By Tony Dutra, Bloomberg BNA
Counsel for Schlumberger Ltd. pressed Federal Circuit judges on Wednesday to set precedent that will stop alleged abusive business and legal practices by non-practicing entities like Acacia Research Corp.
The court may decide the case — an appeal of an attorney disqualification decision — on Fifth Circuit law but at least one panelist, Judge Evan J. Wallach, appeared ready to come down hard on the firm, while another was clearly annoyed that they were even in court.
“Somebody had better be prepared to discuss your business model — using litigation as a weapon and backing away at the last minute,” Wallach said to Steven M. Hanle of Stradling Yocca Carlson & Rauth P.C., Newport Beach, Calif., counsel for Acacia.
Maximilian A. Grant of Latham & Watkins LLP, Washington, arguing for Schlumberger Holdings Corp., went further, accusing Acacia of hiring in-house counsel from major firms for the purpose of starting a new line of patent assertion work. Here, Schlumberger contends, Acacia hired Charlotte H. Rutherford, Schlumberger’s former deputy general counsel for intellectual property, and the new line of work was to buy oil and gas exploration patents and sue companies like Schlumberger.
In-House, Outside Counsel Disqualified
With Rutherford’s certain knowledge and probable recommendation, Acacia purchased U.S. Patent No. 7,986,319, on a method and system for dynamic, three-dimensional geological interpretation to support energy resources exploration and production, within weeks of her joining the firm. Acacia assigned the patent to Dynamic 3D Geosolutions LLC which, according to a ruling by the U.S. District Court for the Western District of Texas, has no employees.
Soon after the purchase, Dynamic Geo filed patent infringement lawsuits against Schlumberger and five other firms.
One defendant, Halliburton Energy Services Inc., filed invalidity challenges at the Patent Trial and Appeal Board. The board granted review of all challenged claims on Jan. 12, 2015 but terminated the challenges three months later, when Dynamic Geo settled with Halliburton and the others, except Schlumberger.
Schlumberger didn’t abandon its motion to disqualify counsel, including outside counsel Collins, Edmonds & Pogorzelski PLLC of Houston.
The district court granted the motion, setting the stage for this appeal.
Settlement, Maybe
Acacia and Schlumberger signed a settlement agreement June 17. On Aug. 1, Acacia moved to dismiss the appeal. The delay annoyed Judges Alan D. Lourie and Todd M. Hughes.
Hughes asked Hanle, “Why did you waste our time?” Hanle’s response, that they didn’t assess all the implications of the settlement, didn’t seem to satisfy Hughes.
Hughes said it was further “troublesome” that the two parties have different versions of the settlement, which the parties have not submitted to the court, and questioned whether the appeal should continue under its terms.
Wallach was even more disturbed that Hanle might have implied that the settlement favored Acacia, after Grant said that “money flowed” to Schlumberger.
Schlumberger: Send a Message
Nevertheless, Hughes ultimately said that Schlumberger would suffer little harm — other than the legal fees from June 17 to Aug. 1 — if the appeal is dismissed.
“This court should set a greater precedent beyond [what will apply to] the Western District of Texas,” Grant countered.
“Attorneys have a duty of loyalty, which was violated here.”
“And an attorney’s duty not to suborn disloyalty,” Wallach said, which seemed to indicate that, if Grant’s accusation about Acacia’s poaching in-house counsel is true, Wallach’s target is as much Acacia as it is Rutherford.
The merits of the case — if the appeal is not dismissed — likely come down to the burden of proof in showing Rutherford’s involvement in Dynamic Geo’s patent acquisition and decision to sue her former employer.
Evidence of Rutherford’s actual communications is lacking, but Wallach proposed that she could have communicated by her conduct, such as by voting in favor of patent acquisition.
Hanle and Collins insisted that Fifth Circuit law demands more.
The case is: Dynamic 3D Geosolutions LLC v. Schlumberger Ltd., Fed. Cir., No. 2015-1628
To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com
To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com
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