The Conflicting Instructions
You are instructed by two directors of a small family company, A and B, who are siblings and equal shareholders, to file a trade mark application for the company's brand. During a call, A tells you privately that B is planning to leave the company and set up a competing business using a similar name, and asks you not to tell B. A also asks you to file the application in A's personal name rather than the company's name, saying it will be 'simpler'. The company's constitution, which A has not provided, may govern ownership of intellectual property. B later emails you asking for a copy of the filing receipt and confirmation that the application is in the company's name.
1. Identify the professional conduct issues raised by A's private call and explain how you should respond.
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Several issues arise at once. First, there is a conflict of interest: you act for the company and for both directors, and A's private disclosure puts you in possession of information that is material to the company and adverse to B's interests. You cannot keep that information in a way that disadvantages B while purporting to act for both. Second, A's request to file in A's personal name is a request to change the beneficial owner of the application, which may misappropriate company assets and may conflict with the constitution. Third, A's request for confidentiality about B's plans creates an ethical trap: you cannot use the information against B, but you also cannot act in a way that misleads B.
The response should be to decline to act on the personal-name instruction until ownership is resolved, and to tell A that you cannot keep material information from B while acting for both. The cleanest course is to recommend that the company obtain independent advice on ownership, and that A and B each obtain separate advice on their personal positions. If they decline, you should consider whether you can continue to act for both, and may need to cease acting for one or both. You must not file in A's name on the basis of a private instruction that may harm the company.
2. B asks for the filing receipt and confirmation of the applicant's name. What do you tell B, and what do you do about the application already prepared in A's name?
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B is a director of the client company and is entitled, as a matter of client care and good practice, to information about the matter on which you are instructed, subject to the terms of the retainer and any agreed limits. The filing receipt should be provided if the application has been filed, and B should be told the truth about the applicant's name. Concealing or misstating the applicant's identity would be a serious breach.
If the application has already been filed in A's personal name on A's instruction, you must not simply leave it there. You should tell both directors what was filed and on whose instruction, explain the ownership risk, and recommend that the application be corrected or reassigned to the company if that is the correct owner. If A refuses, the matter should be escalated to the company's board and, if necessary, to independent advice; you should consider whether continuing to act is consistent with your obligations.
The file should record the sequence of instructions, the advice given and the steps taken. The client care lesson is that ownership of a trade mark application should be confirmed in writing at the outset, with the applicant's legal identity verified, precisely because disputes of this kind are common in family companies.