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A former client has sued Greenberg Traurig, alleging the firm switched sides and used its knowledge of privileged intellectual property information from previous patent work to attempt to invalidate a patent for a new client’s benefit.

Apollo Enterprise Solutions Inc. filed suit May 5 against Greenberg Traurig and 20 other unnamed defendants in the Superior Court of California, County of Los Angeles, citing breach of duty, interference with contract and negligence. Apollo, represented by Kinsella Weitzman Iser Kump & Aldisert of Santa Monica, is demanding at least $2 million for punitive damages, interest and costs.

The case stems from an ongoing collection action case Apollo filed against Lantern Credit in March. Apollo and Lantern had a contract where Apollo, in addition to developing and providing a range of other information technology services, provided its TrueCollect service. The service aims to combine online payment, debt collection and debt recovery technologies into one efficient offering. In exchange, Lantern Credit would pay $5 million for a first term and $6 million for a second term, according to the complaint.

But Apollo alleged that as of Dec. 31, Lantern owed Apollo more than $2 million on the contract, and it sued Lantern to collect the money due. In that case, filed less than two months ago in federal court, Apollo is represented by Jeffer Mangels Butler & Mitchell. Greenberg is representing Lantern.

 

And there’s the rub. In the past, Greenberg also performed extensive legal services for Apollo, according to the complaint. The work included two patents behind Apollo’s TrueCollect service, which gave the firm access to Apollo’s confidential, privileged information.

Now that Greenberg is representing Lantern, the complaint alleges that the firm advised Lantern not to pay and used the privileged information against Apollo to try to invalidate the patents so Lantern could avoid paying. According to the complaint, Greenberg has filed counterclaims seeking a declaratory judgment of invalidity and non-infringement of “the very same patents that Greenberg helped to prosecute for Apollo.”

Greenberg said that the complaint misrepresents what happened.

“This lawsuit is based upon events that occurred more than 12 years ago and mischaracterizes the underlying facts,” the firm said in a statement. “The issues raised in this lawsuit are already the subject of a pending motion in the litigation between Apollo and another party. We deny any wrongdoing and will contest this lawsuit.”

In the federal suit, Lantern argued in a May 8 filing opposing Apollo’s motion to disqualify Greenberg Traurig that the law firm does not have any confidential information related to the matter and only represented Apollo on its provisional patent application. Apollo retained other patent counsel before the patents were formally filed, it said. In addition, Lantern said it is seeking to invalidate Apollo’s patents by applying the new standard set forth by the U.S. Supreme Court’s ruling in Alice Corp. v. CLS Bank International, which altered the standard for patentability of inventions. It is not using Apollo’s provisional patent application to invalidate the patent, Lantern said.

In addition, Lantern said that the sole remaining Greenberg attorney associated with Apollo’s provisional application, Bruce Neel, works in a different practice area group in an office hundreds of miles from Lantern’s attorneys, and has not conveyed any information regarding Apollo or its patents. After the firm learned of the potential conflict of interest, “Greenberg immediately implemented an ethical screen barring any attorneys working on this lawsuit (or for Lantern in general) from access to any information or files relating to Greenberg’s prior representation of Apollo, and barring Mr. Neel from any access to or involvement with any legal work for Lantern or communication with Lantern’s litigation counsel about Apollo,” according to the court filing.

Michael E. McCabe, Jr., McCabe Law .
Michael E. McCabe, Jr., McCabe Law .courtesy photo

Still, a potential conflict remains, according to Michael McCabe, who first wrote about the lawsuit, Apollo Enterprise Solutions, Inc. v. Greenberg Traurig LLP, in his highly-respected IP Ethics & Insights blog.

“You cannot represent a new client against an old client if the work of the new client is substantially related to the work of the old client,” said McCabe, who is the founder of McCabe Law, a firm that specializes in intellectual property ethics and disciplinary matters. “That prohibition lasts forever. … Whether it was one day ago or 20 years ago, it would still be a conflict to invalidate a patent you worked on.”

The only way around it would be to get a waiver from the parties, he said.

“Greenberg Traurig is an excellent law firm. They have a very sophisticated conflicts checking system. Either this particular case slipped through their conflicts checking system so that they didn’t appreciate that there was a conflict, or there is something else going on that we don’t know about,” McCabe said. “It’s a very unusual case that a law firm would turn around and try to invalidate a patent that it helped another client obtain. I don’t understand how that could happen.”