Court Opinion

ID: 211318
Source: CourtListenerOpinion
Date Created: 2011-03-13 08:26:08+00
Date Added: 2024-06-11T17:28:05.819392
License: Public Domain

NOTE: Pursuant to Fed. Cir. R. 47.6, this disposition
                   is not citable as precedent. It is a public record.

 United States Court of Appeals for the Federal Circuit

                                       05-1452

                       PATRIOT SCIENTIFIC CORPORATION,

                                                Plaintiff-Appellee,

                                          and

                        BEATIE AND OSBORN, LLP,
             and BRAMSON, PLUTZIK, MAHLER & BIRKHAEUSER, LLP,

                                                Sanctioned Parties-Appellants,

                                           v.

                                CHARLES H. MOORE,

                                                Defendant-Appellee,

                                          and

                         TECHNOLOGY PROPERTIES, LTD.,
                            and DANIEL E. LECKRONE,

                                           Defendants-Appellees.
                           ___________________________

                              DECIDED: April 12, 2006
                           ___________________________

Before NEWMAN, BRYSON, and PROST, Circuit Judges.

PER CURIAM.

      This is an appeal from an order of the United States District Court for the

Northern District of California disqualifying counsel for Patriot Scientific Corporation
(“Patriot”) and denying Patriot’s motion to allow one of its witnesses to testify. Patriot

Scientific Corp. v. Moore, No. C 04-0618 JF (N.D. Cal. Mar. 8, 2005). Patriot and the

appellees have settled the underlying action, and Patriot has waived its right to appeal

from the disposition of that action. However, Patriot’s disqualified counsel, Beatie &

Osborn, LLP (“Beatie & Osborn”), and Bramson, Plutzik, Mahler & Birkhaeuser, LLP

(“Bramson Plutzik”), have appealed from the court’s disqualification order. We affirm

the portion of the order disqualifying the appellants as Patriot’s counsel, and we hold

that the appellants do not have standing to challenge the remainder of the order.

                                              I

       Russell Fish and Charles Moore are listed as co-inventors on seven patents that

originated with the same application, No. 389,334 (“the ‘334 application”), and issued

between 1995 and 2003. Attorney Willis Higgins represented Fish and Moore in the

prosecution of the ’334 application. Through several transactions between 1991 and

1994, not at issue here, Patriot Scientific Corporation came to own all of Fish’s rights in

the patents. In 2002 and 2003, Moore assigned some of his rights in the patents to

Technology Properties, Limited (“TPL”). In 2004, in the litigation from which this appeal

comes, Patriot sued Moore, TPL, and TPL’s owner Daniel Leckrone, seeking a

declaratory judgment that Fish is the sole inventor of U.S. Patent No. 5,809,336 (“the

’336 patent”)—one of the seven patents that resulted from the ’334 application. The

defendants counterclaimed for a declaratory judgment that Moore is at least a co-

inventor and TPL is at least a co-owner of the ’336 patent and the other six patents that

issued from the ‘334 application. Beatie & Osborn, Bramson Plutzik, and a third law

firm from Georgia represented Patriot in the litigation.

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       Beginning in 2002, in separate actions not part of this appeal, Patriot sued

several other companies for infringement of the ’336 patent. In connection with those

infringement suits, Patriot retained attorney Higgins as a consultant.             Higgins’s

agreement obligated him to testify as a witness in Patriot’s declaratory judgment action

against Moore, TPL, and Leckrone. Fish signed a written waiver of his attorney-client

privilege with respect to Higgins’s work prosecuting the ’334 application, but Moore did

not.

       In the declaratory judgment suit, Patriot filed a motion to allow it to introduce

testimony from Higgins in support of its contention that Moore was not a co-inventor of

the ’336 patent. The defendants opposed Patriot’s motion, and Moore asserted the

attorney-client privilege to prevent Higgins from testifying about his conversations with

Moore during prosecution of the ’334 application. The defendants also filed a motion to

disqualify Patriot’s counsel on the ground that they induced Higgins to breach his

professional obligations to his former client, Moore, by disclosing Moore’s confidences

and by working as a consultant for Patriot in its litigation against Moore.

       The district court granted the defendants’ disqualification motion in part. The

court agreed with the defendants that Higgins had breached his fiduciary duty to Moore

by disclosing Moore’s confidences and by accepting employment adverse to Moore

without Moore’s consent.      In particular, the court found that Beatie & Osborn had

violated California Rule of Professional Conduct 1-120 by inducing Higgins to breach his

duty to Moore, and the court disqualified Beatie & Osborn on that ground. Rule 1-120

provides that an attorney “shall not knowingly assist in, solicit, or induce any violation of

the Rules of Professional Conduct.” The district court also disqualified Bramson Plutzik.

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Although the court found that there was no evidence that Bramson Plutzik was actively

involved in Beatie & Osborn’s communications with Higgins, the court nonetheless

found that Bramson Plutzik was sufficiently involved in the litigation—having appeared

before the court and co-signed pleadings with Beatie & Osborn—that it should be

presumed that the firm was privy to Moore’s confidences. The district court declined to

disqualify Patriot’s Georgia counsel because that firm had not appeared before the

court, because there was no evidence that the firm was privy to Moore’s confidences,

and because disqualifying the Georgia firm would require Patriot to obtain a new legal

team. The court also denied the plaintiffs’ motion to allow Higgins to testify, on the

ground that any testimony adverse to Moore would violate Higgins’s fiduciary duty to

Moore, and because the court found that Moore had validly asserted the attorney-client

privilege to prevent Higgins from testifying.

       After Beatie & Osborn and Bramson Plutzik were disqualified, Patriot and the

defendants settled the lawsuit between them. Pursuant to the terms of the settlement,

the district court entered a stipulated judgment dismissing Patriot’s claims with prejudice

and declaring that Moore is at least a co-inventor and TPL is at least a co-owner of all

seven of the patents in suit. As part of the settlement, Patriot waived its right to appeal.

Beatie & Osborn and Bramson Plutzik, however, took the instant appeal, challenging

the district court’s order disqualifying them and precluding Higgins from testifying.

                                                II

       We first address the question of the appellants’ standing to appeal. The question

of standing to appeal an order disqualifying counsel or excluding testimony is a

procedural matter not unique to patent law, the disposition of which is not “affected by

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the special circumstances of the patent law setting in which [the] issue arise[s].”

Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1360 (Fed. Cir. 1999) (en

banc). We therefore apply the law of the Ninth Circuit.

       The Ninth Circuit has held that not every disqualification order gives the

disqualified attorney standing to appeal.        In re Grand Jury Subpoena Issued to

Chesnoff, 62 F.3d 1144, 1145 (9th Cir. 1995). When, however, a disqualification order

rests on grounds that could harm the attorney’s professional reputation, and that order

is in the form of a sanction, the attorney may file an appeal independent of his client’s

right to appeal. See United States v. Talao, 222 F.3d 1133, 1137-38 (9th Cir. 2000).

Harsh criticism of an attorney in a written opinion is not an appealable sanction,

Weissman v. Quail Lodge, 179 F.3d 1194, 1200 (9th Cir. 1999), but an explicit finding

that an attorney violated a specific ethical rule “per se constitutes a sanction” under the

law of the Ninth Circuit.    Talao, 222 F.3d at 1138.       Such an order is appealable

regardless of whether the parties have settled the underlying action. See Lasar v. Ford

Motor Co., 399 F.3d 1101, 1109 (9th Cir. 2005).           In this case, the district court’s

disqualification order was based on a finding that Beatie & Osborn had violated

California Rule of Professional Conduct 1-120 and that Bramson Plutzik was

presumably privy to the disclosures that flowed from that violation. Under Ninth Circuit

law, the part of the order disqualifying the appellants as Patriot’s counsel is based on

the kind of sanction as to which the appellants have standing to appeal.

       The portion of the district court’s order denying Patriot’s motion to allow Higgins’s

testimony, on the other hand, was not a sanction against the appellants and did not

otherwise injure them. “Counsel have standing to appeal from orders issued directly

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against them, but not from orders applicable only to their clients.”            Uselton v.

Commercial Lovelace Motor Freight, 9 F.3d 849, 854-55 (10th Cir. 1993) (citing cases);

see also Kapco Mfg. Co. v. C & O Enter., 886 F.2d 1485, 1494 (7th Cir. 1989); Warner

Bros., Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1127 (2d Cir. 1989). Patriot, not its

counsel, is the party aggrieved by the loss of Higgins’s testimony. We therefore hold

that the appellants do not have standing to appeal the portion of the district court’s order

denying Patriot’s motion to allow Higgins’s testimony.

                                             III

       We apply Ninth Circuit law in reviewing the merits of the district court’s decision

to disqualify the appellants. Sun Studs, Inc. v. Applied Theory Assocs., 772 F.2d 1557,

1566 (Fed. Cir. 1985). In the Ninth Circuit, the standards adopted by the district court to

govern the conduct of members of its bar are controlling. Id. (citing United Sewerage

Agency v. Jelco, Inc., 646 F.2d 1339 (9th Cir. 1981)). The district court’s rules require

attorneys who are admitted to practice before it to comply with the standards of practice

applicable to California attorneys. N.D. Cal. Civ. Local Rule 11-4(a)(1). The district

court’s basis for disqualifying Beatie & Osborn was that the firm’s attorneys had violated

California Rule of Professional Conduct 1-120 by inducing and assisting Higgins in

breaching his fiduciary duty to Moore as a former client through his disclosures of

Moore’s confidential information and through the assistance he provided to Patriot in its

litigation against Moore. The appellants do not dispute the historical facts of this case,

but argue instead that Higgins’s conduct was permissible. Under Ninth Circuit law, we

review that issue de novo, United States v. Lopez, 989 F.2d 1032, 1036 (9th Cir. 1993),

and if we sustain the district court’s conclusion that an ethical violation occurred, we

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review the court’s choice of sanction for an abuse of discretion. Golden Eagle Distrib.

Corp. v. Burroughs Corp., 801 F.2d 1531, 1538 (9th Cir. 1986).

                                             A

       Rule 3-310 (E) of the California Rules of Professional Conduct states that “[a]

member shall not, without the informed written consent of the client or former client,

accept employment adverse to the client or former client where, by reason of the

representation of the client or former client, the member has obtained confidential

information material to the employment.” The appellants do not dispute that Higgins’s

employment as a consultant to Patriot in its suit against Moore was “employment

adverse to” Moore, or that Higgins’s conduct otherwise fell within the scope of what the

rule prohibits. Under California law, it does not matter that Higgins was acting as a

litigation consultant, rather than Patriot’s attorney. See Am. Airlines, Inc. v. Sheppard,

Mullin, Richter & Hamilton, 96 Cal. App. 4th 1017, 1039 (Cal. App. 2002).

       The appellants argue that this court should make federal common law to the

effect that the attorney-client privilege does not apply “when former joint clients in the

invention and patent prosecution process and their successors in interest litigate to

determine inventorship and ownership.” That argument is beside the point, because the

district court’s order disqualifying the appellants was not based on the attorney-client

privilege, but rather on a finding that the attorneys induced Higgins to violate his duty of

loyalty and confidentiality to a former client. The attorney-client privilege is relevant in

this case only to the question whether Higgins should have been permitted to testify,

which as we have stated is not an issue that the appellants have standing to appeal.

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       In Zador Corp. v. Kwan, 37 Cal. Rptr. 2d 754 (Cal. App. 1995), the California

court explained that in the context of litigation between former clients, the propriety of

disqualifying an attorney “turns upon the scope of the clients’ consent.” Id. at 759. In

Zador, an attorney had previously represented both Zador and Kwan.                The court

declined to disqualify the attorney in subsequent litigation between Zador and Kwan,

because Kwan had signed a waiver before obtaining the attorney’s services. Kwan was

advised that if any conflicts arose between Kwan and Zador, the attorney would

continue to represent Zador, and Kwan agreed not to seek to disqualify the attorney

“notwithstanding any adversity that may develop.” Id. at 762-63. The court held that the

consent was necessary for the attorney to be permitted to represent Zador. Id. In this

case, because there was no such consent we uphold the district court’s conclusion that

Higgins violated Rule 3-310 (E) of the California Rules of Professional Conduct, and that

Beatie & Osborn violated Rule 1-120 by assisting Higgins in doing so.

                                             B

       Turning to the question of the appropriateness of the district court’s

disqualification order, we hold that it was not an abuse of discretion for the district court

to disqualify both law firms. As the court noted, Higgins’s disclosures were crucial to the

disputed issue in the case, and both law firms were deemed to be privy to those

disclosures. Moreover, the district court considered the potential hardship to Patriot

Scientific and declined to disqualify Patriot’s Georgia counsel on that ground. Under the

circumstances, we find no abuse of discretion.         Cf. Metro-Goldwyn-Mayer, Inc. v.

Tracinda Corp., 43 Cal. Rptr. 2d 327, 332 (Cal. App. 1995) (“Where the duty of loyalty

applies, it requires a per se, or automatic disqualification, in all but a few instances.”).

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We therefore uphold the district court’s order disqualifying the appellants as Patriot’s

counsel.

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