On May 1, 2023, United States District Judge J. Paul Oetken (S.D.N.Y.) denied plaintiff Nike, Inc. (“Nike”)’s motion to disqualify counsel for defendant, Lululemon USA Inc. (“Lululemon”). In an action concerning patents related to Nike’s Flyknit shoe technology, Judge Oetken found that Nike had not sufficiently made out a case of disqualification as to its adversary's lawyers.
The Dispute
Nike accuses Lululemon of infringing three patents related to running shoe technology. Shortly after filing the complaint, Nike moved to disqualify Knobbe, Martens, Olson & Bear, LLP (“Knobbe”) as counsel for Lululemon. Nike asserted that there was a “substantial relationship” between Knobbe’s prior work for Nike and the issues in the instant infringement case. It argued that Knobbe had represented Nike in “numerous patent-related matters between 2014 and 2019 and specifically ‘advised Nike on [a] wide range of patent procurement and protection strategies, including strategies related to Nike’s Flyknit patents and its infringement claims against Lululemon.’” Nike, Inc. v. Lululemon USA Inc., No. 23-CV-771 (JPO), 2023 WL 5938942, at *2 (S.D.N.Y. May 1, 2023). The Court was not sold.
The Rule
As set forth by Judge Oetken, disqualification from a case is appropriate when: (1) the moving party is a former client of the adverse party’s counsel; (2) there is a substantial relationship between the subject matter of the counsel’s prior representation of the moving party and the issues in the present lawsuit; and (3) the attorney whose disqualification is sought had access to, or was likely to have had access to, relevant privileged information in the course of his prior representation of the client. Id. at *1 (citation omitted) (emphasis added).
The Outcome
The Court first assessed the nexus between Knobbe’s prior work for Nike and the issues presented in the pending matter. Though Nike was able to show that Knobbe advised it on certain strategic decisions—such as avoiding premature public disclosures of Nike’s invention—the Court held that that type of “generalized risk assessment” did not have a “sufficient factual or legal overlap” with the instant infringement action. Id. at *3. Further, Knobbe began advising Nike in October 2015, which was after the priority date of the three patents at issue in the current litigation. This “underscore[ed]” the lack of overlap. Id. at *2.
Nike also argued that a partner in Knobbe’s Intellectual Property practice was in possession of privileged and confidential materials related to Nike’s patent strategies. Id. at *2. The Court found, however, that the conflict belonging to the partner should not be imputed to Knobbe as a whole. Rather, the presumption of imputation was rebutted by facts showing that Knobbe had implemented sufficient screening measures to safeguard against any misuse of Nike’s confidential information. Id. at *3. Specifically, Knobbe was notified of the alleged conflict on February 16, 2023 and created an ethical wall by February 18, 2023. “Th[e] passage of two days” per Judge Oetken, “[did] not raise a risk of taint, especially because [the partner] ha[d] attested through a declaration submitted to th[e] Court that he never provided advice to Nike on the patents at issue or any ‘patents, products, prototypes, or technology referred to as ‘Flyknit’ or yarn.” Id. at *3.
In the end, Knobbe lived to lawyer another day. The case is Nike Inc. v. Lululemon USA Inc., No. 23-cv-771 (S.D.N.Y.).
