Source: https://patentlyo.com/hricik/page/2
Timestamp: 2019-04-24 18:31:58+00:00

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I’ll be doing it for the AIPLA. You can read more here.
J-M was forced to arbitrate and the arbitrators found in the firm’s favor, though stating the firm should have disclosed the conflict. When the firm moved to confirm the award, J-M opposed it. J-M prevailed in the California high court.
The Court concluded that it could set aside an arbitral award based upon an illegal contract, and that the ethical rules provided a basis for so finding. It rejected the idea that a broad blanket waiver permitted the firm to represent J-M while representing South Tahoe without informing both clients of the conflict. Thus, the arbitral award was vacated.
When a law firm seeks compensation in quantum meruit for legal services performed under the cloud of an unwaived (or improperly waived) conflict, the firm may, in some circumstances, be able to show that the conduct was not willful, and its departure from ethical rules was not so severe or harmful as to render its legal services of little or no value to the client. Where some value remains, the attorney or law firm may attempt to show what that value is in light of the harm done to the client and to the relationship of trust between attorney and client. Apprised of these facts, the trial court must then exercise its discretion to fashion a remedy that awards the attorney as much, or as little, as equity warrants, while preserving incentives to scrupulously adhere to the Rules of Professional Conduct.
The difficult issues this creates for patent lawyers, and others, should be clear. Spotting conflicts of interest is difficult enough, but this case substantially increases the price of not doing.
The opinion just issued, and I’m doing a webinar for the AIPLA on conflicts in patent practice on 9/11, and so will think on this more, and discuss it then.
It discusses another case where this motion was held to be untimely, and there are serious questions about subject matter jurisdiction the court side-steps. Lawyers faced with 285 motions have a lot to think about: plan ahead.
The case itself only affirmed the denial of a motion by lawyers sued for a conflict of interest to compel arbitration, but Adherent Labs., Inc. v. DiPietro, 2018 WL 3520843 (Ct. App. Minn. July 23, 2018) (here) has interesting underlying allegations.
Bunnelle was a part-owner of Adherent. DiPietro, a patent lawyer, began to represent Adherent in 2009. In 2010, Bunnelle left Adherent after a dispute, and began working for IFS. DiPietro continued to represent Adherent.
Bunnelle sued Adherent in 2012, but as a result of suing assigned certain IP rights to Adherent (apparently, this was part of a settlement). DiPietro helped Adherent’s litigation counsel draft the assignment, though apparently DiPietro did not defend Adherent in that suit. However, he did continue to represent Adherent in other matters, it seems.
In 2014, Adherent learned that in March 2013 DiPietro had filed an application for IFS, naming Bunnelle as sole inventor (presumably because the application published). Allegedly, the application was based upon subject matter that Bunnelle had assigned to Adherent in 2012.
The district court determined that appellants knew that Adherent and Bunnelle had an adversarial relationship, and that appellants never sought Adherent’s written consent to represent IFS or Bunnelle. The district court also determined that appellants began representing IFS prior to DiPietro assisting in the drafting of the assignment, and that appellants had available to them, in the course of their representation, Adherent’s confidential information. The district court concluded that facts in the record showed that appellants improperly disclosed Adherent’s confidential information.
The district court determined that summary judgment was not appropriate on Adherent’s breach-of-fiduciary-duty claim because the record contained facts indicating that appellants breached their duty of loyalty, duty of confidentiality, and duty to disclose. The district court also determined that summary judgment was not appropriate on Adherent’s tortious-interference-with-contract claim because facts in the record supported Adherent’s claim that appellants used language from Adherent’s patent application in IFS’s application, which procured Bunnelle’s breach of the assignment.
It is rare, of course, to see allegations which, if true, present this sort of conflict and serves as a reminder to be careful when representing former employees of clients.
Over on the main page, Dennis has pointed out that a cert petition including citations to my posts here about why Section 101 is not a “defense” to infringement, and to the recent CAFC cases about why 101 includes factual inquiries. This rant is about those issues.
[A]s is shown more fully below, the analysis under § 101, while ultimately a legal determination, is rife with underlying factual issues. For example, while members of this court have used varying formulations for the precise test, there is no doubt the § 101 inquiry requires a search for limitations in the claims that narrow or tie the claims to specific applications of an otherwise abstract concept. CLS Bank, __ F.3d at __, 2013 WL 1920941, at *27-30 (meaningful limitations); Id. at *10 (opinion of Lourie, J.). Further, factual issues may underlie determining whether the patent embraces a scientific principle or abstract idea. Id. (opinion of Lourie, J.) (“The underlying notion is that a scientific principle . . . reveals a relationship that has always existed.”) (quoting Parker v. Flook, 437 U.S. 584, 593 n.15 (1978)). If the question is whether “genuine human contribution” is required, and that requires “more than a trivial appendix to the underlying abstract idea,” and were not at the time of filing “routine, well-understood, or conventional,” factual inquiries likely abound. Id. at *11-12. Almost by definition, analyzing whether something was “conventional” or “routine” involves analyzing facts. Id. at *12. Ultramercial II, 2013 U.S. App LEXIS 12715, at *6-7(emphasis added).
In other words, every judge in Alice agreed that 101 requires factual analysis.
Folks, those who forget the past are doomed to repeat it. Patent law and America’s capacity for innovation were saved from this nonsense in 1946. I have read and written about what Congress did in 1946 to rid of “inventiveness” and “invention” as requirements for patentability, and my blog posts above are about how Congress did exactly this in 1946. The answers are in the statutory text. Congress did not want us to argue about “invention” and instead put the conditions for patentability in 102 and 103 (and 112).
Where the judicial activism of the Supreme Court has put our country is is in a dire place. We are in a time when innovation is king. China has more patents pending than the U.S. Around the country, I have heard executives from all types of industry state that our system has made patenting of dubious value. The data shows that the Supreme Court’s rampant activist approach — undertaken perhaps in a noble effort to get rid of some (too many) stupid patents (and combined with IPRs) — has made our patent system weak, eliminated key incentives to innovate, and, most fundamentally, ignored the changes Congress made back in 1946 to stop this nonsense.
First, to explore the possible weaknesses in the factual and technical underpinnings of the experts’ positions. And, second, to build a working knowledge of each expert’s strongest points in order to be able to best convey them to the other side.
Given that most cases settle, and given the importance of experts in patent suits generally, I thought this was an interesting observation and perhaps explains why I’ve been to mediations lately. But I still hate being at them and the entire process!
I thought this was interesting. Magistrate’s daughter will be a summer associate at the patentee’s firm, and so she disclosed it to the parties and invited their views on whether they thought the case should be reassigned. It is Pacific Coast Building Products, Inc. v. Certainteed Gypsum, available here.
When I was clerking for the CAFC a few years ago, as clerks we avoided cases where we had any entanglement as an internal procedure, but I thought this was interesting because obviously the patentee’s firm knew it was going to hire the daughter, and the magistrate thought it wasn’t a conflict, but wanted the facts out there.
This is one of those instances, though, where if I were the patentee I’d be afraid the magistrate would try to be “too fair” to avoid even the appearance of favoritism, but it depends on the facts and relationships. Interesting rare disclosure issue, though.
“Back when I was young,” all we had to do to file an infringement suit was use Form 18 and basically allege “Plaintiff owns a patent and you sell stuff that infringes it.” (For one story about the process of repealing it (and almost all of the forms that used to be sufficient as a matter of law to state a claim), read here.) Abolishing the form meant that the Iqbal/Twombly requirements of pleading factual material, not naked allegations or legal conclusions, which if true plausibly showed infringement.
That eliminated the ability to sue for infringing some patents — say a method claim practiced inside a factory.
At the same time Form 18 went away, the scope of discovery was narrowed. While everyone focuses on the proportionality requirement, Rule 26 was also narrowed to eliminate the ability of a court, even for good cause, to permit discovery into the subject matter of a suit — only discovery into claims or defenses was permitted, and it had to be proportional and so on.
So, that again eliminated the ability to sue for some infringement, and it made it very important that pre-suit investigation identify every infringing product/use possible, or at least do so early and consistent with patent local rules. This is because courts do not permit patentees to obtain discovery into products beyond those identified in a complaint, or early in infringement contentions, without showing reasons why the product was not identified through other means (e.g., Internet searches on the manufacturer’s web page).
So, be careful in your pre-suit investigation, and be thorough. On a larger scale issue, this is but one more way that the value of patents have been reduced.
This one is here. I’ll save you time and tell you that once you enter the claim (push return after each element), hit the print icon (upper left) to get your document.
AI is here and the question of whether you can, or should, use these types of things is something to ponder.
A February 22, 2018 order in Merial Inc. et al. v. Abic Biological Labs. Ltd (Sup. Ct. N.Y.), here, enjoined King & Spalding from representing Abic Biological Labs (“Abic”) and Phibro Animal Health Corporation (“Phibro”) in an ICC arbitration where Abic and Phibro were adverse to Merial Societe Par Actions Simplifiee (“Merial SAS”), which was a former K&S client.
The evidence appears to have shown that K&S had represented Merial SAS, and related entities, from 1998 to at least 2011 concerning transactions and litigation in the animal health and vaccine space. K&S had also for many years represented Phibro and related entities in the animal health and vaccine space.
Merial SAS was acquired by Boehringer Ingelheim GmBH (“Boehringer”) in 2017, and K&S had represented an affiliate of Boehringer until December 2017. In the summer of 2017, Merial and Boehringer became cross-wise, and until then, none of the Merial parties knew that K&S had been representing Phibro.
In the summer of 2017, K&S wrote a letter to the person that it had often interacted with, the head of prosecution and litigation at Merial SAS (Dr. Jarecki-Black), explaining that K&S was representing Abic and Phibro in a licensing dispute they had with Merial SAS (and other entities). Dr. Jarecki-Black responded by asserting that K&S’ representation presented a conflict of interest and demanding that K&S withdraw. A few weeks later, the firm refused, explaining in a letter that it had represented different corporate entities in the matters Dr. Jarecki-Black pointed to, the matters were in all events unrelated to the ICC licensing dispute, and no K&S lawyer who was working against Merial SAS in the ICC matter had represented it previously. In response, Merial SAS reiterated its positions, and its letter also made a new (and very odd) argument: because the license in dispute included a New York choice of law clause, a California lawyer from K&S who was representing Phibro was engaged in the unauthorized practice of law. In its final letter, K&S reiterated that there was no substantial relationship between its work for and the work against Merial SAS, and made short shrift of the odd argument about the unauthorized practice of law.
It seems the parties could not agree on who was right, and instead Merial SAS filed suit in New York seeking an injunction to prevent K&S from being adverse to it (and Boehringer, and affiliated entities) in the ICC.
The court enjoined K&S. What struck me as quite concerning was that there was no overlap between patents or licenses K&S had worked on for Merial SAS and those in the ICC arbitration. Instead, the court noted that K&S “clearly knows a great deal about how the Merial entities approach issues relating to patents and licenses in the animal health and animal vaccine space.” The trial court emphasized that Merial SAS had relied on “a highly credentialed ethicist, Roy D. Simon” and noted that, although the decision was for the court to make, “King & Spalding offered no expert testimony to rebut Mr. Simon’s expert opinion.” The court then noted that “a reasonable lawyer like Mr. Simon came to the conclusion that King & Spalding’s multiple representations of [Merial SAS entities] on issues meaningful to the limited number of players in teh animal health and animal vaccine space would materially advance Abic and Phibro’s interests vis-a-vis Merial,” particular because Dr. Jarecki-Black “will play an integral role in Merial’s defense” in the arbitration.
There are several things of note. First, it is unusual for actual injunctions to be sought (rather than disqualification), and usually injunctions are litigated quite differently from motions to disqualify, but K&S appeared to litigated this as a basic disqualification motion. Second, from the opinion, at least, the injunction was granted based upon what is called “playbook” information — knowing how a client litigates or otherwise behaves, not actual specific confidential information — which is also atypical in some jurisdictions. Third, and from afar, this was not correctly decided, which underscores the point that whenever a firm is faced with a disqualification motion, it should consider the need for expert testimony (and Professor Simon is a highly credentialed ethicist; I don’t think he knows much about patents or licensing), and the need to show — although it’s the other side’s burden — there is no real risk of misuse of confidential information.
Over the last year or so, I’ve given a half dozen talks to practitioners about the differences between the duty of candor in PTAB proceedings compared to general prosecution and Therasense. Each time I do, I can tell the audience is learning that when you’re in IPR, you ain’t in Kansas any more.
In contrast, in PTAB proceedings there are two rules that relates to candor, and they are extraordinarily (and, I believe, unintentionally) broad. (Rule 56 does not apply in prosecution; other rules do.). Oddly, neither rule is the same as Rule 56, and each rule also differs from each other — and for no apparent reason.
The general rule of candor in 37 C.F.R. 42.11(a) provides: “Parties” — stop there and think about what that means — “and individuals involved in the proceeding” — again, stop and recognize that substantive involvement in the proceeding is not required — “have a duty of candor to the Office during the course of a proceeding.” Yes, the rule says a “party” owes a duty of candor, so ostensibly the knowledge of every person who works for a party “counts.” How many people work for Google?
Notice that you cannot read either rule to means something less than what it says without running into basic statutory interpretation problems. For example, you can’t read it to mean “inventors and corporate officers who are involved in the proceeding” because that renders the words “inventors” and “corporate officers” superfluous.
So, when you’re involved in a PTAB proceeding, be very careful about whose information may “count” for purposes of inequitable conduct during the proceeding. To be clear: I think the rule can’t mean what it says, and I’ve advocated that both rules be changed to be identical to Rule 56 (in terms of who is covered, at least), but my belief doesn’t overcome the text of the rules.
As noted below, the ABA recently published an opinion giving guidance to an oft-raised issue in patent practice of what, exactly, is “confidential” information of a former client (e.g., is a published patent application you wrote for a former client nonetheless confidential?). An interesting follow on to the ABA opinion is available here.
This is a non-precedential Third Circuit decision, Smith v. Lindemann (3rd Cir. No. 16-3357 (Sept. 21, 2017), and it’s dicta, but it is worth noting because I have blogged about arbitration and awards that violate public policy, as set forth in lawyer ethical rules, before.
In this case, the client sought an order from the district court that her legal malpractice claim was not subject to arbitration because New Jersey prohibited agreements requiring arbitration of malpractice claims and, even if it were sometimes permitted, the client had to give informed consent.
The court quickly rejected the first argument because there was no case law that supported it. But then in dicta, the court stated that even if state law did prohibit agreements requiring arbitration of malpractice claims, or even if the clause did not meet the requirements of applicable ethical rules, that law and those rules were preempted by the FAA.
The Supreme Court has held that the FAA requires courts to put arbitration agreements “on equal footing with all other contracts” and that they may not interpret state law differently in the context of arbitration. See DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463, 470 (2015) (quoting Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443 (2006)). So, to the extent Smith seeks a more searching review of the advice attorneys provide new clients when an agreement to arbitrate is at issue, her argument is foreclosed by the FAA. See id. We need not decide that question, however, because she fails to explain why a written or oral warning that explicitly uses the word “malpractice” is necessary as a matter of New Jersey law.
The case raises some serious federalism issues, and probably actually is inconsistent with the Supreme Court’s holdings, which permit challenges to arbitration clauses based upon statutes and, in some circuits, other public policies. Given the limited review of arbitral awards, and — at least in this panel’s view — the limited ability of courts to rely upon ethical rules to refuse motions to compel arbitration, clients should be careful about agreeing to arbitration awards and lawyers should probably consider beefing up disclosures about them.
Apple has filed a motion with the PTAB, here, asserting that letters from the former CEO of a patent owner to an original panel, a substitute panel, and Commerce Secretary Wilbur Ross constituted improper ex parte communications that warrant reversing the PTAB’s findings in favor of the patentee and, instead, either entering judgment in Apple’s favor or at least granting a new trial.
Boiled down, Apple argues that after the decision to institute was granted, the former CEO (and still “advisor” to the patentee) sent letters to the panel that had granted institution, and those letters were not made of record. That panel was replaced, without explanation to Apple (or anyone from what I can tell), and a substitute panel then took over the matter.
The former CEO then sent more letters — to both the PTAB chief judge and to the substitute panel which, again, were not made of record. (It’s not clear to me that Apple or the patentee knew of the letters at this time.). Other letters to the chief judge, the substitute panel, and even the Secretary of Commerce followed and the letters were not made of record and Apple was not notified (and, again, neither was the patentee, from what I can tell).
Then on September 18, the patentee posted the letters — calling them “independent” — on its web page. Then there were more letters.
The substitute panel in late November in its final written decision and found Apple had not established the claims were unpatentable.
A month later, Apple filed this motion, stating the facts and asserting that its due process rights had been violated, and more. Interestingly, Apple relies among other things, on the APA, arguing “the ex parte communications violate the APA, which prohibits an ‘interested person outside the agency’ from making, or knowingly causing to be made, an ex parte communication relevant to the merits of the proceeding with a member of the adjudicatory body.” (citing 5 U.S.C. § 557(d)(1)(A)).
Apple also admitted that it had known that, in May, that the former CEO had sent a copy of one of his letters to the court handling the pending litigation involving the patent, because the clerk of that district court had entered the letter on the docket. But, oddly, Apple said it had done nothing because it did not know the letter would influence the PTAB (again, inferring that the letter did influence the PTAB). Further, apparently Apple knew of (what it now says is) an improper ex parte contact but did nothing — even though after it learned of that letter the panel was changed — and it only did something after it lost the IPR.
It will be interesting to learn why the PTAB judges did not inform everyone of the letters (assuming they even received them, and that disclosure did not occur), but it looks like Apple knew in May of (what it now says is) a clear ethics violation, but did nothing, and at least as of September, the patentee knew of (what are allegedly) the improper ex parte communications, and did nothing.
So, let’s see how this gets sorted out.

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