Thursday, September 28, 2017

IP Ethics & Conflicts: New Rules Create New Risks and Responsibilities

Longtime reader Brian Lynch, with IP experts Aurora North, writes in to note an excellent three part series from Michael E. McCabe, Jr: "Breadth Of PTO Ethics Opinion Could Alter How IP Firms Interact With Foreign Associates" --
  • "Thirty years ago, the PTO issued (in 1987 and 1988) ethics opinions regarding very discrete questions concerning two aspects of ethics issues that arise when a U.S. practitioner communicates and services their clients by working through foreign agents and 'client liaisons.'"
  • "In June 2017, the USPTO published the Mikhailova decision.  The public notice published as part of the USPTO Director’s Final Order in that matter provides a thorough discussion of how the OED/USPTO expect practitioners to operate when they are representing clients through “non-practitioner third parties.”  While this guidance may have been written specifically with the invention promotion entity in mind, the Mikhailova decision does not state that it is limited to that particular arrangement."
  • "According to Mikhailova, any legal services arrangement in which a USPTO practitioner interfaces with a “non-practitioner” third-party on behalf of a client must pass muster under a veritable maze of different Rules of Professional Conduct.   And yet the USPTO made a point to state that nothing in Mikhailova was meant to trump anything that was said in the 1987 or 1988 Notices."
  • "Is There a Business Conflict With the Foreign Associate? USPTO Practitioners have a significant financial interest in continuing to receive referrals from their foreign associates. Some foreign associates may refer many different clients or matters to a practitioner. And a number of foreign associate-U.S. law firm relationships have lasted for decades and have generated millions of dollars in revenue for the practitioner.  In addition, many foreign associates have an expectation that the U.S. counsel they choose to work with will refer IP work back to them when U.S. counsel has a client that wishes to obtain patent or trademark protection in the foreign associate’s country."
  • "This business arrangement raises a concern that a regulator at the USPTO would find that the personal interests of the practitioner in maintaining the foreign associate relationship create a conflict of interest... Given the potentially lucrative and longstanding relationships that some IP firms have with the foreign associates, it is reasonable to conclude, as the USPTO observed in the Mikhailova case, that a business conflict of interest exists between the client and the practitioner 'due to the practitioner’s personal financial interest in continuing to receive inventor referrals from the non-practitioner third party.'"
  • "This conflict can be waived, but only if the client gives “informed consent, confirmed in writing.”  In the case of the foreign associate, such informed consent may require disclosure of the length and duration of the relationship, the numbers of cases that the foreign associate has referred to the practitioner, and reasonable alternatives available to the client—such as having the services provided by a practitioner that does not have a business relationship with the foreign associate."
  • "Does The Foreign Associate Referral Client Conflict With A Current or Former Client? The USPTO expects practitioners to conduct adequate conflict checks to ensure that it is not representing another client seeking the same, or a substantially similar variant, to another client’s patent or application; the client is not 'directly adverse' to another firm client; or the matter is not 'substantially related' and adverse to a matter the U.S. practitioner worked on for a former client."
See also: Part 1 and Part 2.

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