08May 2016

man with razorOn May 5, 2016, a Massachusetts state court dismissed Gillette’s claims for breach of fiduciary duty against its former in-house IP counsel who left Gillette and went to work for a competitor, where he used allegedly privileged information gained during his prior employment and helped his new employer analyze and avoid infringement of Gillette’s patents—including patents over which he oversaw prosecution. The court held that Gillette’s amended complaint failed to state claims for breach of fiduciary duty as a matter of law.  Consequently, the court dismissed with prejudice Gillette’s claims against its former in-house attorney.   See The Gillette Co. v. Provost, No. 1584CV00149-BLS2 (Mass. Super. Ct. May 5, 2016) (order granting motion to dismiss). This is the second significant decision from a Massachusetts state court regarding patent ethics and conflicts of interest in the last six months; the first was the Supreme Judicial Court’s decision in Maling v. Finnegan Henderson, discussed in our posts here, here and here.

Factual Background

For 17 years, Chester Cekala worked as an in-house patent attorney for Gillette.  Mr. Cekala left Gillette in 2006.  In 2012, Mr. Cekala joined ShaveLogic, Inc. where he began working on patent matters.

In 2015, Gillette sued ShaveLogic and four former Gillette employees who had gone to work for ShaveLogic. The original complaint alleged that the defendants took Gillette’s confidential information and misappropriated its trade secrets for the benefit of ShaveLogic.

In 2016, Gillette filed an amended complaint adding Mr. Cekala as an additional defendant.  According to Gillette’s amended complaint, Mr. Cekala had access to privileged communications and information relating to Gillette’s patents and technologies and developed “detailed knowledge” about Gillette’s patents and related licensing agreements.  ShaveLogic allegedly hired Mr. Cekala to provide freedom to operate opinions regarding Gillette patents—including patents whose prosecution he allegedly oversaw—and to identify potential voids in Gillette’s patent portfolios.

GilletteThe amended complaint further alleged that ShaveLogic competes with Gillette in the market for wet shaving products and that Mr. Cekala’s knowledge of Gillette’s intellectual property portfolio and patent strategy gives ShaveLogic a “competitive edge in the market.”  Mr. Cekala’s work for ShaveLogic, according to the amended complaint, is substantially related to the legal services he performed while working as counsel for Gillette. The amended complaint alleged Mr. Cekala breached his ethical and fiduciary duties to Gillette, as its former counsel, and that all of the defendants conspired to cause Mr. Cekala to breach his fiduciary duty to Gillette.

Procedural History

Gillette moved for a preliminary injunction to prevent Mr. Cekala, from providing any legal advice regarding Gillette’s patents, not only with respect to patent validity but also on infringement and scope of Gillette’s patents. Although Cekala’s non-compete agreement with Gillette had long expired, Gillette contended that Cekala’s legal advice inevitably disclosed Gillette’s trade secrets to its competitor given his experience with the company.

The Massachusetts court rejected Gillette’s position.  The court noted that “if the court were to accept Gillette’s logic, Cekala would be effectively prevented from working in any legal position for a competitor in the shaving industry even though his non-competition agreement expired years ago.”

On February 22, 2016, Mr. Cekala moved to dismiss the claims alleged against him in the amended complaint for failure to state a claim.  On May 5, 2016, the court granted Mr. Cekala’s motion with prejudice. Continue reading

26Apr 2016

canstockphoto24062764You will learn about life when you play The Game of Life” – original TV jingle for “The Game of Life”

Plaintiffs, alleged owners of the IP rights to the “The Game of Life”, want to end up on Millionaire Estates.  Defendants, including the toy company that has been making and selling “The Game” for decades, are trying to keep themselves out of the Poor Farm.  All of them are lawyered up and “spinning the wheel” of federal district court IP litigation.  See Markham Concepts, Inc. v. Hasbro, Inc., Case No. 1:15-cv-419-S-PAS (D.R.I. Oct. 2, 2015).

Just like real life (and frankly The Game of Life itself), the litigation, which has been pending for seven months, recently spawned an unexpected turn.  No, it was not the birth of twins or an income tax bill, as might occur in the Game.  Instead, defendants have moved to disqualify plaintiff’s IP counsel, the law firm of Greenberg Traurig, for an alleged concurrent client conflict of interest.

At issue in this case is whether a law firm which knows that it is about to become adverse to a current client, and which requested and was denied a waiver of the conflict from its client, can then withdraw from representing the client and promptly represent a party adverse to its “former” client.  In ethics parlance, a “withdrawal” under these circumstances is sometimes referred to as a “hot potato drop.”  Also at issue is whether a purported advanced waiver of conflicts, which states that a client will not “unreasonably” withhold its consent to a future conflict, is enforceable, and even if it is enforceable, whether the law firm under the facts of this matter “unreasonably” withheld its consent to the waiver.

The Lawsuit

This action arises from a complaint filed in October 2015 by Lorraine Markham and her company, Markham Concepts in federal district court in Rhode Island.  According to the complaint, Ms. Markham’s husband, Bill Markham, was the “creator, designer, developer, inventor, author and owner of the rights” to the iconic board game “The Game of Life”  The “Game” was allegedly invented by Mr. Markham in 1959 and has since sold over 30 million copies.  The complaint seeks among other things to establish ownership of the intellectual property rights in the Game, terminate all copyright grants related to the Game, and to obtain royalties allegedly owed for breaches of contract relating to the Game.

The main defendant is Hasbro, Inc., which the complaint alleges is the successor-in-interest to Milton Bradley Company’s rights and obligations concerning the Game.  Other defendants are family members of, and entities associated with, the late Art Linkletter, including an entity formed by Linkletter to promote various games known as “Link.”  Art Linkletter was an early endorser of and spokesman for Milton Bradley, and his picture appeared on “The Game’s” $100,000 bills.

The complaint alleges that  Continue reading

26Apr 2016

canstockphoto6069368On May 5-6, 2016, Practicing Law Institute (PLI) will be conducting its 10th Annual Patent Law Institute.  The Institute will be held in San Francisco and also will be broadcast life via webcast. Registration is available at the following link.

According to PLI,

The Institute is designed to be of ultimate practice value to all three subgroups in the patent law community: patent prosecutors, patent litigators, and strategic/transactional lawyers. The two-day schedule includes six plenary sessions of interest to all patent lawyers and six breakout sessions in each of the three subgroups.

The PLI describes the three substantive breakout sessions as follow:

Prosecution Breakout Track: Three sessions focused on the ongoing USPTO rules and tweaks implementing the New PTO Ethics (modeled on the ABA Rules), Patent Law Treaty Revisions for Designs, and other PTO rule action; and two sessions focused on PTAB and CAFC decisions and their unique strategic spillover into the chemical and biotechnical patent prosecution field. Is it all, by now, naturally occurring and thus ineligible?

The USPTO has been all about AIA implementation; but the Supreme Court has been increasing its patent system oversight with considerable change at the USPTO being the outcome. Are software-implemented methods all abstract? Are the Guidelines fixed and do they accurately reflect the law? Come to our PTO intensive breakouts and find out!

Litigation Breakout Track: How the PTAB has impacted patent litigation; insights from sitting judges in key patent venues; will patent reform change the face of patent litigation forever?; perspectives on litigation involving non-practicing entities; in house views on managing patent litigation; and developments in patent damages. Continue reading

31Mar 2016

canstockphoto25818990A Dallas appeals court has upheld a trial court’s ruling in favor of Baker Botts, L.L.P. on its former client’s claim for patent malpractice based on the firm’s simultaneous representation of two clients in the same technical field. See Axcess International, Inc. v. Baker Botts, L.L.P., No. 05-14-01151-CV (Tex. App.–Dallas Mar. 24, 2016) (mem. op.)

The case arose from Baker Botts’ representation of Axcess International, Inc. and its competitor, Savi Technologies, Inc.  Both companies sought, and eventually obtained, patents in the field of active-radio-frequency identification (“RFID”) products and services.   In 2010, Axcess sued Baker Botts alleging patent malpractice, breach of fiduciary duty, and failure to disclose material information.  A jury found in favor of Axcess on its claim of malpractice, but the trial court found the lawsuit was untimely filed and entered a take-nothing judgment in favor of Baker Botts.

While several issues were raised on appeal, the Texas appellate court ruled that Axcess failed to prove the element of harm proximately caused by the alleged negligence of Baker Botts.  The court held, “In this case, we find no legally sufficient evidence that Baker Botts’ acts or omissions caused Axcess to suffer a compensable injury.”

At trial, Axcess’s expert testified that “with conflict-free counsel,” Axcess could have filed or threatened to file an interference proceeding in the USPTO against Savi and amended the claims of one of its patent applications.  Axcess’s expert also testified that if Axcess had succeeded in the hypothetical interference proceeding, then “Savi’s lucrative government contracts utilizing the patent would be at risk” and thus Axcess “would have been in a better position to negotiate a business solution with Savi” that would have resulted in “some unspecified business deal.”  A jury awarded Axcess $41 million.

The appeals court found that Axcess’s causation evidence Continue reading

16Mar 2016

canstockphoto1589831A patent attorney who was excluded from the USPTO has appealed to the Federal Circuit.

By way of background, on July 15, 2015, the USPTO Director entered an order excluding Richard Polidi from practice before the Office.  The USPTO Director’s disciplinary action came after the Director of the Office of Enrollment and Discipline (OED) filed a complaint for reciprocal discipline predicated on Mr. Polidi’s disbarment from the State Bar of North Carolina.

Based on public documents filed in the North Carolina disciplinary matter, Mr. Polidi was admitted to the practice of law in 2004.  In September 2012, Mr. Polidi received approximately $16,000 in connection with the representation of a client.  According to the North Carolina disciplinary proceedings, at the time he received the funds, Mr. Polidi knew that his client had assigned the right to those funds to a third party.  Instead of providing the funds to the third party, however, Mr. Polidi was found to have Continue reading

08Mar 2016

canstockphoto13549883The Federal Circuit’s 2-1 decision yesterday in In re Queen’s University at Kingston resolved a split in the district courts over whether a “patent agent”-client privilege exists independent from the attorney-client privilege. The majority held it does. While the court’s holding provides clarification in this case of first impression, patent agents, their law firm employers, and their clients should not read too much into the Queen’s University decision. The court’s holding is narrow. Moreover, failure to heed the limits of the court’s decision could create a number of ethical risks for patent agents and their practitioner supervisors.

The Federal Circuit in Queen’s University held that:

To the extent Congress has authorized non-attorney patent agents to engage in the practice of law before the Patent Office, reason and experience compel us to recognize a patent-agent privilege that is coextensive with the rights granted to patent agents by Congress. A client has a reasonable expectation that all communications relating to “obtaining legal advice on patentability and legal services in preparing a patent application” will be kept privileged. . . . Whether those communications are directed to an attorney or his or her legally equivalent patent agent should be of no moment. Indeed, if we hold otherwise, we frustrate the very purpose of Congress’s design: namely, to afford clients the freedom to choose between an attorney and a patent agent for representation before the Patent Office.

Several important observations are noted regarding the Queen’s University decision.

First, the scope of the new patent agent-client privilege, like the attorney-client privilege, is narrow.  As one court observed, the attorney-client privilege is “[n]arrowly defined, riddled with exceptions, and subject to continuing criticism.” United States v. Schwimmer, 892 F.3d 237, 243 (2d Cir. 1989). For a communication between a patent agent and a client to be privileged, it must meet the requirements needed for establishing the attorney-client privilege (and even then, it is more limited).

The requirements articulated by the district court’s decision in United States v. United Shoe Machinery Corp., 89 F. Supp. 357, 358–59 (D. Mass. 1950) are often used in patent cases as the yardstick against which courts measure attorney-client privilege claims. Per the United Shoe standard, the attorney-client privilege applies only if:

(1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication is made (a) is a member of the bar of a court, or his subordinate and (b) in connection with the communication is acting as a lawyer; (3) the communication related to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) or legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client.

Federal Circuit sealThe Federal Circuit’s decision in Queen’s University tweaks subpart (2) of the United Shoe test by expanding “member of the bar of a court” to “member of the bar of” the USPTO.  If a patent agent is going to be able to establish the privileged nature of a communication, the agent (just like an attorney) will still need to show that all of the requirements for establishing the privilege are met.  Thus, for example, the “communication” at issue (whether it is conveyed orally or in a document) must be one that was made by a client to the agent for the purpose of obtaining legal advice or services. In addition, confidentiality is another critical threshold for establishing an attorney-client privilege, and it is well established that “[t]he attorney-client privilege evaporates upon any voluntary disclosure of confidential information to a third party.” Carter v. Gibbs, 909 F.2d 1450, 1451 (Fed. Cir. 1990). Furthermore, Continue reading