Tech Talk : Conflicts of Interest in Patent Law

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Conflicts of interest are always a potential pitfall in the realm of attorney malpractice.  The issue becomes even more complicated when tech-based clients enter the scene.  What happens when two tech clients who are not directly adverse, but instead are potential competitors, both approach you for assistance?

This scenario has come to life at the nexus of attorney malpractice and patent law, where a firm is charged with malpractice due to concurrent representation of two different clients, both of whom sought patent protection at the same time on similar inventions, without each other’s knowledge or consent.  In the malpractice suit, Client A claims he retained a law firm to secure a patent covering his screwless eyewear technology.  Client A avers his attorneys never disclosed that they were already representing an alleged competitor, Client B, in connection with what the complaint described as a “similar” invention, also related to screwless eyeglass hinges.  Although the firm secured four patents for Client A, he claims the firm should have told him that it also obtained a patent for Client B that covered roughly the same eyewear innovations.

The complaint further alleges Client A was “damaged” because the firm’s representation of both clients was a conflict of interest under Massachusetts’ Rule of Professional Conduct 1.7, which prohibits an attorney from representing a client “if the representation…will be directly adverse to another client” or “if the representation…may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests.”

The trial court dismissed the suit for failure to state a claim, holding the complaint failed to allege any facts to suggest that the firm’s representation of Client A violated Rule 1.7.  On appeal, an amicus brief submitted by a bevy of major law firms argues that it is not a violation of ethics rules for a firm to simultaneously represent multiple clients with regard to patents on similar inventions, without obtaining client consent.

The amicus brief’s proposed rule: attorneys should be permitted to represent multiple clients in connection with similar inventions, particularly because the term “similar” is too imprecise to provide any guidance to patent attorneys, judges, or juries.  Instead, a conflict only arises when the claims of two clients’ patent applications are identical or mere obvious variants of each other so that an interference (described below) could be declared between them.

Oral argument is scheduled for next month.  While we wait for the Supreme Court’s decision, a summary of the brief’s points is below, and includes some issues to think about when a tech client reaches out for representation.

  • No direct adversity. The clients’ interests are not directly adverse when the clients are not competing for the same patent, but rather seeking separate patents for separate inventions, in much the same way clients seek building permits or liquor licenses.  In each case, each client may receive its grant of rights from the government without impacting the ability of the other clients to receive their grant of rights. Accordingly, the clients are not directly adverse to each other; and the representation of one client does not materially limit a law firm’s ability to represent the other.
  • No Material Limitation. A firm’s representation of Client A is not limited by its own interests or its interests vis-à-vis Client B.  The clients are not competing with each other for the same (single) patent on one invention; instead each client was separately attempting to obtain its own respective patent on its own respective invention.  Thus, nothing an attorney does for Client B materially limits its ethical duty to exercise independent professional judgment with respect to its representation of Client A.
  • No harm, no foul. No matter how the ethics rules component of the case shakes out, the instant claim must fail because Client A has not alleged any plausible harm befell him due to his attorneys’ concurrent representation of Client B.
  • Client consent conundrum. Seeking client consent would not be a workable solution to the alleged “similar invention” issue because lawyers are required to maintain confidentiality to their clients.  Requiring a firm to obtain informed client consent for the concurrent representation of both clients seeking patents would be unworkable because obtain informed consent from one client would require disclosure of another client’s confidential information, and vice-versa.
  • Public policy problems.
    • Expertise evaporates. Limiting firms to representing only one client in a given field of technology would effectively restrict patent law firms to one client per field of technology, depriving patent lawyers of the ability to specialize in fields of technology and in turn depriving the public of the expertise specialization creates.  Such a rule would also increase the cost of patent applications, as a patent attorney would be required to spend more time learning about the relevant technology before she could prepare the patent application.
    • Small shops suffer. Mandating one client per technology area would hurt individual inventors and small start-up companies. Faced with such a rule, firms would tend to choose a single large client to fill each technological niche, since only a larger client could provide the firm with sufficient work for the attorneys.  Smaller clients then would be turned away due to the conflicts created by the larger client.