February 27, 2012
The Federal Circuit was created to bring uniformity to patent law. It has done the opposite in recent times: There is no uniformity in claim construction, as per my prior posts on Retractable Technologies, Inc. and HTC, etc. There is no uniformity in venue. If you are in Texas, using an expansive reading of Fifth Circuit Regional law, you are likely to be transferred to the infringer’s home forum. Of late, in a case from Delaware, Judge Rader did issue a precedential decision transferring a case from Delaware to Northern California, where the parties’ operations were located giving minimal weight to state of incorporation. Perhaps this is a harbinger of consistency for patent cases under 1404(a), but to date inconsistency has been the rule.
Now we see another area where confusion continues, but this is mainly at the district court level. Maybe the Federal Circuit will cure this inconsistency? Hopefully in a common-sense manner. In the Northern District of California, a lawyer can be disqualified based on little more than the client’s “say so” that the lawyer learned litigation playbook, corporate structure, or otherwise has learned confidential information (which need not be revealed and generally the lawyer’s rebuttal is not given the weight the client’s complaint is given). This might come in a later patent case, as in a recent opinion from Judge Alsup, Talon Research v. Toshiba, an opinion some months ago where I was disqualified from an antitrust case based on prior patent work by Judge Jeffrey White, Oliver v. SanDisk, et al., and other cases. Often the representation ended years ago, but this seems to have little impact in the Northern District.
Recently, Judge Davis in the Eastern District of Texas denied a motion to disqualify in Secure Axxcess v. Dell, Inc., recognizing that not all patent cases are the same, high level assertions of strategy and confidential playbook type information, in cases that ended years ago, will not themselves permit for disqualification in a later patent case. There must be a true overlap between the current and former representation, not just buzzwords. In that opinion Judge Davis found the disqualification request also undermined because similar requests had been filed in multiple patent cases by the same company against the same firm, which tended to show a broad view of disqualification across a field of cases with different subjects.
Today’s market opens up the specter of disqualification as a common litigation tactic: First, a significant number of companies use requests for proposals or bids, or otherwise shop, for the best rates and deals. A significant number of companies treat law firms as other service providers, with less concern for continuity or relationships than in the past. This is by no means true of all companies, but it has been a growing trend. The internet services that post new filings once or twice a day have facilitated this type of purchasing of legal services as it invites inquiries from firms about representation in new cases. Moreover, consolidation in certain industries also creates conflicts when a former client is absorbed by a former adversary.
In addition, lawyer mobility is probably more prevalent now than in the past. Firms grow, open new office, lawyers are laid off and re-hired by other firms, “rain-makers” are courted by other firms, firms merge, firms dissolve (e.g., Brobeck, Heller, Howrey), associates or partners or counsel whose careers hit a ceiling in one firm look for other opportunities. This mobility of attorneys is difficult to cope with in jurisdictions that do not recognize ethical walls or advance waivers of conflicts or where a court broadly construes the types of information that might lead to later disqualification.
It is time for a realistic and common sense approach to conflicts: Companies that shop their cases should not complain if in a later case a firm they previously used but declined to hire for later work shows up on the other side (so long as it is not actually the same dispute or a closely related dispute). Knowledge of a company’s corporate structure, litigation strategy, corporate workings or licensing goals is not a basis for confidential information in many instances, because these facts all change with time, the economy, the product mix: Frankly, among competitors, each others’ corporate structures are hardly secret, and the licensing strategy in most NPE cases is typically pay as little as possible. Imputed knowledge is a firm dependent if not out dated concept in an era of worldwide or national or regional firms that might have hundreds or even more than a 1000 lawyers in multiple offices. Many partners in large firms don’t know each other and don’t know what each other’s practices involve. Disqualification litigation delays lawsuits, runs up expense, and does little to protect clients or the public perception of attorneys.
There is a place for client loyalty, there is a place for disqualification, there is a place for firm loyalty, but right now those concepts are “all over the place”, without consistent or credible boundaries, which vary from jurisdiction to jurisdiction. I hope this is one area where the Federal Circuit can and does recognize modern business practices and realities, recognize facts are important and recognize distinctions should not be blended away with vague concepts of “strategy” or “corporate structure”. Clients that use one or a few firms on a fairly regular basis won’t have this issue. Law firms that respect the bounds of a prior dispute or relationship won’t have this problem. Strong waivers and ethical walls should cure this problem. But those who want to swing the DQ stick wildly and broadly, as another litigation weapon, are a problem and the problem should be stopped.