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By now, it has been a long time since I had to review a Biglaw conflict check report. But I do remember how serious an endeavor it was, not only when trying to open a matter for a new client, but also in terms of maintaining a general sense of the firm’s active client roster. I could argue that as important as a law firm’s financial statements are, perhaps an even more useful proxy for evaluating the health of a firm is the depth and breadth of its conflict check reports. Likewise, the seriousness with which the firm’s partners approach and handle conflict issues that arise is often a solid barometer of a firm’s culture and morale. Partners looking out for themselves rarely spend a thought on conflict issues that might arise out of a given representation. Conversely, firms that are thoughtful and thorough in the treatment of conflict issues — both actual and prospective — are more likely to have a cohesive partnership and a clear sense of direction. All that said, conflicts are hard, particularly in this age of ever-larger law firms engaged in legal practice worldwide.
What is true for other practice areas is also true for patent litigation, at least when it comes to the challenge presented by client conflict issues. That is true whether or not the conflict issues that arise are legal conflicts, such as when a firm is asked to take on a representation adverse to a current or former client, or whether the conflict that arises is a business conflict. The debate that arose well over a decade ago at my former firm about whether the IP group should represent “patent trolls” remains seared in my memory, both for its importance and the level of emotion the debate itself engendered. In today’s patent litigation environment, where firms are often asked to choose which side of a given industry they want to represent, the presence of business conflicts remains a potent issue. It has long been known, for example, that firms practicing pharmaceutical patent litigation may have to elect between representing branded or generic companies. There are exceptions, of course, but it also makes sense that a given pharmaceutical company would want its IP law firm to see the world its way, with part of that vision coming out of representation of like-oriented, if not directly competitive, companies.
Similar considerations are at work in today’s patent litigation market for consumer products technologies, which we can define as broadly as covering everything from automotive to mobile technology to Smart TVs. On the defense side, the concentration of buying power in the hands of a few mass-market retailers, such as Target, Best Buy, or Walmart, has led to a much greater market share for certain products being concentrated in a few suppliers. As a result, fewer litigation-worthy targets remain in any given industry for plaintiffs to pursue, making it more important than ever for defense-oriented law firms to secure engagements from the leading group of defendants. The story is a similar one on the plaintiff’s side. Because of the high cost of litigation, the cases that are most attractive to both law firms and litigation funders are those with high damages potential, namely those same companies that are dominating their respective markets. In short, the shrinking number of patent targets worth fighting for or against is contributing to an even more challenging time for large law firms looking to avoid conflicts issues while not crippling their ability to market to and represent clients in the competitive patent litigation legal marketplace.
A recent decision out of the Eastern District of Texas helps bring some focus to these knotty questions. The decision addresses an attempt by a patent litigation defendant frequent flier, LG, to disqualify a large law firm, Mayer Brown, which it had previously engaged for help on the defense side — but was now representing a patent plaintiff, Pantech, alleging infringement of multiple patents in an EDTX campaign against LG and other smartphone makers. Mayer Brown’s prior representation of LG in patent matters was substantial, including working for LG in a confidential arbitration proceeding and at least four prior district court cases. When sued by Pantech, LG moved to disqualify, only to see the assigned magistrate judge deny its motion. LG objected, leading to an August 28, 2023, decision by EDTX Judge Robert W. Schroeder III that upheld the magistrate judge’s report and recommendation, with one significant exception relating to one of the asserted patents.
Many of the facts were not in dispute. In a 2019 defense engagement, LG agreed to a specific conflict waiver that played a very large role in the Court’s handling of the present disqualification motion. Noting that everyone agreed that use of LG’s confidential information was off-limits with respect to Mayer Brown’s representation of Pantech, the court concluded that disqualification was not warranted in light of LG’s waiver, even as to one of the prior representations that was found not to have been waived. There, the fact that “counsel’s representations in Core Wireless and the instant case are not substantially related under American Airlines and the applicable case law” precluded disqualification, even in the face of technological overlap between the issues in Core Wireless and Pantech.
With respect to another case that fell outside of the waiver, however, even a gap of eight years between Mayer Brown’s limited billing on LG’s behalf was not enough to stop disqualification with respect to one of the Pantech asserted patents. Key to that decision was the fact that confidential LG source code had been shared with Mayer Brown attorneys in the earlier case, leading to a chance that impropriety could arise — even though no such impropriety was even alleged to have occurred. As a result, the court offered LG the opportunity to either waive the conflict with respect to that one asserted patent, or to sever that patent out of the case and disqualify Mayer Brown from representing Pantech in that severed case. LG opted for the latter option, albeit with some continued irritation that Mayer Brown was not fully disqualified.
Ultimately, this situation demonstrates some of the challenges faced by frequent litigants and active patent litigation law firms in managing complicated conflict issues. On the one hand, a specific conflict waiver helped Mayer Brown avoid full disqualification. On the other hand, the presence of that waiver was not enough to deter LG from trying to disqualify its former law firm from representing an active patent assertion entity choosing to assert multiple patents against it. In the end, no one in this dispute appears to have escaped unscathed, much less satisfied. In today’s patent market panning for good counsel can lead to further affirmation that conflict(s) can breed more conflict(s).
Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.
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