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

The Harris County Texas appellate court docket not too long ago affirmed abstract judgment favoring the Hunton Andrews Kurth regulation 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 corporations WPEM and W2W had sued the agency for authorized malpractice after first shedding its infringement lawsuit and being caught with the defendants legal professional charges. The case affords just a few key takeaways for entrepreneurs delving into the patent system.

Background: William Taylor and his enterprise companion developed a software program software referred to 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 companion transferred patent rights again to themselves as people and terminated W2W. They then shaped a brand new firm referred to as WPEM and assigned the patent to WPEM so it might 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 companion, 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 in opposition to one Hunton legal professional, 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 companion 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 task 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 results of terminating a enterprise entity.

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

Key quote: “As soon as dissolved, the company might neither sue nor be sued, and all authorized proceedings wherein 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 harm rule, which bars house owners 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 harm rule, an proprietor of an organization can’t sue to get better damages personally for a mistaken finished to the corporate. ”

The result here’s a basic company protection technique — the protection used the advanced company construction and possession modifications to finally defeated of the claims.  For inventors and startups searching for to guard IP, it is smart to additionally seek the advice of with a company legal professional alongside the way in which to make sure constant safety.

I’ll word right here that though Hunton Andrews Kurth gained on technicalities, in addition they denied the substance of the claims.