Appeals court decision lets inventor, but not company, sue patent attorneys

An inventor-entrepreneur will be able to sue the patent attorneys that he claims botched his application for international patent protection now that the North Carolina Court of Appeals has cleared up a previously unresolved question of state law—but his company will not be able to, which may make it hard for the inventor to win any damages.

Ronald Carter, founder and owner of North Carolina-based Revolutionary Concepts, retained Dougherty & Clements Law Group (now Clements Walker) to help him patent an answering system for video messages that he invented. To protect his patent rights in other countries, Carter asked his attorneys not to publish his U.S. application until he could prepare his application for international patent rights. In July 2005, Carter asked the attorneys to file the international application, but he alleges they never filed it and allowed the U.S. application to be published, leaving him unable to get patent rights elsewhere.

The next year, Carter assigned all his rights and interests in his invention to a Nevada-based corporation he founded, also called Revolutionary Concepts. In 2008, Carter and the Nevada company sued Clements Walker and its attorneys on several grounds, including professional malpractice. The North Carolina Business Court granted Clements Walker’s motion to dismiss Carter’s claims, arguing that he no longer had standing to sue because he had transferred all his rights in the technology to RCI-Nevada. Clements Walker later got RCI-Nevada’s malpractice claims dismissed because the company was never their client.

Carter appealed, and the North Carolina Court of Appeals reversed the ruling dismissing his claims, saying that the business court had implicitly assumed that the right to sue for malpractice could be assigned from one entity to another, something that the state’s courts had never decided.

The court found that while actions arising out of contract claims could be assigned, prior courts had ruled that assignments of personal tort claims are void as violations of public policy because they promote entanglement in another person’s litigation without a justifiable reason. Surveying cases from other states that had considered the question, the court found that most states prohibited assigning legal malpractice claims as a matter of public policy as well. It therefore overturned the dismissal of Carter’s claims, saying he still had a right to sue.

However, the court affirmed the decision to dismiss RCI-Nevada, which now owns the rights to the patented technology. RCI-North Carolina was subsumed into the Nevada corporation in 2008, six months after it filed suit against Clements Walker, and RCI-Nevada took no action after the merger to assert its claims. The court also upheld the business court’s decision not to let RCI-Nevada amend its claim so it could continue the suit.

With RCI no longer a party to the case, Carter will have to prove on remand that he suffered some damages between the time of the alleged malpractice and the time he transferred the rights in the patent to RCI. The appeals court left it to the business court to consider whether the patent transfer affected the extent of the damages to which Carter would be entitled, if any, however the ruling would appear to significantly limit the scope of the law firm’s potential liability.

James Harrington of Harrington Law in Charlotte represented Revolutionary Concepts. Cindy Van Horne and Jerry Parnell of Poyner Spruill in Charlotte represented Clements Walker.

Both Harrington and Van Horne declined to comment publicly on an ongoing case.

The 21-page decision is Revolutionary Concepts v. Clements Walker PLLC (Lawyers Weekly No. 13-07-0441). The full text of the opinion is available online at nclawyersweekly.com.

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