Dynamic 3D Geosolutions LLC v. Schlumberger Ltd. (Schlumberger N.V.) - 837 F.3d 1280 (Fed. Cir. 2016)

Rule:

(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interests are materially adverse to the interests of the former client. (c) A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter: (1) use information relating to the representation to the disadvantage of the former client. Model Rules of Prof'l Conduct R. 1.9 (1983).

Facts:

Defendants Schlumberger Limited hired Charlotte Rutherford in a senior counsel position as Manager in licensing and litigation and was promoted to Director of Intellectual Property. And then promoted her again to Deputy General Counsel. Her job duties included developing and implementing the worldwide IP strategy, protecting and preserving defendant’s IP assets and advising defendant’s senior executives regarding risk issues relating to IP. As part of her work, she managed a copyright lawsuit involving Petrel, defendant’s software platform. She left the defendant’s company and began working at Acacia Research Group LLC the parent company of various patent-holding entities, including Dynamic 3D Geosolutions LLC, plaintiffs in this case. After she joined plaintiff’s company, she twice met with the inventors of ‘319 patent to discuss plaintiff’s acquisition of the patent and possible future litigation. Defendant’s Petrel software product was discussed as a potential target of patent infringement litigation. Plaintiff filed several lawsuits, including one asserting that defendant’s, in its use and sale of Petrel, infringed the '319 patent. Defendants raised Rutherford's potential conflict of interest and filed a motion to disqualify plaintiff’s counsel. The district court granted defendants motion thereby disqualifying Rutherford. The district court found that Rutherford's work at defendant’s was substantially related to her current work with the plaintiff. The court found that because the accused features of Petrel existed in the older versions that Rutherford was exposed to, and because she was involved at defendant’s efforts to license Petrel to other companies, the evidence created an irrebuttable presumption that she acquired confidential information requiring her disqualification. Consequently, because the pleadings were drafted by counsel presumed to possess defendant’s confidential information, the district court dismissed all of plaintiff’s claims against defendant without prejudice. Plaintiffs then appealed the decision of the district court. 

Issue:

Was Rutherford’s former representation for defendants substantially related to her alleged representation in this case?

Answer:

Yes. The district court's decision was affirmed.

Conclusion:

The district court below affirmed the sound principle of not suborning the disloyalty of attorneys. The court held that it was inappropriate to hire a senior attorney, one who was intimately knowledgeable concerning a particular product, its competitors, and its associated business strategies and intellectual property into a position in which she not only participated in but in fact played a significant role in acquiring a patent used to accuse her former employer's product of patent infringement. Moreover, there was a clear conflict of interest for the attorney and principles underlying the ethical standards mandated extending the disqualification to the plaintiff's other in-house attorneys. Furthermore, the court held that the district court did not err in concluding that the disqualification should extend to outside counsel's attorneys and that it did not abuse its discretion in dismissing all pleaded claims without prejudice. Because based on the district court's reasoning, forcing plaintiff to break new ground with a fresh complaint and clean docket rather than to continue drawing from a poisoned well was not an abuse of discretion.