Rader on 101 and the Statutory Text

By David Hricik, Mercer Law School

Over on Gene Quinn’s IPwatchdog page, former chief judge Rader has written an article about the Supreme Court’s 101 jurisprudence.  I clerked for then chief-judge Rader in 2012-13 (I think I have been the clerk’s oldest clerk, then 51 years old).  Alice was issued by the Federal Circuit during my tenure and of course I can’t talk about what I saw, but I can say that the article aligns with my own thoughts about 101: Congress in 1946 (and then 1952) did its level best to get rid of “eligibility” as condition of patentability. The fact that Section 101 is not a “condition of patentability” lends great support to that, as does the legislative history of the 1946 and 1952 act.

I blogged about the textual arguments 11 years ago (sigh) and you can find those comments here.

Tilting at wind mills but maybe this strongly textualist court will realize it has run astray from the text… And maybe I’ll win the Powerball…


Law School Casebook Review: Patent Law Fundamentals (Brean & Snow) 2d Ed

By David Hricik, Mercer Law School

I realize most readers aren’t law professors, so you can stop now…

I have taught IP courses for years and often the books seek to teach the subject through cases, which is a very difficult way to learn it.  This book — Patent Law: Fundamentals of Doctrine and Policy (Carolina Academic Press) — does a great job of using cases to illustrate key points, but often provides descriptive text and problems, and does so in a practical and concise way, and a way geared toward current learning trends.

I’ll be brief, but with respect to its organization, the authors use the funnel approach for many subjects, starting broad (a patent gives a negative right to exclude) and then narrowing (the right to exclude is measured by the claims). It also uses spaced repetition (those two subjects are chapters apart but mentioned in both places), and includes self-assessment questions after each chapter.

More importantly to me, it is efficient.  Again, most of it is text, not case excerpts, and it teaches using simple technology (baking pants — I use pizza to explain patents because it’s easy to draft claims to describe pizza and to understand that the fewer words/limitations the “broader” the patent but this works too).  Further, it describes prosecution and litigation primarily with text, with key points emphasized by cases.

Finally, unlike some other books I’ve considered, it addresses the pragmatics of litigation, including the importance of experts, of local rules (and standing orders), and the typical remedy problems are addressed in an easy-to-grasp manner.

And if you’ve read this far, yes, I hope to get back to blogging regularly and if you know me, you know it has been a difficult couple of years.


PTAB Finds Patentee Breached Duty of Candor During IPR But in Doing So Conflates Rule 56 and IPR Candor Rules

By David Hricik, Mercer Law School

In a single decision issued by several panels, the Board held that the patentee had failed to act in good faith by, boiled down, intentionally withholding material test data that was inconsistent with the arguments it was making in favor of patentability of both original and proposed substitute claims. The case is Spectrum Solutions LLC v. Longhorn Vaccines & Diagnostics LLC, IPR2021-00847 (Patent 8,084,443 B2), IPR2021-00850 (Patent 8,293,467 B2), IPR2021-00854 (Patent 8,669,240 B2), IPR2021-00857 (Patent 9,212,399 B2), IPR2021-00860 (Patent 9,683,256 B2) (May 3, 2023).

Basically, the claims were directed to a composition that would kill certain pathogens and the test data showed it didn’t.  If so, then of course the Board’s conclusion that intentionally withholding that information violates the duty of candor is itself no news.

What is worth discussing is the Board’s statement that Rule 56 applied to an IPR. It cited and quoted Rule 56 in several spots, though it also cited and quoted the IPR rules in other spots.

Why does this matter?   Citing Rule 56 is wrong. By its terms it applies only to “the filing and prosecution of a patent application…”  IPRs are not “patent prosecution.”  (Nor are ex parte re-examinations, which are subject to a different rule from both Rule 56 and the IPR rules, but I digress.). But, the Board did rely also on the IPR rules, which are the applicable ones, so what’s the problem?

That gets to the second point:  the Board’s decision masks the extraordinary breadth of the disclosure rules in IPR. Specifically, in an IPR who is subject to a duty to disclose is much broader — ridiculously broad — compared to Rule 56.

Specifically, Rule 56 only applies to inventors, practitioners, and those “substantively involved” in prosecution. 37 C.F.R. § 1.56(c) In contrast, the main rule that applies to original claims in an IPR proceeding, 37 C.F.R. § 42.11(a), applies to “parties and individuals involved” in the proceeding. Re-read that: not only is it not limited to “substantively involved,” it says “parties.”  No such language appears in Rule 56.

Another IPR rule applies when a party files a paper, and it has a different scope of “who” is subject to disclosure. Specifically, there’s an obligation to disclose inconsistent information, but it is both broader and narrower than both Rule 56 and 42.11(a): that obligation applies to “inventors, corporate officers, and persons involved in the preparation or filing of the documents or things” where the inconsistency exists.  37 C.F.R. § 42.51(b)(1)(iii)

A decade or so ago I was speaking at the Office and pointed out that the word “party” in 42.11(a) is ridiculously broad as is including inventors and corporate officers in 42.51(b)(iii) since it is not limited to those inventors and corporate officers who are at least involved in the proceeding (do you really have to call Tim Cook to see if he knows something when Apple is in an IPR? Inventors who left the company and aren’t involved?).

Would this have mattered here? Doesn’t look like it as the data that was withheld was seemingly known to the lawyers representing the patentee, but it is important in IPR proceedings to watch this trap about the scope of disclosure (and it’s also more important that the USPTO fix it…).

The Split on Pleading Scienter for Inequitable Conduct

by David Hricik, Mercer Law School

Federal Rule of Civil Procedure 9(b) requires that fraud or mistake be pled with particularity.  The Federal Circuit has held that, although inequitable conduct is “broader than fraud” inequitable conduct must be pled with particularity in Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1330 (Fed. Cir. 2009).  (A digression:  I think this is wrong because the Supreme Court has held that Rule 9(b) is limited to “fraud” and “mistake” and it is improper to rely on judicial policies to expand the plain meaning of the rule.  See David Hricik, Wrong about Everything: The Application by the District Courts of Rule 9(b) to Inequitable Conduct, 86 Marquette Law Review  895 (2003) (here).)

One issue that has split the district courts is whether the “single most reasonable inference” standard for scienter applies at the pleading stage. The court in Deere & Co v. Kinze Mfg., Inc (No. 4:20-cv-00389-RGE-HC, C.D. Iowa May 1, 2023) collected the cases:

iLife Techs. Inc. v. AliphCom, No. 14-CV-03345-WHO, 2015 WL 890347, at *4 n.1 (N.D. Cal. Feb. 19, 2015) (“I recognize that there is currently a dispute among courts as to the pleading requirements for an inequitable conduct counterclaim.”) (collecting cases); see also Wyeth Holdings Corp. v. Sandoz, Inc., CIV.A. No. 09-955-LPS-CJB, 2012 WL 600715, at *7 (D. Del. Feb. 3, 2012) (“Several district courts have recently confronted this question and have reached different conclusions.”) (collecting cases); Cutsforth, Inc. v. LEMM Liquidating Co., L.L.C., No. 12-cv-1200 (SRN/JSM), 2013 WL 2455979, at *4 (D. Minn. June 6, 2013) (“District courts are currently conflicted on the effect of the Federal Circuit’s holding in Therasense on the pleading requirements for the specific intent to deceive element.”) (collecting cases). More recent decisions, however, have acknowledged that a majority of courts do not view Therasense as requiring pleadings of inequitable conduct to satisfy the “single most reasonable inference” standard. See Jaguar Land Rover Ltd. v. Bentley Motors Ltd., No. 2:18cv320, 2021 WL 8086357, at *2 (E.D. Va. May 6, 2021) (“[T]he majority position among district courts is that even applying the Rule 9(b) standard requiring heightened specificity when pleading fraud, it is not necessary that intent to deceive be the ‘single most reasonable inference,’ at the pleading stage.” (quoting W.L. Gore & Assocs., Inc. v. Medtronic, Inc., 850 F. Supp. 2d 630, 633 (E.D. Va. 2012))); Front Row Techs., L.L.C. v. NBA Media Ventures, L.L.C., 163 F. Supp. 3d 938, 986 (D.N.M. 2016) (A “line of cases . . . hold[s] that the pleader ‘need only allege facts from which the Court could reasonably infer that the patent applicant made a deliberate decision to deceive the [US]PTO.’ . . . Th[is] . . . line of cases is now the majority position.” (quoting Wyeth Holdings, 2012 WL 600715, at *7)).

The John Deere court ultimately held pleadings showing only a reasonable inference of scienter was required, not the single most reasonable inference, reasoning in part:

Moreover, as multiple courts have noted, the Federal Circuit’s opinion in Delano Farms Co. v. California Table Grape Commission––decided after Therasense––affirmed the Exergen pleading standard on a motion to dismiss an inequitable conduct counterclaim alleging the withholding of material references. Delano Farms Co. v. Cal. Table Grape Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011). The Delano Farms court stated the charge of inequitable conduct would survive “only if the plaintiff’s complaint recites facts from which the court may reasonably infer that a specific individual both knew of invalidating information that was withheld from the [US]PTO and withheld that information with a specific intent to deceive the [US]PTO.” Id. (emphasis added); see also Wyeth Holdings, 2012 WL 600715, *8 (citing Delano Farms, 655 F.3d 1337); Human Genome Scis., Inc., 2011 WL 7461786, at *3 (“Delano Farms, a post-Therasense case . . . also seems to indicate that the less rigorous standard applies.” (citing same)); accord Cutsforth, 2013 WL 2455979, at *4; Mentor Graphics Corp. v. EVE-USA, Inc., 13 F. Supp. 3d 1116, 1125–26 (D. Or. 2014); Illumina Inc. v. BGI Genomics Co., Ltd., No. 20-cv-01465-WHO, 2021 WL 428632, at *4 (N.D. Cal. Feb. 8, 2021); Jaguar Land Rover Ltd., 2021 WL 8086357, at *2; Front Row Techs., 163 F. Supp. 3d at 986; TiVo Inc. v. Verizon Commc’ns, Inc., No. 2:09-cv-257, 2011 WL 13134426, at *3 (E.D. Tex. Sept. 7, 2011); Graphic Packaging Int’l, Inc. v. C.W. Zumbiel Co., No. 3:10–cv–891–J–37JBT, 2011 WL 4862498, at *3 (M.D. Fla. Sept. 12, 2011).

It seems to me that it’s much too high a bar to require the single most reasonable inference at the pleading stage in part because the facts to establish scienter largely will be in the patentee’s possession and if pleading is denied, there won’t be any discovery since it is, largely, limited to information relevant to a pled claim or defense.

An Opinion on Chief Judge Moore’s Reported Unprecedented Effort to Remove Judge Newman

by David Hricik, Mercer Law School

As has been reported by Dennis on the main page, by Gene Quinn on IP Watchdog (here), and by various media I am seeing, Chief Judge Moore reportedly threatened Judge Newman with a petition to remove Judge Newman as incompetent to carry out her duties unless Judge Newman agreed to take senior status. Gene points out the incongruity of Chief Judge Moore’s reported position that Judge Newman may continue to serve as a judge, though Chief Judge Moore ostensibly believes she is incompetent to do so.

I’ve now seen several other articles about this, reporting more or less a consistent story. Hopefully, it’s not true.  Beyond what has been reported, I would add the following two facts.

One, I saw Judge Newman (with Judge Lourie and former Judge O’Malley) speak at at the USPTO three weeks ago.  (I was there speaking on patent ethics.) Judge Newman was eloquent, coherent, cogent, and spoke passionately about various topics, including section 101 (which requires a bit of mental agility, I would say).  As others have pointed out, Judge Newman has, for a very long time, often taken more time in getting her opinions out than other judges, but I have seen nothing in those opinions that show incompetency, and if that delay were the basis that was a well known fact decades ago.

Second, this is the second time Chief Judge Moore has engaged in what is unprecedented conduct that has raised concerns about the integrity of the Federal Circuit.  Boiled way down: A few months back, Judge Moore dissented in a case, 2-1, with Judge O’Malley writing the majority opinion. Once Judge O’Malley retired and without notice to the parties, Chief Judge Moore created a “new” panel and her dissent as a result became the 2-1 majority, with the original majority judge dissenting.  That unprecedented flip of the result of a case is the subject of  a petition for cert in which a group of retired circuit judges as amici wrote (here), in part: “Allowing judges to swap out under the pretense of panel rehearing to change already-published decisions undermines public confidence in the judiciary.” (Full disclosure: I’m on an amicus brief with a different group in that case, available here.)

Hopefully, the reports about Chief Judge Moore using the threat of judicial discipline to force Judge Newman to opt for senior status are wrong, and hopefully the Supreme Court will correct the other matter. At stake is public confidence in the judiciary.

Update:  the Federal Circuit unsealed an order by Chief Judge Moore advocating for Judge Newman’s removal, which does indicate the stories discussed above seem basically to have been true. It is here.

Update on the Akin Gump v. Xcential case

By David Hricik, Mercer Law School

Noted below, Akin Gump had sued a former vendor, Xcential, arguing that its lawyers had invented what Xcential had sought to patent. In response to the firm’s suit, Xcential filed five counterclaims, essentially asserting Akin Gump had misused information that Xcential had disclosed to Akin Gump.

As noted below, Akin Gump moved to dismiss those counterclaims and, further sought a preliminary injunction.

The district court denied the motion to dismiss four of the five, essentially holding Xcential had plead plausible facts that Akin Gump had misappropriated Xcential’s confidential information for the firm’s own benefit.  The order is here. (Call me Nostradamus, but I’d bet Akin Gump’s motion for preliminary injunction will be denied, too.)

On the main page, Dennis posted about a case raising somewhat similar ethical concerns, United Cannabis Corporation v. Pure Hemp Collective Inc., Docket No. 22-01363 (Fed. Cir. 2023), which involved a firm’s admitted use of text from one patent application in an application for another client in closely related cases.  It’s not clear, in either instance, whether any of the firms engaged in improper conduct, but it is not a good look where a firm is prosecuting cases for different clients in technologies so closely related that one client’s application provides a head start on another’s, or allegedly taking a vendor’s confidential information and using it for the law firm’s own benefit.

Interesting Opinion About the Ethics of Giving an Opinion of Counsel to One Client About Another Client’s Patent

by David Hricik, Mercer Law School.

There are a number of ethics opinions and a couple of cases discussing whether it is adverse to opine — infringement, design around, and invalidity — for a client about another’s patent.  This case addresses the issue in the context of consent.

In Kimberly-Clark Corp. v. Extrusion Grp., LLC, 1:18-CV-04754-SDG, 2021 WL 2291078 (N.D. Ga. June 3, 2021), two law firms were merging. Kimberly-Clark was a longstanding client of one of the firms, Foley & Lardner. A client of the other merging firm, Gardere, had asked a Gardere lawyer to provide an FTO. As part of the merger, Foley obtained the informed consent of Kimberly-Clark to provide an opinion for that unidentified client, Extrusion, and specified the technology, and promised that Foley would not provide any additional opinions or handle litigation adverse to Kimberly-Clark related to the opinions. Then the lawyer, Mr. Ward, gave Extrusion the opinion, which was 500 pages long.

Then the firms merged and Kimberly-Clark sued Extrusion. Among other patents, Kimberly-Clark asserted the ’104 Patent and asked Mr. Ward for a written non-infringement opinion specific to it, which the now-merge red firm provided.

Later, Extrusion sought to exclude from evidence both the 500 page FTO and the written noninfringement opinion specific to the ’104 Patent. The court wrote in part:

The first opinion Kimberly-Clark seeks to exclude, the FTO, falls within the waiver. The FTO was drafted before Kimberly-Clark initiated litigation, is a general survey of patent references that is nearly 500 pages long, and contains a single, brief reference to the ’104 patent as it relates to a meltblown design that is not even at issue in this litigation. It cannot fairly be said that patent litigation specifically related to the FTO was anticipated or that Ward was providing assistance in a dispute adverse to Kimberly- Clark at the time he drafted the FTO. The Court, therefore, DENIES Kimberly-Clark’s motion to disqualify and exclude the FTO opinion.

Any testimony offered by Ward in support of the FTO, or any cross-examination of Ward in this regard, is a separate matter. Such testimony may very well create a conflict, and one that does not fall within the scope of the waiver. Whether Ward will be allowed to testify at trial concerning the FTO opinion, and if so, whether any potential subject matter of his direct or cross-examination should be excluded or narrowed, is overly speculative and involves too many variables for the Court to adequately address at 51 this stage of the litigation.

The Court therefore DENIES WITHOUT PREJUDICE Kimberly-Clark’s motion to exclude Ward’s testimony related to the FTO. The parties may raise this issue again with the Court through a motion in limine in advance of trial. With regard to the ’104 Patent non-infringement opinion letter authored by Ward on November 12, 2019, the resolution is much clearer – neither the letter nor any testimony concerning it may stand. Although the letter classifies itself as an “update” to Ward’s earlier non-infringement analysis, it takes the additional step of directly applying Kimberly-Clark’s ’104 Patent to Extrusion’s meltblown die. The letter was drafted after Kimberly-Clark initiated the instant litigation and after Kimberly-Clark advised Extrusion it intended to assert infringement of the ’104 Patent. This letter was undoubtedly written with the aim of assisting Extrusion in its ongoing litigation against Kimberly-Clark and therefore falls outside the scope of the waiver. Accordingly, the Court finds that an un-waived conflict of interest exists as to Ward’s ’104 Patent noninfringement opinion.

Because Foley has not filed an appearance in this case there is no one to disqualify. Still, the Court finds the disqualification analysis helpful. In determining whether disqualification is appropriate, the court may consider: (1) whether the conflict might affect the pending litigation; (2) at what stage of litigation the disqualification issue was raised; (3) whether other counsel can handle the matter; (4) the appearance of impropriety; (5) and the costs of disqualification. Here, the negative effect of the conflict on the pending litigation and the appearance of impropriety outweigh the cost of exclusion. The Court finds it significant that Ward stated a legal opinion explicitly adverse to his own firm’s client, Kimberly-Clark, and did so to assist a party adverse to that client in an active lawsuit. Thus, the Court finds that exclusion of the letter and related testimony is the proper remedy. Kimberly-Clark’s motion to disqualify and exclude the ‘104 Opinion and testimony related thereto is GRANTED

Kimberly-Clark Corp. v. Extrusion Grp., LLC, 1:18-CV-04754-SDG, 2021 WL 2291078, at *5– 6 (N.D. Ga. June 3, 2021) (cleaned up).

Akin Gump Files Petition to Institute Derivation Against Former Vendor Alleging Its Lawyer’s “Idea” was Stolen

By David Hricik, Mercer Law School

First, some background to the technology for this interesting set of disputes. In some legislatures, a bill that changes an existing statute doesn’t do it by redline: the bill does not show new language by underlining and deletions to existing text by strike throughs. Instead, in some legislatures, a bill must say something like “in 28 USC 1332, strike ‘$75,000’ and replace it with “$100,000”.  That can get complicated, especially if there are statutes that cross-reference each other, different enactment dates, and so on.  There are systems that are used to write bills, but even the people who design them hadn’t solved how to do the “replace X with Y” type of bill drafting and the need to do so had apparently been known in the field for a while.

Xcential Legislative Technologies is a company that provides bill drafting (and other) technology to legislatures.  Akin Gump is a law firm that does a lot of lobbying.  In 2019, an Akin Gump lawyer apparently reached out to Xcential to request a demo of its bill-drafting technology. NDAs in place, Xcential met with an Akin Gump lawyer and, among other things, he described that known problem that, again, a problem that apparently people in this field had known about but which no one had solved, or at least solved in a good way: how to design a system that would generate bills that conformed with the “strike through X and replace with Y” mode required by some legislative bodies.

If I understand the facts correctly, Xcential then set out to solve the problem in order to sell services to Akin Gump.  According to Akin Gump’s suit (discussed below), when Xcential returned to demonstrate its solution to the Akin Gump lawyer, the Akin Gump lawyer upon seeing it repeatedly said “holy shit”… but balked at Xcential’s price tag.

They went their separate ways.

Xcential then filed a patent application naming its long-time coding and legislative drafting expert as the sole inventor. The patent application is here.

In 2022, Akin Gump filed a petition to institute derivation, asserting that its lawyer had in fact conceived of the claimed invention. Those petitions are pretty rare and this one is here.

In addition, Akin Gump sued Xcential and the named inventor individually (here). Depending on who you believe, the lawyer — who allegedly doesn’t have any coding experience — had conceived of the claimed invention before it was shown to him by Xcential and he said “holy shit.” You can read more about this suit here. A press release from the company is here. (I don’t see anything on Akin Gump’s site talking about the suit, or I would include it.)

Xcential has filed counterclaims against Akin Gump (here).  Among other things, it asserts Akin Gump misappropriated Xcential’s confidential information, committed slander of title, and includes other claims.

In the suit, Akin Gump moved for preliminary injunction. I may be missing something, but its theory is that its lawyer’s “idea” to draft a bill to meet the “replace X with Y” required format was a “trade secret” and the Xcential patent application (with all of the support necessary to solve the problem) is the theft of that “secret.”  Akin Gump’s preliminary injunction motion is here.  Xcential’s rather, um, direct response to it, here.

Call me skeptical — or maybe it’s because I’ve written a book on statutory interpretation, worked in the US House, and worked in the Arizona State Senate — but the “idea” to draft legislation drafted in the “replace x with y” way was kinda widely known and not “revolutionary” (as Akin Gump’s preliminary injunction motion says). Further, at least under the trade secret laws I’ve looked at, knowing a problem exists isn’t a trade secret. It’s the solution that might be.

Finally, and perhaps it is just coincidence, but the firm that had been representing Akin Gump withdrew and Akin Gump is now representing itself.

Stay tuned…

The Mandamus Transfer Battle and W.D. Texas: Why is the Federal Circuit, or Anyone, Hearing the Petitions?

By David Hricik, Mercer Law School

I’m speaking at a conference in Palo Alto, and one long topic of conversation was about the disagreement between how Judge Albright views Fifth Circuit precedent on mandamus to review discretionary transfers under Section 1404 and the Federal Circuit views that same precedent.

One thing that struck me is that ordinarily, the only reason mandamus review is available for transfer motions is because it is transferring the case out of the circuit, and so the circuit won’t ever get to review it. So, conversely, an order transferring a case within a circuit is not reviewable until final judgment:

The Southern District of Iowa order transferring the case to another district within this circuit was a non-appealable interlocutory order, not subject to mandamus review, because it did not “in any way impair or defeat the jurisdiction of this Court to review any appealable order or judgment which eventually may be entered in the case.” Carr v. Donohoe, 201 F.2d 426, 428–29 (8th Cir.1953); accord Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 383–84, 74 S.Ct. 145, 98 L.Ed. 106 (1953).

Steen v. Murray, 770 F.3d 698, 702 (8th Cir. 2014).
So there are two ways to look at this: one, why is the Federal Circuit hearing these petitions at all, since it will review any decision on transfer on appeal and apply regional circuit law, so mandamus — an extraordinary remedy — should not be available at all. The reason for it doesn’t exist just as it doesn’t exist with an intra-circuit transfer.
Or, you can ask: if the point is to make sure the Fifth Circuit gets its law correct, then any petition should go to the Fifth Circuit, not the Federal Circuit.
Anyhow, there are probably reasons why this is happening the way it is, and perhaps this argument has been made and lost, but the first way of looking at why mandamus is available, only, for out-of-circuit transfers suggests that any review of a transfer order should await final judgment or it erodes that rule.

Thoughtful Decision on Whether LLCs are Treated as Corporations for Purposes of General Personal Jurisdiction

By David Hricik, Mercer Law School

In  Avus Designs Inc. v.  Grezxx LLC (D. Wyo. 22-CV-00173-SWS Dec. 2, 2022) (here), the district court analyzed whether it could properly enter default judgment against a Wyoming limited liability corporation, or “LLC.” As part of doing so, the court was required to analyze whether it had, among other things, personal jurisdiction over the defendant LLC.

After concluding the allegations of the complaint were likely insufficient to support specific jurisdiction, it turned to whether an LLC should be treated the same as a corporation for purposes of general personal jurisdiction. Corporations generally are subject to general personal jurisdiction in the state of incorporation and the state of its principal place of business (generally believed to be where the corporation’s “nerve center” is located), and, potentially, in an exceptional case in a third state. LLCs are organized and registered, not incorporated in the same sense.

The decision thoughtfully discusses splits in the case law and the distinctions between a corporation and LLC, including the fact that members of an LLC may be anonymous, and so it may be impossible to determine the citizenship of each of its members.

I cannot find it on-line but it raises some fascinating issues for pre-suit due diligence for patent suits as well as in general commercial litigation, since it may allow for diversity subject matter jurisdiction in more instances (that is, if an LLC has only the citizenship of its state of organization and nerve center, rather than the citizenship of each of its members, then more state law claims may be brought in federal court).


ABA Ethics Opinion on Replying-to-all When Opposing Counsel CC’s Their Client

By David Hricik, Mercer Law School

Ordinarily, under Model Rule 4.2 you cannot communicate with a person represented by counsel in a matter without opposing counsel’s consent — even if opposing counsel is present (the rule is not limited to “ex parte” communications). Yet, as happens frequently, what if in negotiating a settlement, license, or other matter, opposing counsel CC’s her client: does opposing counsel’s “cc” imply consent to reply-to-all?

In Formal Ethics Opinion 503 (Nov. 2, 2022) (here), the ABA indicated that implied consent likely occurs under these circumstances.  There is, however, case law to the contrary not acknowledged by the ABA. For example, North Carolina Legal Eth. Op. 2012-7 (Oct. 25, 2013) stated:

The fact that Lawyer B copies her own client… standing alone, does not permit Lawyer A to ‘reply all.’ While Rule 4.2(a) does not specifically provide that the consent of the other lawyer must be ‘expressly’ given, the prudent practice is to obtain express consent. Whether consent may be ‘implied’ by the circumstances requires an evaluation of all of the facts and circumstances surrounding the representation, the legal issues involved, and the prior communications between the lawyers and their clients.

In contrast, the ABA stated that by copying a client, a lawyer is “inviting” a reply-to-all.

Further, even the ABA opinion stated that in replying, the lawyer should be very careful to limit the reply to that which is truly responsive to the e-mail, in part stating: “Unless otherwise explicitly agreed, the consent covers only the specific topics in the initial email; the receiving counsel cannot reasonably infer that such email opens the door to copy the sending lawyer’s client on unrelated topics.”

The Opinion has other limitations and guidance, but seems to insulate a common practice and one that likely fits the norms of practice but, given the lack of authority in most states and the split, be careful!

Some Interesting Cases Applying the Rule Against Direct Contact with Persons “Represented by Counsel” in a Matter

by David Hricik, Mercer Law School

Giving a talk in Austin and thought I’d share a couple of interesting results I’ll be speaking about later today.  Rule 4.2 in most states prohibits, without consent of opposing counsel, communications about a matter with a person represented by counsel in that matter. (This applies even if opposing counsel is present, as discussed below.).

In Panora v. Deenora Corp, 2021 WL 5712119 (E.D.N.Y. Dec. 2, 2021), the defense counsel doubted plaintiff’s counsel was forwarding settlement offers to the plaintiff, and so he advised his client to send the offer directly to the plaintiff, which he did. That, said the court, was unethical:

“Although a client can decide on its own whether to directly contact his adversary, a lawyer cannot advise a client to contact his adversary, or do anything that the attorney could not do directly. See ABA Formal Opinion 11-461. It is of course improper for a lawyer to contact a represented adversary, and thus since he can’t do it himself, he can’t put up his client to do it for him either.”

In North Carolina Legal Eth. Op. 2012-7 (Oct. 25, 2013), the bar association was asked whether counsel consents to direct contact by cc-ing his client on an email to opposing counsel.  The conclusion? Maybe:

“The fact that Lawyer B copies her own client…, standing alone, does not permit Lawyer A to ‘reply all.’ While Rule 4.2(a) does not specifically provide that the consent of the other lawyer must be ‘expressly’ given, the prudent practice is to obtain express consent. Whether consent may be ‘implied’ by the circumstances requires an evaluation of all of the facts and circumstances surrounding the representation, the legal issues involved, and the prior communications between the lawyers and their clients.”


USPTO Director Issues Sanctions for Abusing IPR Process in OpenSky/VLSI

by David Hricik, Mercer Law School

The October 4, 2022 presidential decision awarding sanctions against OpenSky LLC and its counsel is here.  There are several amici briefs that went into this order which is a doozy.

Boiled way down, after VLSI obtained a verdict for $675 million against Intel, OpenSky was formed and, according to the Director, was formed solely to file an IPR petition that it copied from one that Intel had previously filed, but which had not been instituted based on the Finitiv factors.  The petition included copy of Intel’s expert’s declaration from it. Later, Intel joined the petition.

Then, OpenSky sought money from both Intel (or it would abandon/not zealously pursue the IPR, and so not save Intel from potential damages) and VLSI (or it would do so, and so jeopardize the judgment VLSI had obtained).  As the order found (because OpenSky refused to provide discovery as ordered by the Director):

In other words, in the absence of contrary evidence due to its discovery misconduct, OpenSky’s behavior and complaints about budgeting establish that it did not intend to pursue the patentability merits but instead intended to leverage the IPR’s existence only to extract a payout from one side or the other.

The Director, among other things, barred OpenSky from actively proceeding but permitted Intel to become the active petitioner, thus arguably permitting Intel to benefit from OpenSky’s wrong-doing, but allowing it because there was no evidence Intel had participated in its wrong-doing. However, Intel is required, on remand, to show a compelling case that institution had been proper.

That is a gross oversimplification, but… wow.

Judge Albright Identifies Outcome-Determinative Discrepancies in Federal Circuit Interpretations of Fifth Circuit Law Under 1404(a)

by David Hricik, Mercer Law School

Judge Albright granted Google’s motion to transfer venue under 28 U.S.C. 1404(a) from the Western District of Texas to the Northern District of California in an opinion in Motion Offense LLC v. Google, LLC (here).  Transfer is governed by regional circuit law, and so here, the law of the Fifth Circuit. What is interesting is the judge noting that the only reason transfer was granted is that the Federal Circuit had reached conclusions different from the Fifth Circuit on what Fifth Circuit law was.

First, one factor in determining whether the transferee venue is more convenient is whether process will be needed to compel testimony and so, if a witness is more than 100 miles from the courthouse, the witness is beyond subpoena power. Thus, if transfer makes it easier to compel more witnesses to testify, that indicates the transferee forum is more convenient.   Judge Albright noted that under Fifth Circuit precedent, the party seeking to transfer has the burden to show there are witnesses and they are unwilling and so transfer will aid in compelling testimony; but unpublished Federal Circuit cases “applying” Fifth Circuit law, say the opposite: unless there is a showing a witness is willing to testify, the court presumes they are not.

Second, the location of documents and volume of them in the transferee district indicates the transferee district is more convenient.  Under Fifth Circuit precedent, the party seeking to transfer has the burden to show the presence of documents, not just that it’s likely they exist, but under the Federal Circuit’s approach, there is a presumption the accused infringer has more relevant documents.

Third, the Fifth Circuit uses a 100 mile rule to determine convenience of the parties and witnesses for trial: the more such people within 100 miles of the transferee courthouse, the more likely it is more convenient.  But, the Federal Circuit instructed not to follow this approach, according to Judge Albright.

The opinion is interesting for a variety of reasons, and I haven’t done my independent look at the cases to see if the opinion fairly characterizes the difference between the Fifth Circuit’s precedent and what the Federal Circuit says is the Fifth Circuit’s precedent, but, plainly, unpublished decisions by the Federal Circuit about Fifth Circuit law can not bind a district court in the Fifth Circuit when it is bound to follow regional circuit law, just as those opinions cannot bind a panel of the Federal Circuit.

Another Reason to File an Answer: Voluntary Dismissal Does not Make Defendant Prevailing Party

By David Hricik, Mercer Law School

In Haynes Holding Group LLC v. ESR Performance Corp. et al (C.D. Cal. 8:21-cv-02033 JVS (JDEx) (I can’t find a free version of the opinion), after the patentee sued, the defendant served a motion to dismiss for lack of personal jurisdiction.  The defendant did not file an answer and then move to dismiss for lack of personal jurisdiction, leaving the patentee free to file a notice of voluntary dismissal, which it did, since the defendant had not answered.

The defendant then argued it was a prevailing party under Section 285 and entitled to fees. Judge Selna (correctly in my view) reasoned that because the dismissal by operation of the Federal Rules of Civil Procedure was without prejudice, and so the patentee could sue on the same claim, the defendant had not prevailed and denied the motion. In part, the court reasoned:

Cases across multiple districts align in holding that voluntarily dismissing a case without prejudice does not render the other party the “prevailing party,” whereas dismissing with prejudice or filing for the dismissal of previously-voluntarily-dismissed claims. See, e.g., Realtime Adaptive Streaming LLC v. Netflix, Inc., 2020 WL 7889048 at *4-5 (C.D. Cal. Nov. 23, 2020) (holding that filing for the dismissal of previously- voluntarily-dismissed claims constitutes an adjudication on the merits); Mixing & Mass Transfer Tech., LLC v. SPX Corp., 2020 WL 6484180 at *3 (D. Del., Nov. 4, 2020) (finding that neither a party’s voluntary dismissal or the court’s dismissal without prejudice would materially alter the legal relationship of the parties because “neither dismissal would prevent Plaintiff from reasserting those same claims against Defendants in another action”); Internet Media Interactive Corp. v. Shopify, Inc., 2020 WL 6196292 at *3 (D. Del. Oct. 22, 2020) (holding that plaintiff’s voluntary dismissal with prejudice rendered the defendant the prevailing party because “Defendant can no longer be subject to the particular claim of infringement asserted in Plaintiff’s Complaint”).

Of course, there are reasons (e.g., the cost of investigation) to not answer but only to move to dismiss, but taking that path and then moving for prevailing party status  is not a viable option.

Interesting Case on Assignability of Legal Malpractice Claims

By David Hricik, Mercer Law School

After Prince, the musician, died an engineer who had unreleased recordings hired a Massachusetts firm who advised the engineer that he was a joint author of the recordings and jointly owned copyright in them, and so could distribute the recordings subject to paying Prince’s estate a share of royalties.  He arranged to do so, and in part arranged it so the law firm would receive a percentage of sales.

Prince’s estate filed suit to enjoin further distribution.  The Massachusetts firm initially represented the defendant, but then was named as a defendant. The firm later was dismissed for lack of personal jurisdiction.  The case against the engineer settled, and as part of the settlement agreement the engineer assigned any claim against the lawyer to Prince’s estate.

Prince’s estate filed a legal malpractice suit — asserting the advice to the engineer had been flawed — against the Massachusetts law firm in Massachusetts.  The law firm moved to dismiss because legal malpractice claims are not assignable under Minnesota law.  The trial court granted the motion, but this court reversed, holding that under conflicts of law principles, Massachusetts law controlled and it permitted assignment (with exceptions).  The court noted the law firm emphasized the agreement’s overall connection to Minnesota, and stated:

They emphasize the contacts with Minnesota, including the fact that the plaintiffs are domiciled in Minnesota and that the agreement to settle the Minnesota litigation was negotiated and executed in Minnesota. Our case law, however, directs our focus to the State with the most significant relationship to the transaction and the parties “with respect to [the] issue” that presents the conflict of laws. Oxford Global Resources, LLC, 480 Mass. at 467, quoting Bushkin Assocs., Inc., 393 Mass. at 632. Here, it is the assignability of legal malpractice claims that presents the conflict of laws. We therefore focus our inquiry on which State has the most significant relationship to the assignability of the legal malpractice claim asserted against Attorney Brown.

Two considerations are particularly important in the context of a conflict regarding assignability: protecting the justified expectations of the parties and effectuating the
policy of the State “with the dominant interest” with respect to the issue of assignability. Restatement (Second) of Conflict of
Laws § 208 comment b. Applying Massachusetts law would protect the justified expectations of Attorney Brown, his law firm, and his clients. Massachusetts law has long permitted the assignment of legal malpractice claims, see New Hampshire Ins. Co. v. McCann, 429 Mass. 202, 208-209 (1999), and Attorney Brown, as a Massachusetts lawyer practicing in a Massachusetts firm, would reasonably expect that his clients might assign their legal malpractice claims against him….

With respect to the second factor, the states’ interests, the court reasoned in part:

Attorney Brown is a Massachusetts-licensed attorney, and his law firm is a Massachusetts limited liability company. He is authorized to practice law by the Supreme Judicial Court of
Massachusetts, see S.J.C. Rule 3:01, as appearing in 478 Mass. 1301 (2018), and his professional duties arise under
Massachusetts law.

The case is Comerica Bank & Trust v. Brown & Rosen LLC (Mass. App. Aug. 30, 2022) (here).

Besides the connection to Prince and the interesting legal analysis — focusing on the issue, not the contract — the case may be another reason why a law firm’s engagement letter should specify choice of law.  While here that would not have changed the outcome, perhaps it might where a Minnesota law firm is sued in Massachusetts, but with a choice of law provision invoking Minnesota law.

Community Property and Patent Ownership

By David Hricik, Mercer Law School

Judge Payne in Mobile Equity Corp. v. Walmart (Case No. 2:21-cv-00126-JRG-RSP) (not available on line for free from what I can see) addressed an accused infringer’s argument that the assignment of the patent-in-suit from the sole inventor (Afana) to the plaintiff, Mobile Equity, was ineffective, and so the patentee lacked standing. The basis for the argument was that the application that led to the patent-in-suit had been filed while Afana had been married (to Kassam) and, by operation of Texas’ community property law, Kassam had an ownership interest in the issued patent that had not been assigned to Mobile Equity and had not been joined as a co-plaintiff.

The facts did not support that result here, it seems, and the motion to dismiss for lack of standing was denied.  The basis was that, ownership of the application had been held only in Afana’s name, as sole inventor), and as a result it had been properly conveyed to Mobile Equity.  Here is the key part (with citations and some quotations omitted):

Section 3.104, 4 entitled “Protection of Third Persons,” provides “where community property is held in one spouse’s name only, there is a presumption that the property is sole- management community property. Absent a showing of fraud or notice on the part of persons dealing with the named spouse, this sole-management presumption protects third parties who rely on the spouse’s authority to deal with the property.” If the requirements of § 3.104 are met, the other spouse has no claim of ownership over the disposed property and the third party takes ownership of the property.

Here, Mobile Equity argues that it is allowed to rely on Afana’s authority to transfer the property and thus take ownership of the Asserted Patents clear of any interest Kassem may have. To earn the right to rely on the presumption, a third party must show three things: (1) the property conveyed was presumed to be subject to the named spouse’s sole management; (2) the grantee was not party to a fraud on the unnamed spouse; and (3) the grantee had no notice of any lack of authority of the named spouse to convey the property. If the third party offers evidence supporting these three facts, the burden shifts to the unnamed spouse to rebut the third party’s presumption of entitlement.

For the first element, all of the patent applications, provisional and non-provisional, filed during the marriage are properly presumed to be sole management community property. Afana was the only listed inventor, thus the community property was held only in Afana’s name. Walmart offers no evidence to rebut this presumption; therefore, Mobile Equity satisfies the first element.

For the next two elements, Mobile Equity offers testimony from Kassem that she was aware that Afana was an inventor of several U.S. Patents. Additionally, Mobile Equity offers two agreements that when read together show Kassem consented to the transfer of any patent rights Afana may have had to the Asserted Patents to Mobile Equity.  The Court finds that this evidence is sufficient to satisfy the remaining two elements of § 3.104, and therefore, the burden shifts to Walmart to rebut Mobile Equity’s presumption of entitlement….

Walmart’s only argument in response is that there is no evidence of Kassem’s consent to transfer the Asserted Patents because the documents cited by Mobile Equity do not specifically identify the Asserted Patents. This argument fails for two reasons: first, Mobile Equity would not have needed to specifically list the ’989 Application, or the ’236 Patent which had issued by November 2014, by name because Afana had already assigned his entire interest in the ’989 Application. Thus, there would have been no reason to list something Mobile Equity already owned. Second, assuming that Mobile Equity did not own the Asserted Patents, the language in the Invention Assignment Agreement is broad enough to have effected the assignment of the Asserted Patents upon execution of the Invention Assignment Agreement. Thus, by incorporating the Invention Assignment Agreement into the “Founder’s Restricted Stock Purchase Agreement”, which Kassem provided written consent to, the Court finds unpersuasive Walmart’s attempt to rebut Mobile Equity’s presumption of entitlement. Therefore, the Court finds that Kassem has no ownership interest in the Asserted Patents and Mobile Equity is the sole owner of the Asserted Patents.

I have no clue if the result is correct under Texas law under these facts, but the “first element” — that because Afana ws the sole inventor he was the sole owner — may not be correct under every state’s law. For example, applying Florida law, the court in Taylor v. Taylor Made Plastics, Inc., 2013 WL 1798964 (M.D. Fl. Apr. 29, 2013), the court dismissed a patent infringement suit because the plaintiff-inventor had not joined his former spouse. The court recognized that, apparently unlike Texas law, under Florida law any property acquired during marriage is a marital asset subject subject to equitable distribution and, in that case, the divorce decree had not awarded legal title to the inventor. The Federal Circuit affirmed dismissal for lack of standing. Taylor v. Taylor Made Plastics, Inc., 565 Fed. Appx. 888 (Fed. Cir. 2014). See also OptoLum, Inc. v. Cree, Inc., 490 F. Supp.3d 916 (M.D. N.C. 2020) (applying Arizona law and holding that, although the patents had been community property, as in Mobile Equity under Texas law, the inventor-spouse had properly assigned it in compliance with Arizona law).

In another Federal Circuit case, the spouses had divorced and in that process the non-inventor spouse had not listed the patent applications as an asset on a “short form” divorce filing. The defendant got a license from the non-inventor, now-ex, spouse and argued as a result it could not infringe.  The Federal Circuit held, however, that because the non-inventor spouse had not listed the patent applications as marital property, she was estopped to claim an interest in the patents and, as a result, the license she had given to the accused infringer was of no effect.  Enovsys LLC v. Nextel Commun., Inc., 614 F.3d 1333, 1341 (Fed. Cir. 2010).

This issue has popped up a few times over the years and the lesson, of course, is that not only is standing always a fundamental requirement, making that determination may require extra due diligence in community property states.

Amicus Brief in Novartis v. Accord

By David Hricik, Mercer Law School

Dennis on the main page had written a couple months back about the opinion of Novartis Pharm. Corp. v. Accord Healthcare, Inc., 38 F.4th 1013 (Fed. Cir. 2022), and the “strange” way the result flipped from a 2-1 panel decision affirming a factual finding by a district court (which had been consistent with prior findings by the PTAB and others) that there had been written description, to a new panel issuing a 2-1 decision on re-hearing reversing the district court.  A group of us filed an amicus brief, not about the merits and “negative limitations” and written description doctrine, but about, to use Dennis’ word, that strange procedure. It is here.  (And of course, after I posted this, I saw Dennis had covered both the “merits” brief and amicus brief, and the “procedural” issue!). So, to quote SNL, “never mind.”

Disqualification due to Foreseeable Conflict Leads to $32m Malpractice Judgment

By David Hricik, Mercer Law School

Ordinarily, a conflict of interest leads to disqualification, but they can lead to fee disgorgement (an attorney is supposed to be loyal, and like any other agent, is not entitled to keep a fee earned while being disloyal) and, on occasion, damages.  In a case affirmed by the Ohio Court of Appeals, those damages were $32 million.

In RevoLaze LLC v. Dentons US LLP, 2022-Ohio-1392 (Ohio App. Apr. 28, 2022), requires understanding what a “verein” is. It is a legal entity recognized under Swiss law somewhat similar to an association. A few law firms are organized this way, including Dentons.

In RevoLaze, Dentons US (part of a verein of many Dentons “entities”) had represented a patentee, RevoLaze, in an ITC proceeding and 17 related infringement suits. At the start of the matter, Revolaze received funding from a litigation funding group, and Dentons US agreed to reduce and cap its fees but had the right to a percentage of any recovery. Dentons had indicated to the litigation funding group that the recovery indicated potential damages of around a billion dollars, and so it vetted the patents and the case and after that agreed to fund the proceeding and related litigation, in phases, for up to $8 million.

But, Dentons US knew the ITC proceeding would be adverse to The Gap, and that Dentons Canada represented The Gap. Thus, if Dentons US was part of the same firm as Dentons Canada, then Dentons US’ representation of the patentee in the ITC proceeding was adverse to one of Dentons US’s clients, and it would be subject to disqualification.  There was no evidence that Dentons had advised RevoLaze of the risk of disqualification or of steps to reduce the impact if it happened.

Of course, The Gap moved to disqualify, and the ITC granted that motion. By that time, Dentons US had billed a significant amount, RevoLaze was struggling, and disqualification caused it to pay an additional $1 million to get replacement counsel up to speed.  The litigation funding group agreed to move up some funding to help, but RevoLaze settled the infringement cases and eventually dismissed the ITC proceeding while appeal of the disqualification order was pending there.

RevoLaze then sued Dentons, arguing the conflict had been foreseeable and that it had been damaged by, among other things, failing to obtain an ITC exclusion order and lost licensing revenue, with the total damages between $23 and $39 million.

To support breach — that disqualification had been foreseeable and so a reasonable lawyer would have either obtained informed consent or not taken the case — RevoLaze’s lawyers showed that Dentons US had been concerned about a conflict caused by the ITC proceeding with a client of a different “part” of Dentons (and so had not named that client in the ITC proceeding), it had a single conflicts database, Dentons’ own expert had written an article discussing the risk that a court would consider different “parts” of a verein to be one big law firm, and other facts

To support causation and proximate cause, RevoLaze had experts opine that but-for disqualification, the litigation funding costs would have been lower, RevoLaze would have obtained an exclusion order, and it would have obtained better settlements (i.e., better licensing and so had incurred lose profits).

The jury awarded $32 million. Then, the appellate court held the evidence was sufficient to support the verdict and the amount of damages.

This case, of course, is odd in that breach turned on whether Dentons was “one law firm” or separate firms, not on whether there was a conflict with a client. But the same logic would apply where a law firm undertakes a representation where it is foreseeable that it would be deemed to be adverse to a client, and so subject it to disqualification.

It appears from this June 2022 filing Dentons is seeking review by the Ohio Supreme Court, and it looks like on the issue of causation, so stay tuned.

Update:  A reader sent a link to an interesting student-authored article on the ITC decision that explains the verein (which auto-corrects to “vermin”) structure.