03 May 2022

Attorney Code of Conduct Passes ‘Health Check’ with Flying Colours

Health Check The Trans-Tasman IP Attorneys Board (TTIPAB) has published a report, and its response, on a Health Check of the Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018 [PDF, 2.05MB].  The Report was prepared by Professor Andrew Christie, who was commissioned by the Board to conduct the review, commencing in July 2021.  The ‘health check’ covers not only the Code of Conduct, which is a statutory instrument by which all registered patent and trade marks attorneys are bound, but also the Guidelines to the Code of Conduct [PDF, 95kB].  The Guidelines are non-binding and are intended to assist people to understand the Code and the conduct it covers.  The purpose  of the review was to confirm whether the Code was working as intended, and to identify any improvements or clarification to the Code and Guidelines.  The review process included conducting structured interviews with 26 stakeholders (attorneys, general counsel of listed groups, representatives of attorney professional associations, and clients).  The interview questions were based on an analysis of issues raised by complaints made to the Board over the past few years.

The headline outcome of the ‘health check’ is that no amendments to the Code of Conduct were found to be necessary.  More particularly, Professor Christie concluded that the Code ‘has no major deficiencies, and there are no major problems with its provisions’.  He found, however, that ‘there is significant scope to provide more guidance on the application of the Code’s provisions by enhancement of the Guidelines.’  The Board has accepted a number of recommendations for specific improvements to the Guidelines.

Other key observations of the Report include:

  1. most stakeholders have a satisfactory awareness and understanding of the Code, and of the Board, but there is scope for improvement among junior attorneys and clients that do not have a registered attorney on staff;
  2. firms within the two publicly listed ownership groups provide appropriate disclosure to clients of their group membership, however individual firms (as opposed to the holding companies) need to improve the clarity with which they disclose the identities of other firms within their group;
  3. the evidence is that firms within ownership groups act independently from other members of their group in the provision of attorney professional services, as required under the Code;
  4. there is no basis to believe that attorneys in ownership group firms are in breach of their core obligations under the Code (i.e. to place following the law, and the interests of clients, the public and the profession, ahead of other considerations, including the interests of shareholders);
  5. clients of firms in ownership groups are being appropriately informed when their consent is required for firms within the same ownership group to act on opposing sides in adversarial matters; and
  6. some dissatisfaction with the Board’s complaint handling process has been identified within the profession.

The Board has identified and responded to 34 recommendations in the Report.  Ten of these are recommendations for no action to be taken, which the Board has merely ‘noted’ (there being nothing for it to do).  Of the remainder, the Board has ‘accepted’ 17 recommendations for enhancements to the Guidelines.  The Board has also ‘noted’ six substantive recommendations, where it recognises that a relevant issues has been raised, but proposes to pursue a different course from that which has been recommended.  Finally, there is one recommendation, relating to specific circumstances around potential conflicts of interest, that the Board has ‘not accepted’ because of concerns that it ‘would introduce unnecessary complexity and ambiguity’ to the Code.

I do not intend to go through every recommendation in detail – anybody who is that interested (which should include all registered attorneys) can read the Report and Response!  However, I would like to highlight the points that caught my attention, and add a little of my own commentary.

Education on the Code

Concerns were raised by stakeholders that some junior attorneys, as well as clients who do not have a registered attorney on staff, are not as familiar with the Code as they could be.  The Board has accepted recommendations that it should provide its own program of Continuing Professional Education (CPE) to raise awareness and understanding of the Code amongst the profession, as well as simple information on the basics of the Code for clients on its website.

Work Carried Out by Freelancers and Other External Contractors

It did not surprise me to see some stakeholders mention the use of ‘freelance attorneys’ by some firms (particularly small firms and sole practitioners) to carry out work on behalf of clients – I do that kind of work myself from time to time.  What did surprise me, however, was to see allegations of attorneys outsourcing work to Indian service providers, or to other firms within an ownership group, without disclosing that fact to the client.  If this is indeed happening, it is completely unacceptable, and it is a little shocking (to me) to think that there are registered attorneys who might think otherwise.

Unsurprisingly, then, the Board has accepted a recommendation that the Guidelines should be enhanced to ensure that it is clear to any attorney too dim to work it out for themselves that the obligation of disclosure (in section 17 of the Code) requires an attorney to inform a client of the person by whom their work was undertaken, where that person is not the attorney or a member of the attorney’s firm.

Some concerns were also expressed that freelancing attorneys doing work for clients of different firms might not be taking appropriate care to maintain loyalty and avoid conflicts of interest.  That would surprise me – I view the clients of firms for which I freelance as ‘mutual’ clients, to which the same duties and loyalty considerations apply as if they were ‘direct’ clients, and I would have expected that other attorneys in the same position would do likewise.  Be that as it may, the Board has accepted a recommendation to enhance the Guidelines to spell out an attorney’s obligations in these circumstances.

‘Commercial Conflicts’

As most attorneys are probably aware, from experience, clients have varying views on ‘commercial conflicts’, i.e. circumstances in which an attorney or firm may act for two clients that compete commercially in the market, but that do not raise any of the issues of legal conflict covered by the Code.  Some clients understand the distinction, and are quite relaxed about it.  Others (including one that was interviewed for the review) take the view that a ‘commercial conflict’ is a conflict, and that for an attorney to continue to act for a competitor is necessarily a breach of the Code.  Clients of the latter kind are wrong, so while this is definitely a client relations management issue for the attorney, it does not warrant any changes to the Code or Guidelines.

Informing Clients About the Board

Section 16(1)(a) of the Code requires registered attorneys to inform clients that attorneys are bound by the Code.  It does not require attorneys to provide clients with any information about the Board, which is responsible for administration of the Code.  Nonetheless, it has been recognised that this would generally be a good idea, and the Board has accepted a recommendation that the Guidelines be enhanced to state that it is good practice to identify, and to provide clients with the contact details of, the Board.

The Conduct of Firms in Listed Groups

Concerns have been raised – not just as part of the review, but in other forums and online publications – about the independence, management of conflicts, and general conduct of firms within the two listed groups, IPH Limited (ASX:IPH) and QANTM IP Limited (ASX:QIP).  Significantly, the Report finds that these concerns are unfounded and that there is no evidence that firms within the ownership groups are operating other than independently in relation to the provision of attorney professional services.  Furthermore, the Report concludes that group firms are meeting their obligations to inform clients of their group membership, and to obtain written, informed, consent from clients to act in circumstances where opposing parties in adversarial matters (such as patent oppositions) are represented by different firms within the same ownership group.

There is, however, one area in which the listed group firms have been found wanting.  While they have generally been clear in communicating that they are members of an ownership group, they have been somewhat less clear in ensuring that clients are informed of the identities of all other firms within the group.  For example, in the case of one (unnamed) group firm that I have just checked, it took me two additional clicks through their website to find the other group members: one to a page describing the firm’s membership of the ownership group; and another to the home page of the group holding company itself, on which all of the group firms are listed.

The Report has found (and I agree) that this is not really good enough, and probably does not meet the requirement under section 23(2) of the Code that ‘the identity of the other members of the ownership group must be clearly disclosed to the public using means and words which can be reasonably expected to come to the attention of the public and be understood by the public.’  The Board has accepted a recommendation that it update the Guidelines, and work with the group firms to ensure that they comply with their obligations.

‘Strawperson’ Oppositions

Under Australian law, anyone may oppose an application, and from time to time an attorney files and prosecutes an opposition on behalf of a client, enabling the true opponent to remain anonymous (although, frankly, it is often not difficult to guess).  Views on the practice vary from believing that it is perfectly fine, to arguing that the law should be changed to prohibit it.  An attorney might feel obliged to act as a ‘straw’ opponent if instructed to do so by a client, but it does raise the potential for conflicts of interest to arise.  For one thing, the individual attorney named as the opponent may become personally liable for certain consequences of the opposition, including any costs awarded, and the risk of being drawn into an expensive Federal Court appeals process.

Given these concerns, the Board has accepted a recommendation to enhance the Guidelines to identify the potential for conflicts to arise when an attorney prosecutes in their own name an opposition on behalf of a client.

‘Dud’ Applications

I was once asked by a client to file a provisional application for an unpatentable ‘invention’, and to keep the costs low by including the bare minimum of detail – basically a title, and a one sentence ‘specification’.  Since only the title of a provisional application is published, the client’s competitors would not be able to determine that the application stood no prospect of ever resulting in enforceable patent rights.  I refused.  Of course, the client remained entirely free to do this all by themselves, but the application would not enjoy the apparent legitimacy of having been filed by a reputable attorney firm.

This is an extreme example, but it is not uncommon for an attorney to be put in the position of being asked to file an application in circumstances in which it may be doubtful – or even impossible – for any valid rights to result.  The general view of the attorneys who were interviewed for the review was that it was acceptable for an attorney to file such an application, so long as they had clearly informed the client of the fact that no valid rights could result.  Most clients agreed, although some raised concerns about the potential for attorneys to commit a fraud on a patent office.

The Report concludes, however, that no changes to the Guidelines are required to address this situation, and that attorneys should be guided in such circumstances by their primary obligation to act in accordance with the law.

Attorneys Taking a Financial Interest in a Client’s Business

Many years ago, I wrote an article here about the UK case of Ford & Warren v Warring-Davies [2012] EWHC 3523 (QB), in which an inventor engaged solicitors to assist him in licensing his invention, on the contingency basis that he would not be charged for the legal services until the invention was successfully licensed.  Everything went swimmingly at first, when the inventor’s and solicitors’ interests were aligned in seeking a mutually beneficial licensing deal.  But when complications arose, after racking up nearly £250,000 in accumulated fees, the relationship fell apart and ultimately ended up in court.  (Postscript: I subsequently received a letter from the inventor, threatening defamation action once he was vindicated via a successful appeal of the decision.  Spoiler alert – he did not successfully appeal, and that was the last I heard of it.)

It is not possible for an attorney to take any kind of financial interest in a client’s business without the potential for a conflict of interest to arise.  Period.  Attorneys interviewed for the review were mostly opposed to the practice, while clients were generally aware of the potential for conflict.  Some on both sides felt that it should not be prohibited outright, to provide an additional avenue for financing the acquisition of IP rights by ‘small’ clients.

The Report rightly observes that ‘[a]n attorney exposes themself to the potential for a conflict of interests to arise when they take a proprietary or financial interest in the IP rights of their client while acting in respect of those rights’ and the Board has accepted a recommendation to enhance the Guidelines to identify this potential.

Public Commentary By and About Attorneys

The division of the profession into ‘traditional’ privately held firms and firms within publicly listed groups has led to a certain degree of friction between some attorneys in each camp.  In our era of social media and online publishing, one consequence of this has been a (thankfully small) number of cases of attorneys making arguably adverse public comments about their competitors in the other camp.  While there is nothing inherently wrong with an attorney (or any other business operator) spruiking their own advantages relative to the competition, there is a risk that negative commentary could reflect poorly on the profession as a whole.  As the Report observes, ‘[i]nappropriate adverse commentary by one attorney about another has the potential to bring the profession into disrepute, to the detriment of all attorneys.’  The emphasis, of course, should be on ‘inappropriate’.

But what is appropriate?  There is no bright line, given competing demands of free expression and maintaining the integrity of the profession.  In balancing these, the Board has accepted a recommendation to enhance the Guidelines ‘by further elaborating what amounts to “courteous, ethical and well-informed” behaviour for the purposes of Code section 13(2).’

Making File Notes of Oral Communications

Who is not routinely making written records of oral communications with clients (and others)?  Apparently some attorneys think that there is not ‘enough time in the day’ to be making file notes!  The Guidelines will be enhanced to state that it is generally best practice, unless instructed otherwise, to make written records of oral communications.

Assisting Attorneys to ‘Do the Right Thing’

Working in a mid-sized firm, I was fortunate for many years to have multiple experienced attorneys to whom I could turn for advice when faced with thorny issues of professional conduct.  The Institute of Patent and Trade Mark Attorneys of Australia (IPTA) has an Ethics and Disputes Committee, with which members may discuss their ethics and conduct issues.  But not all attorneys are members of IPTA (I am not), leaving some with fewer options to seek guidance.  The Report therefore recommends that the Board collaborate with the Australian and New Zealand professional organisations ‘to provide a resource, available to all attorneys, not just those who are members of the Professional Associations, under which an attorney could confidentially (and, perhaps, anonymously) seek guidance from an experienced practitioner about professional conduct matters.’

The Board has merely noted this recommendation, and ‘will work with IPTA and NZIPA to consider how they might provide such a service.’  ‘Consider’ and ‘might’ are weasel words.  My guess is that the suggested service will not eventuate, though I would be happy to be proven wrong.

Prohibiting Harassment, Bullying and Similar Behaviours

As the Report observes, ‘[h]arassment, especially sexual harassment, and bullying behaviour in the workplace are major social issues.  Such behaviours are unacceptable; they are the antithesis of professional conduct.’  While the Code requires attorneys to maintain ‘standards of professional practice that are courteous, ethical and well-informed’, there is no express reference to harassment, bullying and similar behaviours.

If you think that this should go without saying, then you would be wrong.  As in many other professions (just read the news), such behaviours absolutely occur in the IP profession, which contains its fair share of borderline personality types.  The Board has accepted a recommendation to enhance the Guidelines to state explicitly that these behaviours are prohibited in the workplace.  This alone will make no difference to how people actually behave, but it is important to send the right signals to the profession, and to the public at large. 

But, I wonder, why only ‘in the workplace’?  I am a member the the Institute of Electrical and Electronic Engineers (IEEE), which has a Code of Ethics including a more extensive prohibition on harassment and discrimination, with no mention of limitation to the ‘workplace’.

Don’t Act in Opposition to an IP Right You Drafted or Prosecuted

I would have thought this goes without saying.  But apparently not.  Apparently attorneys acting in oppositions against rights where they have previously been involved in drafting and/or prosecution is, or has been, an issue.  Even with information barriers (i.e. ‘Chinese walls’) in place it is perilous, and an appallingly bad look, for an attorney or firm to act against a former client in this way.  The Board has accepted a recommendation to add a statement to this effect to the Guidelines.

Scope of Retainer

To my mind the concept of a ‘scope of retainer’ can be tricky, and somewhat esoteric.  There are, however, fairly straightforward examples, such as when a client instructs a firm in relation to one type of IP right (e.g. trade marks), while sending all of its other IP work (e.g. patents) to a different firm.  The question might arise as to whether the ‘trade marks’ firm then has a conflict if instructed by a second client to oppose one of the first client’s patent applications.  The conventional answer to this question is ‘yes’ – the firm has a conflict between its duty to prosecute a vigorous opposition in the interests of the second client, and its duty of loyalty to the first client.

The Board has an existing position on this.  As the Report observes, the Board’s position is that section 19(4) of the Code requires that an attorney can only act in this situation with the informed consent of the first client

The Report recommends that the Board should ‘consider whether, as a matter of principle, the operation of Code section 19(4) should be qualified by reference to the scope of an attorney’s retainer’.  The Board has not accepted this recommendation, so nothing will be changing here.

Ongoing Conflict Avoidance

Some stakeholders (both attorneys and clients) expressed concerns that appropriate conflict checks were not being conducted prior to firm mergers, to ensure that no new conflicts would arise between clients of the merged firm.  To the extent that I have any knowledge of the processes implemented in merging firms, I do not believe this to be the case.  However, it is understandable that attorneys in competing firms and clients of merging firms might have different perceptions, whether soundly-based or not.

In any event, an attorney’s obligation to identify and avoid actual and likely conflicts is ongoing, including through firm mergers and the movement of attorneys and clients between firms.  The Board has accepted a recommendation to enhance the Guidelines to state that an attorney should continue to monitor for potential or actual conflicts throughout the life of a matter, including when changes in the conduct of a practice occur.

Complaints and Disciplinary Proceedings

The manner in which the Board handles and investigates complaints, and determines whether or not to institute disciplinary proceedings, is contentious within the profession.  Many attorneys are concerned that the complaints process is not as transparent as it could be, and that it is open to abuse by disgruntled clients (and, I am afraid to say, by other attorneys).  In my observation, these concerns are valid, and the Report appears to have recognised this.

Rightly or wrongly, the Board does not appear inclined to meet this criticism head-on.  A recommendation that the Board conduct a review of its complaint handling processes has merely been noted, and kicked down the road to be ‘revisited’ following the ongoing Review of the Arrangement Relating to Trans-Tasman Regulation of Patent Attorneys.

The circumstances in which the Board may institute disciplinary proceedings are dictated by the Australian and New Zealand patents acts and/or regulations, and are thus technically beyond the scope of the review of the Code.  The Report has nonetheless recommended that these issues be considered in the Review of the Arrangement Relating to Trans-Tasman Regulation of Patent Attorneys.  The Board has noted this recommendation, and forwarded it for consideration as part of that Review.

Conclusion – Business as Usual for Most Attorneys

The vast majority of registered trans-Tasman IP attorneys conduct themselves, and their businesses, appropriately.  Nonetheless, issues and concerns do arise from time to time, though fortunately mostly at the fringes.  The ‘health check’ on the Code of Conduct has resulted in a useful survey of a number of these concerns, many of which will doubtless be familiar to most attorneys.  Ours is, after all, a relatively small profession in which news and gossip tends to circulate quite freely.

It is good to have confirmation that the Code is working effectively, and generally meets the needs of the profession.  Updates to the Guidelines will be useful in assisting attorneys to avoid repeating missteps that others may have made in the past.  However, for many attorneys – particularly those who have the support of larger firms and/or more experienced mentors – there will be few surprises in the additional guidance, because most attorneys are already doing the right things.


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