“FaceTec accuses law firm of ‘betrayal’ in patent dispute with Jumio, iProov” —

• “Nevada’s FaceTec has accused its former legal representation of a conflict of interest in its patent dispute with California’s Jumio, and filed a motion to have the firm disqualified from the case.”
• “The case concerns a complaint of Willful Patent Infringement by Jumio Corporation, filed on June 14, 2024. Per the text, ‘FaceTec alleges herein that Defendant Jumio makes, uses, offers for sale and sells in the United States products, systems, and/or services that infringe one or more claims of each of the FaceTec Patents-in-Suit.'”
• “In another twist, the actual tech that FaceTec says infringes on their patent belongs to the UK’s iProov. Having explored a partnership in 2019, Jumio and FaceTec parted ways. Jumio pursued a partnership with iProov, which, per the complaint, ‘thereafter deployed for Jumio a liveness detection technology that infringes on FaceTec’s patent rights.'”
• “Now FaceTec claims that Jumio, having failed at prior efforts to develop its own liveness tools, is using FaceTec’s proprietary liveness detection as a model.”
• “Having crawled through the Northern District of California court system, the case has now reached a boil, with FaceTec calling out its former legal representative, Perkins Coie LLP, for representing Jumio in the dispute.”
• “FaceTec says that since the firm has previously represented it in matters concerning the same patent, its working for Jumio constitutes a conflict of interest – and a ‘betrayal.'”
• “‘Defendant Jumio is well aware of both FaceTec and its patented technology,’ it says. ‘Jumio is a direct competitor of FaceTec and provides competing biometric liveness detection software products.'”

Hat tip to Simon Chester for flagging: “The Law Society Takes Conflicts of Interest Seriously: Knocking on Wood” —

• “In ‘The Lawyer as Friend,’ a famous 1976 law review article, Charles Fried proposed that a lawyer should act as a ‘special-purpose friend’ to each of his or her clients. Within the bounds of the retainer, Fried argued, the lawyer must adopt the interests of the client as their own — just as a friend would.”
• “This analogy helps clarify why conflicts of interest are so toxic to lawyer-client relationships. A conflict of interest usually arises because a lawyer’s loyalty to a client is undermined by the their work for other clients, or by the lawyer’s own personal interests.”
• “A client feels betrayed if they learn (for example) that their lawyer is taking legal fees from the client’s adversary, or learns that the lawyer has some other good reason to want the client’s cause to fail. The stab — like the wound from his friend Brutus that killed Julius Caesar — is especially painful because it’s a stab in the back.”
• “When other people witness such betrayals, the reputation of the enitre legal profession suffers. After all, if people can’t trust us to loyally serve our clients and advance their legitimate interests within the bounds of the law, then what good are we to society?”
• “A large Bay Street law firm has been credibly alleged to have acted in a conflict of interest, thanks to some outstanding investigative reporting by Zach Dubinsky of CBC News.”
• “For several years, McMillan LLP has been a go-to law firm for the Paper Excellence corporation. This large Canadian forestry company has been represented by McMillan on transactions worth over $6 billion, including its acquisitions of Domtar and Catalyst Paper. Those deals would have generated very substantial legal fees for McMillan.”
• “The ethical problem arose when McMillan took on a new retainer, for the Forest Stewardship Council (FSC). That client’s main work is administering the ‘FSC’ certification, which you may have seen stamped on some wood products:”
  The Certification Business, and its Temptations”
• “The problem is that it’s manufacturers who pay FSC for the right to use the stamp. Using the stamp helps sell more product. And so there is a pecuniary temptation for certifiers like FSC to adopt lax rules, and to look the other way if a fee-paying manufacturer breaks them.”
• “One of FSC’s rules is that, in order to remain certified, a company must not only avoid destructive forest practices, but must also not be ‘indirectly involved’ with companies that do so. In November 2023, Greenpeace Canada complained to FSC that Paper Excellence was indirectly involved with Asia Pulp and Paper. That company had been decertified by the FSC in 2007 for destructive forestry practices. Drawing on the CBC’s reporting, Greenpeace alleged that Paper Excellence was effectively a corporate sibling of Asia Pulp & Paper, insofar as both were controlled by Indonesian forestry company Sinar Mas. This type of corporate relationship, if substantiated, would constitute ‘indirect involvement’ according to FSC rules and disqualify Paper Excellence from using the stamp.”
• “That allegation was contested by Paper Excellence, and so the FSC sought corporate law expertise to conduct a review.”
• “The firm that FSC hired was none other than McMillan LLP. As readers will recall, McMillan had cashed a number of cheques from its client Paper Excellence in the past, and probably hoped to do so again in the future. And yet, in this new retainer for FSC, McMillan was to neutrally and dispassionately form an opinion about whether Paper Excellence should lose its lucrative access to the FSC certification.”
• “McMillan LLP concluded that Paper Excellence should keep that certification. Whatever the merits of that conclusion, it is hard to understand how it could have been ethical for McMillan to accept the FSC brief. Large sums in future legal fees from Paper Excellence could have been sucked out of McMillan’s posh Bay Street headquarters, had the firm ruled the other way.”
• “By taking this retainer, the firm effectively became adjudicator of Greenpeace’s case against Paper Excellence. A judge who was very recently employed by a certain corporation should clearly not be assigned to hear a lawsuit involving that corporation (especially if they might be paid by them again in the near future). Likewise, McMillan seems a very problematic choice of adjudicator for this case impugning its former (and potentially future) fee-paying client.”
• “As noted above, the garden variety conflict of interest is problematic because it damages client interests. But in this case, the clients had no problem with it.”
• “FSC told the CBC that it had ‘conducted a conflict of interest check and found none,’ prior to retaining McMillan. It presumably learned of the firm’s prior work for Paper Excellence in conducting this check”
• “But that doesn’t make the conflict of interest go away or render it unproblematic. Consent of the client does not automatically resolve a conflict-of-interest problem, under Canada’s Model Code of Professional Conduct. After all, the question of whether McMillan is a suitable law firm to invetigate Paper Excellence on behalf of FSC doesn’t only affect Paper Excellence and FSC. It affects all consumers who want to be able to rely on the FSC certification as a true sign of ethical forestry practices. It affects every Canadian — whether or not they buy wood — because we all have an interest in upholding a legal profession able to act loyally and professionally.”

“Lateral Attorney Transitions Under the Ethics Rules” —

• “Law firms hiring lateral lawyers should be careful that they are not conflicting themselves out in the process. This is because a lateral lawyer’s conflicts are imputed to the new firm under the Rules of Professional Conduct (RPC). This principle applies to lateral partners as well as associates.”
• “Absent informed consent, confirmed in writing, a lawyer may not switch sides and sue a former client in the same or a substantially related matter. New York Rule of Professional Conduct 1.9 prohibits a lawyer from acting adversely to a former client about whom the lawyer acquired material confidential information:”
• “Unless the former client gives informed consent, confirmed in writing, a lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client:”
  • “1. Whose interests are materially adverse to that person.”
  • “2. About whom the lawyer had acquired information protected by Rules 1.6 [the confidentiality rule] or paragraph (c) of this Rule that is material to the matter. (NY RPC 1.9(b))”
• “The U.S. Court of Appeals for the Second Circuit has ruled that disqualification may be ordered where:”
  • “(1) The moving party is a former client of the adverse party’s counsel.”
  • “(2) There is a substantial relationship between the subject matter of the counsel’s prior representation of the moving party and the issues in the present lawsuit.”
  • “(3) The attorney whose disqualification is sought had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client. (Hempstead Video v. Incorporated Village of Valley Stream, 409 F. 3rd 127, 133 (2nd Cir. 2005) (holding that counsel’s connection to law firm was too attenuated to impute disqualification to entire firm)).”
• “When hiring a lateral lawyer, the new firm must screen for potential conflicts with former clients. This is because RPC 1.10 imputes such conflicts to the entire firm:”
• “But not every lawyer who assisted on a case is deemed to have represented a client within the meaning of the Rules of Professional Conduct. Junior lawyers who played minor roles in a matter will not be subject to disqualification. For example, a lawyer who merely does research, or drafts routine documents, is not necessarily subject to disqualification. See Silver Chrysler Plymouth v. Chrysler Motors, 518 F. 2nd 751 (2nd Cir. 1975). Professor Roy Simon writes that the ethics rules do not require disqualification of junior lawyers with fleeting, de minimus roles:”
• “In one leading case, a lawyer from a large firm had done some research and drafting work for an auto company. (Silver Chrysler Plymouth v. Chrysler Motors, 518 F. 2nd 751 (2nd Cir. 1975)). When the lawyer started his own firm, he became adverse to the former client. A motion to disqualify the lawyer was denied due to the de minimus nature of the associate’s work. As the Second Circuit reasoned:”
• “‘[The associate’s] involvement was, at most, limited to brief, informal discussions on a procedural matter or research on a specific point of law. … But there is reason to differentiate for disqualification purposes between lawyers who become heavily involved in the facts of a particular matter and those who enter briefly on the periphery of a limited and specific purpose related solely to legal questions.’ (Silver Chrysler Plymouth, 518 F. 2nd at 756).”
• “As currently constituted, the New York Rules do not expressly provide for an ethical screen except in limited circumstances. However, a proposal by the New York State Bar Association Committee on Standards of Attorney Conduct (COSAC) would incorporate an ethical screen into the New York rules. That proposed rule change contemplates screening to avoid imputation of conflicts to the firm under RPC 1.10 in most cases. The COSAC proposal has not been adopted by the Appellate Division.”
• “But the courts have designed solutions not contemplated by the Rules of Professional Conduct. Case law permits ethical screens depending on the facts of each case. These facts include the size of the outgoing and incoming law firms, the likelihood that the lateral lawyer has been exposed to confidential information, and the precautions taken by the new firm to prevent the spread of confidential information.”
• “As mentioned, screening is not addressed for most conflicts in the New York Rules of Professional Conduct. However, the courts have held that screening is permissible in some instances, depending upon the facts. The best practices for firms seeking to implement screening are as follows:”
  • “1. Written acknowledgement. The disqualified lawyer should acknowledge in writing the fact of the screening, and the obligation not to discuss any aspect of the tainted matter with other colleagues at the firm. Firm management should instruct the legal and non-legal staffs not to discuss the matter with the screened lawyer.”
  • “2. File separation. Have the files in the tainted matter placed in an area separate from the firm’s other client files and made accessible with codes known only to the team members working on the matter. The paper and digital files for the tainted matter should remain inaccessible to the incoming lateral lawyer. In addition, the disqualified lawyer’s office should be, insofar as practicable, physically remote from the offices of other lawyers working on the tainted file.”
  • “3. Non-participation in fees. The tainted lawyer should not share in any fees from the conflicted matter. If the lateral lawyer is not paid on straight salary, then the firm should send a memorandum to its comptroller regarding the disqualified lawyer’s nonparticipation in the fees generated in the matter.”
    Conclusion”
    “Disqualification of a tainted lawyer may be imputed to the incoming law firm. The incoming lawyer may be disqualified if they had access to confidential information at the prior firm. There is a rebuttable presumption that the incoming lawyer had access to such information. This presumption may be rebutted upon a proper showing that the lawyer in fact did not have access to material confidential information. In addition, the transitioning lateral lawyer should be denied access to paper and electronic files regarding the tainted manner.”