Adobe Moved to Disqualify Opposing Counsel Where Counsel Had Done Opinion Work and Had Never Sent a Letter Terminating the Relationship Before It Took Matter Adverse to Adobe

July 24, 2013

Plaintiff TQP Development, LLC ("TQP") filed a patent infringement action against Adobe Systems Incorporated ("Adobe"). TQP was represented by the law firm of Russ August & Kabat in the action against Adobe ("RAK"). Based on the fact that RAK had previously represented Adobe in opinion work, Adobe moved to disqualify RAK.

As explained by the district court, "[i]t is undisputed that RAK, the current lead counsel for TQP, represented Adobe in a series of matters between 2006 and 2012 involving the issuance of opinion letters concerning whether Adobe products infringed certain patents. The last of these engagements, herein referred to as the "Manufacturers" matter, commenced in 2010 with an analysis of certain patents owned by Manufacturers and whether they were infringed by Adobe products. According to the Declaration of Nicholas Martini (Dkt. No. 34-4), these opinions were updated and revised several times through December 2011 (requiring about 112 hours of RAK attorney time) as additional patents were obtained by Manufacturers and additional information was received by Adobe. The last services by RAK on this matter were provided by Marc Fenster of RAK during a February 6, 2012 conference call with two of Adobe's inside counsel and a Senior Vice President. Mr. Fenster declares that he asked during this call whether Adobe needed any further work on this matter and he was told they did not. The Adobe declarants do not recall this exchange. Both sides agree that there were no further communications regarding the matter before Mr. Fenster and RAK undertook to represent TQP in this matter several months later."

The primary basis of Adobe's motion was that RAK breached Rule 1.7(a) of the Model Rules of Professional Conduct of the American Bar Association. "As the Fifth Circuit made clear in In re Dresser Industries, Inc., 972 F.2d 540, 544 (5th Cir. 1992), lawyers practicing in the federal courts of this Circuit are governed by both the Model Rules and those of the forum state. Rule 1.7(a) provides that "a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if ... the representation of one client will be directly adverse to another client."

The district court then reviewed the Texas Rule of Professional Conduct regarding termination of the attorney-client representation. "As Texas Rule of Professional Conduct 1.15 ('Declining or Terminating Representation') states: 'Upon termination of representation, a lawyer shall take steps ... such as giving reasonable notice to the client ... .' It is well established that 'an attorney-client relationship may arise by implication if the lawyer knows a person reasonably expects him to provide legal services but does nothing to correct that misapprehension.' Valls v. Johanson & Fairless, L.L.P., 314 S.W.3d 624, 634 (Tex.App.-Houston, June 3, 2010). If it can arise in that fashion, an existing attorney-client relationship can definitely continue by implication."

The district court then found that RAK could not explain why Adobe would not have expected to continue to use RAK. "Counsel for RAK was unable to articulate at the hearing any basis to suggest that Adobe would not have expected to continue to use RAK's legal services to evaluate the further developments in the Manufacturers matter, as those developments are shown in the Martini Declarations to have played out after the February 2012 telephone conference. The Court finds that Adobe had a reasonable expectation that RAK would continue to act as its lawyer in the Manufacturers matter and that RAK failed to give Adobe reasonable notice to the contrary before undertaking the adverse representation of TQP in this matter."

As a result, the district court determined that Adobe was still a client at the time of the adverse representation. "Having found that Adobe was still a client at the time RAK undertook the adverse representation, it is not necessary to determine whether the two matters (the Manufacturers matter and this case) are 'substantially related.' That question only presents itself if Adobe is considered a former client at the time that RAK undertook the TQP representation in this case. See ABA Model Rule 1.9 and Texas Rule 1.09. Suffice it to say that counsel should always interpret this term broadly in considering their duty to a former client, and the Court considers it to be a very close call in this case."

Accordingly, the district court granted the motion to disqualify RAK.

TQP Development, LLC v. Adobe Systems Incorporated, Case No. 2:12-CV-570-JRG-RSP (E.D. Tex. July 13, 2013)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.