Analyzing Potential Conflicts in Patent Prosecution

In a prior post, we discussed a Massachusetts case concerning conflicts of interest in patent prosecution. As we noted before, while these issues are of increasing importance as patent prosecution becomes more focused and specialized, absent from the decision was an analytical framework by which to evaluate and analyze potential conflicts in patent prosecution.

The published literature suggests two alternative frameworks to analyze potential prosecution conflicts: claim-based and information-based. In this post, we elaborate on how these frameworks should be employed, and identify the questions patent attorneys need to consider when evaluating potential conflicts.

Our prior post discussed Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner LLP, 473 Mass. 336, 42 N.E.3d 199 (2015), where the plaintiff asserted malpractice based on alleged conflict of interest in representation in applying for patents before the Patent Office (known as “patent prosecution.”)

Plaintiff alleged that the law firm that prosecuted several patent applications for eyeglass technology for him was, at the same time, prosecuting applications for competing eyeglass technology for another client.

The Maling court held that he had failed to make out a malpractice claim; rejecting his argument that the mere fact that the patents sought would compete economically meant a per se conflict. While it noted some additional factors that might create an actionable conflict, Maling had failed to allege them with enough specificity to survive dismissal.

As we noted before, the issues raised in Maling are increasing in importance. Patent prosecution counsel tend to focus more and more on particular fields of technology, and often have multiple clients operating in the same technological space. Absent from the decision in Maling, however, was an analytical framework by which to evaluate and analyze potential conflicts in patent prosecution.

The published literature suggests two alternative frameworks to analyze potential prosecution conflicts: claim-based and information-based. In this post, we elaborate on how these frameworks should be employed, and identify the questions patent attorneys need to consider when evaluating potential conflicts. Of course, the best time to consider these issues is before accepting representation, when patent practitioners need to anticipate how potential representations might implicate these kinds of conflicts.

Claim-Based Conflicts

As the name implies, “claim-based conflicts” are grounded in consideration of the patent claims in the clients’ respective applications. Patents are a grant of the right to exclude others from using, offering to sell, and selling the patented invention.

There are two basic parts of a patent: the written description (or specification) and the claims. The specification must describe the invention in detail sufficient for one skilled in the art to make and use the invention; the claims must “particularly point out and distinctly claim” the subject matter of the invention.

The patent claims, often analogized to a land deed, define the metes and bounds of what others are excluded from doing. To prove infringement, a patent owner has to show that the defendant has used or made something that meets each and every element of at least one of the patent claims.

Clearly, there would be a conflict if an attorney prosecutes a patent application with claims that overlap the claims of a patent of a different client. That would be like an attorney registering deeds for two clients to the same strip of land, an obvious conflict.

But potential conflicts go beyond that situation. Patent attorneys are charged with obtaining the broadest possible claim coverage they can from the Patent Office within the legal constraints of the Patent Act and what is disclosed and enabled in the specification. Patent prosecution often consists of a back-and-forth negotiation between the attorney and the Patent Office about how broad the claims can be.

An ethical conflict may arise where representation of one client constrains or affects, perhaps subtly, the scope of claims the attorney attempts to obtain for another client.

Even for a single client, how broad a claim scope to seek can be a complex decision involving competing considerations. Patent attorneys need to be careful to determine that these complex strategic decisions are not affected by the fact of a second representation. Among other questions to be asked:

  • What is the optimum claim scope that the attorney would apply for in each case if no second representation existed?
  • Do they overlap? If so, there is likely a conflict.
  • Is there a strategic reason to seek narrower claims?

    Even when representing a single client, there may be a strategic reason to seek less than the maximum claim scope for each client. For example, there is good reason to try to avoid being too broad in an initial filing that later require amendments to be allowed by the Patent Office, because narrowing amendments raise a presumption that the applicant surrendered any later argument of infringement under the doctrine of equivalents. See Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 535 U.S. 722, 740-41 (2002).

    But where there are two clients, one must ask if such a decision to seek narrower claim being made truly independently of the fact of the second representation?

These questions can help flesh out whether there is a conflict.

These questions often need to be revisited over time. Patent claim scope can change as a patent application is prosecuted, as new claims are added, and through such procedures as continuation, continuation-in-part, and reissue applications, and through applications for new inventions.

Each such event requires a new inquiry as to whether there is a claim-scope conflict between any two clients.

Information-Based Conflicts

Simultaneous patent prosecution for two competitor clients can also raise serious issues about preservation and use of confidential client information. Attorneys are generally required to maintain the confidentiality of client confidences. Professional Rule 1.6.

This duty remains even after the representation ends. Id. In fact Rule 1.9 bars subsequent representation of a different client where the second representation is “in the same or a substantially related matter” and the second representation is “materially adverse to the interests of the former client.” Rule 1.9(a).

“Matters are ‘substantially related’ for purposes of this Rule if they involve the same transaction or legal dispute or if, under the circumstances, a reasonable lawyer would conclude that there is otherwise a substantial risk that confidential factual information that would normally have been obtained in the prior representation would materially advance the client’s position in the subsequent matter.” Rule 1.9, Comment 3 (emphasis added).

Patent applications and information in them are by law generally kept secret for at least 18 months, and are then published by the Patent Office. Clients often provide confidential information to their patent attorneys to help them understand the invention and prosecute the application.

Where a patent attorney prosecutes patents in the same field or technological space, there is a real possibility that confidences learned from one client will be useful in prosecuting a second client’s application. This is not a fanciful concern – in one case reported in the literature, which settled for $12 Million, a patent applicant sued its patent counsel for using its confidences to help prosecute an application for a different client. Caliper Tech. Corp. v. Rowland, No. CV 780743 (Cal.Super.Ct. 1999).

Duty of Disclosure And Conflicts

Patent practice has one unusual feature that can create additional information-based conflict problems. Patent Office regulations impose on each individual dealing with it a duty to disclose to the Patent Office all information “material to patentability,” 37 C.F.R. § 1.56, a duty which overrides any duty of confidentiality to the client. See id. § 11.106(c).

Failure to disclose such information can lead to a charge of “inequitable conduct,” which can render the patent unenforceable.

How do the duties of disclosure and client confidentiality relate when there are different clients involved – i.e., when the attorney prosecuting an application for one client knows information material to the application, but that is only known to him as the confidence of a second client?

The Federal Circuit has twice taken up the issue, but the results have been less than clear. See Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed. Cir. 1995) (court split on the issue); Akron Polymer Container Corp. v. Exxel Container, Inc., 148 F.3d 1380 (Fed. Cir. 1998) (court assumed there was a duty of disclosure in this situation, but reversed finding of inequitable conduct for other reasons).

The Patent Office takes the position that where the information is material to patentability, the duty of disclosure to the Patent Office would trump the duty of confidentiality to the client, even if the application is for a different client from that whose confidential information would need to be disclosed.

In such a scenario, the attorney’s only ethical way of proceeding is to withdraw from the representation of the pending application. Of course, practitioners would be well advised to avoid such circumstances from the start by being sensitive to similarities in subject matter that could give rise to such required cross disclosures.

Patent practitioners thus need to be cognizant of the tension between the duty of disclosure as to one client and the duty of confidentiality as to another client. And, since the duty of confidentiality does not end with termination of the representation, this applies to possible conflicts with former clients as well.

Imputed Conflicts v. Imputed Knowledge

So far, we have discussed potential conflicts regarding a single patent attorney representing different clients. What if the two clients are represented by different attorneys in the same firm?

Where there is an actual conflict for one attorney, that is imputed to all attorneys in the firm, under both the Patent Office rules of practice, 37 CFR § 11.110, and Rule 1.10 of the Rules of Professional Conduct.

The issue is more complex as to informational conflicts, because the duty of disclosure cited above is expressly formulated to reach individuals: “[e]ach individual associated with the filing and prosecution of a patent application” has a duty to disclose information material to patentability. 37 CFR § 1.156(a) (emphasis added). A later subsection defines the scope of who has such a duty in terms of individuals. Id. § 1.156(c).

The Patent Office regulations note that “the duty applies only to individuals, not to organizations,” MPEP § 2001.01, and add that, for example, the duty of disclosure does not apply to a corporation or institution as such, but only to individuals involved in the prosecution of the patent.

The Federal Circuit concurs. See Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1329 (Fed. Cir. 2009), which heavily emphasized that organizations do not have a duty of disclosure, only individuals do.

Thus the mere fact that two attorneys work for the same firm (or corporation) would not impute knowledge from one to the other to trigger the duty of disclosure. If Attorney A is working on an application, only his knowledge need be disclosed to the Patent Office. That Attorney B in the same firm might have some knowledge that is material to that application does not trigger a duty of disclosure on anyone.

However, attorneys must still be cautious in situations where they might work together or collaborate on patent assignments, or even help out or give advice to one another. The regulations impose a duty of disclosure on each attorney “who prepares or prosecutes the application.”

While that provision has not been construed by the Federal Circuit, a similar phrase in the next subsection, “substantively involved in the preparation or prosecution of the application,” has been construed very broadly. See Avid Identification Systems, Inc. v. Crystal Import Corp., 603 F.3d 967, 974 (Fed. Cir. 2010), where the Federal Circuit construed the “substantively involved” language to mean “that the involvement relates to the content of the application or decisions related thereto, and that the involvement is not wholly administrative or secretarial in nature.”

Under that broad standard, a patent attorney who assists another attorney in the firm in preparing an application (beyond routine ministerial assistance) arguably would be considered as one who “prepares or prosecutes” the application, triggering a duty of disclosure as to anything he knows that is material.

Conflicts And The America Invents Act

The Leahy-Smith America Invents Act of 2011 (AIA), P.L. 112-29, introduced several major reforms in U.S. patent practice. As of 2013, the United States changed from a “First to Invent” system to a “First to File,” or, more precisely, a “First Inventor to File” system.

Rights to an invention are no longer rewarded to the first person to independently create an invention; rather the first to invent and file an application in the Patent Office is awarded the patent. This creates a “race to the patent office” to secure rights by the earliest possible filing that meets the requirements for a patent.

Little has been written so far about the ethical implications of the AIA. One obvious problem inheres in the race-to-the-Patent-Office aspect of the AIA. If counsel is representing two parties with overlapping inventions, then the very act of filing for one client would prejudice the other, by granting it rights superior to the second client.

Counsel’s choice to prepare one client’s application before the other client’s application would likely determine the winner in the proverbial “race.” This was not so prior to the AIA, where first-to-invent was the governing rule, and thus the timing of the applications was not determinative.

But the AIA raises other significant ethical issues. The way the AIA implements first-to-file is by making the disclosure in the first application “prior art” to later applications. See 35 U.S.C. § 102(a). Section 122 requires patent applications to be kept confidential initially, but also requires that they be published within 18 months, subject to a few narrow exceptions.

Once published, all disclosures in an application are considered prior art retroactive to the date of filing. Thus a first-filed application, when eventually published, will be considered “prior art” to all later-filed patent applications.

The effect of one client’s application being rendered prior art to a second client’s application is potentially much broader than the overlapping-claims analysis discussed above.

First, patent applications include a written description of the subject matter of the invention, which could support claims broader than those initially claimed. (This is the basis for continuation and/or re-issue applications, which rely on the prior disclosure to add or amend claims). Disclosures in the specification filed for Client A could well end up invalidating a later-filed application for Client B.

Second, prior art is important in determining whether an invention is “obvious.” Section 103 of the Patent Act precludes patent rights where the claimed invention, though not disclosed exactly in the prior art, is an obvious extension (to one having ordinary skill in the art) over what was known before.

The AIA impacts analysis of obviousness in two ways: first it renders prior-filed applications as “prior art.” Second, it amended Section 103 to determine obviousness as of the effective filing date of the invention claimed in that application, rather than as of the time that the claimed invention was made. The AIA thus expands the scope of prior art and postpones the date when the obviousness analysis is applied.

(The postponement of the date of the obviousness analysis affects prosecution in other ways. Prior art now includes public disclosures, such as in scientific journals, or in third-party applications, that occur in the window of time between invention and filing. Thus, delay in filing an application now may potentially prejudice a client, since any public disclosures during that window could invalidate the application.)

When considering whether to represent two inventors operating in the same technology space, counsel must now consider not only whether claims might overlap, but whether any disclosures in one application could render obvious (and hence unpatentable under Section 103) any claims in the second application.

Conclusion

Representing two clients with competing technologies is a position “fraught with possible conflict of interest” and this perilous situation can continue even after one representation is completed. We have elaborated on two analytic frameworks that should aid patent practitioners in determining whether there is a conflict of interest.


A previous version of this post appeared in the New York Law Journal, August 3, 2016