Federal Circuit Grants Motion to Disqualify Jones Day on Appeal

The general rule is that a lawyer can’t be adverse to a current client; but, mere economic adversity is not enough.  What if I’m seeking to enjoin party A, who sells products to one of my clients, and so any injunction may cause economic harm to my client?

This is a potentially very dangerous opinion for patent firms.  Jones, Day was representing Apple when it entered an appearance in a case where the defendant had been preliminarily enjoined from making certain batteries.  Apple used those batteries.

Apple moved to intervene in the Federal Circuit to disqualify Jones, Day from representing the battery maker on appeal.  The motions panel (Dyk-auth; Newman Hughes) granted the motion to disqualify, though in a non-prec opinion.

Jones, Day stated it would not be adverse to Apple in any direct negotiations for licensing, etc.  Nonetheless the panel disqualified the firm.  The key passage:

[T]he burden placed on the attorney- client relationship here extends well beyond the sort of unrelated representation of competing enterprises allowed under Rule 1.7(a). Apple faces not only the possibility of finding a new battery supplier, but also additional targeting by Celgard in an attempt to use the injunction issue as leverage in negotiating a business relationship. Thus, in every relevant sense, Jones Day’s representation of Celgard is adverse to Apple’s interests. This conclusion is not altered by the fact that Apple is not named as a defendant in this action. The rules and cases such as Freedom Wireless interpreting them make clear it is the total context, and not whether a party is named in a lawsuit, that controls whether the adversity is sufficient to warrant disqualification. 2006 WL at *2; see also Arrowpac Inc. v. Sea Star Line, LLC, Nos. 3:12-cv- 1180-J-32JBT et al., 2013 WL 5460027 at *10 (M.D. Fla. Apr. 30, 2013) (interpreting same rule as encompassing “any representation directly adverse to the interests of a current client.”). Celgard contends that despite the conflict we should not grant disqualification because of the prejudice involved in impinging on Celgard’s right to choose their counsel and secure new counsel. Celgard further suggests that if Rule 1.7(a) were to cover conflicting representations merely because the client is up or down the supply chain then “lawyers and clients would have no reliable way of determining whether conflicts of interest exist in deciding whether to commence engagements.” Opposition at 13, Celgard, LLC v. LG Chem, Ltd., Appeal Nos. 2014- 1675 et al. (Oct. 14, 2014).

That, however, is not our holding. Nor is it the facts of this case. As evidenced by Jones Day’s attempts to limit the nature of the representation, Jones Day and Celgard clearly knew the potential for conflict here yet elected to continue with the representation. See id. at 4 (“Jones Day explained that it could represent Celgard against LG Chem, but not against customers of LG Chem who were also Jones Day clients—such as Apple.”). Thus, the legal costs and delay in proceedings that may result from a disqualification are attributable in no small way to Celgard and Jones Day themselves.

The case is not on-line but I’ve posted it, I hope, here.

So… watch out for injunctive relief that might affect current clients!  Good luck running conflicts checks on this one (though seemingly Jones Day knew of the ‘conflict’ before it appeared, in this case).  By the way, there is another case, in the ITC, involving Google where the ITC came to a somewhat different conclusion, though under more attenuated facts.

Brilliant New Book on Ethics in Prosecution 2015 Edition Out Now!

By David Hricik

Proud to announce that the 3rd edition of Patent Ethics: Prosecution that I co-authored with Mercedes Meyer is now available here!  This edition adds a massive amount of new material to deal with the new PTO ethics rules and the fast-moving, roller coaster world of ethical issues in patent practice!

From the description:

Patent Ethics: Prosecution (2015 Edition), by David Hricik and Mercedes Meyer, is an essential guide to the ethical issues arising in the course of the patent prosecution process. By providing relevant rules and case law, it allows practitioners to identify ethical problems before they arise and to address them most effectively when they do. Patent Ethics: Prosecution is one of two volumes on patent ethics — the second focuses on litigation — and is the first of its kind to combine the United State Patent and Trademark Office (PTO) rules with commentary by the authors, which distills the authors’ own experience and expertise in patent prosecution into effective practice strategies.

The 2015 Edition is particularly relevant considering the significant ramifications with the United States Patent & Trademark Office (USPTO) repealing its existing rules, the USPTO Code of Professional Responsibility, and replacing them with the new USPTO Rules of Professional Conduct. Furthermore, the 2015 Edition also comprehensively discusses ethical issues of major concern for patent law practitioners such as:
•   The increase in malpractice claims based upon patent prosecution as well as recent significant verdicts of $30 million and $70 million.

•   The USPTO’s Office of Enrollment and Discipline’s vigorous enforcement efforts, continued persistence in asserting a broad view of its jurisdiction, and resulting increase in the volume of case law and other authorities.

•   The troublesome issue of best mode and the America Invents Act.

•   The various ethical issues surrounding patent agents.

The 2015 Edition features new analysis of current client conflicts in patent practice, including when prosecution and opinion work become “adverse” to a client, the conflicts of interest created by the AIA’s approach to the best mode, and duty of candor post-Therasense. It also includes an updated PTO Code completely annotated with OED decisions on each provision.

Makes a perfect Christmas present, too!  Buy one for every lawyer in your firm!  Heck, buy two so they have one at home!

Federal Circuit: Firm Cannot Switch Sides in Patent Case

By Dennis Crouch

In re ATopTech (Fed. Cir. 2014)

Professor Hricik already wrote some on this case [link], but I wanted to discuss it in a bit more depth as well.

In 2013, Synopsys sued ATopTech for infringing its U.S. Patent No. 6,507,941. The ‘941 patent covers a sub-grid connectivity method used in chip layout automation software known as electronic design automation (EDA). ATopTech hired the 800-lawyer behemoth firm of O’Melveny & Myers to handle the defense. However, N.D. California Judge Chesney disqualified the O’Melveny firm based upon a conflict of interest.

O’Melveny has some history with the parties. The ‘941 patent was previously owned by Magma Design and O’Melveny represented Magma Design for almost a decade, including in its 2012 merger with Synopsys. O’Melveny had also represented Magma Design in several EDA-patent lawsuits against Synopsys and had apparently considered asserting the ‘941 patent against Synopsys. Further, two of the attorneys on the O’Melveny trial team had been part of the Magma Design team, including Luann Simmons (Managing Partner of OMM San Francisco).

Based upon these facts, the district court found that the relationship between the current and former representation substantial enough to create an irrefutable presumption that confidential material information was transmitted to the attorneys regarding the current dispute. The result of that conclusion is that O’Melvany cannot now switch sides to represent the opposing party. The district court did not, however, go so far as to particularly find that the O’Melveny attorneys had actually breached any ethical duties.

In a Mandamus action, ATopTech asked the Federal Circuit to overrule the lower court decision. However, the appellate panel denied the Mandamus petition – finding instead that the lower court “had a sound basis for disqualifying OMM.”