Bringing a professional liability claim once thought to be best suited for federal court, a former client instead will face off against defendant Baker Botts in a complicated case before a Dallas County Court-at-Law jury on April 22.
The former client claims that Baker Botts was negligent and breached its fiduciary duty in allegedly failing to disclose that the large Texas law firm had represented a competitor in the pursuit of patents for a similar invention.
Baker Botts denies the allegations in the petition, alleging in its response to the state court lawsuit that the client bought the claims against the firm in “bad faith.”
Paul Koning, a partner in Dallas’ Koning Rubarts who represents Baker Botts in the case, wrote in an email that the litigation has been filed “eight years after the fact” by “an unsuccessful business seeking nothing more than to have others pay for its own business failures.”
“Axcess engaged Baker Botts to prosecute patent applications, and Baker Botts successfully secured many patents for Axcess. In doing so, it acted ethically and without conflict,” Koning wrote.
The plaintiff originally filed the case, Axcess International v. Baker Botts, in U.S. District Court in the Northern District of Texas in Dallas in 2010.
But on Feb. 20, 2013, the U.S. Supreme Court ruled in Gunn v. Minton that 28 U.S.C. §1338(a)—the federal law giving federal courts exclusive jurisdiction over patent cases—does not deprive state courts of the authority to hear a state law claim alleging legal malpractice in an underlying patent case. So, eight days after the high court ruled in that case, the former client refiled the case against Baker Botts in state court.
“We had been set for trial for months when that case came out,” said Jon Suder about the high court’s decision in Gunn. He’s a partner in Fort Worth’s Friedman Suder & Cooke who represents plaintiff Axcess International in the case. And he and his client almost immediately decided that state court was better suited to try the case.
“We didn’t want to lose any time,” he said.
According to the original petition in Axcess, the background to the dispute is as follows. Axcess provides radio frequency identification (RFID) products. It retained Baker Botts in 1998 to file and pursue a patent application for a “dual frequency” system used to track people, products and assets through wireless tags.
Nine days after filing three patent applications for RFID devices on Axcess’ behalf on July 20, 1999, at the U.S. Patent and Trademark Office, Baker Botts agreed to represent Savi, a competitor of Axcess, to pursue patents on similar RFID devices. Baker Botts “failed to identify potential conflicts” in representing Savi and did not notify Axcess that it planned to represent Savi in pursuing RFID patents, according to the petition.
Nearly a decade later, Axcess first learned that Baker Botts represented Savi when another company involved in patent infringement litigation with Savi “subpoenaed Axcess to testify concerning BB’s conflicting role in obtaining the Savi patents. This was the first time Axcess learned of BB’s duplicity.”
In mid-2009 Axcess hired new counsel and terminated Baker Botts, according to the petition.
In 2010, Axcess filed its complaint in federal court, moving it two years later to state court, alleging that Baker Botts was negligent by “failing to seek patent protection for Axcess” and breached its fiduciary duty “by failing to disclose to Axcess that it represented Savi in pursuing patents for Savi in the RFID industry within the scope of Axcess’ claimed invention at the same time it was pursuing patents for Axcess in the same industry for the same invention,” among other things.
The petition also alleges that Baker Botts’ conduct damaged Axcess because that conduct caused Savi to be placed in a leadership position in the RFID industry, prompting U.S. military contractors to comply with Savi’s patents, which, in effect, “robbed Axcess of its rightful place as the leader in the RFID industry.”
In its March 29, 2013, answer to the petition, Baker Botts alleges it did nothing wrong and that Axcess did not suffer any damages or harm. Many of the pleadings Baker Botts filed in the case are under seal, which is common in cases that involve intellectual property.
“Baker Botts was never engaged to represent Axcess against the supposed competitor that was also Baker Botts’ client—Axcess hired a different law firm for that. After receiving the other law firm’s advice for two years, and after the competitor rejected two demand letters from that other law firm, Axcess decided not to pursue any of its legal options against the competitor, and instead entered into an agreement to license the competitor’s patents (all with the advice of other law firms and without consulting or telling Baker Botts),” Koning wrote.
“Axcess’ products and business strategy failed, and Axcess suffered no legal losses at all, much less any caused by Baker Botts,” he continued in his email.
Suder says he expects Baker Botts to allege at trial that the former client brought the claim against the law firm too late.
About a statute of limitations argument, Suder said, “That’s one of their big issues.”
He continued, “They’re saying we should have known. I don’t think anyone disputes that we did not know.
“Our position is: We didn’t know. We trusted our lawyers to tell us material things,” Suder said of his client’s claims against Baker Botts.
“This is material,” Suder said of the law firm’s representation of a competitor. “And when you’re looking for patents, you’re not studying who the lawyer was that prosecuted the patent.”
Before the high court’s ruling in Gunn, claims against law firms involving patents had been filed in federal court because of the specialized subject material, Suder notes. But he doesn’t expect any problems in having the case heard by Mark Greenberg, judge of Dallas County Court-at-Law No. 5.
“In state court, Dallas is one of the few counties that have concurrent jurisdiction between district and county court—there are no jurisdictional limits,” Suder said. “And Mark Greenberg has impressed the hell out of me in his willingness to read everything and ask very pointed questions. Federal courts have law clerks, but he read it all himself.”