Patent Ethics by Hricik

A Hiatus

I apologize for the last two weeks.  I managed to get very ill, behind on everything, and then was deposed as an expert.  

As I mentioned at the start of the blog, not long ago, I'm headed off to clerk for Chief Judge Rader starting in a couple weeks.  I won't be blogging during that time, and the blog will as s result go dark through August of 2013.

"I'll be back."

ABA Seeking Comments on Rules about Registration of In-House Counsel and Limited Recognition of Foreign-Based Lawyers

The cover memo is here.

The proposed rule is here, and is interesting for patent litigation purposes (it would not likely be adopted by the USPTO, at least not for a while).  I am not sure it goes far enough.

Another related proposed rule about admission pro hac vice is here.

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

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

[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

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!

Follow up on (final one, I'm sure everyone hopes: Judge Alsup Orders Google and Oracle to Reveal Relationships with Bloggers, Journalists and Academics

Google on Friday August 24 filed its supplemental list of bloggers and all.  The article about it, with links to Google's submissions, is here.

Is Patentable Subject Matter a Statutory Defense?

Over in the main site, there's a post by Jason Rantanen about Whiteserve v. Computer Packages, here. He points out that Judge Mayer, sua sponte, would have held some claims invalid for lack of patentable subject matter.  

There's an argument that this is not a validity defense, which I find interesting.  Briefly, we're dealing with a statute, not common law, and so the statute matters. Under the statute, there are specifically enumerated defenses.  See Aristrocrat Tech. v. Int'l. Game Tech, 543 F.3d 567, 661-63 (Fed. Cir. 2008).  If a statutory requirement is not identified as an invalidity defense, then it's not.  Id.

Section 282 lists a number of things as defenses, but lack of patentable subject matter under Section 101 is not expressly listed.  You would have to argue that it's implicit, I guess, in "non-infringement" under 282(1).  But that seems to be a very loose reading of the statute (I wrote a book on statutory interpretation and won't bore you with a lot of the mumbo jumbo).

Wait, you say, it's long been recognized as a defense.  Maybe, but a lot of statutes are read wrongly for a long time.  E.g., Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 177, 191 (1994) (overruling 60 years of judicial decisions authorizing a statutory cause of action on the ground that Congress in fact had not authorized it).

What's the ethics angle in this?  Heck, I don't know, except that under our system, the statute matters.  Someone explain to me how we can get to an invalidity defense under the statutory language, based on 101...?

 

Maintenance Fee Reminders as Indicia of On-Going Attorney-Client Relationships

There's a split in the law (even in the USPTO) on whether a lawyer who calendars or sends maintenance fee reminders creates an on-going attorney-client relationship with the recipient/patent owner.  This is highly significant since, for example, a lawyer who represents a client cannot be adverse to it, at all, and "adversity" has a very unwieldy definition in all areas, but especially patent practice.  (In addition, in some states an on-going attorney-client relationship tolls the running of the statute of limitations.)

So, what do you think of this language, for an engagement letter, say, to help avoid misunderstanding?

"If a patent is granted to you as a result of our prosecution, you must periodically pay maintenance fees or the patent will lapse, perhaps rendering it worthless.  Generally, fees will be due 3½, 7½, and 11½ years after the date of issuance.  We will send to your last known address maintenance fee reminders as a service, even though our attorney-client relationship has concluded, but only if you request us in writing to do so when we forward any patent to you.  If you do not ask us in writing to do so, we strongly suggest that you either hire a commercial service to do this for you, or place reminders of maintenance fees in more than one calendaring system.  Failure to docket maintenance fees can result in the loss of patent rights."

Adversity in Patent Litigation

I just finished (for now) the updated chapter in the second edition of our book on ethical issues in patent prosecution that covers conflicts of interest in patent prosecution.  There's very little authority out there, but lots of lawsuits and ethics "experts" with different opinions about what is, and is not, adverse in patent prosecution, so this topic is always interesting.

In updating it, I enjoyed reading the ITC decision denying Google's motion to disqualify Pepper Hamilton. In the Matter of Certain Portable Communication Devices, Inv. No. 337-TA-827 (Order No. 7 Feb. 13, 2012).  (Disclosure: I was an expert retained by Pepper Hamilton to provide an opinion.)  The case is interesting and provides some light on what might be "adverse" in patent litigation and, in my view, also in patent prosecution.  The tone of the ALJ's decision also offers, I think, important lessons on how to approach a motion to disqualify: if you're accusing the side of being unethical, act with very clean hands.

In that case, Pepper Hamilton was prosecuting a few patent applications for Google. It undertook to represent a patentee, Digitude, in an exclusion proceeding before the ITC, seeking an order preventing importation of certain cell phones and other devices. 

Google was not a defendant, and its products and services were not accused of infringing the patent involved in the ITC proceeding. Nonetheless, the accused products used Google’s Android software, and that software allegedly satisfied one element of a claim-in-suit.  Google intervened in the proceeding, contending that Pepper Hamilton was adverse to it, because Google was a member of a consortium (the “Open Handset Alliance”) that provided, free of charge, the Android software as an open source product to the device makers.  Further, the Open Handset Alliance specifically disclaimed any warranty of non-infringement when doing so.

The staff recommended denying the motion to disqualify, and the ALJ did so. The ALJ rejected several arguments presented by Google to establish adversity despite the usual indicia under the burden of proof required in the ITC:

Based on the foregoing, I find that Google has not clearly demonstrated that Pepper Hamilton's representation of Digitude is "directly adverse" to Google. Any finding of a violation of Section 337 in this investigation will not impact Google's legal interests because of the wording of the Apache 2.0 license under which Android is licensed [which disclaimed the warranty of non-infringement]. Moreover, I find that Google did not provide the full factual background when it asserted that Android is a "Google product," as the evidence establishes that Android is an open source project run through the Open Handset Alliance, whereby the software is provided at no cost and everyone is invited to contribute. Google asserts that Pepper Hamilton's representation of Digitude is adverse to Google's business interests as well. Google offers no evidence regarding how Google's business interests will be harmed through this litigation. Instead, Google offers a declaration from its in-house Litigation Counsel that makes conclusory assertions such as "Google has a strong interest in preserving the Respondents' continued importation of devices that incorporate Google's Android technology," and, to the extent that Digitude's infringement claims are directed to Android, "Google's legal and business interests are harmed." Such unsupported assertions do not demonstrate that Google' s business interests will be harmed if Digitude obtains relief against the respondents' Android-based products. Google argues that respondents in this investigation who make products that do not run the Android operating system may assert Google's patents or technology as prior art that invalidates Digitude's patents, thereby requiring Pepper Hamilton to attack Google's prior art patents or technology. Google offers no evidence that any Google patent or technology is being asserted as prior art in this investigation, making Google's argument pure speculation. The mere possibility that Google prior art will be relied upon in this investigation does not give rise to a Rule 1. 7 violation.

Google raises a concern regarding Google's possible involvement in this investigation as a third party. Pepper Hamilton has assured Google that it will not seek any third party discovery from Google in the current investigation.  Pepper Hamilton has also assured Google that if another party seeks third party discovery from Google and a deposition takes place, no Pepper Hamilton attorney will examine a Google witness. (ld) I fmd that these assurances are sufficient, and that Pepper Hamilton will be held to these promises, and the other promises included in Mr. Zemaitis' January 20, 2012letter. (ld) Pepper Hamilton shall have no involvement in any Google third party discovery in this investigation. This prevents any potential direct adversity from arising.

Google also raises a concern regarding the confidentiality of its information. Google has not offered any evidence that its confidential information has been viewed or used by Pepper Hamilton attorneys representing Digitude. Pepper Hamilton has already established an ethical screen. With this ethical screen in place, Pepper Hamilton attorneys working on this investigation on behalf of Digitude cannot access Google's confidential information, and Pepper Hamilton attorneys working on behalf of Google cannot access confidential information in the current investigation. Digitude offered declarations from the Pepper Hamilton attorneys who have made an appearance in this investigation, with each declaration stating that the attorney has not, inter alia, performed legal work for Google or accessed any Google confidential information while at Pepper Hamilton. Moreover, there is a physical separation of any hard copy documents, as Pepper Hamilton's work for Google takes place in its Pennsylvania and Delaware offices, while Pepper Hamilton's work for Digitude takes place in its Massachusetts and Washington, DC offices.  I find that the actions taken by Pepper Hamilton serve as a reasonable precaution to keep the confidential information of Google and Digitude separate. Pepper Hamilton shall ensure that these safeguards are kept in place.

 In sum, I find that Google has not met its heavy burden in demonstrating that Pepper Hamilton should be disqualified from representing Digitude in this investigation.

 

Judge Alsup Orders Further Disclosures from Google in Google v. Oracle

Judge Alsup held Google's disclosures were insufficient, and clarified in a way that he suggested might result in further disclosures by Oracle. He explained: "the order was designed to bring to light authors whose statements about the issues in the case might have been influenced by the receipt of money." He also wrote: "listing all commenters known by Google to have received payments as consultants, contractors, vendors, or employees. As for organizations receiving money, they need not be listed unless one of its employees was a commenter."

My impression from going through all these orders is that the Judge has seen some smoke, and believes there is fire. Whether that fire is something the judiciary should be concerned with is itself an interesting question.  Again, I analogize it to sponsored science, where disclosure by a scientist that he has been paid by X corporation to conduct a study on Y compound, which is made by X corporation, is something that should be disclosed. Arguably, the case is stronger in instances of "soft" information like legal analysis, since, in theory, a scientific article should disclose enough that it could be judged on its own.

The order is here.

 There is an article here.

Follow up on: Judge Alsup Orders Google and Oracle to Reveal Relationships with Bloggers, Journalists and Academics

The parties made their disclosures. An article about it is here.  Google's list is here and Oracle's is here.

An interesting broader issue arsises from the allegation by Oracle (if true) about Google having a "network" of advisors, and what that might mean for broader issues, beyond this case. Oracle allege a vast network of folks paid to advance Google's IP agenda (pretty much in those words).  In one of my worlds, academic research and writing, no one discloses ties like that.  What if, for example, Google saw my masterful piece on why TheraSense might not be retroactive, and paid me $100,000 to publish it far and wide and further it, since it needed that defense to succeed in a case?  What if I'm just on a retainer to Google, but I'm blogging here on some on-going Google litigation, or a pending appeal?  Shouldn't I disclose that?

Anyhow, if Google wants to pay me a lot of money to write articles, they can, I'd just disclose it.  Hint, hint.