Daredevil #17

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).

Other jurisdictions have taken a similar approach.  See, e.g., LA County Bar Assoc. Formal Opinion No. 507; DC Bar Opinion 300.

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.

III. Conclusion

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.

8 responses to “Daredevil #17

  1. OT, but I feel obliged to point out that “Elliot Pasko” is named after Elliot S! Maggin and Martin Pasko because I don’t know who else is going to.

  2. On the topic of patent law, I think the common time travel scheme of going back in time and “inventing” things that were created in the future could be an interesting future article.

  3. I can see how the theme of small, independent creators being cheated of the profits from their inventions by a large corporate entity might resonate with the comics community.

  4. I’m not really clear on how what Fortknight does is a “scam”. They provide research funding for promising inventors in return for an ownership interest in any resulting inventions. Isn’t this exactly how most universities in the US operate? Professors get lab space, a salary, and graduate assistants and in return the university gets some (or all) income from any patent which results from that research and is commercialized. And isn’t this exactly how every large company operates? Employees get research funds and a salary in return for assigning all patents to the company. In both instances the professor/employee inventor would be prevented from commercializing the invention outside of the agreement with the university/company. Isn’t this exactly what Fortknight is doing?

    • Fortknight promises “no-strings attached” funding, but it turns out there are a lot of strings, probably hidden in a thick contract. This is very different from a university or other employer, which are typically very upfront about the fact that the researchers are under an obligation of assignment.

  5. So, some sort of fraud in the inducement scam?

    Doesn’t seem very sinister.

    You would be surprised how many professors/employees don’t realize they agreed to assign away their IP rights when they sign an employment contract. I probably see one every couple of months.

    As always, be sure to read anything fully before you sign it kids.

  6. Wouldn’t this make the contract (and assignment of rights) null and void, since there would be no consideration or sufficiency? Do all the work, get no benefits? It’s different from an employment contract, because with employment, there is sufficient benefit to both parties.

    • The scientist gets the money with which to do the work. Fortknight gets an obligation of assignment or at least the ability to say the funding has to be used for a particular purpose. That’s adequate consideration on both sides.

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