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Ropes & Gray Wins Lien Against Patents

Ropes gray logo The Boston law firm Ropes & Gray has won a key victory in an attempt to collect unpaid legal fees and has set new precedent in the process. In a case of first impression, Massachusetts' highest court ruled this week that the firm is entitled to an attorney's lien on patents and patent applications, as well as on the proceeds from the sales of those patents.

"A patent attorney who successfully secures a patent for his client in proceedings before the USPTO is entitled to the same protection under [the lien statute] as an attorney who obtains a favorable judgment for his client in court," the Supreme Judicial Court decided in the case, Ropes & Gray LLP v. Jalbert.

The firm is owed some $109,000 for patent prosecution work performed in 2002 and 2003 on behalf of Engage Inc., an advertising software company. When Engage filed for bankruptcy in 2003, the law firm asserted that the amount it was owed was secured by an attorney's lien filed under Massachusetts law. By that time, Engage had sold the patents but agreed to maintain a cash reserve from the sale proceeds sufficient to pay the firm's lien.

In the bankruptcy proceedings, Engage's liquidating supervisor, Craig Jalbert, contended that the attorney's lien did not apply to patents and that the debt owed to Ropes & Gray was therefore unsecured. When the bankruptcy court agreed with the supervisor, the firm appealed first to the U.S. District Court, which affirmed the bankruptcy court, and then to the 1st U.S. Circuit Court of Appeals, which decided to certify the questions to the SJC for its interpretation of Massachusetts law.

The SJC had little difficulty deciding that the attorney's lien statute applied to patent prosecutions. "When rendering legal services to a client to secure a patent, an attorney can assert a lien on the patent application when it is filed with the USPTO, and the lien necessarily remains attached to the subsequently issued patent, protecting the attorney's right to compensation," the court said.

That still left the question of whether the lien carried over to proceeds from the sales of the patents. Again, however, the SJC was quick to conclude that it did. "The purpose of the lien statute would be eviscerated if an inventor could just sell a valuable property right, one that was obtained by the attorney's work in the first instance, and pocket the proceeds. This construction of the lien statute is entirely consistent with what occurs when other types of property are sold subject to a commercial lien."

The SJC's opinion sends the matter back to the 1st Circuit. Given the opinion's outcome, Ropes & Gray appears to be on track to recover its unpaid fees.

Posted by Robert J. Ambrogi on July 29, 2009 at 12:45 PM | Permalink | Comments (4)


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