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.

Comment Period for Proposed Amendment to Rule 30(b)(6), Others, Closes February 15

By David Hricik

30(b)(6) depositions are part of the toolkit of any competent patent litigator.  The proposed change would, I think, help with some questions about the rule, but leave others unresolved.  The proposed amendment to Rule 30(b)(6) is below, with the proposed new language not in italics:

In its notice or subpoena, a party may name as the deponent a public or private corporation, a partnership, an association, a governmental agency, or other entity and must describe with reasonable particularity the matters for examination. The named organization must [proposal deletes the present word “then”] designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf; and it may set out the matters on which each person designated will testify. Before or promptly after the notice or subpoena is served, and continuing as necessary, the serving party and the organization must confer in good faith about the number and description of the matters for examination and the identity of each person the organization will designate to testify. A subpoena must advise a nonparty organization of its duty to make this designation and to confer with the serving party. The persons designated must testify about information known or reasonably available to the organization. This paragraph (6) does not preclude a deposition by any other procedure allowed by these rules.

While I appreciate the idea behind the change — to foster cooperation by requiring conferring about the topics and so on — the case law about the use of Rule 30(b)(6) demonstrate to me that a lot more could be done to eliminate problems. (E.g., can you instruct a witness not to answer if the question is outside the scope of the notice.)   If they’re going to amend it, I would hope for more is one way of stating it.

You can find more about the proposals, which include changes related to petitions at the appellate level for panel rehearing and rehearing en banc, here (to save you time, 30(b)(6) starts on page 31).

New Paper on Ethics and Social Media

By David Hricik

I’ve long written about ethics and technology (my old paper about email security, I am proud to say, pushed back on the idea that (at least in the 1990s) email was insecure).  For an AIPLA speech I’m giving next month, I wrote a paper on various ethical issues that arise with the use of social media.  It is available here.

The issue that I’ve run into a few times now in IP cases is judicial research into facts. I represented people in one of those matters, which was before the OED, and can’t reveal anything much about it, and the other was a case where judicial research led to a show cause order that was based upon…. poor judicial research.  The paper points out those and similar problems.

Webinar today on Inequitable Conduct Post-Regeneron

By David Hricik

The Intellectual Property Owners Association (IPO) will offer a one-hour webinar entitled “Inequitable Conduct After Regeneron: What Litigators, Patent Prosecutors, and Patent Owners Need to Know” on January 10, 2019 from 2:00 to 3:00 pm (ET).  Kevin Noonan of McDonnell Boehnen Hulbert & Berghoff LLP, and Rohit Singla, Munger of Tolles & Olson LLP and I will discuss the significant ongoing impact of the 2017 Federal Circuit decision in Regeneron v. Merus, which found a patent unenforceable due to inequitable conduct based partly on an adverse inference drawn because of the behavior of litigators years after prosecution ended.  You should be able to find it at:




Court denies motion to clarify obligations when making permitted ex parte contacts

By David Hricik

The ABA Model Rules and most state rules divide the world into “persons represented by counsel,” who may not be contacted about a matter, and “unrepresented persons,” who may.  Speaking generally, a lawyer may not communicate about a matter with a person who is “represented by counsel” in that particular matter.  See, e.g., A.B.A. Model Rule 4.2.  This is true even if the represented person wants to talk to the lawyer: only the person’s lawyer may consent.

If a person is not “represented by counsel,” in a matter, a lawyer may communicate with that person, subject to requirements of Rule 4.3, which usually include explaining why the lawyer is communicating and not giving legal advice. A comment to that rule states: “In order to avoid a misunderstanding, a lawyer will typically need to identify the lawyer’s client and, where necessary, explain that the client has interests opposed to those of the unrepresented person.”

Two common problems arise with these rules.  One is that whether a person is “represented by counsel” is not always clear when an entity is the opposing lawyer’s client: if you’re suing my client, and my client is a huge multi-national corporation, is everyone at my client “represented” by me, or what?  The comment to ABA Model Rule 4.2 provides some clarity, but not a lot at the margins, by stating:

In the case of a represented organization, this Rule prohibits communications with a constituent of the organization who supervises, directs or regularly consults with the organization’s lawyer concerning the matter or has authority to obligate the organization with respect to the matter or whose act or omission in connection with the matter may be imputed to the organization for purposes of civil or criminal liability. Consent of the organization’s lawyer is not required for communication with a former constituent.

That’s likely why a comment states: “A lawyer who is uncertain whether a communication with a represented person is permissible may seek a court order.”

The second problem is that often what, exactly, a lawyer must say to a person who is not “represented by counsel,” can be unclear.  Obviously, a lawyer who wants the person not to reveal information will want the person to be given all sorts of information by opposing counsel — “you don’t have to talk to me and you shouldn’t reveal privileged information” and so on — while the lawyer wanting to make the contact wants to make the contact friendly and informal.

It’s not perfectly clear from the court’s order, but it appears that in Hoist Fitness Systems, Inc. v. TuffStuff Fitness International, Inc. (C.D. Cal. Jan. 7, 2019), a lawyer sought an order modifying the protective order to specify that certain persons were not “represented” and to clarify what the lawyers had to do to comply with Rule 4.3.  The court denied the request:

Defendant seeks to amend the Protective Order to require the parties to comply with the law – specifically, California Rule of Professional Conduct 4.37. Defendant “seeks clarification from the Court regarding the proper interpretation of Rule 4.3, and if it agrees with [Defendant’s] interpretation, grant [Defendant’s] request to amend the protective order to ensure compliance with Rule 4.3 by all counsel in this litigation.” Dkt. 147 at 1.

Pursuant to Local Rule 37-2.4, “[t]he Court will not consider any discovery motion in the absence of a joint stipulation or a declaration from counsel for the moving party establishing that opposing counsel (a) failed to confer in a timely manner in accordance with L.R. 37-1; (b) failed to provide the opposing party’s portion of the joint stipulation in a timely manner in accordance with L.R. 37-2.2; or (c) refused to sign and return the joint stipulation after the opposing party’s portion was added.” L.R. 37-2.4. Here, Defendant filed the instant Motion to Amend the Protective Order without a Joint Stipulation or the required declaration from counsel. Hence, the Court need not consider Defendant’s Motion to Amend the Protective Order.

In addition, the Court declines Defendant’s request to give an advisory opinion on whether Plaintiff’s counsel has violated California Code of Professional Conduct 4.3. Golden v. Zwickler, 394 U.S. 103, 108, 89 S. Ct. 956, 959, 22 L. Ed. 2d 113 (1969) (“‘(T)he federal courts established pursuant to Article III of the Constitution do not render advisory opinions.”). Moreover, there is no good cause to amend a stipulated protective order to include a requirement that counsel comply with the law. Fed. R. Civ. P. 26(c)(1) (“The court may, for good cause, issue an order to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense.”).

It’s hard to tell, but if the party seeking the modification had identified particular individuals and sought rulings as to them, then perhaps the cost of formal discovery could have been reduced, and the potential for future motion practice on this point, eliminated.

GDPR and Requests by EU Clients to be Forgotten

By David Hricik

Prosecution for foreign clients presents several ethical issues, and the recently enacted EU General Data Protect Regulation (“GDPR”) presents some fun ones.  In Maryland State Bar Association Ethics Opinion 2018-06 (here), the committee tackled how a firm can abide by an EU client’s request to be “forgotten” — and so delete all records of having represented the client — and  yet after that run conflicts checks to make sure the firm isn’t being adverse to that former client in a substantially related matter, as Rule 1.9 of most state ethical rules (and USPTO rule 11.109) require.  To illustrate, if you delete the fact that your firm once represented Bob Smith, and someone in the future asks your firm to be adverse to Bob Smith, Bob’s name won’t show up in the conflicts check and, if the matter against Bob is related to the work your firm and done for him, you could wind up having Bob complain that your violating Rule 1.9.

The committee stated that, if an EU client asks to be forgotten, this can be a waiver of any future conflict, stating:

If a former client asks an attorney to delete the information needed to manage conflicts of interest, and the GDPR requires the attorney do so, we believe that the client’s request can act as a waiver of conflicts that could have been discovered had the data been retained if: (1) the firm provides written advice to the former client that fully informs the former client that deleting the information could result in a conflict and that by requiring such deletion the client consents to the firm’s potential future representation of other clients with conflicts that might otherwise have been discovered, and (2) none of the attorneys who handle the matter for the firm have any retained knowledge of the former client’s information.

The opinion goes on to describe what is required for informed consent, and provides a useful guide.  I don’t know how often this will happen, but if it does, this opinion provides a framework to analyze the issues. I’d be really certain the former client understands what being forgotten will mean.  Perhaps they can be persuaded to let the firm forget everything except its name, and so at least that will trigger some future analysis by firm lawyers if Bob’s name shows up on a conflicts check.

An Interesting Opinion on the Right to Jury Trial that Can Relate to 101 and 285

By David Hricik

In the three prior posts (hey, it’s a trend!) on Section 285, I pointed out the need for lawyers to advise principals of patentees that they may, personally, be on the hook for liability for fee shifting.  For example, if the patentee is an asset-less shell corporation, the accused infringer may seek (perhaps should seek, promptly) to join principals of the patentee in the event that the case is found exceptional.  Likewise, given the long-standing line of cases (going back to Ultramercial, decided when I was clerking for Chief Judge Rader (here)), the CAFC has indicated 101 can implicate factual issues and, so, likely the right to trial by jury.

It’s not a patent case, but nonetheless Marchan v. John Miller Farms, Inc. (3:16-0-357-WGY D. N.D. Dec. 11, 2018), here, has a discussion pertinent to both issues. The court addressed whether a jury must decide piercing the corporate veil under federal law, and held that there is a federal right to trial by jury on this issue.  Honestly, that surprised me, but I hadn’t looked at the issue in 20 years.

The court did mention patent cases, and did mention a lot of things that should resonate with patent litigators about various issues in patent cases, including Section 101 and willfulness.  The court wrote, after deciding the issue before it, in part as follows:

The analysis ought not end here. Some scholars have recently advocated making judges, not juries, decide whether to pierce the corporate veil: 

[J]udges . . . are best suited to decide in each case whether the corporate veil should be pierced, for four reasons: (1) veil piercing is an inherently equitable remedy that judges are better equipped to decide; (2) veil-piercing inquiries require a weighing of legal fictions and concepts that lay jurors simply are not trained to perform; (3) decisions by judges are likely to produce more consistent results in similar cases; and finally (4) judges can likely make veil-piercing decisions more efficiently than juries can. 

Brian D. Koosed, Anthony P. Badaracco, and Erica R. Iverson, Disregarding the Corporate Form: Why Judges, Not Juries, Should Decide the Quiddits and Quillets of Veil Piercing, 13 N.Y.U. J.L. & Bus. 95, 136 (2016); see also Mark A. Olthoff, Beyond the Form–Should the Corporate Veil Be Pierced?, 64 UMKC L. Rev. 311, 336 (1995) (“Because consideration of these factors involves a weighing test, a jury may be ill-suited to decide the question. Therefore, the trial judge should make the final determination of the piercing issue.”).

These contentions crop up from time to time in different contexts. See, e.g., Brandon M. Reed, Who Determines What Is Egregious? Judge or Jury?, 34 Ga. St. U.L. Rev. 389, 426 (2018) (arguing that judicial determinations of willful or egregious patent infringement “will reduce prejudice at trial, increase judicial efficiency, and foster predictable outcomes in litigation.”); but see David Nimmer, Juries and the Development of Fair Use Standards, 31 Harv. J. L. & Tech. 563, 589-93 (2018) (“Learning to Love the Seventh Amendment”). It is appropriate to point out that most of these unsupported conclusions are nothing but elitism, pure and simple. They are an unabashed retreat from the magnificent vision of the Founders. “The Seventh Amendment promised to ‘preserve[]’ the right of ‘trial by jury’ in virtually all civil suits ‘at common law’ and limit the power of federal judges to overturn any fact properly found by a civil jury.” Akhil Reed Amar, America’s Unwritten Constitution 435 (Basic Books 2012).

Let’s deal with the quoted contentions in reverse order:

Efficiency. Yes, there is something to this argument in the present case. The issue of veil piercing has been fully briefed and argued. There is nothing to suggest that further discovery will add to the store of information available to decide this issue. Unfortunately, the existence of a judicial vacancy makes it unlikely that this case will come before a local jury in North Dakota before well into 2019 and this is far too slow. This does not reflect on jurors, however. Rather, it is a result of the lack of judicial resources to preside over the requisite jury trial. More particularly, it reflects that I am unable, in view of my own caseload and the cases in other districts I visit, to go to Fargo, North Dakota to try this case. Efficiency is one component of justice, but it is not the sole goal of the justice system. Were that not the case, why have trials at all?

Consistency. Hardly. The great strength of our common law system is reasoned inconsistency, i.e., each court reaching out for the best possible justice in the case before it, where reasoned but varying decisions draw from the body of other such decisions with the idea that the law will grow and adapt based on such reasoning. Ours is not a civil code system where I can simply look up the rule and apply it to each case.

The working judge is not and never has been a philosopher. He has no coherent system, no problem solver for all seasons, to which he can straightaway refer the normative issues. Indeed, if he could envision such a system for himself, he would doubt that, as a judge, he was entitled to resort to it; he would think he must be less self-regarding.

Hon. Benjamin Kaplan, Justice, Massachusetts Supreme Judicial Court, Encounters with O.W. Holmes, Jr., 96 Harv. L. Rev. 1828, 1849 (1983).

Judges are better equipped — jurors are not trained to weigh legal concepts.

This is simply not true. I have been a trial judge for over forty years. In the fact-finding line, anything a judge can do a jury can do better. The best sociological evidence confirms this truth. See James Surowiecki, The Wisdom of Crowds (2004).

The fact–finding most analogous to that involved in the veil-piercing inquiry is the fact-finding undergirding a determination of successor liability — surely a jury issue. See, e.g., Jury Verdict, Thomas & Betts Corp. v. New Albertson’s, Inc., No. 10-11947-WGY (D. Mass. Dec. 12, 2015), ECF No. 801. Likewise, in the case at bar, the jury will need to decide whether the product was of merchantable quality, whether it was unreasonably dangerous, and perhaps the comparative negligence of the parties on certain counts. It may also have to assess both compensatory and punitive damages.

Four months ago, I watched a jury learn about the mechanics of 3-D printing and analyze a certain interface layer at the microscopic level to determine obviousness and infringement. Tr. Jury Trial, Desktop Metal, Inc. v. Markforged, Inc., No. 1:18-cv-10524-WGY (D. Mass. Sept. 24-27, 2018), ECF Nos. 559-64. More recently, I watched a jury determine probable cause to remove an obstreperous passenger from a campus shuttle bus. Electronic Clerk’s Notes, Strahan v. Parlon, No. 1:17-11678-WGY (D. Mass. Sept. 17-20, 2018), ECF Nos. 156-61. I asked another jury this question: “Did the anticompetitive effect of [a] settlement [between two pharmaceutical companies] outweigh any procompetitive justifications?” Jury Charge at 37:9-18, In re Nexium (Esomeprazole) Antitrust Litig., No. 12-md-02409-WGY (D. Mass. Dec. 3, 2014), ECF No. 1441, aff’d, 842 F.3d 34 (1st Cir. 2016).

Jurors have long been deciding all these issues and many more complex. It takes a special type of arrogance simply to conclude that American jurors cannot handle the veil-piercing issues presented here.

Quite simply, jurors are the life’s blood of our third branch of government.

It is not too much to say that a courthouse without jurors is a building without a purpose. See Judith Resnik & Dennis E. Curtis, Representing Justice: Invention, Controversy, and Rights in City-states and Democratic Courtrooms 293 (Yale University Press 2011); Lewis F. Powell, Jr., Foreword to John O. and Margaret T. Peters, Virginia’s Historic Courthouses xi (University Press of Virginia 1995) (“Public buildings often . . . reflect the beliefs, priorities, and aspirations of a people. . . . For much of our history, the courthouse has served not just as a local center of the law and government but as meeting ground, cultural hub, and social gathering place.”). It is a quiet government museum to what was once the most extensive and robust expression of direct democracy the world has ever seen.

Come in. Look around. It’s quiet. The real work goes on in judicial chambers, hidden from public view. See Brock Hornby, The Business of the U.S. District Courts, 10 Green Bag 2d 453 (2007). You can hear your footsteps along the broad corridor past the vacant courtrooms. Go into a courtroom. There will be an American flag, limp upon its staff. Along one wall is the jury box. There decent, common-sense Americans with an overarching sense of duty have sat for years. Again and again, the courtroom has heard the clerk intone the familiar cry, “Ladies and gentlemen, please stand and harken to your verdict as the Court records it.” No more.

In this courtroom, the chairs in the jury box are empty, mute testimony to the consistent derision of self-interested corporations,[4] shallow stereotyping by lawyers and scholars who do not know their way around a courtroom, and the virtual abandonment of the civil jury by those judicial officers most charged with keeping our jury system vital and flourishing. 

Americans themselves may yet rescue their right to a jury. Workers at Uber, Lyft, Microsoft, Google, and Facebook have caused those corporations to abjure forced arbitration of claims of sexual harassment and assault. See Daisuke Wakabayashi & Jessica Silver-Greenberg, Facebook to Drop Forced Arbitration in Sexual Harassment Cases, N.Y. Times, November 9, 2018, at B1; Kate Conger & Daisuke Wakabayashi, Google Bows to Demands to Overhaul Abuse Policy, N.Y. Times, November 9, 2018, at B1; Daisuke Wakabayashi, Yielding to Critics, Uber Eliminates Forced Arbitration in Sexual Misconduct Cases, N.Y. Times, May 16, 2018, at B3.[5] Large law firms are increasingly yielding to pressure to drop mandatory arbitration agreements for employment-related claims, such as those alleging sexual harassment and discrimination. See Chris Villani, After Kirkland, Sidney Arbitration Flip, Group Eyes DLA Piper, Law360, Nov. 28, 2018 (describing how pressure from Harvard Law School students led Kirkland & Ellis and Sidley Austin LLP to end. See Chris Villani, After Kirkland, Sidney Arbitration Flip, Group Eyes DLA Piper, Law360, Nov. 28, 2018 (describing how pressure from Harvard Law School students led Kirkland & Ellis and Sidley Austin LLP to end forced arbitration for employees, while DLA Piper, Drinker Biddle & Reath LLP, Knobbe Martens, Paul Hastings LLP, Stoel Rives LLP, and Varnum LLP retain such clauses in their employment contracts). But see Michael Selby-Green, Morgan Stanley is fighting to stop a race-discrimination suit from going to trial by using a controversial tactic that keeps employee complaints secret, Bus. Insider, October 6, 2018; Anthony J. Oncidi, Consider the True Implications of Waiving Arbitration, Daily Journal, Nov. 14, 2018 (implicitly characterizing forced arbitration as a weapon and suggesting that dropping it is “a dangerous form of unilateral disarmament”).

Do you care about any of this?

You should.

Your rights depend on it.


4. While corporations primarily use forced arbitration to bar access to our justice system altogether, see Cynthia Estlund, The Black Hole of Mandatory Arbitration, 96 N.C. L. Rev. 679, 709 (2018); see also Jessica Silver-Greenberg & Michael Corkery,In Arbitration, a ‘Privatization of the Justice System,’ N.Y. Times, Nov. 1, 2015, data support their self-interested decision even in those few cases that are actually heard. As one would expect, in state courts, corporations win somewhat less than half the time. Alexander J. S. Colvin, An Empirical Study of Employment Arbitration: Case Outcomes and Processes, 8 J. Empirical Legal Stud. 1, 5 (Table 1) (2011). In the more rules-bound federal courts, they win 63% of the time. Id. In arbitration, where the corporation is a repeat player, i.e., is active in the market hiring arbitrators, it wins a whopping 83% of the time. Id. at 13 (Table 3).

5.  In Arbitration, a ‘Privatization of the Justice System,’ N.Y. Times, Nov. 1, 2015, data support their self-interested decision even in those few cases that are actually heard. As one would expect, in state courts, corporations win somewhat less than half the time. Alexander J. S. Colvin, An Empirical Study of Employment Arbitration: Case Outcomes and Processes, 8 J. Empirical Legal Stud. 1, 5 (Table 1) (2011). In the more rules-bound federal courts, they win 63% of the time. Id. In arbitration, where the corporation is a repeat player, i.e., is active in the market hiring arbitrators, it wins a whopping 83% of the time. Id. at 13 (Table 3).

Remarkably, despite these workers’ disparate and unfocused protests, they are the direct descendants of the views of our Revolutionary-era patriots. As Professor Jamal Green points out so persuasively: 

[T]he mode of representation that would best resist the Executive was less the legislature than the jury, which the Founding generation saw as an essential vehicle for articulating the rights of the community. “In these two powers consist wholly, the liberty and security of the people,” John Adams wrote of voting for the legislature and of trial by jury. “They have no other fortification against wanton, cruel power: no other indemnification against being ridden like horses, fleeced like sheep, worked like cattle, and fed and cloathed like swine and hounds: No other defence against fines, imprisonments, whipping posts, gibbets, bastenadoes and racks.” 

Adams was writing in 1766, against the Stamp Act, but the view of juries as bound up crucially with rights recognition and enforcement motivated the Bill of Rights. In criticizing the 1787 Constitution, the influential antifederalist Federal Farmer called the jury trial and legislative representation “the wisest and most fit means of protecting [the people] in the community.” Jurors were drawn from that very community and had vast powers of investigation, via the grand jury, and adjudication, via the petit jury. As Professor Akhil Reed Amar emphasizes, jury service was commonly viewed as analogous to service in the legislature itself. 

2. Rights as Federalism. — Viewing the Bill of Rights through an eighteenth-century lens illuminates its focus on institutional form. A remarkable number of its amendments seek to preserve the role of the jury and other local representative institutions in federal administration. 

Jamal Greene, Rights as Trumps?, 132 Harv. L. Rev. 28, 112-13 (2018) (footnotes omitted). 

More on Fee Awards and Competent Billing and Motion Practice

By David Hricik

In my last post, I mentioned being thoughtful about billing records and some other issues about Section 285.  As if on cue, a court issued an opinion which denied an award of some fees because the time had been block billed.  As a result, the court could not determine if the time had been incurred as part of the defense of an exceptional suit or were incurred in a covered business method proceeding which the court had concluded was not within the scope of compensable fees. The case is SAP America, Inc. v. InvestPIC, LLC (3:16-CV-02689-K (N.D. Tex. Dec. 4, 2018) (Kinkeade, J.).

The case reinforces the need for good billing practices.  I always tell my students to think of billing records as persuasive writing.  Why? I explain that, foremost, the client should be motivated to want to pay for the time.  “Research re patent” is not as motivating as “research regarding effective filing date of patent,” for example.  And, pertinent here in any fee dispute — between lawyer and client, or, as in Section 285 cases, between the lawyer and the opposing party — having work records that are well-written and concise can make a huge difference.

Of course, there are reasons at time not to be very explicit: once, for example, I was involved in a case where the opposing lawyers were required to submit their fee statements monthly in a related bankruptcy case. We monitored that, and as a result we were able to see what issues opposing counsel were examining in almost real-time. But, the rise of Section 285 fee shifting is good reason to make clear and precise time entries a habit.

285, Claim Construction and Lessons from Fee Awards

By David Hricik

First off, happy holidays to everyone. I’ve had some health issues and have been very intermittent in posting.  Other than getting old (a good thing), I am happy to report that I am fine.

Second, a lot has been going on in 285. Long ago, I posted here about how prevailing parties were beginning to try to either (a) join lawyers for the losing party to the case to impose fees against them or (b) simply (somehow) have the lawyers held liable without joining them.  In addition, more recently, here, I discussed how (c) prevailing parties are seeking to join the principals of asset-less (or near asset-less) patentees and obtain fees from them. In both posts, I discussed the conflicts that can arise between lawyers and clients, and some of the harmful effects of imposing liability on lawyers under 285, given Octane:  the zeal of a lawyer, if liable for non-frivolous but “not ordinary” cases, will be chilled.  “I can do this under Rule 11, but I might be liable for fees if we lose,” is the conundrum the combination of Octane and using 285 to impose liability on lawyers presents, to  put it simply.

A recent case on 285 illustrates another issue, which relates to the obligation of lawyers to create a record that will support an award of fees if they prevail and to seek fees in a way that results in a reasonable award. In one recent case, DataTern v. Microstrategy (Mass. Dec. 2018), the accused infringer prevailed. The court held the case was exception for two reasons: some sort of “Judge shopping” had occurred which caused the accused infringer to consolidate cases, and after claim construction, it became unreasonable to pursue the case.

The accused infringer, rather than seeking fees caused by judge shopping, sought all of its fees incurred early in the case, before consolidation, rather than those that were the extra fees caused by the judge shopping: $590,000. It got nothing, but from the court’s order had it segregated out the fees reasonably, it might have received around $59,000.

It is hard to tell whether the billing records were insufficiently clear to allow for this, or that the strategy was to seeking it all without recognizing the need to show causation of additional fees. Either way, there are good lessons to learn both during litigation (write good work records as they may be used for, or against, you) and in seeking fees, be reasonable.

With respect to the fees after Markman, the accused infringer sought all of the fees from the date of the Markman ruling onward: “every single item” as the court noted.  The court again applied a reasonableness standard and looked to causation. It first reasoned that it was absurd to suppose the lawyer instantly could have determined the court’s order rendered further prosecution unreasonable, consulted with its client, and dismiss the case.  The court reasoned that about six weeks was enough time for the patentee’s lawyers to have done that work, so immediately lopped off fees for that time period.  Then, because work records showed duplicative work, the court lopped off an additional 10% as a rough cut.  The first step took the amount sought from $430,000 to $340,000, and then down to $310,000.

The case provides useful guidance in fee petitions moving forward, providing a  reasonable cushion for client consultation after a particularly important adverse ruling, such as a Markman ruling.

Finally, the accused infringer sought $157,000 for seeking fees (i.e., for preparing and filing the 285 motion. The accused infringer had made five arguments to support an award, and the court found 2 meritorious (above), and so lopped of 3/5 of the amount sought, taking it to $94,000. Then, exasperated, the court stated it could not understand how it took nearly 300 hours to prepare the motion when the accused infringer had not, as noted above, gone through the billing to show which were actually caused by the misconduct.  It awarded $6800.

What are the lessons?  It seems that the accused infringer’s attorneys had spent $157,000 to prepare something that could have been done for $7,000, and that it was inadequate to do the job, according to the court at least.  Thus, prevailing in an exceptional case is not a free ticket to reimbursement of fees.