Thinking of investing in a business that competes with a former client?

Then you should read Texas Ethics Opinion No. 626 (April 2013).  The opnion is quite broad:  L represents Corporation A and acquires non-public proprietary information about its competitive position in the field.  L's representation ends when Corporation A is sold, but the corporation continues on in its business.  L now proposes to make a significant investment, passive, in competing Corporation B.  L "is not involved in the organization or formulation of the initial business plan of Corporation B and he does not provide legal services or otherwise participate in the management or operation of Corporation B's business."

The opinion relies on the principle that L may not use confidential information to the disadvantage of Corporation A.  The opinion noted that L would be using his knowledge of Corporation A in investing, his decision to invest "could reveal to interested person information concerning the lawyer's assessment of Corporation A that is based on confidential information," and so he could not do so, absent (a) informed consent after full disclosure (ha!), (b) if it was an insignficant investment (which depended on the facts, but which was characterized as "a sufficiently small portion of the total amount invested in Corporation B and there were other investors ready to make an investment in the same amount if the lawyer did not"), (c) he had not gained any pertinent confidences, or, (d) though he had, the information had "ceased to be relevant" to Corporation A's business.

The significance of this opinion to patent lawyers should be clear. I also note that many states, including Texas, allow adverse use of information against former clients once it has become generally known.  Because the opinion focuses on unique aspects of the Texas Rules, the central point of the opinion might not hold true in every jurisdiction.