Jump to Navigation | Jump to Content
American Bar Association

Litigation News

Court Approves Firm's Representation of Competing Patent Clients

By Andrew J. Kennedy, Litigation News Associate Editor – April 11, 2016

 

In a case that has given the patent bar a collective sigh of relief, the Massachusetts Supreme Judicial Court held that a law firm that simultaneously represented two clients with competing inventions did not have an unethical conflict of interest. Maling v. Finnegan, Henderson, Farabow, Garrett, & Dunner, LLP. The appellate court found no conflict where the clients’ interests were only economically, not directly, adverse. ABA Section of Litigation leaders agree with the appellate court’s warning that the opinion does not give law firms a free pass, and encourage firms to scrutinize potential conflicts and work with clients for advance waivers where appropriate.


A Tale of Two Clients
Plaintiff Maling first engaged the law firm in its Boston office in 2003. Over the next six years, the firm obtained four patents for him in the area of screwless eyeglass technology. Meanwhile, lawyers in the firm’s Washington, D.C. office obtained screwless eyeglass technology patents for another client, a Japanese company that Maling viewed as a competitor. After discovering that the firm represented the competitor, Maling sued the law firm.


The plaintiff asserted that the Japanese company’s work involved the “same patent space” and that the law firm had filed patent applications more quickly for his competitor than it did for him. The plaintiff also complained that he had asked the law firm to provide a legal opinion addressing the similarities between his patents and those of his competitor. The firm refused to draft the opinion and that, the plaintiff alleged, rendered his invention unmarketable.


Subject Matter Conflict Is Not Per Se Unethical
The trial court dismissed the suit. The plaintiff appealed and the Supreme Judicial Court affirmed. As an initial matter, the appellate court explained that the simultaneous representation of clients competing for patents in the same technology area is referred to as a “subject matter conflict.” The plaintiff argued that such conflicts should be per se ethical violations. He relied on Massachusetts Rule of Professional Conduct 1.7, which bars lawyers from representing clients if the representation is “directly adverse to another client” or if there is a “significant risk” that the representation of one client “will be materially limited by the lawyer’s responsibilities to another client.”


The appellate court acknowledged that subject matter conflicts present potential problems for lawyers. But it still squarely rejected the plaintiff’s argument. It held that representing clients who are only economically adverse are not direct conflicts of interest under Rule 1.7. Here, according to the appellate court, the two clients “were not competing for the same patent, but rather different patents for similar devices.”


However, a direct conflict likely arose, the appellate court reasoned, when the plaintiff asked the firm to provide an opinion regarding the likelihood that the firm’s other client would sue him. The appellate court found that providing such an opinion would likely pose a direct conflict. The firm could have either declined the representation, or obtained a client waiver after disclosing the conflict. Because the firm refused to supply the requested opinion, the appellate court concluded that the firm had acted properly.


The appellate court then analyzed whether the law firm’s representation of the two competitors rendered its representation of the plaintiff “materially limited.” Such a claim could be actionable, the appellate court found, if the plaintiff had shown that the firm had engaged in “claim shaving.” In other words, if the firm had altered claims in the plaintiff’s patent application because of information contained in the other client’s application, a question would arise whether “courses of action that reasonably should be pursued on behalf of the client” were foreclosed. But the appellate court decided that the plaintiff’s complaint was factually insufficient to support that theory.     


While the decision was a victory for the law firm, the appellate court also warned firms of the duty to identify and remedy actual and potential conflicts. It observed that what constitutes an adequate conflicts check is a complex question that is gaining in complexity due to the rise of large law firms. “Nothing we say here,” the appellate court cautioned, “should be construed to absolve law firms from the obligation to implement robust processes that will detect potential conflicts.”


Impact on Litigators
“Most patent attorneys develop technology-specific practices,” explains Angela Foster, North Brunswick, NJ, cochair of the Section of Litigation’s Intellectual Property Litigation Committee. “A problem can arise when the firm’s successful marketing attracts several clients in the same subject area. That problem is greater in large firms because there are more attorneys and potentially more clients with overlapping inventions. Patent attorneys should be mindful that violation of the rules of professional responsibility in most states and the United States Patent and Trademark Office do not require a showing of client harm,” she advises.


Furthermore, subject matter conflict does implicate material limitation conflict. “Material limitation conflicts arise when there is some aspect of another engagement or your larger practice that might limit your ability to discharge duties to your client,” notes Nicholas B. Reuhs, Indianapolis, IN, cochair of the Conflicts of Interest Subcommittee of the Section’s Ethics & Professionalism Committee. But, “these kinds of conflicts are typically waivable,” he adds.


Reuhs offers two practical suggestions. First, “this decision is an invitation for firms to explore advance waivers to try and avoid this type of dispute.” Second, “if you are going to specialize, you want to have some sort of clearinghouse or practice area meetings to track conflicts that are not going to show up on traditional conflict reports.”


Keywords: conflict of interest, patent, subject matter conflict, advance waiver


 
Related Resources
 
 
Copyright © 2017, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).