ETH 1166
Ethics Opinion 1166
New York State Bar Association
New York State Bar Association Committee on Professional Ethics
May 7, 2019
Topic:
Non-legal business owned by lawyer in intellectual property:
Choice of Law, Fee-Sharing, and Supervisory Duties
Digest:
A New York lawyer who operates both a law firm and a
consulting firm on intellectual property matters in multiple
jurisdictions must determine the applicable ethical rules on
a matter-by-matter basis, is not engaged in work distinct
from the practice of law, may associate and share fees with a
non-U.S. lawyer if certain criteria are met, may not share
ownership or share fees with a person not thus qualified as a
lawyer, and may not delegate the duty to supervise the work
of a non-lawyer.
Rules:
5.3(a), 5.3(b), 5.4(a), 5.5, 5.7(a), 8.5(a) & (b).
FACTS
1. The
inquirer is a New York attorney who is also admitted in other
U.S. jurisdictions and before the U.S. Patent and Trademark
Office (“USPTO”). The inquirer is the sole owner
of a law firm, through which the inquirer practices
intellectual property law, and also the lone shareholder of a
corporation that provides business and consulting services on
issues relating to intellectual property. The two entities
have separate, but linked, websites and the inquirer uses a
different email address for each entity. The mailing address
for both entities is the inquirer’s home in New York,
where the majority of the work is performed. The inquirer
also provides services to clients elsewhere in the U.S. and
in countries around the world.
2. The
inquirer provides intellectual property-related services
through the entity the inquirer deems appropriate. For
services that the inquirer deems to be “clearly not the
practice of law (e.g., the brokering of patents),” the
inquirer would engage clients through the consulting firm and
provides “an appropriate disclaimer that [the] services
are NOT the practice of law.” For services that the
inquirer deems to “clearly [constitute] the practice of
law or where there is some potential confusion,” the
inquirer would engage clients through the law firm and treats
the matter as a legal matter. The inquirer notes that one
need not be a lawyer to practice before the USPTO.
3. The
services the inquirer proposes to render include, among
others, assessing the validity and value of intellectual
property, whether registered (e.g., patents) or unregistered
(e.g., trade secrets); advising on whether property should be
registered or otherwise classified; drafting and reviewing
business arrangements between the client and third parties;
counseling on how best to exploit and protect the
intellectual property; outlining best practices for policies
governing issues such as human resources, cyber-security,
risk management, contracts with manufacturers and suppliers,
insurance, and corporate governance; advising on strategies
to raise capital for the client’s business and to sell
or otherwise transfer the intellectual property; and
representing the client in pursuing registrations of
intellectual property, issuing opinions, negotiating
contracts with third parties in jurisdictions around the
globe, and managing other counsel in litigation, arbitration
or regulatory proceedings on behalf of the client.
4. The
inquirer is in the process of engaging four individuals: (a)
a U.S. lawyer with a profile similar to the inquirer’s;
(b) a U.S. patent agent (who is not and need not be a
lawyer); (c) a person certified to practice law in Europe but
not admitted to practice in any U.S. jurisdiction; and (d) a
technologist who is neither a lawyer nor a patent agent.
These individuals would like to be partners or shareholders
in the entities the inquirer owns, or at least employees who
not only receive fixed salaries, but also share in the
profits and fees generated by the entities.
QUESTIONS
5. The
inquirer poses several questions, two of which ask whether
the non-lawyers the inquirer plans to hire would be engaged
in the unauthorized practice of law if they perform any of
the above services without the direct supervision of a
properly admitted firm lawyer in the relevant jurisdiction.
This Committee does not provide opinions on the unauthorized
practice of law. As Comment [2] to Rule 5.5 states:
“The definition of the ‘practice of law’ is
established by law and varies from one jurisdiction to
another.” Thus, determining what constitutes the
practice of law is a question of law that is outside our
jurisdiction. N.Y. State 1093 ¶ 14 (2016); N.Y. State
1082 ¶ 7 (2016). We turn, therefore, to the
inquirer’s remaining questions, and the issues thereby
raised, which are:
(a) Since the inquirer practices in several jurisdictions,
which ethical rules will apply?
(b) Do the New York Rules of Professional Conduct (the
“Rules”) apply to the activities of the
consulting firm?
(c) Is the non-U.S. lawyer a non-lawyer for purposes of the
application of Rule 5.4 which prohibits sharing legal fees
with a non-lawyer?
(d) May the inquirer share fees from the legal services or
non-legal services with the non-lawyers the inquirer hires?
(e) If a non-lawyer is involved in any of the activities
above that are deemed the practice of law, and is merely an
employee of either the law firm or the consulting firm, what
degree of lawyer supervision is required? May the lawyer be
from a third party law firm or be an in house counsel of the
client?
OPINION
Disciplinary
Authority and Choice of Law
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