Patent practitioners in my experience live in a vaccuum. Often, they think patent practice is not subject to the same rules as other areas. But, when a motion to disqualify or malpractice claim is brought, they suddenly learn that the rules that other lawyers abide by apply with equal force in patent practice.
Client identity is one of those issues. In a series of posts, I'll address some common issues in patent practice. Today deals with entities, such as corporations, partnerships, LLC's and the like.
If your firm represents corporations, you need to be aware that if you don't deal with the issue of client identity effectively in your engagement letter, you may find that you have a lot more clients than you thought. For example, if you represent a third tier subsidiary of some company, you may be unable to be adverse to any affiliate of that company — no matter how attenuated its relationship is with your "real" client.
If you represent one corporation, how do you know if you represent all others? The best method is to specify: "by representing ____, we do not represent its affiliates, parents, subsidiaries, or other owners or constituents." If you don't put that, you're more likely than not going to have to look at what law applies, and you'll find there is a split. The majority approach relies on a multi-factor test (this one from a New York bar opinion, but it is typical):
1.1 Does the current corporate client have an objectively reasonable belief that its affiliate has de facto become a current client of the law firm, either because of the law firm’s relationship and dealings with the affiliate during the representation, or because of significant overlaps in personnel and infrastructure between the corporate client and its affiliate?;
1.1.1. Do the current corporate client and its affiliate share the same directors, officers, management, or other personnel?;
1.1.2. Do the current corporate client and its affiliate share the same offices?;
1.1.3. Do the current corporate client and its affiliate share the same legal department (or report to the same general counsel)?;
1.1.4. Do the current corporate client and its affiliate share a substantial number of corporate services?; and
1.1.5. Is there substantial integration in infrastructure between the current corporate client and its affiliate, such as shared computer networks, e-mail, intranet, interoffice mail, health benefit plans, letterhead and business cards, etc.?
2. Is there a significant risk that the law firm’s representation of either the current corporate client or the adverse client in the adverse representation will be materially limited by the law firm’s responsibilities to the other client?
3. During its representation of the corporate client, did the law firm learn confidences and secrets from either the client or its affiliate that would be so material to the adverse representation as to preclude the law firm from proceeding?
In a recent patent case, the court also looked to whether the company the lawyer wanted to sue used the same logos as its client… You get the point.
Now let me really scare you by combining this knowledge with the post below about maintenance fees and adversity: if your firm is calendaring a single maintenance fee for a subsidiary of some huge corporate conglomerate, you may need to treat that entire conglomerate as a current client — and you can't be adverse to any part of it, and adversity includes far more than just suing it!