IP Firm Tees Up Dismissal Of Subject Matter Conflict, Negligent Patent Prosecution Malpractice Case

Michael E. McCabe, Jr.Conflicts of Interest, District Court Litigation, Patent Ethics, Patent Malpractice, Patent Subject Matter ConflictsLeave a Comment

A recent patent malpractice action filed in federal court in New York against an IP firm raises once again the issue of subject matter conflicts between concurrent clients in prosecuting patent applications in a similar field of technology.  The issue of subject matter conflicts in concurrent patent representation continues to be an area of significant interest–and concern–for IP practitioners who represent multiple clients in the same area of technology.  See our post discussed here.

On October 18, 2016, Portus Singapore PTE Ltd. (“Portus”) filed an amended complaint for legal malpractice against the recently-shuttered IP boutique, Kenyon & Kenyon (Kenyon), and two of its former attorneys.  In its amended complaint, Portus alleged that it was represented by Kenyon with regard to Portus’ patent portfolio for more than a decade. The amended complaint alleges that Kenyon was negligent in two respects (1) losing three and one-half years of patent term; and (2) failing to disclose a concurrent conflict of interest with another client in the same technical field as Portus.

The Alleged Negligent Prosecution-Lost Time

The amended complaint alleges that Portus owns a “highly valuable smart home and internet protocol (“IP”) video surveillance” patent.  According to Portus, its patent has numerous “infringement targets and licensees.”

Portus allegedly filed a patent application in Australia on December 17, 1998, covering certain video surveillance technology. On December 17, 1999, Portus filed an international PCT application.  On June 15, 2001, Kenyon, at the request of Portus, filed a United States application as the national stage of the PCT Application (“the ’417 Application”).  The ’417 Application allegedly had an effective filing date of December 17, 1999–the filing date of the PCT application.

On January 19, 2005, the USPTO issued its first office action in the ’417 Application.  The Amended Complaint alleges that, in response to the office action, Kenyon failed to convert the application by filing a continuation of the international application and that “Doing so would have secured patent term adjustment rights that would have enabled Portus to extend the term of the patent” by approximately three and one-half years.

The Amended Complaint alleges that under the 1999 American Inventors Protection Act, Portus was entitled to patent term adjustment so long as a petition was filed within a reasonable amount of time of Kenyon’s knowledge of a potential patent term adjustment issue.   The Amended Complaint alleged further that Kenyon waited nine (9) years—until August of 2014—before advising Portus that it was entitled to an additional three and a half years of patent term.

Kenyon filed a petition to convert the application to claim benefit of the international application in order to extend the patent term.  The petition, however, was denied.  The Amended Complaint alleges that the grounds for denial of the extended patent term was Kenyon’s failure to convert the application on patent term adjustment grounds within a reasonable time after the January 2005 office action.

The Alleged Patent Subject Matter Conflict

In addition, the Amended Complaint alleges that in 2011, co-defendant Ginsberg defended Bosch in an infringement action brought against Bosch by an unidentified plaintiff “in the smart home and IP video surveillance domain.”    In addition to defending Bosch, Kenyon has also prosecuted patents on behalf of Bosch in the “smart home and IP video surveillance domain.”

According to the Amended Complaint, throughout its representation of Bosh, “Defendants were simultaneously representing Portus in its prosecution of its patent portfolio.”  Portus asserts that, “Bosch was a potential infringement and licensee target in the patent prosecution, yet Defendants never notified Portus about its representation of Bosch.”

As an aside, the Amended Complaint fails to allege that “but for” this alleged concurrent representation, Portus would have gotten a “better” patent or broader claims.  Portus also does not allege that it was required to narrow claims or that it lost any patent rights due to Kenyon’s work on any of Bosch’s patent applications.

In 2015, Portus provided Kenyon with an infringement analysis with “claim charts for a utility deployment of IP video surveillance based on Bosch Video Management System and IP cameras.”  Portus allegedly sought Kenyon’s advice as to whether such a deployment would infringe Portus’ patent claims.  Evidently, no opinion was provided, although the Amended Complaint fails to allege what was Kenyon’s response to that request or whether it provided the requested opinion.  However, Portus asserts that “to this date, Defendants have never disclosed a potential conflict of interest to Portus.”

Kenyon’s Motion to Dismiss

On December 9, 2016, Kenyon filed a motion to dismiss the Amended Complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6).  In its motion, Kenyon alleges that the failure to file an earlier petition for term extension was not the proximate cause for any harm to Portus and that Portus’s petition to convert would have been denied even if it had been timely filed (apparently, Kenyon concedes that the conversion petition was untimely).

In particular, Kenyon asserts that Portus “misunderstands the law” and that “If a continuation application to the ’417 Application was, in fact, filed in 2005, no patent term adjustment would be available from the period between the effective filing date of the parent application (that is, the ’417 Application), and the date of the first office action in 2005.  See Mohsenzadeh v. Lee, 790 F.3d 1377, 1382 (Fed. Cir. 2015) (the patent term adjustment statute “does not provide patent term adjustments in continuing applications based on delays in the prosecution of parent applications . . . .”).”  The motion to dismiss further argues that, under 37 C.F.R. § 1.704(c)(12), no patent term adjustment can accrue from or carry over from before the filing date.

The motion to dismiss further argues that Portus’ conflict of interest malpractice claim fails to state a cognizable claim because it fails to plausibly allege that but for the alleged conflict regarding Kenyon’s concurrent representation of Portus and Bosch, it suffered any cognizable harm.  The only alleged “harm” suffered was the loss of patent term, but the Amended Complaint fails to allege how or why that loss of patent term caused Portus to suffer harm vis-à-vis Bosch.

As another aside, notable by its absence is any citation in Kenyon’s briefs to the Massachusetts Court’s recent decision dismissing a patent malpractice claim based upon an alleged subject matter conflict between two concurrent clients where the complaint failed to allege how or why the two clients’ concurrent patent rights interfered with one another or how the plaintiff’s rights were adversely impacted by the work done by the IP firm for its other client. See Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336 (2015)

In its opposition to Kenyon’s motion, Portus asserts that Kenyon misconstrues its allegation of malpractice. According to Portus, “Defendants’ malpractice was their failure to file a continuation application under § 111(a), which made Portus’s patent application ineligible for patent term adjustment.  Had Defendants’ filed a § 111(a) continuation application (instead of the national stage application they did file under § 371), Portus would have been eligible for such patent term adjustment rights.”  Portus further notes that the USPTO’s 2014 decision confirmed that Portus (through Kenyon) “had the ability to file a continuing application claiming the benefit of the international application, which would have secured the desired patent term adjustment rights.”

As for the malpractice claim predicated on the alleged undisclosed conflict of interest with Bosch, Portus’s argument is limited simply to repeating its allegation that Kenyon simultaneously represented Portus and Bosch in the same field of “smart home and IP video surveillance” technology.  Portus further argues that Bosch “was a potential infringement and licensee target in the patent prosecution, yet Defendants never notified Portus about its representation of Bosch.”  Notably, however, no argument is advanced by Portus that Kenyon was ever made aware that Bosch was a “target” for “potential infringement” or licensing of the patent application at least before February 2015, when Portus sought a legal opinion regarding infringement by Bosch.  Since the opposition (as well as the Amended Complaint) fail to state whether Kenyon ever provided the requested opinion, the implication is that Kenyon declined to do so.

Kenyon’s motion to dismiss is pending.  On January 19, 2017, the district court ordered the parties to submit chambers’ copies of their respective briefings.  Whether this means the court is getting ready to rule is anyone’s guess.

It will be interesting to see how the court decides both of the causation issues.  Based upon the pleadings and briefs, however, with respect to the subject matter conflict-malpractice cause of action, it appears Kenyon has the stronger argument.

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