Conflicts of Interest at IP Firms Clarified

Thursday 5th July 2012

Most New Zealand patent attorney firms (the author’s firm included) advise a large number of clients, some of whom may be competitors. The New Zealand patent attorney profession is small and options for representation can be limited. The impact of this has been recognised previously by the New Zealand Court of Appeal in similar cases.

In July 2011 the High Court had the opportunity to review the duties owed to competing clients in The Baby Hammock Co v AJ Park Law.

The Baby Hammock Company (BHC) had sought advice from AJ Park Law about a baby hammock that it had developed. The advice was that a patent, registered design, or other protection was not available due to earlier publication.

Some time later, AJ Park agreed to act for Hushamok which also made baby hammocks. BHC discovered that Hushamok had obtained registered design protection for its products, and that AJ Park had assisted it to do so.

BHC alleged that in acting for Hushamok, AJ Park breached its fiduciary duties to BHC.

Although the Court was required to consider general conflict of interest issues, it was also required to assess the credibility of witnesses in determining what had occurred between BHC and AJ Park. The Court expressed disquiet concerning BHC’s evidence, in particular a series of emails produced by BHC about its relationship with AJ Park. For example, one email, dated August 10 2004, said “we are going to be working with AJ Park” when the first meeting between someone from AJ Park and BHC occurred by chance during a flight on 12 August 2004.

In Baby Hammock, the Court held that merely acting for competitors does not give rise to a disqualifying conflict. The critical issue was whether a duty to an existing client would be breached if, in acting for a competitor, the potential for future conflict arises. The Court held that:

  1. The mere risk of future conflict is insufficient to found a breach of duty;
  2. Mere commercial disadvantage experienced by all competitors is not enough, and the disadvantage must affect the IP rights of another client, and
  3. Hushamok was entitled to secure IP rights effective against the world. Registered design protection did not carry any special adverse implications for BHC.

For some firms this decision simply confirms their conflict of interest policy, and for others, it provides useful guidance.

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