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), 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.

Inbound Important Emails that go Unread due to Technology Fails: Another Case

By David Hricik, Mercer Law School

This is not a patent case, but I have seen similar problems in prosecution, patent litigation, and related contexts over the years: an important email goes to a spam filter, or some other place, and gets left unread.

In a recent Fifth Circuit case, Rollins v. Home Depot (Here), plaintiff’s counsel was trying to settle a case when defense counsel filed and so e-served a motion for summary judgment — with a 14 day response deadline. For whatever reason, it did not get seen by the plaintiff’s lawyer.  The time for response came and went, and the district court granted the defense motion.  When plaintiff’s lawyer a short time later reached out to defense counsel again about settlement, defense counsel informed plaintiff’s counsel final judgment had already been entered.

Plaintiff’s counsel moved for relief from judgment under Rule 59, which was denied. On appeal, the Fifth Circuit found no abuse of discretion. Two points it made are wroth emphasizing: (1) it emphasized that plaintiff’s “counsel was plainly in the best position to ensure that his own email was working” and (2) plaintiff’s  “counsel could have checked the docket after the agreed deadline for dispositive motions had already passed.”

Ouch.

With all of us working at home more, clearly we need to be more vigilant about email traffic and deadlines. Firms need to consider ways, not only to assist with remote workers’ efforts in that regard, but to help capture emails that indicate decisions by clients (as to filing, or not, for example), and other important information.

A September CLE in Salt Lake City with Dennis, Me, and Other Important People!

By David Hricik, Mercer Law School

I’m happy to announce, and hope to attend in-person, the CLE described below in Salt Lake City.  While virtual CLEs have their benefits, I miss seeing and interacting with folks, and hope we can get close to normal soon. But, it’s also available virtually and looks to be a good mix of practical and conceptual work! Here’s their announcement:

The Elevate Your Prosecution 2021 conference on patent prosecution will be held in the Murano room of the Grand America in Salt Lake City on Friday, September 24 – Saturday, September 25.

We are expecting and pending for 14 hours of Utah CLE. The roster of speakers includes Dennis Crouch, John Duffy, David Hricik, and John White. The full agenda follows below, and more details are at www.elevateyourprosecution.com.

We invite you to register at your earliest convenience for the in person event (about 40 spaces remaining), the speakers dinner Friday night (about 8 spaces remaining), or the webcast.

You can register at www.elevateyourprosecution.com/registration/

The agenda:

Friday, September 24, 2021:

1.1    Michael Spector and Julie Burke (Petition.ai LLC): Deep Dive into Strategies for Successful Petitions at the USPTO

1.2.   Dan Tucker (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP): Realities of Succeeding in PTAB Trials 1

1.3.   Mike Bohn (VLP Law Group LLP): Surviving, Pivoting, and Thriving in the Changing Global IP Marketplace

1.4.   Dan Tanner (Tanner IP PLLC): The Ethics of Educating Clients about Patent Vulnerabilities – a Litigator’s Perspective

1.5.   James Long (Li & Cai IP Group, PTAB.US): A Memory Palace Approach to PTAB Case Citations and Holding Statistics

1.6.   Andrew Godsey (Global Technology Transfer Group) and Clarke Nelson (InFact Experts LLC): Comprehensive Overview of Modern Patent Valuation

1.7.   Margaret Polson (Polson Intellectual Property Law PC): Overview of Design Patents for Software-Related Inventions

1.8.   Travis Banta (former USPTO) and Kip Werking (FisherBroyles, LLP): Using Persuasion and the USPTO Count System for Successful Examiner Interviews – an Examiner’s Perspective

Saturday, September 25, 2021:

2.1.    Scott McKeown (Ropes & Gray LLP): Realities of Succeeding in PTAB Trials 2: Prosecuting for the PTAB

2.2.    David Hricik (Mercer Law School): Academic Perspective on Patent Valuation 1: Recent Legal and Technological Changes Reducing Patent Value

2.3.    John Duffy (University of Virginia School of Law): Academic Perspective on Patent Valuation 2: Historical Overview of File Wrappers for Famous Patents

2.4.    Adam Mossoff (George Mason University Antonin Scalia Law School): Academic Perspective on Patent Valuation 3: Implications of the New Paradigm of Patents as Public Rights in the Administrative State

2.5     Ron Katznelson (President at Bi-Level Technologies): Pecuniary Interests of PTAB Judges – Empirical Analysis Relating Bonus Awards to Decisions in AIA Trials

2.6.    Robert Greenspoon (Flachsbart & Greenspoon, LLC): Past and Future Constitutional Challenges in Patent Law

2.7.    John White (CEO & Managing Director at PCT Learning Center): Overview of the Benefits Today of Relying More Heavily on the PCT

2.8.    Dennis Crouch (University of Missouri School of Law): To Be Determined

Deadlines: Thoughts for Good and Bad Practices?

By David Hricik, Mercer Law School

Over the decades (sigh) I’ve been involved in various capacities in cases where practitioners have missed deadlines.  Sometimes, the client’s partly to blame. For example, imagine a client at the last minute dumping a lot of information they expect to be included in an application or any claim is barred (say by a prior publication).  At other times, the lawyer misses the date. For example, imagine key docketing personnel leave and that leaves a knowledge gap, or an unanswered email box, allowing a deadline to pass by.

Obviously, having dual docketing systems is important. Ensuring dates are entered correctly is important. Ensuring that there is a person responsible for the deadline, likewise important. And, of course, much of this is now automated.

I would be curious to rad what you believe to be “best practices” or mandatory minimum standards in this area. For example, I’ve seen some firms send notices to clients that in essence say “we’re not going to foreign file unless you tell us” while others insist on an affirmative “I don’t want foreign filings” written message from the client, and hound the client until they get it.

If you have “war stories” or thoughts or concerns, please share them in the comments. Obviously, everyone understands you’ll be telling us about someone else’s mistake, not yours!  :-).

FYI I am writing a short article on this topic and would love to share with other practitioners what you have learned. I’m thinking “where the landmines are” might be a good title for this one.

Section 285: When Lawyer Blames Client

By David Hricik, Mercer Law School

A long time ago, I posted here about the potential for conflict when fee shifting is in play and the opposing party is seeking an award of fees and asserts that the opposing party may be liable instead of, or in addition to, opposing counsel.  In other contexts, courts have found this can create a conflict between the targeted lawyer and client.

For example, in In re Marriage of Wixom & Wixom, 182 Wash. App. 881, 332 P.3d 1063 (2014), after a bitter and long custody dispute in which both the husband and his lawyer took ridiculous positions, the trial court imposed $55,000 in sanctions  jointly against husband and his lawyer. On appeal, the lawyer argued that the sanctions should only be imposed against the husband.  The appellate court, on its own motion disqualified the lawyer from representing the client and limited the lawyer’s ability to represent only himself. Later, the appellate court held sanctions could be imposed jointly. See, e.g., U.S. v. Emigration Improvement Dist., 14–CV–701, 2016 WL 4148251, at *6 (D. Utah Aug. 4, 2016) (reasoning that attorneys were conflicted when they tried to shift liability for fee awards from themselves to their client); Exp. Dev. Canada v. ESE Elecs. Inc., CV1602967BRORAOX, 2017 WL 3122157, at *5 (C.D. Cal. July 10, 2017) (“The circumstances indicate a conflict of interest between Counsel and their clients with respect to fault for evidentiary complications related to Bright Light’s payments and the Euler insurance claim.”).

I haven’t looked at whether this issue has cropped up in the precise context of Section 285, but lawyers should be thoughtful when Section 285 is raised and the issue of fault, or liability, as between lawyer and client is implicated. (If you know of cases, let me know!). It may be the conflict is waivable. In addition, it may be that courts should use the principle, recognized under Rule 11, that only the lawyer should be liable for legal errors, to reduce conflicts of interest and to also allocate fault where it makes the most sense to place it.

ABA Ethics Opinion on Virtual Law Practice:

By David Hricik, Mercer Law School

The American Bar Association committee on professional ethics issues opinions on issues which, while not binding on any jurisdiction, often have sway over courts and bar associations in malpractice or disciplinary matters.  If you follow their guidance, you, in a sense, start off in safe harbor.  Most state rules are similar to the Model Rules, and the USPTO’s disciplinary rules are similar, but not identical, and the USPTO did not adopt the comments to the model rules. Thus, the OED is not bound by ABA ethics opinions but they hold sway.

In ABA Formal Ethics Opinion 498 (March 10, 2021) (here), the ABA provided guidance on the ethical issues that we all have done a lot of the last year, and which I am guessing we will continue to do for a while: practice law outside the confines of a typical brick-and-mortar, or steel-and-glass, law office.  The abstract of the opinion states:

The ABA Model Rules of Professional Conduct permit virtual practice, which is technologically enabled law practice beyond the traditional brick-and-mortar law firm.1 When practicing virtually, lawyers must particularly consider ethical duties regarding competence, diligence, and communication, especially when using technology. In compliance with the duty of confidentiality, lawyers must make reasonable efforts to prevent inadvertent or unauthorized disclosures of information relating to the representation and take reasonable precautions when transmitting such information. Additionally, the duty of supervision requires that lawyers make reasonable efforts to ensure compliance by subordinate lawyers and nonlawyer assistants with the Rules of Professional Conduct, specifically regarding virtual practice policies.

I have probably given six or so CLEs this past year on ethical issues in law practice, and the need for technological competence is a critical factor, as is the related need to ensure good document retention: lawyers should use reasonable care and memorialize a client’s important decision in something other than a text or phone call.  Also, in-house counsel who are employed by a company in a state where they are not licensed — and so who practice under a state “registration” rule or statute — need to very carefully read the likely applicable rule or statute to avoid, among other things, the unauthorized practice of law.  I would also add that, based upon the traffic on listservs I’m on, being careful to ensure things get filed timely with the USPTO is important (PAIR seems to be having a lot of issues lately!).

Employee Inventors, Client Identity, and Assignments

By David Hricik, Mercer Law School

Over the years (sigh, decades) of being involved with ethical issues in patent practice, one set of problems that recurs involves assignments from employee-inventors.  I was reminded of some of them by a recent article in Landslide Magazine by Fred Carbone (of my old firm, Baker Botts), entitled “Employee Inventors and Patent Ownership: Whose Rights are They Anyway?” (available, I hope not behind a paywall, here).

The article does a good job of laying out some of the thorns in the bramble bush of choice of law in interpreting contracts of assignment (which, of course, arises only when the assignor was an inventor, and inventorship can be its own thorny issue).  The article points out some common law gap filling obligations that may require an assignment where no written agreement, or an ineffective one, is in place.  Apparently, Mr. Carbone is going to give a talk on April 20, 2021 on other ways to obtain assignment (as explained on page 23 of the magazine).

One related issue that I’ve discussed more than a few times and seen arise repeatedly over the years is when, after a dispute arises between a former employee and former employer, the former employee asserts that he had believed that the lawyer who had represented the employer also represented the employee and that the employee had been an inventor and either was left off or was included as an inventor but did not owe an obligation of assignment.  Sometimes that implicates Model Rule 4.3, which can require a lawyer to correct a non-client’s misunderstanding as to who the lawyer represents.

As a best practice, even if not required, including a written statement that the lawyer does not (or does) represent the inventor, or advising the inventor to obtain her own counsel, or both, may often be a good idea to avoid either misunderstanding or strategic behavior.

Intentional Over-billing of Clients Leads to 2-year Suspension

by David Hricik, Mercer Law School

A partner at a major firm had been suspended initially for six months for intentionally over-billing certain clients for 450 hours of work she and other lawyers had not performed.  (Apparently, one justice initially decides the penalty in a bar proceeding there.). Bar counsel then argued to the entire court that six months was insufficient, and the Massachusetts Supreme Court agreed.  In its opening paragraph, the court stated:

The single justice acknowledged the respondent’s “admittedly cavalier attitude toward client billing,” but concluded that “the large number of hours she reported in 2015 is not substantial evidence that all or even most of the 450 hours at issue in this case were fraudulently billed.” Our focus, however, is not on the quantum of excessive fees that were billed, but on the fundamental dishonesty inherent in the respondent’s client billings themselves. It is not the sheer number of unworked hours that establishes the misconduct but, rather, the dishonesty manifested by billing for them at all.

The case, In the Matter of Zankowski (Mass. March 25, 2021) is here.

Yes, it’s a state case. But, consistent with this, over the years I’ve heard various speeches by attorneys from the OED say that they’re forgiving of many things — mistakes happen, hindsight is often 20-20 — but intentional misconduct is not one of those things I’ve heard them mention. As the Massachusetts court wrote, billing for them at all is what indicates a serious violation. And, related to that, many state disciplinary rules, like the USPTO Rules, require certain members of firms to have in place policies to ensure compliance with the ethical rules, and so one lawyer’s misconduct could cause ripple effects.

Enforceability of Clauses Requiring Arbitration of Malpractice Claims: Plummer v. McSweeney

By David Hricik, Mercer Law School

In Plummer v. McSweeney, the plaintiff, Plummer, sued a law firm for legal malpractice. The firm moved to compel arbitration.  The district court denied that motion because, among other things, the clause required that the client pay a pro rata share of the arbitration fees and that rendered it substantively unconscionable since she could not afford it and that amount plainly exceeded the ordinary filing costs of a lawsuit. It also held that the firm’s post-dispute offer to pay her costs did not change that result. The firm appealed.

The Eighth Circuit reversed.  It held that under D.C. law the post-dispute offer to pay mooted the substantive unconscionability.  It also rejected procedural unconscionability because she could have chosen another firm and the agreement made clear its terms were negotiable.

Finally, it rejected, as not controlling, the requirements that an ABA ethics opinion had imposed on arbitration clauses.  In part it stated:

Plummer also points out that, since Haynes [a case applying D.C. law in this context] the American Bar Association released an ethics opinion on the effect of its Model Rule 1.4(b) (on which D.C. Rule 1.4(b) is based) on the use of arbitration provisions in retainer agreements. See ABA Comm. on Ethics & Prof’l Responsibility, Formal Op. 02-425 (2002). The ABA opined that “the lawyer should make clear that arbitration typically results in the client’s waiver of significant rights, such as the waiver of the right to a jury trial, the possible waiver of broad discovery, and the loss of the right to appeal.” It also notes other effects that an attorney “might explain” as well. Some courts have even expanded on this opinion, requiring attorneys to discuss with clients a wide assortment of the potential consequences that could attend agreeing to arbitrate disputes with an attorney. See, e.g., Hodges v. Reasonover, 103 So. 3d 1069, 1077 (La. 2012).

The case has some facts that make the result even harsher, but the incentive it creates — to allow a lawyer to impose an unconscionable agreement on a client but then obviate that later — plainly undermines the goal of full and fair disclosure to clients.  Lawyers should be careful, despite the case, to comply with ethical rules:  a lawyer may set herself up to compel arbitration and lose her license.

Informing Clients and Former Clients of Data Breaches

By David Hricik, Mercer Law School

Law firms are targets of hackers, and patent firms in particular are so. Why? Because hackers know they have the “wheat” separated from the chaff, and hackers believe firms also have less robust security than their clients.  See Am. B. Ass’n. Formal Eth. Op. 483 (here). That is likely more so in disbursed work forces caused by the pandemic.

In that opinion, the ABA explained the duties of a firm to use reasonable care to avoid hacking.  If a hacking occurred, the opinion concluded that a firm had to notify current clients and provide sufficient information to them to respond.  The ABA refused to say that lawyers owed such an obligation to former clients.

In Maine Opinion 220 (here), the Maine committee reasoned that a lawyer had an obligation to inform both current and former clients of breaches affecting their data.  The issue remains open in many states.

Firms should consider addressing the issue in engagement letters:  once the relationship ends, so too does the duty to advise on hacking.  Of course, returning the files at the end of a representation and destroying remaining ESI is also a good risk management tool.