Tag Archives: Ethics

New Patent Assertion Entity Flying Above the Radar: Blackbird

Perhaps there are other entities like this, but if so they haven’t made the boom that this one has.  Blackbird Technologies was founded by former big-firm (WilmerHale, Kirkland Ellis) patent litigators. It buys (or somehow obtains rights to assert) patents and asserts them with its own in-house staff of litigators.  Its “news” page reports a number of suits — at least 100 in its short life — and reports that it settled many.

It came onto my radar because of an interesting case involving a prosecution bar.  A defendant pointed out that because Blackbird’s business is buying patents to assert, no lawyer at it should see the defendant’s highly confidential information because those lawyers could then go acquire patents that covered the defendant’s planned products.  The court resolved the issue by requiring the company to covenant not to sue with respect to future products, an interesting resolution of the problem.  A pertinent part of the order in Blackbird Tech LLC v. Service Lighting and Electrical Supplies, Inc., et al., C.A. No. 15-53-RGA (D. Del. May 18, 2016) (Andrew, J.) provides:

the Court will require that Blackbird agree to a covenant not to sue any of these Defendants for infringement of patents involving lighting technology that are acquired during the time between the entry of the protective order and one year after the conclusion of the litigation. To be clear, if Blackbird acquires a patent on any lighting technology6 during the restricted time period, it may never assert that specific patent against these Defendants.

(As an aside, I would love to see how it acquires patents, since some interesting ethical issues could arise from its acquisition practices, since it’s a corporation but it’s practicing law, it seems.  There are some very odd issues that arise sometimes.)

Then I read that Blackbird has sued Cloudflare (Blackbird Tech LLC v. Cloudflare, Inc., which it seems is an Internet security company.  In response, Cloudfare put a “bounty” on every Blackbird patent.  That story is reported widely, including here and here, for example.

Blackbird states that it is designed to help small inventors overcome the obstacles of patent litigation, including the obstinate, more powerful defendant.  I am know that small inventors, and small companies, sometimes face the 800 pound gorilla defendant who refuses to deal fairly, and so the benefit that something like Blackbird can bring is real.  It will be interesting, however, to see if that is what Blackbird is, or if it is going to bring a bunch of nuisance suits, which Cloudflare believes it has done, as it has stated here.

Nova Chemicals v. Dow Chemical: Does 285 Apply to Independent Actions to Set Aside Judgments and Does the CAFC Have Subject Matter Jurisdiction?

This one, Nova Chemicals Corp. v. Dow Chemical Co., __ F.3d __ (Fed. Cir. May 11, 2017) (here) is interesting because of the issue it doesn’t raise, but more on that in a moment.  Patentee Dow sues and obtains a judgment against Nova.  Years later, the defendant believes that the judgment had been obtained by fraud, and brings an independent action in equity (as allowed by FRCP 60) to set aside that earlier judgment.  Basically, Nova asserted that Dow had lacked standing, basing its argument on some later testimony in an unrelated case, and that the infringement proofs had been misleading.

To set aside a judgment under these circumstances, through an independent action, requires proof of fraud on the court or a truly grave miscarriage of justice.  The district court dismissed the complaint and the CAFC affirmed that dismissal under Rule 36, without any opinion.

Then Dow moved in the district court for fees.  The district court granted them under Section 285, which of course allows a court in patent cases which are “exceptional” to award fees.  Nova never argued 285 did not apply, and the CAFC noted that on appeal.

The CAFC affirmed the district court’s findings, and it’s an odd case not likely to recur, so the substance of the panel’s 285 analysis isn’t too revealing.

But what is interesting to me are two things.  First, the apparent concession by Nova that 285 applies to equitable actions to set aside judgments. I’m not sure that is so clear but presumably they looked at that.  But it is also interesting to me, and is related to that, that this appeal (and the earlier appeal) was taken to the Federal Circuit, not to a regional circuit.  The Federal Circuit’s appellate jurisdiction is limited to civil actions arising under the patent laws, which an independent action to set aside a judgment is not, one would think…

The Jenner & Block Contingent Fee Case Heads to SCOTUS… the Client Hopes

I’ve discussed a few times this fight over whether a patent assertion entity should be required to pay full hourly fees, or anything, to a firm that dumped it after losing the case on summary judgment, when the client hired another firm, got the case reversed on appeal by paying hourly rates to the new firm, and later settled the case for significant money.  The last post on it was here, and, full disclosure: I was an expert opposed to Jenner & Block, which was awarded money in the arbitration and prevailed in the state court fight over confirmation of that award.

Generally, the question before the Supreme Court is whether the Federal Arbitration Act preempts a state from setting aside an award if it violates a state public policy.

An amicus brief in support of cert was just filed by the Eagle Forum (yes, Phyllis Schafly’s outfit), which is interesting in and of itself.  A link to that brief is here.  According to it, there is a circuit split on this issue. If, as apparently the courts below held, an arbitration award cannot be challenged even if it requires enforcement of an unethical fee agreement, it’d be nice to have the Supreme Court make that point, so the rest of us can take corrective action in legislatures.  Can you imagine the holding, if the allegations are true:  “an unreasonable fee can be enforced in arbitration because that’s what Congress intended when it adopted the FAA in 1925…”

It seems to me that if this is the law, maybe every lawyer-client arbitration clause will need to say: “In addition to losing your right to trial by jury, any ethical limitation on our fees will not apply…”

Think on that one.

Alleged Unethical Payments to Experts Who “Volunteered” to Testify

I serve as an expert witness, and there are a variety of difficult ethical issues that being one presents, but whether you can say you’re not being paid when you are isn’t one of the difficult issues.

The case where experts allegedly were being paid when the jury was told they weren’t isn’t a patent case, but it’s interesting.  At trial, the plaintiff’s lawyer allegedly told the jury that his experts weren’t being paid, but had volunteered out of concern for people injured by the product, a hip replacement device made by the defendant, J&J.

J&J loses, and it’s not just any loss, but a “bellwether” case — the first case in a series of cases, and so its outcome will affect the value of the rest of the cases. And it’s not just a loss, it’s a $500m judgment, reduced to “only” $150m under tort reform caps.  And it’s not just a series of cases: there apparently 9,000 similar cases pending.

J&J has moved under 60(b) to set aside the judgment because, it asserts, in fact the experts knew they were going to be paid and were paid after trial, and a charitable donation was made.  The case is on appeal in the Fifth Circuit, and there’s a longer story about it, here.

IP Firm Sues Former Lawyer for Improperly Soliciting Clients Before Departure

Lawyers leaving a firm are often tempted to try to persuade clients to go with them, to make copies of files that may not be their property, and to engage other activity that may constitute breach of fiduciary duty to their current firm.  Some of that — and more allegedly happened in Houston, resulting in the filing of JL Salazar Firm v. Friedrich.  An article about the case is here.

I’ve walked lawyers through departures many times, and most states have bar opinions providing step-by-step “instructions” for what can, and cannot be done.  Often lost in the desire to leave, and to make a new start, is the fact that the clients don’t “belong” to anyone.


Supreme Court Affirms Causal Requirement for Sanctions under Inherent Power

In patent litigation, as in all civil litigation, district courts have various means to impose sanctions for litigation misconduct.  Rule 11, Rule 37, Section 1927, and, of course, Section 285 are rule- or statutorily-based means to impose costs on those who litigate improperly.

Federal courts also have the “inherent power” to impose sanctions even if one of those rules or statutes is not violated.  But, because it is judicial in nature and cannot be used to swallow the rule, inherent power has long been somewhat cabined. Among other things, the Court has always held that any sanctions imposed must be causally related to the misconduct.

The Court affirmed that requirement in a non-patent case, Goodyear Tire & Rubber Co. v. Haeger (Apr. 18, 2017).  In that case, Goodyear engaged in a years-long effort to hide key documents from the plaintiffs, who, not knowing of them, settled the case.  When they sought sanctions, the district court awarded all of the litigation fees the plaintiff had incurred from the time when the scheme had begun:  $2.7 million.  It also held, conditionally, that $2 million was caused directly by the shenanigans.

The Ninth Circuit affirmed, but the Court reversed, unanimously.  It reiterated that in some cases — such as when the entire defense or entire claim are brought in bad faith — a shifting of all fees is proper, but found that was not the case here.  Instead, unable to discern if the $2 million conditional award was appropriate, it remanded for the courts below to decide what amount had actually been caused by Goodyear’s misconduct.

Section 285 is often the myopic focus of patent litigators.  While the Goodyear opinion confirms the causation requirement of inherent power, it also should remind litigators to think of all available means to seek compensation for improper litigation conduct.

Employee’s use of Employer’s Email Server Waives Privilege

Many employers allow employees to use email, but have policies that state that the employer is free to monitor email.  Many cases have held that, depending on the facts, the employee cannot assert privilege under those circumstances:  both in claims between employee and the employer and between the employee and a third party.

This doctrine bit another employee recently, in a New York Appellate Division case, Peerenboom v. Marvel Entertainment, LLC, (N.Y. App. Div. March 16, 2017), available here.  The court found spousal privilege and attorney client privilege waived because the employee (the chair of the company) lacked a reasonable expectation of privacy based upon application of the four factors from the leading case.

Any time a lawyer is aware that his client is sending emails from an employer, he should consider whether privilege will be deemed waived, and, conversely, lawyers should look to see if the opponents are doing this, and so waiving privilege.

This is not a new body of law, but it continues to bite people.