). The District of Columbia Court of Appeals held that
because it was Respondent's own failure to disclose the grievances pending against her that

caused the delay, imposition of identical discipline would not constitute a grave injustice. Id. at
74.

Similarly, to the extent that the harshest punishment possible was an unjust result of
Haley's actions, Haley has no one to blame but himself.

Haley signed a document that

specifically stated that his resignation could be treated as disbarment "by all other jurisdictions."

(Admin. R. at 39). The WSBA suspended Haley for failure to pay dues or attend continuing
legal education classes. Haley resigned facing allegations of extortion. Given the circumstances,

the USPTO's view that reciprocally disbarring Haley did not constitute grave injustice was not a

clear error of judgment.

While the Court sympathizes with Haley, under the arbitrary and

capricious standard of the APA, the Court cannot, in this case, overturn the USPTO's application
of its own regulation.

The Administrative Record simply does not bear out a clear error of

judgment. Therefore, the Court must DENY Haley's Cross-Motion.
IV. CONCLUSION

For the foregoing reasons, the Court grants Defendants' Motion to Dismiss and the Court

denies Haley's Cross-Motion. The Court finds it inappropriate to recognize a new type of Bivens
claim and even if it did, Defendants would be entitled to immunity. Furthermore, the USPTO

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had congressional authority to promulgate 37 C.F.R. § 11.24 and its application of it was not
arbitrary and capricious. Accordingly, it is hereby

ORDERED that Defendants' Motion to Dismiss (Doc. 7) is GRANTED on all counts
and

ORDERED that Haley's Cross-Motion for Partial Summary Judgment (Doc. 13) is
DENIED.

IT IS SO ORDERED.

ENTERED this /

day of September, 2015.

Alexandria, Virginia

91 £ /2015
/s/

Gerald Bruce Lee

United States District Judge

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