The Many Mistakes in the Panel Decision in GS CleanTech Corp v. Adkins

By David Hricik, Mercer Law School

Over on the main page, Dennis has written up GS CleanTech Corp. and Cantor Colburn LLP v. Adkins Energy LLC (Fed. Cir. 2020) [Fed Cir Decision][DCT Decision] (does Dennis ever sleep?), which affirms a holding of inequitable conduct.

That finding can ruin careers.  Dennis examined the merits: I want to examine the procedure used on appeal. (I’ve taught civil procedure for decades now, and served as a clerk on the court a few years ago… this case is in need of correction by the full court or the panel on rehearing — whether it changes the outcome, or not, a point on which I have no view.) Whatever the merits, the panel mistates key issues of appellate review of inequitable conduct and contradicts prior panel decisions and even Therasense itself — and does so in a way that radically increases the scope of this equitable defense while, at the same time, failing to analyze the equities, oddly enough.

Specifically, first, the panel states the the standard of review of a fact finding of materiality underlying inequitable conduct  is for abuse of discretion. That is just flat wrong. “[W]e review the district court’s findings of materiality… for clear error.” Am. Calcar, Inc. v. Am. Honda Motor Co., 768 F.3d 1185, 1189 (Fed. Cir. 2014). Accord, Regeneron Pharm., Inc. v. Merus N.V., 864 F.3d 1343, 1351 (Fed. Cir. 2017).

Worse, invalidity “under the on-sale bar is a question of law with underlying questions of fact.” Robotic Vision Sys., Inc. v. View Eng’g, Inc., 249 F.3d 1307, 1310 (Fed. Cir. 2001). Accord, The Medicines Co. v. Hospira, Inc., 881 F.3d 1347, 1350 (Fed. Cir. 2018). The panel examines for abuse of discretion of, not just the underlying factual questions, but the legal question. That is wrong. Indeed, it applied abuse of discretion to whether the invention was ready for patenting, which is also wrong.

As stated,  reviewed the findings of intent to deceive for abuse of discretion: that’s wrong. “This court reviews the district court’s factual findings regarding what reasonable inferences may be drawn from the evidence for clear error.”
Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1291 (Fed. Cir. 2011)

And, third, the panel never (as the district court apparently failed to do) analyzed equitable balancing — given the circumstances should the entire patent be held unenforceable?  I’ve often observed that nothing in Therasense changed the rule that, if the accused infringer meets its burden of showing both materiality and intent, “then the district court must weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable.” Therasense, Inc. v. Becton, Dickinson and Co., 649 F.3d 1276, 1287 (Fed. Cir. 2011).

The panel applied the standard of review on the ultimate issue — equitable relief — to fact findings and legal conclusions. It’s a slippery slope, and one with severe consequences to the boundaries created by Therasense: it allows district courts to make clear errors on factual findings and legal conclusions, but be affirmed on appeal so long as they do not abuse their discretion. Finally and in addition, lack of careful appellate review will lead to OED investigations into practitioners, as well as ruined businesses and scientific careers.

Another Example of a Repeating Fact Pattern Implicating Privilege Waiver

By David Hricik, Mercer Law School

Of course, patent prosecution and litigation involves a lot of confidential information. As a result, protective orders, prosecution bars, and clawback arrangements are part and parcel of most patent suits. Perhaps because confidential and privileged information is more frequently involved than in some other forms of litigation, waiver issues are also common.

Over the years, I’ve bumped into this issue a couple of times:  an email from a client (or client’s representative) is claimed to be privileged even though the sender shared the email account with their spouse.  This happened recently in RTC Indus., Inc. v. Fasteners for Retail, Inc. (N.D. Ill. Feb. 26, 2020) (here).  The judge there held privilege was not waived, in part because married couples naturally share email accounts and there was no evidence the spouse had actually viewed the email.

That is not a universal approach, however. In addition, where an email account, or computer, is shared by people who are not married (such as roommates), a greater risk of privilege waiver exists. Finally, many employers monitor employee email, and, so, for example, if an employee e-mails a lawyer from a work computer, it may be that privilege is waived.  To be clear, this can happen even where the dispute is between the employee and some third party, not between employee and employer.

Jury Awards $32m Against Dentons for Damages Caused by its Disqualification

By David Hricik, Mercer Law School

A “verein” is a legal entity recognized under Swiss law somewhat similar to an association. Several law firms are organized this way, including Dentons.  Dentons agreed to represent a patentee, Revolaze LLC,  in an ITC proceeding when another “arm” of Dentons represented one defendant, The Gap.

The Gap moved to disqualify, arguing that Dentons was a single law firm and so it could not be adverse to its own client. The ITC agreed, and disqualified Dentons.

The patentee then sued for damages caused by the disqualification.  On February 20, and Ohio jury awarded what is reported to be the largest malpractice verdict in Ohio history, over $32 million.  Presumably, the damages were in part caused by the rapid pace of an ITC proceeding, but the details I know of are sketchy.

There are articles about the case, one behind a paywall (here) and the other not, but it seems mostly based on a conversation with the plaintiff’s lawyers, here.

Disqualification of a Party’s Expert Who Migrates to the Firm of a Court-Appointed Expert

By David Hricik, Mercer Law School

An order by Judge Alsup in Oracle Am., Inc. v. Google, LLC (N.D. Cal. Jan 28, 2020 (here)) reflects an unusual fact pattern.  The court had appointed an expert (in docket 2143, which by itself says a lot) who worked with the firm of Charles River Associates (“CRA”).  Google had an expert, Dr. Leonard.  Google notified Oracle that Dr. Leonard was to become “affiliated” with CRA, prompting Oracle to file an “objection” with the court.

In response, Judge Alsup issued an order stating the most it could say so far was “that Dr. Leonard (and Google) have made this move at their peril.”  He asked for motion practice and an appropriate record.

Expert witnesses are not subject to the same rules of conflicts of interest as lawyers (even when a lawyer is serving as an expert witness).  I know of cases where opposing parties choose experts who end up at the same firm, but never one where a court-appointed expert is affiliated with the same firm as a party’s expert.  If it is a conflict — and one that can’t be obviated by a screen of Dr. Leonard and other appropriate measures (I can think of many) — presumably Google will suffer disqualification of its expert, which would presumably cause tremendous problems with its case if, as you’d think, Dr. Leonard is serving an important and non-cumulative role.

Interesting problem.

Access to Prior Art Initiative of the USPTO to Ease Importation of Prior Art References from Parent Cases

By David Hricik, Mercer Law School

The USPTO is a couple of years into its Access to Prior Art Initiative, which in its first phase was designed to create for the examining corps a single list of references combining those cited in an application (by applicant and examiner) and references from the immediate U.S. parent applications (cited by applicant and examiner, but not third parties).  In the first phase, if an application met criteria for inclusion (among other things, only certain Art Units were included), the Office would notify the practitioner that the prior art was automatically imported, reducing the burden o cite that art.  The project was intended to then expand to include foreign counterpart and PCT applications.

In looking for exactly how broadly this has been implemented, I was unable to find much information after January 2019.  As Carl Oppedahl recently pointed out, it’s a great idea and means to avoid unnecessary work and issues about disclosure.  If you’ve had any involvement and can share, that’d be great.  I’m curious, for example, if the process is working: for example, is the importation complete and accurate?   I’ll also reach out to the Office and see if I can learn anything and will amend this post if so.

While I can understand why the list might not automatically include third party submissions, the omission does create a potential “trap” where a practitioner in the child fails to cite third-party art from the parent which was material to the parent, or is (or becomes) material to the child.

Another Disqualification Based Upon Implied Attorney-Client Relationships with Corporations Affiliated with the Client

By David Hricik, Mercer Law School

Over on the main page, Dennis summarized the grant of a motion to disqualify in the non-precedential decision in Trimble Inc. v. PerDiem Co. (Fed. Cir. Jan. 28, 2020) (Taranto, J.).  The firm representing PerDiem on appeal (another firm had represented it in the trial court) was at the same time providing prosecution advice to a subsidiary of Trimble.  Applying an amorphous multi-factor test that is common, the panel held that because the firm was representing the subsidiary, it could not be adverse to the parent on appeal. Hence, the firm was disqualified.

Oddly enough, probably at the moment this opinion was released, I was speaking at the Association of Corporate Patent Counsel meeting, with Mercedes Meyer, and discussing this recurring one:  the corporate client moves to disqualify a lawyer who is adverse, not to the corporate client, but to a subsidiary, parent, or affiliate.  Where, as here it seems was the case, the lawyer and client do not clearly define whether representation of one entity means the lawyer represents others, they leave it for a court to decide which entities are “the client” by examining the corporate structure, how the entities’ legal services are provided, and other often unpredictable factors.

It may be a difficult issue to broach at the onset of a representation, but it also may be better for both client and lawyer to understand what scope of loyalty the client expects and the lawyer can understand what potential future business she must forego, and that benefits the firm, its future clients, and the corporate entity.

Texas Bar Opinion on Encouraging Positive On-Line Reviews by Current or Former Clients

By David Hricik, Mercer Law School

This month, the Professional Ethics Committee for the State Bar of Texas issued Opinion No. 685, which addressed whether a lawyer could encourage current or former clients to post favorable reviews or comments on social media sites.  The Texas opinion stated that, so long as nothing of value was given for the reviews and that the lawyer did not encourage false, misleading, or unfounded statements, this would be appropriate.

On the other hand, while not deciding whether a lawyer has an obligation to monitor posts, the opinion joined the views of other states and explained that “if lawyer becomes aware that a client posted a favorable review that is false, misleading, or unfounded, the lawyer should take reasonable steps to see that the statement is corrected or removed.”  The opinion suggested that, if the lawyer controlled the site, the statement should be removed, but even if the lawyer did not, the lawyer should ask the author to address the concern, or “consider” asking the owner of the site to address the concern.  Finally, it suggested that if that failed, the lawyer should make a “curative statement” — but one that did not violate client confidences.

Lawyers have been taken to task several times for revealing client confidences, but it has been after someone posts a negative comment and the lawyer, defending herself, revealed client confidences. The Texas opinion, like others, emphasized that revealing confidential information even in response to a negative review is improper, unless the client consents to disclosure.

I’m imagining a former client posting “David got me a better result than any other lawyer could have,” and me having to post something in response! So, below, please only post truthful things and don’t overstate my abilities or I’ll have to cure your kindness.

ABA Opinion Limits Ability of Firms to Restrict Departing Lawyers

By David Hricik, Mercer Law School

An issue I’ve frequently been asked to discuss is the ethical constraints on firms to impose restrictions or requirements on departing lawyers — such as precluding a lawyer from doing logistical work on setting up a new, separate firm upon departure — as well as the departing lawyer’s obligations to her clients and soon-to-be-former firm.  In addition, migrating lawyers create issues for the new employer, such as imputed disqualification of former client conflicts.

In December 2019, the ABA issued a formal ethics opinion that clarified the ability of firms to restrict departing lawyers.  In American Bar Association Formal Ethics Op. 489 (available here).  The synopsis provides a good summary:

Lawyers have the right to leave a firm and practice at another firm. Likewise, clients have the right to switch lawyers or law firms, subject to approval of a tribunal, when applicable (and conflicts of interest). The ethics rules do not allow non-competition clauses in partnership, member, shareholder, or employment agreements. Lawyers and law firm management have ethical obligations to assure the orderly transition of client matters when lawyers notify a firm they intend to move to a new firm. Firms may require some period of advance notice of an intended departure. The period of time should be the minimum necessary, under the circumstances, for clients to make decisions about who will represent them, assemble files, adjust staffing at the firm if the firm is to continue as counsel on matters previously handled by the departing attorney, andsecure firm property in the departing lawyer’s possession. Firm notification requirements, however, cannot be so rigid that they restrict or interfere with a client’s choice of counsel or the client’s choice of when to transition a matter. Firms also cannot restrict a lawyer’s ability to represent a client competently during such notification periods by restricting the lawyer’s access to firm resources necessary to represent the clients during the notification period. The departing lawyer may be required, pre- or post-departure, to assist the firm in assembling files, transitioning matters that remain with the firm, or in the billings of pre-departure matters.

It is important, in my experience, for departures (and arrivals) to be done with sensitive both to the various relationships involved when a lawyer departs, and, as well, to the complex conflict issues that face the new employer.  This ABA opinion helps on the first issue and suggests the need, for example, to examine partnership or other policies or agreements among lawyers to ensure good practices.

Loss of Patent Rights in EPO on CRISPR

By David Hricik

The Board of Appeals at the EPO held on January 17, 2020 that the EPO patent on CRISPR gene editing technology was revoked for lack of novelty because it could not claim priority to a US provisional application.  The EPO decision is here.

Carl Oppedahl has written a post laying out what went wrong, in late 2013, that caused the problem. That post is here.

On an unrelated note, I’ve been fighting some health issues and hope to be blogging regularly again.

What to do if Someone Offers you an Opponent’s Information.

By David Hricik, Mercer Law School

The L.A. bar association is the latest to offer an opinion on what to do if someone, say the opposing party’s former employee, offers you information from the opposing party that looks purloined or seems confidential.  In Los Angeles City Bar Ass’n Professional Responsibility & Ethics Committee Opinion No. 531 (July 24, 2019) (here), the committee gave some useful guidance.

First, the committee stated the lawyer had to determine if the person possessed the information unlawfully.  If so, the lawyer might need to alert the court or appropriate authorities.

Second, the lawyer had to determine if the information was privileged or otherwise protected. As stated in a prior post, this can trigger obligations to at least notify the opposing party.

Third, because the lawyer does not represent the person providing the information, the lawyer had to comply with Rule 4.3, which, stated generally, requires the lawyer advise the person the lawyer does not represent her, and to ensure the lawyer does not appear disinterested.

Finally, the lawyer may need to consult with the client about what to do next, and to ensure the client does not use the lawyer’s services to unlawfully access information.

Of course, disgruntled former employees are often valuable sources of information but, as this opinion shows (in good detail!), there are things to be wary of.

New York City Bar Opinion on Receipt of Inadvertently Sent Documents

By David Hricik, Mercer Law School

In Opinion 2019-3 (May 16, 2019), the Association of the Bar of the City of New York, gave guidance on an issue on which most state ethics rules leave lawyers hanging. Under Model Rule 4.4(b), and similar state rules including the USPTO rules, a lawyer who receives a document related to the representation of a client, and knows or should know it was inadvertently sent, must notify the sender and then… the rule stops.

Obviously, the other side will (if the document has any significance) ask for the lawyer to return or delete it and, just as obviously, if the document has any significance the lawyer’s client will want the lawyer to not return it and, if it had been privileged, to argue it no longer is because it was inadvertently sent without due care.

This opinion provides a nice discussion of the background to various issues that arise with inadvertent receipt and some good historical background. As for specific guidance, my takeaways were as follows.

First, look to see if there is controlling law on what the lawyer can or must do.  A protective order, a standing order, a local rule, agreement of counsel, or prior decision of the court may control, for example.

Second, the opinion points out that if a lawyer knows, before reading the document, that it may have been inadvertently sent, it is unclear if the lawyer must examine it or can, instead, stop and notify the sender and thereby avoid knowing whether the document had any significance to the client’s objectives.  If the document has no significant bearing on the client’s objectives, the opinion states the lawyer may not have to let the client know of its receipt.  Of course, that course presents risks to the lawyer.

Third, if the document is significant and there is no clear obligation as to what to do, the lawyer should inform the client of receipt.  Then discussion is required because, as the opinion points out, use may entail risk. The client may not understand that disqualification, sanctions, or just an angry judge may result.

Fourth, if after consultation, the client “demands” the lawyer use the information, then the lawyer must assess the risk of doing so. For example, if the document contains opinion work product, using the information may be very risky since it is very difficult to waive protection over opinion work product.  But if there is risk, the lawyer must assess it and can withdraw if use subjects the lawyer to discipline or sanctions.  Without those risks, the client’s wishes should prevail, according to this opinion.

Finally, the opinion advised that a lawyer cannot choose not to use the information solely as a professional courtesy to the opposing party, or to personally benefit.

The question of what to do after a lawyer notifies the transmitting party of the mistake is one that the rules leave unanswered. This opinion provides a framework to analyze that issue, a fact-dependent problem at that!

TM Attorney Sued for Allegedly Attacking TM he had Obtained for Client

By David Hricik, Mercer Law School

A lawyer registered a mark for Annie Sloan Interiors Ltd. (ASI) to register a mark for it, but later represented Jolie Design & Decor LCC (JDD) and Jolie Home, LLC (Jolie Home) to challenge the mark (“CHALK PAINT”) asserting genericness (apparently at the USPTO and in litigation).  ASI, a former client by then, sued for breach of fiduciary duty and legal malpractice.

Defendant moved to dismiss. The court held the complaint adequately pled breach of a fiduciary duty. Specifically, the court reasoned ASI alleged the lawyer had “breached a duty of loyalty by using knowledge gained during his representation of ASI to assist a different client in a challenge to its mark, and that its damages consist of the money expended in defending the mark and any resulting diminution in the value of the mark.”

The court found that an agreement “waiving” (i.e., consenting) to this was insufficient because, among other things, in it ASI acknowledged the firm would be representing JDD, and made no mention of Jolie Home.

As for legal malpractice, the defendant argued the claim was time-barred, and here is a key lesson for practitioners. The lawyer had, it seemed, “terminated” the representation in 2015, at a time when the malpractice claim would have become barred. However, the complaint alleged that the lawyer “remained ASI’s designated attorney in the CHALK PAINT® stylized design trademark proceedings—and held the power to act on ASI’s behalf—throughout the time period from June 2012 through mid-2018, until his power of attorney was revoked and he was replaced as attorney of record on June 1, 2018.” The court reasoned that because it was “ASI’s position that Kappel’s representation did not actually terminate until he was removed as its attorney before the United States Patent and Trademark Office (“USPTO”), on June 1, 2018, and that up until that date, he remained enrolled before the USPTO as ASI’s attorney of record, holding the full power of attorney for CHALK PAINT® design mark before the USPTO. ASI also argues that in failing to withdraw as attorney of record at the USPTO, Kappel failed to perfect or complete his termination based on the 2015 termination letter.”  The court denied the motion to dismiss based on the defense of limitations given those allegations.

It’s rare to see a lawyer allegedly challenging a patent, or mark, it obtained for a former client, and this is one more example of why it seems risky to do so.

CLE, Fees, and the USPTO

By David Hricik

Mercer Law School

The listservs I’m on have exploded lately with concern, and some anger, about proposed fees on practitioners, and the potential for CLE requirements. Today, I happened to be reading an article, in a peer reviewed journal, by Frank Fagan, that purportedly shows that every one-hour of CLE decreases charges brought to state bars by 10%.  The article is here.

I don’t know about the quality of the analysis, and so would be curious what you all think on the merits and generally.


How Things Snowball: The Consequences of Violating a Rule

By David Hricik, Mercer Law School

Being disciplined by the USPTO, a state bar, or being sanctioned by a court is, of course, not a good thing for a lawyer and in some instances it can end a career or sharply limit one.  Over the past 30 or so years, I’ve seen a lot of somewhat unpredictable consequences flow from discipline or a finding of misconduct by a court.

For example, the USPTO requires practitioners to update their addresses and, from time to time, it has sent letters to the current address and if the recipient doesn’t respond within (I think it is) a month, the practitioner is “administratively suspended.”  If that happens, not a huge deal to correct, but some state bars require reporting administrative suspensions, and if a practitioner fails to do that, then the practitioner has two problems. And, if practitioner later “covers up” either thing, well, then three problems.  (I wrote an article a while back called “how things snowball” and it came to mind just now).

This post is inspired by a recent filing, a typically mundane request to be admitted pro hac vice.  In it, the lawyer stated he hadn’t been subject to discipline but in fact, he had. Four times, over about 40 years.  According to a corrected request, the original request had been made by his office mistakenly over his signature, and that is why the four had been left off.  The order from the court asking opposing counsel if, now, they wished to oppose the motion to admit is here.  Different courts have different approaches to signing by permission and non-lawyers can’t do certain things, so will the explanation as to the original mistake now snowball into something else?  Will the judge find the “four priors” matters? The omission? I have no idea and it sounds as if a mistake was made and promptly corrected, but, things can snowball.

And, as the final example, if you haven’t read the California Supreme Court case vacating a $3m fee awarded to a firm because it had an undisclosed conflict of interest (and, as a consequence of not disclosing the conflict, (a) its arbitration agreement with the client was unenforceable and (b) it also might have had to disgorge more than the $3m award), it’s blogged below.

There are lots of ways that a violation — even at times a technical one — can snowball into something much worse — privilege waiver for unauthorized practice of law, in-house counsel failing to follow “in-house registration” statutes leading to discipline or loss of privilege, and more.

I think it is from Hill Street Blues:  “Be careful out there.”

ABA Issues Opinion on Dividing Contingent Fees with Prior Counsel

By David Hricik

The American Bar Association’s committee on professional ethics issues ethics opinions interpreting the ABA Model Rules, which are similar to (almost) all state rules, as well as the PTO’s disciplinary rules.  Its opinions are not binding, but they hold sway.

The ABA released Formal Opinion 487 (June 18, 2019), addressing how successor counsel should divide fees with predecessor counsel (from a different firm) who have contingent fee agreement with successor counsel’s client in the case.  The opinion provides some helpful guidance on what can be — given the literal language of the fee splitting rules — some thorny issues. The summary of the opinion states:

In a contingent fee matter, when a counsel (successor counsel) from one firm replaces a counsel (predecessor counsel) from another firm as counsel for the client, Rules 1.5(b) and (c) require that the successor counsel notify the client, in writing, that a portion of any contingent fee earned may be paid to the predecessor counsel. The successor counsel may not be able to state at the beginning of the representation the specific amount or percentage of a recovery, if any, that may be owed to the predecessor counsel unless the amount or percentage has been agreed by the client and both predecessor and successor counsels. The successor counsel is not bound by the requirements of Rule 1.5(e), either at the time of engagement or upon a recovery, because Rule 1.5(e) addresses situations where two lawyers are working on a case together, not situations where one lawyer is replacing another. Upon a monetary recovery, the successor counsel may only disburse a portionof the overall attorney’s fee to the predecessor counsel with client consent or pursuant to an order of a tribunal of competent jurisdiction. If there is a dispute as to the amount due to the predecessor counsel under Rule 1.15(e) the disputed amount may have to remain in a client trust account until the matter is resolved. If successor counsel negotiates with predecessor counsel on the client’sbehalf, successor counsel must explain to the client the potential conflict of interest in the dual roles pursuant to Rule 1.7, where successor counsel has a personal interest in the amount predecessor counsel may receive or in the timing of the release of funds held pursuant to Rule 1.15(e)

OED Disciplines Lawyer for not Personally Signing TM Documents

By David Hricik

Trademark regulations require that the lawyer sign — even type in the electronic signature — all documents. A lawyer had been letting non-practitioner legal assistants sign various documents.  She realized that this was improper, but waited several months before doing anything. As a result, she was publicly reprimanded and placed on a year’s probation. The decision in In re Sapp is here.

In addition to being a reminder about signature requirements, I wonder if this is the way the Office will get at the various TM filings that have made the news lately…

CAFC Affirms Exceptional Case and Maybe Encourages Sand-Bagging

By David Hricik

Thermolife Int’l LLC  v. GNC Corp. (Fed. Cir. May 1, 2019) (here) is pretty interesting.  Plaintiffs (Stanford University was one of them) filed about 80 lawsuits, settling many for nuisance value.  Among the 80 defendants were Hi-Tech Pharmaceuticals, Inc. and Vital Pharmaceuticals, Inc. (“Hi-Tech”).  The defendants moved for and lost summary judgment on invalidity, but then the parties agreed to bifurcate further proceedings, with invalidity being determined first.

The trial court held after a bench trial that the asserted claims were invalid under 102 and 103.  A month after that, Hi-Tech moved for an exceptional case finding, but based upon lack of adequate pre-suit investigation into (wait for it) infringement.  The accused products had been publicly available and their labels indicated no infringement (insufficient amounts of one ingredient).

The court allowed plaintiff’s counsel to explain what pre-suit investigation had been done, but the trial court struck the declaration as belated.  Beyond that, the response did not fully address the claims and issues Hi-Tech had raised.  The court then found the case exceptional, essentially reasoning that because the labels indicated no infringement and the products were publicly available, the lawyers should have tested them, but did not.

The panel affirmed (Taranto, Bryson, Stoll).  Calling the determination unusual, the court nonetheless found no abuse of discretion. It noted that Hi-Tech had not “give early notice of the defects in plaintiffs’ infringement assertions that later became he basis for the fee award,” but concluded that because of the numerous suits and need to consolidate this “reasonably led not only to coordination among numerous defendants but to the agreement of all parties, for efficiency, to give priority to the common issue fo validity so that even discovery as to party-specific issues like infringement could be postponed.”  In addition, the court found no abuse of discretion that the pre-suit investigation had been inadequate given the labels and publicly-available products.

I suppose in the narrow sense of mass consolidated suits, the award of fees makes sense, but if the concept is taken out of context, one could imagine defense firms racking up hours hoping for a win on a hard issue while then using an easy issue to establish an exceptional case.  Further, if the invalidity case was close, presumably the amount of fees (not mentioned in the appeal and not challenged) would reflect some discount or adjustment since invalidity was, presumably, not “out of the ordinary.”

Interesting case, not for the merits of finding no adequate pre-suit investigation, but for the rest.

How far can you go in Pre-Suit Investigative Contacts with Opposing Parties?

By David Hricik, Mercer Law School

I’m often asked questions about how far a lawyer can go (directly or through a private investigator) in determining the facts before filing suit. On the one hand, Rule 11 (and Section 285) require investigation; on the other, certain ethical rules limit the ability to do so. For example, Rule 4.2 precludes communicating about a “matter” with a person “represented by counsel” in it — and, a “matter” can exist before a suit is filed and, further, in the cases of entities, even very low level people can be “represented by counsel.”  Further, in communicating with a person who is not “represented by counsel in a matter,”  Rule 4.3 requires lawyers to not appear “disinterested” and, in some circumstances, to explain their role to the person with whom they’re communicating.

Of course, normally, a lawyer can do what an ordinary consumer can do. There’s nothing unethical about walking into a store — even the defendant’s store — and buying a product.  There’s usually nothing wrong with asking the kinds of questions that an ordinary consumer would ask.  On the other hand, there’s a line and it’s not a bright one, between ordinary consumer questions and asking about the “matter.”  (These same observations hold true with on-line business-to-consumer chat rooms, e-mail, and the like.)

Lawyers in a recent patent case crossed the line. They avoided disqualification but found the “admissions” they had obtained excluded. The decision in Dareltech, LLC v. Xiaomi, Inc., (S.D.N.Y. April 11, 2019) is here.  It doesn’t illuminate the line very much — the lawyers, it seemed to the court, secretly recorded an opposing party’s employees seeking admissions that related to personal jurisdiction, not basic consumer questions — but is a good reminder that pre-suit investigations need to be done with care.

Lessons to Learn? Federal Circuit Disqualifies Firm Adverse to Members of Corporate Family of a Client

By David Hricik, Mercer Law School

In an order granting motions to disqualify — rather than analyzing with discretion a decision of a district court — the Federal Circuit disqualified Katten Muchin Rosenman LLP (“KM”) from representing parties in appeals styled Dr. Falk Pharma GMBH v. Salix Pharma. Int’l., Inc. and Salix Pharma., Inc. v. Mylan Pharma., Inc., available here.

The case involves a number of issues, some of which are obscured by discussion of agreements that, in large measure, turned out to not affect the court’s analysis.  To be clear, this post simplifies the case a lot, but I’ll mention a few weeds at the end.

The story begins in 2001, when a lawyer at KM began to represent Bausch & Lomb (“Bausch”) in trademark matters.  Those representations, apparently a series of off-and-on work (as is common) continued for years.  While it was disputed whether that work continued, at the time of the motion to disqualify, KM was representing Bausch in trademark litigation.  Plainly, the firm could not be adverse to Bausch.

Meanwhile, two lawyers at Alston & Bird (“A&B”) were representing Mylan in patent suits and an IPR.  A&B was plainly representing Mylan, and so could not be adverse to it. Those matters largely wrapped up and were, with one exception, fully briefed before the Federal Circuit.

Then, in May 2018, after all but one of the patent cases and IPR proceeding had been fully briefed before the Federal Circuit, the lawyers who were representing Mylan left A&B for KM.  They then entered appearances for KM in those appeals. (To be clear, some motion practice occurred in the district court before final judgment, but that was stayed and the motions dealt with by the Federal Circuit.)

Thus, as things stood, KM lawyers were representing Mylan in several patent appeals.  Bausch, KM’s client, was not a party to those appeals.

The motions to disqualify filed in the Federal Circuit were based upon the fact that Bausch was a corporate affiliate of parties who were adverse to Mylan in the appeals.  Thus, the motion asserted KM’s representation of Bausch precluded it from being adverse to Bausch’s afiliates in the Mylan matters.  Among the affiliates in the Mylan matters was Bausch’s ultimate parent, Valeant-CA.

So, after motions to intervene and other things, the question the Federal Circuit faced was whether KM could be adverse to a current client’s ultimate (but indirect) parent corporation and its other affiliates, also indirectly related.  Judge O’Malley held it could not.  She gave two rationales for holding that representing Bausch precluded KM from being adverse to the entities involved in the Mylan appeals.

First, the Outside Counsel Guidelines were part of an engagement letter relating to KM’s representation of Bausch that identified Valeant-CA as the client.  KM was representing Mylan against Valeant-CA.  Further, language in the engagement letter indicated that corporate affiliates were also the client, and some affiliates were adverse to Mylan, and so KM was adverse to them.  Thus, KM was adverse to a current client by operation of the OC Guidelines and engagement letter.

Second, Judge O’Malley assumed, arguendo, there was some ambiguity, and relied upon principles developed by the Second Circuit (the Mylan patent cases were in the Third and Fourth, and from the PTAB, but she reasoned those jurisdictions would follow the Second Circuit’s lead), which set out a multi-factor test to determine whether, if there is no agreement, affiliates of a client should be considered to be the client for conflicts purposes, which include: “(i) the degree of operational commonality between affiliated entities, and (ii) the extent to which one depends financially on the other.” Based upon those factors, and the affidavit from the movants showing the interrelationships, she held that by representing Bausch, KM was representing all of the various entities.

After concluding that KM was adverse to a current client, Judge O’Malley noted that there is a split on whether being adverse to a current client automatically requires disqualification or, instead, leads to equitable balancing.  She concluded that, even looking at the equities, disqualification was warranted.

Why does the case matter?

First, if client identity is not clear, a firm’s representation of an entity can result in inability to be adverse to all parts of a far-flung enterprise.  Further, leaving client identity unclear subjects the firm, and existing and future clients, to the multi-factor test, which hardly helps practical planning.

Second, Judge O’Malley in a footnote noted that Federal Circuit law does not apply to ethical issues. Here, she noted that the because the appeals were from New Jersey and Virginia, those regional circuit’s laws applied. The rules are not always the same. Further, although she noted one appeal was from an IPR from the PTAB, she stated — incorrectly — that the USPTO disciplinary rules apply.  But motions to disqualify in the USPTO are not governed by those rules.

Third, her comments about adversity should give pause to patent practitioners.  While obviously being across the “v.” on an appeal is adverse, she observed that “we look to the total context, and not whether a party is named in a lawsuit, to assess whether the adversity is sufficient to warrant disqualification.” (Internal quote marks and citation omitted).

Fourth, and finally, while here disqualification does not appear to have caused significant disruption — briefing in all but one of the cases was done, and co-counsel seems to have been involved — that is not always the case.  Disqualification can hurt clients, and severely.

So, be careful out there.

Another Post on 101 and Statutory Text, and Hopefully my Last

By David Hricik

I’ve written on this blog my argument — I think, observation — that the text of the Patent Act does not authorize invalidity, or patentability, to be based upon Section 101.  (Here is one of them.)  Why rant again?

First, Dennis on the main page posted here the USPTO’s new guidelines on eligibility.

Second, today at the AIPLA mid-winter meeting, Bob Armitage spoke passionately about how  these guidelines are nonsensical and that we will never resolve the 101 problem because it is leading us down a path of nonsense talk.  (Is a non-mathematical concept not abstract?  What is a “method of organizing human activity?”).  The Federal Circuit in one of the Alice opinions quoted Judge Rich who said in 1946 Congress got rid of this nonsense — of what is “inventiveness” and so on — but here we are, talking nonsense.

So, this post. Here is my suggestion:  someone should assert the USPTO lacks rule making power to adopt these regulations (or guidelines) because 101 is not a condition of patentability.  Maybe the USPTO will reject the argument (I bet they will but a textualist would not), and maybe the CAFC will reject the argument (ditto), and more likely than not the Supreme Court would, too (but, I hedge my bets because several justices are textualists and the Court has actually never analyzed the statutory text).  You could, if you made this argument, end up showing the Court what the USPTO and CAFC know, which is that 112 and 103 are the authorized and regulated ways to police broad patents, and 101 is not.

Maybe you can help us stop talking nonsense.