Today’s post covers the latest issue of Daredevil, “Divide by Hero.” Mark Waid’s run continues to be terrific, and this issue was particularly good. Most of it is a flashback, so it’s a good issue to check out even if you haven’t been following the series (which you really should be). A couple of legal issues stood out in this issue, including one involving my personal area of practice, patent law, which doesn’t come up terribly often in comics. Minor spoilers ahead.
I. Invention Promotion Companies and Other Scams
Part of the flashback story involves a scientist, Elliot Pasko, who had been taken in by a company called Fortknight, which Foggy Nelson describes as “a predator corporation posing as a no-strings endowment fund. They stake promising young inventors…then bury them with bogus ownership claims, patent infringement allegations, and worse whenever their ‘beneficiaries’ strike gold.” As it turns out, there are quite a few scams aimed at inventors, though they usually don’t take this form. Nonetheless, what Foggy describes could work.
The most common form of scam is the ‘invention promotion company.’ The United States Patent and Trademark Office has a useful page that details the common elements of these scams. Basically they lure inventors with unwarranted promises of success at the Patent Office and easy money, when in reality they either deliver nothing or, at most, an often useless design patent that protects only the non-functional design of a thing. The kinds of companies are a real problem, particularly for individual inventors, but Fortknight seems to be operating a different kind of scam.
I suspect that the way Fortknight’s scam would work is that the company would promise research funding, but hidden in the agreement would be an assignment of patent rights from the inventor to Fortknight. Then, as soon as the research was far enough along to apply for a patent, Fortknight would pull the rug out from under the inventor, obtain a patent, and sue the inventor if he or she tried to continue their research elsewhere. If an inventor assigns their rights, then they can be prevented from making, using, or selling their own invention just like anyone else.
As a side note (and as discussed in our review of Daredevil: Yellow), there’s no reason that Nelson & Murdock couldn’t take this case, since it involves patent litigation rather than practice before the United States Patent & Trademark Office.
II. Profit Sharing and Legal Ethics
Foggy took Pasko’s case under curious terms: “all the pro bono he required in exchange for ten percent of future profits.” Now, pro bono doesn’t necessarily mean free; it can also mean working at a substantially reduced rate, but this isn’t pro bono work. This is for-profit work (literally) that is effectively a kind of contingent fee, since if Pasko loses then there definitely won’t be any profits. But is this kind of thing ethical? The answer is a highly qualified yes.
In New York, “A lawyer may accept an equity interest in a client if the lawyer complies with the Rule of Professional Conduct governing business transactions with clients and the acceptance does not otherwise create a conflict for the lawyer or result in an excessive fee.” NYSBA Opinion 913. Entering into a business transaction with a client in this way brings with it several requirements, including that the transaction be fair, reasonable, and communicated in writing. The client must also be advised of and be given a reasonable opportunity to seek independent legal advice regarding the transaction. And the client must communicate his or her informed consent in writing. Contingent fee arrangements likewise have their own rules, mostly to do with carefully explaining the nature of the fee agreement in writing. See NY Rule 1.5(c).
I’ll admit that I was a bit surprised by this result. I knew that lawyers could, under some circumstances, enter into business transactions with clients, and that lawyers could take contingent fees. But I did not expect that the two could be ethically combined. I would have thought that combining the risks involved would simply be too much and that ethics committees would opt for a bright line rule prohibiting the practice.
Daredevil doesn’t always get the law right, but it’s better than most comics on that score. And despite my initial skepticism, it looks like it was right this time around as well. Kudos to Mark Waid for combining accuracy and excellent storytelling.