No Per Se Ethical Violation for "Subject Matter Conflicts"

Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP

By Andrew Williams --

In a case that was watched by the entire patent law community with some fascination, the Supreme Judicial Court of Massachusetts concluded on December 23, 2015 "that the simultaneous representation by a law firm in the prosecution of patents for two clients competing in the same technology area for similar inventions is not a per se violation of" Rule of Professional Conduct 1.7.  Moreover, because the Plaintiff, Chris E. Maling, did not allege facts sufficient to demonstrate that the Finnegan law firm violated its ethical obligations, the dismissal of the action was affirmed.  Although this certainly came as a relief to almost every attorney working in private practice, the Court warned about the significant financial and reputational risks of violating Rule 1.7:  "Nothing we say here today, however, should be construed to absolve law firms from the obligation to implement robust processes that will detect potential conflicts."  Slip opinion at 23.

This case stems from Finnegan's representation of Mr. Maling related to screwless eyeglasses, and specifically the eyeglass hinge block design.  Presumably, this design did not result in breaking glass.  Figure 1 of U.S. Patent 7,101,039 illustrates a pair of glasses containing the rim and temple arm of at least one aspect of Mr. Maling's invention:

According to the opinion, attorneys in Finnegan's Boston office represented Mr. Maling for more than five years, from April, 2003 to May, 2009.  At the same time, attorneys in Finnegan's Washington, D. C. office represented Masunaga Optical Manufacturing Co., Ltd. in the same subject matter space.  Apparently Mr. Maling had engaged Finnegan to prepare and prosecute a patent for his invention, including conducting a related prior art search.  In fact, according to the Patent Office database, Finnegan obtained three related patents for Mr. Maling (Mr. Maling obtained a fourth patent, but Finnegan was not listed as attorney on its face).  However, in 2008, when Mr. Maling asked Finnegan for a legal opinion addressing the similarities between some Masunga patents and his own, Finnegan declined (the opinion noted that the record did not provide Finnegan's rationale for this decision, but if they had provided the legal opinion, that could possibly have been an ethical violation).  Mr. Maling alleged that Finnegan's refusal to provide this opinion resulted in his inability to obtain funding.  Mr. Maling therefore contended that Finnegan's simultaneous representation of both clients and its failure to disclose the alleged conflict resulted in "great harm" and "tremendous financial hardship."

The Court in this case was looking at Rule 1.7 as it is applied in Massachusetts, but the rule is almost identical every other jurisdiction in which it was adopted.  This rule has two parts.  The first, Rule 1.7(a)(1), proscribes representing two parties that are directly adverse.  ("A concurrent conflict of interest exists if . . . the representation of one client will be directly adverse to another client.").  Even though this conflict can be waived by both parties with informed consent as long as the attorney or firm is not representing both parties against each other in the matter, it exists to safeguard the sense of loyalty found in the attorney-client relationship (as well as to serve as a prophylactic measure to protect confidences).  Maling did not claim that he was directly adverse to Masunaga in the traditional sense.  Rather, he alleged that this case fell under the scope of this rule because he competed in the same patent space as Masunaga.  However, the Court noted that the comments to this Rule make clear that economical adversity is not sufficient.

For the patent context, the Court looked to the FCC case of Curtis v. Radio Representatives, Inc., 696 F. Supp. 729 (D.D.C. 1988).  In that case, the U.S. District Court for the District of Columbia had held that the same firm could simultaneously represent more than one client seeking to obtain radio broadcast licenses from the FCC.  It is only when the possibility of "objectionable electrical interference exist[s] between" station to station that a conflict of interest could develop.  By analogy, if the same attorney can obtain patents in the same "subject matter" space, without the scope of the claims overlapping, there would be no conflict.  Maling in this case did not allege such an overlap of space (oddity?).

Before we move on, it is useful to consider how such an overlap might be a candidate for direct adversity?  The Court had one answer -- interferences.  If the patents covered identical or obvious variants of each other, an interference proceeding could have been declared (at least for pre-AIA patents and applications), which certainly would have been adverse.  If an interference proceeding had been called, "or if Finnegan, acting as a reasonable patent attorney, believed such a proceeding was likely, the legal rights would have been in conflict . . . ."  The opinion suggests that such a conflict could be waivable, but it unclear if this would pass the requirements of Rule 1.7(b)(3).

Rule 1.7(a)(2) also defines a concurrent conflict of interest where "there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer."  As the opinion makes clear, this can occur when an attorney engages in "claim shaving," which is making changes to the claim scope to avoid the conflict.  "Altering the claims in one client's application because of information contained in a different client's application at least creates a question of fact as to whether 'courses of action that reasonably should be pursued on behalf of the client' were foreclosed."  Slip Op. at 18.  Again, Maling did not allege such facts.

The Court did address the requested "opinion" regarding the Masunaga patents, finding that if Finnegan had conducted this work, it likely could have violated both Rule 1.7(a)(1) and (2).  Of course, because Finnegan had not conducted this work, it did not correspondingly violate the ethics rules.  But, the Court warned that the scope of representation at the outset can define what might or might not be a violation.  If Finnegan had only agreed to file and prosecute a patent application, there would likely have been no issue.  However, if "Finnegan should have reasonably anticipated that Maling would need a legal opinion," then conflict liability could have been created.  Nevertheless, because there was simply too few facts alleged in this case, all of this discussion essentially amount to dicta.  Regardless, it would be wise to pay attention so as to not end up the subject of an opinion in which sufficient facts are alleged.

To be clear, this case involves the Massachusetts Supreme Judicial Court's application of Rule 1.7 of the Massachusetts Rules of Professional Conduct, and therefore is not binding but only persuasive authority in every other jurisdiction that has adopted Rule 1.7 of the Model Rules.  Nevertheless, had this decision come out differently, it would have had a chilling effect on all intellectual property law firm practices.  In the first place, in most cases it is unreasonable to expect your patent attorney to only represent one client.  After all, most clients look to the experience and technical expertise of the patent attorneys they hire.  It would be unrealistic to allow this experience to give rise to a per se "subject matter" ethical violation.  In addition, it would be difficult to draw the line as to what "subject matter" would give rise to such an ethical violation.  To use the Maling case as an example, would the subject matter be limited to "eyeglass hinge block designs" or "screwless eyeglasses," or could it be interpreted more broadly to be all eyeglass technology or fashion in general.  Instead, the use of the Curtis case as analogous is useful.  As long as the scope of patent protection being sought for both clients is sufficiently distinct as to not cause any "electrical interference" between the two, there should no sense of doubt that this is not a conflict issue.  However, as the differing claim scope gets closer to overlapping, there is an increased risk of getting "shocked."

Comments

[Cass L. Singer]

Timely Bowie tribute noted. Kewl. Maybe it isn't true that "nothing has changed" in the culture of law over the (golden?) years.

As for the reported decision itself, it seems to draw too fine a distinction between obviousness and interfering subject matter. IMHO, if a practitioner is obligated to argue against the scope of the disclosure or claims contained in a patent his or her firm prosecuted for a first client, during prosecution of a later application filed by a second client, there's a conflict.

I don't know whether that was the issue here. The decision doesn't get into the specific reasons why Finnegan saw a conflict regarding the requested opinion; if it was based solely on economic competition, representation would have been permissible (admittedly, not required). I'm a little surprised, though, the court didn't remand to allow for a more definite statement of plaintiff's claims.

Curtis isn't relevant. While the FCC applicants were all broadcasters, I didn't see anything in the opinion suggesting they were competitors in the same market, where relevant markets are limited in geographic scope by the physics of electromagnetic waves. A broadcasting license issued to one client would necessarily have no impact on the scope of a license issued to another. This simply isn't true when considering obviousness.

[Liz Nevis]

I have heard from several sources – and thought it made sense — that it's advisable to get non-infringement opinion letters prepared by an independent attorney or firm. The rationale was that the prosecuting firm already has a vested interest that could, perhaps unconsciously, skew their interpretation of the results, and the litigating firm shouldn't be put in the position of being counsel and witness in the same proceeding.

Because of this, I've heard of specialty firms that ONLY do opinion letters ( rather like garages that only do smog testing, not the associated repairs, so they've got nothing to gain by making sure people fail). At trial they get to be heroes just for one day (couldn't resist). I let out a whistle when I heard some of the prices, but I bet it would still have cost Mr. Maler less than taking this case all the way to the state Supreme Court.