Federal Circuit Summary

Before Lourie, O’Malley, Reyna. Appeals from the Patent Trial and Appeal Board, United States District Court for the Northern District of West Virginia, and United States District Court for the District of New Jersey.

Summary: A firm’s representation of an indirect subsidiary of a parent corporation may create a disqualifying, concurrent conflict of interest for representation of a party adverse to a different indirect subsidiary of the parent corporation.

Katten Muchin Rosenman LLP represents Bausch & Lomb Inc. in an ongoing trademark litigation. Mylan is involved in several ongoing actions against Valeant and Salix, including three appeals before the Federal Circuit. While these actions were still pending, Mylan’s counsel left their firm and joined Katten. Bausch and Salix are both indirect subsidiaries of Valeant. Following Mylan’s counsel’s move, Valeant and Salix moved the Federal Circuit to disqualify Katten as counsel for Mylan based on its concurrent representation of Valeant’s indirect subsidiary, Bausch.

The Federal Circuit, applying regional circuit law and the Model Rules of Professional Conduct, found that Katten’s representation of Bausch constituted a concurrent conflict of interest, and granted the motion to disqualify. Although representation of a corporation does not necessarily impart a conflict to all its corporate affiliates, the Federal Circuit clarified that an affiliate can be considered a client by either express agreement or when affiliates are so interrelated that representation of one constitutes representation of all. The Federal Circuit found that Katten’s Engagement Letter with Bausch, and the Outside Counsel Guidelines incorporated therein, created an ongoing attorney-client relationship between Katten, Valeant and its subsidiaries Salix and Bausch. Furthermore, the Federal Circuit adopted the Second Circuit’s factors when considering corporate interrelatedness, and found that Valeant, Bausch and Salix have sufficient operational commonality and sufficient financial dependence to give rise to a corporate affiliate conflict. Finally, the Federal Circuit rejected Katten’s reliance on an ethical wall as doing too little, too late. Thus, the Federal Circuit granted the motion to disqualify Katten.

This case is: DR. FALK PHARMA GMBH v. GENERICO, LLC

Editor: Paul Stewart

Written by: Daniel A. Kamkar & Karen M. Cassidy