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Ethics and the IP Attorney - Serving Two Masters

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Ethics and the IP Attorney - Serving Two Masters

Intellectual Property Law is different than most areas of the law. In particular, attorneys that prosecute patents and file applications for trademarks practice before the United States Patent and Trademark Office (“USPTO”). As such, those attorneys—who are required to be licensed by a state and, thus, subject to its Model Rules of Professional Conduct—are also subject to and must follow the USPTO’s Rules of Professional Conduct. In this Overview on Ethics and the IP Attorney, attorneys learn some of the similarities and differences between the two sets of ethical rules, as well as analyze cases addressing some IP-specific ethical issues.


Ken Kula
Senior Counsel
Buether Joe & Counselors, LLC.


Ken Kula: Welcome to ethics and the IP attorney serving two masters by Quimbee. My name is Ken Kula. Paradoxically intellectual property law is both the same as any other type of law, family law, criminal law contract, and different from any other type of law. It is the same in the sense that every IP attorney who litigates must adhere to the ethical rules of the state in which he or she practices. Those rules most likely mirror the Model Rules of professional conduct put forth by the American Bar Association, as adopted by the various states.

   Intellectual property law, however, is also different from the other areas of the law. That is because IP attorneys typically practice before the United States Patent Trademark Office, which I'll refer to as the USPTO. That office's personnel will unabashedly tell anyone who asks that they "take very seriously the competency and conduct of attorneys who practice before the USPTO. All attorneys who practice before us are subject to our disciplinary jurisdiction and must abide by the USPTO rules of professional conduct." That comes from the website, www.uspto.gov, under hiring a U.S. licensed attorney.

   This presentation strives to ensure all participants gain a general understanding of the ethical issues that may affect IP attorneys. To do so the presentation includes a number of course materials, including today's slides complete with detailed presenter notes, current articles on ethics or intellectual property law, and five cases that address ethics and the IP attorney in specific aspects of the law. You may follow along with those slides or simply sit back and enjoy our presentation on Ethics and the IP Attorney.

   In the end, it will provide you with a unique overview on ethics as it relates to intellectual property law, including an analysis of cases and USPTO ethical rules that address areas that are rarely discussed in other CLE programs. The cases and their specific topics that will be discussed are the following. One, Advanced Manufacturing Technologies, Inc. v. Motorola, Inc. and it's a District of Arizona case from 2002, and it will discuss the inadvertent forming of the attorney-client relationship.

   Second, we'll talk about Freeman Equipment, Inc. v. Caterpillar, Inc. It comes from the Northern District of Illinois Federal Court at 2 62 Fed Sup 3rd, 631 and it discusses whether the past representation of an alleged infringer by the patentee's current counsel warrants that counsel's disqualification.

   We'll also talk about Seelie v. Original Media Group, a slip opinion that came out in 2020 and is found at 2020 West Law, 136659, and it raises the possibility of an ethical violation by an attorney who fails to site controlling authority to the court. It also discusses other information about how an attorney should present his or her case to the court.

   We will also talk about BelAir Electronics, Inc. v. Carved, LLC, another slip opinion that came out May 7th, 2021 out of the Northern District of Indiana and it discusses both the proper and improper use of Rule 11 of the Federal Rules of Civil Procedure in a patent infringement case.

   And finally, we'll talk about a case entitled Powell v. Home Depot, U.S.A., Inc. This opinion is found at 663 fed 3rd, 1221, which the Federal Circuit handed down in 2011. That case discusses the potential inequitable conduct during the prosecution of a patent for failing to keep the USPTO adequately informed.

   Those are the cases that will be discussed in this presentation. With that basic summary of what we're going to cover, let's get started with an overview of ethics and the IP attorney by comparing some of the ABA's Model Rules with similar USPTO rules. As I indicated, the USPTO has its own ethical rules and its own power to discipline attorneys that practice before it.

   So let's do a comparison of the two masters, the ABA rules and the PTO's. Let's start with ABA Model Rule 1.1, which covers competence. It states, "A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation." We will see this rule come into play when we're discussing Rule 11 in one of the cases that I mentioned above. Now let's compare ABA Model Rule 1.1 on competence with the PTO Section 11.101 on competence. It states, "A practitioner shall provide competent representation to a client. Competent representation requires the legal scientific and technical knowledge, skill, thoroughness, and preparation reasonably necessary for the representation." This comes from the USPTO website under crosswalk final 4-4.

   Now looking at the two rules and comparing them, you'll see that the PTO Section 11.101 includes scientific and technical knowledge and the competency therein, whereas the ABA Model Rule 1.1 does not. This is obviously a prerequisite for practicing before the USPTO, and that is having at least some competence in scientific technical knowledge.

   Now let's compare the ABA Model Rule 1.3 on Diligence with the PTO Section 11.103 on Diligence. The ABA Model Rule 1.3 states simply, "A lawyer shall act with reasonable diligence and promptness in representing a client." Similarly, the PTO Section 11.103 on Diligence, simply states, "A practitioner shall act with reasonable diligence and promptness in representing a client." So obviously the only difference between the ABA Model Rule 1.3 on Diligence and the PTO Section 11.103 on Diligence is the substitution of the word practitioner for lawyer.

   So, let's now look at ABA Model Rule 1.6 regarding Confidentiality of Information and compare it to PTO Section 11.106 on Confidentiality of Information. Section A of the ABA Model Rule 1.6 states, "A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is implied in order to carry out the representation or the disclosure is permitted by paragraph B." Similarly, the PTO Section 11.106 on Confidentiality of Information states and subsection A, "A practitioner shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, the disclosure is permitted by paragraph B of this section or the disclosure is required by paragraph C of this section."

   So the comparison indicates that the two rules, ABA Model Rule 1.6 and PTO Section 11.106 are very similar, although the PTO Section 11.106 rule on Confidentiality of Information has an additional requirement, that is that the practitioner shall not reveal information relating to the representation of a client unless the disclosure is required by paragraph C of this section. That's the additional requirement. Looking at subparagraph C, we see that it states, "A practitioner shall disclose to the office information necessary to comply with applicable duty of disclosure provisions." That provision will come in into play when we discuss the Powell v. Home Depot case. Again, a practitioner shall disclose to the office information necessary to comply with applicable duty of disclosure provisions.

   Moving on, let's discuss ABA Model Rule 3.1, Meritorious Claims and Contentions, and compare that to PTO Section 11.301 on Meritorious Claims and Contentions. ABA Model Rule 3.1 state's, "A lawyer shall not bring or defend a proceeding or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law. A lawyer for the defendant in a criminal proceeding or the respondent in a proceeding that could result in incarceration may nevertheless so defend the proceeding as to require that every element of the case be established."

   Compare that to section PTO 11.301 on Meritorious Claims and Contentions. It's a little shorter. It states, "A practitioner shall not bring or defend a proceeding or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension modification or reversal of existing law."

   And it is obvious that the PTO Section does not include the section on a lawyer for the defendant in a criminal proceeding or the respondent in a proceeding that could result in incarceration. The reason for that is obvious. The PTO, at least up to today, is not imprisoning people for violating their ethical rules. The other thing I want to point out, which is interesting with regards to the ABA Model Rule 3.1 on Meritorious Claims and Contentions, is the last sentence, which is that, "A lawyer for the defendant in a criminal proceeding made defend the proceedings as to require that every element of the case be established."

   Why am I pointing this out? I'm pointing this out because when you practice law, invariably someone will come up to you and say, "How can a lawyer defend someone who is obviously guilty? How can a lawyer defend someone where all the evidence points to the person's guilt?" I won't name any particular defendants from recent past cases, but I'm sure you can think of someone that you saw that was being tried in a criminal case and you said to yourself, "All the evidence points that he or she is guilty. How can the attorney defend that person?" And the reason is in Rule 3.1, Meritorious Claims and Contentions. A lawyer for the defendant in a criminal proceeding may nevertheless so defend the proceeding as to require that every element of the case be established.

   So when a defense attorney is defending someone who looks like all the evidence is against him or her, the defense a attorney is making sure that the plaintiff actually prove every element of the case. The defense attorney is not necessarily asserting that his client or her client is not guilty or innocent, but that they're ensuring that the prosecution puts forth every element of the case and establish it before a conviction is had. So that is very important with regards to why defense attorneys are always able to defend people who look like all the evidence is against them.

   So let's now move on to some certain cases that address both these rules, these principles, and some of the issue that may arise. I want to say before moving on that just by looking at the ABA and the PTO ethical rules, you'll see that they're very, very similar, and although you possibly could violate one rule without the other, not violating the rules typically go hand in hand. So if you're not violating ABA Model Rule 3.1 on Meritorious Claims and Contentions, you probably will not be violating the PTO Section 11.301 on Meritorious Claims and Contentions, because in essence both those rule rules require that there not be a frivolous or bad faith argument put forth before the court or the tribunal. And this is similar with the other ABA Model Rules in the other PTO Sections on ethics. They are very, very similar, and typically, although you are subject to both of them, you most likely, by adhering to one, will also automatically adhere to the other.

   So let's move on to analysis of cases addressing ethics and the IP attorney. The first topic I want to talk about is the unintended attorney-client relationship. You may be asking, "How can an attorney, client relationship be unintended?" Well, we're going to talk about how sometimes a little bit of lack of formality will actually result in something that is unintended.

   So intellectual property attorneys, I find, may have closer relationships with their clients than most attorneys. This may be especially to true for patent prosecuting attorneys, who work regularly with inventors during the patent application process. That being said, there are still times when the line between attorney and client is blurred. For example, a patent may need to list multiple inventors. Some of the inventors may have made major contributions, others may have made a minor contribution. Does the patent prosecuting attorney represent all inventors or just the one with whom the attorney communicates regularly?

   This uncertainty brings up one mistake that a patent prosecuting attorney may make. The attorney may not recognize the existence of an attorney-client relationship. This is problematic because one cannot truly be prepared to protect that which he or she does not know exists. Too often attorneys either create ambiguity with respect to whether an attorney-client relationship exists or too casually create an attorney-client relationship, believing it will be a limited engagement. Now, the former may typically happen during one of those brief meetings with one other inventors in the case of patent prosecuting attorneys or during a deposition of a corporate client in the case of litigation attorneys. There the representation was brief, the discussion may have been short, but yet an attorney-client relationship was for formed and all the ramifications there of would be applicable. Now the latter instance may occur when attorneys, intellectual property or otherwise, create an attorney-client relationship unintendedly.

   So let's talk first about the situation involved in the case of Advanced Manufacturing Technologies, Inc. v. Motorola, Inc., case number 99-cv-01219 out of the District of Arizona and decided on July 2nd, 2002. There an attorney represented Motorola in a dispute over the sale of a machine shop. A retired Motorola employee who had managed the shop was deposed. So he was retired, wasn't working for Motorola anymore. The attorney represented Motorola, but this retired employee was being deposed. During the deposition, the retired employee stated he was being represented by Motorola's attorney. This is very common. The attorney for Motorola will have reached out to the retired employee and said something to the effect, "Hey, the other side wants to depose you. Don't worry, I'll be there to defend it. Nothing bad will happen. I'll tell you how it works and then we can go from there." So something like that probably happened and at the deposition, the Motorola employee or former employee indicated he was being represented by the Motorola attorney, which was true.

   Motorola's attorney did not deny, qualify or correct him. That's going to become key because what typically happens and what should have happened is the Motorola attorney should have said, "Well, I'm only representing him for purposes of this deposition. Our engagement is limited to defending him at this deposition," or something to that effect, but evidently that was not done in this case. Thereafter, Motorola threatened to sue the retired employee for a possible breach of an employment agreement in effect at the time of the negotiations for the sale of the shop.

   Now, the retired employee moved to disqualify the Motorola attorney and his firm from representing Motorola, claiming that there was a conflict of interest in that he was represented by the same attorney. So this attorney that represented the former employee at the deposition is now representing Motorola in suing him for a breach of contract. Now, the Motorola attorney denied that he ever represented the retired Motorola employee, but the magistrate judge ruled otherwise. So the Motorola attorney is thinking, "No, I was just representing Motorola and I was at the deposition and I was there to protect Motorola's interest," but that's not what the former employee indicated at the deposition, and the Motorola attorney did not deny it or qualify it. So the magistrate ruled that the retired Motorola employee had shared confidential information with the Motorola attorney based on the belief that he was represented by the attorney for purposes of the deposition. The magistrate agreed in part and imposed safeguards to ensure the retired Motorola employee's interests were adequately protected. So it wasn't a full disqualification, but the magistrate agreed that there had to be certain safeguards imposed to protect the Motorola employee's interest.

   Similarly, an attorney-client relationship can have potentially devastating results when it is not clearly formed or ended. This is because once an attorney-client relationship is formed, the attorney is ethically and legally bound to the rules regarding loyalty, competency, diligence, and confidentiality, and all those rules that we talked above, ABA Model Rules, as well as the PTO rules, they are going to come into fruition once that attorney-client relationship is formed and therefore the attorney and the client needs to know when the relationship had formed. So in other words, a full blown attorney, client privilege surfaces and cloaks communications, even though the attorney may have never believed an attorney-client relationship was created or that it was already ended.

   Now this may manifest sometimes at what people call the cocktail representation or the cocktail engagement and that's where you, as an attorney are at a cocktail party and a friend or family member comes up to you and says, "Hey, you're an attorney, right? Well, let me ask you this," and the person presents a factual scenario, and then you indicate, "Well, based upon my understanding of the facts and based upon my understanding of the law," yada yada, yada.

   Well, there could be an argument made that the person came up to you was trying to engage you for legal advice and you provided legal advice without qualifying it in any way. So the argument could be made that an attorney-client relationship was formed, and if so, as indicated, a full blown attorney-client privilege surfaces and would cloak those communications, even though, in that instance, the cocktail attorney may have never believed an attorney-client relationship was created.

   This also happens similarly, when a client relationship ends and the firm or the attorney does not send out a disengagement letter and the client still believes that he's being represented or she's being represented by the attorney of the firm. So after one matter ends, maybe months later, maybe a year later, the client will interact with the attorney or the firm and ask for certain things to be done or ask for certain legal advice, and the client still believes that the attorney or the firm is representing the client because there was never any final, formal disengagement letter. That can come back to haunt you as well.

   So I would suggest you look at the case of Togstad v. Vesely, Otto, Miller & Keefe. It's a Minnesota case found at 291, Northwest 2nd 686. It's an older case, 1980, but the Minnesota Supreme Court upheld a nearly $650,000 judgment against a law firm that the law firm thought it had declined representation, but it wasn't clear that it had declined representation, and so therefore it was found to have actually been representing the client, and therefore there was $650,000 in judgments against the law firm, even though the law firm didn't believe that an attorney-client relationship was formed.

   So be very careful with regards to cocktail conversations about representation and legal advice. Always have, in your back pocket, the phrase that starts off with, "Well, I'm not your attorney and I don't have enough facts or legal research to answer your question, but just between you and me, I would say that," and then you could finish the sentence.

   So let's move on to some other cases. We are about halfway done with the presentation and we have four more cases that we're going to discuss. So we'll be discussing them at about a little less than 10 minutes per case. The first case I want to talk about is Freeman Equipment, Inc., v. Caterpillar Inc. It's found at 262 Fed Supp 3rd, 631. It's a Federal District Court case out of the Northern District of Illinois in 2017, and I indicate that this is a case which shows that when your past may come back to haunt you. So let's talk about Freeman.

   In the Freeman case, a patentee brought an action against an alleged infringer, alleging that final drive guard assemblies, that's not going to be important, but I got to say what it is, and accused heavy duty tractor crawlers infringed patents. Ultimately the alleged infringer moved to disqualify the patentee's council. Now the cases that we're going to be discussing, a lot of them appear to have the thread running through them that there is gamesmanship at hand and it seems like some of these motions to disqualify or we'll see a motion for Rule 11 sanctions or things like that, are really not so much based upon the merits, but are tactical decisions by one party to try and reek havoc on another party and more gamesmanship than legal maneuvering.

   So the district court looked at the facts and ultimately decided that disqualification of the patentee's council, based on his phone call to a former employee of alleged infringer was not warranted, so there was no disqualification. And similarly, the district court looked at the facts and ruled that the simple past representation of an alleged infringer by the patentee's counsel also did not warrant the counsel's disqualification, but let's look at the facts a little bit more, so we can understand the court's rationale and see if you agree that it appears that possibly there's more gamesmanship than true meritorious claims at hand.

   So in this patent infringement suit, the plaintiff alleged that defendant Caterpillar manufactures and sells heavy duty tractor crawlers incorporating "final drive guard assemblies," that infringe three of plaintiff's patents. The defendant filed a motion to disqualify plaintiff's counsel and the defendant asserted two bases for the disqualification. First, that plaintiff's counsel, that would be Mr. Patton spoke by telephone to a Mr. Perry, who was a retired Caterpillar employee, about the Caterpillar's internal legal practices pertaining to patent procurements without disclosing to Mr. Perry, that he, Mr. Patton, represented an entity suing Caterpillar for patent infringement. Second, the defendant also asserted that Mr. Patton, the attorney, previously represented Caterpillar in a patent infringement litigation, and therefore defendant sought to disqualify both Mr. Patton and his law firm from representing the current plaintiff in this action.

   So now defendant's chief complaint brought to the court was that Mr. Patton called Mr. Perry and without identifying himself or his client asked Mr. Perry whether he recalled a conversation he had with a Mr. Freeman, who was the owner of Freeman Equipment at a trade show back in 2008. Mr. Patton went on to ask supposedly whether Caterpillar had any internal process for evaluating and drafting a patent applications, and if so, what the process was. Mr. Patton also talked about Caterpillar's inventor disclosure forms, and the incentives Caterpillar uses to encourage employees to disclose patentable inventions, and he allegedly asked if anyone at Caterpillar would ever attempt to falsely represent an idea as their own in order to obtain a patent or another reward from the company.

   Supposedly the conversation lasted about 20 to 30 minutes, but the plaintiff disputes that Mr. Patton failed to identify himself during the call with Mr. Perry and the plaintiff pointed out to the court that Mr Patton's declaration, which states that at the outset of the call, he introduced himself by name and explained that he was an attorney representing the plaintiff in a patent case against Caterpillar involving these final drive guard things.

   So the court is presented with dueling declarations, one from Mr. Patton and one from Mr. Perry. In the declaration, Mr. Patton acknowledges asking Mr. Perry about the general procedures for evaluating and patenting new inventions at Caterpillar and states that he told Mr. Perry he only wanted a general outline of the process, not any specific details or confidential information. Mr. Patton stated affirmatively that Mr. Perry did not talk about any legal advice he had seen or received at Caterpillar or about any specific matter. Now, the defendant of course, argued that disqualification is required based on Mr. Patton's previous representation of Caterpillar in "a number of litigations, including a patent infringement litigation," and the defendant put forth some docket sheets, which showed, at least tangentially, that Mr. Patton was involved in these previous representations, including one case that was suing the Green Bay Packers. Well, depending if you're a Green Bay Packer fan, you would think that maybe that in and of itself would warrant disqualification, but I am Oakland Los Angeles, Las Vegas Raiders fan, and so I don't take that position.

   Anyway, the only substantive pleading filed on Caterpillar's behalf was an answer and a counterclaim, which was filed by Caterpillar's lead counsel, not Mr Patton and Mr. Patton states that the case was stayed pending reexamination of the asserted patent and was later dismissed without any prejudice by agreement of all the parties involved and that Mr. Patton didn't recall having any involvement in any substantive analysis of the complaint or of Caterpillar's counterclaims or access to any Caterpillar confidential information.

   So the court took up the review and said that the motion for disqualifications are evaluated using a two-step analysis. First, the court had to consider whether an ethical violation had occurred and then second, the court had to determine, if there was an violation, whether disqualification is the appropriate remedy. So just because there is an ethical violation, doesn't ipso facto mean that disqualification should occur.

   The court pointed out that disqualification is a drastic measure, which courts should hesitate eight to impose, except when absolutely necessary. They pointed out that motions to disqualify, "Should be viewed with extreme caution for they can be misused as techniques of harassment." There's a telltale sign that maybe the court is viewing this case as one of those misused motions for harassment. So the court pointed out that the movant bears a heavy burden to prove the facts required for disqualification.

   Now, in particular, the defendant argued that Mr. Patton's phone call to Mr. Perry violated Rules 4.3 and 4.4 of the Illinois Rules of Professional Conduct and those would mirror the ABA Model Rules. Rule 4.3 provides the Illinois rule, "In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not state or imply that the lawyer is disinterested when the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding." So that was the rule that was at issue and whether it was violated and even if it was violated, then the court would take the further step of determining whether actual disqualification was warranted.

   The court pointed out on its face, the Perry declaration, this is the employee, does not suggest that Ms. Patton, the attorney, either stated or implied that he was disinterested in this litigation. Mr. Perry states that Mr. Patton did not mention the litigation at all, so that weighs in his favor. Now the defendant's view was that the omission about the litigation was an ethical breach in and of itself because Mr. Patton had an affirmative duty to inform Mr. Perry of the litigation, his role in it, and the fact that his client is adverse to Mr. Perry's former client. The court said that even if they assume that Mr. Perry indeed failed to provide that information, it is clear that defendant suffered no harm as a result.

   So the court pointed out the record does not suggest that Mr. Patton, the attorney, sought or obtained any privileged information from Mr. Perry, and more troubling, the court pointed out that the evidence revealed that the defendant had actually publicly disclosed its practices relating to the very topics that it now faults Mr. Patton for discussing with Mr. Perry. So again, smacks more of gamesmanship than of real concern about ethical violations. Now, the defendant went on to insist that Mr. Patton's conversation with Mr. Perry, "related to privileged topics." Anytime you see a vague assertion like that, that's a telltale sign that maybe there's no real there, there, and the court found this and said, "but topics are not privileged, communications are, and only when all the requisite conditions are met." So that did not bode well for the motion for disqualification.

   Then the defendant went on and said, "Well, regardless of how Mr. Patton framed his questions, he was necessarily hoping to elicit privileged information from Mr. Perry," since defense counsel had previously told Mr. Patton that Caterpillar produced the discoverable material responsive to his request and that it was asserting the attorney-client privilege over "internal patent applications and documents created in relation to those applications."

   Well, that didn't fly because the court found that whatever the merit of defendant's argument, that "general patent procedures," end are not relevant to the claims or defenses in his action, the fact that Mr. Patton may have discussed irrelevant with Mr. Perry certainly does not compel his disqualification. So the defendant's argument that Mr. Patton's question violated Rule 4.4, which prohibits lawyers from using means that have no substantial purpose other than to embarrass, delay or burden a third party or use methods of obtaining evidence that violate the legal rights of such a person was found to be unpersuasive by the court and is not supported by authority.

   So then the court went on to look at defendant's argument that Mr. Patton. and his law firm must be disqualified based on Mr. Patton's past representation of Caterpillar. The court pointed out right away that that argument merits little discussion, which is a telltale sign that it's going to be discarded. The court pointed out that it's a two point analysis, that first, a motion to disqualify should be made with reasonable promptness when a party discovers the facts that lead to the motion and the court pointed out here, there was a six month delay, which didn't bode well. And then second, the court pointed out that notwithstanding defendant's lengthy apology for appearance of improprieties,  all agree that the analysis ultimately turns on whether defendant has shown that Mr Patton's previous representation of Caterpillar is substantially related to his current representation of Freeman and they said that under the three step level inquiry, that this wasn't found to be the case.

   In fact, the court pointed out that it only had to look at the first step in the inquiry, which was to make a factual reconstruction of the scope of the prior legal representation, and here the court pointed out that the only evidence defendant offers regarding the scope of Mr. Patton's previous representation of Caterpillar is his notice of appearance in the Green Bay Packer case, and neither that document, nor defendant's vague references in his memorandum to another unspecified patent case in which Mr. Patton was allegedly involved, allowed the court to make any meaningful factual reconstruction of the scope of Mr. Patton's prior representation. So for all those reasons, the defendant's motion disqualify was denied, and as I stated in the beginning, I think it was more a tactical move by the movant rather than a true concern that there was an ethical violation that required disqualification.

   So now let's move on to the second case. This is Seelie v. Original Media Group LLC, case number 19-cv- 643, and it's an Eastern District in New York case, decided January 13th, 2020, and can be found at 2020 Westlaw 136659. This is what you know but do not cite can hurt you case, okay? So this is the Seelie case, very interesting case, and again, the language that the court uses pretty much tips its hand as to how things are going to play out. So this is a copper infringement action in which the plaintiff, a professional photographer, granted a license for the use of a photograph that he took, and then the defendant copied the photograph from the licensee's publication and ran it without permission. Also, in publishing the photograph without permission, the defendant removed the credit for the photograph in which the licensee had shown plaintiff's name.

   So there was actually a motion for default judgment because the defendant never contested it, didn't ever show up, so this plaintiff's attorney filed a motion for default, and when there's a motion for default, the court pointed out, that when a default judgment is warranted, based on a party's failure to defend the allegations in the complaint with respect to all the factual assertions are taken as true, but with respect to the amount of damages, they are not deemed true. And here the plaintiff was seeking statutory damages of $30,000 for count one and $10,000 for count two.

   So again, this appears to be a case in which the plaintiff overextended and was a little more greedy. So as the old saying says, "Pigs get fat, hogs get slaughtered." So the plaintiff was seeking the maximum amount for count one, which was the $30,000 and then additional all $10,000 for count two. The court started off by stating that in the default context, it's obviously incumbent upon the plaintiff to submit a record sufficient to support the amount of statutory damages that he is seeking and a plaintiff can certainly disclose his usual licensing fee, so actual damages can be considered as a component of statutory damages.

   So here remember there's simply one photographic issue and the attorney is seeking $40,000 in damages and the court's first real statement that tips the court's hand is quote, "Unfortunately, plaintiff has not given me much assistance in applying these factors. Plaintiff has 'respectfully declined' to disclose the fee paid by his licensee or any other licensee for the photograph or similar photographs, asserting that having elected statutory damages, his usual license fee is irrelevant. The court said, "Yeah, it's irrelevant, but it's also very telling that you didn't produce it."

   So the court pointed out that instead of conducting some minimal investigation of the infringement and then arguing the facts of this case to support his award request, the plaintiff asserts that there is a long line of cases in this circuit which awarded $30,000 on default judgment motions. Of course, the court pointed out that these long line of cases provided facts to justify a $30,000 damage award, and it also pointed out that many of these other cases that awarded damages for the default on these copyright infringement cases were actually cases filed by the plaintiff's attorney. The court went on to state, "This illustrates a bigger problem with plaintiff's presentation. The fact that out of the hundreds of Copyright Act and DMCA cases filed in this court in the Southern district of New York over the last 18 years, a very large number of them prosecuted by this very plaintiff's attorney, a relative handful have awarded the amount of statutory damages he seeks here, does not give me any guidance as to the amount of statutory damages that should be awarded in this case. For every case that plaintiff sites that awarded the same amounts he is seeking, there are more cases awarding different amounts, including many cases brought by this plaintiff's counsel, in which he sought the same amounts that he is seeking here."

   So, again, this is starting to look like kind of a shakedown by the plaintiff, overreaching, trying to get a ton of money, $40,000 plus attorney's fees for the case that is for one photograph and one infringement. The court pointed out that this plaintiff's counsel had actually come before a number of other district courts seeking other requested amounts of $30,000 and pointed out that other courts had similar issues with regards to the lack of evidence that the plaintiff's attorney was putting forth to try and obtain such a large statutory amount and the court pointed out that there was just basic information on the internet that the plaintiff's counsel could have provided the court, which would allow out it to make a reasonable assessment of the reasonableness of the statutory damages, but the plaintiff's counsel didn't even do that. "The internet has lots of information and plaintiff has not even given the court that much assistance."

   So all this was indicating that the court was viewing the fact that the plaintiff was bringing the emotion for default judgment and yet seeking the maximum statutory amount for damages without adequate evidence, problematic. Then the court made this statement, which is probably the most telling of kind of a shot across the attorney's bow by saying that the plaintiff was putting forth a number of cases, which was indicating that he should be awarded the amount that he is asking for, but they didn't actually support that award. The court went on to say, "None of the cases he has failed to cite are controlling authorities, so he has not committed any ethical violation by not disclosing them. Nevertheless, counsel's cherry picking of cases that support statutory awards that at least lean toward windfall recoveries, without disclosing that in a number of single instant infringe against obscure defendants, like the one here, he has recovered mere hundreds of dollars in statutory damages, renders his truncated presentation of the case law, of little use to me."

   So the court was very troubled by the fact that the plaintiff's attorney cherry picked the cases to try and support his request for the maximum statutory amount, but the court also pointed out that none of the cases he failed to site were controlling authorities, so therefore there wasn't an ethical violation. So again, that is one of the more important facts of this case to keep in mind. First, don't overreach, don't be greedy and second, when you have the burden to put forth evidence and law, if you do not put forth a case that has controlling authority and you know about it, then that is an ethical violation. So that is that case.

   Let's now move on to the next case, which is BelAir Electronics, Inc., v. Carved, LLC. It's a federal district court case out of the Northern District of Indiana, decided just earlier in 2021, May 7th. I call this the do not roll the dice on Rule 11 case. In this instance, we're talking about plaintiff BelAir contends that the defendant Carved manufacturers and sells various cases for different types of cell phones and tablets, all of which infringe on BelAir's asserted patents. Now Carved said they don't infringe and move for sanctions against BelAir under Federal Rule of civil Procedure 11, arguing that BelAir did not adequately investigate its claims that the infringement claims are frivolous, that its products do not infringe the asserted patents, the patents are invalid, and the suit was filed as harassment. Again, looking underneath for the true intention of the defendant here, filing a Rule 11 motion in the beginning of the case indicates that it's more possibly a tactical maneuver to try and intimidate the plaintiff rather than seeking truly to have a ruling on the merits.

   The plaintiff, after filing suit, was presented with a motion to dismiss the case, which the court took under advisement and ruled that it was denied and the motion to dismiss was denied, and so at least the legal elements were presented in the complaint and therefore there was no basis for having the case dismissed.

   The court went out on to address the Rule 11 part and said, rule 11 requires an attorney to, "Conduct a reasonable inquiry into the law and facts before filing a pleading in a court and to certify that the claims contained therein are not frivolous, legally unreasonable and without factual foundation or asserted for improper purpose." We addressed that in the ABA rule earlier. The court pointed out that a frivolous argument is one that is baseless or made without a reasonable  and competent inquiry, but the court also said that Rule 11 is intended to deter abusive litigation practices and not as a substitute for a motion to dismiss.

   The court said the fact that BelAir did purchase one of Carved cases supports the notion that it conducted a proper pre-filing investigation, and the court pointed out while the parties may disagree over whether Carved's phone and tablet cases infringe on the patents, that is the core question of this case and cannot be disposed of without proper investigation into the factual merits of the claim. So BelAir's counsel had made a declaration that he did a pre-filing construction investigation, so that was sufficient for the court to determine that a Rule 11 violation had not occurred. And the court pointed out that the defendant can argue that no patent infringement has occurred, but it must do so at the appropriate stage of litigation, not through a motion for sanctions. So again, looking at this, this looks to be a very questionable filing of a Rule 11 motion, more for intimidation factor than for legitimacy with regards to a possible ethical violation and the warranting Rule, 11 sanctions and dismissal.

   We only have a few minutes left. So what I'd like to talk about is the last case, which one that I'm intimately familiar with, and it is Powell v. Home Depot U.S.A, Inc, and this is at 663 Fed 3rd, 1221. This is a 2011 case and I dubbed this, keep it on the up and up with the USPTO case. Just a very brief factual background on this case, Home Depot was actually having some instances where people were using their radial arm saws to cut lumber in the store, and they were having mishaps where the worker would cut himself. There was only, I believe, maybe a handful of cases around the country where someone had cut themselves, but in Home Depot's defense, they thought, "Hey, if anyone cuts themselves, that's too bad for our employees and so therefore we need to stop this." So they decided to who put a guard on their saws to prevent the injuries.

   So first they reached out to the actual manufacturer of the saws and said, "Hey, will you put these guards on the saw and we need it to be put on all the saws all over the country in all the Home Depot stores," and the manufacturer of the saw said, "Well, I can do it for my saws, but I'm not going to do it for other saws because I'm afraid of liability from those manufacturers." So he had actually, the manufacturer, had brought down a type of guard that he believed was going to work well on the saw, and when that individual declined to put them on all the saws, then Home Depot reached out to the individual, Mr. Powell, who actually was kind of the maintenance man for installing the saws and cleaning them or repairing them, stuff like that.

   And Mr. Powell looked at what the original saw company had made with regards to a saw guard and said, "Yeah, I can do the same thing and put it on all your saws and I'll do it for," and I don't remember the exact amount, but, "$5,000 per saw and Home Depot said, "Well, that's a little too. How about if you do it for a lesser amount?" and he declined. So Home Depot reached out to a third party and had that party come in and ask, "Will you retrofit our saws? Here's a basic design that's already been created and will you do it for $1,200?" and that individual company said, "Sure."

   Well, Mr. Powell found out about that, so he ran and got a patent on the saw guard, which arguably was the one that the original saw company provided and then he filed for a patent on that and in the patent prosecution process, he did what you'd call was make special, which indicates that it should go to the front of the line and the prosecution of the patent should be faster than the usual 2.7 years that it takes for patent to get issued. And in the representation, Mr. Powell indicated that there was a potential infringer of his patent, and that is why they needed to have the patent issued more quickly and that he needed to have the patent issued quickly. Well, Mr. Powell knew that there wasn't going to be his use of the application on the saw with Home Depot and he didn't update the PTO with regards to the actual facts with regards to make special.

   So the argument was made that he purposely deceived the PTO into moving his patent to the head of the line and this was inequitable conduct and unethical of him and the court looked at the facts and indicated that there wasn't enough end evidence to indicate that Mr. Powell did this intentionally so therefore under the current rules provided for the inequitable conduct and the motion to make special, the patent application, the court ruled that there just wasn't sufficient evidence to find that it was an intentional act of deception, and they found that Mr. Powell did not commit that act. But the fact is that you need to make sure that once you file a patent application, you keep the PTO updated and make sure that they know what the true facts are.

   So this concludes our hour long overview on Ethics and the IP Attorney from Quimbee. I hope it has provided you with the background. You will need to perform your role as an IP attorney before both the courts and the USPTO when protecting possibly your client's most treasured assets. I hope it has also provided you with some insights into intellectual property law that you may not otherwise get. Thank you very much.

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