A Patent Agent's Duty of Care

Avoiding the client getting
its hands on your PI

Claims of professional negligence against patent attorneys are seldom brought to trial. Therefore, I was surprised to see a long-running trial against the Bromhead Johnson firm and their partner Dr Spencer in the lists for 11 days before Mr Justice Birss earlier this year. The decision was issued yesterday It describes the tale of a start-up (DualGlo), that was successful in securing funding. It had filed a PCT application and had patent applications of ambitiously wide scope. A familiar tale to many of my readers - hence the concern caused by this story.  Even though there was no finding of negligence, it is far from being an unblemished success.

Returning to the tale, in 2008/9 with money running out, the DualGlo investors decided to turn troll and try and raise money to fund patent litigation. The judgement sets out the full story including the technical details of the invention DualGlo - a glow in the light and in the dark plastic material first intended for torches. 

It will be difficult to do justice in a short blog post to the whole sorry story so where you see paragraph numbers mentioned they are to the full decision. The Claimants were the inventors, DualGlo and their investors. DualGlo had spent just £222,700 with Bromhead including disbursements and of that £57,000 was still unpaid. Nevertheless, the disclosure showed that by April/ May 2010 the investors were considering litigation against Bromhead Johnson as a way of raising funds to enable patent litigation (paragraph 191).Much of the proceedings concerned the US patent (Hirotec) DualGlo had acquired for US$550,000. The judge thought it might yet be enforced in the US (paragraph 313)  but stresses in paragraph 245 that his finding are not findings of infringement of US patents under US law.

However, the claimants could not frame a case that made the patent agent responsible for their loss, though they had several attempts at setting one out (paragraph 200). Bromhead secured the client from UDL. UDL had carried out searches and filed two patent applications but Bromhead did not have that file. In paragraph 80 the judgement says that some advice from UDL was wrong (though I doubt that would have caused any loss either). The judge found that on taking over the case "There was no reason for Dr Spencer to seek the file from the other firm nor to investigate anything at the patent office" (paragraph 203). [This is an important and useful outcome as more angst is caused by asking for files than any other part of the client take on process]

The next attack was on the basis of the scope of Dr Spencer's advice. The acquisition of the Hirotec patent is a step outside the normal patent prosecution sphere. Late in 2004 he had been asked to edit a letter of advice addressed to his clients but which was in fact used to raise money to buy the Hirotec patent (paragraph 115) but without his knowledge (paragraph 215). Later in 2008 Dr Spencer had written directly to an investment broker.  That letter says that Hirotec was a powerful patent and the judge finds in paragraph 236 that that was reasonable advice. There was also a 'to whom it may concern' letter which was held to be negligently wrong (paragraph 239) because it suggested more products would infringe Hirotec than did. Fortunately the judge held that the were no consequences flowing from this negligence as no investor invested on the strength of it. [Close call there - triple check any of those letters but its tough when your client needs help to raise the funds that will pay you and keep you in business, even more so if you are Solo so bear this warning and 11 days of High Court action in mind when you say no. In the conclusion at paragraph 332 the judge makes it clear that if Hirotec had been worthless the patent agent would have been liable]

Next we come to consideration of whether it is wise to be an optimistic, positive thinking patent attorney as Dr Spencer undoubtedly was (before he became a witness in the High Court where he transformed into being defensive and argumentative or met Mr Hall the new director in 2007 who found him arrogant (paragraph 38)). The judgement contains a detailed analysis of much of Dr Spencer's advice. The direct negotiation of different claims in different territories will be all too familiar to most patent agents. It was only in "happy hindsight" that the claimants felt they had been misled but the judge does conclude that some aspects of Dr Spencer's advice were 'advice no reasonable patent attorney could give' (paragraph 299) but ultimately his clients wouldn't have done anything differently.

A particularly worrying line of argument that many patent agents will find familiar as it is often used to put pressure on us for robust advice is that 'without a portfolio of 'broad defensible patents' the business would not have been able to continue because it would not have been able to secure funding'.  In paragraph 309, the judge dismisses this because the business was a product business and not a putative troll at that stage. It also appears that Dr Spencer was not the only optimist as the inventors themselves had overstated their prospects of securing granted patents.

In discussing the scope of the duty the patent attorney owes to his client, the judge blessedly concludes that we do not  have to advise our client what to do and take responsibility for the commercial risk (paragraph 317). The idea that Dr Spencer had a general retainer and could so be responsible for the failure of the DualGlo business was rejected. However, his involvement in the decision to purchase the Hirotec patent could have led to him being liable for losses flowing from that transaction (paragraph 321). A good thing it wasn't worthless then.

There is a warning bell sounded in paragraph 325. If you know from the outset that your client intends to be a patent troll then your liability may be greater. Indeed you might bear the risk if the business fails. Fortunately that is obiter.

Other useful points:

• it might or might not be necessary to say that foreign advice is necessary all the time (paragraph 77 and 208)
• desirability of keeping advice about infringement and prior art affects clearly separate (paragraph 90)
• stay away from giving advice on commercial issues like acquiring and licensing IP if you don't want to be described as cavalier (paragraph 94) or pay for the consequences
• there is no need to forward formulaic US attorneys letters to your client (paragraph 109)
• a two-month delay in reporting EPO third party observations does not reflect well on your business practice (paragraph 144)
• avoid criticism of your record keeping (paragraph 255) in this case it was not a pleaded ground of negligence but it might be next.

A Career as a Non Practising Entity

I have been pondering how the patent profession deals with those who aspire to make a career as an NPE - the judgmentally neutral name now being given to what some would call a patent troll and others would call an Independent Inventor.

For most in the IP profession the client of choice is the established business or funded startup. NPEs such as Universities and Commercial Research Organisations even Intellectual Ventures would never be turned away. Ability to pay is the main driver in the selection of our clients. There is little thought given to whether the patent attorney has any role in assessing whether their client is making a fair contribution to the social contract represented by the patent system.

Many independent inventors have great ideas. Those who aspire to become entrepreneurs and create their own startups are clearly on the side of the angels. Their object may be financial gain for themselves but along the way they are making the technology available to the world and providing employment and, if successful, a tax take back to the government. There are many more, however, who do not want to take those risks and look at the NPE route.

For all UK inventors who cannot afford to buy in all their patent information and advice needs, the British Library Business and IP Centre and inventors organisations like Ideas 21 and other Inventors Clubs round the country provide information and support.

Some inventors fall into the arms of the Invention Brokers or Promoters. The UK IPO published a leaflet in 2007 warning of the risks of paying for invention assessments but this no longer seems to get much publicity in the post - DRAGON'S DEN environment which has created a market for organisations like Trevor Baylis to *assist* independent inventors. There is a link to the old advice here.

Patent Offices have to deal with all and the UK IPO is particularly patient. The Independent Inventor is unwise to start at the European Patent Office as the fees are so much higher, the requirements more complex and the delays so much longer. However the EPO does make a very good handbook available which is worth studying for the unrepresented inventor.

The USPTO has to deal with many independent inventors in their great nation. They host an annual Independent Inventors Conference which has just finished. It seems that there were no obviously non-resident inventors there. However it is worth noting that an Independent Inventor, wherever he may be in the world, can e-file his application with the USPTO for a mere $82. However, that is not to say I could recommend anyone to file a US patent application without a US patent attorney to help them, as there are a great many further administrative hurdles to negotiate and fees to pay before the patent issues.

For the NPE it is wise to remember that only an issued patent has value. There are those who succeed in getting paid for their ideas but those that do so without investment are rare indeed. The best way to succeed is by creating a business round the idea and having the courage of your convictions. Licensing once the product has been proved is a great deal easier though far from simple.

However if you are invention addict do it for fun and maybe you can wite a blog
about it as Stephen has done. GoogleAds do pay. You will find it as hard to justify conditional fee representation in England as you will to get a paying licensee of an untested invention.