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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
Third Annual Litigation Ethics Summit
On November 13, 2020, Frankfurt Kurnit held its Third Annual Litigation Ethics Summit, consisting of three hour-long panels, earning the attendees three ethics CLE credits in New York and California. Read more.
November 19 2020
A Primer On New York’s COVID-19 Executive Orders and What They Mean for Your Practice
This past week, New York has taken a number of steps to restrict movement in and around the State in an effort to contain the COVID-19 crisis. Governor Andrew Cuomo has issued executive orders and the chief judges of the state and federal courts have issued administrative orders that have had a sweeping impact on the legal industry as well as the business community at large. Read more.
March 22 2020
ABA Opinion Limits Restrictions on Departing Partners
There’s important news for law firm leaders who have recently revised partnership and shareholder agreements to restrict partner departures. In ABA Formal Opinion 489, the ABA Standing Committee on Ethics and Professional Responsibility spells out new limits on notice periods, on rules governing communications with clients, and on so-called “ownership” of clients. Here’s what firm managers need to know to stay on the right side of the ethics rules. Read more.
February 6 2020