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By Tony Dutra
Charges of malpractice, breach of duty, fraud, and negligence against the law firm Ropes & Gray survived a challenge for failure to state a claim, according to a Jan. 13 ruling by the U.S. District Court for the District of Massachusetts (Cold Spring Harbor Laboratory v. Ropes & Gray LLP, D. Mass., No. 1:11-cv-10128-RGS, 1/13/12).
As to the malpractice claim, the court found “dubious at best” the firm's contention that its patent attorney, in submitting a patent application, followed “accepted practice” by copying text from a previously issued patent specification.
The court also denied R&G's motion to dismiss the remaining claims in light of the patent attorney's relationships with outside companies that represented its client's competitors.
Long Island, N.Y.-based Cold Spring Harbor Laboratory hired Ropes & Gray's Boston office in 2001 to prosecute a series of patent applications on methods and technologies involving synthetic RNA molecules called short hairpin RNAs (shRNAs).
Matthew P. Vincent, a registered patent attorney at R&G, was the primary attorney responsible for drafting and prosecuting the applications. In significant part for each CSHL application description, he copied essentially verbatim text from another patent (6,506,559) granted to Andrew Fire. He did not disclose the copying to CSHL. In 2006, the Patent and Trademark Office rejected pending claims as anticipated by the Fire patent.
R&G did not become aware of the copying until 2008. The firm also billed CSHL and other clients, as requested by Vincent, for services performed by IP Resource Co., without R&G's knowledge that Vincent had formed the company as a side venture. Vincent resigned from R&G in 2009.
CSHL originally filed its complaint in 2010 against R&G and Vincent in the U.S. District Court for the Eastern District of New York. The case was transferred to Massachusetts, and CSHL filed an amended complaint in that court. The complaint alleged legal malpractice, breach of fiduciary duty, fraud and fraudulent concealment, and negligence by R&G and Vincent.
The defendants filed a motion to dismiss each count pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted.
Judge Richard G. Stearns denied the motion as to each count.
Justifying the copying of a prior patent into a new patent application specification, R&G and Vincent argued that there was nothing inherently wrong with copying from the prior patent, and indeed that such copying is accepted practice, citing David Pressman, Patent it Yourself 181 (13th ed. 2008).
The court found that citation “dubious at best, and at worst, an insult to the professional standards of the patent bar.” It further recited multiple passages from the complaint that implied a causal connection between Vincent's actions and the PTO's rejection.
Finally, the court rejected R&G's argument that the claims were not patent-eligible regardless. It noted that, after firing R&G, CSHL continued to prosecute patent claims with WilmerHale as new counsel, and the PTO issued a notice of allowance of some method claims. “These developments cast significant doubt on defendants' contention that the Hannon patent applications would have been rejected by the PTO ‘in any event,' ” the court said.
It thus denied the motion to dismiss the malpractice claim.
The breach of fiduciary duty claim involved further actions by both R&G and Vincent.
First, CSHL alleged that Vincent, through IP Resource Co. but while still an R&G partner, also worked on a patent application for a CSHL competitor, Insert Therapeutics, and included subject matter from the CSHL applications in the Insert application. Vincent also allegedly formed another company, Calando Pharmaceuticals Inc., to license Insert's technology.
CSHL charged R&G with a breach of fiduciary duty by allowing Vincent to represent Insert and own Calando.
CSHL further alleged a breach of R&G's duty of loyalty by not disclosing to CSHL that, in arranging a licensing agreement between the company and RXi Pharmaceuticals, R&G also represented RXi.
The court denied the motion to dismiss these claims as well. “By putting themselves in a position where they could reveal such information to potential competitors such as Insert and RXi, defendants created a direct conflict of interest,” the court explained. “CSHL also plausibly alleges that R&G breached its fiduciary duties by failing to request a conflict waiver at an appropriate time, and by failing to provide full disclosure in requesting the waiver [later].”
The court, again finding sufficient support in the complaint, also rejected R&G's argument that CSHL failed to allege damages accruing from the conflict of interest. It noted in a footnote that CSHL's “loss of chance” theory of damages—based on a lost opportunity of earlier PTO approval of the patent application—was acceptable under Massachusetts law as well.
Whether the complaint alleged damages was at issue as to the fraud and negligence claims as well. The fraud claim was based on the failure to disclose the copying. Again citing the opportunity to rectify the problem with the PTO earlier had CSHL known of the copying, the court recognized that the damages included “losing years of priority.”
The detail that supported CSHL's damages claim as to breach of duty also supported the harm requirement of the negligence claim, the court said in conclusion.
John O. Mirick of Mirick, O'Connell, DeMallie & Lougee, Boston, represented CSHL. R&G was represented by Philip R. Forlenza of Patterson, Belknap, Webb & Tyler, New York. Robert J. Muldoon of Sherin & Lodgen, Boston, represented Matthews.
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