David Hricik Professor, Mercer Law School Of Counsel, Taylor, English, Duma LLP
Why Conflicts Matter • You have to be ethical. • Rare for a patent prosecution conflict, alone, to cause malpractice claim, disqualification, or grievance. Instead, conflicts asserted in: • • Fee disputes “defense” and/or disgorgement; and “Motive” in in a routine malpractice case. • Remember: malpractice cases and fee disputes will be in • state court, or arbitration, unless there’s diversity 2
Today’s Plan Scope of conflicts in prosecution is not well- • developed in case law. To understand prosecution conflicts, look first at • litigation, opinions, and then apply those lessons to prosecution. • Within prosecution, go from easy to harder to spot 3
Choice of Law This Can be Outcome Determinative 4
State Rules or Not? • State courts tend to • Many states have Rule apply state disciplinary 8.5(b): For conduct rules in malpractice, pending before a tribunal, disqualification. its rules control, unless they say otherwise. But they often won’t • apply to patent • E.g., N.J. prosecution because … But not NY • 5
NY: Court (not Tribunal) and Admitted (b) In any exercise of the disciplinary authority of this jurisdiction, the Rules of Professional Conduct to be applied shall be as follows: (1) For conduct in connection with a matter pending before a court before which a lawyer has been admitted to practice (either generally or for purposes of that proceeding), the rules to be applied shall be the rules of the jurisdiction in which the court sits, unless the rules of the court provide otherwise, and (2) For any other conduct …. 6
Not Pending NJ: If not before ”tribunal,” the rules where the conduct occurred unless “predominant effect of the conduct” was in another jurisdiction, then its rules apply. NY: If not before “court,” the rules where the lawyer principally practices, unless “predominant effect” is in another jurisdiction in which the lawyer is licensed, then its rules apply. 7
So … if NJ & NY Licensed & USPTO NJ would apply USPTO Rules (USPTO is a “tribunal”), but NY rules would apply since USPTO is not a ”court.” And, where is “predominant effect” of patent prosecution? Takeaway: a good starting point is to recognize more than one set of rules could apply and that following the most stringent rules is a good starting point for the analysis. 8
Choice of Law in USPTO, ITC, Courts • Entities where patent lawyers practice follow different rules. • Sometimes the same entity applies different rules, sometimes depending on the procedural issue in which the ethical issue arises. Sometimes the differences are textual. • • Sometimes the identical rule has been interpreted differently. 9
Prosecution Discipline: USPTO Rules • Disqualification: Case-by-case basis usually • applying ABA Model Rules. 10
IPR Discipline: USPTO Rules • • Disqualification: Case-by-case 11
ITC Discipline: • • Disqualification: Model Rules used as guide 12
Federal Litigation Discipline: State rules if adopted or refer to state bar • • Disqualification and “ethics”…. 13
Federal Ethics • Circuit splits widely: Must follow rules adopted in district court local rules, so • usually state rules; • Error to follow rules in district court local rules and instead must apply “national standards” apply • Texas federal courts! • Apply Model Rules. • Varies even within circuit. 14
Choice of Law: Malpractice • The “ethics” analysis should apply. • So if a matter is before a tribunal/court and you comply with its rules, that should control/help. 15
So … Identify which set(s) of rules may apply. • Ordinarily, following the most stringent rule will avoid any • problem. But not always! 16
USPTO Rule 11.107 Two Forms Informed Consent of Current Client Conflicts (a) Except as provided in paragraph (b) [A] practitioner may represent a client if: (1) The practitioner reasonably believes that the (b) … , a practitioner shall not represent a client if the representation involves a practitioner will be able to provide competent and concurrent conflict of interest. A diligent representation to each affected client; concurrent conflict of interest exists if: (2) The representation is not prohibited by law; (1) The representation of one client will be directly adverse to another client; (3) The representation does not involve the or assertion of a claim by one client against (2) There is a significant risk that the another client represented by the practitioner representation of one or more clients in the same litigation or other proceeding will be materially limited by the before a tribunal; and practitioner’s responsibilities to... [anybody]. (4) Each affected client gives informed consent, confirmed in writing. 17
Clear Material Limitation OA applies one of your client’s patents to reject • pending claims for a different client. You narrow pending claims because of your • obligations to the patent owner-client, but a lawyer who only represented the applicant would not have done so. 18
Clear Adversity Can’t sue or take an appeal against a current client, • even in an unrelated matter. • Can’t negotiate against a current client, even in an unrelated matter. Small matter, totally unrelated, branch office, • young lawyer, etc. -- no impact (generally) on analysis.
Adversity: A Spectrum “simultaneous Appearing in representation in suit, ITC, IPR to unrelated matters of represent clients whose interests opposing party are only economically to a client. adverse”
Helping Behind the Scenes X Corp A lawyer may not assist another firm to litigate against a Your Firm current client of the lawyer. Plaintiff v. X Corp Other firm 21
Causing Later Liability X Corp Is there adversity if Your Firm your firm is successful, the Plaintiff A v. Acme defendant will later have an Acme v. X Corp indemnity claim against some Other firm other client? 22
Adverse Courts hold that bringing a suit that will trigger an • indemnity claim against a client is adverse. • Sometimes do not disqualify because of facts of case (delay in filing, bad faith, etc.) 23
How Do You Spot This? Indemnity can arise by contract. • • Implied warranty of noninfringement under UCC if a company sells a part to another one. Does a reasonable conflict check require running all of this • down? • What if lawyer learns well-into litigation of another client’s obligation to indemnify or its warranty?
Economic Impact Injunction Case #1 Google Open Source Consortium Google intervenes to DQ PH firm Open Source Consortium Pepper Hamilton gave Android OS to device makers No adversity even though Complainant v. Device Makers lawyer was seeking ITC 337 proceeding to exclude phones using Android OS, costing Google money 25
Economic Impact: Injunction Case # 2 Apple intervenes on appeal to DQ JD firm Apple CAFC disqualified JD from LG Chem appeal because it “asserted sold batteries Jones Day the position that an to Apple injunction on behalf of one client should limit the activities of another” and Celgard v. LG Chem Jones Day’s representation Appeal to affirm would let Celgard use the preliminary injunction injunction as leverage in against LG Chem business negotiations with Apple. 26
Hypos and Spotting? What if a Pepper Hamilton client had made cases for the phones being excluded? What if Jones Day hadn’t known that Apple bought the batteries? How do you spot these economic impacts ahead of time? 27
Badly Modified Airplanes Owner of 1 modified plane, Evergreen v. Plane modifier, GATX BoNY MBP Firm owned other modified plane 28
Assembling the Documents MBP had been “ advancing assertions in pleadings and dispositive motions that could provide [plane modifier, GATX] with defenses to claims by BoNY.... MBP then sought discovery to support those assertions. Because BoNY is a current owner of [a modified airplane], any defenses to [plane owner, Evergreen ’ s] claims are probably dispositive of BoNY ’ s claims.... ” 29
What if…. • You represent patentee. In due diligence, you identify five potential infringers. • • One is a client. Can you represent the patentee against the other four? • • Maybe… 30
Assembling the Documents X Corp Can your firm represent a patentee Your Firm against a non-client if that same patentee, through separate Plaintiff A v. Acme counsel, sues a client of your firm on the Plaintiff A v. X Corp same patent? Other firm 31
Assembling the Documents At least five-non-party-clients have intervened to DQ lawyers, • with differing results. See Milwaukee Elec. Tool Corp. v. HILTI, Inc., 2015 WL 1898393 (E.D. Wis. Apr. 27, 2015) (citing four of the cases) and SAS Institute (the fifth, discussed below)
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