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Before 2007, John McAleese may have had the "accidental investor" defense if anyone ever questioned his involvement with the patent-trolling company suing one of his firm's biggest clients. His wife was involved with FlatWorld Interactives, a company that patented gesture-based control of a touchscreen device. According to Ars Technica, they even made attempts to commercialize the concept, but when Apple's iPhone was revealed in 2007, the company's plans turned to the courtroom.
What's the problem? They do, after all, own the patent. It is their right to enforce it. And this doesn't seem to be some shell company that merely exists to purchase dormant patents in order to bring suit (though they did seek a reissue of the patent in 2007 to "tailor it more closely to iPhone claims" and tried to sell it to trolls).
The issue is, John McAleese was an attorney at Morgan Lewis & Bockius LLP, a BigLaw firm that represents Apple in patent litigation. He was also an investor in FlatWorld, and if the records dug up by Ars Technica are what they appear to be, he played an active role in planning the suit against Apple.
If your conflict bells are ringing, good, you are apparently paying more attention than either McAleese or Morgan Lewis.
The iPhone was released in 2007. Since then, the McAleeses have had the patent reissued, explored sales of the patent to multiple patent enforcement entities, tried to partner up with Google and Nokia (both have had patent battles with Apple), and eventually filed suit last year. Earlier this year, Apple’s in house attorney received the opposing counsel’s privilege log, which had more entries for Mr. McAleese, an attorney at Morgan Lewis, than for any other person, writes Ars Technica.
Needless to say, Apple was (and is) very angry. They’ve sought to have FlatWorld’s counsel dismissed and have alleged that John McAleese was acting as a pipeline for information to be used in the pending litigation.
It’s messy. It was also quite avoidable. See, there is a chance that this is all a misunderstanding. For one, John McAleese wasn’t an intellectual property practitioner. He practiced environmental law. He also, in an email to a partner this year, told them that he notified Morgan Lewis of the FlatWorld involvement years before.
There were two possible solutions here: one, they could’ve fired McAleese years ago, or two, they have been able to handle this with a Chinese wall. Though the ABA Model Rules frown upon these arrangements, when the conflict is a personal interest, it appears that such a measure might suffice. State rules may vary, however.
The firm also should’ve notified Apple of the conflict once it arose, though since litigation wasn’t commenced until recently, they may not have known of the actual conflict. (Do firms routinely check employees’ investments to see if their companies own patents that might conflict with clients? We’d guess no.)
Actual ethics breach or not, this situation looks bad for Morgan Lewis and worse for John McAllese.