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The high level of liability exposure in patent work and the growing complexity of the practice area are making law firms increasingly vulnerable to malpractice lawsuits that blame attorneys for a job gone wrong. It is a practice area rife with details and deadlines, and one that many firms have expanded in recent years following a deluge of patent work in industries such as pharmaceuticals, computer technology and medical devices. But a rise in the percentage of malpractice claims related to patent prosecution and the potential impact of huge damages claims have law firms skittish about the type of work. “I’m not going to say patent attorneys don’t make mistakes, but it’s making attorneys less willing to go out on a limb for their clients,” said Baker & McKenzie lawyer Todd Sharinn. A patent prosecutor, Sharinn is defending a $10 million malpractice action filed in New York for work he performed while at Greenberg Traurig. The lawsuit filed by Quickie LLC involves the alleged failure of his former firm to pay ongoing fees to the U.S. Patent and Trademark Office (PTO) to keep Quickie’s application for a medical device patent alive. Quickie LLC v. Greenberg Traurig, No. 07-CV-10331, is just one example of common patent malpractice actions called “missed deadline” cases, in which attorneys allegedly drop the ball in pursuing the patent with the PTO. A Chilling Effect? Overall, the percentage of attorney malpractice claims based on representation related to patent, trademark and copyright work from 1983 to 2003 went from 0.5% to 2%, based on the latest information available from the American Bar Association. The only other practice areas in which malpractice claims increased during the same 20-year period by a greater percentage were estate, trust and probate matters, which climbed by two percentage points, and family law, in which malpractice claims also rose by two percentage points. Although the percentage increase in patent malpractice claims alone is not dramatic, the damages can be. Sending chills through the patent bar was a $30 million judgment, upheld last year, against Fish & Richardson for its failure to file a patent application in a timely manner for a digital imaging client. Also last year, a South Carolina jury awarded a former client of Columbia, S.C.’s Nexsen Pruet Adams Kleemeier $5.5 million for its handling of a patent involving a nutcracking machine. Other pending actions include a $75 million malpractice case against Chicago’s Seyfarth Shaw and San Jose, Calif.’s Burnett Burnett & Allen involving snowboard-binding technology, and another against Buchanan Ingersoll & Rooney for an allegedly bungled application in Taiwan for a patent related to flat-screen nanotechnology. Still another case is ongoing against San Francisco-based Townsend and Townsend and Crew involving an online wholesale product ordering system. That case seeks punitive damages. “I can sympathize with the problems with patent prosecutors who miss deadlines and that sort of thing,” said Justin Beck. A partner at Beck Ross Bismonte & Finley in San Jose, Calif., he is representing the plaintiffs in the $75 million snowboard case. “But it’s like another area of law. The clients expect lawyers to perform their services competently,” Beck said. The rewards for patent work in many cases are not in keeping with the perils attorneys face, said Steven Moore, a partner at Kelley Drye & Warren. “It’s high risk but not for the big dollars,” said Moore, a patent litigator and prosecutor in the New York firm’s Stamford, Conn., office. By some estimates, run-of-the-mill prosecutions can net law firms as little as $800 and even more specialized versions can net them only about $5,000. Worsening matters for the patent bar, Moore said, is the U.S. Supreme Court decision earlier this year in KSR International Co. v. Teleflex Inc., 127 S. Ct. 1727. The decision will make it more difficult to obtain patents and easier to invalidate issued patents, which will lead to more malpractice claims, he said. Some of the larger firms that handle patent prosecutions include Pillsbury Winthrop Shaw Pittman; Venable of Washington; Stites & Harbison; Morrison & Foerster; and Bingham McCutchen. Moore, who said the number of patent malpractice claims “clearly is going up,” expects some law firms to “wash their hands” of prosecution work. He is especially concerned about new rules established by the PTO that he asserts will make the patent prosecution process even more complex. Representing the inventor of a heat manifold system for automobiles, Moore helped obtain a recent court order that temporarily enjoined the PTO from implementing the rules, which would have taken effect last month. Specifically, the new rules reduce the number of times applicants may file for continuations of their applications. They also limit to five the number of independent claims, or phrases that describe the invention and therefore protect it from infringement. The temporary injunction, granted by Judge James C. Cacheris of the U.S. District Court for the Eastern District of Virginia, is part of a joint lawsuit filed against the PTO by Smithkline Beecham Corp. and Triantafyllos Tafas, Moore’s client. The action, Tafas v. Dudas, No. 1:07-CV-00846, alleges, among other things, that the new rules are unconstitutional because the PTO failed to weigh their effects on the “promotion of science and the useful arts.” The U.S. Attorney’s Office for the Eastern District of Virginia, which represents the PTO, did not comment on the case. In August, the PTO issued a press release saying that the new rules would allow it to process patents more effectively. Irrespective of the new rules, Thomas McGarry, a legal malpractice attorney with Chicago-based Hinshaw & Culbertson, said he is encountering more patent-related malpractice cases. “IP lawyers have come on the radar,” McGarry said. Not only has the potential for enormous damages created nervousness among patent lawyers, but the high costs of defending such actions also are of concern. McGarry and others noted that patent malpractice cases often require the parties to “re-litigate” the patent application process, with all its minutiae. He said some of his clients experience “sticker shock” when they realize how expensive defending a case can be. Another reason for an increase in patent malpractice actions is that many firms in the past several years have gotten into the patent business because of the proliferation of work, said Bruce Swicker, president of Earhart Leigh Associates, a malpractice insurance agency in New York. For example, in 2005, the number of utility patent applications at the PTO totaled 390,733, compared with 212,377 in 1996, for an 84% increase, according to the PTO. Swicker, who noted an increase in patent malpractice claims, said that patent law is not an area in which to dabble. “Someone who does a little bit of it is someone most likely to screw up,” he said. He added that the mere mention of the word “patent” when attorneys are seeking insurance coverage sends prices rocketing. “Once it comes into the equation, boom, you’re in a new level of pricing,” Swicker said.

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