By Eric Schweibenz
On July 25, 2011, Chief ALJ Paul J. Luckern issued the public version of Order No. 3 (dated July 14, 2011) denying Respondents Süd-Chemie AG, Süd-Chemie, Inc., and Airsec S.A.S.’s (collectively, “Süd-Chemie”) motion to disqualify a law firm as counsel for Complainant CSP Technologies, Inc. (“CSP”) in Certain Flip-Top Vials and Products Using Same (Inv. No. 337-TA-779).

By way of background, this investigation is based on a May 17, 2011 complaint filed by CSP alleging a violation of Section 337 in the importation into the U.S. and sale of certain flip-top vials and products using the same that infringe U.S. Patent No. 7,537,137.  See our May 18, 2011 and June 20, 2011 posts for more details.

According to the Order, in support of its motion to disqualify, Süd-Chemie argued that the law firm should be disqualified because it knowingly represented Clariant AG (“Clariant”) at the time the Complaint was filed.  Süd-Chemie asserted that Clariant, as of April 21, 2011, owns and controls Süd-Chemie and that Clariant’s management is substantially the same as that of Süd-Chemie.  Süd-Chemie argued that because the law firm represented entities on both sides of the investigation without Clariant’s consent, it violated ABA Model Rule of Professional Conduct 1.7.

Both CSP and the Commission Investigative Staff (“OUII”) opposed the motion.

ALJ Luckern determined that although the law firm had represented CSP for over eight years and Clariant for about eight years, it had never represented Süd-Chemie. Specifically, the ALJ cited to an Illinois State Bar Association (ISBA) decision stating that “[b]ecause a corporate client’s affiliate is not deemed to be a client of the coproration’s lawyer merely because of the affiliation, then a representation adverse to the affiliate will not be directly adverse to ‘another client’ within the meanin[g] of Rule 1.7.”  Although this ISBA decision stated that there might be particular circumstances that would require the lawyer to consider a subsidiary of a corporate client to be a client of the lawyer, the ALJ found that none of those circumstances were present.  The ALJ also noted that it was not until May 13, 2011 that a majority of the supervisory board at Süd-Chemie was changed to include Clariant’s directors and officers.  Thus, the ALJ found that the representation of CSP in a matter adverse to Süd-Chemie did not present an ethical conflict.

Regarding the appropriateness of disqualification, the ALJ found that because (1) CSP would be unduly burdened by a disqualification of the law firm, (2) patent litigations are complex, and (3) the conflict at issue was due to an affirmative act of Süd-Chemie (the party seeking disqualification), the factors weighed against the granting of Süd-Chemie’s motion.  Accordingly, the ALJ determined that the law firm need not be disqualified.