Patriot Scientific v. Moore, 2006 WL 994747 (C.A. Fed. 2006) not presently citable as precedent
Brief SummaryTwo law firms suing a co-holder of a patent retained as a consultant an attorney who previously represented the defendant co-holder of the patent without securing the defendant’s consent. The defendants filed a motion to disqualify the firms on the ground that they induced the consultant to breach his professional obligations to the former client. The trial court agreed. The law firms were disqualified and the underlying case then settled. On appeal, the United States Court of Appeals for the Federal Circuit held that the firms had standing to appeal but nonetheless affirmed the lower court’s order disqualifying the firms.
Complete SummaryRussell Fish and Charles Moore were listed as co-inventors on seven patents that originated with the same application. Attorney Willis Higgins represented Mr. Fish and Mr. Moore in the prosecution of the application for those patents. Ultimately, Patriot Scientific Corporation came to own all of Mr. Fish’s rights in the patents. Mr. Moore assigned some of his rights in the patents to Technology Properties, Ltd.
In 2004, Patriot Scientific sued Mr. Moore, Technology Properties and the owner of Technology Properties, seeking a declaratory judgment that Mr. Fish was the sole inventor of one of the seven patents. Defendants counter-claimed for a declaratory judgment that Mr. Moore was at least a co-inventor and Technology Properties at least a co-owner of the disputed patent. Patriot Scientific was represented in the litigation by Beatie & Osborn, Bramson Plutzik and a third law firm from Georgia.
In separate actions independent of the present appeal, Patriot Scientific had sued other companies for infringement of the disputed patent and had hired Mr. Higgins as a consultant. Under the consulting agreement, Mr. Higgins was also obligated to testify in Patriot Scientific’s declaratory judgment action against Mr. Moore and the Technology Properties defendants. Mr. Moore did not consent in any way to Mr. Higgins’s role in the lawsuit.
When Patriot Scientific sought to introduce testimony from Mr. Higgins that Mr. Moore was not a co-inventor of the disputed patent, defendants responded in part on the basis of attorney-client privilege and in part by filing a disqualification motion.
The district court agreed that Mr. Higgins had breached his fiduciary duty to Mr. Moore and disqualified Beatie & Osborn for violating California Rule of Professional Conduct 1-120 by inducing Mr. Higgins’s breach of duty to Mr. Moore. Rule 1-120 prohibits attorneys from knowingly assisting in, soliciting or inducing violations of the Rules of Professional Conduct. The district court also disqualified Bramson Plutzik, finding that it was sufficiently involved in the litigation that it was presumptively aware of Mr. Moore’s confidences. The Georgia law firm was allowed to remain in the case.
Some time after the two firms were disqualified, the lawsuit settled. Beatie & Osborn and Bramson Plutzik then appealed the disqualification order.
Applying Ninth Circuit law, the Federal Circuit Court of Appeals observed that when a disqualification order is based on grounds that could harm an attorney’s professional reputation and is in the form of a sanction, the attorney is entitled to appeal. Moreover, a finding that an attorney violated a specific ethical rule is a per se sanction under Ninth Circuit precedent. Because the firms were disqualified for violating Rule 1-120, the firms had standing to appeal.
The firms argued on appeal that Mr. Higgins’s conduct was permissible and that the attorney-client privilege should not apply when former joint clients who participated together in prosecuting a patent later litigate to determine patent rights. The Federal Circuit affirmed the disqualification of both firms. The Federal Circuit quoted the California case of Zador Corp. v. Kwan, 37 Cal.Rptr. 2d 754 (1995) for the proposition that in the absence of Mr. Moore’s consent, Mr. Higgins simply could not reveal Mr. Moore’s confidential client information. Thus, Mr. Higgins himself was in violation of California Rule of Professional Conduct Rule-310(E) since he had no such consent. The two firms that appealed were then held properly disqualified for having induced Mr. Higgins’ breach.
Significance of the CaseThis case is significant because of its holding that disqualified attorneys may appeal a disqualification order even if the case settles. It is also significant because it places firms on notice that they must use care to employ conflicts-free consultants.
Although we would not ordinarily submit an alert about a case that cannot be cited as precedent, we are doing so here because, effective Jan. 1, 2007, the federal prohibition on citations to unpublished opinions will come to an end pursuant to Federal Rule of Appellate Procedure 32.1.
This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.