It is Ethics 101 that a law firm cannot use its former client’s confidential information in a substantially related matter on behalf of a different client directly adverse to the former client, at least not without the former client’s informed consent. The reason for this common sense rule, which prohibits “side-switching,” is that a lawyer’s duty of confidentiality extends beyond the termination of the representation and helps to assure clients that their secrets are safe with even their former counsel. In a recently-filed lawsuit, a patent owner accuses its former IP counsel of violating its former client duties and is using its confidential and privileged information against it on behalf of another client.
The lawsuit is Apollo Enterprise Solutions, Inc. v. Greenberg Traurig LLP, Case No. BC660185 (Cal. Sup. Ct. May 5, 2017) (complaint in greenberg). The plaintiff, Apollo Enterprises, alleges that it “provides advanced solutions” for payment and debt collection and that its products are protected by a “broad intellectual property portfolio.” Apollo alleges that the Greenberg Traurig law firm was “engaged in all aspects of the patent prosecution process for Apollo’s debt settlement system” and that during its representation of Apollo, the law firm received confidential and privileged information relating to Apollo’s technology.
Apollo allegedly offers a debt collection service called “TrueCollect” that combines online payment, debt collection, and debt recovery technologies “into one offering.” According to Apollo’s complaint, Greenberg helped Apollo obtain patents relating to this particular service.
Apollo further alleges that it entered into a contract with a company called Lantern Credit LLC. The contract included a license to Apollo’s TrueCollect patented technology. According to Apollo, Lantern failed to pay $2 million due under their contract. This debt prompted Apollo to sue Lantern for breach of contract. That case is now pending in federal court.
Meanwhile, Greenberg Traurig is representing Lantern against its former client Apollo in the breach of contract action. Not only that, Apollo alleges that its former IP counsel has filed counterclaims seeking a declaratory judgment of invalidity and non-infringement of “the very same patents that Greenberg helped to prosecute for Apollo.”
Apollo’s lawsuit against its former IP counsel alleges claims for breach of fiduciary duty, interference with contractual relations, and negligence. The complaint seeks $2 million in compensatory damages plus an unspecified sum for punitive damages. Apollo’s complaint is pending in Los Angeles Superior Court.