• New York Court Holds That an IP Law Firm Representing Clients with Competing Technologies Engages in a Conflict of Interest
  • February 20, 2004
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • Plaintiffs, Searle and Pfizer filed a complaint against a law firm that had represented them in patent matters, alleging breach of fiduciary duty and a breach of DR 5-105 of the New York Code of Professional Responsibility. The complaint alleged that the plaintiffs were co-promoters of a new class of drugs, called COX-2 inhibitors, which were claimed to have potent anti-inflammatory activities with fewer side-effects than other non-steroidal anti-inflammatory drugs. The plaintiffs marketed one such drug, called Celocoxib, under the trade name Celebrex┬«. The complaint alleged that the law firm knew of the plaintiffs' co-promotion agreement through its representation of plaintiffs on COX-2 related matters, and that the law firm did not disclose that it was also representing the University of Rochester in its application for a patent involving claims directed to the use of COX-2 inhibitors, and did not seek plaintiffs' consent to that representation. The complaint further alleged that the University of Rochester's purpose in seeking the patent was to assert the patent in litigation or licensing negotiations with Searle and Pfizer.

    The court noted that the lawyers in the firm who represented the plaintiffs and the lawyers who represented the University of Rochester worked in the same practice group and were located in the same Manhattan offices. In their complaint, the plaintiffs alleged that the firm circulated an internal "conflicts" memo regarding the firm's retention by Searle in COX-2 patent matters, but that the two partners working on the University of Rochester matters did not respond to that memo.

    The law firm's position was that a conflict of interest in representing multiple clients only arises after there is an "actual adversity" between them. The firm emphasized that no litigation had commenced between the University of Rochester and the plaintiffs, and that no licensing negotiations had taken place while the firm represented all three parties.

    The court, in ruling on a motion for partial summary judgment, stated the legal issue as whether the law firm violated DR 5-105 and breached its fiduciary duties to the plaintiffs by representing two different patent clients in connection with related, though not necessarily identical, applications pending before the Patent and Trademark Office, with knowledge of the likelihood that one client would sue or attempt to license the other.

    The court found that the firm's representation of the plaintiffs and the University of Rochester on related patent issues under these circumstances, without informing the plaintiffs of the potential for a conflict of interest and without obtaining the plaintiffs' waiver or consent, constituted a breach of DR 5-105.

    Although the court concluded that the law firm had violated DR 5-105, it denied the plaintiffs' motion for partial summary judgment based on that violation because there is no authority for basing civil liability on the violation of a disciplinary rule. The court denied summary judgment as to the breach of fiduciary duty because there were triable issue of fact regarding that allegation. The court, however, stated that it would report its finding of a violation of DR 5-105 to the Disciplinary Committee.

    Case Significance
    This is the first case to specifically address conflicts of interest arising from a lawyer's representation of clients with competing technologies and the court in this case found that such representation does constitute a conflict of interest. To avoid similar conflict of interest situations from arising in the future, patent and trademark law firms should build into their conflicts checking systems a way to identify related technologies for which the firm is filing patent applications for different clients.