Brookwood Cos. v. Alston & Bird LLP

• Decision Date: 26 January 2017
• Docket Number: 653723/14,2482
• Citation: 2017 NY Slip Op 00535
• Parties: Brookwood Companies, Inc., Plaintiff-Appellant, v. Alston & Bird LLP, et al., Defendants-Respondents.
• Court: New York Supreme Court — Appellate Division

2017 NY Slip Op 00535

Brookwood Companies, Inc., Plaintiff-Appellant,
v.
Alston & Bird LLP, et al., Defendants-Respondents.

2482
653723/14

Appellate Division of the Supreme Court of the State of New York

Decided on January 26, 2017

Acosta, J.P., Andrias, Moskowitz, Gische, Webber, JJ.

Storch Amini & Munves PC, New York (Steven G. Storch of counsel), for appellant.

Friedman Kaplan Seiler & Adelman LLP, New York (Eric Seiler of counsel), for respondents.

Order, Supreme Court, New York County (Eileen Bransten, J.), entered on or about September 30, 2015, which granted defendants' motion to dismiss the complaint, unanimously affirmed, with costs.

Plaintiff (Brookwood) is the former client of defendants (A & B) and this is an action for legal malpractice and other causes of action. The parties' dispute arises from an underlying patent infringement lawsuit that was brought against Brookwood in connection with work undertaken on behalf of the United States government (patent action).

A focal point of this appeal is Brookwood's claim that A & B, in the patent action, negligently litigated defenses that were available to Brookwood pursuant to 28 USC § 1498. 28 USC § 1498 provides that when a patent is infringed for the benefit of the United States government, the patent holder's remedy is against the United States in the United States Court of Federal Claims. Brookwood alleges that had A & B not been negligent, the motions that A & B eventually brought based on 28 USC § 1498 would have been granted and Brookwood would have avoided the approximately $10 million it expended on defending itself at trial and on appeal. Important in this analysis is the fact that Brookwood ultimately prevailed in the underlying patent action, achieving a judgment of noninfringement. The theory of Brookwood's malpractice case is not that but for A & B's negligence it would have prevailed in the patent action; rather Brookwood's claim is that but for the manner in which A & B interposed the defenses available to Brookwood under 28 USC § 1498, Brookwood would have prevailed without incurring the additional legal fees it expended. In other words, but for A & B's negligence, Brookwood could have achieved the same result more expeditiously and economically. The Supreme Court granted A & B's motion and dismissed the complaint in its entirety, holding, among other things, that the allegations did not support a finding of attorney negligence or of proximate cause. We now affirm.

28 USC § 1498(a)¹ authorizes government contractors to infringe on United States

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patents when providing goods and services for the government to the government's specifications. In those circumstances, the federal government waives immunity from suit, allowing the patent holder to sue it for any resulting infringement (Madey v Duke Univ., 413 F Supp 2d 601, 606 [MD NC 2006]; see also Windsurfing Intern., Inc. v Ostermann, 534 F Supp 581, 587 [SD NY 1982]).

In 2006, the federal government solicited bids for production and delivery of cold-weather clothing for use by the military. At a presolicitation conference, Brookwood informed the government that it believed that compliance with the government's specifications for such garments could infringe on patents held by nonparty Nextec Applications, Inc. (Nextec). The government ultimately changed its specifications, but before doing so, a government specialist stated in an email to Brookwood that the government's standard patent infringement indemnity clause would be included in the contract stating, in sum and substance, that the government authorizes and consents to the use of any patented invention in fulfillment of its contracts (see CFR 48 CFR 52.227-1[a]). The government contract was ultimately awarded to Atlantic Diving Supply (ADS) and Brookwood was approved as ADS's subcontractor, responsible for manufacturing and supplying to ADS the fabric needed to fulfill the contract with the government. The contract provision identified in the government specialist's email was not included in the government's contract with ADS.

For a number of years preceding any of these events, Brookwood had hired A & B to perform nonlitigation intellectual property services, including preparing noninfringement opinions, the subject of which were some of the patents held by Nextec. After Nextec commenced the patent action, Brookwood retained A & B to defend it, specifically because of its pre-litigation familiarity with those patents. Brookwood now claims that had A & B disclosed that there was the potential for the attorney-client and/or work product privilege to be waived if the noninfringement opinions were used in the patent action, Brookwood would not have retained the firm.

Nextec commenced the patent action against Brookwood in the Southern District of New York, alleging patent infringement and asserting both product and method claims (Nextec Applications Inc. v Brookwood Cos., No. 07-CV-6901). The product claims pertained to the tangible aspects of Brookwood's manufacture of the fabric, whereas the method claims alleged infringement of Nextec's know-how or process used to apply a coating that gave fabrics their breathable, water-resistant characteristics.²

A & B filed an answer on Brookwood's behalf, which included a defense under 28 USC § 1498. It then brought two successive motions for partial summary judgment, each approximately one year apart. The first motion, made in June 2008, was made only after Nextec had narrowed its claims, for purposes of expert discovery. In the first motion, A & B sought dismissal under 28 USC § 1498, but limited only to Nextec's production claims against Brookwood's manufacture and sale of fabrics. In its January 6, 2009 order, the Southern District granted the motion in part, dismissing all claims related to fabrics Brookwood manufactured for ADS for eventual delivery to the federal government. The motion was, however, denied to the extent that Nextec raised issues of fact regarding whether some of the fabric Brookwood had delivered to ADS might have made its way into the marketplace and been made available to the general public.

Following the close of expert discovery related to the remaining claims, Brookwood moved for summary judgment as to the method claims in the complaint. Nextec separately...