Arnesen v. Raymond Lee Organization, Inc.

• Decision Date: 15 October 1971
• Docket Number: No. 71-1520.,71-1520.
• Citation: 333 F. Supp. 116
• Parties: Robert F. ARNESEN on behalf of himself and all others similarly situated, Plaintiffs, v. The RAYMOND LEE ORGANIZATION, INC., et al., Defendants.
• Court: U.S. District Court — Central District of California

333 F. Supp. 116

Robert F. ARNESEN on behalf of himself and all others similarly situated, Plaintiffs, v. The RAYMOND LEE ORGANIZATION, INC., et al., Defendants.

No. 71-1520.

United States District Court, C. D. California.

October 15, 1971.

Norman G. Axe, Marvin E. Jacobs, Gerald L. Price, Beverly Hills, Cal., for plaintiffs.

Adams, Duque & Hazeltine, Los Angeles, Cal., for defendants.

ORDER DENYING MOTION TO DISMISS AND MOTION TO QUASH SUMMONS

DAVID W. WILLIAMS, District Judge.

This is a class action for damages and injunctive relief brought pursuant to the Patent Act, 35 U.S.C. § 33, and the Lanham Act, 15 U.S.C. § 1125(a). This Court has jurisdiction by reason of Title 28 U.S.C. § 1338.

Plaintiff alleges that the Raymond Lee Organization, Inc. is a business which purports to provide a complete service package to inventors, and that it advertises in national publications its service of preparing patent applications for inventors, assists them in technically developing and refining the invention, aids in the preparation of patent drawings and descriptions to establish a "Patent Pending" status for the invention, all for a fixed fee plus 10% interest in the invention. Defendant's advertisement suggests that it further assists the inventor by preparing a sales letter and prospectus for him and in aiding the introduction of the invention to industry. Its promotional material disclaims that it is a registered patent attorney or agent, but indicates that its services are so complete that no other outside services are needed by the inventor.

Defendants have moved pursuant to Rule 12(b) of the Federal Rules of Civil Procedure to dismiss the complaint on the ground that it fails to state a claim upon which relief can be granted, and individual defendants Raymond Lee, Lawrence Peska and Howard D. Gressey further move to quash service of summons upon them on the grounds that the Court lacks personal jurisdiction over them.

THE PATENT ACT CLAIM

Section 33 of Title 35 of United States Code provides that,

"Whoever, not being recognized to practice before the Patent Office, holds himself out or permits himself to be held out as so recognized, or as being qualified to prepare or prosecute applications for patent, shall be fined not more than $1,000 for each offense."

Defendants call attention to the fact that Section 33 is a penal statute and they argue that no private right of action arises thereunder and that even if there were a private right of action, defendants have engaged in no activity which constitutes a breach of the statute. It is well-settled law that "though Congress has not created a statutory right of action * * * it is still possible for the courts to do so on the principles of the common law. The breach of a penal statute may be regarded by the courts as an operative fact upon the basis of which may be predicated a common law tort liability to a person injured as a result of the breach, provided he is within the class for whose protection the penal statute presumably was passed." Jacobson v. New York, N. H. & H. R. Co., 206 F.2d 153, 156 (1st Cir., 1953). This was but a restatement of the statutory tort doctrine first enunciated in the case of Couch v. Steel, 2 E. & B. 402, 118 Eng.Rep. 1193 (Q.B.1854), and recognized by the Supreme Court in Texas & Pacific Railway v. Rigsby, 241 U.S. 33, 36 S.Ct. 482, 60 L.Ed. 874 (1916). In Rigsby, the Court noted that the doctrine was an application of the maxim Ubi jus, Ibi Remedium. Recently the Supreme Court has urged all federal courts to adjust their remedies to violations of federal rights. Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L. Ed. 939 (1946); J. I. Case Co. v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d 423 (1964). Accordingly, wherever consistent with the intent of the statute, courts have construed an implied right of action. See, e. g., Kardon v. National Gypsum, 69 F.Supp. 512 (E.D.Pa.1946); Reitmeister v. Reitmeister, 162 F.2d 691 (2nd Cir., 1947); Fagot v. Flintkote, 305 F.Supp. 407 (E.D.La.1969).

It is consistent with the purposes of Section 33 to construe an implied right of action if plaintiff is within the class for whose protection the statute was enacted. Chapter 3 of Title 35 regulates practice before the Patent Office. It is beyond question that that office can establish rules and regulations for practice before it which are neither subject to nor subordinate to the rules of practice of the individual states. Sperry v. Florida, 373 U.S. 379, 83 S.Ct. 1322, 10 L.Ed.2d 428 (1963). It follows that the Patent Office also has the power to establish criteria for practice as well as rules for disbarment and that it has plenary authority to regulate the patent bar. Addressing himself to the predecessor statute to the one here in issue, Commissioner Coe of the Patent Office told The House Committee on Patents that "the purpose of this bill is to prevent unauthorized practice before the Patent Office. At present, numerous persons * * * solicit patent business and otherwise engage in the unauthorized practice before the Patent Office."¹ The remarks of Commissioner Coe and the plain language of both the prior law, 52 Stat. 342, and the current law, Chapter 3, Title 35, have, as their object, the establishment of high standards of professional competence in the patent bar.

The Court in Hull v. United States, 129 U.S.App.D.C. 47, 390 F.2d 462 (D.C.Cir.1968) was of the opinion that the setting of high standards and high penalties for holding oneself to be qualified when one is not, acted simply as a deterrent to unauthorized patent practice. Judge Anderson in United States v. Blasius, 397 F.2d 203 (2nd Cir., 1968) saw the deterrent effect as being but one side to the coin. The other side was protection of the inventor. Indeed it is difficult to distinguish between the setting of a standard and the benefit to be accorded inventors; the reason for the standard is to accord some measure of protection to the inventor population, otherwise the high standard would be academic. See Fitzgerald v. Pan American World Airways, 229 F. 2d 499 (2nd Cir. 1956). This Court concludes that inventors are within the class for whose protection the statute was enacted.

The defendant contends that he never held himself out as being "qualified" to prepare or process patent applications as that term is used in Section 33 of the Patent Act. Defendant would adopt the definition of "qualified" found in Hull, supra at 466, that "(w)henever anyone who is not registered with the Patent Office says he is, or, without saying so directly, employs methods which give the impression that he is, he may be criminally punished." However, a later case² construed "qualified" to mean "possessing particular skill or `know-how' in performing certain tasks and functions rather than the more legalistic meaning, less familiar to the general public, which is having formal legal authority to perform particular tasks or functions."

Though the history of the Act does not illumine the meaning to be given the word "qualified", the revision of the statute in 1952 gives some assistance. The prior Act, 35 U.S.C. § 11a, 52 Stat. 342, specified that among those who engaged in "unauthorized" practice were those excluded from practice and who had not been reinstated. While this category of person is not specifically included in the current act, it is clear from the reviser's note that the language of the prior Act was merely simplified. This suggests that a former patent attorney bears a heavier burden of showing that he did not hold himself out as being qualified than one who was never a patent agent or attorney.

The facts indicate that Raymond Lee did not, in effect, state that he was a registered patent attorney. However, his course of conduct virtually negates his statement that he is not registered. His credentials, imprinted on his stationery, state that he was a former patent attorney as well as a patent examiner for the Patent Office. The introductory letter he sent to plaintiff suggests that if one uses his services, one need not employ counsel nor other outside specialists to process the patent application. In short, the service promised was but one step short of filing the application with the Patent Office and it included the preparation of technical drawings and definitive text. It is difficult to imagine how high standards of professional competence can be maintained if a former patent attorney can advertise and engage in these activities and still not be considered as holding himself out as "qualified" to process patent applications.

"The whole purpose of protecting citizens from unskilled and unethical practitioners would be brought to naught if they could advertise and sell their service in preparing patent applications so long as they refrained from stating or implying that they were registered patent agents." Blasius, supra, at 207.

The motion to dismiss for failure to state a claim upon which relief can be granted is denied.

THE LANHAM ACT CLAIM

Defendant argues that Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), confers no private right of action on a defrauded consumer but only on competitors because the intent of the act is to "protect persons engaged in commerce." That section says in pertinent part:

"(a) Any person who shall affix, apply, or annex, or use in connection with any goods or services, or any container or containers for goods, a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same * * * shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes that he is or is likely to be damaged by the use of any such false description or representation." (emphasis added).

The liability clause of Section 43(a) is...