Baillie & Ors v Bromhead & Co (A Firm) & Ors

A professional adviser’s duty depends on the particular retainer and circumstances. A patent attorney’s ordinary duties concern patent drafting, prosecution, validity and infringement, but the duty may extend to commercial advice where the attorney assumes responsibility for a transaction. The court should identify the scope of duty before determining recoverable loss. Advice about a patent transaction may engage responsibility for losses flowing from that transaction, whereas advice about patent prosecution does not ordinarily make the attorney responsible for the failure of the client’s underlying business. A patent attorney advising an inexperienced client must explain advice in terms the client can understand. The court also confirmed that causation and recoverable loss require a fact-sensitive analysis of the purpose and scope of the duty.

The claimants, including the DualGlo companies, their founders and investor companies, sued patent attorney Michael Spencer and his firms for professional negligence. The principal allegations concerned advice about acquiring the Hirotec patent, the scope and validity of patent protection based on the DualGlo PCT application, and the loss said to have resulted from continuing the business and patent prosecution.

The defendants denied negligence, causation and liability to the investor claimants, and counterclaimed for unpaid professional fees. The court considered whether the priority error, the Hirotec advice and the advice concerning the DualGlo PCT were negligent, what duties were owed to the investors, and what losses would have been recoverable if negligence had been established.

1. Claim and counterclaim. The negligence claim was dismissed. The defendants’ counterclaim for unpaid professional fees succeeded in the agreed sum of £57,328.58 plus interest.
2. Scope of duty. The scope of a patent attorney’s duty cannot be characterised by a single formula for every aspect of a long relationship. The court must examine the particular advice or work. The ordinary role focuses on patents and prosecution, but it may include wider advice where the attorney assumes responsibility for a commercial decision. Advice to inexperienced clients must be explained in understandable terms.
3. Hirotec. The advice concerning Hirotec was commercial advice to acquire the patent, not merely information about validity or infringement. If the patent had been worthless, the defendants would have been liable for losses flowing from the purchase transaction. The patent was not worthless: the coloured DualGlo formulations fell within its claim and it was reasonable to infer that competing products would also infringe. The Hirotec negligence claim therefore failed.
4. DualGlo PCT. The advice concerning the PCT application related principally to patent prosecution and validity. The attorney did not advise that the broadest PCT claims would necessarily be valid or obtainable. Advice that the core inventive concept was patentable was not negligent. Although advice that certain broad claims would be valid over Hannacolor was negligent, the claimants did not establish reliance causing recoverable loss.
5. Investors and loss. No duty was owed to Lacomp before the 2008 letter because the advice was given to the DualGlo claimants and was not communicated to investors for that purpose. The 2008 letter could create a duty to an investor who relied on it, but no investor did so. The failure of the product business resulted from business and funding failures, not the patent advice. The scope of duty concerning the PCT did not extend to those losses.