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recognizing “unsettled law exception to malpractice liability” relied on in Biomet
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Civil Action No. 10-0454 (JDB)
02-02-2012
ENCYCLOPAEDIA BRITANNICA, INC., Plaintiff, v. DICKSTEIN SHAPIRO, LLP, Defendant.
MEMORANDUM OPINION
Defendant Dickstein Shapiro, LLP, a law firm, represented plaintiff Encyclopaedia Britannica, Inc. in the prosecution of several patents relating to a multimedia database search system for retrieving textual and graphical information. When Britannica sued to enforce these patents against other parties, the patents were ruled invalid. Britannica now sues for malpractice. Britannica alleges that Dickstein's representation was negligent and that Dickstein breached its fiduciary duty to Britannica by acting under a conflict of interest and failing to notify Britannica of its own malpractice.
Now before the Court are Dickstein Shapiro's motion to dismiss and motion for summary judgment. In the motion for summary judgment, Dickstein argues that Britannica's claim of malpractice in the prosecution of the patents is barred by the statute of limitations. In the motion to dismiss, Dickstein argues with respect to Count I that its conduct cannot have constituted negligence because whether the patents as filed were valid was an unsettled question of law, and with respect to Count II that Britannica has not alleged facts plausibly supporting a claim of breach of fiduciary duty. Also before the Court are two motions by Britannica for leave to amend the complaint, which seek to add additional allegations of negligence regarding another patent on the search system that was also held invalid. Finally, also before the Court is Britannica's motion to strike a brief from Dickstein regarding the motions for leave to amend. The motion to strike contends that Dickstein's brief violated the Court's instructions as to filings by the parties.
As explained below, Dickstein has not shown that the negligence claim is barred by the statute of limitations, so the motion for summary judgment will be denied. However, because Britannica's additional allegations would be barred by the statute of limitations, Britannica's amendments to the complaint would be futile, so the motions to amend the complaint will be denied. The related motion to strike will also be denied. Since the negligence alleged by Britannica was not an issue of judgment, the motion to dismiss will be denied with respect to Count I. Finally, because Britannica has failed to allege sufficient facts in support of its breach of fiduciary duty claim, the motion to dismiss will be granted with respect to Count II. The case will proceed on Britannica's negligence claim (Count I).
I. Background
In order for a patent to be valid, it must meet several requirements, including "novelty." A patent is not "novel" if "the invention was patented or described in a printed publication in this or a foreign country . . . more than one year prior to the date of the application for patent in the United States." 35 U.S.C. § 102(b). Once a person has filed a patent application, he may later file another application as a "continuation" of the earlier patent. If the continuation application meets certain requirements, delineated in 35 U.S.C. § 120 ("section 120"), it gets the benefit of the prior application's filing date for the purpose of assessing novelty. See 4A Donald S. Chisum, Chisum on Patents § 13.01. The earlier application is known as the "parent" application and the continuation application is known as the "child" application. Id. § 13.03. The child application is said to "claim priority" to the parent application. Id. An additional application may then be filed as a continuation to the child application, and this "grandchild" application also gets the benefit of the initial application's filing date. Hence, continuation applications can be strung together into a chain, without limit, with all of the later applications claiming priority to the original application's filing date. See Application of Henriksen, 399 F.2d 253, 256 (C.C.P.A. 1968).
This case arises from a chain of patent applications relating to a multimedia database search system for retrieving textual and graphical information. The chain began in 1989 and culminated in two applications filed in 2005. Britannica was represented by Dickstein Shapiro in the prosecution of each of the patents in the chain. The initial application ("First Application"), No. 07/426,917, was filed on October 26, 1989 and resulted in the issuance of Patent No. 5,241,671 ("'671 patent"). See Encyclopaedia Britannica, Inc. v. Alpine Elecs. of Am., Inc., 643 F. Supp. 2d 874, 877-78 (W.D. Tex. 2009) ("Alpine II"), aff'd, 609 F.3d 1345 (Fed. Cir. 2010) ("Alpine II Appeal"). A continuation application ("Second Application"), No. 08/113,955, was filed on August 31, 1993. Id. at 877-79. As described below, this application was later deemed abandoned. On February 28, 1994, a continuation application ("Third Application"), No. 08/202,985, was filed and resulted in the issuance of Patent No. 6,546,399. Id. On March 25, 2002, a continuation application ("Fourth Application"), No. 10/103,814, was filed and resulted in the issuance of Patent No. 6,978,277. Id. at 877-78. Finally, on June 13, 2005, two continuation applications, No. 11/150,812 and No. 11/150,494, were filed and resulted in the issuance of Patents No. 7,051,018 ("'018 patent") and No. 7,082,437 ("'437 patent"), respectively. Id. The patent chain is summarized in the following diagram:
Although not of consequence for present purposes, in addition to the Second Application, a redundant, identical continuation application, No. 08/113,893, was also filed on the same day (August 31, 1993). See Decl. of Jon D. Grossman ("Grossman Decl.") ¶¶ 5-6 (Compl. Ex. D). The Second Application was apparently originally filed as a "back-up" to this identical application. Id. ¶ 7; see also infra note 2. The identical application was expressly abandoned by Britannica on October 29, 2003 and is not part of the purported chain of priority. Grossman Decl. ¶ 12.
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The issues relevant to Britannica's complaint concern primarily the Second and Third Applications. On September 14, 1993, the United States Patent and Trademark Office ("PTO") sent Britannica a Notice of Incomplete Application regarding the Second Application. Id. at 878. This notice indicated that the first page of the Second Application was missing from the submitted application. As a result, the Second Application made no reference to the First Application and therefore did not claim priority to the First Application. Id. On October 29, 1993, Dickstein Shapiro filed a Petition for Granting a Filing Date, arguing that the missing page was not necessary for an understanding of the claimed subject matter and requesting that the application be accepted without the missing page and be granted its filing date of August 31, 1993. Alpine II, 643 F. Supp. 2d at 878. This petition was denied on the ground that the missing first page rendered the application incomplete under PTO's examination procedures. Id. The petition decision identified two ways that Britannica could remedy the problem: (1) file a request for reconsideration accompanied by an oath or declaration by the inventors or (2) file the missing page accompanied by a supplemental oath or declaration by the inventors. Id. at 878-79.
In addition to lacking a reference to the First Application, the Second Application did not include a declaration signed by each named inventor, as required by the Manuel of Patent Examining Procedure, or a filing fee. See Alpine II Appeal, 609 F.3d at 1347-48. The identical application that was filed on the same day as the Second Application (and eventually expressly abandoned) apparently did contain the required declaration and filing fee. See Grossman Decl. ¶ 5. Although Dickstein intended the Second Application only to serve as a "back-up" to the other application, Dickstein apparently later became confused by its own redundant filings and expressly abandoned the more complete of the two applications, rather than the "back-up." See id. ¶ 12. For present purposes, these additional flaws with the Second Application are moot, since the lack of reference to the First Application was a fatal flaw in and of itself in both of the identical applications.
On February 28, 1994, Dickstein, on behalf of Britannica, submitted a Petition for Extension of Time regarding the Second Application. Id. at 879. On the same date, Dickstein also submitted the Third Application. The Third Application claimed priority to the Second Application and indicated (erroneously) that the Second Application claimed priority to the First Application. Id. Dickstein did not thereafter submit any further materials for the Second Application, and the PTO issued a Notice of Abandonment regarding the Second Application on March 23, 1995. Id. Under the terms of section 120, a child application may claim priority to a parent application that is subsequently abandoned so long as the child application was filed before the parent's abandonment; hence, the abandonment of the Second Application, in and of itself, did not present a problem for the Third Application.
After the issuance of the patents, Britannica filed suits in 2005-2007 in the Western District of Texas seeking damages for their infringement. Britannica's lawsuits (collectively, "the Alpine litigation") generated two separate sets of decisions and appeals ("the Alpine I litigation" and "the Alpine II litigation"). The Alpine I litigation concerned Britannica's claim of infringement of the original '671 patent (issued from the First Application), while the Alpine II litigation regarded alleged infringement of the '018 and '437 patents (issued from the final applications in the chain). Britannica's complaint in the present case pertained only to the Alpine II litigation; the Alpine I litigation is the subject of the motions for leave to amend the complaint and is described in more detail below. Britannica was represented in both Alpine litigations by Baker Botts, LLP. Alpine II, 643 F. Supp. 2d at 875.
Britannica alleged infringement of the '671 patent in Encyclopaedia Britannica, Inc. v. Alpine Electronics of America, Inc., No. 1:05-cv-359-LY (filed May 16, 2005). This suit generated the Alpine I decisions. Furthermore, although the Alpine II decisions treated all the defendants collectively as one group, the decisions actually resulted from two separate lawsuits alleging infringement of the '018 and '437 patents. Britannica's complaint in Encyclopaedia Britannica, Inc. v. Alpine Electronics of America, Inc., No. 1:06-cv-578-LY (filed July 25, 2006) alleged infringement of the '437 patent, and Britannica later amended its complaint to include alleged infringement of the '018 patent. See Mem. of P. & A. in Supp. of Def.'s Mot. for Summ. J. as to Count I of the Compl. Based upon the Statute of Limitations [Docket Entry 10] ("Def.'s Summ. J. Mem.") at 7-8. Britannica's complaint in Encyclopaedia Britannica, Inc. v. Magellan Navigation, Inc., No. 1:07-cv-787-LY (filed May 21, 2007) alleged infringement of the '437 patent by another group of defendants. See Def.'s Summ. J. Mem. at 7-8.
The Alpine II defendants argued that the '018 and '437 patents were invalid by challenging the patents' priority chain. They did not dispute that the '018 and '437 patents had priority to the Third Application — that is, that the chain was valid from the Third Application onward. Id. at 876. However, the Alpine II defendants argued that the Third Application could not claim priority to the First Application because the intermediate Second Application lacked a reference to the First Application. Id.
The Alpine II court agreed with the defendants and held the patents invalid. The court found that the Second Application could not claim priority to the First Application because, under section 120, "for any application to be entitled to the filing date of a prior-filed application, it must . . . make explicit reference to the prior-filed application." Id. at 882. Furthermore, the court concluded that the lack of explicit reference in the Second Application could not be remedied by the Third Application because Section 120 "require[s] that each application in the chain must individually meet the requirements of the statute." Id. The defective Second Application, then, "breaks the chain of priority" and therefore "the Third Application is not entitled to the benefit of the filing date of the First Application." Id. Due to Britannica's publication of a foreign patent application more than one year prior to the filing date of the Third Application, the court held that the '018 and '437 patents, as progeny of the Third Application, were invalid and granted defendants' motion for summary judgment. Id. On appeal, the Federal Circuit affirmed. That court noted that "whether 35 U.S.C. § 120 requires an intermediate application in a priority chain to 'contain a specific reference to the earlier filed application'" was "one of first impression for this court." Alpine II Appeal, 609 F.3d at 1349.
The complaint in the present case was filed on March 18, 2010, subsequent to the Alpine II district court decision but prior to the affirmance. This Court briefly stayed the case until the Federal Circuit upheld the district court's decision on June 18, 2010.
II. Britannica's Complaint in this Court
Britannica's complaint alleges that Dickstein was negligent and breached its fiduciary duty to Britannica over two distinct time periods. The first period was during the prosecution of the patents in the 1990s. Britannica alleges that "Dickstein's incompetent prosecution efforts exposed the '018 and '437 patents to an invalidity defense." Id. ¶ 10. Britannica also alleges later misconduct by Dickstein during the course of the Alpine litigation. Britannica alleges that "[w]hen Dickstein learned of the Summary Judgment motion filed [in Alpine II] in October of 2007, Dickstein did two damaging things. First, Dickstein pursued a self-serving[] course of action in the Patent Office (PTO) that would arguably seek to remedy Dickstein's earlier errors and incompetence. Second, and without any notice to Britannica as mandated by Dickstein's fiduciary status, Dickstein alerted Dickstein's insurer to the likelihood of a malpractice claim by Britannica." Id. ¶ 12. Britannica argues that "[b]ecause of Dickstein's self-interested strategy before the PTO, Britannica's position in the Summary judgment proceedings [in Alpine II] was further weakened." Id. ¶ 13. More specifically, Britannica cites an affidavit that was submitted to the PTO by Dickstein partner Jon D. Grossman, who was responsible for the patents' prosecution in the 1990s. Id. ¶ 14. Britannica alleges that this affidavit "essentially confesses negligence on the part of Britannica's counsel Dickstein" and "doomed any possibility of the PTO granting relief that would have salvaged the '018 and '437 patents." Id. ¶ 15. Britannica further alleges that this affidavit "acknowledges that Grossman/Dickstein fraudulently suppressed and concealed the incompetent prosecution of the relevant Britannica patent applications from Britannica and demonstrates that Dickstein is estopped from challenging Britannica's pursuit of damages resulting from this conduct." Id.
According to Britannica's complaint, this Court has jurisdiction pursuant to 28 U.S.C. § 1338, which states in part that "district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents." It is not entirely clear, however, that this case, sounding in malpractice, actually "arises under" the patent laws. See Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808-09 (1988). In any case, the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332 because the plaintiff is a corporation organized under the laws of Delaware with its principal place of business in Illinois and the defendant is a limited liability partnership with a principal place of business in Washington, D.C. See Compl. ¶¶ 1-2.
The two counts of Britannica's complaint allege slightly different theories of liability. Count I of the complaint is based on professional negligence. Count I alleges that Dickstein committed negligence "by failing to protect Britannica's valuable intellectual property assets, which Dickstein pledged to do." Compl. ¶ 20. Count I also alleges that "Dickstein further breached the appropriate standard of care and Dickstein's fiduciary obligations to Britannica by concealing the Grossman prosecution failures and Dickstein's conflicted status." Id. Count I therefore contends that "Dickstein's conduct has proximately caused Britannica many millions in damage, not only in the context of the failed Texas litigation but also in terms of millions of dollars to be realized by Britannica from royalties and licensing fees, which would otherwise be recoverable from infringers of the '018 and '437 and related patents who were not defendants in the Texas litigation." Id. Since Count I references both periods of alleged misconduct by Britannica — the initial prosecution of the patent in the 1990s and the later action after Alpine was underway — the Court interprets the negligence claim to pertain to conduct from both periods.
Count II of Britannica's complaint is based on breach of fiduciary duty. Count II alleges that "Dickstein owed Britannica fiduciary duties" and that "Dickstein willfully breached those duties by failing to advise Britannica of the conflicts that existed once Dickstein learned of the summary judgment proceedings, by notifying the Dickstein carrier without notice to Britannica; and by attempting to self-servingly rectify Dickstein's earlier errors, omissions and negligence, all without giving Britannica the notice and guidance mandated by Rule 1.7 of the Rules of Professional Conduct." Id. ¶ 23. Since Count II references only alleged misconduct occurring during the Alpine litigation, the Court interprets the breach of fiduciary duty claim to relate only to the conduct from that period.
III. Dickstein's Motion for Summary Judgment on Count I
Dickstein's motion for summary judgment argues that Count I of the complaint is barred by the statute of limitations, which is three years from the date the claim accrues. Dickstein contends that the negligence claim accrued more than three years before this case was filed on March 18, 2010 because Britannica was on notice of Dickstein's alleged malpractice at the very latest when the Alpine II defendants filed their answer on October 25, 2006. a. Summary Judgment Standard
Summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The party seeking summary judgment bears the initial responsibility of demonstrating the absence of a genuine dispute of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party may successfully support its motion by identifying those portions of "the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of motion only), admissions, interrogatory answers, or other materials," which it believes demonstrate the absence of a genuine issue of material fact. Fed. R. Civ. P. 56(c)(1); see Celotex, 477 U.S. at 323.
In determining whether there exists a genuine dispute of material fact sufficient to preclude summary judgment, the court must regard the non-movant's statements as true and accept all evidence and make all inferences in the non-movant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A non-moving party, however, must establish more than the "mere existence of a scintilla of evidence" in support of its position. Id. at 252. Moreover, "if the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (citations omitted). Summary judgment, then, is appropriate if the non- movant fails to offer "evidence on which the jury could reasonably find for the [non-movant]." Id. at 252. b. Statute of Limitations Law
Under District of Columbia law, legal malpractice claims must be filed within three years from the time the right to maintain the action accrues. Knight v. Furlow, 553 A.2d 1232, 1233 (D.C. 1989); see D.C. Code § 12-301(8). A cause of action accrues for statute of limitations purposes at the time the injury actually occurs. Knight, 553 A.2d at 1234. However, "where the relationship between the fact of injury and some tortious conduct is obscure at the time of injury," the D.C. Court of Appeals has adopted the "discovery" rule. Id. "Under this rule, a cause of action accrues when the plaintiff has knowledge of (or by the exercise of reasonable diligence should have knowledge of) (1) the existence of the injury, (2) its cause in fact, and (3) some evidence of wrongdoing." Id.; see also Wagner v. Sellinger, 847 A.2d 1151, 1154 (D.C. 2004) ("In short, knowledge is deemed sufficient if the plaintiff has reason to suspect that the defendant did something wrong, even if the full extent of the wrongdoing is not yet known.") The D.C. Court of Appeals has also adopted the "continuous representation" rule. See R.D.H. Commc'ns, Ltd. v. Winston, 700 A.2d 766, 768 (D.C. 1997). "Under this rule, 'when the injury to the client may have occurred during the period the attorney was retained, the malpractice cause of action does not accrue until the attorney's representation concerning the particular matter in issue is terminated.'" Id. (quoting Weisberg v. Williams, Connolly & Califano, 390 A.2d 992, 995 (D.C. 1978)).
In Weisberg, the D.C. Court of Appeals considered a legal malpractice claim in which the clients had retained attorneys to prosecute claims against the United States government. 390 A.2d at 993-994. The clients alleged that the attorneys negligently handled their case by, among other things, "allowing the statute of limitations to run on the major part of the appellants' claims under the [Federal Tort Claims] Act." Id. at 994. The court held that the negligence claim against the attorneys was itself barred by the statute of limitations. The court rejected the clients' assertions that their cause of action accrued as late as "the date on which [the clients'] successor attorney informed them that the judge had ruled that the statute of limitations period had run on part of their claims" or "the date on which [the clients] finally settled the case against the government for less than they would have absent appellees' alleged negligence." Id. at 995. The court concluded that the clients "were on actual notice of all the elements that formed the basis of their claim "when the government earlier pled the statute of limitations in its answer, at which time the clients "were represented by successor counsel and certainly should have been aware that their case contained a Statute of Limitations problem." Id. at 995, 996.
Relying on Weisberg, the D.C. Court of Appeals subsequently dismissed as time-barred a negligence claim against an attorney who filed the client's disability suit too late. Bleck v. Power, 955 A.2d 712, 714 (D.C. 2008). The court held that the cause of action accrued at the latest when the client "knew [the attorney] had missed the contractual filing, and she had replaced him with new counsel." Id. at 715-16. On the other hand, the court in Wagner v. Sellinger held that a malpractice claim did not accrue on the date that an attorney failed to conduct adequate discovery while litigating a case for a client, concluding instead that the cause of action accrued only when the case was ultimately lost, as there was a "lack of a demonstrable injury before the jury verdict was entered." 847 A.2d at 1154, 1157. The Bleck court characterized the outcome in Wagner as "turn[ing] on the peculiar difficulty of determining whether an attorney's inferior representation in the conduct of litigation is injurious before the outcome of the litigation is known." 955 A.2d at 717.
In the recent case of Hillbroom v. PricewaterhouseCoopers LLP, 17 A.3d 566, 568 (D.C. 2011), the D.C. Court of Appeals considered a malpractice suit in which the attorneys filed an informal claim for a refund of their clients' federal estate taxes but failed to timely file a formal claim. The attorneys, relying on Weisberg and Bleck, asserted that the statute of limitations began to run when the clients "retained new counsel and admittedly were aware that [their former attorneys] had missed the tax refund filing deadlines," while the clients, relying on Wagner, argued that "the lawsuit was timely filed because they did not suffer an 'actual injury' . . . until they settled their refund claims with the IRS." Id. at 571-72. The court rejected both contentions, observing that "our case law 'clearly contemplates a flexible, case-by-case approach'" to statute of limitations issues. Id. at 574 (quoting Williams v. Mordkofsky, 901 F.2d 158, 162 (D.C. Cir. 1990)). The court distinguished Weisberg and Bleck, stating that "the statutory deadlines for filing formal claims for federal estate tax refunds described in the Complaint are subject to various exceptions that have no counterparts under the statute of limitations that was involved in Weisberg or the insurance contract that was involved in Bleck." 17 A.3d at 574. The court determined that "neither from the face of the Complaint nor from the undeveloped record can it fairly be said that, for statute of limitations purposes, [the clients] must be charged with knowledge of their injury" when the filing deadlines were missed. Id. at 577. On the other hand, the court also rejected the contention that the claim did not accrue until the clients ultimately settled their refund claims with the IRS. Id. at 578. Rather, the court concluded that "[a]t the latest, [the clients] knew or should have known of their injury — and their cause of action accrued — when they learned of the IRS's definitive position" in opposition to their claims. Id. c. Parties' Arguments
Dickstein maintains that three dates are relevant to the accrual of plaintiff's claim: May 23, 2006; July 25, 2006; and October 25, 2006. Dickstein contends that plaintiff's alleged injury occurred by no later than May 23, 2006, the date on which the '018 patent issued. Def.'s Summ. J. Mem. at 16. Dickstein argues that "an alleged failure to adequately protect Britannica's interests during prosecution" is "akin to missing a filing deadline, as in Bleck, or negligently drafting a document, as discussed in Wagner." Id. at 18. Next, Dickstein argues that Britannica could have discovered its injury "by the exercise of reasonable diligence," Knight, 553 A. 2d at 1234, when the Alpine case was filed in the Western District of Texas on July 25, 2006. Def.'s Summ. J. Mem. at 19. Dickstein argues that Britannica's attorneys in the infringement action, Baker Botts, "should have carefully reviewed the entire prosecution history" prior to filing suit and that this review would have put Britannica on notice of the problem. Def.'s Summ. J. Mem. at 21. Finally, Dickstein argues that Britannica was put on notice at the latest on October 25, 2006, when the Alpine defendants filed an answer asserting an invalidity defense based on a failure to meet the requirements of section 120. Dickstein argues that Britannica then "knew there was a potential § 120 issue in the litigation" and that "[a] reasonable attorney in these circumstances would have reviewed the prosecution history of the '437 patent and the preceding applications in the chain to determine whether there was any potential § 120 defect." Id. at 22.
Britannica responds that its attorneys were not aware of any issues with the patents until October 5, 2007, the date a motion for summary judgment was filed in Alpine specifying the problems with the '437 and '018 patents. Pl.'s Opp'n to Def.'s Mot. for Summ. J as to Count I Based upon the Statute of Limitations [Docket Entry 18] ("Pl.'s Opp'n to Summ. J.") at 5, 10. Britannica cites the affidavit from Dickstein attorney Grossman (the individual responsible for the patent prosecution), who stated that he was "not aware that there were any issues concerning priority . . . until on or about October 5, 2007." Id. at 5; see Grossman Decl. ¶ 19. Relying on Wagner, Britannica also argues that it was not injured until August 3, 2009, when the Alpine II court held the patents invalid. Pl.'s Opp'n to Summ. J. at 9-10. With respect to the October 2006 date, Britannica notes that "Alpine's Answer to the complaint listed boilerplate string cites claiming the patents were 'invalid, unenforceable, and or void'" and that section 120 was one of eight cites with no factual specificity. Id. at 5. Britannica also maintains that Dickstein continuously represented Britannica until July 2009, noting that Dickstein billed Britannica for work relating to the multimedia search patents in 2007, 2008, and 2009. Id. at 5, 11-14. With respect to Britannica's continuous representation argument, Dickstein responds that it did not perform sufficient work for Britannica after the '018 and '437 patents issued in 2006 to constitute continuous representation. d. Analysis
Britannica also argued in its opposition that the statute of limitations was tolled by an agreement between Dickstein and Britannica, but at the motions hearing held before the Court on August 5, 2011, the parties agreed that the tolling agreement was irrelevant for statute of limitations purposes.
The Court has been presented with five relevant events regarding the possible accrual date of the statute of limitations for Claim I. In chronological order, they are: the issuance of the patents in 2006, the filing of Alpine II in July 2006, the filing of the answer in October 2006, the filing of the motion for summary judgment in October 2007, and the Alpine II decision in August 2009. Since this action was filed in March 2010 and the statute of limitations is three years, the professional negligence claim in Count I would be allowed under the latter two dates but barred under the first three dates unless saved by the continuous representation exception.
Applying the relevant case law quickly eliminates the first and last dates — when the patents were issued and when Alpine II was decided — as possibilities for the date of accrual. The malpractice cause of action accrues only when the client "has knowledge of (or by the exercise of reasonable diligence should have knowledge of)" the injury. Knight, 553 A.2d at 1234. Hence, Weisberg, Bleck and Hillbroom all found the statute of limitations to accrue only when notice was made to the client of the attorney's mistake or the record suggested that the client was actually aware of it. There is no reason to believe that the PTO's issuance of the patents put Britannica on notice that those patents were invalid; quite the opposite, it would have been reasonable at that time to at least presume that the patents were valid. Hence, the cause of action did not accrue on the date the patents were issued. Furthermore, Hillbroom eliminates the date that the Alpine II court ruled the patents invalid as a candidate. Hillbroom makes clear that accrual ordinarily occurs when the client is put on notice of a possible problem by notification of opposition to its position, not when the matter is later resolved to the client's detriment. And Britannica did not here face the "peculiar difficulty" encountered in Wagner of determining whether attorney conduct in the midst of litigation caused injury before the litigation concluded.
To be sure, the Court recognizes the apparent tension between Wagner and the other cases. Although the court suggested in Bleck that Wagner presented a "peculiar difficulty," in fact the predicament presented in Wagner — determining whether a mistake by an attorney would, at the end of the day, actually result in harm to the client — was also faced by the clients in the other cases. Contrary to Wagner, the relevant inquiry is when the client was put on notice of the attorney's mistake, not when it became certain that the mistake would result in injury. In any case, the later cases from the D.C. Court of Appeals appear to limit Wagner to the factual scenario of attorney error during litigation, which does not apply to the present case.
Although a more plausible candidate, the filing of the Alpine II lawsuit in July 2006 was also insufficient to trigger accrual of the malpractice claim on the record before the Court. With respect to actual knowledge of a problem with the patents, Alpine II's filing in truth cuts against accrual. That Britannica sued to enforce its patents suggests that Britannica thought the patents were valid, and nothing in the record suggests that Britannica sued with anything other than the expectation that it would win. On the other hand, Dickstein presents a plausible argument that Baker Botts should have reviewed Britannica's patents before filing suit and that that review should have notified Baker Botts (and therefore Britannica) that there was a problem. Yet Weisberg undermines this line of reasoning; though the court in that case did ultimately decide that the statute of limitations had elapsed, it relied on the later date of the defendants' answer to the underlying lawsuit, not the date of filing the lawsuit. In any event, given that PTO granted the '018 and '437 patents, presumptively indicating validity, and that the problem was several steps in the patent chain earlier and occurred more than a decade prior to Alpine II's filing, it is difficult for the Court to conclude that an exercise of reasonable diligence in preparing for Alpine II would necessarily have put Britannica on notice of Dickstein's mistake.
The two best candidates for the date of accrual are the date of the filing of the answer in October 2006 and the date of the filing of the motion for summary judgment in October 2007 — if the latter then Count I survives, but if the former it does not. Here the question is whether this case is more similar to Weisberg or to Hillbroom. In Weisberg, the court held that accrual was triggered by an answer raising the underlying problem with the plaintiffs' case. But Hillbroom emphasized the need for a "flexible, case-by-case approach" and distinguished the relatively straightforward statute of limitations problem of which the answer notified the Weisberg plaintiffs from a less clear problem with the informal tax refund claim filed in Hillbroom. In this case, the Alpine II defendants' answer provided some notice to Britannica that the defendants would be asserting a section 120 problem with Britannica's patents, but that notice was in the form of a string citation with no detail about what the problem actually was. Furthermore, although a review of the prosecution history would have revealed that there were problems with the Second Application, leading to that application's eventual abandonment, there was at least a wrinkle of ambiguity (what the Federal Circuit called a "question of first impression") regarding whether the Third Application cured those problems. When the motion for summary judgment was filed, of course, it laid out in detail the grounds for the defendants' opposition — the relevant accrual point in Hillbroom — and notified Britannica of the argument that would eventually carry the day in Alpine II and on appeal.
Taking this all into account, the Court cannot, on the current record, place the date of accrual at the filing of the Alpine II answer. The statute of limitations problem in Weisberg would have been easier to discern on the basis of an answer than was the problem that doomed Britannica's case here, given the complexity of the patent prosecution process generally and the history of these patents specifically. The string citation in the answer, absent more, cannot therefore be construed as sufficient notice of how the Alpine II defendants would be challenging the patents. Taking the flexible approach described in Hillbroom, the Court finds that the motion for summary judgment filed in October 2007 made the opposition to Britannica's patents clear; on the current record, the cause of action has not been shown to have accrued prior to that date.
Hence, the Court concludes at this time that the filing of Count I in March 2010 was not outside the statute of limitations and the motion for summary judgment must be denied. Of course, if further development of the record produces evidence that Britannica either actually knew or should have known of the section 120 problems at an earlier time, the Court may revisit this statute of limitations issue.
IV. Britannica's Motions for Leave to Amend the Complaint and Britannica's Motion to Strike
Britannica has filed two motions for leave to amend its complaint. These amendments concern the Alpine I case, which pertained to the First Application in the chain and the original patent, '671, that was issued from that application. In addition to the '437 and '018 patents (the terminal patents in the chain) being ruled invalid in Alpine II, the '671 patent (the first patent in the chain) was also ruled invalid on other grounds in Alpine I. Although the two counts alleged in the original complaint — professional negligence and breach of fiduciary duty — would remain the same under the amended complaints, the motions to amend seek to supplement the negligence claim (Count I) to include allegations regarding the First Application and the '671 patent. The first and second amended complaints are similar in substance, but the second amended complaint alleges more specifically that Dickstein continuously represented Britannica, for statute of limitations purposes, during the Alpine litigation. Dickstein opposes the motions for leave to amend on the ground that the amendments would not survive a motion to dismiss and therefore are futile, arguing that the claims with respect to the '671 patents are barred by the statute of limitations. In addition, Britannica has filed a motion to strike Dickstein's brief in opposition to Britannica's second motion to amend. Britannica argues that the brief violated the Court's directive for simultaneous filings regarding the continuous representation issue. a. Motion to Strike
The Court will address Britannica's motion to strike as a preliminary matter. Britannica argues that the Court "explicitly denied [Dickstein's] request to file a responsive pleading" at the motions hearing on August 5, 2011. Pl.'s Mot. to Strike [Docket Entry 34] at 1. Dickstein responds that Britannica's filing subsequent to the hearing went beyond a factual filing and made arguments in support of Britannica's position, to which Dickstein had a right to respond. Def.'s Mem. in Opp'n to Pl.'s Mot. to Strike [Docket Entry 35] at 1. The Court agrees that the motion accompanying Britannica's filing went beyond the factual filing contemplated by the Court's discussion with the parties at the motions hearing and made legal arguments in support of its position. Hence, it was reasonable for Dickstein to respond to those arguments. Accordingly, the Court will deny the motion to strike Dickstein's opposition brief. The Court notes that its consideration of the opposition brief was not determinative in its decisions regarding the motions for leave to amend. b. Background
A valid patent application must include a "specification" that "contain[s] a written description of the invention, and of the manner and process of making and using it." 35 U.S.C. § 112. A patent specification must "particularly point[] out and distinctly claim[] the subject matter which the applicant regards as his invention." Id. This requirement is known as "definiteness." See All Dental Prodx, LLC v. Advantage Dental Prods., Inc., 309 F.3d 774, 779 (Fed. Cir. 2002).
As noted above, the Alpine I litigation resulted from a suit by Britannica to enforce the original '671 patent. On December 29, 2005, a defendant in Alpine I moved for summary judgment, arguing that the '671 patent's specification was indefinite. See Am. Compl. ¶ 10 (Ex. 1 to Pl.'s Mot. to Amend the Compl. [Docket Entry 22]). The district court granted the motion for summary judgment on September 30, 2008, agreeing that the patent was indefinite and therefore invalid. Encyclopaedia Britannica, Inc. v. Alpine Elecs. of Am., Inc., No. 05-459, WL 7328271, at *10-18 (W.D. Tex. Sept. 30, 2008), aff'd, Encyclopaedia Britannica, Inc. v. Alpine Elecs. of Am., Inc., 355 F. App'x 389 (Fed. Cir. 2009). c. Leave to Amend and Motion to Dismiss Standards
Federal Rule of Civil Procedure 15(a)(2) instructs courts to "freely give" leave to amend a pleading "when justice so requires." Whether to grant a motion to amend is within the sound discretion of the district court. Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996). However, it is an abuse of that discretion to deny a motion to amend without a "justifying" or sufficient reason. Foman v. Davis, 371 U.S. 178, 182 (1962). These reasons include "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies . . . undue prejudice to the opposing party . . . futility of amendment, etc." Id. Generally, under Rule 15(a) the non-movant bears the burden of persuasion that a motion to amend should be denied. See Dove v. Wash. Metro. Area Transit Auth., 221 F.R.D. 246, 247 (D.D.C. 2004); see also Gudavich v. District of Columbia, 22 F. App'x 17, 18 (D.C. Cir. 2001) (noting the non-movant "failed to show prejudice from the district court's action in allowing the motion to amend"). A court may, however, "deny a motion to amend on grounds of futility where the proposed pleading would not survive a motion to dismiss." Nat'l Wrestling Coaches Ass'n v. Dep't of Educ., 366 F.3d 930, 945 (D.C. Cir. 2004); see also Foman, 371 U.S. at 182.
All that the Federal Rules of Civil Procedure require of a complaint is that it contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). Although "detailed factual allegations" are not necessary to withstand a motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555-56; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570); accord Atherton v. Dist. of Columbia Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009). A complaint is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S. Ct. at 1949. This amounts to a "two-pronged approach" under which a court first identifies the factual allegations entitled to an assumption of truth and then determines "whether they plausibly give rise to an entitlement to relief." Id. at 1950-51.
The notice pleading rules are not meant to impose a great burden on a plaintiff. Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347 (2005); see also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512-13 (2002). When the sufficiency of a complaint is challenged by a motion to dismiss, the plaintiff's factual allegations must be presumed true and should be liberally construed in his or her favor. Leatherman v. Tarrant Cnty. Narcotics & Coordination Unit, 507 U.S. 163, 164 (1993); Phillips v. Bureau of Prisons, 591 F.2d 966, 968 (D.C. Cir. 1979); see also Erickson, 551 U.S. at 94 (citing Twombly, 550 U.S. at 555-56). The plaintiff must be given every favorable inference that may be drawn from the allegations of fact. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). However, "the court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint." Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). Nor does the court accept "a legal conclusion couched as a factual allegation," or "naked assertions [of unlawful misconduct] devoid of further factual enhancement." Iqbal, 129 S. Ct. at 1949-50 (quotation marks omitted); see also Aktieselskabet AF 21. November 21 v. Fame Jeans Inc., 525 F.3d 8, 17 n.4 (D.C. Cir. 2008) (explaining that the court has "never accepted legal conclusions cast in the form of factual allegations"). d. Britannica's Motions to Amend and Dickstein's Opposition
The first amended complaint alleges that Dickstein committed negligence in its prosecution of the '671 patent, in addition to its alleged negligence regarding the '018 and '437 patents. See First Am. Compl. ¶¶ 10-15. The second amended complaint supplements the first amended complaint regarding whether Dickstein continuously represented Britannica beyond the patents' prosecution through the course of the Alpine litigation. The second amended complaint alleges that Britannica and Dickstein's attorney-client "relationship with respect to the '671 patent and its progeny remained active from 1989 to 2009" and describes the facts that indicate that Dickstein continuously represented Britannica through 2009. See Second Am. Compl. (Ex. 1 to Pl.'s Mot. for Leave to File Second Am. Compl. [Docket Entry 31]) ¶¶ 11-15, 30.
Dickstein contends that Britannica's amended complaints should be dismissed as futile because the amended complaints would not survive a motion to dismiss. Among other things, Dickstein contends that Britannica's claim of malpractice regarding the '671 patent is time-barred. Dickstein argues that Britannica suffered its claimed injury by no later than July 2, 2002, when the PTO issued a certificate for the '671 patent. See Def.'s Mem. of P. & A. in Opp'n to Pl.'s Mot. for Leave to File First Am. Compl. [Docket Entry 24] ("Def.'s Opp'n to Leave to File") at 11-12. Dickstein asserts that Britannica's claim accrued by no later than December 29, 2005, the date of the filing of the motion for summary judgment in Alpine I, and that the claim is therefore outside the three-year statute of limitations period. Id. at 12. In response, Britannica argues that the statute of limitations did not begin to run until the Alpine I decision in September 2008 and, in the alternative, that the continuous representation rule tolled the statute of limitations until 2009. See Pl.'s Reply in Supp. of Mot. to Amend the Compl. [Docket Entry 27] at 6-10. The parties have each filed a flurry of exhibits regarding the continuous representation argument, which are addressed in more detail below. e. Analysis of Accrual Date
Putting aside the continuous representation issue for a moment, resolving the accrual date of the Alpine I negligence action — i.e., the negligence in prosecution of the '671 patent — is more straightforward than the resolution of the accrual date with respect to Alpine II — i.e., the negligence relating to the '018 and '437 patents. The issue is easier because the Alpine I lawsuit, answer, and motion for summary judgment were all filed more than three years prior to the filing of this case. Hence, the Court need not distinguish among those three events, as was required with respect to Alpine II. The only question is whether accrual occurred, at the latest, upon the filing of the motion for summary judgment or whether the cause of action did not accrue until the patents were later ruled invalid by the Alpine I court.
On this question, the Court's reasoning and application of the relevant case law regarding Alpine II applies in full force regarding Alpine I. The Hillbroom and Bleck cases make clear that accrual can occur before the ultimate resolution of the underlying issue. Those cases stand for the proposition that accrual occurs when the client is on notice of a possible problem, not when the problem is later conclusively determined to have caused injury. The only conflicting authority is Wagner, and Bleck and Hillbroom clarified that Wagner was based on the "peculiar difficulty" of determining that attorney misconduct in the midst of litigation actually caused injury. That was not the situation here, and so Hillbroom and Bleck control. Accrual occurred when Britannica was notified of the Alpine I defendants' opposition to the patents, at the very latest when the motion for summary judgment was filed. The cause of action therefore accrued outside the statute of limitations unless the continuous representation exception applies. f. Analysis of Continuous Representation Issue
As noted above, the continuous representation issue is the focus of the second motion to amend the complaint. The parties have conflicting views about how to interpret Dickstein's involvement with the '671 patent after its issuance and have filed various exhibits and declarations with respect to the issue. But it does not appear that the parties dispute any facts regarding what happened, just how the events are characterized.
Dickstein Shapiro had principal responsibility for prosecuting all of the patents before the PTO. See Second Am. Compl. ¶¶ 5-6. Dickstein's prosecution work, and the issuance of the patents, occurred prior to the filing of Alpine I, more than three years before the filing of this lawsuit. See id. ¶ 6. Dickstein has filed a record of the docket in Alpine I. See Ex. 11 to Def.'s Opp'n to Leave to File. The counsel of record in Alpine was Baker Botts. Dickstein nonetheless also played some role in that litigation. See Second Am. Compl. ¶¶ 12-14. Dickstein has filed with the Court the entirety of its billing records regarding Britannica in the three years immediately preceding this case. See App. 6A to Pl.'s Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Opp'n to Mot. to Dismiss") ("App. 6A"). In August 2007, Dickstein attorney Grossman received a deposition subpoena in the Alpine litigation and billed Britannica for preparation regarding that deposition. See App. 6A at 73-74. In April 2008, Britannica's general counsel contacted Grossman via email regarding the Alpine litigation. Decl. of William J. Bowe ("Bowe Decl.") ¶ 10 (Ex. 8 to Mot. for Leave to File Sec. Am. Compl [Docket Entry 31]). In June 2008, Dickstein billed Britannica for research involving a law review article, which apparently was in response to a press inquiry about the patents. Id. ¶ 11; see Decl. of Gary M. Hoffman [Docket Entry 32] ("Hoffman Decl.") ¶ 16. In October 2008, Grossman took remedial action with the PTO, including filing an affidavit describing the problems with the Second Application. See Compl. ¶ ¶ 13-15; Grossman Decl. And in September 2008, Dickstein appears to have conducted research regarding the inventors of the multimedia search system and contacted them or their relatives. App. 6A at 85-87. Dickstein also filed maintenance fees for the '018 and '437 patents in June and July 2009. See Hoffman Decl. ¶ 10. The billing records also include occasional other minor entries.
Britannica maintains that Dickstein represented Britannica in connection with the patent chain through 2009. Pl.'s Reply in Supp. of Mot. to Amend the Compl. [Docket Entry 27] at 8-10. Britannica characterizes Dickstein as being part of a "Patent Prosecution and Enforcement Strategy Group." Bowe Decl. ¶ 5. Britannica states that "[d]uring the pendency of the '671 summary judgment motion, Dickstein remained Britannica's counsel. Because of Dickstein's 16 years of work on patenting the invention, Dickstein had important knowledge to assist in defending the '671 Patent as well as its progeny in the legal proceedings then ongoing. It would have been problematic to dismiss Dickstein as counsel during that time period . . . ." Id. ¶ 9. Britannica also asserts that "Dickstein's internal records are likely to show additional evidence of [work] relating to the '671 Patent from August 2005 to at least 2009." Id. ¶ 12.
The District of Columbia Court of Appeals adopted the continuous representation rule in R.D.H. Communications v. Winston. "The rule's primary purpose is to avoid placing a client in the untenable position of suing his attorney while the latter continues to represent him. For that reason, the rule is limited to situations in which the attorney who allegedly was responsible for the malpractice continues to represent the client in that case." Williams, 901 F.2d at 163 (quotation marks omitted). The rule ceases to apply when "the attorney's representation concerning the particular matter at issue is terminated." Bradley v. Nat'l Ass'n of Sec. Dealers Dispute Resolution, Inc., 433 F.3d 846, 850 (D.C. Cir. 2005). When the representation has terminated is a "question of fact." Winston, 700 A.2d at 768.
In Williams, the D.C. Circuit ruled that representation terminated when the parties were in an adversarial position and the clients were no longer relying on the attorney for legal advice. 901 F.2d at 163. The court rejected the notion "that the policy underlying the rule . . . is broad enough to allow extension of the rule to any negotiations between an attorney and a former client that seek to repair damage done during the representation." Id. By contrast, a judge in this district held that attorneys continued to represent clients during an IRS audit and litigation regarding trusts previously created and administered by the attorneys for the clients, even though the client hired other counsel for the audit and litigation after the attorney's original mistake came to light. De May v. Moore & Bruce, LLP, 584 F. Supp. 2d 170, 181 (D.D.C. 2008). That court determined that "defendants' roles in creating and amending the trusts, administering the trusts, and defending the trusts against the IRS were all inextricably intertwined and without interruption for almost a decade." Id. at 182. The court therefore concluded that "the facts relating to defendants' legal work cannot be conveniently divided into transactional work versus litigation given the extensive overlap between these functions." Id.
Here, the Court finds that Dickstein's work on behalf of Britannica after the issuance of the patents in 2006 was insufficient for the application of the continuous representation rule. The bulk of the work performed by Dickstein after 2006 concerned Dickstein's participation in the Alpine litigation and the related remedial efforts at the PTO. Although Britannica now seeks to characterize Britannica's involvement in the litigation as substantial, the fact of the matter is that Britannica retained Baker Botts to litigate the Alpine cases, not Dickstein. The Alpine I docket sheet reveals substantial activity in the case, and almost none of that activity involved Dickstein. That Grossman was subpoenaed as a witness based on his previous work on the patents and that Dickstein billed for Grossman's work relating to his deposition cannot transform Dickstein into Britannica's counsel in the litigation. The purpose of the continuous representation rule would not be served by triggering the rule on that basis; there is no reason to believe that Britannica was faced with a choice between suing Dickstein and having Dickstein respond to a subpoena and participate in ongoing litigation as a witness. Likewise, that Grossman and Britannica's general counsel may have had a single telephone conversation about the Alpine litigation is also insufficient to invoke the rule. If such minimal participation in a client's ongoing affairs were enough to toll the statute of limitations, attorneys would have substantial disincentives from providing even the barest assistance to clients regarding matters in which they are knowledgeable based on their prior representation of the client.
Dickstein's remedial efforts at the PTO similarly do not warrant the application of the continuous representation rule. To be sure, these efforts were closest to the heart of how Dickstein did continue to represent Britannica — in the prosecution of patents at the PTO. But it is not in dispute that these efforts were made only when the Alpine defendants' made clear how they would be challenging the patents. Hence, Dickstein was, as in Williams, "seek[ing] to repair damage done during the representation." 901 F.2d at 163. The purposes of the continuous representation rule would be ill served if the limitations period was tolled by an attorney's remedial efforts in such a situation, since attorneys would be discouraged from trying to fix mistakes previously made in concluded matters for fear of tolling the statute of limitations. That situation is far afield from a client facing the prospect of terminating representation in an ongoing matter in order to be able to sue for malpractice, which is the situation contemplated by the rule.
The remaining stray actions taken by Dickstein on behalf of Britannica during this time period are also insufficient to trigger the rule. A law firm may, as a courtesy to its client, pay the renewal fees on patents that the firm prosecuted, but payment of a renewal fee can hardly be characterized as legal representation for purposes of the continuous representation rule. Equally insignificant is pulling a law review article for a client in response to a press inquiry about a matter on which an attorney represented the client. And whatever the reason that Dickstein researched and tried to contact the inventors of the patents, such action and the other, even more minor entries are too insignificant to toll the statute of limitations.
There is admittedly some resemblance between De May and the present situation, but the facts of that case are distinguishable from the facts here. It was probably foreseeable here, as the court found relevant in that case, that the attorney would become involved in the client's later litigation regarding the attorney's work — that is, that Dickstein would become involved in Britannica's infringement suits regarding the patents that Dickstein prosecuted. The nature of patent prosecution is such that prosecution efforts may become relevant in subsequent litigation, and a prosecution attorney's work is not necessarily done simply because the patent has issued. But unlike in De May, where the attorney fully represented the client in the subsequent action and was only later supplanted by other attorneys, here Britannica hired Baker Botts to bring the infringement suits, separately from Dickstein's prosecution of the patents. It appears that Britannica itself considered the representation "divided into transactional work versus litigation." De May, 584 F. Supp. 2d at 182. That Dickstein provided some assistance does not extend its representation of Britannica once Britannica retained another firm to actually handle the litigation. Hence, the earlier and later efforts were not "inextricably intertwined" here, as they were in De May.
Finally, although Britannica has asserted that further discovery would produce additional instances of Dickstein's work during the statute of limitations period, Dickstein has stated that it has already turned over its records regarding the work it performed for Britannica in this time period. It is difficult to see what Britannica could possibly hope to obtain in discovery beyond such a production. Britannica has not alleged anything more specific beyond the conclusory assertion that it thinks more should be there. In light of Dickstein's current disclosure, there would be little sense in amending the complaint simply to force Dickstein to state again that what is in the record is all there is. g. Conclusion
In sum, the Court finds that Britannica's cause of action accrued no later than December 2005 and that the statute of limitations was not tolled by the continuous representation rule. Hence, the claims alleged in the amended complaints would be barred by the statute of limitations and therefore are futile. For these reasons, the Court will deny the motions to amend. As explained above, the Court will also deny the motion to strike.
V. Dickstein's Motion to Dismiss
Under District of Columbia law, to prevail on a claim of legal malpractice, a plaintiff must establish the applicable standard of care, a breach of that standard, and a causal relationship between the violation and the harm. Biomet Inc. v. Finnegan Henderson LLP, 967 A.2d 662, 664 (D.C. 2009). Dickstein's motion to dismiss challenges the two counts of the complaint on different grounds. With respect to Count I, Dickstein argues that its conduct cannot have been malpractice because at the time of the patent prosecution the proper interpretation of section 120 was an unsettled question about which reasonable attorneys could disagree. With respect to Count II, Dickstein argues that Britannica has not alleged facts plausibly suggesting a conflict of interest with respect to the remedial efforts and that Dickstein did not have any obligation to inform Britannica of a possible malpractice claim or of Dickstein's communications with its insurer. a. Count I
In arguing that Count I must be dismissed, Dickstein relies primarily on Biomet v. Finnegan Henderson. In that case, the D.C. Court of Appeals affirmed the dismissal of a legal malpractice suit in which a client alleged that its attorney failed to preserve a challenge to damages awarded in litigation, resulting in waiver of the issue on appeal. Biomet, 967 A.2d at 665. The court invoked the principle of "judgmental immunity," under which " an informed professional judgment made with reasonable care and skill cannot be the basis of a legal malpractice claim." Id. at 665-66. In order for a claim to be dismissed on the basis of judgmental immunity, the court must be satisfied that (1) the alleged error is one of professional judgment, and (2) the attorney exercised reasonable care in making his or her judgment. Id. at 666. More specifically, the Biomet court relied on the "unsettled law exception to malpractice liability," under which an attorney "'is not liable for an error of judgment regarding an unsettled proposition of law.'" Id. at 667-68 (quoting Mills v. Cooter, 647 A.2d 1118, 1122 (D.C.1994)).
Dickstein argues that the unsettled law exception applies to this case because it was an unsettled question of law whether the patent chain met the requirements of section 120. Def.'s Mot. to Dismiss Pursuant to Rule 12(b)(6) [Docket Entry 11] ("Def.'s Mot. to Dismiss") at 27-29. Dickstein asserts that the PTO's issuance of the patents suggests that the PTO determined that the requirements of section 120 were, in fact, satisfied. Id. at 29-30. Dickstein indicates that the other law firms representing Britannica in the Alpine II litigation took the position that the patents were valid under section 120, and that under Federal Rule of Civil Procedure 11(b)(2), these law firms were required to make only those arguments "warranted by existing law." Id. at 31-32. Furthermore, Dickstein notes that the Federal Circuit acknowledged that whether section 120 requires an intermediate application to contain a specific reference to the earlier-filed application was a question of "first impression." Reply Mem. of P. & A. in Further Supp. of Def.'s Mot. to Dismiss Pursuant to Rule 12(b)(6) [Docket Entry 20] at 2.
The Court is not persuaded by Dickstein's arguments regarding Count I of the complaint. Dickstein's motion obscures the distinction between the alleged errors in prosecuting the Second Application and the later applications that sought to restore the chain of priority. Dickstein has not disputed that the Second Application was probably filed with a missing page due to an administrative accident. See Grossman Decl. ¶¶ 8-9. Britannica also asserts that Dickstein had an obligation to "pursu[e] the necessary PTO-requested corrective action." Pl.'s Opp'n to Mot. to Dismiss at 7. It may well have been an unsettled question whether the Third Application resolved these problems with the chain, but that does not speak to whether the prosecution of the Second Application itself constituted malpractice. To put the same point slightly differently, Biomet makes clear that the alleged attorney error to which the judgmental immunity principle applies must actually be a mistake of professional judgment. As Britannica correctly notes, filing a document with a page missing was not a matter of judgment. Id. at 7. Rather, it was a simple administrative error. There is also the question of whether Grossman's more recent filing with the PTO (and alleged concealment of his previous error) further imperiled the patent chain and therefore constituted negligence. Whether this filing was prudent does not have much to do with the section 120 issue.
As Britannica colorfully states, quoting St. Jerome, "Once wool has been dyed purple, who can restore it to its previous whiteness?" Pl.'s Opp'n to Mot. to Dismiss at 15.
To be clear, the Court is not determining that either the prosecution of the Second Application or Grossman's later actions necessarily constituted professional negligence. Nonetheless, it is not problematic as a matter of law for Britannica to argue that Dickstein erred with respect to the Second Application even though it was an open question whether later applications could resolve the error (or errors). That is enough, on the facts alleged, to provide a sufficient ground for entitlement to relief, and hence to defeat Dickstein's Rule 12(b)(6) motion to dismiss. Accordingly, the motion to dismiss will be denied with respect to Count I. b. Count II
As described above, the Complaint cites three instances of alleged misconduct by Dickstein in support of Britannica's breach of fiduciary duty claim in Count II, all taking place after the filing of the motion for summary judgment in Alpine II: (1) Dickstein's failure to advise Britannica of the conflict of interest between Dickstein and Britannica at that time; (2) Dickstein's notification of its insurance carrier without notifying Britannica; and (3) Dickstein's attempt to remediate the problems with the Second Application at the PTO without notifying Britannica of a potential malpractice claim. See Compl. ¶ 23.
Dickstein's motion argues that Britannica has failed to allege facts that plausibly suggest a breach of fiduciary duty. Def.'s Mot. to Dismiss at 33. With respect to the alleged conflict of interest, Dickstein contends, among other things, that "[o]nce Britannica made the decision to attempt remedial action before the PTO, its interests were identical to those of Dickstein Shapiro, because a favorable ruling would have eliminated both the basis for the invalidity claim and the basis for any potential malpractice claim against Dickstein Shapiro." Id. at 35. As to the notification of the insurance carrier, Dickstein argues that it was not obligated to inform Britannica of its communications with its insurer because Britannica was, once the motion for summary judgment was filed, fully aware of all the relevant facts and represented by other counsel (Baker Botts). Id. at 37. Dickstein likewise disputes that it had any independent obligation to notify Britannica of a potential malpractice claim. Reply Mem. of P. & A. in Further Supp. of Def.'s Mot. to Dismiss [Docket Entry 20] at 11.
Dickstein's motion also argues that, assuming it did breach the standard of care, Britannica has failed to allege facts suggesting "any injury proximately resulting therefrom." Def.'s Mot. to Dismiss at 33. Since the Court resolves the motion in Dickstein's favor on the first ground, it need not address this argument. --------
In response, Britannica argues with respect to the remediation efforts at the PTO that "[n]ot only was the self interest conflict manifest, but also the lack of professional judgment reflected by Grossman's lame excuses precluded any effective remediation." Pl.'s Opp'n to Mot. to Dismiss at 13. Britannica maintains that "Rule 1.4 of the D.C. Rules of Professional Conduct, the Restatement of the Law Governing Lawyers §[ ]20, and Dickstein's independent fiduciary duty all mandate that Dickstein advise and communicate with Britannica as soon as Dickstein saw the malpractice claim looming." Id. at 12-13. Specifically, Britannica directs the Court to the comments to Rule 1.4, which state: "The lawyer must be particularly careful to ensure that decisions of the client are made only after the client has been informed of all relevant considerations. A lawyer may not withhold information to serve the lawyer's own interest or convenience." Britannica also relies on a law review article that concludes that "[i]f the lawyer's conduct of the matter gives the client a substantial malpractice claim against the lawyer, the lawyer must disclose that to the client." Benjamin P. Cooper, The Lawyer's Duty to Inform His Client of His Own Malpractice, 61 Baylor L. Rev. 174, 176 (2009).
The Court finds that Britannica has not alleged sufficient facts to make out a claim for breach of fiduciary duty. Count II can be conceived of as two distinct, but related allegations: first, that Dickstein was in a conflicted posture when it made its remedial efforts to the PTO, and, second, that Dickstein should have notified Britannica that Britannica might have a malpractice claim against Dickstein. Neither of these allegations is sufficient to state a claim for breach of fiduciary duty.
On the facts alleged, it is not plausible for Britannica to suggest that Dickstein faced a conflict between its interests and Britannica's during the Alpine litigation. Britannica and Dickstein had very similar interests when the validity of the patents was challenged. At that time, Britannica faced both the prospect of losing any profits from the patents and the cost of defending the patents from challenge in litigation. As a direct consequence of Britannica's exposure, Dickstein faced the possibility of a potentially very expensive malpractice action for those costs (Count I of the present case). Both parties therefore had a parallel interest in preventing the patents from being struck down.
To be sure, it is possible to imagine that the incentives facing Britannica and Dickstein were marginally different during the Alpine litigation. As Britannica's counsel correctly articulated at the motions hearing, even if the patents were held valid after litigation, Britannica could still conceivably sue Dickstein in negligence for the cost of that litigation, since Britannica would not have had to litigate the issue if the Second Application had been flawlessly filed. See Winston, 700 A.2d at 771 ("[I]n appealing that adverse judgment, the client sustains injury such as attorney's fees and court costs.") Conversely, if the patents were held invalid after litigation, Dickstein could be liable for both the lost profits and the litigation costs. Hence, Dickstein would have an interest in trying to avoid the negligence claim altogether, not just in trying to save the patents.
Yet there are several flaws with this line of reasoning. To begin with, the fact that the magnitude of the respective interests might differ does not alter the fact that Britannica's and Dickstein's interests were parallel. Moreover, whatever the costs of litigating Alpine might have been, they would pale in comparison to the lost profits from the invalid patents. Britannica has not argued otherwise; on the contrary, they have alleged damages in this action in the amount of $250 million, the bulk of which presumably is not litigation expenses. Since Dickstein would be facing a dramatically smaller malpractice suit if the patents were upheld than if they were defeated (and quite possibly no such suit at all), the firm's interest in saving the patents would vastly exceed any interest in undermining Britannica's position. More importantly, Britannica has not alleged facts indicating what action it believes Dickstein took to avoid the negligence suit at the expense of Britannica's interests. The complaint alleges that Dickstein's conduct before the PTO "attempt[ed] to rectify the earlier prosecution errors" and that the Grossman affidavit "essentially confesses negligence on the part of Britannica's counsel Dickstein." Compl. ¶¶ 13, 15. It is difficult to square these statements with the charge that Dickstein's conduct before the PTO was an attempt to avoid a negligence suit at the expense of the patents. Britannica has not alleged anything specific about Dickstein's conduct that suggest Dickstein was concerning itself with a negligence suit, rather than with preservation of the patents. Indeed, Britannica has failed to allege facts indicating that Dickstein did anything that conflicted with its client's interests, beyond the conclusory statement that a conflict existed.
As indicated above, Dickstein's action at the PTO after the filing of the Alpine litigation might well be relevant to Britannica's negligence claim in Count I. For example, the complaint alleges that "Britannica's position in the summary judgment proceedings . . . was further weakened" by Dickstein's conduct. Compl. ¶ 13. But an allegation of incompetence pertains to a negligence claim, not to a conflict of interest or breach of fiduciary duty claim as alleged in Count II.
The Court also finds that Britannica's allegation that Dickstein should have notified it of a possible malpractice claim fails as a matter of law. The Rules of Professional Conduct speak to "inform[ing]" one's client and abstaining from "withholding" information. Under some circumstances, a lawyer may, indeed, have an obligation to advise his client about a possible malpractice claim. Most obviously, when a lawyer continues to represent a client who may have a viable malpractice case against the lawyer, the client may unknowingly be relying on legal advice from a conflicted source. See Restatement (Third) of the Law Governing Lawyers § 20, cmt. c (2000) ("If the lawyer's conduct of the matter gives the client a substantial malpractice claim against the lawyer, the lawyer must disclose that to the client[] . . . pointing out the possibility of a malpractice suit and the resulting conflict of interest that may require the lawyer to withdraw.") Here, however, the problems with the patent chain were detailed in the Alpine defendants' motion to dismiss, and, as explained above, Britannica was primarily represented by other counsel at that time. It is hardly the case that Britannica was unknowingly relying on legal advice from a conflicted source or that Dickstein was otherwise taking advantage of Britannica's ignorance for its own benefit. Britannica has cited no case suggesting that a lawyer has an obligation to inform a former client, who is both otherwise represented and informed of all the facts, that he might be able to sue for malpractice. An obligation to notify the client under such circumstances would not alleviate a problematic situation; rather, it would simply be an invitation to sue. Furthermore, whatever may be made of Dickstein's notification to its insurer, that action cannot itself trigger a requirement to disclose the possibility of a malpractice suit to a client. Hence, Dickstein was not required to notify Britannica of a possible malpractice claim here.
In sum, Britannica has failed to allege sufficient facts in support of its allegation that Dickstein breached its fiduciary duty to Britannica. Hence, the motion to dismiss will be granted as to Count II.
VI. Conclusion
Since the Court cannot conclude, on the current record, that Count I is barred by the statute of limitations, the motion for summary judgment will be denied. The Court does, however, conclude that the additional allegations in the amended complaints would be time-barred, so the motions for leave to amend the complaint will be denied, along with the motion to strike. The Court finds that the doctrine of judgmental immunity does not apply to Britannica's negligence claim, and therefore the motion to dismiss will be denied with respect to Count I. The case will proceed on this claim. Finally, the Court finds that Britannica has failed to allege sufficient facts in support of a breach of fiduciary duty claim, and hence the motion to dismiss will be granted with respect to Count II. A separate order has been issued on this date.
/s/_________
JOHN D. BATES
United States District Judge Dated: February 2, 2012