12014 ACC-SoCal In-House Counsel Conference

   

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SECRETS, LIES, AND MONEY! Ethical rules for interacting with non-lawyers in IP

litigation and transactionsJanuary 22, 2014

Los Angeles, California

Sponsored by Sidley Austin LLP

Panelists: Kelly Kriebs, Sidley Austin LLP Samuel Tiu, Sidley Austin LLP

Moderator: Harrison Perla, Esq., CEVA, Inc.

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Is it ethical for lawyers/parties to pay fact witnesses (e.g., inventors) to cooperate in litigation?

Even in negotiations with another party, how should a lawyer interact with a represented party, or maintain the client’s confidence, but remain truthful?

How should in-house counsel deal with employees who had access to sensitive trade secrets of their former employers?

Questions for Consideration

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Content of testimony vs. reasonable value for loss time– ABA Model Rules 3.4(b) and Comment (3)

ABA Formal Opinion 96-402

– Cal Rules of Prof. Conduct 5-310(B) California Formal Opinion 1997-149

– 18 USC 201 – Federal anti-bribery and anti-gratuity statute

– Case law

Compensating aFact Witness Inventor

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Benefits should be directly tied to reasonable reimbursement for time and expenses

What about payment contingent on successful outcome of case?

Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456 (Fed. Cir. 1998) ($300K upon execution of agreement and $1 million dollars on successful outcome payable to inventor)

ESN LLC v. Cisco, 685 F. Supp 2d 631 (ED Tex. 2009) ($200K based on favorable outcome payable to former employer of inventor)

TQP v. Newegg ($350/hour plus 2.5% of settlement awards)

Reasonableness of Payment

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Can I prevent a non-employee inventor witness from communicating with the other side’s attorneys?

– ABA Model Rules 3.4(f)

– Cal Rules of Prof. Conduct 5-310(A)

“Locking Up” The Inventor Witness

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Shield communications with the attorney-client privilege

Issues to consider:– Joint representation/conflict of interests

ABA Model 1.7 (and Cal Rule 3-310)

– Solicitation rules ABA Model 7.3

Representing the Former Employee/Inventor

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Case law example:– Sensormatic Elecs. Corp. v. WG Security Prods., Inc.,

2006 U.S. Dist. LEXIS 30591 (E.D. Tex. May 11, 2006)

Privilege protection of communications:– FRCP 26(b)(4)(C) (non-testifying expert)

– FRCP 26(b)(4)(D) (testifying expert)

Inventor – Dual Capacity Witness

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If the inventor is a former employee of your adversary …– Communication

Represented by counsel? ABA Model Rule 4.2 California Rule 2-100

Not represented by counsel? Proposed California Rule 4.3(b)

– Payment

– Hire as expert witness?

Inventors of the Adverse Party

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Not affiliated with either party

Payment considerations as part of litigation strategy– Witness bias?

TypeRight Keyboard Corp. v. Microsoft Corp., 374 F.3d 1151 (Fed. Cir. 2004)

– Control and non-attendance at trial

Prior Art Witnesses

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Check the specific jurisdiction for your case

Candor with court and opposing counsel is important

Disclose early

Take-Aways

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Cal Rules of Prof. Conduct 2-100– Not limited to litigation; also applies to transactions

Graham v. U.S. (9th Cir. 1996) 96 F.3d 446; Cal Rules of Prof. Conduct 2-100 Discussion (2008)

– Knowledge of Representation Snider v. Superior Court (Quantum Productions Inc.) (2003) 113

Cal.App.4th 1187; Cal. Bar Form. Op. 1996-145

Communication with Represented Parties

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Consent to communication with represented party must come from the party’s counsel (Cal Rules of Prof. Conduct 2-100)

– Consent from Target’s GC or outside counsel?

– ABA Form. Op. 06-443

Communication with Represented Parties

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Communication via Social Media– SDCBA Legal Ethics Opinion 2011-2

Take-Aways– Do you know (or should you have known) the opposing

party is represented by counsel?

– Get consent from counsel to communicate with her client

– Consider all forms of communication

Social Media and Take Aways

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“Open Source” Review

“Open Source” License– Permissive

– Viral

– Attribution requirements

Copyright infringement– Jacobsen v. Katzer, 535 F.3d 1373 (2008)

“Open Source” Software

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Duty of Candor– How does duty relate to duty to follow client’s

instructions and keep confidences ABA Model Rule 1.2(a) Cal Bus. & Prof. Code 6068(e)

– No duty to protect the interests of non-clients Fox v. Pollack (1986) 181 Cal.App.3d 954 and Skarbrevik v.

Cohen, England & Whitfield (1991) 231 Cal.App.3d 692 Goodman v. Kennedy (1976) 198 Cal.3d 355 and ABA Formal

Opn. No. 94-387

– Who is the client? Cal Rules of Prof. Conduct 3-600

Duty of Candor

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Duty of Candor– Cal Bus. & Prof. Code 6106

– ABA Model Rules 4.1 and 8.4

– Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282

Must not participate in fraudulent conduct– Cal Rules of Prof. Conduct 3-210 and related

Discussion

May have to “report up” and perhaps, ultimately, withdraw (resign)

Duty of Candor

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Duty of candor to the court – standards differ– ABA Model Rule 3.3

– Cal Rules of Prof. Conduct 5-200 and Cal Bus. & Prof. Code 6068(d)

Take-Aways– Duty of confidentiality to client is paramount

– But cannot knowingly make a false statement of fact or perpetrate a fraud

– Duty to “report up”

Duty of Candor; Take-Aways

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Ethical dilemma– Cannot possess trade secrets of others

– But destroying documents with trade secrets may be viewed as spoliation of evidence

Possible approaches?– Return the information

– Quarantine the information

– Destroy the information

Employee with Former Employer’s Trade Secrets

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Onboarding new employees is important

Examples:– IBM v. Visentin, 2011 U.S. Dist. LEXIS 15342 (S.D.N.Y.

2011)

– Amazon.com v. Powers, 2012 U.S. Dist. LEXIS 182831 (W.D. Was. 2012)

Employee with Former Employer’s Trade Secrets

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Kelly Kriebs– Partner, Corporate and Finance

Sidley Austin LLP

Samuel Tiu– Partner, Litigation - Intellectual Property

Sidley Austin LLP

Harrison Perla, Esq.– Director of Worldwide Legal Affairs

CEVA, Inc.@HarrisonEsquire on Twitter

Panelists

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11th Annual In-House Counsel ConferenceJanuary 22, 2014 (Los Angeles, CA)

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www.acc.com/chapters/socal/