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December 28th, 2015
Law Firms Win Big Case Arising from Representation of Clients with Competing Interests
Law firms often struggle to determine when the rules of professional conduct permit representation of clients who compete in the marketplace. When is it OK, for example, to represent clients with competing patents, trademarks, or copyrights? A recent Massachusetts Supreme Judicial Court case provides important guidance for IP lawyers -- particularly those representing clients with patents.
In Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner LLP, the Court held that a law firm may represent multiple patent clients who are competitors in the marketplace and are pursuing related inventions.
Finnegan Henderson, a national law firm, represented Chris E. Maling in patent prosecution matters for Maling's invention of screwless eyeglasses. Attorneys in the firm's Boston office secured four patents for Maling's invention. At the same time, attorneys in Finnegan Henderson's D.C. office represented Masunaga, a Japanese corporation that was also seeking patents for screwless eyeglass technology. When Maling found out about the concurrent representation, he sued Finnegan Henderson for legal malpractice, alleging that the firm failed to disclose a clear conflict of interest and that the concurrent (and conflicting) representation caused him "tremendous financial hardship."
Maling argued that Finnegan Henderson's representation of two clients with competing patents violated Massachusetts Rule of Professional Conduct 1.7. The Rule prohibits a lawyer from representing a client who is "directly adverse" to another current client or when the representation of one client would materially limit the lawyer's ability to represent another client. Maling claimed that he and Masunaga were "directly adverse" to one another because they had competing patents in the "same patent space." The Court ruled for Finnegan Henderson, holding that the two clients were not adverse to each other within the meaning of Rule 1.7 because they did not have conflicting legal rights and interests but only "conflicting economic interests." The Court cautioned that under different circumstances - for instance if the two clients were litigating against each other in an "interference proceeding" before the U.S. Patent and Trademark Office - an impermissible conflict of interest would arise.
Maling was closely watched by lawyers around the country. As patent law continues to grow more specialized, patent lawyers have been struggling to analyze conflicts of interest in situations where clients, who are not necessarily legal adversaries in the traditional sense, have competing economic interests. While Maling is not controlling outside of Massachusetts, it is one of the first cases to address this issue directly and provides much-needed guidance for practitioners in other jurisdictions facing similar challenges.
If you have any questions about conflicts of interest or other professional responsibility issues, please contact Nicole Hyland at (212) 826 5552 or firstname.lastname@example.org, Ronald Minkoff at (212) 705 4837 or email@example.com, John Harris at (212) 705 4823 or firstname.lastname@example.org, Richard Maltz at (212) 705 4804 or email@example.com, Tyler Maulsby at (212) 705 4893 or firstname.lastname@example.org or any other member of the Legal Ethics and Professional Responsibility Group.
Other Legal Ethics and Professional Responsibility Alerts
California Supreme Court Holds that Conflict Invalidates Firm’s Engagement Letter But Says Firm Still May be Able to Get Paid
Last week, the California Supreme Court issued its decision in Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., a decision which lawyers and law firms anxiously awaited for months. Read more.
September 4 2018
N.Y. State Bar Ethics Committee Takes On Avvo Legal Services, Says Model Violates Ethics Rules
Recently the New York State Bar Ethics Committee issued a pair of opinions about the limitations on a lawyer's ability to take advantage of certain on-line legal marketing services. Read more.
August 31 2017
Non-Party Has Sufficient Interest to Disqualify Law Firm from Second Circuit Case
At the request of a non-party, the US Court of Appeals for the Second Circuit recently disqualified the law firm BakerHostetler LLP ("Baker") from representing its client Prevezon Holdings Ltd. ("Prevezon"). Read more.
October 24 2016