Unethical behaviour - why do we do it and what is the cure?

I examine unethical behaviour in business and professional services.

Hardly a day goes by but we read of another corporate scandal involving dishonesty of one form or another. Major banks, as well as household names such as Rolls Royce, VW and Tesco, are reported as paying settlements running into hundreds of millions. The legal sector is no exception and the latest scandal involving former human rights lawyer Phil Shiner is one example. So why does this keep happening and what can be done about it?


I have just finished Professor Robert Cialdini’s new book, Pre-suasion – a revolutionary way to influence and persuade. It is an astonishing catalogue of our susceptibility to cues that have been proven to influence our subsequent choices and actions. For example, simply being asked whether you consider yourself an adventurous person before answering questions put by a street survey agent makes it vastly more likely that you will willingly hand over your email and phone number. They are unsettling revelations, not least because this knowledge in the hands of the unscrupulous can be used against us for profit.


Perhaps because references to the accelerating impact of AI in our working and personal lives are so prevalent, at least in my spheres of interest, my first thought was how Cialdini’s evidence-based methods could be put into use on a mass scale using AI. My conclusion is that all it needs is a business with targets to reach and investors to please. While dystopian projections of the impact of technology abound, exemplified by Channel 4’s ‘Black Mirror’ series, we should not sleep walk into the insidious infiltration of influence techniques designed to divert us from truly free choice.


Professor Cialdini acknowledges the possibility that what he has revealed will be misused and addresses it head on; though in doing so confronts another human factor in play, namely the predisposition to act unethically for financial gain. He refers, among other sources, to Ernst & Young Global Fraud Surveys (20132014) ‘documenting that many senior business leaders know the heavy reputational costs of recognised unethical conduct but are willing to enact or permit such conduct when it raises company fiscal outcomes’.

Cialdini refers to the VW diesel emissions debacle which led to the company’s largest loss in its history and its reputation going from 70% favourable to 80% unfavourable. He offers some possible explanations as to why senior business leaders persist in such behaviour and concludes that they simply don’t think they will get caught.


I find myself saying ‘surely not’; surely such things could not be allowed to happen in a major organisation that must be subject to controls that prevent such behaviour. Another book I have read recently is The Power Paradox – how we gain and lose influence by Dr Dacher Keltner, who demonstrates that those who are afforded power tend to believe that the rules that apply to others don’t apply to them. Regrettably this thesis also rings true.

Reward bias is one of 25 cognitive biases explored by Charlie Munger, Warren Buffet’s long-time business partner, in a paper entitled ‘The psychology of human misjudgement’. The proposition is that when there is a reward incentive most people will do whatever it takes to obtain it, including behaving unethically. When the power paradox is combined with reward bias it is easy to see how business leaders might behave unethically and so, surely, we should expect it and be ready to deal with it.


In his earlier bestseller, Influence – The Psychology of Persuasion, Robert Cialdini explained our tendency to act in consistency with our choices. This may explain the otherwise puzzling fact that unethical conduct can be suspected, or even known, and yet nothing is done to investigate or address it until, for example, a whistle-blower sounds an alarm that cannot be ignored. When that happens, many will express outrage despite having previously turned a blind eye to the situation. The explanation may be that it is safer to act in accordance with existing choices, for example by staying with an existing supplier, than it is to take affirmative action in consistency with commonly stated values.


Human nature being what it is, the answer must be that deterrence rather than cure is all that is achievable. Bribery, corruption, fraud, and dishonesty in general are corrosive and can be addressed by law, provided there is a willingness to report and bring offenders to account. Too many are ‘getting away with it’ right under the noses of those who prefer the counsel of the three wise monkeys (hear no evil; speak no evil; see no evil). Corporate responsibility includes being prepared to deal with dishonesty decisively.


My sense is that professional standards and sanctions have a real impact on legal professionals because, having worked to obtain a professional qualification, the majority are not willing to risk being prevented from practising and so lose their livelihood. Company directors are far less likely to be prevented from working, or being appointed as a director, because they have bent the rules. 

Reputation is all-important in professional services and when it is lost the consequences can, and should be, catastrophic. Some providers of professional services have been, and will continue to be, drawn into unethical conduct and their clients must be prepared to subject even the most established relationships to scrutiny. Unethical conduct is a zero-sum game in which both clients and the profession are losers until the perpetrator is brought to account.

CPA Global agrees to pay $5.6m to settle US class action alleging overcharging

CPA Global Limited, the world’s largest intellectual property management company, has recently settled a class action case in the US, where it was alleged that it had been overcharging for patent management fees. The alleged overcharging occurred by “inflating certain fees and outright inventing others.” CPA has now settled this case out of court for $5.6 million.

The terms of settlement were arrived at after mediation, with a 64-page Court document filed in the District Court of Eastern Virginia on 13 March 2017. Once approved by the Court, the class action, which commenced on 29 June last year, will end. The Court’s approval process will take a further four months during which time potential claimants will be contacted and given the option to take the money or opt out.

The settlement only benefits US patent holders, with a maximum of 40 non-US patents renewed in any one year, who between 1 January 2012 and 31 December 2016 used CPA Global to pay their annuities. Class members who do not opt out will be compensated from what remains from a $5.6m fund to be provided by CPA. It must also provide last known contact information for current and past clients in the defined class; subject to the Court’s approval, as much as 33% of the settlement fund may be paid to the claimant’s lawyers and $25,000 to the claimant.

Many would commend CPA for resolving the class action before it reached trial and for keeping the class definition so restricted and the settlement fund so small.  Once the case had become a ‘rocket docket’ to be tried by end July 2017, the urgency to settle must have been all the greater and doubtless this is what the rocket docket process is designed to encourage.  Was this simple expediency aimed at limiting legal and other costs of litigation or was it a deliberate choice to prevent potentially embarrassing evidence being presented in open Court and, worse still, a judgment finding that CPA had indeed been engaged in systematic overcharging?

On the one hand, settlement makes sense for CPA, especially given rumours that there will be a change in ownership within the next six months. On the other, why would CPA pass on the opportunity to have the claims of overcharging tested by a Court in a case which pleaded only two instances of overcharging and involved a claimant with a very small portfolio?  As one might expect, the Court document records, at length, that the settlement in no way amounts to an admission of any of the claims in the action and that CPA refutes those claims completely.

CPA may have dodged this bullet but there will almost certainly be more to follow, not least because US law firms will doubtless be offering their services to patent holders outside the prescribed class with larger portfolios and potentially much larger claims. This is not going to go away and CPA can expect further claims in the US and on their home ground in Jersey, UK.

Dennemeyer, the second largest patent annuity payment provider, has run several webinars in which it has presented carefully sanitized data pointing to egregious levels of overcharging by some providers. Patent holders have been given enough cause to question whether they are in fact paying considerably more than the service fee agreed with their provider. 

For those willing to look under the covers, my firm offers a ‘no saving, no charge’ service that includes advising on and negotiating terms with their existing providers or with an alternate provider. 

Contact me for advice

Damned if you do – Damned if you don’t

Overcharging for patent annuities - the dilemma facing in-house counsel

The world’s largest provider of patent annuity payment services, CPA Global, is the subject of a Class Action in the US in which it is alleged it has been overcharging its clients. 

On 9 February 2017, Life Sciences Intellectual Property Review posted an article entitled ‘CPA Global seeks settlement after claims it overcharged patent feesin which it was reported as follows:

‘According to a January 30 order, the parties engaged in successful mediation, have agreed in principle to settlement and have signed a memorandum of understanding. In order for the parties to finalise the settlement, the district court granted their request to stay all deadlines for 30 days and cancel the case hearing, which was initially scheduled for February 17.

The case is stayed until March 1.’

One hesitates to believe that an organization of the stature, scale and longevity of CPA Global could possibly be engaged in overcharging of clients and yet one must consider the possibility that the inflation of charges may have been, and may indeed remain, systemic. 

Meanwhile, Dennemeyer, the world’s second largest provider of patent annuity payment services, has been running webinars and posted videos reporting overcharging on a massive scale by competitors. 

In March 2015 Brandstock, one of the larger European players in the IP services sector, published a report on findings from more than 100 benchmarking projects conducted on behalf of owners of some of the world’s largest patent and trademark portfolios entitled:

150 Million US$ Savings – How Far Can You Go? The why, what and how of agent benchmarking and trademark and patent cost reduction’3. In conclusions set out on page 6 of the report, it was stated:

Only from a selected group of countries had all agents been applying the correct official fees. In certain regions, many agents applied hefty mark-ups of 30 to 50% and more. Again

a strong North to South and West to East increase was identified. In addition, some providers of global services such as patent annuities made up for their ever-decreasing handling fees with decades of applying incorrect exchange rates, thereby overcharging owners of large patent portfolios by anything from 13 to 35% and resulting in millions of US$ in damages.

Damned if you do

This information places in-house counsel at risk of being held responsible for any overcharging that took place ‘on their watch’. Yet how should counsel have discovered the overcharging for themselves?

Damned if you don’t

Now that the information is out, are in-house counsel now at risk of being held responsible for not taking steps to address the risk and recover any past overpayments?

In my webinar delivered via BrightTALK on 15 February I explain the basic components of patent annuities and consider the claims against CPA Global. My firm is able to provide expert help to patent holders who are concerned to ensure that they are paying the right fees for their patent annuities.

Watch the webinar

Contact me for advice