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.

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.

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.

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.

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:

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.

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!

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.

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.

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.”

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:

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…

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.

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.