On-going Suit About Conflicts During Prosecution

The case itself only affirmed the denial of a motion by lawyers sued for a conflict of interest to compel arbitration, but Adherent Labs., Inc. v. DiPietro, 2018 WL 3520843 (Ct. App. Minn. July 23, 2018) (here) has interesting underlying allegations.

Bunnelle was a part-owner of Adherent.  DiPietro, a patent lawyer, began to represent Adherent in 2009. In 2010, Bunnelle left Adherent after a dispute, and began working for IFS.  DiPietro continued to represent Adherent.

Bunnelle sued Adherent in 2012, but as a result of suing assigned certain IP rights to Adherent (apparently, this was part of a settlement).  DiPietro helped Adherent’s litigation counsel draft the assignment, though apparently DiPietro did not defend Adherent in that suit. However, he did continue to represent Adherent in other matters, it seems.

In 2014, Adherent learned that in March 2013 DiPietro had filed an application for IFS, naming Bunnelle as sole inventor (presumably because the application published).  Allegedly, the application was based upon subject matter that Bunnelle had assigned to Adherent in 2012.

Adherent sued Bunnelle and IFS, alleging Bunnelle had breached the assignment and IFS had tortiously interfered with it.  Adherent also sued DiPietro and his firm for breach of fiduciary duty, alleging that they had prosecuted applications for IFS based on Adherent’s intellectual property.  That’s the underlying part of the story that is interesting.  In that regard, the opinion explains that the district court had, earlier, denied the lawyer-defendants’ motion for summary judgment:

The district court determined that appellants knew that Adherent and Bunnelle had an adversarial relationship, and that appellants never sought Adherent’s written consent to represent IFS or Bunnelle. The district court also determined that appellants began representing IFS prior to DiPietro assisting in the drafting of the assignment, and that appellants had available to them, in the course of their representation, Adherent’s confidential information. The district court concluded that facts in the record showed that appellants improperly disclosed Adherent’s confidential information.

The district court determined that summary judgment was not appropriate on Adherent’s breach-of-fiduciary-duty claim because the record contained facts indicating that appellants breached their duty of loyalty, duty of confidentiality, and duty to disclose. The district court also determined that summary judgment was not appropriate on Adherent’s tortious-interference-with-contract claim because facts in the record supported Adherent’s claim that appellants used language from Adherent’s patent application in IFS’s application, which procured Bunnelle’s breach of the assignment.

As for the issues decided in this opinion itself, it turns out that Adherent settled its case against Bunnelle and IFS and that settlement agreement contained an arbitration clause. So, the defendant lawyers sought to compel arbitration of Adherent’s claims against them based on the arbitration clause in the settlement agreement between Adherent, on the one hand, and Bunnelle and IFS on the other. In short, that didn’t work. (I actually wrote an article about somewhat related issues in arbitration clauses a long time ago and it’s here.)

It is rare, of course, to see allegations which, if true, present this sort of conflict and serves as a reminder to be careful when representing former employees of clients.