Davis v. Brouse McDowell (pdf) is the Federal Circuit’s first precedential patent legal malpractice decision issued in 2010. It offers yet another cautionary tale for both plaintiffs and defendants in their pursuit and defense of patent legal malpractice claims.
Most will read and analyze the Davis case for its ultimate holding, i.e., conclusory expert witness testimony regarding the patentability of a “lost” or foregone patent right is insufficient to support the “case-within-a-case” causation element of a legal malpractice claim.
While that take-away point is crucially important, the underlying district court record also discloses a paradigm example of how client relationships can unravel at their outset. Some real life lessons of the case are revealed by the halting interactions between the seemingly prospective client and counsel in their early dealings with each other. One of the key factual issues becomes “When was an attorney-client relationship formed?”
The salient facts are these. In late 2003, Heather Davis contacted Daniel Thomson, then a partner in the Brouse McDowell law firm “to find out just some general questions about intellectual property.” (The quoted material is from the district court’s summary judgment decision (pdf).)
The two spoke over the phone. Davis explained that she was interested in finding an attorney she could “eventually” work with in connection with her alleged invention of an “IP-Exchange” where intellectual property could be bought and sold. Davis stated that she was particularly interested in pursuing international coverage for her inventions. (More after the jump.)
Alleged Malpractice Mistake No. 1. Thomson sent Davis a “marketing” letter in December 2003 that explained the general law relating the Patent Cooperation Treaty. It explored a number of benefits for invoking the PCT. The letter, however, did not discuss the “absolute novelty rule” of some foreign jurisdictions, i.e., the rule that disallows a patent when an invention has been disclosed to the public before a patent application is filed.
Along with the “marketing” letter, Thomson mailed Davis a proposed engagement letter, which she never signed. In fact, Davis testified in her deposition that she didn’t ever remember receiving the “marketing” letter and that she did not retain Thomson in 2003. Yet the marketing letter would form the a key basis for the plaintiff’s legal malpractice claim theory because it did not include any “absolute novelty bar” discussion.
Other than a phone call in November 2004 with Thomson in which she believed she discussed the launching of her IP-Exchange website, Davis did not remember using Thomson or any other Brouse McDowell attorney from 2003 to 2005.
Davis Retains Separate Patent Counsel in November 2004. Davis hired a separate patent agent to prepare a provisional patent application related to her IP-Exchange website and then launched the website. She did not follow up her provisional application with non-provisional applications within one year as required and they lapsed. She then filed two provisional applications with the USPTO in January 2006.
Alleged Malpractice Mistakes Nos. 2 and 3. Five (5) days before her provisional applications were set to expire in January 2007, Davis called Thomson and informed him that she wanted to file non-provisional patent applications to preserve the January 2006 “priority” date for her self-filed provisional applications. Despite the short turn-around time, Thomson agreed to do the work, but informed Davis he was leaving town for the weekend.
Davis provided Thomson with 14 pages of single-spaced patent claims, but couldn’t send some 275 pages of other materials because her fax machine was broken. Those materials were eventually hand-delivered to Thomson’s secretary along with a $5000 retainer. No other Brouse McDowell attorney worked on the applications while Thomson was out of the office. When Thomson returned to work, he had until the end of the day to prepare the patent applications. He filed three U.S. patent applications (he intended to “clean them up later”), but did not file any PCT application.
That same evening, Davis inquired about the PCT applications, and Thomson informed her that, based on their conversations, he did not think they were worth the monetary expenditure because Davis’s premature launch of the website precluded her from obtaining patent coverage in Europe. However, he eventually agreed to prepare the PCT applications, which were filed three days later.
The working relationship between Thomson and Davis deteriorated and he informed her he would be withdrawing as her attorney before the USPTO. In June 2007, the USPTO granted two out of Thomson’s three requests to withdraw, but apparently misplaced the third request. That request was not granted until July 2008.
Ultimately, Davis’s patent application went abandoned. In the malpractice lawsuit, she alleged that because her inventions lacked patent protection, her investors withdrew, leaving her unable to operate the IP-Exchange as a business.
Davis blamed her business collapse on sloppy patent work on the applications that were filed, on the failure of her counsel to timely file a PCT application, as well as on the firm’s deficient marketing letter that made no mention the absolute novelty rule.
Her experts opined that her damage claim was worth approximately $14M based on a lost profits analysis. (The lost profits analysis would also founder and be dismissed on summary judgment grounds because the lost profits damages claim associated with a new business was too speculative.)
Was Brouse McDowell “Hired” But Not Retained in 2003? In the revisionist history world that often characterizes legal malpractice claim-making, Davis argued that she had an attorney-client relationship with Thomson that continued uninterrupted from 2003 through July 2008. Having a 2003 attorney-client relationship in existence was vital to Davis’ claim that the “marketing” letter’s failure to discuss the “absolute novelty” bar constituted malpractice.
While Davis admitted that she had not “retained” Thomson in 2003, that fact was not dispositive of her claim because she thought that meant she hadn’t paid him—even though she considered him to be her lawyer.
An obvious, initial practice pointer emerges from these facts: advise prospective clients that no attorney-client relationship is formed until a formal retainer agreement is entered into between the lawyer and the client. Make sure that “no attorney-client” relationship formation language is included in correspondence, so it can be documented later. Also, include a discussion of the “absolute novelty” rule in any general letter outlining the benefits of filing a PCT application. This case is an prime example of how even firm “marketing” materials can be used to bolster a legal malpractice claim.
Why Was Plaintiff’s Expert Witness Testimony Insufficient for Summary Judgment Purposes? The Davis case illustrates perfectly the “case-within-case”causation difficulties faced by plaintiffs pursuing patent legal malpractice claims.
Plaintiff’s liability (and damages) expert, James O’ Shaughnessy, was certainly well-credentialed and experienced. Among other things, he had been a partner at Foley & Lardner for 10 years.
His 61 page expert witness report provided detailed opinions about alleged breaches of the standard of care committed by plaintiff’s patent prosecution counsel. There was more than enough in his expert witness report to raise a disputed issue of material fact regarding patent prosecution counsel’s alleged breach of duty to his client.
With respect to the “case-within-case” causation issue—i.e., but for the patent prosecution’s alleged errors, the plaintiff would have obtained a patent for her invention—the Shaughnessy expert witness report, however, was too general for both the district and appellate court’s liking. He essentially opined that some patent would issue from Davis’s applications; in other words, that the applications filed by plaintiff contained patentable subject matter. He did not attempt to draft or analyze hypothetical claims that could or should have issued after USPTO examination.
The liability expert’s failure to more precisely define the patent claims that may have issued from Davis’s inventive work proved to be a dispositive flaw in her patent legal malpractice claim. Her expert admitted during his deposition that he had not performed a formal patentability analysis. He defined a “patentability analysis” as the “question of whether the claims are patentable in [an] application over prior art.”
Davis tried to repair this evidentiary deficiency by arguing that her expert performed a “pre-application” analysis of patentability that did not require an analysis of any actual, draft patent claims. The district court was not impressed by this argument. The distriict court judge rejected the expert’s causation analysis as conclusory and not comporting with Daubert expert witness admissibility standards.
A pivotal expert witness practice pointer arises from the Davis case. Make sure your patent malpractice liability expert performs some form of patentability analysis and includes it in his or her expert witness report. Do not wait until after receiving defendant’s summary judgment motion to prepare a responsive affidavit on this point. In this case, that responsive affidavit came too late. Defendants successfully argued that it should be stricken because it was not included in the body of his expert witness report. Hence, defense counsel had no opportunity to depose the expert on this point.
In summary, a malpractice claimant cannot rest on providing a laundry list of errors that may have occurred without tying them causally to patent claims that would have issued but for the patent prosecution errors. It may be tempting to give short shrift to a patentability analysis in a case because of the expert witness expense entailed in such an exercise.
The Davis case dismissal outcome is not an isolated example of what happens to patent legal malpractice cases that are long on alleged errors in patent prosecution activities, but come up short on describing and analyzing what patent claims could and should have issued but for those patent prosecution errors.