conflicts of interest and attorney · pdf fileconflicts of interest and attorney...

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 78701 (512) 474-7054

State Bar of Texas 8TH ANNUAL PATENT LITIGATION COURSE

August 2-3, 2012 Dallas

CHAPTER 15

CLAUDE E. DUCLOUX400 W. 15th Street, Suite 808

Austin, Texas 78701Telephone: (512) 474-7054

E-Mail: [email protected] of Texas, Austin, B.A., 1972St. Mary's University, San Antonio, J.D., December 1976BAR ADMISSIONSTexas1977; California 1978, Colorado 2003Various US District Courts and Circuit Courts of AppealEMPLOYMENTAssistant General Counsel, State Bar of Texas: 1978-1980Robinson, Felts, Starnes, Angenend & Mashburn; Civil Trial Attorney, 1980-1987Wood, Lucksinger & Epstein; Civil Trial Attorney, 1987-1989Private practice; Civil Trial Attorney, Business Formation, Transactions, Trials and Appeals, Mediation and Arbitration; 1989-Present

PROFESSIONAL ACTIVITIESPresident, Travis County Bar Association (now, Austin Bar Association); 1997-1998;

(All officer positions: Pres.-Elect; Comptroller, Treasurer, Secretary '95-96; Director) Chair, Texas Board of Legal Specialization, 1997-1998

Director, 1994-1997; Civil Trial Law Advisory Commission, 1985-1994Board Certified: Civil Trial Law, 1984; Civil Appellate Law, l987

Chair, Texas Bar Foundation 2005-2006; Secretary-Treasurer (04-05); Trustee 2004-2008 Sustaining Life Fellow, District Nine Membership Chair 1996-98; numerous awards committees 1996-2008

Chair, Texas Center for Legal Ethics and Professionalism: 2004-06, Trustee 2003-07 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, 2005.

Chair, College of the State Bar of Texas; 1992-94; Vice-Chair 1990-92; Director, 1988-98, Member 1985-Present; BoardAdvisor 1999-2000, Numerous Committees

Chair, State Bar of Texas Annual Meeting (Texas Bar Convention), 2001Chair, United States Fifth Circuit Judicial Conference, Austin 2004President, St. Mary’s Law Alumni Association, 2006-07, Trustee, 2001-2008.

Associate, American Board of Trial Advocates, 1999- pres.Director, State Bar of Texas; District 9, 1998-2001; Executive Committee 1999-2001

(Outstanding 3rd Year Director Award - 2001) Director, Austin Lawyers Care (now: Volunteer Legal Services of Central Texas), 86-89Director, Austin Young Lawyers Association, 1984-1986Editor, Travis County Practice Handbook, 1984, 1986Trustee; St Mary’s University, San Antonio, Texas 2007-08Member 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, 1996-1998PROFESSIONAL HONORSAnnual 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 2006Pro Bono Award, Volunteer Legal Services of Central Texas, 1991, 1993, 1997, 1999W. Frank Newton Award (Statewide Annual Pro Bono Award given by State Bar of Texas), 2000Professionalism Award, Austin Bar Association, 2007Outstanding Mentor of the Year Award, Austin Young Lawyers Association, 2007.MILITARY SERVICE U.S. Army; 1st Cavalry Division, 1972-1974 (Awarded Army Commendation Medal, 1974)

Conflict of Interest and Attorney Disqualification Chapter 15

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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 1001 .................................................................................................................... 5 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 ........................................................................................... 10

Conflicts of Interest andAttorney Disqualification:

Patent Law

Conflicts of Interest andAttorney Disqualification:

Patent Law

Advanced Patent L it igat ion

Irv ing , Texas August 2 ‐3, 2012

Claude E. Ducloux

Aust in, Texas

Special ThanksSpecial Thanks

The following authors, whose work I reviewed in preparation of this presentation:

Tom RegerTom Reger, at Fish & Richardson, for his 2010 presentation

David W. Elrod and Jonathan C. Polakfor their 1997 article

And David Krollat SBOT for PowerPoint help!

Types of Conflicts of InterestTypes of Conflicts of Interest

In patent prosecution there are3 types of conflicts:

1.Subject matter conflicts;

2.Clients who have materially adverse interests; and

3.Breach of confidentiality

Conflicts of Interest and Attorney Disqualification: Patent Law Chapter 15

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Patent Law: What Law Governs?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?”What constitutes

“adverse interests?”

• PTO Rule 10.66: likely to involve “. . . differing interests . . . and adversely affected.”

d l l “di l d ”• ABA Model Rule 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?

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 10.66 (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.”


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When will you be materially adverse?Whenever you:

When will you be materially adverse?Whenever you:

• Litigate against a client’s patent.

• Give an opinion concerning the client’s patent.

Gi d i b t d i i d th li t’• Give advice about designing 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 facePossible 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 ManagementBut… How?

The Key: Risk ManagementBut… 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


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Danger AreasDanger Areas

1. When the prosecuting lawyer knows technologies would create an interference (thus conflicting out joint prosecution)(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 10.56.

Duty to Make Reasonable Inquiry Duty to Make Reasonable Inquiry

Remember you have a duty to make reasonable inquiry.

You can’t ignore obvious resources andYou 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 Duty to Make Reasonable Inquiry

37 CFR §11.18(b) requires:

A. That all statements made of the parties’ k l d town 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. 1001 and any other applicable Criminal Statute.


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Findings of Fraud or 18 USC 1001Findings 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.

RothermRothermel’s 3 QuestionsRothermRothermel’s 3 Questions

Between Parties:1

Will my representationof A be materially and

directly adverseto the interest of B?


To Third Parties:2

Do I have any dutiesto third parties which willlimit my representation

of A or B?


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My Own or My3

y yFirm’s Interests:

Is my representationof A or B adversely limited

by my own interests?

The Lawyerhas the duty

Rights and DutiesRights and Duties

has the duty

to make sufficient disclosure..



has the duty

to secure permission.


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has the duty

to withdraw when appropriate.

Watch out for EXCEPTIONS!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:Complete Disclosure to the Affected Parties Includes:

The existence of the conflict

The “nature” of the conflict2

1The nature of the conflict

The implications of the conflict

Possible adverse consequences of common representation

Advantages of common representation

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3

4

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How do you determine the extent of the explanation to the client?

How do you determine the extent of the explanation to the client?

This will be based on:

• The client’s sophistication• The client s sophistication

• The client’s education and

• The client’s previous experience.

What about “Aligned Clients” with potentially different interests?

What about “Aligned Clients” with potentially different interests?

1. Make sure WHOM you represent: The owners? The corporation? The venture?p

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 DisqualificationBurden 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


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• Texas Supreme Court has held the Trial Court should require the party seeking disqualification to demonstrate actual

Burden of Proof Over DisqualificationBurden of Proof Over Disqualification

qprejudice 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 (5th Circuit, 1992).

Disqualification in the Fifth CircuitDisqualification in the Fifth Circuit

5th Circuit REVIEWS MORE BROADLY:

Their Rules are Broader: it says the Disciplinary Rules are not the “sole authority” governing a y g gMotion 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 LessonsThree 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.


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Bad Things Happen: Handling a GrievanceBad Things Happen: Handling a Grievance

• Always respond timely and completely

• Never respond pro se; always have someone respond for you


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