Frank E. Quirk, University of Akron School of Law, Akron, OH
Model Rule 5.1 and 5.3: duties of lawyers as supervisors. Have to ensure measures in effect giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct. Applies to all lawyers with comparable managerial authority to partners in firms, not just partners in firms. Lawyers subject to the Rule have to establish internal policies and procedures designed to detect and resolve conflicts of interest, identify dates by which actions must be taken in pending matters, protect client funds and property, and ensure that inexperienced lawyers are properly supervised. For IP practice groups/firms: calendaring/docketing aspect is probably the most important. Then practices and procedures for issuance/review of opinion letters.
Comment 3: additional measures will depend on firm size, structure, and nature of practice. Partners may not assume that all lawyers associated with the firm must inevitably conform to the rules. Most complaints are about small firms. Managing partner may be in the bullseye for misconduct by others (gave example), but that’s rare. Alabama: lawyer disciplined for overburdening associates and having a quota system for opening files, not giving them enough time to do the work responsibly; DC: supervisory lawyer disciplined for failing to offer even rudimentary ethics training; NJ: supervisory lawyer disciplined for having no plan for systematic periodic review of assigned files.
Whether a lawyer has supervisory authority is a question of fact. Pushing a heavy caseload on undertrained and overburdened lawyers is a problem, especially in the public defender system.
Appropriate remedial action must be taken, which depends on immediacy of the lawyer’s involvement and seriousnes of the misconduct. Supervisor and subordinate both have responsibility to correct misrepresentation by the subordinate.
Responsibilities for nonlawyer assistants: you have to put measures in effect giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer. Very important for outsourcing.
Must give assistants appropriate instruction and supervision on ethical aspects, especially nondisclosure—these people aren’t lawyers, don’t know the rules, aren’t bound by the rules: this means more supervision is required than that for lawyers. A lawyer can be held responsible for assistants’ misconduct if knows/ratifies/fails to supervise appropriately.
Outsourcing and offshoring. Some claim that $1 billion of work will be going to India within a few years. ABA approves of outsourcing so long as the lawyer remains ultimately responsible. Must comply with 5.1 and 5.3 specficially: take reasonable efforts to ensure that lawyers’ conduct is compatible with their obligations. Lawyers must disclose outsourcing to clients. If they’ll communicate confidential information, that requires client consent. Standard terminology is coming into play: outsourcing generally refers to domestic agencies; offshore outsourcing refers to going out of the country; offshoring refers to establishing offices outside the country to undertake activities that would otherwise be outsourced offshore.
ABA: Substantial due diligence must be taken to establish providers’ competence. State opinions approving outsourcing consider them to be nonlawyers under 5.3 rather than lawyers under 5.1, addressing a concern over the unauthorized practice of law. No confidential information may be revealed without client consent.
Major issues to be addressed: Competence of outsourcing agency; unauthorized practice of law/aiding and abetting same; client confidentiality; reasonableness of fees and expenses.
Prof. David Hricik, Mercer University School of Law, Macon, GA
“Better them than us”: things that can go wrong in patent, and IP, practice in general. He monitors filings, talks to insurance companies, etc.: things are happening that should make you pause. First, the number of claims is clearly increasing dramatically. Second, the types of claims are changing: not typical missed deadline case where someone lost a PCT date. More focused on substantive errors: claims were not properly drafted; didn’t pursue broad claims early in prosecution, costing client money in licensing. Third, less noticeable but still a trend, is that big firms are no longer untargeted. Maybe it’s because boutiques have been swallowed up.
Number one source of problems: missed deadlines. Always have a double check: don’t let one person enter the data. Could keep a paper and a computer log. Be really careful if you have an FDA practice where you’re dealing in days, not months; people get confused sometimes and calculate based on the wrong unit. 90 days is not the same thing as 3 months.
Vaxxion v. Foley Lardner: A number of wrinkles. West Coast FL was retained to file a provisional application for Vaxxion on a technology known as mini-cells. Next, filed nonprovisional application, and 1-year bar for filing PCT application passed (there’s a fight over whose fault it is); filed a bit late. Consequence: can reach back only to the nonprovisional filing date. If there’s any intervening art in the period between provisional and nonprovisional, there’s client harm. East Coast office of FL was hired to represent a client, and missed the conflicts check. FL filed a provisional application for EnGeneIC in between Vaxxion’s provisional and nonprovisional; it was cited against Vaxxion as prior art.
Patent conflict checks are an art, not a science, on subject matter: but look at this disaster. The judge in the case said that knowledge was imputed among all lawyers in the firm for purposes of malpractice claims. The lawyers who filed their application on time “knew” that they were harming Vaxxion. The lawyers who missed the deadline “knew” it would help EnGeneIC. For some purposes this makes sense, but for malpractice these mistakes were turned into deliberately harming one’s own client. Case settled after that ruling.
What are the odds of 2 clients in the same field coming to the same firm? Pretty high! If a firm is known as being good in a certain area.
Cases pending now where claim drafting errors are alleged. In one case the firm used “consisting of” instead of “comprising,” which narrows the scope of the claim. Several cases: claim is that the spec wasn’t drafted broadly enough to support the scope of the invention disclosed to the lawyer. A lot more botched litigation claims being brought—patent firm retained to prosecute an infringement suit and gets in a ditch; client sues for improper handling, especially if the client was sanctioned for having brought the suit. Some of this is judgment call, though he doesn’t think consisting/comprising is.
One pending case involving due diligence is pending in Texas. Facts: Company A retains firm A to do stock purchase of company; its principal asset is IP, a couple of patents. The firm is retained to do due diligence, including making sure company owns its IP. Firm fails to realize that the principals of the company own the IP in their own names. Worse, then, the statute of limitations on specific performance/breach of warranty runs. Thereafter, without explanation, firm A comes to principals and asks them to assign the patents, without saying that firm A doesn’t represent the principals, that they might want a lawyer, or that they’re under no legal obligation to sign (though there may be a moral obligation). Not clear whether firm realized the problem on its own or went to the company and confessed. Next, principals sue firm and its client for fraud for saying that the principals should sign the assignment without explaining.
Disputes/motion practice over client identity: be clear about who the client is. Inventors: well-known problem. Individual claimants often try to disqualify firms because they allegedly represented the individuals as well as the company during prosecution: maybe they executed a power of attorney; maybe you sent an email to them marked ATTORNEY-CLIENT, and in some states their expectations can make a difference. Inventors subject to assignment who give power of attorney are not, without more, clients, but they do regularly sue and seek to disqualify firms claiming they were clients. Mostly they lose, but it still costs a lot of money.
What can you do to reduce these claims for disqualification/malpractice? One: have the invention assigned to the company, don’t get power of attorney. Other firms say that’s not practicable with big companies. Other thing: when you send power of attorney, stamp on it and put on the cover letter in big letters: WE ARE NOT YOUR LAWYERS; this doesn’t make you my client; I represent only the company and I don’t represent you. Also remember: some people may be legitimately confused about your role; a clear statement is a good thing in that circumstance.
Another client identity issue being litigated more often: do you represent General Electric just because you represent General Electric Credit Corporation? For patent, the question arises with joint development agreements. Your client enters into a JDA with some other company. That company has its own law firm. Its scientists will be named on the patent application with yours. Normally, the agreement will say that one party has control of patent prosecution, subject to an obligation to confer with/confer in good faith with/keep the other side informed. If everything goes fine, great. But 80% of these JDAs fail. You think the other guy’s scientists aren’t clients, because all you have is a power of attorney and the other guy’s scientists are represented/subject to assignment. But in litigation it may be argued that you represented the other guy’s scientists. You would think that these arguments would fail—how could you owe a fiduciary duty where the agreement says you have control? But in one case, the court granted SJ to the other side, holding that the other scientists were also clients. Lawyers use poor language: record “met with client” in work records when they weren’t clients.
Reduce risk of this mess: send out letters to the scientists and the other law firm: we only represent our client, though we understand our client has contractual obligations to the other side. Those are our client’s obligations and our fiduciary duty is only to our client. There can be a lot of ambiguity; there’s bad law out there now.
Growing area: misuse of trade secrets. Not Pepsi’s lawyers running off to Coca-Cola, but firms are getting sued because they’re taking closer and closer applications. When you’re prosecuting 2 cases close together, you’re setting yourself up for a trade secret misuse argument. Even public information you learn while representing a client can be a client confidence. Lawyer can be disciplined for disclosing something in a public court record learned while representing a client.
Background information about how technology works: court has ruled that information can be confidential even if it’s known to those with ordinary skill in the art. Don’t reuse “back in the day, here’s how they did it” in different applications. He’s not saying that’s properly decided but you should be aware of the state of the law.
Grievance committee of the PTO, the OED. Aggressive organization, sometimes surprising choices. OED is going around and looking at firm webpages. If you say “Bob prosecutes applications” and Bob isn’t registered, they’ll come after you for aiding unauthorized practice of law and false advertising, even if Bob helps people. They want you to say “Bob assists in the prosecution of applications, with supervision.” Scientific advisors: don’t use the words “prosecutes applications.” If they send you a letter, be careful about how you respond: the slightest misstep in response becomes a second allegation against you. He’s not sure this is a big problem, but they are going after it.
Reported case, half a year back: clamping down on people submitting art in cases that aren’t theirs. Narrow form of filing protest to get art in front of the examiner. Any other way will be deemed a violation of the rules. You can do “poor man’s reexamination” and mail the art to the applicant, informing them of material art and hope that works, but otherwise be careful.
Guy gets a case and hands it off to his litigation partners, but stays on the case/shows up for hearings/listed as lead counsel. Client and law firm get sanctioned for bringing the case. The OED sends a letter to the lawyer asking why he shouldn’t be sanctioned for failure to supervise his partners, who weren’t registered and thus weren’t within the scope of the OED’s authority. What’s this got to do with patent prosecution?
Q: how many of these claims are related to fee disputes?
Hricik: none of the ones he discussed. However, it’s not one to one that suing for fees invites a malpractice claim, but it’s close enough that you should count on it.
Q: What happens when you want attorney-client privilege to protect communications between counsel and the scientists? Joint interest defense?
Hricik: the common interest privilege is designed to protect privilege when there is disclosure to a non-client; otherwise we’d be talking about the joint client privilege: in fact an element of the privilege is that you didn’t represent the other guy. So it’s consistent to claim the privilege without agreeing that you represented the other guy.
Q: if you get waivers from both clients in a related field, are you clean?
Hricik: Maybe from a disciplinary perspective, if there’s full disclosure—we may, while prosecuting the other claim, say bad things about your patents or try to antedate another of your patents. Would still worry about trade secret misuse allegations. Possible also that you’d be charged with deliberate blindness in not learning relevant information.
Q: if you’re reading the Official Gazette on behalf of a client and see a reference, that’s now confidential and you can’t disclose it to the Office without consent from your client?
Quick: question is what the expectation of the client was. Cases are now coming down where the information is publicly available: e.g., disclosing a former client’s criminal conviction—you learned about it in the course of the attorney-client relationship and the client expected it to be confidential.
Hricik: Gazette probably won’t ever be in that category, but what if you find a dissertation on a shelf in Michigan and the client doesn’t want it disclosed (but doesn’t take unethical action and just declines to file an application), and then later you have another client to whom this is material? Cases are in direct conflict: one requires disclosure, another requires suppression. Patent Office has taken the position that you have to go to the first client. If the client says no, you have to noisily withdraw from that prosecution—which seems to send a signal about case/client #2, but is it the right signal?
Q: Can you use boilerplate? At some point, that was originally drafted for another client.
Hricik: the court in the relevant case wasn’t going to hold it was boilerplate on a 12(b)(6) motion; client sufficiently alleged it was more than that. Be careful copying text anyway, because you can end up limiting claims.
Q: if you want to take advantage of offshoring for document review/prosecution, what steps do you have to take re: US export laws?
Alstadt: you can’t export products/information within certain categories. When you file a patent application, you get a foreign filing license. So he’s filed a provisional application and gotten his license, which then makes it ok under export control laws. If not that, have someone review it for compliance with the export controls, and keep a record of having done that.
Hricik: Calendaring maintenance fees for clients—he doesn’t think you should do it. PTO and Oregon bar has said that you have to count them as an active client if you’re calendaring their maintenance fees. Might also toll the statute of limitations because you’re actively representing them. Sometimes the PTO has said this doesn’t create an attorney-client relationship, but it’s also said the opposite. Maintenance fees are missed all the time; if you miss one, you’ll lose every penny of profit you ever made by doing maintenance. What you can do if you really want to do this: in engagement letter and when sending a reminder, say: if you ask, we’ll calendar your maintenance fees but this is a non-legal service and it isn’t part of our attorney-client relationship. Missed maintenance fees = malpractice claim; it’s amazing that the fees are only missed on really valuable patents (if you look at the complaints).