If a patent lawyer represents separate clients applying for patents involving the same subject matter, has she violated her ethical responsibility to either client?
On December 23, 2015, the Massachusetts Supreme Judicial Court became one of the first state courts to address this issue. Maling v. Finnegan Henderson, Farabow, Garrett & Dunner, LLP.
The central issue in this case was whether the simultaneous representation of clients competing for patents in the same technology area — a so-called “subject matter conflict” — was a conflict of interest. The court found no conflict, stating, “we conclude that although subject matter conflicts in patent prosecutions often may present a number of potential legal, ethical, and practical problems for lawyers and their clients, they do not, standing alone, constitute an actionable conflict of interest that violates [Mass. R. Prof. C.] rule 1.7.”
However, the court suggested a few ways in such “potential” problems might give rise to an actionable conflict of interest.
First, it would be improper, without disclosure and consent, for a lawyer to represent two clients where the claims are identical or obvious variants of each other and a reasonable patent lawyer should reasonably foresee that an interference proceeding (or, under the American Invents Act, a derivation proceeding) was likely.
Second, the patent lawyer must be careful to avoid a directly adverse conflict. Finnegan avoided such a conflict in this case when the plaintiff sought a legal opinion from Finnegan regarding the likelihood that he might be exposed to claims by the second client. Finnegan declined to provide this opinion. The court suggested that had Finnegan provided such an opinion the interests of Finnegan’s two clients would then have been “directly adverse,” and therefore a violation of the rules of professional conduct in Massachusetts. Importantly, there was no allegation that Finnegan had agreed to provide such an opinion in its engagement letter with the plaintiff. Moreover, the plaintiff did not allege that Finnegan should have reasonably anticipated that the plaintiff would need such an opinion.
Third, a patent lawyer may not engage in “claim shaving”- altering the claims in one client’s application because of information contained in a different client’s application.
Fourth, the plaintiff in this case did not allege that the representation of two patent prosecution clients in the same subject matter area led to the disclosure of client confidences, or was used to one client’s advantage over the other client. For example, there was no allegation that Finnegan delayed filing the plaintiff’s patent application to ensure the success of the second client’s application. This likely would have been a violation of the rules of professional conduct.
More generally, the court discussed what constitutes an adequate conflict check in an environment where law firms have offices in multiple states (Finnegan has five offices in the U.S., and this case involved lawyers in different offices). That fact is no excuse for the failure to implement what the court characterized as “robust processes” — a phrase never before used by any U.S. court in the context of conflict checks or professional conduct generally — to detect potential conflicts. The court noted that it has not defined a minimum protocol for carrying out a conflict check in the area of patent practice, or any other area of law, and it declined to do so in this case, leaving this to be developed on a case-by-case basis.
While patent lawyers may be breathing a sigh of relief at this decision, the court’s list of horribles leaves them with a lot to think about, particularly in the areas of engagement letters and effective conflict checks. And, it may prompt clients to ask some tough questions when engaging patent counsel – “hey, by the way, are you providing patent services to anyone else in my subject matter area? Can you tell me about that so I can be sure there’s no direct conflict? Could that possibly create a problem for me down the road?”
It’s safe to say that in-house ethics counsel in law firms with large patent prosecution practices and multiple locations will have something to keep them busy on January 4th.
Maling v. Finnegan Henderson, Farabow, Garrett & Dunner, LLP (December 23, 2015).
The Court of Appeals for the Federal Circuit (“Federal Circuit”) has issued a typically fractured en banc decision (12 judges, 5 opinions) holding that the 70 year old disparagement provision of § 2(a) of the Lanham Act (the federal trademark statute) is unconstitutional under the First Amendment.
This law states, in relevant part:
No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it—
(a) Consists of or comprises immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute …. (emphasis added)
The background of this decision is straightforward. Simon Shiao Tam named his band, “The Slants”, and attempted to register it as a trademark. Tam asserted that he had chosen this name to make a statement about racial and cultural issues in the United States, and by chosing this name his band sought to “reclaim” or “take ownership” of Asian stereotypes.
The Patent and Trademark Office denied registration, finding the name disparaging to persons of Asian descent. Ultimately (at least at present), the Federal Circuit took the case “en banc” (meaning all judges in the circuit would rule on the case, not merely a panel of three judges).
The Federal Circuit reversed, stating:
Courts have been slow to appreciate the expressive power of trademarks. Words—even a single word—can be powerful. Mr. Simon Shiao Tam named his band THE SLANTS to make a statement about racial and cultural issues in this country. With his band name, Mr. Tam conveys more about our society than many volumes of undisputedly protected speech. Another rejected mark, STOP THE ISLAMISATION OF AMERICA, proclaims that Islamisation is undesirable and should be stopped. Many of the marks rejected as disparaging convey hurtful speech that harms members of oft-stigmatized communities. But the First Amendment protects even hurtful speech.
The government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others. The government regulation at issue amounts to viewpoint discrimination, and under the strict scrutiny review appropriate for government regulation of message or viewpoint, we conclude that the disparagement proscription of § 2(a) is unconstitutional.
It now falls to the Department of Justice, which defended the PTO in this case, to decide whether it will seek an appeal to the Supreme Court. It also remains to be seen what implications this decision will have in the Washington Redskins litigation, where the PTO was ordered to cancel several “Redskins” trademarks on the ground that they were disparaging to Native Americans. That case was recently decided by a federal district court in the Fourth Circuit (which encompasses Maryland, North and South Carolina, Virginia and West Virginia). Pro-Football, Inc. (owner of the Redskins marks) has filed an appeal to the Court of Appeals for the Fourth Circuit, which may or may not find the Federal Circuit’s decision persuasive. If it rules differently, the chances of a successful Supreme Court appeal in the Redskins case is great.
In re Tam (CAFC, December 22, 2015)
Update: the Federal Circuit’s decision was affirmed by the Supreme Court. Matal v. Tam (2017)
I’ve often written about how easy it can be for an employer to lose the ability to enforce an employee noncompete provision. In recent years the courts have come down hard on employers who materially change an employee’s job responsibilities but fail to require the employee to enter into a new contract, holding in many cases that a noncompete provision in the old contract does not survive the job change. (For example, see Rent-A-PC Fails to Enforce Restrictive Covenants Against Former Employees).
However, there is an even more fundamental mistake employers can make, as illustrated in the decision in Meschino v. Frazier Industrial Co. (D. Mass. November 18, 2015). In this case the employee entered into an agreement in 2005 which contained a covenant not to compete and a confidentiality provision. The employee then signed a new employment agreement in 2012, but the 2012 agreement did not include these terms or refer back to the 2005 agreement. As the court noted, the 2012 agreement “states on its face that it contains ‘the terms of [the employee’s] employment’ without any reservation or reference to any other document or agreement.”
That, so far as Massachusetts Federal District Court Judge Stearns was concerned, was the end of the matter. The employer may have intended to preserve the 2005 noncompete provision in the 2012 contract (as it claimed), but the 2012 agreement contained not even the hint of such an intention.
Employers and employees have a lot at stake when it comes to noncompete and confidentiality agreements, and failing to consult a qualified lawyer to make sure that these terms remain in effect (or, in the case of an employee, to know when they may not be enforceable) can be a costly mistake, as Frazier learned in this case.
Meschino v. Frazier Industrial Co. (D. Mass. November 18, 2015).