Massachusetts SJC Holds No Ethical Violation Based on Patent “Subject Matter Conflict”

by Lee Gesmer on December 28, 2015

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).

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