IP Law Daily, PATENT—E.D. Va.: USPTO’s patent termination based on fraudulent signature practice upheld, (Mar 30, 2026)

By Carolin Dennis, B.Sc., LL.B., LL.M.

USPTO successfully defended its decision to sanction an art kit company, including termination of its patent application, due to the misconduct of its patent representative.

The federal district court in Alexandria, Virginia, granted summary judgment in favor of the USPTO, rejecting an art kit company’s argument that the USPTO must consider the applicant’s lack of knowledge or culpability in sanction cases. The district court found that the USPTO did not err in determining that the company was responsible for the actions of its patent representative. The district court further concluded that the USPTO did not act arbitrarily or capriciously in imposing sanctions (Diamond Art Club, LLC v. Stewart, No. 1:25-cv-00341-PTG-WEF (E.D. Va. Mar. 25, 2026)).

Patent application. Diamond Art Club, LLC (DAC), a premier art kit company, was the assignee of the ’688 Application, a patent application for diamond art projects invented by J. Wang (Inventor Wang) and Perrier (Inventor Perrier) (collectively, Inventors). The Inventors had hired the firm Wayne & King (W&K), operated by Y.M. Wang (Dr. Wang), to prosecute and file the ’688 Application before the USPTO. However, at the time of filing the ’688 Application, Dr. Wang was neither a registered practitioner nor licensed to practice law. Therefore, during the process of filing the ’688 Application, W&K used the electronic signature of USPTO Practitioner Yang.

In October 2022, Practitioner Yang received a request for information from the USPTO’s Office of Enrollment and Discipline inquiring about certain certifications that had been filed bearing her apparent signature. On December 19, 2022, she sent a letter to the USPTO “regarding the apparent unauthorized practice of law on certain patent applications prepared by non-registered practitioners.” According to Yang’s statements to the USPTO, Dr. Wang, her former classmate and W&K’s owner, told her that she could gain practical patent prosecution experience working at W&K; subsequently, without her knowledge, he established W&K credentials on her behalf. She claimed she “knew nothing about these certifications or the cases in which they were filed.” Later, the USPTO issued a Show Cause Order to DAC stating that the agency had “reason to believe that there has been an unauthorized use of the name and impermissible entry of the S-signature of practitioner...Yang in this application.” On September 29, 2023, Practitioner Yang filed a response on behalf of DAC. The response emphasized that the Inventors were not aware of the unauthorized use of Yang’s signature. The USPTO issued a Final Order concluding that “the signatures of the practitioner which appear in this application are in fact false signatures,” consequently imposing sanctions and terminating the ’688 Application under 37 C.F.R. § 11.18(c). The Order recognized that the applicant and other persons or entities involved in the application may have been unaware of the conduct at issue. However, the Order concluded that this consideration does not alleviate the rule violations given the well-established law “that a party is bound by the acts of their representative.”

The USPTO issued sanctions in the form of: (1) terminating the proceedings on the ’688 Application; (2) precluding the submission of any petition to revive this application or any petition to withdraw a holding of abandonment; (3) precluding the submission of an Application Data Sheet or any other paper which includes a claim of benefit to the filing date of this application; and (4) striking all documents with the signature of Yang. DAC then filed a complaint challenging the USPTO’s administrative decision to impose sanctions on it, including termination of its patent application, due to the misconduct of its patent representative. According to the DAC, the USPTO’s decision was arbitrary and capricious under the Administrative Procedure Act (APA). However, the USPTO and Coke Morgan Stewart, Director of the USPTO (collectively, defendants) contended that the agency reached a proper decision on the basis of the administrative record and the legal precedent holding that principals are responsible for their agents’ actions. Both parties moved for summary judgment on their respective positions.

Summary judgment. DAC argued that the USPTO's action was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law because as victims unaware of any signature fraud, they should not be punished for their representative’s misconduct. DAC contended that it did not have knowledge of the fraudulent signatures or an intent to defraud. Accordingly, the USPTO abused its discretion in levying sanctions because it imposed “unjustified and excessive” sanctions, failed to “appropriately weigh relevant factors” in imposing sanctions, and acted contrary to the evidence. Conversely, the defendants’ Cross-Motion argued that DAC is responsible for W&K’s actions, where W&K acted as its representative. Thus, the defendants contended that the USPTO acted properly in finding that the DAC had violated the duty of candor and imposing a sanction.

Principal-agent relationship. The district court noted that it is well-established under agency law that principals are responsible for the actions of their agents or representatives. Similarly, parties in proceedings before the USPTO bear responsibility for the consequences of their attorneys’ acts or omissions. The record demonstrated that DAC retained W&K and granted it power of attorney. During its representation of DAC in the patent application process, W&K submitted Yang’s false signatures in violation of the duty of candor and good faith under 37 C.F.R. § 1.56 and the duty of reasonable inquiry under 37 C.F.R. § 11.18(b)(2)(i).

DAC also argued that “extenuating circumstances” or actions adverse to a principal’s interests relieve a principal from the consequences of the agent’s actions. However, the DAC did not point to any facts in the record suggesting that W&K intentionally misled the patent applicant about the unauthorized signature. Indeed, the record itself is inconsistent as to whether DAC had any contact with Yang. The district court also agreed with the defendants’ argument that, “it would be entirely unworkable for the system to permit a party to disclaim certain portions of representation by unilaterally declaring them, after the fact, to be unauthorized.” Accordingly, the district court found that the USPTO acted in accordance with the law when finding DAC responsible for the actions of its representative.

Arbitrary and capricious standard of review. The district court noted that when imposing sanctions, the USPTO considers a series of non-exhaustive factors: whether the improper conduct was willful or negligent; whether it was part of a pattern of activity, or an isolated event; whether it infected an entire application, or only one particular paper; whether the person has engaged in similar conduct in other matters; whether the conduct was intended to injure; what effect the conduct had on the administrative process in time and expense; whether the responsible person is trained in law; what is needed to deter that person from repetition in the same case; and what is needed to deter similar conduct by others. The district court found that the USPTO properly assessed the factors and determined that documents containing false signatures of Yang were submitted to the USPTO in thousands of applications, as part of a deliberate scheme, knowingly executed over a prolonged period of time.

In light of the USPTO’s interest in “protecting the integrity of the U.S. patent system,” it concluded that it could not rely on the truth or accuracy of information submitted by W&K and accordingly terminated all affected patents. The district court also found that termination of the patent application along with thousands of others affected by W&K’s misconduct was reasonable considering W&K’s explicit deception and the need to protect the integrity of the patent system. Therefore, deference to the USPTO’s findings, the district court concluded that the USPTO did not act arbitrarily or capriciously in imposing sanctions on DAC.

Accordingly, the defendants’ motion for summary judgment was granted.

The Case is No. 1:25-cv-00341-PTG-WEF.

Judge: Giles, P.

Attorneys: Diana Lyn Curtis Shutzer (Fox Rothschild LLP) for Diamond Art Club, LLC. Raul A. Ruiz, U.S. Attorney's Office, for Coke Morgan Stewart and USPTO.

Companies: Diamond Art Club, LLC

Cases: Patent USPTO VirginiaNews GCNNews