CONFLICTS OF INTEREST AND ATTORNEY DISQUALIFICATION

Transcription

1 CONFLICTS OF INTEREST AND ATTORNEY DISQUALIFICATION CLAUDE E. DUCLOUX Hill, Ducloux, Carnes & De La Garza An Association of Individual Practitioners- Not a Partnership 400 W. 15th Street, Suite 808 Austin, Texas (512) State Bar of Texas 8 TH ANNUAL PATENT LITIGATION COURSE August 2-3, 2012 Dallas CHAPTER 15

2 CLAUDE E. DUCLOUX 400 W. 15 th Street, Suite 808 Austin, Texas Telephone: (512) EDUCATION University of Texas, Austin, B.A., 1972 St. Mary's University, San Antonio, J.D., December 1976 BAR ADMISSIONS Texas1977; California 1978, Colorado 2003 Various US District Courts and Circuit Courts of Appeal EMPLOYMENT Assistant General Counsel, State Bar of Texas: Robinson, Felts, Starnes, Angenend & Mashburn; Civil Trial Attorney, Wood, Lucksinger & Epstein; Civil Trial Attorney, Private practice; Civil Trial Attorney, Business Formation, Transactions, Trials and Appeals, Mediation and Arbitration; Present PROFESSIONAL ACTIVITIES President, Travis County Bar Association (now, Austin Bar Association); ; (All officer positions: Pres.-Elect; Comptroller, Treasurer, Secretary '95-96; Director) Chair, Texas Board of Legal Specialization, Director, ; Civil Trial Law Advisory Commission, Board Certified: Civil Trial Law, 1984; Civil Appellate Law, l987 Chair, Texas Bar Foundation ; Secretary-Treasurer (04-05); Trustee Sustaining Life Fellow, District Nine Membership Chair ; numerous awards committees Chair, Texas Center for Legal Ethics and Professionalism: , Trustee Authored numerous Professionalism Video Tapes: 1996(segment on "Office Procedure and Practices"), Co-wrote "Ethics Jeopardy, 1997, Ethics Jeopardy II, 2001; Defense Ethics tapes, Skills updates, Chair, College of the State Bar of Texas; ; Vice-Chair ; Director, , Member 1985-Present; Board Advisor , Numerous Committees Chair, State Bar of Texas Annual Meeting (Texas Bar Convention), 2001 Chair, United States Fifth Circuit Judicial Conference, Austin 2004 President, St. Mary s Law Alumni Association, , Trustee, Associate, American Board of Trial Advocates, pres. Director, State Bar of Texas; District 9, ; Executive Committee (Outstanding 3 rd Year Director Award ) Director, Austin Lawyers Care (now: Volunteer Legal Services of Central Texas), Director, Austin Young Lawyers Association, Editor, Travis County Practice Handbook, 1984, 1986 Trustee; St Mary s University, San Antonio, Texas Member and Founder Bar & Grill Singers, Lawyer Group performing musical parody across the country, and raising (through Jan 2008) $400,000 for pro bono causes. Member, Supreme Court Advisory Committee on Court-Annexed Mediation, PROFESSIONAL HONORS Annual Professionalism Award, College of the State Bar of Texas, 2002 Outstanding Young Lawyer Award, 1987 (Awarded by Austin Young Lawyers Association) Presidential Citation; State Bar of Texas, 2001 and 2006 Pro Bono Award, Volunteer Legal Services of Central Texas, 1991, 1993, 1997, 1999 W. Frank Newton Award (Statewide Annual Pro Bono Award given by State Bar of Texas), 2000 Professionalism Award, Austin Bar Association, 2007 Outstanding Mentor of the Year Award, Austin Young Lawyers Association, MILITARY SERVICE U.S. Army; 1st Cavalry Division, (Awarded Army Commendation Medal, 1974)

3 Conflict of Interest and Attorney Disqualification Chapter 15 TABLE OF CONTENTS TYPES OF CONFLICTS OF INTEREST... 1 PATENT LAW: WHAT LAW GOVERNS?... 2 WHAT CONSTITUTES ADVERSE INTERESTS?... 2 WHEN CAN YOU REPRESENT COMPETITORS AND NOT HAVE A CONFLICT?... 2 WHEN WILL YOU BE MATERIALLY ADVERSE?... 3 POSSIBLE CONSEQUENCES THAT YOU FACE... 3 THE KEY: RISK MANAGEMENT BUT HOW?... 3 DANGER AREAS... 4 DUTY TO MAKE REASONABLE INQUIRY... 4 FINDINGS OF FRAUD OR 18 USC ROTHERMEL S 3 QUESTIONS... 5 RIGHTS AND DUTIES... 6 WATCH OUT FOR EXCEPTIONS!... 7 COMPLETE DISCLOSURE TO THE AFFECTED PARTIES INCLUDES:... 7 HOW DO YOU DETERMINE THE EXTENT OF THE EXPLANATION TO THE CLIENT?... 8 WHAT ABOUT ALIGNED CLIENTS WITH POTENTIALLY DIFFERENT INTERESTS?... 8 BURDEN OF PROOF OVER DISQUALIFICATION... 8 DISQUALIFICATION IN THE FIFTH CIRCUIT... 9 THREE BIGGEST LESSONS... 9 BAD THINGS HAPPEN: HANDLING A GRIEVANCE i

4 Conflicts of Interest and Attorney Disqualification: Patent Law Advanced Patent Litigation Irving, Texas August 2 3, 2012 Claude E. Ducloux Austin, Texas Special Thanks The following authors, whose work I reviewed in preparation of this presentation: Tom Reger, at Fish & Richardson, for his 2010 presentation David W. Elrod and Jonathan C. Polak for their 1997 article And David Kroll at SBOT for PowerPoint help! Types of Conflicts of Interest In patent prosecution there are 3 types of conflicts: 1.Subject matter conflicts; 2.Clients who have materially adverse interests; and 3.Breach of confidentiality 1

5 Patent Law: What Law Governs? Texas Disciplinary Rules of Professional Conduct, Rules 1.05, 1.06, 1.07 & 1.08 PTO Rules (37 CFR, Part 10 and 11); Manual of Patent Examining Procedures; United States District Court Local Rules; and Patent case law. What constitutes adverse interests? PTO Rule 10.66: likely to involve... differing interests... and adversely affected. ABA Model dlrule 1.7: directly adverse or materially limited [by duty to another] Texas DTRPC 1.06(b): materially and directly adverse or reasonably appears or become adversely limited by the lawyer s or law firm s responsibilities to another. When can you represent competitors and not have a conflict? Model Rule 1.7 says: Representation in unrelated matters of... competing economic enterprises, does not require consent. But, Patent Rule (37 CRF 10.66(c)) says: A practitioner may represent multiple clients if it is obvious that the practitioner can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation. 2

6 When will you be materially adverse? Whenever you: Litigate against a client s patent. Give an opinion concerning the client s patent. Give advice di about tdesigning i around the client s patent. Try to explain away the PTO reference to a client s prior art. Review portfolios in the industry with clients. File a competing patent in the client s industry. Possible consequences that you face 1. A disqualification motion. 2. An infringement suit/inequitable conduct defense. 3. A civil suit for malpractice. 4. Disciplinary action by the patent office. 5. State Bar discipline. 6. U.S. District Court discipline. The Key: Risk Management But How? 1. Be careful in client intake process; 2. Be aware when possible conflicts become apparent; and 3. Know how to resolve: Option 1: Don t take the matter. Option 2: Waiver letters when possible. Option 3: Withdrawing when necessary 3

7 Danger Areas 1. When the prosecuting lawyer knows technologies would create an interference (thus conflicting out joint prosecution). 2. Use of Confidential Knowledge: Problems of Confidentiality: The PTO and State Rules require attorney to maintain confidentiality of client information (See TDRPC 1.05) and 37 CFR Duty to Make Reasonable Inquiry Remember you have a duty to make reasonable inquiry. You can t ignore obvious resources and form a reasonable belief unless you have made every inquiry reasonable under the circumstances. Duty to Make Reasonable Inquiry 37 CFR 11.18(b) requires: A. That all statements made of the parties own knowledge true; B. That all statements made on information and belief are believed to be true; and C. False statements are subject to the penalties under 18 U.S.C and any other applicable Criminal Statute. 4

8 Findings of Fraud or 18 USC 1001 CAVEAT: Criminal findings of false filings: Automatic Disbarment as conviction of Intentional Crime. See, Texas Rules of Disciplinary Procedure, Sec 8.01 et seq. Rothermel s 3 Questions 1 Between Parties: Will my representation of A be materially and directly adverse to the interest of B? Rothermel s 3 Questions 2 To Third Parties: Do I have any duties to third parties which will limit my representation of A or B? 5

9 Rothermel s 3 Questions 3 My Own or My Firm s Interests: Is my representation of A or B adversely limited by my own interests? Rights and Duties The Lawyer has the duty to make sufficient disclosure.. Rights and Duties The Lawyer has the duty to secure permission. 6

10 Rights and Duties The Lawyer has the duty to withdraw when appropriate. Watch out for EXCEPTIONS! Complete Disclosure AND Permission Mere disclosure is not sufficient Lawyer must still reasonably believe that their interests will not be affected by joint representation DISCLOSURE MUST MEET RULE 1.06 STANDARDS Complete Disclosure to the Affected Parties Includes: The existence of the conflict The nature of the conflict The implications of the conflict Possible adverse consequences of common representation Advantages of common representation 7

11 How do you determine the extent of the explanation to the client? This will be based on: The client s sophistication The client s education and The client s previous experience. What about Aligned Clients with potentially different interests? 1. Make sure WHOM you represent: The owners? The corporation? The venture? 2. Make sure clients understand that; and 3. Hire tag along counsel if conflict later develops, so you can stay in. Burden of Proof Over Disqualification The party seeking disqualification has the burden: 1. Must demonstrate actual prejudice resulting from the opposing lawyer s service in dual roles 2. Must establish with specificity a violation of one or more Disciplinary Rules 3. Showing a remote possibility of DR violation will not suffice 4. It is further not sufficient to prove that might develop a conflict in the future 8

12 Burden of Proof Over Disqualification Texas Supreme Court has held the Trial Court should require the party seeking disqualification to demonstrate actual prejudice to itself resulting from the opposing lawyer s service in the dual roles. Ayres v. Canales, 790 S.W.2d 554 (Tex. 1990) citing Disciplinary Rule 3.08, comment 10; In Re: American Airlines, 972 F.2d 605 (5 th Circuit, 1992). Disqualification in the Fifth Circuit 5 th Circuit REVIEWS MORE BROADLY: Their Rules are Broader: it says the Disciplinary Rules are not the sole authority governing ga Motion to Disqualify. They may consider ABA Model Rules or their own case law. Moreover, under Federal Law, Motions to Disqualify are substantive motions affecting the rights of parties and are determined by applying standards developed under Federal Law. Three Biggest Lessons 1. Carefully review all new client matters on intake; ask the right questions, and don t worry about it later. Worry about it now. 2. If there is a conflict, can it be intelligently explained and waived? If so, get it in writing, and if not, withdraw. 3. If the Court wants you out, you ll be out, since most courts use the smell test and find a rule to support the fragrance. 9

13 Bad Things Happen: Handling a Grievance Always respond timely and completely Never respond pro se; always have someone respond for you 10