IP Subject Matter Conflicts of Interest: Who is Looking Out For You?
As patent attorneys develop knowledge in particular technology areas, they often seek to represent multiple clients in that technology area. This approach, however, can lead to potential conflict of interest problems. In fact, conflicts of interest arising from the representation of multiple clients in the same subject area during patent prosecution have resulted in recent high-profile malpractice lawsuits - Tethys Bioscience Inc. v. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC, N.D. Cal., No. C 09-5115 CW and Max-Planck-Gesellschaft zur Frderung der Wissenschaften e.V. v. Wolf Greenfield & Sacks, P.C. 1:09-cv-11168. Regardless of the eventual outcomes of these cases, it is clear that counsel and law firms involved in patent prosecution should carefully evaluate client representations to avoid conflicts that could jeopardize clients’ rights, breach fiduciary duties, and/or violate PTO rules, Model Rules, and state legal ethics rules.1
Is Your Counsel “Loyal?”
The duty of loyalty to each client is of extreme importance in patent practice. One component of the duty of loyalty prevents lawyers from performing a service for one client that adversely affects the interests of another client. This duty arises frequently in the context of patent prosecution. When the lawyer discovers that he has been drafting applications in the same technology area for different clients, what are his options and duties? Choosing to represent a new client having deeper pockets over an existing client, as sometimes occurs in the present economic climate, may violate the duty of loyalty. In many circumstances wherein a lawyer finds himself with conflicting obligations to file patent applications, the only solution to the conflict is to resign from both representations. Otherwise, even after the lawyer has resigned from representing one company, his work on the application for the remaining company may be colored by his knowledge of the putative rights of the departed client. Clearly, when two companies are operating businesses creating intellectual property in the same technical subject matter, the duty of loyalty becomes very significant to the lawyer's ability to represent both companies.
Is Your Confidential Information at Risk?
The federal regulations governing procedures before the PTO require disclosure by the inventor or his attorney of any information known to either of them and material to the prosecution of a patent application. Meanwhile, Rule 1.6 of the Model Rules of Professional Conduct prohibits an attorney from revealing the confidential information of his client. The PTO also requires that an attorney preserve “the confidences and secrets of a client.”
The duty to disclose and the requirement to keep client confidences create a direct conflict of interest when an attorney possesses confidential information from one client that also happens to be material to the prosecution of a patent for another client. This conflict is especially critical because a patent prosecuted without full disclosure of material information by the attorney may be found unenforceable down the road.
If an attorney is unable to disclose confidential information obtained from one client, but is duty-bound to disclose the information in order to fulfill his duty of candor to the PTO for a second client, the attorney must withdraw from the representation. An attorney does not have the option to continue prosecuting a patent application while failing to disclose his actual material knowledge, even though this information may be the confidential information of another client.
Is Your Counsel Taking Steps to Protect You as a Client?
Most firms, at a minimum, utilize procedures for preventing a new client representation where a conflict of interest is present with an existing client. Some firms perform conflicts checks by simply comparing the names of adverse parties in the proposed new matters with a list of firm clients, and then to compare the name of the new client with a list of matters for existing clients to see whether the new client is adverse in an existing matter. This traditional method of avoiding conflicts is often ineffective in detecting potential subject matter conflicts. A firm must be proactive in the field of patent prosecution; specifically, a firm must take systematic protective measures against creating subject matter conflicts. Thus, there is an ongoing need for subject matter conflict review at all law firms with new cases continuously being taken up.
Many firms properly utilize a second round of checks for subject matter conflicts. The problem with this approach, however, is that some firms are willing to take on the risk of actual or potential subject matter conflicts in ex parte matters such as patent prosecution.
In conclusion, given today’s competitive technology climate, you need to know if your counsel is looking out for you. It is imperative to carefully question your patent counsel as to the potential subject matter overlaps in the same or related technologies. There are, of course, significant advantages in retaining a patent prosecution counsel with prior experience in the same technology. Nevertheless, clients should always consider whether the advantage of retaining a lawyer with prior experience outweighs the chance that a future subject-matter conflict will arise.
1 We note that regarding Max-Planck-Gesellschaft zur Frderung der Wissenschaften e.V. v. Wolf Greenfield & Sacks, P.C., U.S. District Court for the District of Massachusetts recently found that there was an attorney-client relationship between the parties, but that the clock had run out on the malpractice and breach of fiduciary duty claims brought by Germany-based Max Planck. The judge denied, however, the Wolf Greenfield summary judgment motion on Max Planck's request for a declaratory judgment that the law firm was required to cease its prosecution of some of the patent applications at issue.