Agri-Labs Holdings LLC v. TapLogic LLC
Filing
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OPINION AND ORDER granting in part and denying in part 49 Motion to Disqualify Counsel Dean McConnell and Motion for Extension of Time to Complete Claim Construction Discovery to Include September 16, 2015. Signed by Magistrate Judge Susan L Collins on 10/29/2015. (rmn)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
AGRI-LABS HOLDINGS, LLC,
Plaintiff/Counter Defendant,
v.
TAPLOGIC, LLC,
Defendant/Counter Claimant.
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Case No. 1:15-cv-00026-RLM-SLC
OPINION AND ORDER
Before the Court is a motion to disqualify filed by Defendant TapLogic, LLC
(“TapLogic”), in which TapLogic seeks to disqualify Attorney Dean McConnell as counsel to
Plaintiff Agri-Labs Holdings, LLC (“Agri-Labs”), in this action. (DE 49). This motion is now
fully briefed and therefore ripe for adjudication. (DE 52; DE 58). For the following reasons,
TapLogic’s motion will be GRANTED IN PART and DENIED IN PART.
A. Factual and Procedural Background
On January 22, 2015, Agri-Labs filed this action against TapLogic, alleging that
TapLogic infringed on Agri-Labs’s patent, specifically U.S. Patent No. 8,268,857 (“the ‘857
Patent”), by selling a product called the “Ag PhD Soil Test.” (DE 1 ¶¶ 1, 10). The ‘857 Patent
was issued by the United States Patent and Trademark Office (“USPTO”) on October 16, 2012,
for a “Soil Sample Tracking System and Method” based upon an application filed by inventor
Tony Wayne Covey; Agri-Labs now owns the ‘857 Patent. (DE 1 ¶¶ 7, 9). The ‘857 Patent
“generally relates to a system and method for performing soil analysis that uses smart phones,
applications for smart phones, soil containers having unique identifiers, and global positioning.”
(DE 1 ¶ 8). Agri-Labs alleges in this suit that TapLogic has infringed on the ‘857 Patent by
making, using, offering to sell, and/or selling the Ag PhD Soil Test product in the United States.
(DE 1 ¶ 21).
Tap-Logic filed its answer and a counterclaim against Agri-Labs on February 17, 2015.
(DE 11). In the counterclaim, Tap-Logic seeks a declaratory judgment of invalidity and
noninfringement of the ‘857 Patent. (DE 11 at 6-7).
Attorney McConnell filed an appearance on behalf of Agri-Labs on January 22, 2015, the
same date that Agri-Labs filed the complaint initiating the case against TapLogic. (DE 2).
TapLogic filed the instant motion to disqualify Attorney McConnell on August 31, 2015,
contending that his serving as both prosecution counsel and litigation counsel for Agri-Labs will
prejudice TapLogic because (1) Attorney McConnell is a necessary witness in this case and
therefore should be disqualified under Indiana Rule of Professional Responsibility 3.7; and (2)
there is no way to prevent Agri-Labs from using Tap-Logic’s trade secrets to draft and prosecute
future claims in pending patent applications, unless Attorney McConnell is disqualified, due to
his dual role as both litigation and prosecution counsel for Agri-Labs. (DE 49 at 6-10).
In response, Agri-Labs contends that TapLogic’s motion to disqualify should be denied
because TapLogic has failed to meet its burden of concretely establishing the necessity of
disqualification, and TapLogic instead “has presented to the Court a myriad of conjecture,
speculation and misstated authority.” (DE 52 at 1-2). Agri-Labs distinguishes the case cited by
TapLogic in support of its argument that Attorney McConnell should be disqualified pursuant to
Indiana Rule of Professional Responsibility 3.7, Interactive Coupon Marketing Group, Inc. v.
H.O.T.! Coupons, LLC, No. 98 C 7408, 1999 WL 409990 (N.D. Ill. June 7, 1999) (“Hot
Coupons”), from the instant case, as Agri-Labs contends that Hot Coupons involved allegations
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of inequitable conduct during the prosecution of the patent raised as an affirmative defense by the
defendant, which is not an issue here. Agri-Labs also states that in Hot Coupons, the court
denied the motion to disqualify because the defendants could not show, at that stage of the
proceedings, what the prosecuting attorneys would testify to at trial, and therefore could not meet
its burden of showing the necessary prejudice. Agri-Labs therefore contends that Attorney
McConnell should not be disqualified as a necessary witness in this case under Rule 3.7 at this
stage of the proceedings. With respect to TapLogic’s second argument that Attorney McConnell
should be disqualified to prevent disclosure of TapLogic’s trade secrets, Agri-Labs argues that
any potential disclosure can be prevented by the entry of a protective order prohibiting the
participating of any of Agri-Labs’s litigation attorneys who are privy to confidential information
such as trade secrets from TapLogic. Additionally, Agri-Labs contends that TapLogic’s
argument concerning disclosure of trade secrets to Attorney McConnell is now moot, because
Attorney McConnell has transferred all pending patent applications for Agri-Labs to another
attorney, Attorney McConnell’s power of attorney to prosecute patent applications for Agri-Labs
has been revoked, and Attorney McConnell is no longer prosecuting any pending patent
applications for Agri-Labs. Finally, Agri-Labs argues against Attorney McConnell being
disqualified at this stage in the litigation because it would cause substantial hardship on AgriLabs.
In its reply brief, TapLogic contends that Agri-Labs has conceded that a protective order
could not be crafted with Attorney McConnell serving as patent prosecutor for Agri-Labs in
patent applications that claim priority to the patent in suit by naming another attorney as patent
prosecutor. (DE 58 at 1-2). TapLogic therefore requests that the Court prohibit Agri-Labs or any
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successor from making Attorney McConnell its patent prosecutor for the applications claiming
priority to the patent in this suit for at least one year after final judgment in this action and after
all appeals have been ruled upon or the date for appeals has expired. TapLogic also argues that
its motion to disqualify Attorney McConnell is not premature, because unlike in Hot Coupons, a
case in which several lawyers from the same firm had been associated on the case, and where if
one had to testify, another could serve as trial counsel, in the instant case, no other attorneys have
been associated with Attorney McConnell for Agri-Labs on the case. Because Attorney
McConnell is a sole practitioner that is both the only prosecution counsel and the only litigation
counsel, TapLogic contends he should be disqualified. TapLogic argues that only the
prosecuting attorney can testify as to issues of enforceability and why prior art was not submitted.
TapLogic contends that Attorney McConnell violated his duty of candor to the USPTO when he
represented that the one art reference did not disclose manual pulling of soil, as TapLogic states
that this prior art does disclose manual pulling of soil, which shows Attorney McConnell’s
statement was false. Finally, TapLogic argues that there is no substantial hardship to Agri-Labs
here because they should have known from the outset that Attorney McConnell may be a
necessary witness, given that Agri-Labs chose to rely upon the same counsel to prosecute the
patent and litigate this lawsuit.
B. Law & Analysis
The Northern District of Indiana has adopted the Indiana Rules of Professional Conduct,
see N.D. Ind. L. R. 83-5(e), which prohibit a lawyer from serving as an advocate at a trial in
which he is likely to be a necessary witness, unless the testimony relates to an uncontested issue
or relates to the nature and value of legal services rendered in the case, or if the disqualification
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of the lawyer would work substantial hardship on the client. Ind. Rules of Prof’l Conduct 3.7.
“The commentary to Rule 3.7 also provides that the opposing party has a proper objection when
the combination of roles may prejudice that party’s rights in the litigation.” Hutchinson v.
Spanierman, 190 F.3d 815, 828 (7th Cir. 1999). “In determining whether to disqualify counsel, a
court is directed by Rule 3.7 to conduct a balancing between the interests of the client and those
interests of the opposing party.” Id.
Thus, the Court must balance the interests of Agri-Labs in keeping Attorney McConnell
as counsel in this litigation against the interests of TapLogic in Attorney McConnell’s
disqualification. The Court will first address TapLogic’s arguments regarding disqualification of
Attorney McConnell as a necessary witness, before turning to TapLogic’s arguments regarding
disqualification of Attorney McConnell to protect TapLogic’s confidential information.
1. Attorney McConnell Will Not Be Disqualified
as a Necessary Witness at this Time
TapLogic has moved to disqualify Attorney McConnell on grounds that he will be a
necessary witness under Indiana Rule of Professional Responsibility 3.7. TapLogic contends that
Attorney McConnell will be a necessary witness regarding his prosecution of the patent
application; a document he drafted to support the claim construction, called a Response to Office
Action; and possible inequitable conduct by Agri-Labs and Attorney McConnell in failing to
disclose prior art pertaining to manual pulling of samples. (DE 49 at 7-8).
“Given that inequitable conduct claims are frequently asserted as almost a reflex to
infringement claims, the court has no reason to believe that just because the charge has been
made, it will be proven.” Hot Coupons, 1999 WL 409990, at *2 (citations omitted). The Court
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agrees with the well-reasoned opinion by the Northern District of Illinois in Hot Coupons that
courts should not “routinely disqualify trial counsel simply because trial counsel’s firm also
prosecutes patents.” 1999 WL 409990, at *2.
TapLogic seeks to prove that in prosecution of the ‘857 patent, Agri-Labs and Attorney
McConnell engaged in inequitable conduct by, among other things, failing to be truthful to the
USPTO regarding prior art that did include manual pulling of soil samples. TapLogic’s
argument that Attorney McConnell’s testimony is necessary is essentially that his testimony is
necessary because TapLogic needs it to show that the undisclosed prior art was material to the
patent prosecution and that the prosecuting attorneys and their client intended to withhold the
known prior art. TapLogic states, however, that “[a]t this point, all of the potential topics for
Dean McConnell’s testimony at trial have not been fully fleshed out and will not be until his
deposition.” (DE 49 at 8). Nevertheless, TapLogic states that it is seeking to disqualify Attorney
McConnell now, prior to his deposition, because it “suspects if it waits until after Mr.
McConnell’s deposition that Agri-Labs will claim it will suffer more prejudice.” (DE 49 at 8).
“Testimony is prejudicial when the ‘projected testimony of a lawyer or firm member is
sufficiently adverse to the factual assertions or account of events offered on behalf of the client,
such that the bar or the client might have an interest in the lawyer’s independence in discrediting
that testimony.’” Coolsavings.com Inc. v. E-Centives, Inc., No. X, 2000 WL 1262929, at *3
(N.D. Ill. Sept. 1, 2000) (quoting Lamborn v. Dittmer, 873 F.2d 522, 531 (2d Cir. 1989); Hot
Coupons, 1999 WL 409990, at *3). TapLogic bears the burden of showing that Attorney
McConnell’s testimony would substantially prejudice Agri-Labs. Id. (citing Hot Coupons, 1999
WL 409990, at *3). Where an attorney’s testimony would be duplicative of the client’s
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testimony, the attorney’s testimony is cumulative and therefore is not necessary. Hot Coupons,
1999 WL 409990, at *3 (citing Mitts & Merrill, Inc. v. Shred Pax Corp., 112 F.R.D. 349, 353-54
(N.D. Ill. 1986); Gaull, M.D. v. Wyeth Labs., Inc., 687 F. Supp. 77, 80 (S.D.N.Y. 1988)). As in
Hot Coupons, it is too early to tell whether TapLogic’s claims of inequitable conduct have merit
or whether Attorney McConnell’s testimony will be adverse to Agri-Labs; thus the Court will not
disqualify Attorney McConnell as counsel to Agri-Labs at this point in the litigation. TapLogic’s
motion will therefore be DENIED IN PART without prejudice as to disqualifying Attorney
McConnell as a necessary witness. If a conflict becomes clear at a later date, TapLogic is free to
make another motion to disqualify.
2. Attorney McConnell Will Not Be Disqualified to Protect TapLogic’s
Confidential Information as a Barring Order Will Suffice
TapLogic seeks to disqualify Attorney McConnell from representing Agri-Labs in this
matter because Attorney McConnell prosecutes patents for Agri-Labs, and his access to
TapLogic’s trade secrets and other confidential information during the course of this litigation
would give Agri-Labs a competitive advantage when drafting claims in pending patent
applications. TapLogic argues that Attorney McConnell would be able to redraft claims in
applications that claim priority to the ‘857 patent and use TapLogic’s trade secrets to later sue
TapLogic or its clients for infringement on subsequently issued patents. TapLogic therefore
requests that Attorney McConnell “be removed from this case, and/or from further prosecution of
Covely’s patent applications.” (DE 49 at 10).
Agri-Labs, in its response to TapLogic’s motion to disqualify, argues that TapLogic
should have sought patent prosecution bar language in a protective order rather than seeking to
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disqualify Attorney McConnell, but states that TapLogic agreed to a protective order which did
not include such language. Agri-Labs contends that this shows TapLogic’s abusive intent in
moving to disqualify Attorney McConnell. Agri-Labs further represents that Attorney
McConnell has now transferred all pending patent applications for Agri-Labs to another patent
attorney, John T. Woods, III. Agri-Labs states that Attorney McConnell’s power of attorney to
prosecute Agri-Labs’s patent applications has been revoked, and Attorney McConnell is no
longer prosecuting any patent applications for Agri-Labs. Agri-Labs thus contends that
TapLogic’s arguments regarding the disqualification of Attorney McConnell due to his access to
TapLogic’s trade secrets are moot.
In TapLogic’s reply to Agri-Labs’s response, TapLogic recognizes that Agri-Labs has
removed Attorney McConnell as its patent prosecutor, and argues that this removal shows that
Agri-Labs has conceded that a protective order could not have been crafted with Attorney
McConnell serving as patent prosecutor in patent applications that claim priority to the patent in
this lawsuit. TapLogic now requests that Agri-Labs or any successor not be permitted to change
the prosecution back to Attorney McConnell until at least one year after the final judgment in this
action and all appeals have been ruled upon or the time for appeals has expired.
Agri-Labs’s removal of Attorney McConnell as its patent prosecutor appears to resolve
TapLogic’s arguments that Attorney McConnell should be disqualified as counsel in this case
due to his access to TapLogic’s trade secrets in this case. Thus, TapLogic’s motion to disqualify
Attorney McConnell is DENIED IN PART as to arguments regarding his access to and use of
TapLogic’s trade secrets and confidential information. However, the issue remains whether the
Court should order that Attorney McConnell may not be reinstated as patent prosecutor for Agri8
Labs or its successor within a year following the final resolution of this case and any appeals.
In Hot Coupons, the case with facts analogous to the instant matter, the court barred the
plaintiff’s patent counsel from reviewing any of the defendant’s confidential information. 1999
WL 409990, at *5. In ruling on a motion for reconsideration, the court revised its order to clarify
that “all of plaintiff’s attorneys who are privy to confidential information obtained from
defendant in discovery shall not participate in the prosecution of any patent application for
plaintiff relating to the subject matter of the patents in suit during the pendency of this case and
for one year after the conclusion of this litigation, including appeals.” Interactive Coupon Mktg
Grp., Inc. v. H.O.T.! Coupons, LLC, No. X, 1999 WL 618969, at *4 (N.D. Ill. Aug. 9, 1999).
Here, as Attorney McConnell is no longer prosecuting patents for Agri-Labs, barring him
from viewing confidential information and trade secrets disclosed by TapLogic would not be
appropriate. It is appropriate, however, to bar Agri-Labs or its successor from reinstating
Attorney McConnell–for a period of one year after the final resolution of this case, including
appeals–as its patent prosecutor in patent applications that claim priority to the patent in suit
here. Thus, Tap-Logic’s motion will be GRANTED IN PART as to TapLogic’s request for an
order barring Attorney McConnell’s reinstatement by Agri-Labs as patent prosecutor of patent
applications that claim priority to the patent in suit here, until at least one year after the final
resolution of this case, including appeals.
C. Conclusion
Accordingly, TapLogic’s motion to disqualify (DE 49) is GRANTED IN PART and
DENIED IN PART as follows:
(1)
DENIED IN PART at this time without prejudice, with
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respect to TapLogic’s request that Attorney McConnell be
disqualified as a necessary witness;
(2)
DENIED IN PART as moot, with respect to TapLogic’s
request that Attorney McConnell be disqualified due to his
access to and use of TapLogic’s trade secrets and other
confidential information; and
(3)
GRANTED IN PART, in that Attorney McConnell shall
not participate in the prosecution of any patent application
claiming priority to the patent in suit for Agri-Labs or any
successor during the pendency of this case and for one year
after the conclusion of this litigation, including any appeals.
SO ORDERED.
Entered this 29th day of October 2015.
/s/ Susan Collins
Susan Collins,
United States Magistrate Judge
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