It is common for different entities to have input into prosecution, as where a licensee has input into prosecution of pending applications. In such circumstances, the parties likely can assert a “common interest” privilege so that third parties cannot access their communications. However, courts continue to conflate the existence of a common interest with implied joint attorney client relationships.
In the most recent example (others are in our book), DePuy Orthopaedics, Inc. (“DePuy”) entered into a research agreement with Orthopaedic Hospital (“OH”). OH would develop products and DePuy would pay a royalty if any were commercialized. Some patent applications were filed. OH later contended that DePuy had developed products that required it pay OH a royalty; DePuy refused, and OH brought a declaratory judgment. See DePuy Orthopaedics, Inc. v. Orthopaedic Hosp., 2016 WL 7030400 (Dec. 1, 2016).
In the course of the lawsuit, OH moved to compel all documents from DePuy related to prosecution of the patent applications. DePuy refused to provide the documents. In doing so, it conceded that the parties shared a common interest with respect to the patent applications, but contended that DePuy’s in-house attorney did not jointly represent both OH and DePuy when doing so.
The court held that as a matter of law DePuy’s in-house lawyer represented both it and OH. In doing so, it applied the test for determining whether a lawyer represents a client. Thus, because the lawyer jointly represented both OH and DePuy, nothing was privileged between them in this dispute.
As I’ve written, this is legally incorrect. The issue isn’t whether DePuy’s in-house lawyer represented one client, but whether she represented two. When that is the issue, courts that appropriately analyze this issue recognize that a different analysis is required. For example, implying a joint-client relationship can create conflicts of interest. Further still, with respect to in-house counsel, this could create the unauthorized practice of law (for example, if she were not licensed in the state where the activities occurred, but registered by the state, and the “representation” went beyond that necessary to practice before the USPTO. It could also result in liability by in-house counsel to third parties, and in-house counsel typically don’t have malpractice insurance.
This same fact pattern has bitten several outside firms and in-house counsel before. Any time a lawyer is prosecuting patents where there is some agreement where a “non-client” has input — a joint venture agreement, a license, a joint development agreement — the lawyer should be extremely careful to ensure that the “non-client” knows it is not a client.