Taylor v. Hunton Andrews Kurth LLP: A Cautionary Story for Inventors and Startups

The Harris County Texas appellate court docket just lately affirmed abstract judgment favoring the Hunton Andrews Kurth legislation agency and its attorneys. Taylor v. Hunton Andrews Kurth, LLP, 14-22-00410-CV (Tex. App.–Hous. [14th Dist.] July 13, 2023).  Taylor and his firms WPEM and W2W had sued the agency for authorized malpractice after first shedding its infringement lawsuit and being caught with the defendants lawyer charges. The case provides a couple of key takeaways for entrepreneurs delving into the patent system.

Background: William Taylor and his enterprise accomplice developed a software program software known as SafeCell and assigned the patent rights to their startup firm W2W. They employed Hunton AK to deal with the patent software course of. Hunton filed provisional and non-provisional patent functions on behalf of W2W.  A number of years later, after a patent was granted (and their authorized invoice nonetheless unpaid), Taylor and his accomplice transferred patent rights again to themselves as people and terminated W2W. They then shaped a brand new firm known as WPEM and assigned the patent to WPEM so it may sue one other firm for infringement. That lawsuit failed with an entire reversal — WPEM was ordered to pay $180,000 in attorneys’ charges to the defendant.

Taylor, his accomplice, WPEM, and W2W then sued Hunton for authorized malpractice, alleging negligence within the dealing with of the unique patent software. The trial court docket dismissed all claims besides Taylor’s particular person claims towards one Hunton lawyer, which have been later severed and dismissed in a separate order. The appellate court docket affirmed, holding (1) Taylor was not the agency’s consumer, and neither was WPEM; (2) though W2W as a consumer its had been terminated in 2017 — greater than 3 years earlier than hand.  That was an issue as a result of Texas has a 3-year limitation on actions following dissolution of an organization.

Key Takeaways for Inventors and Startups

1. Watch out when assigning IP rights from people to companies, and again once more.

The engagement letter was between W2W and Hunton, not with Taylor or his accomplice as people. And, Hunton had the people signal a selected assertion that they weren’t the shoppers.  The court docket discovered this disclaimer made clear Hunton solely represented W2W. The switch of the patent from W2W to the people didn’t switch W2W’s attorney-client relationship.

Key quote: “The project of a patent doesn’t switch an attorney-client relationship.” (quoting Telectronics Proprietary, Ltd. v. Medtronic, Inc., 836 F.second 1332 (Fed. Cir. 1988)).

2. Perceive the consequences of terminating a enterprise entity.

W2W lacked standing to sue as a result of it had been terminated as an entity exterior the 3-year winding up interval permitted below Texas legislation. Its claims have been extinguished.

Key quote: “As soon as dissolved, the company may neither sue nor be sued, and all authorized proceedings through which it was a celebration abated.” (quoting Hunter v. FW, 620 S.W.second 547 (Tex. 1981)).

3. Particular person shareholders usually can’t sue for harms to the corporate.

The court docket utilized the company damage rule, which bars homeowners from recovering personally for accidents to the corporate. Taylor owned no particular person losses as a result of he didn’t personal the patent rights at any related time.

Key quote: “Underneath the company damage rule, an proprietor of an organization can not sue to get well damages personally for a unsuitable finished to the corporate. ”

The end result here’s a basic company protection technique — the protection used the advanced company construction and possession adjustments to in the end defeated of the claims.  For inventors and startups in search of to guard IP, it is sensible to additionally seek the advice of with a company lawyer alongside the way in which to make sure constant safety.

I’ll be aware right here that though Hunton Andrews Kurth received on technicalities, additionally they denied the substance of the claims.