Sunday, December 15, 2013

Professor David Hricik's Legal Ethics and Non-Practicing Entities Article

Much of the press talks about the lack of ethics of patent trolls, but like many things there is more to the story.

For example, Santa Clara University Law School invited Professor Hricik to speak on legal ethics that face a "patent troll" or non-practicing entity's (NPE) counsel. It sounds like the assumption was to focus on this side, because NPE's have much less discovery than defendants which can be leverage to extract a nuisance settlement.

In preparing for the talk, Professor Hricik realized, and called it counter-intuitive, that the legal ethics issues extend to defendant's counsel in a big way, because they have significant control over how discovery is scheduled, but are typically paid by the hour. For example, they could bifurcate discovery and schedule determinative issues like infringement at the front end of discovery to save money. Yet the NPE's desire the suit not be quickly adjudicated aligns with defendant counsel's desire to "earn" fees during discovery. So if the NPE counsel makes comprehensive discovery, the defendant's counsel may act in a cost ineffective way.

Professor Hricik notes Rule 11 and 35 USC 285 require counsel act ethically. My observation is courts rarely use Rule 11 and Section 285 to police how parties manage discovery. And without court limits, discovery in patent litigation is too often a law firm money maker.

Anyway, I agree with Professor Hricik about ethics obligations running to all parties in NPE litigation, and recommend reading: Legal Ethics and Non-Practicing Entities: Being on the Receiving End Matters too.

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