Petition — Valeron Corp. v. General Electric Co.

sy

-

Bupreme Court, U. & °

FILED

79-1160 JAN 28 1980

JR., CLERK

IN THE | -

Supreme Court of the United States

OCTOBER TERM 1979

THE VALERON CORPORATION,

Petitioner,

vs.

GENERAL ELECTRIC COMPANY,

—_———_——

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SIXTH CIRCUIT

———

CULLEN, SLOMAN, CANTOR, GRAUER,

SCOTT & RUTHERFORD, P.C.

BY: Jerold I. Schneider

3200 City National Bank Building

Detroit, Michigan 48226

(313) 964-0400

Donald A. Panek

The Valeron Corporation

20800 Coolidge Highway

Oak Park, Michigan 48237

Attorneys for Petitioner

THE INLAND PRESS, DETROIT, MICHIGAN

A). Re OEE DROME ck |

~ ‘ as :

‘

SRE oy

TABLE OF CONTENTS

Ll. OPINSONS BELOW .<>..6<5 wind. feed... :

5 i

Ill. QUESTIONS PRESENTED .................

IV. CANONS OF ETHICS INVOLVED ..........

V. STATEMENT OF THE CASE ...............

A.

NATURE OF CASE AND PROCEEDINGS

REE? SAME acd) Shs SA Bed, Sete 8 wa, Tle

VI. REASONS FOR GRANTING THE WRIT .........

A.

E.

CONC

THE ISSUES ARE OF WIDE RANGING IM-

PORTANCE IN THAT THEY AFFECT EVERY

ATTORNEY-CLIENT RELATIONSHIP ........

. THE DECISION BELOW CONFLICTS WITH

THE LAW OF THE FORUM .................

. THE DECISION BELOW CONFLICTS WITH

THE DECISION OF ANOTHER CIRCUIT AS

TO DISQUALIFICATION BASED UPON “AP-

PEARANCE OF IMPROPRIETY’ .............

. THE DECISION BELOW SHOULD BE RE-

VIEWED BECAUSE OF DIFFERENCES IN

PRINCIPLE WITH DECISIONS OF THE SU-

PREME COURT AND THE VARIOUS COURTS

OF APPMABS? | 5.35 Sh eso eet

THIS COURT IS. ALREADY CONSIDERING

LIMITATIONS ON THE CLAIM OF

POV II RPS A , O

LUSION ..... eae RRR RAE eee A Ree Ome ND

APPENDIX Opinion of the United States District Court,

Eastern District of Michigan .............

Opinion of the U.S. Court of Appeals for

Gen See Ceale Se ea

ii | iii

TABLE OF AUTHORITIES Page

Page United States v. Woodall, 438 F.2d 1317 (5th Cir. 1971),

CASES: | cert. denied 403 U.S. 983 (1071) vn ccec ces ececvcees 10

Auseon v. Reading Brass Co., 22 Mich. App. 505 (Ct. Walker Process Equip. v. Food Mach. Chem., 382 U.S.

MMMM ATs uS9As cus gig BAG o 4 00k Then dh oy Gee he 8 Fe SOURS RICE. vi STE OL aN SNA ea ll

- Board of Education v. Nyquist, 590 F.2d 1241 (2d Cir. | Wingilia v. Ashman, 241 Mich. 334 (1928) .............

PGI a eminsrih eas hb ek aa ORK Aad Bio wien °c vo dld'ee'e 9

Doe, Matter of, 551 F.2d 899 (2d Cir. 1977) ............ 12 | STATUES

Erie R. Co. v. Thompkins, 304 U.S. 64 (1938) .......... 8 | sheng: gm te bt RRR I a a ene ee ’

Esposito v. United States, 436 F.2d 603 (9th Gir. 1970) .. 11 OTHER:

Fisher v. United States, 425 U.S. 391, 403 (1976) ....... 10 Cin A Cannas Of Bibiite oo hk aa 9

Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970)... 12 Ce ee ea nig uty feu a rk 9

General Electric v. Sciaky Bros., 304 F.2d 724 (6th Cir. Michigan Formal Ethics Opinion No. 7 (May, 1959, Mich.

1962) dWibve |b ie 6'6'— C Gib Bie 6b Ob 0 06 66.0 be 006 0 OG 8 06 6 6 on 8 . 3 State B.J., p. 36) ORY REEL Ol a 7 ately: EERIE A lpr 5

Gillette v. Gillette, 269 Mich. 364 (1934) ............... 8 Michigan Informal Ethics Opinion No. C1250 (June 1,

Horowitz, In re, 482 F.2d 72 (2d Cir. 1973) ............ il 1976, Mich. State B. Comm. Ethics) ..........00000: 8

Kingsland v. Dorsey, 338 U.S. 318 (1949) .............. 1} McCormick, Evidence, Sections 87, 91, 93, 95, 97, 106

Laughner vy. United States, 373 F.2d 326 5th Cir. 1967).. 12 eee ee ee Nahar ice ae myn oe pea 10, 12

Mead Data Central, Inc. v. United States Dept. Air Force, Standard 503(: ! te PRE |

Standard 503(a)(4), Federal Rules of Evidence (proposed) 10, 11

seeit-ie ig oe Poelagydd Leo aes ae ' Standard 503(d)(1), (3), Federal Rules of Evidence (pro-

Murphy v. Riggs, 238 Mich. 151 (1927) ................ 8 aaa lad 0) sl gil Spe, Poin BAT IAOE, Ke Mele 1

aaa b Mfg. v. Automotive Maint. Mach., 324 U.S. 7 | Standard 511, Federal Rules of Evidence (proposed) .... 10

Pe aL ih te Weles ie fot may yr SC Wigmore, Evidence, Sections 2242, 2298, 2327-9, 2374,

Sewyer, In re, 229 F.2d 806 (7th Cir. 1956) ............ 8 2389-90 (McNaughton Rev. 1961) .............006- 10, 12

Smith v. Arc Mation, Inc., 402 Mich. 115 (1978) ....... 8

United States v. Friedman, 445 F.2d 1076 (9th Cir. 1971) 12

United States v. Gordon-Nikkar, 518 F.2d 972 (5th Cir.

|

Ta ie EEE Saas FAG agile a Pa ds, MD 11, 12 |

United States v. McCambridge, 551 F.2d 865 (lst Cir.

1) A ie ac SUEY eo. USN Sean 19 |

United Stetes v. Tellier, 255 F.2d 441 (2d Cir. 1958), cert.

eS Ag RR ll

United States v. Trammel, 583 F.2d 1166 (10th Cir, 1978) |

cert, granted (No. 78-5705) .......ccccsceeeceeeeues 12 |

IN THE

Supreme Court of the United States

OCTOBER TERM 1979

THE VALERON CORPORATION,

Petitioner,

vs.

GENERAL ELECTRIC COMPANY,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

SIXTH CIRCUIT

,

\

The Valeron Corporation, Petitioner, respectfully prays that

a Writ of Certiorari issue to review the Judgment of the United

States Court of Appeals for the Sixth Circuit entered on Oc-

tober 30, 1979. |

I. OPINIONS BELOW ;

The opinion of the Court of Appeals for the Sixth Circuit is

found in the Appendix to this Petition commencing at page

14a. It is reported at 203 USPQ 1053. The opinion of the Dis-

trict Court is set forth in the Appendix commencing at page

la. It is officially reported at 428 F. Supp. 68 and also at 196

U.S.P.Q. 298.

II. JURISDICTION

The Judgment of the United States Court of Appeals for the

Sixth Circuit was entered on October 30, 1979. The jurisdiction

of this Court is invoked under 28 U.S.C. 1254(1).

2

Ill. QUESTIONS PRESENTED

Is it proper to automatically disqualify an attorney from rep-

resenting an interest adverse to a former client under Canons

of Ethics No. 4 relating to Preservation of Client Confidences

where, in fact, there actually were no confidences because (1)

the former client itself published all the relevant information

both before and after disclosing it to the attorney, and (2) the

information was disclosed to the attorney for the purpose of

preparing public documents (i.e., patent applications which

were later published) and (3) the patent law requires full dis-

closure of all pertinent information?

Is it proper disqualify an attorney from representing an in-

terest adverse to a former client under Canons of Ethics No. 9

relating to Appearance of Impropriety where the former rep-

resentation was on a related, but different.matter and where (1)

the former client hired the attorney knowing that the attorney

was simultaneously representing competitors of the former

client, (2) the former client assisted the attorney in the attor-

ney's work for the competitors of the former client, (3) the law

of the forum permits representation of an interest adverse to a

former client, and (4) the information disclosed by the former

client is not privileged from discovery?

IV. CANONS OF ETHICS INVOLVED

Canon 4

“A Lawyer Should Preserve the Confidences and Secrets of a

Client.”

Canon 9

“A Lawyer Should Avoid Even the Appearance of Profes-

sional Impropriety. ”

V. STATEMENT OF THE CASE

A. Nature of Case and Proceedings Below

Introduction:

Relying upon Canon 4 (Preservation of Client Confidences)

3

and Canon 9 (Appearance of Impropriety), the lower Courts

disqualified Valeron’s trial counsel in a patent infringement suit

brought by G.E. because nine years earlier, counsel had writ-

ten the initial drafts of related but different patent applications

for G.E.’s in-house patent attorney to revise and file. Such

counsel did not write the patent application which became the

patent-in-suit which relates to a screw fastener. Among the

patent applications that counsel wrote, some used or could

have used the patented screw fastener which earlier had been

marketed and published by G.E. as its standard fastener. Find-

ing a “substantial relationship” (i.e., the patented, commer-

cially marketed standard screw was disclosed in at least one of

the later patent applications prepared by counsel), the lower

Courts held that Cantor must be automatically disqualified pur-

suant to a presumption of confidence. In ‘following the pre-

sumption of confidence, the Courts disregarded the fact that

there were no client confidences because G.E. itself had pub-

lished the patented screw, and,also disregarded the law which

requires complete disclosure of all pertinent information in

patents so that legally there could be no confidences.

Background:

In 1975, seven years after asserting patent infringement,

General Electric Company (G.E.) filed suit against The Valeron

Corporation (Valeron) in Detroit. Some months after. suit be-—

gan, Valeron changed counsel and retained patent attorney

Bernard Cantor, a member of the Bar of the State of Michigan.

Cantor advised the District Court and G.E. that Valeron would

be filing a Motion for Dismissal based upon laches because of

G.E.’s seven year delay in suing, under the authority of a simi-

lar case involving the same Plaintiff. General Electric v Sciaky

Brothers, 304 F.2d 724 (6th Cir. 1962). Thereafter, G.E.

moved to disqualify Cantor because, nine years earlier, Cantor

“represented” G.E. by writing initial drafts of a number of pat-

ent applications although not the application of the patent of

4

this lawsuit. It thus appears to Valeron that the Motion to Dis-

qualify was a diversionary tactic to side track the District Court

from the dispositive and fatal issues of laches.

The District Court conducted an evidentiary hearing on the

issues raised by the Motion to Disqualify Cantor. In so doing,

the District Court expressly rejected the principle that there

were no confidences to be preserved because G.E. itself pub-

lished the relevant information both before and after any al-

leged disclosure to Cantor. That is, the patented screw fastener

was commercially marketed, published, advertised and cata-

loged by G.E. long before G.E. told Cantor about the screw

fastener. G.E. even admitted that all the information which it

allegedly disclosed to Cantor was “discoverable,” that it had no

direct proof of any disclosure of confidences to Cantor, and that

some information was given to him by G.E. to assist him in

representing a G.E. competitor in a different patent suit.

The Court also disregarded the principle that the issues in

this suit are not related to the work Cantor had done for G.E.

Further, the lower Court disregarded the Michigan law that

“Appearance of Impropriety” is not a basis for disqualification.

In addition, the Court disregarded the fact that for the nine

preceeding years, i.e., 1967-1976, Cantor had no contact what-

soever with G.E. Thus, the District Court disqualified Cantor

and his law firm under Canon 4, Preservation of Confidences,

and Canon 9, Appearance of Impropriety. The Court of Ap-

peals affirmed.

B. Statement of Facts

The, present proceedings, begun in 1976, are ancillary to a

patent infringement lawsuit brought in 1975 by G.E. against

Valeron for infringement of the Kelm United States Patent

3,341,920 which was filed Feburary 16, 1965 and which issued

September 19, 1967. The Kelm patent relates to a locking

screw fasterner. The Kelm patent application was filed before

5

G.E. hired Cantor. Cantor did no work whatsoever on the

Kelm patent.

During the period of November 1965 through August 1967,

Cantor, a patent attorney in private practice, wrote initial

drafts of eleven patent applications which G.E.’s in-house at-

torney revised and filed. G.E.’s in-house patent attorneys han-

dled all the proceedings in the United States Patent Office with

respect to all these patent applications. In essence, Cantor

acted as a scrivener in preparing drafts of patent applications

for G.E.’s in-house attorneys. All of these patent applications

were later published in the United States, or in foreign coun-

tries, or both. None were kept secret.

G.E. based its Motion to Disqualify on the theory that since

the locking screw of the Kelm patent was utilized in some of

the later physical devices for which Cantor wrote drafts of patent

applications, there was a “substantial relationship” between the

Kelm patent-in-suit and the applications which Cantor wrote.

G.E. argued that such “substantial relationship” raised an ir-

rebuttable presumption of confidences which precluded the

Court from considering the proven fact that there actually were

no confidences. (That is, all the relevant information was pub-

lished in G.E.’s patents, as required by the patent law, as well

as advertised by G.E. in connection with its sales.) The lower

Court agreed with G.E. and refused to pierce the presumption

of confidence. In so doing, the lower Courts ignored Valeron’s

~ proofs, as follows.

First, the lower Courts ignored the fact that G.E. itself did

not keep its information confidential. G.E. itself published not

only the Kelm patent disclosure, but also the Kelm locking screw

device in its trade literature and at trade show demonstra-

tions, long before (as well as after) G.E. told Cantor about the

locking screw. Hence there were no relevant “confidences” to

be preserved.

Second, the information which was disclosed to Cantor was

given to him for the purpose of writing patent applications

6

which ultimately would become (and in fact did become) public

documents. In other words, the information was disclosed to

Cantor with the intent that the information be made public.

Third, during the time that Cantor was writing patent appli-

cations for G.E., he was simultaneously representing com-

petitors of G.E. with the full knowledge and cooperation of

G.E. In fact, in connection with one of those competitors, G.E.

made its files available to Cantor to assist Cantor in his rep-

resentation of the competitor.

During the evidentiary hearing, G.E. admitted it had no di-

rect evidence of any confidences disclosed to Cantor. In addi-

tion, during the evidentiary hearing, G.E. admitted that any

information which it disclosed to Cantor would be discover-

able.

None-the-less, the District Court disqualified Cantor under

Canons 4 and 9 of the Canons of Ethics. In so doing, the Dis-

trict Court expressly rejected the concept that a voluntary pub-

lic disclosure by the former client was a waiver of the right to

claim privilege based on “confidences.” The District Court also

refused to follow the law of the forum state, Michigan, which

permits representation of an interest adverse to a former client.

The District Court reasoned that there was a substantial rela-

tionship between the locking screw of the Kelm patent-in-suit

and the locking screw of the later patent applications on which

Cantor worked. In so doing, the Court rejected the evidence

(including G.E.’s own Stipulation) that the subject matter of

the Kelm patent and the Kelm locking screw had been pub-

lished by G.E. both before and after Cantor was told about it.

The District Court further reasoned that even if Cantor did

not obtain any confidential information, the appearance of im-

propriety justified disqualification. In so doing, the District

Court again relied on the substantial relation between the

Kelm locking screw patent and the locking screw of the later

patent applications which Cantor wrote, without regard to

7

G.E.’s own activities in publishing such information prior to

any disclosure to Cantor.

The Court of Appeals affirmed based on the substantial rela-

tion test, i.e., because the locking screw was common to the

_Kelm patent and to some of the later applications which Cantor

‘wrote.

VI. REASONS FOR GRANTING THE WRIT

A. The Issues Are of Wide Ranging Importance in that They Affect

Every Attorney-Client Relationship.

While every attorney is bound by the Canons of Ethics and

the Code of Professional Responsibility, the obligations upon

the attorney are not unlimited. Clients should expect their at-

torneys to maintain client confidences, but not if the client it-

self publishes the confidences. In essence, this case holds chat

the attorney-client confidences must be preserved by the at-

torney, forever, even though the client never preserved the

confidences. Hence, the essential question is: is there an

attorney-client confidence which binds the attorney when the

client itself does not keep and does not even intend to keep the

information confidential? Valeron submits that the attorney-

client privilege should not be available as a tactical weapon to

a former client who has not maintained the confidences itself.

Over the last ten years, there has been a substantial amount

of litigation with respect to disqualification of counsel. Peti-

tioner submits that it is appropriate for this Court to speak de-

finitively on the issue of disqualification so that attorneys,

clients, potential clients and the public will be able to c.mpre-

hend not only the obligation of the attorney but the limitations

of such obligation. To increase the public faith and trust in the

American judicial system, it is of substantial importance not

only to the parties to this matter, but to the public, to mini-

mize potential attorney-client conflicts. A decision by this

Court on the questions presented will provide guidance to all

. members of the Bar as to the types of matters which they can

8

handle and the possible consequence, i.e., the potential impro-

priety of the attorney handling certain matters in the future.

Thus the questions presented in this Petition go far beyond

the dispute between the parties and go to the heart of our

judicial system.

B. The Decision Below Conflicts with the Law of the Forum.

Under Erie R. Co. v. Thompkins, 304 U.S. 64 (1938), the

Federal Court in Detroit and the Court of Appeals for the Sixth

Circuit were required to follow the law of the forum state,

Michigan, in consideration of attorney disqualification. In

Smith v. Arc-Mation, Inc., 402 Mich. 115 (1978), the Michigan

Supreme Court rejected the “appearance of impropriety” doc-

trine as a basis for disqualification.

Michigan law permits representation of an interest adverse

to that of a former client. Gillette v. Gillette, 269 Mich. 364

(1934); Murphy v. Riggs, 238 Mich. 151 (1927). Michigan law

would only disqualify counsel from representing a party if

counsel had previously represented the other party on the

Same subject matter. Wingilia v. Ashman, 241 Mich. 534

(1928); Auseon v, Reading Brass Co., 22 Mich. App. 505

(1970). The aforementioned Michigan law is further exempli-

fied by Michigan Formal Ethics Opinion No. 7 (May 1959,

Michigan State Bar Journal, page 36) and the Michigan In-

formal Ethics Opinion C1250 (June 1, 1976, Michigan State Bar

Committee on Ethics).

The District Court decision did not consider the law of the

forum. When the applicability of the law of the forum was

raised on appeal, the Court of Appeals rejected such contention

without any citation of authority as being “without merit.”

The “Appearance of Impropriety” must be based on com-

parison to some standard. Since there is no federal legislation

which creates a national “standard” and since, as demonstrated

in the next section of this Petition, the decisions below conflict

with the decisions of another circuit, it is submitted that the

9

Courts should be required to consider and follow the law of the

forum.

C. The Decision Below Conflicts with the ision of Another Cir-

cuit as to Disqualification Based Upon Appearance of Impro-

priety.” \

Recently, the Second Circuit had occasion to consider the

“Appearance of Impropriety” as a basis for, disqualification. In

Board of Education v. Nyquist, 590 F.2d 1241 (2nd Cir. 1979),

the Court of Appeals reversed a Canon 9 disqualification stat-

ing:

‘ “We believe that when there is no claim that the trial

will be tainted, appearance of impropriety is simply too

slender a reed on which to rest a disqualification order

except in the rarest cases.” Id. at page 1247.

In the instant case, there is no claim that the trial would be

tainted. To the contrary, G.E. admitted that all its information

was discoverable and that there was no direct proof of dis-

closure of any confidences.

Petitioner submits that either the Courts below should be

required to follow the law of the forum, or, alternatively that

the conflict between the Circuits should be resolved, Since

clients frequently have offices in different states, the clients are

entitled to expect that the attorneys, upon whom they rely, will

be required to follow either the law of the forum or a single,

national standard. Similarly, since attorneys, and certainly at-

torneys who specialize in certain disciplines, provide legal serv-

ices for clients located in different states, attorneys should have

a basis to determine, in advance, whether their activities might

be restricted based upon the law of each state or upon a single

standard.

D. The Decision Below Should Be Reviewed Because of Differences

in Principle with Decisions of the Supreme Court and the Vari-

ous Courts of Appeals.

The underlying basis for the disqualification below was the

alleged preservation of attorney-client confidences, i.e., G.E.’s

10

claim of attorney-client privilege. The purpose of the privilege

is to encourage clients to make full disclosure to their attor-

neys. Fisher v. United States, 425 U.S. 391, 403 (1976). How-

ever, as recognized by this Court as well as the Courts of the

other circuits, the attorney-client privilege is not unlimited.

The privilege has certain metes and bounds which the Courts

below refused to consider.

First, since the attorney-client privilege is intended to pro-

tect the client’s confidences, what if there are no confic -nces to

be preserved because of the client’s own public disclosures?

The Courts below refused to examine this issue. However, this

Court provided, in Standard 511 of the proposed Federal Rules

of Evidence, that a voluntary disclosure by the client is a

waiver of the privilege. Here G.E. made such voluntary dis-

closures, by repeated acts, both before and after any alleged

disclosure to Cantor. Never-the-less, the Courts below would

not consider the issue of waiver.

The waiver of the claim of privilege, based upon the client’s

voluntary disclosure, is also recognized by the Courts of Ap-

peals of the other circuits as well as by various Treatises. United

States v. McCambridge, 551 F.2d 865 (1st Cir. 1977). See, Un-

ited States v. Woodall, 438 F.2d 1317 (5th Cir. 1971), cert.

denied, 403 U.S. 933 (1971); McCormick, Evidence, Sections

87, 93, 97, 106 (2nd Ed. 1972); 8 Wigmore, Evidence, Sections

2242, 2327-29, 2374, 2389-90 (McNaughton Rev. 1961).

Second, there is no “privilege” when the disclosure to the

attorney is intended to be disclosed to third persons. As this

Court recognized in Standard 503 (a)(4) of the proposed Fed-

eral Rules of Evidence, communications are confidential if not

intended to be disclosed. Here, however, the disclosures to

Cantor were intended to be disclosed and published and were,

in fact, published by G.E. as patents. The decisions below ig-

nore the principle that there were no confidences because

G.E. intended Cantor to publish the information. Hence, the

11

decision conflicts not only with Standard 503(a)(4) but also with

decisions of the other Courts of Appeals. United States v. Tel-

lier, 255 F2d 441 (2nd Cir. 1958), cert. denied, 358 U.S. 821

(1958); In re Horowitz, 482 F.2d 72 (2nd Cir. 1973); United

States v. Gordon-Nikkar, 518 F.2d 972 (5th Cir. 1975); Espo-

sito v. United States, 436 F.2d 603 (9th Cir. 1970); Mead Data

Central, Inc. v. United States Department of Air Force, 566

F.2d 242 (D.C. Cir. 1977).

In the present case, G.E. could not have intended the com-

munications to be confidential. Both G.E. and Cantor were

obligated to make full, public disclosure of all relevant informa-

tion. The information was given to Cantor for the purpose of

Cantor preparing patents. Under the law, the client, G.E., and

the attorney, Cantor, each had an uncompromising duty of

making a full disclosure to the United States Patent and

Trademark Office. Precision Instrument Mfg. Co. v. Automo-

tive Maintenance Machine Co., 324 U.S. 206 (1945). G.E. and

Cantor were both obligated to observe ine highest degree of

candor in dealing with the Patent Office. Kingsland v. Dorsey,

338 U.S. 318 (1949).

In view of the obligation of disclosure on G.E. and Cantor,

disqualifitation on the basis of the attorney-client privilege,

i.e., preserving confidences, is inapposite. The only justifica-

tion for now claiming disqualification based upon the attorney-

client privileges would be if full disclosure was not made by G.E.

or Cantor. But if a full disclosure was not made, the attorney-

client privilege cannot be claimed by G.E. under the “im-

proper purpose” exception. That is, as this Court recognized,

in dealings with the Patent Office, there can be either a know-

ing or a “technical” fraud. Walker Process Equip., Inc. v. Food

Machine ¢& Chemical Corp., 382 U.S. 172 (1975). If there was a

failure to make a full disclosure, by G.E. or Cantor, then there

would be no protectible privilege. See, Standards 503(d)(1) and

503(d)(3), proposed Federal Rules of Evidence. The principle

that communications regarding wrongdoings or breach of duty

12

are outside the attorney-client privilege is also recognized in

the other circuits, as well as in the Treatises. Matter of Doe,

551 F.2d 899 (2nd Cir. 1977); United States v. Gordon-Nikkar,

supra; Laughner v. United States, 373 F.2d 236 (5th Cir. 1967);

Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970); In re

Sawyer's Petition, 229 F.2d 805 (7th Cir. 1956); United States

v. Friedman, 445 F. 2d 1076 (9th Cir: 1971); McCormick, Evi-

dence, Sections 91, 95 (2nd Ed. 1972); 8 Wigmore, Evidence,

Sections 2298, 2327 (McNaughton Rev. 1961).

Thus, if both G.E. and Cantor made a full disclosure, there

are no confidences to protect. On the other hand, if either failed

to make a full disclosure, the conduct is outside thdécope of

the privilege.

E. This Court is Already Gonsidering Limitations on the Claim of

Privilege.

During the present term, this Court granted Certiorari in

United States v. Trammel, 583 F.2d 1166 (10th Cir. 1978), cert.

granted (No. 78-5705). One of the issues presented in the in-

stant Petition, namely, limitations on. the right to a claim of

privilege is generally similar to Trammel, where the underlying

issue is limitations on a claim of marital privilege based upon

conduct.

The attorney-client privilege is a shield, and not a sword. It

should not be available as an offensive weapon for the purpose

of disqualifying an attorney. Petitioner submits that the Courts

below, contrary to the principles enunciated in decisions of this

Court and the other Courts of Appeals, have allowed the claim

of privilege to be misused.

13-

CONCLUSION

For the foregoing reasons, the Petition for a Writ of Certio-

rari should be granted.

Respectfully submitted,

CULLEN, SLOMAN, CANTOR, GRAUER,

SCOTT & RUTHERFORD, P.C.

By: JEROLD I. SCHNEIDER

3200 City National Bank Building

Detroit, Michigan 48226

(313) 964-0400

DONALD A. PANEK

The Valeron Corporation

20800 Coolidge Highway

Oak Park, Michigan 48237

Attorneys for Petitioner

—APPENDIX—

i)

Opinion la

IN THE

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

GENERAL ELECTRIC COMPANY CIVIL

vs. ACTION

VALERON CORPORATION, NO. 5-71257

Defendant.

OPINION ON MOTION TO DISQUALIFY

General Electric sues Valeron claiming infringement of its

United States Patent No. 3,341,920 and has now moved for an

Order to disqualify Bernard }. Cantor and the firm of Cullen,

Settle, Sloman & Cantor, P.C., as attorneys for Valeron Cor-

poration, defendant herein.

General Electric Company is organized and exists under the

laws of New York and Valeron Corporation is organized and

exists under the laws of Michigan. The suit arises under the

Patent Laws of the United States.

In its complaint General Electric charges that Valeron in-

fringed G.E. Patent No. 3,341,920 (the Kelm Patent) by mak-

ing, selling and actively inducing others to use cutting tools

embodying the invention in that patent. Valeron denies in-

fringement and seeks a declaration of invalidity because of

specified prior art and prior invention. Valeron says that the

Kelm Patent (920) is invalid because of an alleged prior inven-

tion disclosed in U.S. Patent No. 3,310,859 which is now

owned by Valeron.

In making these findings regarding the Kelm Patent or any

other patent the Court notes that these findings are made for

the purpose of ruling on plaintiff's motion only.

The Kelm Patent in suit is applicable in the cutting tool field.

It applies specifically to a cutting insert retained in a pocket on

a cutter tool body by a locking pin that fits in a hole in the

2a Opinion

insert and is threaded into a hole in the cutter body. As the pin

is tightened a conical portion on the pin engages an offset coni-

cal portion of the hole in the body. This causes the pin to move

in a direction which locks the insert against a shoulder of the

recess of pocket in the cutter body.

U.S. Patent No. 3, 310,859, herein known as the Diemond

Patent, also is applicable in the cutting tool field. It applies

specifically to a cutting insert retained in a recess on a cutter

tool body by a locking pin having a head that fits in a hole in

the insert and a shank which is threaded into a hole in the

cutter body. As the pin is tightened a conical portion on the

head of the pin engages an off-set conical portion of the hold in the

body which causes the pin to move in a direction which blocks

the insert against the shoulder of the recess or pocket in the

cutter body. In these proceedings this has been referred to as

the Valeron lock screw mechanism. The Kelm locking mech-

anism (920) is used by plaintiff in its single-point cutting tools,

boring bars and milling cutters. The Valeron lock-screw mech-

anism (859) is used in its single-point cutting tools, boring bars

and milling cutters.

Shortly after this case was commenced Bernard Cantor en-

tered his appearance as trial counsel for Valeron. What gives

rise to controversy is that Cantor was an attorney for plaintiff in

1965-1967. He prepared several draft patent applications for

General Electric including subject matter which plaintiff claims

is substantially related to the subject matter in this case.

When plaintiff filed its motion the Court determined that an

evidentiary hearing was necessary in order to rule. The follow-

ing facts appeared.

Cantor's contacts as an attorney for plaintiff in 1965 through

1967 were with the Carboloy Department of plaintiff. He dealt

primarily with Harold J. Holt, in-house patent counsel for the

Carboloy Department. In preparing some eleven patent appli-

cations for plaintiff Cantor met with Holt and received dis-

Opinion 3a

closures of inventions, including samples, drawings and written

disclosures by the inventors; had conferences with them, re-

viewed drafts with them, obtained knowledge of plaintiff's cut-

ting tools and exercised professional judgment by reviewing re-

lated applications, drafting claims to avoid interference prob-

lems, known prior art and division and restriction require-

ments.

It appeared that in the period 1965-1967 William Reich,

Manager of Engineering at Carboloy, Elbert J. Weller, Man-

ager of a Metal Working and Mining Produ®ts Engineering

Section,-and: tool designers Walter Kelm, Tom Gowanlock,

Tom Kordowski, Norman Campbell, Floyd Kirkham and Arn-

old Bower all worked together for plaintiff. They discussed, ad-

vised and cooperated with each other in connection with the

projects of the cutting tool group and had access to each other's

ideas, notebooks and disclosures. It was in this period that the

Kelm locking mechanism was invented by Walter Kelm. Work

was also done on an insert utilizing the Kelm locking mech-

anism by Weller and Kelm, an adjustable boring bar by Kelm,

and a disposable insert milling cutter by Campbell and Weller.

Holt, with whom Cantor worked, prepared and prosecuted

patent applications which matured into the Kelm Patent in suit

as well as the Weller-Kelm ‘921 Patent and the Kelm '923 Pat-

ent. During this period it appeared that when plaintiff's Carbo-

loy division prepared a patent application this was usually

begun with an invention disclosure letter; then in turn engi-

neering prints, drawings, invention questionnaires, supple-

mental disclosure letters, relevant prior art, novelty search re-

sults, interpretation of prior art, patentability opinions and

comments on questions of infringement became a part of the

application file. Other data also was included and of signifi-

cance in this connection is the fact that Holt maintained inven-

tion records. The information in these patent application files

was not publicly disseminated.

4a Opinion

In connection with the patent applications on which Cantor

worked, Holt and Cantor worked closely and Holt disclosed to

Cantor all of the documents and information necessary to com-

plete as final an application draft as could be done. To carry out

his work as an attorney in connection with these eleven applica-

tions Cantor had numerous conferences at the Carboloy Plant

with Holt and the inventors. Holt’s files were available to Can-

tor. He received confidential disclosures and engineering draw-

ings and he had access to plaintiff's patents, patent collections

and prior art collections on fitting and pocketing inserts in

tools. He likewise had access to plaintiffs pending applications.

He rendered advice. He suggested strategy on how to obtain

claim protection and he made recommendations on how to pro-

ceed with patent applications.

Among the patent applications on which he worked was the

Campbell-Weller milling cutter application, the Kelm ’401 bor-

ing bar and the Kirkham U.S. Patent No. 3,368,265. These

were inventions in the cutting tool area. He also did work on

mining drills and in areas other than this.

The Court notes that Cantor began his professional relation-

ship with plaintiff after the Kelm 920 Patent had been filed.

While Cantor did not prepare this application, plaintiff con-

tends that Cantor had full opportunity to acquire information,

confidences and secrets and form his own opinions regarding

the Kelm ’920 Patent while he was plaintiffs attorney.

It is significant that Cantor prepared the Kirkham ‘265 Pat-

ent for it relates to a machine for operating cam pin-locking

mechanisms to automatically release, index and secure an in-

sert in a cutting tool holder. The cam pin-locking mechanisms

are claimed in plaintiffs Hill Patent which defendant says in its

answer is prior art which invalidates the Kelm ’920 Patent.

Cantor had access to Kirkham. He received a witnessed writ-

ten invention disclosure signed by Kirkham and viewed the

machine for cam pin-locking mechanisms on two occasions for a

total of four hours.

Opinion 5a

Cantor also worked closely with Kelm in the preparation of

the Kelm '401 Patent. He also met Kelm’s associates and in

connection with this work Cantor made notes, hand sketches

and reviewed drawings. The Kelm adjustable boring bar con-

tains the Kelm locking mechanisms insert. In studying the bor-

ing bar for the purpose of making a patent application Cantor

had access to the locking mechanism of the Kelm ’920 Patent.

Cantor also worked on the Campbell-Weller milling cutter

invention, a milling cutting body having a plurality of pockets,

each with an indexable insert and an underlying seat retained

therein by the locking mechanism of the Kelm Patent in suit.

Here, again, Cantor met with Holt and again he had access to

Weller, Campbell, and the drawings and documents necessary

to complete this application. Plaintiffs Exhibit 61 shows that

Cantor's drawing for the Campbell-Weller milling cutter appli-

cation is strikingly similar to Fig. 2 of the drawing in the patent

application for the Kelm Patent in suit. This same exhibit

shows that in the Cantor draft description it was stated that

“such releasable locking means ... are disclosed in . . . the

patent application of Walter Kelm (Kelm ’920 Patent in suit)

... Plaintiffs Exhibit 46 referred to the similarity between

Fig 2 of the drawings in the Kelm Patent 920, and Fig. 5

which is Cantor's drawing in the Campbell-Weller milling cut-

ter application. Figs. 5 and 6 in Plaintiffs Exhibit 13AA, which

are rough drawings made by Cantor, show a protrusion of the

pin which is shown only in the Kelm ’920, Weller and

Campbell 921 and Kelm ’923 patents. Cantor, in testifying to

this, said that he obviously copied it off something. Again, this

indicates the access that he had to the drawings and concepts of

the patent in suit. Cantor acknowledged that he would nor-

mally refer to a pending application when incorporating it by

reference in the disclosure of the patent application on which

he was working. He acknowledged that the Campbell-Weller

application incorporates the entire disclosure of the then Kelm

application for the ‘920 patent.

6a Opinion

Thus, when one considers the inventor's disclosure letter,

Plaintiffs Exhibit 13DD, and attached prints, Plaintiffs Exhibit

43A through H, which characterize utilization of the Kelm lock-

ing mechanism as a unique feature, Cantor's own application

draft and drawings which describe and incorporate by refer-

ence the locking mechanism of the Kelm Patent in suit, and the

rejection of the Campbell-Weller application by the Patent Of-

fice examiner it must be concluded, and the Court so finds,

that there is a substantial relationship between the subject mat-

ter of Cantor’s work on the Campbell-Weller application and

the Kelm 920 Patent. The locking mechanism Cantor disclosed

in his application is the locking mechanism of the Kelm ‘920

Patent. The inferences which flow from Cantor’s activity in this

regard are so strong that-it would be unreasonable to conclude

that Cantor did not have some knowledge of the Kelm ‘920

application. ae

While plaintiff introduced other evidence which it claims es-

tablishes the substantial relationship between the Diemond

Patent and the patent in suit, particularly that of the patent

office activity, the Court will make no findings in that re; 1rd

since such questions may well go to merits of the suit itself. It is

sufficient to say that the contentions of the parties in this re-

gard, the answer filed by defendants and the matters that have

sought to be and have been investigated in discovery to-date all

tend to show a substantial relationship between the matters on

which Cantor worked while he was an attorney for General

Electric and the subject matter of this suit.

Based on these findings the Court concludes that Cantor,

while a patent attorney for plaintiff, exercised professional

judgment in the course of his representation of plaintiff; that

the subject matter in his representation of plaintiff and his

present representation of defendant is close and that he had

access to confidential information and opportunity to examine

this information, and that accordingly the opinions, views and

Opinion 7a

professional judgment which he now has might and in all likeli-

hood were formed in good measure as the result of that prior

relationship he had with plaintiff. Thus the Court concludes

that even if Cantor did not obtain any confidential information,

and even if one were to say that no part of his present profes-

sional opinions or judgments are based on his activity on behalf

of plaintiff while he was their attorney, there is, nonetheless,

the appearance of impropriety. That appearance of impropriety

exists now because Cantor represents an interest adverse to

that of General Electric on subject matters which are substan-

tially related and identical.

In considering the matter of disqualification of an attorney,

courts have used the substantial relationship test as a standard.

In Consolidated Theatres vs. Warner Brothers, 216 F.2d 920

(2d Cir. 1954), it was held that to prove the existence of a pro-

fessional obligation “the former client need show no more than

that the matters embraced within the pending suit wherein his

former attorney appears on behalf of his adversary ‘were sub-

stantially related to the matters or cause of action wherein the

attorney previously‘represented him, the former client.”

In that case the Court of Appeals for the Second Circuit re-

ferred to a district court case, namely, T. C. Theatre Corpora-

tion vs. Warner Brothers, 113 F. Supp. 265, at 268, in which

Federal Judge Weinfeld held that:

“In cases of this sort the court must ask whether it can

reasonably be said that in the course of the former rep-

resentation the attorney might have acquired informa-

tion related to the subject of his subsequent representa-

tion. If so, then the relationship between the two mat-

ters is sufficiently close to bring the later representation

within the prohibition of Canon 6.”

In an early case in this Circuit the U.S. Court of Appeals for

the 6th Circuit said in United States vs. Bishop, 90 F.2d, 65,

66, (1937), quote:

8a Opinion

“It is well settled that an attorney who has acted for

one party cannot render professional services in the

same matters to the other party, and it makes no differ-

ence in this respect whether the relationship itself has

terminated for the obligation of fidelity still continues.”

In the case of Canon vs. U.S. Acoustics Corporation, 398 F.

Supp. 209 (Northern District, Illinois, 1975), Judge Marshall

dealt at length with this subject. That Court pointed out that

the common law principles of disqualification are embodied in

the Code of Professional Responsibility. He noted that Canon 4

states that “a Lawyer Should Preserve the Confidences and

Secrets of a Client.” Judge Marshall then undertook an analysis

of the underlying ethical considerations. He found that for the

relationship of attorney and client to be of maximum benefit to

the client this required a total disclosure by the client to the

attorney and it was a necessary corollary to this concept that

the lawyer would then preserve any confidences and secrets

transmitted to him. Only upon the lawyer’s having obtained all

possible information from his client could the lawyer make the

necessary professional judgment as to what was relevant and

important and what was irrelevant and unimportant and that

consequently the lawyer receiving the confidences and secrets

of his client could not use such information to the client's dis-

advantage. He pointed out that Canon 9 of the Code of Profes-

sional Responsibility provides that “a Lawyer Should Avoid

Even the Appearance of Professional Impropriety.” He noted

that the United States Court of Appeals for the 7th Circuit held

in the case of Dr. Schloetter, et al, vs. Railoc of Indiana, Inc.,

Civil No. S74-117, decided December 1, 1976, at page 5,

“Read together, the two canons indicate that an attorney may

be required to withdraw from a case where there exists even an

appearance of a conflict of interest.” Judge Marshall then con-

cluded that a former client need show no more than that the

matters embraced within the pending suit, wherein his former

Opinion 5 9a

attorney appears on behalf of his adversary are substantially re-

lated to the matters of cause of action wherein the attorney

previously represented him, the former client.

In similar vein Judge Weinfeld’s Opinion in T. C. Theatre

Corporation vs. Warner Brothers, supra, at page 268 is il-

luminating:

“The Court will assume that during the course of the

former representation confidences were disclosed to the

attorney bearing on the subject matter of the represen-

tation. It will not inquire into their nature and extent.

Only in this manner can the lawyer’s duty of absolute

fidelity be enforced and the spirit of the rule relating to

privileged communications be maintained . . . In cases

of this sort the Court must ask whether it can reasonably

be said that in the course of the former representation

the attorney might have acquired information relating to

the subject matter of his subsequent representation. If

so, then the relationship between the two matters is suf-

ficiently close to bring the latter representation within

the prohibition of Canon 6.”

Or again, Judge Marshall: (Cannon, supra, page 223):

“In essence the Court was saying it would order dis-

qualification if the matters in the two engagements were

substantially related. This is determined by asking

whether it could reasonably be said that during the

former representation the attorney might have acquired

information related to the subject matter of the subse-

quent representation. Importantly, the Court did not

require the movant to prove that confidences and sec-

rets were reposed. That fact-is assumed once a substan-

tial relationship is established.”

In American Roller Company vs. Budinger, 513 F. 2d 982,

986 (3rd Cir. 1975), the Court. held that:

10a Opinion

“It is the possibility that confidences might be

breached and not the fact of their disclosure or use that

dictates disqualification once a substantial relationship

between two representations has been established.”

Defendant also argues that in any event all information ob-

tained from General Electric by Cantor has been published or

it is available from non-confidential sources. This was treated in

In Emle Industries, Inc., vs. Patentex, Inc., 478 F. 2d 562,

572-573 (2nd Cir. 1973), and the Court held that this argument

was of no avail. The Court stated:

“. . . the client’s privilege in confidential information

disclosed to his attorney is not nullified by the fact that

the circumstances to be disclosed are part of a public

record, or that there are other available sources for such

information, or by the fact that the lawyer received the

same information from other sources.”

From these cases the following principles emerge:

1. Ifthere is a substantial relationship or a sufficiently close

relationship between the matters on which the attorney

worked in his prior retainer and the matters in which he

has worked on his subsequent retainer, this is all that

the former client need show.

2. This substantial relationship or sufficiently close relation-

ship test is compelled by the nature of the relationship

of attorney and client.

3. All confidences and information of the client are to be

protected.

4. The ethical considerations which support this concept

require that a lawyer should preserve the confidences

and secrets of his client and that a lawyer should always

avoid even the appearance of professional impropriety in

so doing.

5. Because of these considerations a lawyer should be dis-

qualified in a representation in which he may have had

Opinion lla

access or opportunity to obtain confidential material and

the client need show no more than this in order to be

protected.

The local rules of this Court adopt the Code of Professional

Responsibility and these Canons by reference. These consider-

ations and the Canons apply fully to attorneys practicing in this

court.

Finally this Court notes that even if it were forced to con-

clude that it had doubt that an attorney received any confiden-

tial information that doubt should be resolved in favor of attor-

ney disqualification. In Hull vs. Celanese Corporation, 513

F.2d 568, 571 (2d Cir. 1975), the Court faced an argument that

in-house counsel for Celanese had switched sides to become a

plaintiff (rather than a lawyer) on the other side. It was then

sought to disqualify the Rabinowitz firm who represented this

plaintiff and it was argued that they had advised this plaintiff

and former attorney for Celanese, one Delulio, not to reveal

any information to them received in confidence by plaintiff as

an attorney for Celanese. While the Court credited the Rab-

inowitz firm for this attempt to avoid the receipt of any confi-

dences, it held that the receipt of confidential information itself

did not have to be shown, only that the attorney might have

acquired information, and that if there was doubt as to this it

should be resolved against the attorney.

What finally must be said is, that Canon 9 of the Code Of

Professional Responsibility makes it obligatory that a lawyer

should avoid even the appearance of professional impropriety.

In our society lawyers have been granted significant privileges.

It is in their interests, as well as in the preservation of the

adversary system, that there be scrupulous adherence to

proper dealing. It makes no difference that the clients involved

in this litigation are experienced and sophisticated corpora-

tions.

12a Opinion

Consequently, the Court concludes that Bernard Cantor

must be disqualified in his representation of the defendant in

this case. In order to make it clear that the appearance of im-

propriety cannot be countenanced, the Court reluctantly con-

cludes that Cantor’s firm should likewise be disqualified.

An appropriate Order may be submitted.

JOHN FEIKENS

United States District Judge

DATED: January 31, 1977, Detroit, Michigan.

IN THE

UNITED DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

GENERAL ELECTRIC COMPANY CIVIL

vs | ACTION

VALERON CORPORATION, NO. 5-71257

Defendant.

ORDER DISQUALIFYING DEFENDANT'S COUNSEL

Upon Plaintiffs Motion to Disqualify Defendant's Counsel

and after an evidentiary hearing thereon, and pursuant to my

Opinion on Motion to Disqualify dated January 31, 1977, and

upon motion of the defendant, Valeron Corporation, for certifi-

cation pursuant to 28 U.S.C. §1292(g),

IT IS HEREBY ORDERED THAT:

1. Plaintiffs Motion to Disqualify Defendant's Counsel is

granted.

2. Bernard J. Cantor, the firm of Cullen, Settle, Sloman &

Cantor, P.C., 3200 Penobscot Building, Detroit, Michigan

48226, and all attorneys associated with the firm of Cullen,

Order 13a

Settle, Sloman & Cantor, P.C., are hereby disqualified from

representing The Valeron Corporation in this litigation.

3. Bernard J. Cantor, the firm of Cullen, Settle, Sloman &-

Cantor, P.C., and all attorneys associated therewith shall not

disclose to The Valeron Corporation or any new counsel re-

tained by The Valeron Corporation any information whatsoever

that Bernard J. Cantor or his firm may have acquired from

General Electric Company during his former representation of

General Electric Company.

4. The District Court is of the opinion that the Order of

Disqualification involves a controlling question of law as to

which there is substantial ground for difference of opinion and

that an immediate appeal from the Order may materially ad-

vance the ultimate termination of the litigation pursuant to 28

U.S.C. §1292(b).

5. Upon filing an Application for Appeal and an Appeal, the

proceedings in the District Court shall be stayed pending such

Appeal.

6. IT IS HEREBY FURTHER ORDERED THAT this

Court’s Opinion on Motion to Disqualify dated January 31,

1977 be and is hereby corrected as follows:

A. On page 2, line 8 of the last complete paragraph,

“blocks” is changed to — locks —.

B. On page 9, fifth line from the bottom, “He” is deleted

and — It is — is inserted.

C. On page 10, first line, “then” is deleted.

JOHN FEIKENS

United States District Judge

l4a Decision

No. 77-1323

UNITED STATES COURT OF APPELAS

FOR THE SIXTH CIRCUIT

GENERAL ELECTRIC COMPANY, Appeal from the Un-

Plaintiff-Appellee, ited States Distict

v. Court for the East-

The Valeron Corporation, ern District of

Defendant-Appellant. Michigan.

~ ore: EDWARDS, Chief Circuit Judge, PHILLIPS,

Senior Circuit Judge, and BROWN, District Judge. *

BROWN, District Judge. General Electric Company

brought this action against Valeron Corporation, alleging that

Valeron infringed General Electric’s Patent No. 3,341,920.

Valeron denied infringement and sought a declaration of in-

validity because of specified prior art and prior invention. In

the latter respect, Valeron relied, inter alia, on the prior inven-

tion disclosed by its Patent No. 3,310,959, the Diemond pat-

ent. These patents have to do with a method of fastening a

cutting tip in a cutting tool.

Shortly after the case commenced, Bernard J. Cantor entered

his appearance as trial counsel for Valeron. General Electric

then moved for an order disqualifying Cantor as such counsel

for Valeron. The basis of the motion, stated generally, was that

in 1965-1967 Cantor, as a patent attorney retained by General

Electric, prepared several draft patent applications for General

Electric and that the relationship between that work and the

subject matter of the instant litigation is such as to require Can-

*Honorable Bailey Brown, Chief Judge, United States District Court for the

Western District of Tennessee, sitting by designation on the date of argu-

ment; elevated on September 27, 1979 to the Sixth Circuit Court of

Appeals.

Decision 15a

tor’s disqualification. District Judge John Feikens then held a

lengthy evidentiary hearing on this issue at which much testi-

mony and many exhibits were received, following which a care-

fully prepared and full opinion was filed setting out the court’s

findings and conclusions to the effect that Cantor and his law

firm must be disqualified. Valeron then appealed the order of

disqualification.

Although the parties have not raised the question of the

jurisdiction of this court under 28 U.S.C. §1291 to entertain

this appeal, we note that our ruling in Melamed vs. ITT Conti-

nental Baking Co., 592 F.2d 290 (6th Cir. 1979), is in no way

inconsistent with our accepting jurisdiction in this case. There

we did point out that motions to disqualify counsel and im-

mediate appeals of rulings thereon can cause great delay in the

processing of the litigation. Nonetheless, Melamed holds that

an appeal will be dismissed as interlocutory only where there is

an order denying a motion to disqualify after an evidentiary

hearing and a finding that the moving party cannot be injured

by the challenged representation.

As stated, Cantor was retained as a patent lawyer by General

Electric during 1965-1967 to prepare drafts of several patent

applications. General Electric contends that Cantor’s work in

preparing such applications is substantially related to the sub-

ject matter of the instant litigation, and that, this being-so, dis-

qualification is required. The subject matter to which General

Electric refers is the defense upon which Valeron relies, i.e.

denial of infringement and an assertion of invalidity based on

prior art and prior invention. :

That proof of such a substantial relation is generally sufficient

to require disqualification is supported by the very recent hold-

ing of this court in Melamed, supra, in which this court said at

292:

It has been repeatedly held that an attorney may not

represent a client in litigation against a former client if

16a Decision

the subject matter of the litigation is “substantially re-

lated” to work he or she did for the former client. See

e.g. Emle Industries, Inc. vs. Patentex, Inc., 478 F.2d

562, 565 (2nd Cir. 1968); Wilson P. Abraham Construc-

tion Corp. vs. Armco Steel Corp., 559 F.2d 250, 252

(5th Cir. 1977); T. C. & Theatre Corp. vs. Warner Bros.

Pictures, 113 F.Supp. 265, 268 (S.D.N.Y. 1953).

The trial court held that there is such a substantial relation

here based on its finding that Cantor was working with patent

house counsel and engineers of the Carboloy Department of

General Electric, during which he had access to the files on

General Electric's patents, patent applications, patent collec-

tions and prior art collections on fitting and pocketing inserts in

tools. The trial court also found that Cantor received confidential

tial disclosures while doing this work. Such findings are cer-

tainly not clearly erroneous. This being so, the conclusion that

Cantor should be disqualified must be affirmed.

Valeron argues that the showing of a “substantial relation”

between Cantor's prior work for General Electric and the in-

stant litigation is not sufficient; it contends that it is necessary

that General Electric show a substantial relation between Can-

tor’s work for it and the actual issues of the present lawsuit and

that such has not been shown. While we do not mean to indi-

cate that Valeron would be entitled to prevail even if we ac-

cepted this view of the law, we note that this narrower formula-

tion is not supported by case law generally and is contrary to

the formulation as set out by this court in Melamed, 592 F.2d

(6th Cir. 1979) at 292 and cases cited therein. As is stated in

Wilson P. Abraham Construction Co. vs. Armco Steel Co., 559

F.2d 253 (5th Cir. 1977), cert. denied, 434 U.S. 1015, cited and

relied upon in Melamed, at 252:

[A] former client seeking to disqualify an attorney

who appears on behalf of his adversary, need only to

show that the matters embraced within the pending suit

Decision 17a

are substantially related to the matters or cause of action

wherein the attorney previously represented him.

We also note that the narrower formulation might well be diffi-

cult to apply in practice since the actual issues in lawsuits are

frequently not determined until long after the litigation has

begun.

As indicated, the trial court found as a fact that Cantor had

received confidential information from General Electric in con-

nection with his work of preparing draft patent applications.

This being so, we need not resolve here the apparent conflict

between the opinion of the trial court to the effect that once

the “substantial relationship” test is met, the receipt of confi-

dential information is conclusively presumed, and the opinion

of the court in City of Cleveland vs. Cleveland Electric Illumi-

nating Co., 449 F.Supp. 193 (N.D. Ohio 1977), aff'd by order,

573 F.2d 1310 (6th Cir. 1977), in which it is stated that the

presumption of receipt of such information may be rebutted

and if rebutted, disqualification is not necessary. We further

note that such statement in the City of Cleveland case is really

dictum since the court held that the City, the complaining

party, had effectively waived its claim that the attorneys not

represent the adversary party and further held that a “substan-

tial relation” had not been proved. Compare: Novo Teraapeutisk

Laboratorium A/S vs. Baxter Travenol Laboratories, Inc., et

al., —F.2d —, 48 U.S.L.W. 2189 (7th Cir., en banc, decided

August 16, 1979), wherein the court held that, in the unusual

circumstances of that case, the presumption of the receipt of

confidences could be and was rebutted.

This court has considered the other contentions of Valeron

and has determined them to be without merit.

The order of disqualification entered by the District Court is

therefore

AFFIRMED.

ee A OP a eA Aaa tee ee ar eee eee ee