IP torts and natural persons as defendants

A longstanding member of the E-trademarks listserv offered up an all-too-familiar fact pattern:

Scenario:  In-house counsel sends a cease-and-desist letter asserting non-existent trademark rights.  Assume the letter is sent in bad faith and constitutes unfair competition.
Question:  Since unfair competition is a tort and in-house counsel is acting within the scope of employment, I would assume this person is jointly and severally liable with the employer.  Thoughts?  Case law?

So can you go after the person who signed the letter?

My take is “yes” you can go after the person who signed the letter, and indeed if you do so, you may be making the world a better place.

First a bit of background …

When we were first-year law students sitting there in torts class, talking about natural persons and corporations, the main things we agonized about were respondeat superior and piercing the corporate veil.  The point being that if the driver of the truck ran over our bicycle, likely as not the driver was judgment-proof and the only way we would get enough money for the emotional distress incurred would be to pursue a deep pocket.  So in torts class we talked about holding the corporation liable and then, if the corporation itself turned out to be judgment-proof, we talked about piercing the corporate veil, all in an effort to “follow the money”.  Indeed in the case of truck squashes bicycle the plaintiff might not even bother to name the natural person (the driver of the truck) as a defendant.

Intellectual property causes of action are basically tort causes of action, so it’s very easy to get into a sort of a rut and to assume that whatever we talked about in tort class must be the important stuff.  A fact pattern that starts with actions by real live human beings quickly morphs into a hunting license to go after corporations.  But consider that in many trademark cases, the court will not award even a penny of damages.  The relief granted will in many cases be limited to injunctive relief.

If there is an active infringer on the other side, an injunction against a legal entity may be pointless because the other side might simply dissolve the legal entity and set up a new one.  Meanwhile if you planned ahead and named the human beings as defendants, the injunction against them would remain in place notwithstanding any slippery dealings involving legal entities.

Here the questions presented are slightly different … the fact pattern presented is not that of an active infringer, but instead an in-house counsel who is, it seems, misusing the legal system.  The listserv member is looking at a possible unfair competition claim, or prima facie tort claim, or tortious interference with contractual relations … one or another of those state-law causes of action that differ from one state to the next.  The hope is to get the attention of the person who actually signed the letter and maybe next time this person will think twice before asserting a nonexistent legal claim.  (Or maybe will have to actually pay some damages … or maybe will think a bit about what it would mean to lose his or her license to practice law.)

In such a case, does it matter if (as presented in the hypothetical fact pattern) the signer of the letter was “acting within the scope of employment”?  I suggest the answer is that it does not matter at all.  Either way the signer of the letter is personally liable if it turns out that the letter creates some tort liability under the relevant body of state tort law.

Returning to the “infringer” fact pattern for a moment.  If I am drafting up a complaint against an infringer, and if I am able to name the human being who did the deed, I will often name that person in addition to naming the corporation.  Maybe the human being will turn out not to be judgment-proof.  And maybe the human being will be motivated to give some truthful testimony in the hope of being let out of the case.

Turning back to the hypothetical posed by the listserv member.  Another listserv member said this:

It’s pretty hard to sue lawyers when they’re representing someone.  So I think the answer is yes but it may be very hard to establish their liability.

I disagree. If a lawyer (ill-advisably) applies his or her signature to a cease-and-desist letter, and if the letter causes tort harm, I think the liability falls directly on the lawyer.  The lawyer might seek contribution or indemnity from the client, but that’s a separate matter.  The party harmed by that letter might choose to name the client as well as the lawyer, but that’s a matter of tactical choice.  The lawyer is liable, I suggest, and gets no immunity under the law simply because the lawyer happened to be representing a client.

As usual, comments welcome.

3 Replies to “IP torts and natural persons as defendants”

  1. Unfortunately, many states are willing to very broadly (unjustifiably, in my mind) apply the Common-Law doctrine of “litigation privilege” — even to pre-litigation activities. So that, combined with the issue of corporate-veil piercing as you already mentioned, would make it very difficult to sue the hypothetical in-house attorney individually for drafting and sending an unjustified C&D letter in most states, I believe.

    However, having said that, there are some states that may not be so quick to extend the litigation privilege for activities not within the normal scope of duties of an attorney, or for certain causes of action. If the hypothetical in-house attorney later causes the filing of an objectively baseless suit, then it might be possible to go after the in-house attorney (if you can pierce the corporate veil) and the corporation for abuse of process and/or malicious prosecution (if the accused defendant actually wins the case, should it go that far, in the case of malicious prosecution). In many states, those causes of action are not necessarily going to be dismissed early based on an assertion of “litigation privilege” by the defendants.

    Finally, of course, if an objectively frivolous action is actually filed, then the wrongfully accused infringer can always try to convince the court to issue Rule-11 sanctions, including attorney fees. Unfortunately, even if granted, Rule-11 sanctions are, in theory, not designed to help the aggrieved party, but are supposed to serve the public interest in general, so the wrongfully accused infringer may or may not realize actual meaningful relief.

  2. Listserv member Craig McLaughlin was kind enough to point out this case in which the recipient of a cease-and-desist letter brought an unfair competition claim against the letter writer and it did not get dismissed under Rule 12(b)(6).

  3. “The hope is to get the attention of the person who actually signed the letter and maybe next time this person will think twice before asserting a nonexistent legal claim.”

    My profs in law school were adamant about our obligation to act ethically, notwithstanding what our employers, clients, or partners might insist. I’ve always taken this seriously, if the excrement hits the wind machine, it is my license and my reputation on the line. I think this has prevented me from taking actions that superiors have demanded I take, and I have left a job over it.

    Furthermore, it is a waste of client’s time and money to argue over nonexistent claims or to disregard the actual law just because you want to be a bully.

    I guess what I am saying is that, generally, I share the concern of many of the voices on the list who are concerned about making an individual lawyer personally and individually responsible for his employer’s bad choices, however, there is a moment, and let’s face it we all know where that line is, when the attorney herself is responsible.

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