Most patent malpractice cases are the result of not a single error by one person, but a combination of errors, often involving multiple individuals. Such a combination of errors led to a Virginia intellectual property firm’s failure to file its client’s, Protostorm LLC’s, patent application. The end result: on October 10, 2014, a federal judge in New York entered a judgment of nearly $8 million against the law firm of Antonelli Terry Stout & Kraus LLP, and two of its former attorneys, Carl Brundidge and Frederick Bailey, for legal malpractice. Protostorm LLC et al. v. Antonelli Terry Stout & Kraus LLP, No. 1:08-cv-00931 (E.D.N.Y.)
U.S. District Judge Pamela Chen ruled that the Antonelli law firm should pay almost $7 million in compensatory damages and $900,000 in punitive damages to Protostorm following a jury’s August 2014 verdict. Plaintiff is also seeking an additional $7 million in pre-judgment interest. Thus, the total damages award could run as high as $15 million.
The district court’s summary judgment opinion provides an excellent summary of the facts, the players, and the various issues that were left for trial. The facts below are summarized from the summary judgment ruling:
A. So Many Lawyers
In February 2000, Protostorm’s principals asked Protostorm’s corporate counsel to oversee Protostorm’s interactions with other attorneys, in particular billing and correspondence. The principals informed their corporate counsel they wanted to obtain a patent for an online computer game and related software. Corporate counsel introduced them to an attorney named Worthington, who was not a patent lawyer, but who was “knowledgeable about intellectual property matters.”
In May 2000, Worthington introduced the principals to the Antonelli firm and Dale Hogue (“Hogue”), who was of counsel to the Antonelli firm. According to one of the Protostorm principals, it was the company’s understanding that Antonelli and Hogue would prepare and file any patent applications and oversee the process to completion.
B. The Provisional Patent Application Filings
On June 19, 2000, Worthington emailed documents relating to the preparation of a provisional, non-final patent application to Brundidge, an attorney and member of the Antonelli firm. On June 27, 2000, Bailey, an associate at the Antonelli firm, signed a first provisional patent application, dated that day, and submitted it to the USPTO. The Antonelli firm was listed as the contact for correspondence with the USPTO. Brundidge and Bailey informed Ginley (corporate counsel) and Worthington (the other counsel) that the provisional application had been filed and that the final application was due by June 27, 2001.
In April 2001, Worthington (a non-patent attorney) filed a second provisional patent application, in order to cover new features of the Protostorm’s invention. It is unclear what basis Worthington had, as a matter of law, to file such a patent application since she was neither the inventor nor registered to practice before the USPTO.
On May 17, 2001, Protostorm entered into a written retainer with Hogue—the only written retainer—for Hogue’s services in “securing patent protection.” By this time, Hogue no longer worked for Antonelli. Therefore, as of May 2001, four different sets of lawyers had some involvement in the patent application: (1) Prototype’s corporate counsel, who was a non-patent attorney; (2) Worthington, the non-patent attorney who nevertheless filed a second provisional application; (3) at least two different patent lawyers from the Antonelli law firm; and (4) Hogue, a patent attorney who was previously employed by the Antonelli law firm but who left and formed his own firm.
The Protostorm-Hogue retainer specified that the patent application would be physically filed by Antonelli, Terry, but that Hogue would perform the work necessary to prepare and file the application. Furthermore, the Antonelli firm would render a separate bill for the cost of filing fees and its representation.
On June 20, 2001, Hogue emailed two attorneys at the Antonelli firm (Brundidge and Bailey) attaching various documents and drawings necessary for the preparation of the final patent application, and stating that Worthington would “instruct ” Antonelli “separately on foreign filing” of the application.
Also in June 2001, Worthington directed the Antonelli firm to file an international patent application under the Patent Cooperation Treaty (“PCT”), instead of a domestic patent application. Worthington made clear that Protostorm wanted to designate for patent protection every PCT signatory country.
On June 25, 2001, counsel from the Antonelli firm (Bailey) filed a final PCT patent application, listing Protostorm as the “applicant.” Bailey and Brundidge of the Antonelli firm were listed as the “agent[s] or common representative[s].” One page of the application included a list of over one hundred PCT signatory countries, next to which were boxes to be checked off to indicate interest in patent protection. The boxes corresponding to approximately one hundred countries were checked, leaving only three unchecked: Mongolia, Zimbabwe, and the United States.
D. Nothing Gets Filed
Thereafter, nothing was filed by anyone from the Antonelli firm. No submissions were made to meet any of the deadlines. Furthermore, the Antonelli firm admitted that it took no action with regard to correcting the non-designation of the United States on the PCT application.
On September 13, 2001, an employee of the Antonelli firm wrote an email to Hogue stating that the Antonelli firm had contacted Worthington in order to obtain a Power of Attorney executed by Protostorm. On a printout of this email, a handwritten note, dated September 20, 2001, stated, “Per a conversation with Carl [Brundidge] (on today) Protostorm.com has not paid their bill. Therefore, DON’T DO ANY FURTHER WORK ON THIS CASE.”
Brundidge had the Antonelli firm stop all work for Protostorm. On September 25, 2001, Worthington emailed the Antonelli firm asking,” Kindly advise us of the status of the Protostorm patent application. Does anything need to be done at this stage?” Brundidge of the Antonelli firm responded that the Power of Attorney was “now due.” Brundidge added that the Antonelli firm had not been paid for its services and that “Under the circumstances we can not perform any further work for Protostorm unless the outstanding balance is paid or a substantial payment significantly reducing the unpaid balance is provided.”
In December 2001, Protostorm was led to believe that the patent application was secured. No one took any further action with respect to the patent application. According to Protostorm, the Antonelli firm never notified it that the firm was withdrawing as counsel.
In 2006, Protostorm learned of possible infringement of its invention by Google. In 2007, the Antonelli firm advised Protostorm that that an international application had been filed, but that it had been deemed “withdrawn,” because no POA or “national stage” submissions had been filed.
Protostorm filed its malpractice suit in 2008. A jury verdict was returned in favor of Protostorm in August 2014.
Lessons #1 – Always have a written engagement agreement. Here it was unclear what lawyer was representing which client and for what purpose. This was a classic case of having too many cooks in the kitchen, with everyone getting involved but no one really in charge. This was a recipe for disaster from the beginning.
Lesson #2 – Counsel that is responsible for filing and prosecution should have one client representative, with authority, for communicating advice and receiving instructions. This is especially true when there are multiple client representatives who appear to be communicating at different times with different people.
Lesson #3 – Be wary of any drafts of applications or other USPTO filings prepared by non-patent counsel and “just filing” them. While that is a normal process when cases originate in a foreign country and are sent to U.S. counsel just before the 1-year deadline, when preparing a domestic U.S. application, due care must be exercised by U.S. counsel in preparing the application and all associated paperwork in accordance with governing U.S. legal requirements. Simply cutting and pasting someone else’s work is putting your fate in someone else’s hands.
Lesson #4 – Proofreading is critical in patent preparation and prosecution. Some other level of review should have been put in place institutionally to ensure that all of the papers to be filed in the USPTO were complete and in good form. This includes both substantive filings as well as non-substantive, but still important, documents.
Lesson #5 – Once you have entered your appearance in the Office, you cannot just unilaterally quit on your client even if you haven’t been paid. Before you can withdraw, you need to give the client prompt notice of your intention to withdraw, including advising the client in writing of all deadlines and due dates. And withdrawal is only permitted if it can be done without prejudicing the rights of the client. Furthermore, you need to return the client’s property promptly, including all originals of client documents, to the client or the client’s designee. All of this needs to be set forth in writing. A clearly labeled and unambiguous disengagement letter should make clear that the representation has concluded.
Lesson #6 – Avoid later disputes about what you said to the client, or what the client said to you, by confirming every communication in writing. From the record in the Protostorm case, it appears that counsel was receiving oral instructions and not always following up in writing with confirmation of what was said. While this extra effort may seem unnecessary, if a dispute arises between the lawyer and the client over what the lawyer allegedly told the client, or what the client allegedly told the lawyer, the client invariably wins. Put it all in writing.
Hindsight is always perfect vision. But a few practice changes can make the difference between having a happy Protostorm client or a Perfect Storm malpractice disaster.