Mishandled Disclosures: A Greek Tragedy in IP Law

by Dennis Crouch

Neuropublic S.A., a Greek technology company, has filed a federal lawsuit against the law firm Ladas & Parry LLP, with several claims stemming from the firm’s alleged mishandling of Neuropublic’s confidential invention disclosure — sending it out to a third party (“PatentManiac”) for a preliminary novelty search which then (again allegedly) further leaked the disclosure. Although the case does not involve submission to AI algorithms, some of the questions here are similar to those many  IP attorneys are considering when onboarding new AI tools.

According to the complaint [SDNY-1-24-cv-04156-1], in 2020 Neuropublic retained Ladas & Parry to assess the patentability of its innovative “telemeter station” technology for the agriculture industry. Neuropublic provided the firm with a detailed, confidential 21-page “Proposed Invention Disclosure” describing this technology. Ladas & Parry then allegedly sent this entire confidential disclosure to a third-party firm in India called PatentManiac, without informing Neuropublic’s or obtaining consent.  The complaint also alleges that Ladas & Parry failed to obtain any confidentiality agreement from PatentManiac or instruct them to keep the disclosure confidential — allegedly permitting Neuropublic’s valuable trade secrets to be exposed.

The consequences: in 2021, a patent application surfaced in Australia that appears to have been derived from Neuropublic’s confidential disclosure. This prior art publication now jeopardizes Neuropublic’s ability to obtain patent protection on its invention, undermining years of research and development investment.

With leak cases, it is always difficult to trace the leak back to the source. Here, the plaintiff alleges that Ladas & Parry and a local legal counsel in Greece were the only ones with an English version of the disclosure (the original was in Greek), and the resulting Australian application is based upon that English version. “Neuropublic’s Proposed Invention Disclosure has been otherwise confidentially maintained and protected in Greek.”  Tying this together further, the Australian application was filed on by IPQuad Partner who, like PatentManiac, is based in New Delhi.  And, according to the allegations. IPQuad’s co-founder was previously employed by PatentManiac.

The lawsuit asserts five causes of action against Ladas & Parry: misappropriation of trade secrets under federal and NY state law, copyright infringement, legal malpractice, and breach of fiduciary duty.

A few key issues emerge in my mind based upon Neuropublic’s complaint:

1. The scope of the engagement letter and confidentiality obligations: A critical question will be what exactly the engagement letter between Neuropublic and Ladas & Parry provided regarding the firm’s ability to share confidential information with third parties. Well-drafted engagement letters typically permit the firm to work with and disclose confidential client information to associated entities as reasonably necessary to carry out the representation. Although many firms then have written agreements with their outside associates to maintain confidentiality, there is also usually at least an implicit understanding that those associated entities will maintain confidentiality.

However, the sufficiency of these routine provisions becomes murkier when highly sensitive trade secrets are involved and the third party is located in a foreign jurisdiction like India with very different legal and business norms. Especially for trade secrets, it is advisable to both obtain the client’s explicit informed consent before disclosure and put in place robust written non-disclosure agreements with the third party.

2. Causation challenges: Even if Neuropublic can show that Ladas & Parry mishandled its confidential information, it may have difficulty proving that this misconduct directly caused the Australian publication and patent obstacles. Accessing evidence and testimony from India to definitively trace the leak may prove onerous. However, the circumstantial links alleged in the complaint between PatentManiac, IPQuad Partners and the suspicious similarities between Neuropublic’s disclosure and the Australian filing appear. If this holds up, it may be enough to at least shift the burden to the defense.

3. Damages theories: The complaint is somewhat vague on the precise damages caused by the alleged trade secret misappropriation and malpractice. Under the patent laws of many countries (including the US), a patent applicant can often overcome unauthorized disclosures of their invention (typically those made less than 12 months before the filing date) if they can show the disclosure occurred without their consent or was derived from them. So in theory, Neuropublic would have been able to exclude the Australian application as prior art and obtain patents.  However, relying on this procedure is far from certain, may not be available in all countries, and will undoubtedly require Neuropublic to expend significant additional time and money.

The Neuropublic lawsuit is a general reminder of the risks associated with sharing client data with third parties, even for seemingly routine tasks like prior art searches.  As more AI tools come online, the risk continues to grow – especially because the privacy protections of many of these are difficult to understand and trust and because their operations continue to change on a regular basis.

21 thoughts on “Mishandled Disclosures: A Greek Tragedy in IP Law

  1. 5

    I recall a legal ethics rule 1.6 which forbids unauthorized disclosure of information without the client’s consent. Ladas & Parry LLP should have gotten consent of their client to have the Indian search firm do the patent search and gotten an NDA with the IP search firm. Can you say “disbarment” and “would you like fries with that order”?

    Now I understand why my boss had us do the searches internally in the US and not outsource searching to India for this exact situation. The entire IP community has tremendous legal and ethical exposure with the results of this lawsuit. Critical R&D can NOT be outsourced due to the ubiquity of industrial espionage. A certain US auto manufacturer had all the IP work off shored causing all the patent attorneys in the US to lose their jobs. How is that working out for you now car manufacturer?

    Too bad congress can’t change the tax laws to allow R&D for such things as patent application preparation to be considered a fully deductible business expense ONLY IF the R&D is done within the US. The US was a world leader in manufacturing back when R&D used to be a fully deductible expense back in the 60s. There needs to be an economic incentive for US businesses for National Security to conduct critical research on shore or all technologies will continue to go overseas to PatentManiacs.

  2. 4

    OK, what sort of reputable IP firm would send a search out to a searcher in India (or any foreign country)?

    1. 4.1

      +1

    2. 4.2

      Patent Leather – Is this a serious question? I’m in the search business and I’d guesstimate that 95% of patent search work is sent off shore at this point. And there are plenty of US firms that are merely fronts for off shore work with clients none the wiser (or wink, wink, save me a few bucks wiser).

      I run a US based firm and I get 5-10 emails per week asking me to off shore my work. These emails offer to do the work and repackage it in any format of my choosing so clients will never know. And unlike the world of patent law which has ethical standards and enforcement means, there is NOTHING of a similar nature in the Wild Wild West world of patent searching.

      1. 4.2.1

        Sounds like an Efficient Infringer’s subpoena goldmine.

      2. 4.2.2

        Its not only many prior art searches that are now sent offshore for cost savings, so is the initial prepararation of many U.S. patent applications.

        1. 4.2.2.1

          Which is why there should be a fee for apps prepared that way that aren’t up to snuff.

          1. 4.2.2.1.1

            Should be…?

            Your should has no bearing in law.

            (Of course, you already know that because I have already told you that)

            1. 4.2.2.1.1.1

              But it does in the fee dept.

              1. 4.2.2.1.1.1.1

                It does not / no such thing as “fees for those who do not do their own search.”

                No such category.

                What are you smoking?

  3. 3

    Would it have helped Neuropublic at least in the U.S. if we still had first-to-invent?

  4. 2

    Yes, but the issue both Dennis and I were addressing is not the initial existence or breach of the trade secret, but how much you can collect in damages in the lawsuit for such a breach.

  5. 1

    >The complaint also alleges that Ladas & Parry failed to obtain any confidentiality agreement from PatentManiac

    If true, that seems pretty damning wrt malpractice. Getting a CDA in place before disclosure is literally IP Law 101. Modern business 101, even.

    1. 1.1

      Yes, if true, failing to obtain any confidentiality agreement from an INDIAN prior art search company before sending them an unfiled invention dislosure allegedly secret is far worse than not obtaining any agreement from the client. That is not just a patent or trade secret law issue, it could be an export control violation.
      But the difficulty of recovering damages for alleged breach of confidentiality from the law firm here is even worse than noted, since this is not a commercially protectable trade secret. The trade secret would end on the first installation, and hence disclosure, of this “telemeter station technology for the agriculture industry” in any ungarded farmer’s field, even if not already disclosed in a published patent application or patent. For recovery for any loss of patent rights that would have to be proven, both for the inventions patentability and for that patent’s commercial value.

      1. 1.1.1

        BTW, I had my own prior experience once with what I considered the loosy-goosy attitude of an Austrailian law firm to improper inventorship designations on their patent applications.

      2. 1.1.2

        Wouldn’t the trade secret status be determined at the time the unauthorized party disclosed it? If the information was non-public and the rightful owner of the information was taking reasonable steps to maintain it as confidential, isn’t that enough?

        It seems unlikely that trade secret protection is retroactively lost upon unauthorized disclosure to third parties.

      3. 1.1.3

        Export control violation? The invention was made in Greece. I haven’t heard of the DOJ prosecuting a single person for an export control violation due to sending a US-originating invention disclosure abroad, let alone an invention disclosure that originated outside the USA.

        1. 1.1.3.1

          AM,

          Perhaps you haven’t seen one because to see one would mean the IP firm committed an unreasonable act.

          It’s been well over a decade and a half since our firm investigated outsourcing (pre-US filing), and easily determined that the risks outweighed any benefits.

          And while the AIA eviscerated several penalties (inventorship, ‘deceptive intent’), it did not touch the ‘ultimate penalty’ for violating the BIS/USPTO process for filing first in the US (for those appropriate applications requiring such) in order to clear the export hurdle.

        2. 1.1.3.2

          True, but I think you will find tht most firms or major corporations are concerned enought about it to have a standing confidentiality agreement for all disclosures with the Indian firms they now send IDs to be drafted as patent applications.

    2. 1.2

      My thoughts, on reading the story, are on the difference between on the one hand, following all the “rules” and, on the other hand, using one’s common sense.

      Even if L&P had bound in the search firm in India with all the right contractual documentation, that is not going to be enough to prevent wandering eyes and ears and loose talk within the searcher’s office. Whatever happened to common sense at the desk of the responsible L&P attorney?

      Perhaps a folk memory of the First to Invent regime leaves some US attorneys rather too casual about telling persons other than the USPTO about their client’s invention even before they file on it at the USPTO?

      1. 1.2.1

        Most inventors want to file non-domestically, so I don’t think that is the issue.

        I wonder whether this was sent out by someone more junior, or not a lawyer? Regardless, that would show a lack of supervision.

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