Judgmental Immunity in Patent Malpractice Cases

I serve as an expert in patent cases, sometimes for clients and sometimes for lawyers.  Before offering an opinion, I look very closely at every case, but more closely before opining that a lawyer has violated the standard of care or breached a fiduciary duty to a client. Why?  First, it’s easy to second-guess decisions made in patent prosecution:  reasonable care is required, but what is reasonable under the budget and time constraints (and then-current knowledge) in patent practice may not stand up to the glare of fly-specking that goes on in malpractice litigation, just as a patent that is well-prosecuted may not withstand the scrutiny of litigation.  Second, and it probably is related to the first point, some decisions in patent practice are inherently judgment calls and so there’s a zone of “discretion,” if you will, that should be afforded to those decisions.

The law recognizes these notions in the form of a doctrine called “judgmental immunity.”  The D.C. Circuit recently applied this doctrine in a patent malpractice,  Seed Co. v. Westerman, (D.C. Cir. Aug. 12, 2016).

The malpractice claim arose out of an interference proceeding and has an interesting twist.  The lawyer needed to claim priority to an earlier-filed Japanese patent application that had been domesticated through a PCT.  The Japanese application and the PCT were in Japanese.  Regulations required that a motion to claim benefit had to include English translations of the earlier applications in the claim.  The lawyer filed a US translation of the (first-filed, obviously) Japanese application, but not the PCT.

The Board awarded the earlier Japanese filing date.  Seed won.

The Federal Circuit reversed.  It held that without the English translation of the PCT, the Board erred in awarding  giving the application the filing date of the Japanese application, and, as a result, Seed lost the interference.

Hence the malpractice case.

The district court granted summary judgment to the defendant lawyers, relying upon the “judgmental immunity doctrine.”  It reasoned that, because the law was not settled that a translation of the PCT was required, their decision not to file one was immune from second-guessing.

This court, however, reversed.  It stated that the judgmental immunity doctrine was limited to circumstances where “a lawyer makes a strategic choice between two options, each of which has costs and benefits.”  Thus, an interpretation of unsettled law that “manifestly risks the loss of a client’s claim for no plausible advantage” was subject to a jury’s inference that “a reasonable lawyer would err on the side of caution by filing the translation if the requirements were ambiguous and there were no reason not to do so.”

(The case also has an interesting discussion of the continuous representation rule, a rule that basically says so long as a lawyer is representing a client, limitations does not begin to run.  Here, lawyers who represented the client while at Firm A left and took Seed Co. with them; as to them, limitations continued to be tolled; but not as to Firm A.)


Lawyer who copied and filed substantial portion of draft brief of co-party on appeal held to have violated copyright laws

The court in Newegg Inc. v. Ezra Sutton, PA (CV 15-01395 TJH C.D. Cal. Sept. 2016) (here), faced some interesting facts.  Boiled down, a lawyer representing a co-appellee of Newegg at the Federal Circuit copied a substantial portion of a draft brief written by a lawyer for Newegg, and filed it.

According to news reports, after that, the lawyer withdrew that brief and filed a shorter one which, allegedly, still was based substantially on Newegg’s draft brief.  Newegg then registered copyright for its brief after they were filed, covering both the draft and final brief.  (My mind wonders… if you register copyright on a draft brief, what’s the scope of waiver?) Then Newegg sued the lawyer for copyright infringement.

Rather than raising fair use right away, the defendant lawyer late in litigation moved to amend the final pre-trial order to add fair use as an affirmative defense; and the plaintiff moved for partial summary judgment on infringement.  In an order granting the defendant lawyer’s motion to amend the final pre-trial order to add fair use, the district court held that there was no fair use on summary judgment.  Thus, the lawyer was liable.

This creates some very interesting problems for lawyers, and calls to my mind the case a few years ago where a patent prosecutor was sued for using language from a patent in a specification for another client.  I’m not a copyright lawyer, and so just raise this case for you to think.

Report: Examiner Billing Fraud at the USPTO

The report is here.  This is the summary:

For the 9-month period, the OIG reviewed specific work activities of approximately 8,100 patent examiners and identified 137,622 unsupported hours. This equates to a one-year average of nearly 180,000 unsupported hours. For the 15-month period, the OIG analyzed work activities for roughly 8,400 examiners and identified 288,479 unsupported hours.

The OIG adopted a conservative approach in considering the evidence. These considerations resulted in the OIG excluding a significant amount of unsupported hours in order to ensure that the methodology did not assume unfairly that a particular examiner was not working. Based on certain examiner records, however, the OIG found that the total unsupported hours over the 9- and 15-month periods could be twice as high as reported in this investigation.

The OIG’s analysis further determined that for the 9-month period:

  •   The 137,622 unsupported hours equate to nearly $8.8 million in potential waste.
  •   Approximately 28% of the total unsupported time consisted of overtime hours. The overtime hours equate to over $2.1 million in potential waste.
  •   296 of all examiners covered in this analysis had 10% or more unsupported hours and accounted for 39% of the total unsupported hours. The USPTO paid over $1.4 million in bonuses to these examiners.
  •   226 of those 296 examiners accounted for over 42,000 unsupported hours and also received above-average annual performance ratings.
  •   36 of the same 296 examiners claimed unsupported hours equivalent to three days for every 80 hours of computer-related work time.
  •   The total unsupported hours could have reduced the patent application backlog by 7,530 cases.

For the 15-month period:

  •   The 288,479 unsupported hours equate to over $18.3 million in potential waste.
  •   Approximately 28.5% of the total unsupported time consisted of overtime hours. The overtime hours equate to over $5.4 million in potential waste.
  •   415 of all examiners covered in this analysis had 10% or more unsupported hours and accounted for 43% of the total unsupported hours. The USPTO paid approximately $7.8 million in bonuses to the 415 examiners.
  •   310 of those 415 examiners received above-average annual performance ratings and accounted for nearly 98,000 unsupported hours.
  •   56 of the same 415 examiners claimed unsupported hours equivalent to three days for every 80 hours of computer-related work time.
  •   The total unsupported hours could have reduced the patent application backlog by approximately 15,990 cases.

    The OIG also found that the USPTO policies limit the agency’s ability to prevent and detect time and attendance abuse. For example:

  •   The USPTO does not require teleworkers to log in to their computers on workdays if they do not telework full-time.
  •   Although the majority of examiners with unsupported hours received average or better performance ratings, the USPTO requires that only poor performers provide their supervisors with work schedules.
  •   The USPTO does not require that on-campus examiners use their USPTO-issued ID badges to exit through the access control turnstiles during weekday working hours.
  •   The data suggest that USPTO’s production goals are out of date and do not reflect current efficiencies.

Texas Appellate Court Lets Trial Court Ruling of no Patent-Agent-Client Privilege Stand

Earlier this year, the Federal Circuit in a 2-1 panel decision in In re Queen’s University held there was a privilege over communications between a patent agent and client with respect to patent prosecution.  That decision is here.  I gave a talk earlier this year about how I think this case creates some risks even if it is followed, and the powerpoint for that talk is here.

A civil case in Texas has given another reason to be careful.  Plaintiff filed a patent application and apparently used a patent agent to do the work.  When the defendant refused to pay the plaintiff for using the invention (it seems), the defendant sought discovery of all communications between the patent agent and the plaintiff.  The trial court ordered their disclosure.

The plaintiff sought mandamus review.  The court of appeals refused to grant that extraordinary relief, stating in part:

No Texas statute or rule recognizes or adopts a patent-agent privilege. The trial court declined to recognize such a privilege here. Relator asks this Court to recognize a new discovery privilege and determine that the trial court abused its discretion for not recognizing the new privilege. Neither this Court nor the trial court has the authority to adopt a new discovery privilege. In re Fischer & Paykel Appliances, Inc., 420 S.W.3d at 848. We decline to do so here and, therefore, conclude the trial court did not abuse its discretion by refusing to adopt the privilege.

Further, Queen’s University is not binding here. The Federal Circuit applies its own law for substantive and procedural issues if those issues are “intimately involved in the substance of enforcement of the patent right.” 820 F.3d at 1290. This includes determination of whether documents are discoverable “in a patent case because they relate to issues of validity and infringement.” Id. at 1291. If the case involves substantive issues of patent law, such as claim construction, validity, and inequitable conduct, then the Federal Circuit applies its own patent law precedent. Id. Communications between a non-attorney patent agent and his client “that are not reasonably necessary and incident to the prosecution of patents before the Patent Office,” however, are outside the scope of a patent-agent privilege. Id. at 1301–02. Whereas the federal common law governs privilege in a federal case, “in a civil case, state law governs privilege regarding a claim or defense for which state law supplies the rule of decision.” Id. at 1294 (quoting FED. R. EVID. 501).

This case is not a patent infringement case. It is a breach of contract case governed by Texas law. The underlying dispute does not involve a determination of the validity of the patent or whether Tabletop Media, LLC infringed on the patent. The Queen’s University court expressly excluded such cases from the scope of the privilege, and neither this Court nor the trial court is required to apply federal patent law to the merits of the case. Where, as here, the substantive claims are governed by state law, the state privilege law also applies. Texas does not recognize a patent-agent privilege, and we decline to create a new common law privilege.

A copy of that decision, In re Andrew Silver (Dallas Ct. App. 05-160074-CV, Aug. 17, 2016) is here.

I am not sure that reasoning makes sense, since the choice of law analysis underlying it is missing:  whether a communication is privileged doesn’t turn on where the proceeding is filed or what law gave rise to the claim, which seems to be the Dallas court of appeals’ view.  (For example, the Dallas approach would mean that a communication that is not privileged under some foreign country’s law would be privileged if suit were filed in the US.)

Hopefully the Texas Supreme Court will fix this, since it seems to be wrong and is going to make a mess.

How not to Bring a Rule 11 Motion in a Frivolous Patent Suit

Here is a fun one.  Lawyers are defending their client in a patent case.  They conclude that prosecution history disclaimer precludes infringement.  So, they email to the patentee’s counsel a Rule 11 motion raising the issue, and do not file the motion. They wait the required 21 days.  Then they file it.

Problem is… they waited a year to serve the motion. Courts hold that the motion should be served as soon as practicable.  As a result, the court held the motion was properly denied as having been served in an untimely fashion.

The opinion, Dragon Intel. Property, LLC v. AT&T Serv., Inc., 9Civ. A. No. 13-2061-RGA (D. Del. July 12, 2016) is here.

Octane: Malpractice Claims by Clients Forced to Pay the Other Side’s Fees?

Three things have concerned me about Octane.

The first is that, for the first time, there is a “gap” (if you will) between zealous advocacy under Rule 11 (and other similar statutes) and the fee shifting statute. So, as a lawyer, I may be ethically required to do something that could result in my client paying the other side’s fees.

Think on that for a second.

The second thing — and this does not exactly take a clairvoyant — is that a client who is forced to pay the other side’s fees may sue a lawyer who did not advise the client of that risk.   Clients who have been forced to pay fees to their opponents because of state statutes have already done this. E.g., Air Turbine Techn., Inc. v. Quarles & Brady, LLC, 165 So.2d 816 (Fla. Ct. App. 2015) (granting summary judgment to lawyer because advice that client did not likely face fee shifting — under a state statute, not 285 — was reasonable and in good faith at the time the advice had been given).

So, lawyers should be careful to recognize both the “holding back” that might be necessary because of Octane or to have a full discussion with their client about the risks of “going all the way” to the limits of Rule 11.  I don’t like the way the law is right now, though I do think as a matter of statutory interpretation Octane was correctly decided.

The third thing, and I’ve written about this before, is the open possibility that fees can be imposed directly against the lawyer under Section 285.  That post is here.  As I pointed out in that post, there’s not been a lot of thought put into whether 285 can be used against lawyers, and as a matter of statutory interpretation, there are arguments on both sides.  In that earlier post, I pointed out that non-precedential cases have, without much analysis, held 285 couldn’t be used directly against lawyers.  A few months after I wrote that post, a second court in that same district also in a non-pref opinion followed the holding of the first court, writing:

Unlike other types of sanctions, sanctions under § 285 may not be assessed against counsel—only against a party. Rates Tech. Inc. v. Broadvox Holding Co., LLC, 56 F.Supp.3d 515, 526 (S.D.N.Y.2014) (citing Phonometrics, Inc. v. ITT Sheraton Corp., 64 Fed. Appx. 219, 222 (Fed. Cir. 2003)). As my colleague Judge Scheindlin recently explained, “Generally”, “[w]hen a fee-shifting statute that authorizes the courts to award attorneys’ fees to prevailing parties does not mention an award against the losing party’s attorney [as is the case in section 285], the appropriate inference is that an award against attorneys is not authorized.” Id. n.97 (alterations in original) (quoting Healey v. Chelsea Resources, Ltd., 947 F.2d 611, 624 (2d Cir. 1991)).

Advanced Video Techs. LLC v. HTC Corp., No. 1:11 CIV. 06604 (CM), 2015 WL 7621483, at *5 (S.D.N.Y. Aug. 28, 2015).


Choice of Law Compared to Subject Matter Jurisdiction

One thing I have to deal with a lot when advising lawyers — whether practitioners for prosecution matters or litigators in patent case (or other stuff) — is the difference between subject matter jurisdiction and choice of law.

First, I cannot tell you how important this issue can be. For example, under some state rules public information is confidential; it’s not under the USPTO rules.  If state rules apply, I may have to ask a client for permission before I disclose a prior art patent to the Office.  That sounds like a silly example, and it is, but you’d be surprised what “experts” I’ve testified against say sometimes…

So let me give a simple walk through.

Ordinarily, a state bar is going to be able to discipline a lawyer for conduct occurring in representing clients in a state even if the practice is entirely federal and even if the lawyer is not licensed in a state.  So, if Bob is a patent lawyer licensed only in Minnesota and is prosecuting an application for an Iowan, the Iowa authorities (whether it’s disciplinary counsel or the court, I don’t know) are going to be able to subject him to discipline.  Likewise, more obviously, the OED can discipline him.

What rules apply?  The goal of modern choice of law principles in legal ethics is to make it so that one set of rules applies and we can easily figure that out.  Where a matter is pending before a tribunal, the tribunal’s rules will generally apply.  So, if Bob files the application and misses a deadline, the USPTO’s rule about neglect, or competence, should be applied by both the Iowa bar and the OED.

Here is the USPTO Rule on subject matter jurisdiction, which is unique to the Office, but notice how it defines its reach — to practice before the office:

All practitioners engaged in practice before the Office… are subject to the disciplinary jurisdiction of the Office….. A person not registered or recognized to practice before the Office is also subject to the disciplinary authority of the Office if the person provides or offers to provide any legal services before the Office.

“Proceeding before the Office” is itself defined:  “Proceeding before the Office means an application for patent, an application for reissue, a reexamination, a protest, a public use matter, an inter partes patent matter, correction of a patent, correction of inventorship, an application to register a trademark, an inter partes trademark matter, an appeal, a petition, and any other matter that is pending before the Office.”

So, plainly Bob is involved in a proceeding before the Office and the OED could discipline him.  Can the OED apply Iowa’s Rules to his conduct?  Do they apply? Before we get there, let’s see if the OED could discipline Bob because Bob had violated an Iowa rule — without Iowa already having done so.

Another subsection of that same USPTO regulation in title 37 of the CFR identifies what is a basis for OED discipline:

The following, whether done individually by a practitioner or in concert with any other person or persons and whether or not done in the course of providing legal services to a client, or in a matter pending before the Office, constitute grounds for discipline or grounds for transfer to disability inactive status.

(1) Grounds for discipline include:

(i) Conviction of a serious crime;

(ii) Discipline on ethical grounds imposed in another jurisdiction or disciplinary disqualification from participating in or appearing before any Federal program or agency;

(iii) Failure to comply with any order of a Court disciplining a practitioner, or any final decision of the USPTO Director in a disciplinary matter;

(iv) Violation of any USPTO Rule of Professional Conduct; or

(v) Violation of the oath or declaration taken by the practitioner. See § 11.8.

So, unless some other agency or court has disciplined a practitioner, or one of the other specific acts has occurred, the OED has to find that a practitioner violated a USPTO Rule.  So, the OED has to find that Bob violated the USPTO Rules.

Now for Iowa.  (I used to speak there every year!  Why haven’t they invited me back in a couple years?).  Let’s do it in reverse order.  What rules would Iowa apply to Bob’s conduct?  Luckily, it’s the USPTO rules, as Iowa Rule 32:805(b) makes clear:

(b) Choice of Law. In any exercise of the disciplinary authority of Iowa, the rules of professional conduct to be applied shall be as follows:

(1) for conduct in connection with a matter pending before a tribunal, the rules of the jurisdiction in which the tribunal sits, unless the rules of the tribunal provide otherwise; and

(2) for any other conduct, the rules of the jurisdiction in which the lawyer’s conduct occurred or, if the predominant effect of the conduct is in a different jurisdiction, the rules of that jurisdiction shall be applied to the conduct. A lawyer shall not be subject to discipline if the lawyer’s conduct conforms to the rules of a jurisdiction in which the lawyer reasonably believes the predominant effect of the lawyer’s conduct will occur.

The USPTO is a “tribunal.”  It defines itself as one!  See 37 C.F.R. 11.1 (“Tribunal means the Office…”). So, the Iowa Rules won’t apply to Bob’s conduct; even if Iowa tried to discipline Bob, it would apply the USPTO Rules.

Warning:  not every state has the same version of Rule 8.5, and some have weird carve outs (e.g., D.C.).

Now, if Iowa wanted to discipline Bob, does it have subject matter jurisdiction to do so?  It does!  Here is the rest of Iowa’s rule 8.5:

(a) Disciplinary Authority. A lawyer admitted to practice in Iowa is subject to the disciplinary authority of Iowa, regardless of where the lawyer’s conduct occurs. A lawyer not admitted in Iowa is also subject to the disciplinary authority of Iowa if the lawyer provides or offers to provide any legal services in Iowa. A lawyer may be subject to the disciplinary authority of both Iowa and another jurisdiction for the same conduct.

(Remember, Bob’s licensed only in Minnesota.)  So, we end up with a nice good, predictable approach.  A recent case analyzing the subject matter jurisdiction issues, but not the choice of law issue, is York v. W. Va. Office of Disciplinary Counsel, 744 S.E.2d 293 (2013).  According to this opinion, (scroll down to top of page 26), in an unreported later decision, Mr. York was disciplined.

(By the way, Minnesota could also discipline Bob, and it would also apply the USPTO rules in doing so.  Whew!)

Here, unless the facts are weird, Bob’s conduct would violate both Iowa and the USPTO rules, and Minnesota’s for that matter, so who cares?

Like I said at the start, there are critical differences between the USPTO rules and many state rules and often those differences tell us whether Bob keeps his license, or not. More often, choice of law becomes an issue in disqualification motions and in legal malpractice cases.  Ethical rules like state bar rules and then USPTO rules are are applied in disqualification and malpractice cases.  If something is ethical under the USPTO rules, but unethical under state law, choice of law may provide the answer to what’s right — whether a client has a malpractice claim, or a lawyer is subject to disqualification.

Where it gets even more interesting is if the conduct occurs before the application is filed, and so there is no matter before a tribunal (yet).  Some choice of law rules state that that apply to matters that going to be before a tribunal, but many don’t.  Others say that the cover only the lawyer who appears before the tribunal, so what about a lawyer who does work in the office on an application but whose name doesn’t appear on the filing?  What rules apply?  What if it’s an assignment that’s incompetently drafted (probably won’t matter but you see my point)?  What if…

Finally, if state law somehow does apply to conduct before the office, then it may be that a preemption analysis is required, because the USPTO rules do narrowly preempt state law to the contrary.

Quick Hit: Massachusetts Case Litigating Spouse’s Interest in Invention.

I can’t find anything available on line that is not behind a paywall, so…  Recall that I’ve written here about how there’s an interesting question as to whether in a community property state the spouse of an inventor has an interest in inventions (and other IP).  Defendants have, so far unsuccessfully, taken quitclaims from the spouse in an effort to defeat infringement suits, as a result.

There’s a Massachusetts appeal pending where, from what I can tell from what I’ve found on-line, the spouse of an inventor is claiming that because funds from a joint bank account were used on the invention, she has an interest in it.  The case is Mazzu v. Mazzu, No. 2015-P-16011, and it is on appeal from the Suffolk Count Superior Court to the Appeals Court of Massachusetts.  Who knows what we will learn.

On a related note, while talking with a big-shot lawyer from Arizona, I learned that she includes spouses of inventors on assignments…

Halo, Civil Procedure, and Defending On-going Infringement Suits

I was listening to conversation about Halo, the decision of the Supreme Court to make it easier to establish willful infringement.  If the case is “egregious” and not “typical” infringement, enhanced damages are now available.  Further, the key time period is the time of moving forward with what turned out to be infringement of a valid patent, not the time of trial.

Of course, the obvious lesson going forward is that it will be more likely for accused infringers to rely upon an opinion of counsel indicating lack of infringement or invalidity (or some other way to avoid liability, like 101 or unenforceability like inequitable conduct or prosecution laches).  No news flash there.  And, of course, the fact that the timing of the opinion — earlier the better — means that there are likely going to be more opinions generated.

So, looking forward:  there will be more opinions used more often, you would think.

What I think is interesting are pending cases where a decision has already been made not to rely upon an opinion of counsel.

There are, no doubt, many pending cases where it is too late because of a scheduling order to disclose an opinion of counsel previously obtained.  The battle there will be over whether there is good cause to modify the scheduling order.  Lawyers in the position of needing to make that modification should do so quickly. I can imagine arguments cutting both ways in a particular case.  But competent lawyers in need of buttressing a defense against willfulness would get on that analysis, and soon.

What if, in contrast, a lawyer had advised a client– based upon the pre-Halo standard — not to get a formal opinion, with the idea being that the defendant would rely upon litigation defenses that were basically expressed to the client somewhat informally at the time of infringement.  Can the defendant now get into evidence the fact that those litigation defenses were communicated originally informally?  Does this implicate the need to modify the scheduling order or comply with some other local rule about waiver of privilege for opinions?

Finally, lawyers should consider cases where clients may pre-Halo have not needed an opinion but now may want to have one.  That advice needs to be given soon!

There are probably other fact patterns, but those jumped out at me sitting and listening today.  Thoughts?

Finally, and on a related note:   The Supreme Court’s statement that it’s the time of infringement that matters and not later is really unworkable and flawed.  A defendant, for example, who finds another piece of prior art later, closer to trial, surely can rely upon that evidence (and/or opinion analyzing it) as (a) confirming the strength of an earlier opinion or  (b) providing evidence that, from that time forward, its infringement was not “egregious”?

Sexism in Patent Practice

I’m attending the Federal Circuit Bar Association’s annual Bench & Bar, speaking tomorrow on ethics. Last night, had a great time visiting with a number of great lawyers, many of them highly experienced women.

What I heard shocked me.

Each of the women in the conversation were very successful in their careers. Each was in a different place — in-house, government, private practice.  Each had different practice backgrounds, ranging from due diligence/MA type stuff, to litigation, to prosecution.

All shared stories of appalling sexism. Each had been taken as the assistant for the actual lawyer. Each had been called things like “missy” and the like.  And each had experienced this at high levels of practice, in recent years, not at some point long ago.

I know that bad behavior occurs, but I was floored by some of the specific stories — can’t share because of confidentiality — but we can do better!

NY Ethics Opinion: New York Lawyers May Partner With Japanese Benrishi (“Patent Agents”)

Benrishi are authorized under Japanese law to practice patent law, but need not be lawyers.  Generally, under U.S. ethical rules, lawyers may not be partners with non-lawyers. Instead, much like US patent agents, they need not sit for the general bar but must pass a patent registration examination.  Unlike US patent agents, they may in some circumstances represent clients in patent matters in certain courts.  Nonetheless, a New York ethics committee reasoned that, under some circumstances, US lawyers may form partnerships with Japanese Benrishi.

The opinion by the New York State Bar Association on Professional Ethics, Op. No. 1072 (2015), is here.  The conditions include ensuring that the educational and ethical requirements are similar to other New York laws regulating partnerships with other foreign-licensed professionals.

On a related note, under some circumstances, of course, patent attorneys may form partnerships with patent agents, but that requires, like this, extreme care.

Revision to IPR Duty of Candor: Broadening Duty?

The USPTO today announced it was amending 37 CFR 42.11 to include a Rule 11 type certification.  I see a lot of issues but one relates to a post earlier last month I made here.

As the final rule now provides, with the key new language underlined:

(a) Duty of candor. Parties and individuals involved in the proceeding have a duty of candor and good faith to the Office during the course of a proceeding.

(b) Signature. Every petition, response, written motion, and other paper filed in a proceeding must comply with the signature requirements set forth in § 11.18(a) of this chapter. The Board may expunge any unsigned submission unless the omission is promptly corrected after being called to the counsel’s or party’s attention.

(c) Representations to the Board. By presenting to the Board a petition, response, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney, registered practitioner, or unrepresented party attests to compliance with the certification requirements under § 11.18(b)(2) of this chapter.

In turn, Section 11.18(b)(2) provides:

 To the best of the party’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances,
(i) The paper is not being presented for any improper purpose, such as to harass someone or to cause unnecessary delay or needless increase in the cost of any proceeding before the Office;
(ii) The other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(iii) The allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and
(iv) The denials of factual contentions are warranted on the evidence, or if specifically so identified, are reasonably based on a lack of information or belief.

When you combine this with some other statements made by the USPTO (and PTAB cases quoted in the comment) in the announcement of the final rule, it is also clear that a patentee seeking to substitute an amended claim is representing that the proposed claim is patentable over all art known to it (query whether “prior art” includes sales?).  For example, the USPTO wrote:

[A] patent owner must argue for the patentability of the proposed substitute claims over the prior art of record, which include: (a.) Any material art in the prosecution history of the patent; (b.) any material art of record in the current proceeding, including art asserted in grounds on which the Board did not institute review; and (c.) any material art of record in any other proceeding before the Office involving the patent. Id. at 2. The Patent Owner must also distinguish over any art provided in light of a patent owner’s duty of candor, and any other prior art or arguments supplied by the petitioner, in conjunction with the requirement that the proposed substitute claims be narrower than the claims that are being replaced.

Where I end up is that this rule on its face is clearly broader than Rule 56:  the lawyer must certify that, based upon a reasonable investigation, that a substitute claim is patentable over all prior art known to a party or “persons involved” in an IPR.  Again, what about a substitute claim known to be unpatentable over non-art information?

Baker Botts Dodges $42 million Verdict in Patent Conflict Case

This is a fascinating case on several levels, Axcess International, Inc. v. Baker Botts LLP (Tex. App. Dallas March 2016).  Baker Botts was representing one client, Axcess International, Inc. (“Axcess”) in prosecuting patent applications involving certain radio frequency identification technology. After it had filed those applications, it began to represent another client, Savi Technologies, Inc. (“Savi”) in prosecuting applications on similar technology. There is a lot going on in the case, but essentially Axcess sued Baker Botts and alleged two breaches of duty.

First, that, but for a conflict of interest between Savi and Axcess, Baker Botts would have broadened claims the firm had been pursuing for Axcess. The opinion is hard to follow but there seem to be two, related, claims made by Axcess.

First, Axcess argued that had it broadened its claims, the USPTO would have declared an interference with a then-pending Savi application, and Axcess would have prevailed. Put the other way, Baker Botts “pulled its punches” – had a material limitation in terms of 37 C.F.R. 11.107, I presume — on its ability to represent Axcess – because of its representation of Savi. Had it prevailed in the interference, Axcess would have claims to subject matter that turned out to be the lucrative technology. That leads to the second basis, which is that the broadened claims would have issued to Axcess and would have covered the lucrative terrain.

The case went to trial and the jury awarded $42 million dollars to Axcess. However, Baker Botts moved that judgment be entered in its favor, and raised four grounds. The trial court granted the motion without saying why.

The appellate court affirmed on one of the alternate grounds to affirm raised by Baker Botts – that there was no causation: specifically, that expert testimony was required and the testimony presented fell short of reliable expert testimony but was instead speculative.

In holding there was no evidence of causation, the Texas state appellate court placed the standard quite high, in my opinion and based solely on what is repeated in the opinion. The appellate court held that Axcess should have had an expert who was competent to testify that an interference would have been declared, specifically someone who could testify an Interference Practice Specialist would have reacted to the suggestion of an interference.

The second point seems to be that conflict-free counsel would have obtained broader claims that covered Savi’s commercial products. Here, the appellate court said there was no evidence the USPTO would have issued the claims. It is not clear what was done by Axcess: did the expert compare the hypothetical claims to the prior art of record? If so, that would seem to be enough, but the appellate court stated that there had to be evidence of how the USPTO would have responded to hypothetical patent applications and “evidence from similar cases.” In a vacuum and without the full trial record, this seems odd. Again, the opinion is hard to follow.

So, Baker Botts for now has dodged a $42 million verdict that arose out of relating competitors in closely related patent applications. Who knows how much the firm spent in doing so, and whether it will be reviewed by the Texas supreme court (that court has a discretionary review procedure sort of like the U.S. Supreme Court. Those risks need to be assessed in examining so-called “subject matter” conflicts. (Buy my book on prosecution ethics and read more!)

One other thing: along the way, the court stated that Baker Botts had been subpoenaed in a related case where an accused infringer argued that Baker Botts had failed to disclose in applications for Savi information the firm had obtained from Axcess. That case settled and there is no indication Savi sued Baker Botts for that failure; the existence of the subpoena and that case shows the risks of representing competitors and being careful about doing so!

Finally, the case is a warning about being careful: state courts are going to decide patent prosecution malpractice claims. Think about that.  I honestly sometimes don’t know if arbitration is any better, however, and I am beginning to think that there really are some issues in even a routine malpractice case where a state’s interpretation of law could radically affect a federal objective and interfere with patent prosecution. Stay tuned for that.

Cravath’s Been Hacked: Are IP Firms a Major Target?

Cravath reported that hackers had breached the firm’s website, according to the NYT in a story here.  I’d assume it was someone who wanted to get access to key financial information in order to use it for illicit purposes.  An IP firm can, of course, possess some significant proprietary information — trade secrets, product designs, and other business information that could be of use to competitors, stock manipulators, and others.

Most firms, of course, are aware of their ethical obligations to take reasonable precautions to secure client confidences, no doubt in part because the standard of care requires it, hacks are public knowledge, and in fact the FBI issued a warning several years ago on this point.  But a Citigroup report dated almost exactly one-year ago said that lawyers still were behind the curve, and articles specific to IP firms (such as this one, calling IP firms the low-hanging fruit compared to the USPTO’s data) are out there also signaling warnings.

The Cravath incident hopefully will bring more attention to this topic and to the need some IP firms may have to act.


The Breadth of the Duty of Candor in IPR

This column is about shows that because of the wording of regulations imposing the duty of candor in IPR, parties — parties — in an IPR owe an extremely broad duty of candor.  This ain’t your grandpa’s Rule 56.

Here’s the regulation, 37 C.F.R. 42.11:  “Parties and individuals involved in the proceeding have a duty of candor and good faith to the [USPTO] during the course of a proceeding.”

There’s a lot of unpacking to do when that rule is applied, but one key different between 42.11 and 1.56 is who is covered by the obligation.  Under 1.56 it is, of course, those persons substantively involved in prosecution.  Now look at 42.11:  parties.  And persons “involved.”  Obviously, “persons involved” is broader than persons substantively involved, but parties means, one would think, the party and everyone in it.  That is an extraordinarily broad scope.

By the way if you compare 42.11 to the narrower “inconsistent information must be disclosed” obligation in IPR in 42.51, it applies to a different set of people and does not include parties, so one would think these words were deliberately chosen and have different meaning.

Finally, there are proposed amendments in the works which, I heard when I was at the USPTO a couple weeks ago, are coming “soon.”  There’s more about that here, and I don’t know if it will narrow the scope of who is covered, if anything, the proposed amendment to 42.10 adding a certification by the lawyer may make it clear that a lawyer has a duty to investigate everything known to a “party” to an IPR.

A PTO official said to me after my talk that trying to think about IPR with an overlay of prosecution will do nothing but harm. He’s right.


Iqbal, Twombly, the Demise of Form 18, and Rule 12 Hell

A few months ago, I was at the Eastern District of Texas Bench and Bar Conference, and I started talking to a federal district judge about her views of the then-imminent demise of Form 18, the form that essentially made it sufficient for a complaint alleging direct infringement to include only barebones allegations of the facts.  Her response was, “it’s going to be Rule 12 hell.”

And she was right.

Where the law now is is this, it seems:  to state a claim of direct infringement, a patentee must state factual content — which excludes legal conclusions and conclusory statements — which, if taken as true, plausibly shows infringement.  What she saw happening is what is happening, and a good example of this just happened in an order, Atlas IP LLC v. Pacific Gas & Elec. Co., from Judge LaPorte of the Northern District of California.

Where we are, it seems, is that we’re going to have to apply rules from Iqbal and Twombly about how legal conclusions don’t count to patent claims, where what matters is, of course, the legal conclusion about what the claim means.  Once that clutter is removed and it becomes clear that legal conclusions can sometimes ‘count’ for purposes of stating a claim, we are still going to have to face defendants filing motions asserting that the alleged interpretation is an “implausible” interpretation of the claims.  And we’re going to do that element by element.

So, “Markman Plausibility” hearings to decide Rule 12(b)(6) motions are coming your way?

Rule 12 hell?  Rule 12 hell no!

The Maling Decision from Massachusetts on Subject Matter Conflicts

In late December, the high court of Massachusetts issued a decision in Maling v. Finnegan, Henderson.  The decision is accessible, if you search for “Maling,” here.

Boiled down, the court affirmed the grant of the firm’s Rule 12(b)(6) motion to dismiss a complaint that in broad terms alleged that the Finnegan firm had a conflict because it represented the plaintiff and another client in obtaining patents claiming screwless eyeglass hinge inventions.  There are two broad issues:  when is prosecution of patents for one client adverse to another, and when are two patent applications so close that prosecuting them creates a material limitation on the lawyer’s ability to represent either client.

With respect to adversity, this form of conflict is sometimes viewed as a “finite pie” conflict, where two clients are fighting for a resource that cannot meet both their demands.  In Maling, the court relied on a case that I’ve cited for two decades now that involved a firm representing two companies each pursuing a license to a radio channel.  The court reasoned there that so long as they were not fighting over the same channel, and there was no electrical interference between the two channels, there was no direct adversity and so no conflict.  By analogy, the court’s essential holding was that unless patent claims interfere or are to obvious variations of each other, there is no direct adversity.  (The court also noted that giving an infringement opinion to one client about another client’s patent would be adverse, but that was not alleged, apparently, here.)

With respect to material limitations, this form of conflict arises when a lawyer’s obligations to anyone (including himself) precludes him from competently representing a client.  The basic test is:  imagine what a lawyer without the “obligation” would do; and then ask whether the obligation the allegedly conflicted lawyer had would result in a material limitation.  Simple example:  if a lawyer represents a car wreck plaintiff, the lawyer generally cannot cross-examine that plaintiff even in an unrelated matter if it doing so would involve, say, exposing eyesight problems that could be used against the plaintiff in the car wreck. The court in Maling contrasted the allegations in the complaint to situations where firms have shaved claims for one client to avoid another client’s patent.  There was nothing like that here, and nothing like what the court suggested might otherwise be a material limitation.

The court ended with admonitions to lawyers to be sure to monitor for conflicts carefully.  I’ll end by noting that this is not the first, or last, word on this topic.

“Be careful out there,” as they said in Hill Street Blues.


PTAB Allows Filing of Motion for Sanctions for Alleged Protective Order Violation

Lately I’ve had a lot of calls about ethical issues in IPR proceedings. The rules are not clear in a number of instance and the case law is sparse and not always easily harmonized with the plain text of the rules.  This case caught my eye, though, for a different reason.

The order is paper 23 in RPX Corp. v. Applications on the Internet Time, LLC, IPR 2015 (Dec. 4, 2015).  The actual order itself grants the petitioner authority to file a motion for sanctions for alleged violations of the Standing Default Protective Order.  Obviously, parties need to police against such violations.

What the case reminds us is that the Standing Default Protective Order is not… a standing default protective order.  Instead, it is entered only by motion of the parties, and that motion must include the proposed protective order.

Here, the parties had previously agreed to be bound by the protective order, and so the fact that they had not requested entry of any protective order did not matter. However, remember that there really is no default standing protective order… a misnomer that can hurt you.