Interesting Malpractice Case Based Upon Claiming Work Product Over Pre-Suit Testing

Ethics

When I speak on ethics, I always say that you never know how issues will get raised.  Things that seem like "academic" concerns turn out to be "gotchas".  This is not quite that, but it is a fun twist.

We all know that Rule 11 requires adequate pre-suit investigation, and, usually, the way breach of those rules get raised is through a Rule 11 motion.

Usually.

In a legal malpractice case, a patentee alleges that its lawyers' improper designation of testing that he had done as "work product" caused sanctions to be entered against him that, ultimately, reduced his patent infringement damages award.  Haase v. Abraham, watkins, Nichols, Sorrels, Agosto & Friend, LLP, 404 S.W.3d 75 (Tex. App. — Houston [14th Dist.] no pet. hist.).  The defendants won a partial victory on appeal.  The procedural history of the case involves two appeals to the Federal Circuit, among other things!

 

Exergen as the Guidepost for Findings to Support Inequitable Conduct

Ethics

As everyone knows, Therasense changed the substantive law of inequitable conduct, requiring but-for materiality (with the "affirmative egregious misconduct") exception, and intent to deceive the office.  (Debates rage on some aspects of this, but that's the core.)  Exergen, of course, held that Rule 9(b) applies to inequitable conduct allegations, requiring that the "who, what, when, where, and why" be pled.

Yet, I have seen examples of district court opinions finding inequitable conduct that do not, themselves, meet the pleading requirements.  It cannot be that findings that would not satisfy Exergen can, nonetheless, support inequitable conduct.

I'm surprised that no one has, as yet, made this argument (that I know of).  Exergen provides a roadmap for district court findings and conclusions, and also the means to attack findings of nequitable conduct on appeal when they fail to meet that standard.

Am I missing something?

A Random Thought on IPR, BRC, and Life

Ethics

In preparing for class, I was reading through the old case about product-by-process claims, which recognizes that under the broadest reasonable construction standard, a claim is unpatentable if the product is old, but it's valid, after issuance, if just the product is old.  In other words, the limitations are ignored during prosecution because the claims are viewed as product claims.  Atlantic Thermoplastics, 970 F.2d 834 (Fed. CIr. 1992).

Okay, so… this just makes my head spin.  Suppose a patent issues, covering "a shoe made by the process of A and B."  To invalidate the claim, an accused infringer would have to show the prior art had a shoe made by the process of A and B, but in IPR, he merely has to show the shoe in the prior art.

I don't even know how to make sense of that result.  Assume no stay, you end up with an unpatentable valid patent…. sort of ….

 

Soliciting Thoughts on Prosecution Bars

Ethics

Hi, all,

I'm writing an article and updating a chapter in a book.  I'd like to know if you have views on these questions.  Please think about these from the perspective of the purpose of these bars which, ostensibly, is to prevent a lawyer who is engaged in "competitive decision-making" (which includes some forms of prosecution, but not all) from misusing information disclosed by an opposing party during litigation to benefit the prosecution client.

1.  Currently, courts tend to make the length of the bar 2 years from the end of litigation, including any appeal.  (a) Is two years too long in some technologies? If so, which? (b) Whatever the appropriate length of time, should it be measured from the end of appeals?  If not, from what point in time?

2.  Should IPR be included?  Reissue (either within 2 years or outside)?  Other activities?

3.  Prosecuting patents is not enough.  What objective evidence should courts look for in deciding whether someone's prosecution activities rise to the level of "competitive decision-making"?  For example, presumably there is less of a concern where in-house counsel do the preparation and outside counsel essentially file and then prosecute from there.

4.  In your experience, are prosecution bars put in place too readily, or too unwillingly, or just about right?

5.  Other random thoughts.

All posts will become eligible to be read by me and maybe included in some roundabout way in the article.

David

Thoughts on the GAO Report and Implications for Legal Ethics

Ethics

Interesting read.  Again the full GAO Report is here.  The report is more balanced than I would have expected, pointing the finger largely at software patents, patent quality, and litigation costs, not NPEs.  

I know that Chief Judge Rader is doing his level best to try to reduce costs, as are many members of the judiciary, through model orders and the like.  When it comes to these costs, lawyers on both sides of the v have responsibilities.  

The plaintiff's side's responsibilities have been written about a lot:  primarily the need for adequate pre-suit investigation including careful infringement analysis.

The defense side's responsibilities are less often talked about (I think).  Defense lawyers paid by the hour can have conflicting interests:  there may be a clear path to dismissal of a suit or early settlement, but the billable hour is in tension with that result, at least where the client is not sophisticated enough in patent litigation to guard against that problem.  A while back, I was asked to write about the problem of trolls, and, not by design but through analysis, concluded that defense counsel faced some serious issues.  The article is here.

Now to work on the article about Section 285, which I think is the flexible solution to a lot of problems — despite the Federal Circuit's decision in Brooks Furniture!

Higher Pleading Standards for Direct Infringement?

Ethics

In recent years, the Supreme Court in Iqbal and Twombly required more than "notice" pleading.  But, under Rule 84, the forms in the appendix are deemed sufficient.  Form 18  requires very little to plead direct infringement.  Although the Federal Circuit has in a couple of cases limited the applicability of that form, e.g., R+L Carriers, Inc. v. DriverTech LLC, 681 F.3d 1323 (Fed. Cir. 2012) (Form 18 controls over Iqbal and Twombly for direct infringement, but not for indirect infringement) and K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc., No. 12-1425 (Fed. Cir. Apr. 18, 2013)( any conflict between  Iqbal and Twombly and Form 18 hould be resolved in favor of Form 18 for direct infringement), but some say more robust pleading would reduce marginal lawsuits.

Those folks may soon have their way.  The Judicial Conference Committee on Rules of Practice & Procedure report at around page 275 of this report wants to abrogate Rule 84, and so eliminate the imprimatur given the forms.

Granted, Rule 11 and prreliminary infringement contentions and so on eliminate the practical scope of Form 18, but this may be a good thing.  Thoughts?

Some Random Thoughts on Good Appellate Practice at the CAFC

Ethics

I read a lot of briefs this last year while clerking at the CAFC, and developed some pretty unexpected opinions and some that confirmed "conventional wisdom."

First, the quality of briefing, even in signficant cases, is too often abysmal.  I too often saw some bad writing, bad reasoning, bad judgment, and bad research.  Fundamental issues were often overlooked. Smaller points:  don't load up your questions presented ("did the distict court err by ignoring the overwhelming evidence of deceit and foulness that was undisputed including sworn testimony by the Pope…").  Get the standard of review right, and focus on it in your argument.  The court does not decide everything de novo, and that principle does often matter.  The fact that a judge thinks the jury was "wrong" does not matter if the question is substantial evidence, for example.  Cast your arguments in terms of the standard of review!

Second, a lot of people say you should "never" use trial as appellate counsel. I would never say never, but I would say that even if it makes sense to use trial counsel on appeal (economically, or for whatever reason), have someone else with appellate experience read the briefs and moot the lawyers.  The CAFC is not a jury, and sometimes skill sets that do great at trial don't fare so well on appeal.

Third, do not — do not, do not, do not — raise more than you absolutely need to on appeal.  If you are raising more than three or four broad errors, you better have a very good reason to do so.  Why?  First, you don't have space.  Second, think about the message you are sending: the district court got nothing right.  Third, chances are some of those arguments are weak. They will weigh down the better arguments.  They give the other side easy targets.  Don't hand the other side a hammer.

Fourth, at oral argument, cut to the chase.  Don't start with a bunch of hot air.  Don't spend time to castigate opposing counsel or the district court. Explain, dispassionately but effectively, what was wrong and how it warrants appellate relief.  And, know the record.  Moot the argument before hand with people who have read, only, the briefs and appellate record — not those who tried the case. Also, if you sense the panel is done with your argument, especially as appellee, ask if they have any other questions and if not, sit down, shut up, and think about having a nice coffee afterward. You do not need to talk until the red light goes on.  Oh, and when the red light goes on, stop or ask permission to finish your remark. If the red light goes on and the court says "do you have any final words" say two sentences, not twenty.

Fifth, if you won below, think VERY carefully about cross-appeals. You may not be able to raise as an alternate grounds to affirm invalidity, for example, if you won non-infringment.  Think carefully about claim construction.  Again, you probably need an appellate person to help you out, not just trial people, and, more particularly, someone familiar with CAFC appeals.

Sixth, be respectful in the briefs.  I know how hard this is; I was a lawyer for a long time (well, I still am but I was ONLY a lawyer for a long time).  Things get heated.  Judges sometimes seem to favor the other side.  Money gets wasted and clients are unhappy with that. Usually no one wants to be in litigation.  But it does not help your cause to let heat obscure the light. Be respectful.

For what that's worth.

Prosecution bars and the burden of proof and production

Ethics

The proponent of a protective order has the burden to show good cause for its entry, as per Rule 26.  Some courts are requiring that the party seeking a prosecution bar establish that the other side's counsel is engaged in "competitive decision-making."  E.g., Clayton Corp. v. Momentive Performance Materials, Inc., 2013 WL 2099436 (E.D. Mo. May 14, 2013).

That is unworkable.  In Clayton, the court denied a bar because the lawyers seeking it didn't submit affidavits showing what opposing counsel was doing for their client.  

How could they?

It seems a much better approach is to place the burden of showing that the information being disclosed is "important enough" to warrant a bar, and, if the opposing party objects to inclusion of a prosecution bar, to require them to establish that they are *not* engaged in competitive decision-making. 

Thoughts?

On Trolls

Ethics

I wrote an op-ed with Chief Judge Rader and Santa Clara law professor Colleen Chien in the New York Times this past year.  It's here.  I love the art work.

I'll write more about 285 shortly, and will not respond to comments here, but was dismayed at some of the comments this op-ed engendered.  Some people have good disagreements and criticisms.  But I read how I was a "West coast law professor" (check your geography, bud!) who had never litigated a contingent fee case (check my bio, bud!).  Anyhow, more on the legal aspects of 285 shortly.  I'm in the midst of reading a slew of cases for the next edition of one of my books and so am having too much fun with other things now…

 

 

Thinking of investing in a business that competes with a former client?

Current Affairs, Ethics

Then you should read Texas Ethics Opinion No. 626 (April 2013).  The opnion is quite broad:  L represents Corporation A and acquires non-public proprietary information about its competitive position in the field.  L's representation ends when Corporation A is sold, but the corporation continues on in its business.  L now proposes to make a significant investment, passive, in competing Corporation B.  L "is not involved in the organization or formulation of the initial business plan of Corporation B and he does not provide legal services or otherwise participate in the management or operation of Corporation B's business."

The opinion relies on the principle that L may not use confidential information to the disadvantage of Corporation A.  The opinion noted that L would be using his knowledge of Corporation A in investing, his decision to invest "could reveal to interested person information concerning the lawyer's assessment of Corporation A that is based on confidential information," and so he could not do so, absent (a) informed consent after full disclosure (ha!), (b) if it was an insignficant investment (which depended on the facts, but which was characterized as "a sufficiently small portion of the total amount invested in Corporation B and there were other investors ready to make an investment in the same amount if the lawyer did not"), (c) he had not gained any pertinent confidences, or, (d) though he had, the information had "ceased to be relevant" to Corporation A's business.

The significance of this opinion to patent lawyers should be clear. I also note that many states, including Texas, allow adverse use of information against former clients once it has become generally known.  Because the opinion focuses on unique aspects of the Texas Rules, the central point of the opinion might not hold true in every jurisdiction.

Some recent cases on Prosecution Bars

Current Affairs, Ethics

A couple recent cases have addressed several key issues with prosecution bars.  As you know, it has become common for protective orders in litigation to include provisions that prohibit a person from receiving certain highly proprietary information if that person engages in "competitive decision-making," which can include patent prosecution.  

In Unwired Planet LLC v. Apple Inc., 2013 WL 1501489 (D. Nev. Apr. 11, 2013), Apple persuaded the district court to expand the bar to prevent outside counsel who had access to certain Apple confidential information from giving advice on "patent acquisitions."  The district court found that there was a risk that Unwired would determine which patents to buy to target Apple products.

The other issue that is percolating has two aspects to it:  do existing prosecution bars cover IPR and, if not, should they?  The first issue turns on the language of the existing protective order.  The second on whether IPR permits the same sort of risk of patent prosecution.  These issues were litigated in Politec Inc. v. Scentair Tech., Inc., 2013 WL 2138193 (E.D. Wis. May 17, 2013), which reached an odd balance.  It held that IPR was within the scope of the bar, but allowed outside counsel to participate but prohibiting them from amending, substituting, or adding claims during IPR.

If you have an existing protective order, these cases counsel to examine whether it is broad enough, either for IPR or for other activities.

Hello, everyone!

Current Affairs, Ethics

I just finished my clerkship with Chief Judge Rader, and have arrived back at Mercer Law School.  What an amazing and transformative year.  It was an honor to serve the court.

In my absence, the PTO adopted new ethical rules.  The rules are here, on a page that includes some helpful tables comparing the PTO rules to the Model Rules, and other information.

Unlike the effort in 2003, this time the PTO in large part adopted a slightly-out-of-date version of the ABA Model Rules, with a couple exceptions (including, for some odd reason, the choice of law provision).  There are now fewer differences between the ethical rules that apply to discipline in OED proceedings and those that would apply in state disciplinary proceedings, but key differences exist.  One is that the PTO did not adopt any private-practice screening provisions, but several states permit screening to be used, even over the objection of a client, to avoid a conflict caused by a lawyer migrating from one firm to another.  I'm still working through them, and will post more as I go.

David

 

Judge Alsup’s Last (?) Order on Bloggers in Oracle v. Google

Ethics

On the same day he issued an order awarding Google some $4m in expert witness fees and other costs, Judge Alsup denied Google's motion for a new trial and JMOL, and in doing so took "this opportunity to state that it will take no further action regarding teh subject of payments by the litigants to commentators and journalists and reassures both sides that no commentary has in any way influenced the Court's orders and rulings herein save and except for any treatise or article expressly cited in an order or ruling."  That order is here.

An article is here.

The order awarding expert fees is here.

Who is Your Client Part 2: Inventors Subject to Assignment to Your “Other” Client

Ethics

[This is pre-AIA. I need to think through what happens next month….  I am not sure it's too different, though.]

Obviously, if you represent an inventor,  you represent the inventor.  If I were to hire you to file an application, you'd be my lawyer:  you're providing legal services to me.

What if a third party pays you?  Suppose I can't afford to hire a lawyer, but a friend has a company with money, and it pays for you to represent me.  I'm still your client — and you better make sure that the company understands that fact, and you need to ensure that the fact that it is paying you to represent me doesn't interfere with your loyalty to me.

Now, I"m going to skip over a hundred fact patterns between that end and the very common (indeed, the paradigm I'd suggest) of patent prosecution in the U.S. — a lawyer hired by a company to file an application for its benefit, but the inventor is an employee under an obligation to assign to the company — but I'll come back to it at the end.  These middle ground circumstances are the risky areas, we'll see.

Let's deal with the paradigm:  BigCo hires you to file an application, and tells you that Inventor is subject to an obligation to assign.  What if it's wrong?  If you go to the Inventor and put an assigment in front of him and have him grant you a PoA, you're dealing with a person with adverse interests (the invention is his, not your client's, at least without more facts and law).  See Model Rule 4.3 (obligations to unrepresented person).

So, step one ought to be to ensure that there is, in fact, an obligation to assign.  (This may not take much — if you've represented the company for years and know it has a regular policy, for example, of requiring absolute assignments you're probably done.) 

What if you investigate, but have doubts about the enforceability of what you find?  Suppose, for example, you think it's ineffective to require assignment?  Putting an assignment in front of an unrepresented inventor, and asking for a POA, creates three risks that many other lawyers have had to litigate — often successfully, but not always.

First, under Rule 4.3 you are likely going to be viewed as providing advice to an unrepresented person with interests adverse to your client.

Second, under some states, you have an affirmative legal obligation to warn people who might reasonably believe that you represent them, that you don't.  Imagine an unsophisticated inventor, presented with a "power of attorney" and told to sign some documents.  A jury could find such person should have been warned.

Third, you may be deemed to have formed an attorney-client relationship with the inventor.  Even in cases where the lawyer thought there was an absolute obligation of assignment, sometimes (for purposes of disqualification or legal malpractice) courts have found an attorney-client relationship.  These are rare circumstances (usually the inventor loses), but not uncommon.

Now, there is Federal Circuit case law, initially applying Ninth Circuit "law" on the formation of attorney-client relationships (is there such a thing?), holding that without more, obtaining a POA from an inventor subject to an absolute obligation of assignment does not create an attorney clent relationship.  I have severe doubts about whether "Ninth Circuit law" matters, even in the Ninth Circuit, to a state law malpractice claim, but even where this reasoning controls, it's a pretty narrow holding, which explains why inventors often bring claims, either in malpractice or disqualification motions, that they were also represented by the company's lawyer.  

But the "without more" part is important:  if the attorney is doing anything besides very minimal work with an inventor, she does risk creating an attorney-client relationship even under this standard.  Also, in many states the subjective belief of the party claiming to have been a client matters a lot more than the Ninth Circuit "law" would suggest, and so state law can avoid the "rule" that without more a POA does not create an attorney client relationship.

And then there are all those cases in the middle — where the facts are not so crisp as a routine employee-obligated to assign, such as where an acquisition or some other transaction is involved.

"You're crazy, David." Yes, I've heard that many times.  But I've read the cases, seen the muddy realities of real life, and worried about two things:  legitimate confusion by an inventor about whether the lawyer represents him, and "baseless" claims brought to disqualify a lawyer or impose malpractice liability. Both concerns matter to BigCo and to lawyers, I hope.

So, (and consistent with a comment above), be very thoughtful before you obtain a POA from an inventor.  Consider transmitting it with an email that simply says "As you know, I do not represent you, I only represent BigCo."  That sort of simple thing will go a long way to avoid problems. In a perfect world (also consistent with the comment above, or below?), don't obtain a POA from an inventor — I realize that in the real world that doesn't always work for practical reasons.  But it is the best approach.

 

Who is Your Client? Part 1: Corporate Affiliates

Ethics

Patent practitioners in my experience live in a vaccuum.  Often, they think patent practice is not subject to the same rules as other areas.  But, when a motion to disqualify or malpractice claim is brought, they suddenly learn that the rules that other lawyers abide by apply with equal force in patent practice.

Client identity is one of those issues.  In a series of posts, I'll address some common issues in patent practice.  Today deals with entities, such as corporations, partnerships, LLC's and the like.

If your firm represents corporations, you need to be aware that if you don't deal with the issue of client identity effectively in your engagement letter, you may find that you have a lot more clients than you thought.  For example, if you represent a third tier subsidiary of some company, you may be unable to be adverse to any affiliate of that company — no matter how attenuated its relationship is with your "real" client.

If you represent one corporation, how do you know if you represent all others?  The best method is to specify:  "by representing ____, we do not represent its affiliates, parents, subsidiaries, or other owners or constituents."  If you don't put that, you're more likely than not going to have to look at what law applies, and you'll find there is a split. The majority approach relies on a multi-factor test (this one from a New York bar opinion, but it is typical):

1.1 Does the current corporate client have an objectively reasonable belief that its affiliate has de facto become a current client of the law firm, either because of the law firm’s relationship and dealings with the affiliate during the representation, or because of significant overlaps in personnel and infrastructure between the corporate client and its affiliate?;

1.1.1. Do the current corporate client and its affiliate share the same directors, officers, management, or other personnel?;

1.1.2. Do the current corporate client and its affiliate share the same offices?;

1.1.3. Do the current corporate client and its affiliate share the same legal department (or report to the same general counsel)?;

1.1.4. Do the current corporate client and its affiliate share a substantial number of corporate services?; and

1.1.5. Is there substantial integration in infrastructure between the current corporate client and its affiliate, such as shared computer networks, e-mail, intranet, interoffice mail, health benefit plans, letterhead and business cards, etc.?

2. Is there a significant risk that the law firm’s representation of either the current corporate client or the adverse client in the adverse representation will be materially limited by the law firm’s responsibilities to the other client?

3.         During its representation of the corporate client, did the law firm learn confidences and secrets from either the client or its affiliate that would be so material to the adverse representation as to preclude the law firm from proceeding?

In a recent patent case, the court also looked to whether the company the lawyer wanted to sue used the same logos as its client… You get the point.

Now let me really scare you by combining this knowledge with the post below about maintenance fees and adversity: if your firm is calendaring a single maintenance fee for a subsidiary of some huge corporate conglomerate, you may need to treat that entire conglomerate as a current client — and you can't be adverse to any part of it, and adversity includes far more than just suing it!